Joint Ventures. Frank Hartman, Jr., and Robert Wiesner visited the site of a derailment of a Burlington Northern (BN) train to bid on lumber carried on the train. Hartman was to provide the salvage expertise, and Wiesner was to provide the know-how to

Question

sell the lumber. They submitted a bid of $113,663, which BN accepted. To make the payment, Hartman and Wiesner contacted Dave Anderson, who contacted Doug Feller, the managing partner of BBD Partnership. Hartman, Wiesner, Anderson, and Feller agreed to share profits from the sale of the lumber. BBD then borrowed the money to pay BN. BBD, through Feller, had promised to get involved only if it could own the lumber, however. Thus on the bill of sale, BN entered the names "Hartman Construction" and "Feller Associates," a sole proprietorship owned by Feller. BBD later sold its interest in the deal to another party. Two years later, Hartman, Wiesner, BBD, and Feller became involved in a lawsuit over the funds that BBD had borrowed. Was the deal between the parties a joint venture or simply a loan from BBD to Hartman and the others? Discuss fully.

Answer 1

Joint ventures
The court found that the transaction between the parties was not a loan but a joint venture "wherein the parties pooled their respective assets and talents for the completion of a specified transaction, the salvage and sale of the lumber and agreed to divide between themselves the proceeds from the sale." The court defined a joint venture as "an association of two or more persons to carry on a single business enterprise for profit." Hartman, Wiesner, Anderson, and Feller negotiated a deal and drafted a document to memorialize their agreement in which they referred to their transaction as "this joint venture." The purpose of the agreement was to salvage and resell lumber from the Burlington Northern derailment for a profit. Each party provided a necessary element to ensure that the salvage project was completed—Hartman the salvage expertise, Wiesner the sales expertise, and Anderson, Feller, and BBD the financial connections—and each party was to receive a share of the profit. The court also pointed out that the parties had an equal right of control in the venture.