City & County of Denver v. Fey Concert Co.

960 P.2d 657, 1998 WL 340015

• Court: Supreme Court of Colorado
• Decided: June 29, 1998
• Docket: 96SC798
• Status: Published

Opinions

Justice BENDER

delivered the Opinion of the Court.

This case concerns a protest by the respondent, Fey Concert Company (“Fey”), to an assessment by the Department of Revenue for Denver facilities development admissions tax (“seat tax”) on tickets for a series of concerts that Fey promoted under a joint venture with the Denver Zoological Foundation (“Foundation”), an agent of the City and County of Denver (“Denver”). The court of appeals held that the party selling tickets to the concerts — the joint venture — was an agent of the Foundation, and that the concert series was therefore exempt from the seat tax pursuant to section 53-347 of the Denver Revised Municipal Code, which exempts sales by the city or a department of the city from the seat tax regulation. See Fey Concert Co. v. City & County of Denver, 940 P.2d 972, 977 (Colo.App.1996). We hold that the concert series is not eligible for this tax exemption because an agency relationship did not exist between the Foundation and the joint venture, and therefore the tickets were not sold by an agent of Denver. Accordingly, we reverse the decision of the court of appeals.

I.

The Foundation is a nonprofit municipal corporation and an agent of Denver. It manages, controls, and administers the Denver Zoological Gardens (“Zoo”), which is owned by Denver. Every summer, the Foundation promotes and produces “Zoofest,” a series of concerts held on the grounds of the Zoo.

Because admission to entertainment at any facility owned by Denver, such as the Zoo, is a taxable privilege, see D.R.M.C. § 53-342, the Denver Revised Municipal Code requires anyone who sells tickets to such an event to collect a seat tax in the amount of ten percent of the price of each admission and to remit these taxes to the Denver Department of Revenue.¹ See id.; D.R.M.C. § 53 — 346(b); D.R.M.C. § 53-348(e). The ticket must display the amount of the tax, separate from the sale price. See D.R.M.C. § 53-348(c). The party selling the tickets is liable to the city for the amount of the tax even if the seller fails to collect the tax from the purchaser of the ticket. See D.R.M.C. § 53-348(c), (d).

Zoofest would normally be subject to the seat tax because a fee is charged for admission and because it takes place at the Zoo, a facility owned by Denver. However, the Code contains various exceptions to the seat tax. One of these exceptions provides that “all sales to or by the city or any department thereof’ are exempt from the seat tax. D.R.M.C. § 53-347(3). Until 1993, Zoofest was organized by the Foundation, an agent of Denver. Thus, until 1993 Zoofest fell within the exception for “sales to or by the city” and was exempt from the seat tax.

In 1993, the Foundation and Fey entered into a co-promotional agreement creating a joint venture that would “co-promote the 8th annual Zoofest Concert Series with shared expenses, liabilities, and income.” The agreement stated that Fey was an independent contractor of the Foundation rather than an employee, and allocated thirty percent of the profits and losses to the Foundation and seventy percent to Fey.

The co-promotional agreement delineated the duties of each party. The Foundation was to make available a portion of the Zoo premises, restrooms, parking lots, and like facilities. The Foundation reserved the right to approve talent, to control and manage the Zoo, and to enforce the rules of the Zoo. Fey’s duties included booking talent, handling ticket sales and distribution, “mak[ing] all decisions concerning the actual operation and production of the Event, which are Fey’s expertise and not the expertise of the Zoo,” and acting “as the joint venture’s representative in paying all expenses associated with the production of each Event” including “all taxes, excise or license fees of whatever nature applicable to this joint venture.”²

During the course of the summer, Fey contacted officials at the Denver Department of Revenue twice to inquire whether this new arrangement would affect the exemption from the seat tax previously enjoyed by Zoo-fest. Both times, the officials responded that Zoofest would no longer be eligible for the exception and instructed Fey to collect and remit the seat tax.³ Nonetheless, Fey failed to collect the seat-tax on any of the tickets sold for the 1993 Zoofest concert series and failed to remit seat taxes to the Denver Department of Revenue. As a result, the Department issued a “Notice of Final Determination, Assessment, and Demand for Payment” informing Fey that it owed $36,362 in taxes and additional amounts in penalties and interest.

Fey petitioned the Manager of Revenue for cancellation of the assessment pursuant to section 53-361(c) of the Denver Revised Municipal Code, arguing that Zoofest was exempt from the seat tax because the Foundation, an agent of Denver, was exempt under the exception for “all sales to or by the city or any department thereof,” and Fey was a mere agent of the Foundation.

