## Facts

- In February 1988, Moss Venturers and United Artists Theatre Circuit, Inc. (UA) entered into a joint venture agreement to form the Moss/United Artists Joint Venture (the Joint Venture) to operate a group of movie theaters, including Movieworld Douglaston.
- The venture agreement provided that it was governed by New York partnership law and designated UA as the managing venturer, giving UA “complete authority and responsibility” for operating the business and making day-to-day business decisions.
- In September 1992, UA, in its own name and without referencing the Joint Venture, entered into a consulting agreement with P.A. Properties, Inc. (PAP).
- Under the consulting agreement, PAP agreed to analyze and investigate possible lease overcharges involving Movieworld Douglaston, a theater operated by the Joint Venture.
- UA entered the consulting agreement intending that any savings found would help the Joint Venture.
- UA never paid PAP for its services.
- In 2000, UA filed for bankruptcy protection.
- PAP filed a bankruptcy claim against UA for \$1,059,716; the claim was later settled for \$600,000, and PAP ultimately received about \$35,000 through the bankruptcy.
- PAP then sued B.S. Moss’ Criterion Center Corporation (Moss), alleged to be the successor to Moss Venturers, seeking to recover the unpaid balance by treating UA’s consulting agreement as an obligation of the Joint Venture (and therefore of Moss Venturers/Moss).
- Both parties moved for summary judgment.

## Issues

1. Whether UA, as managing venturer, had actual authority to bind the Joint Venture (and the other venturer) to PAP’s consulting agreement even though UA signed only in its own name and did not disclose the Joint Venture.
2. Whether internal limits in the venture agreement restricted UA’s power to retain consultants of the kind PAP provided, such that the Joint Venture was not bound.
3. Whether PAP’s course of dealing—contracting solely with UA and pursuing payment in UA’s bankruptcy—supported treating UA as the only party liable for the consulting fees.

## Decision

- PAP’s motion for summary judgment was denied.
- Moss’s motion for summary judgment was granted on PAP’s attempt to hold Moss liable for UA’s unpaid fees on the theory that the Joint Venture (and thus the other venturer) was bound by UA’s consulting agreement.
- The court concluded that PAP could not enforce the consulting agreement against Moss as a Joint Venture obligation where UA contracted only in its own name and PAP did not show UA had actual authority, under the venture agreement, to bind the Joint Venture to that engagement.

## Legal Principles

- Under New York partnership law, a partner (or managing venturer) may act as an agent of the partnership/joint venture, but liability of an undisclosed principal depends on the agent’s actual authority to enter that type of contract for the principal.
- A grant of broad day-to-day management power does not, by itself, establish authority to bind the venture to every professional-services arrangement; authority must be assessed in light of the venture agreement’s specific allocations of power and any stated limits.
- When a contract is made solely in the agent’s name and the principal is not disclosed, the third party must still prove that the agent was authorized to commit the principal to the particular obligation.
- A third party’s decision to contract only with the agent, and then to seek recovery from the agent (including through bankruptcy proceedings), supports treating the agent as the sole obligor absent proof that the contract was authorized as a venture debt.

## Conclusion

The court held that PAP could not shift responsibility for UA’s unpaid consulting fees to Moss, the alleged successor to the non-managing venturer, because UA signed the consulting agreement only in its own name and PAP failed to show that UA had actual authority under the joint venture agreement to bind the Joint Venture to that consulting engagement; summary judgment was therefore granted to Moss and denied to PAP.


P.A. Properties, Inc. v. B.S. Moss' Criterion Center Corp., 2004 WL 2979984 (2004)