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Wooten v. Marshall


decided: June 3, 1960.


Author: Clark

Before CLARK, MOORE, and FRIENDLY, Circuit Judges.

CLARK, Circuit Judge.

Plaintiff seeks to establish a joint venture with defendant Marshall in the purchase of 160 acres of land, known as the Young tract, located in Anchorage, Alaska, and to compel defendant to account for the profits realized from the sale of the property. The court below granted the relief sought, D.C.S.D.N.Y., 173 F.Supp. 230, and defendant appeals.

Upon conflicting evidence the trial court found the following facts, which are amply supported by the record and which defendant disclaims any intention of questioning. In 1947 the parties were business associates, plaintiff as President and defendant as Chairman of the Board of Alaska Airlines, Inc. Plaintiff suggested to defendant the advisability of purchasing the Young tract for their own account and with an eye toward future residential development in view of the shortage of available housing in the area for airline personnel. The parties agreed to associate in such purchase and to share equally the profits and losses sustained. Various possibilities for profitable development or disposition of the property were discussed, but no definite plans were formulated aside from the reservation to each party of the right to purchase a small portion of the tract as a homesite.

Although plaintiff offered to raise one-half of the purchase price, defendant patronizingly insisted upon paying the full amount, with the understanding that he would be entitled to interest if no profit materialized within a few years. Defendant, without plaintiff's consent, took title to the property in his own name; but an exchange of letters indicates that no repudiation of the agreement was thereby intended.*fn1 Following the purchase, plaintiff exerted much effort to protect the parties' interest in the property and to exploit the same. His activities continued until sometime after November 1949 when he severed his connection with the airline because of management disagreement and left Anchorage. Although the parties thereafter discussed the property and their rights therein on a number of occasions, defendant unilaterally sold portions of the tract without consulting or sharing the proceeds with plaintiff.

The major contention on appeal is that the agreement found by the court below falls within the Statute of Frauds. This contention was raised in a motion for summary judgment and denied by Judge Bryan in an opinion reported in D.C.S.D.N.Y., 153 F.Supp. 759. It was again raised at trial and denied by Judge Murphy in his opinion, D.C.S.D.N.Y., 173 F.Supp. 230. We need not resolve what seems to be an open question in New York - whether its Statute of Frauds is to be viewed as substantive or procedural for choice of law purposes. See Rubin v. Irving Trust Co., 305 N.Y. 288, 113 N.E.2d 424. If substantive, the law referred to would be that of Alaska as the place of contracting, the place of performance, and the center of gravity of the contract. See Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99, 50 A.L.R.2d 246; see also Global Commerce Corp., S. A. v. Clark-Babbitt Industries, Inc., 2 Cir., 239 F.2d 716; Alaska Airlines v. Stephenson, 9 Cir., 217 F.2d 295, 15 Alaska 272. As there do not appear to be any controlling Alaska decisions, the New York courts would undoubtedly look to local precedents, since the relevant portions of the respective statutes are the same.*fn2

Defendant's position is that the agreement was one for the creation or transfer of an interest in real property, and not one of joint venture. This contention is primarily based upon the reservation by plaintiff of an option to purchase a portion of the property as a homesite, and reliance is placed upon Pounds v. Egbert, 117 App.Div. 756, 102 N.Y.S. 1079. There it was suggested that if a copartnership to deal in land also envisions a conveyance of property by one partner to another, it comes within the statute. See also Levy v. Brush, 45 N.Y. 589. But this rationale must be considered modified by the holding in Mattikow v. Sudarsky, 248 N.Y. 404, 162 N.E. 296, which has established a distinction between a commercial venture and one contemplating a mere tenancy in common. See Weisner v. Benenson, 275 App.Div. 324, 89 N.Y.S.2d 331, affirmed per curiam 300 N.Y. 669, 91 N.E.2d 325; Rizika v. Kowalsky, 207 Misc. 254, 138 N.Y.S.2d 711, affirmed per curiam 285 App.Div. 1009, 139 N.Y.S.2d 299. Decisions by the Alaska courts in analogous situations suggest that a like result would there be reached. See Whistler v. MacDonald, 9 Cir., 167 F. 477; Hendrichs v. Morgan, 9 Cir., 167 F. 106; Cascaden v. Dunbar, 9 Cir., 157 F. 62, certiorari denied 212 U.S. 572, 29 S. Ct. 682, 53 L. Ed. 656; Shea v. Nilima, 9 Cir., 133 F. 209.

Applying this test we have no doubt that the parties entered into a commercial venture. The purchase of the tract was made in anticipation of its development and exploitation; and plaintiff's subsequent efforts, of which defendant was continuously informed, were directed toward this end. Thus the evidence demonstrated, inter alia, activity in employing an architect and obtaining a plot plan and plans of a housing development and of an apartment house layout, activity in arranging for and obtaining surveys of the property, activity in connection with local and national builders with a view toward construction of homes, activity in connection with statutory provisions for financing construction in Alaska, and endeavors to obtain commercial users for part of the property. These actions are not consonant with a mere cotenancy, but so clearly demonstrate the commercial nature of the venture that there is no need to attempt a definitive exposition respecting the elements of a joint venture.*fn3 Plaintiff's option to purchase a small portion of the tract does not negate this commercial purpose, and in any event no enforcement of this right is here sought. See 1 Restatement, Contracts ยง 221 (1932).

Error is also assigned to the finding that plaintiff did not abandon the venture upon his departure from Alaska. Plaintiff testified, however, to his subsequent efforts in connection with the property and to the rejection of these proposals by defendant, who refused to cooperate until various claims arising from plaintiff's management of the airline had been settled. This evidence adequately supports the conclusion that defendant prevented any further participation in the venture by the plaintiff. Defendant's claim in the accounting proceeding for an allowance as compensation for his services in selling portions of the tract was also properly disallowed. See Levy v. Leavitt, 257 N.Y. 461, 178 N.E. 758.

The judgment is affirmed.

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