Opinion
No. 2-077 / 01-0736
Filed October 30, 2002
Appeal from the Iowa District Court for Fayette County, John Bauercamper, Judge.
The plaintiff appeals from the district court's ruling granting the defendants' motion for summary judgment. REVERSED AND REMANDED.
David J. Dutton and Carolyn A. Rafferty of Dutton, Braun, Staack Hellman, P.L.C., Waterloo, for appellant.
Randall D. Armentrout of Moyer Bergman, P.L.C., Cedar Rapids, for appellees.
Heard by Vogel, P.J., and Miller and Vaitheswaran, JJ.
Larry Fettkether appeals from the district court's ruling granting the motion for summary judgment filed by the defendants George Fettkether and Fettkether Construction, Inc. Larry contends the district court erred in granting summary judgment because there are factual disputes as to whether the parties formed a partnership. We reverse and remand.
We note that plaintiff Larry Fettkether also named "Fettkether Construction, Partnership" as a defendant. However, the existence of such an entity is at issue in this lawsuit. We therefore will not refer to it as a party.
I. BACKGROUND FACTS.
Larry and George are brothers. In 1986, they agreed to work together. However, they never reduced their agreement to writing. Larry was in the construction business, and George had been in the concrete business. In 1990, George formed his own corporation, Fettkether Construction, Inc. The shareholders were George and his wife, Dawn. In January 1999, George announced to Larry that he wanted to dissolve their business arrangement.
Larry filed this suit. He alleged (1) George and he owned and operated a partnership, Fettkether Construction, (2) George violated his fiduciary duty to the partnership in various particulars, (3) George and Fettkether Construction, Inc. caused dissolution of the partnership in contravention of the partnership agreement and Larry's rights, and (4) George and Fettkether Construction, Inc. engaged in fraud and misrepresentation in converting partnership assets and profits to their own personal use and accounts.
George filed a motion for summary judgment. The trial court granted the motion, determining that the undisputed facts do not establish the existence of a partnership, but merely show a sharing of gross returns under Iowa Code section 486.7(3) (1999). Larry filed an unsuccessful Iowa Rule of Civil Procedure 1.904(2) motion. He appeals.
II. SCOPE OF REVIEW.
We review a summary judgment ruling for the correction of errors of law. Iowa R.App.P. 6.4; Hameed v. Brown, 530 N.W.2d 703, 706 (Iowa 1995). Summary judgment is appropriate only if there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Iowa R.Civ.P. 1.981(3). On appeal, our task is to determine whether a genuine issue of material fact exists and whether the district court correctly applied the law. Red Giant Oil Co. v. Lawlor, 528 N.W.2d 524, 528 (Iowa 1995).
III. MERITS.
Larry contends the district court erred in granting summary judgment when there are factual disputes as to whether the parties entered an oral agreement to form a partnership. He argues that, viewed in the light most favorable to him, the evidence establishes the essential elements of a partnership. He asserts that (1) the brothers had an intent to associate as partners; (2) they engaged in a business; (3) they earned profits; and (4) they were co-owners of profits, property, and control.
Section 486.6(1) defines a partnership as "an association of two or more persons to carry on as co-owners a business for profit." A partnership has four elements: (1) an intent by the parties to associate as partners; (2) a business; (3) earning of profits; and (4) co-ownership of profits, property, and control. Chariton Feed Grain, Inc. v. Harder, 369 N.W.2d 777, 785 (Iowa 1985). The crucial test of a partnership is an intent to associate as partners. Id. This element need not be in writing, but it may be inferred from the conduct of the parties and the circumstances surrounding the transactions. Thorp Credit, Inc. v. Wuchter, 412 N.W.2d 641, 647 (Iowa Ct.App. 1987).
In Chariton, our supreme court stated that whether a written instrument creates a partnership is a question of law for the trial court. Chariton, 369 N.W.2d at 783, 785. However, that case involved a written contract. Id. Here, the parties' agreement was verbal, and the question of whether a partnership was created is thus not controlled by a writing or writings.
Viewing the evidence in the light most favorable to Larry, we conclude there exists a genuine issue of material fact as to whether Larry and George entered into a partnership. The second and third elements of a partnership, whether there was a business and whether the business earned profits, are not seriously at issue here. The parties were involved in the construction business together for a number of years, and the business earned profits during that time. The real issues in this case involve the first and fourth elements, whether the parties intended to form a partnership and whether there was co-ownership of profits, property, and control.
We conclude there was sufficient evidence of the parties' intent and their co-ownership of profits, property, and control to generate genuine issues of material fact concerning those elements. The summary judgment record contains evidence from which the finder of fact could find that: (1) in 1986 George went to North Carolina, where Larry was living, to help with the construction of their sister's house; (2) while there, George proposed to Larry that they go into business together in Iowa; (3) the brothers agreed to go into business together in Iowa, and share profits; and (4) the brothers did go into business together in Iowa and did share profits. This evidence concerning an agreement to share profits and the actual sharing of profits, if believed by the finder of fact, constitutes prima facie evidence of the existence of a partnership. See Iowa Code § 486.7(4) (stating that receipt of share of profits is prima facie evidence of partnership, with several exceptions, including the receipt of profits as payment for wages of an employee). The record also contains evidence that Larry believed he participated in all the work of the partnership and held himself out as partner. Additionally, there is evidence from which the finder of fact could find that George actually acknowledged the partnership by informing Larry in 1990 that the formation of Fettkether Construction, Inc. would not affect the brothers' business relationship.
In addition to the evidence from which the finder of fact could find that the parties intended to associate as partners and shared profits and losses, there is at least some evidence of co-ownership of property and control of the business. Larry testified that he purchased half the concrete forms used by the business out of his share of the profits. There is evidence that: (1) each of the brothers contributed a truck and miscellaneous tools to the business; (2) Larry bid some jobs, although George did most of the bidding and preparing of bids; (3) Larry believed that not only he but also George and Dawn would have been exposed to liability if something had gone wrong at a work site at which he was supervising or working; (4) Larry had authority to discipline employees and possibly even to fire them, although he had not often exercised this authority; (5) the parties discussed employees' wages together; and (6) Larry believed he would have input into changing bookkeepers had that become necessary.
We note there is strong evidence that no partnership was formed. The alleged partnership was not memorialized in writing. There were no partnership accounts, and no partnership tax returns were filed. Larry filed a Schedule C tax form, indicating he considered income from the parties' work to be income from a sole proprietorship. He at other times and in other ways represented that he worked as a sole proprietor. However, considering the evidence in the light most favorable to Larry, we conclude substantial evidence supports each element of the existence of a partnership and therefore genuine issues of material fact preclude summary judgment. We reverse the grant of summary judgment and remand for further proceedings.