Christmas Lumber Co., Inc. v. Valiga

Christmas Lumber Company, Inc. (Christmas Lumber) (plaintiff) sued Robert Valiga, Robert Waddell, and John Graves (defendants) to recover the cost of building materials Waddell purchased to build a house for Valiga. Waddell was a land surveyor with an architecture degree who decided to go into contracting. Valiga’s house was the first and only house Waddell ever built. Graves was a tax preparer who arranged the contract with Valiga and agreed to help Waddell because it was not tax season. Waddell signed Valiga’s contract on behalf of “R.H. Waddell Construction, Inc.” even though no corporate charter was filed. Waddell did not know who prepared his charter but had purportedly signed it as incorporator on August 19, 1988, although nobody filed it until three months later. Meanwhile, problems with quality arose almost immediately after construction began. In November, Valiga fired Waddell. The next day, Waddell and Graves entered a joint-venture agreement (JVA) stating its purposes were to construct Valiga’s house and “to assure shared liability in the event of a lawsuit” against Waddell and Graves, and that the two would share profits and losses equally. Waddell made amends with Valiga and returned to work on the project in November. Somebody filed Waddell’s corporate charter in December. When Valiga expressed shock over the construction costs the following February, Waddell quit. After Christmas Lumber sued, Valiga brought a separate lawsuit against Waddell and Graves, and the court consolidated the two lawsuits. Christmas Lumber obtained summary judgment for $17,083 against Waddell personally, and Waddell and Graves each paid half. After Graves requested dismissal claiming he could not be personally liable to Valiga, Valiga produced the JVA. Waddell testified he thought his corporation existed when he contracted with Valiga but admitted he partnered with Graves and the two split the $11,500 contractor’s fee Valiga paid. Graves countered his only role was sharing in the profits, but he had worked on the house six to eight hours a day during most of the construction. The trial court concluded Waddell and Graves were joint venturers in a partnership and entered judgment for Valiga for $80,046 against them both personally. Waddell and Graves appealed, arguing they could not be personally liable because Valiga had contracted only with R.H. Waddell Construction, Inc.