After a hearing, an ALJ held that Fey was not exempt from the seat tax, reasoning that the joint venture could not be characterized as “the city or a department thereof.” The ALJ found:

.The seller of those admissions was the joint venture — a partnership for a limited purpose — made up of the Foundation and Fey. This partnership cannot be characterized as “the city or a department thereof.” Thus, the exemption in D.R.M.C. § 53-347(3) is not applicable.

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It is irrelevant that the admission sales were not subject to FDA tax during the years when the Foundation was solely responsible for the Zoofest concert series. In those years, the admissions sales were made by a City department, and so were subject to the exemption in D.R.M.C. § 53-347(3). The character of the seller changed when the Foundation and Fey entered into the joint venture agreement, and the exemption became inapplicable.

Notwithstanding the agreement, Fey argued at the hearing that it was a mere agent of Denver. However, by entering into the agreement, the Foundation and Fey established a joint venture. Under the agreement, the Foundation and Fey were partners in a partnership formed for a limited purpose. As such, each partner was both a principal and an agent with regard to the other partner. Accordingly, Fey cannot claim that it was solely an agent of the Foundation, because it was equally the principal of the Foundation, just as the Foundation was both the agent and the principal of Fey.

(Citations omitted.) Fey appealed this administrative decision to the district court pursuant to C.R.C.P. 106(a)(4),⁴ arguing that the joint venture sold the tickets and that'the joint venture was exempt from the seat tax because the joint'venture was the agent of the Foundation, which in turn was the agent of Denver. The district court ruled that the ALJ did not exceed her jurisdiction or abuse her discretion by concluding that the 1993 Zoofest concert series was not exempt from the seat tax. The district court agreed with Fey that the joint venture sold the tickets but determined that an agency relationship did not exist between the joint venture and the Foundation.

The court of appeals reversed, holding that the ALJ abused her discretion by misconstruing the language- of the joint venture agreement. See Fey Concert, 940 P.2d at 977. The court of appeals acknowledged that “[b]y virtue of the general law of partnership, both parties had an equal right to control the joint venture.” However, the court of appeals determined that under the co-promotional agreement, the parties intended the Foundation to exercise dominant control over Zoofest and to delegate “a limited range” of functions to Fey. Id. at 976. Based on this allocation of duties, the court of appeals determined that the joint venture was the agent of the Foundation and that Fey was a subagent of the Foundation. The court of appeals held that “because the Foundation, i.e., the principal of the joint venture, was exempt, so too were its agent (the joint venture) and its subagent (Fey).” Id. at 977.

The court of appeals also held that the ALJ abused her discretion by “misappl[ying] the relevant legal standards in reaching her decision” because the ALJ should have determined the applicability of the seat tax exception by determining the owner of the site for Zoofest. Id. The court of appeals relied upon City & County of Denver v. Board of Assessment Appeals, 782 P.2d 817, 821 (Colo.App.1989), a case involving property taxes, for the proposition that “ ‘[t]he fundamental question for tax exemption purposes must be decided on the basis of real ownership.’ ” Fey Concert, 940 P.2d at 977 (quoting City & County of Denver, 782 P.2d at 821). The court of appeals concluded that because the Zoo was owned by Denver — which was exempt from the seat tax — the events at the Zoo were similarly exempt from the seat tax.

Denver then petitioned this court for cer-tiorari review of the decision of the court of appeals.⁵

II.

The parties agree that the exemption from the seat tax requirement applies if the party charging admission to the event is an agent of Denver or a subagent of Denver via the Foundation. The Foundation argues that the joint venture sold the tickets and that the joint venture is not an agent or a subagent of Denver. Fey argues that the joint venture was responsible for selling the tickets but that it did so only in its capacity as an agent of the Foundation and that the Foundation and not the joint venture should be considered the “vendor” for purposes of the seat tax exemption. Hence, the question presented for the resolution, of this appeal is whether the joint venture was an agent or a subagent of Denver. The ALJ held that the joint venture was not an agent or a subagent of Denver. Our review of this decision is limited to a determination of whether the ALJ exceeded her jurisdiction or abused her discretion under C.R.C.P. 106(a)(4).

We begin with a discussion of the law of agency. An agency is a “fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.” Harold Gill Reuschlein & William A. Gregory, The Law of Agency and Partnership § 2, at 4 (2d ed.1990); see also Stortroen v. Beneficial Fin. Co., 736 P.2d 391, 395 (Colo.1987). This consensual arrangement may, but need not, amount to a contract. See Stortroen, 736 P.2d at 395. “What is critical is that the parties materially agree to enter into a particular relation to which the law attaches the legal consequences of agency....” Id. The existence of an agency relationship is usually a question of fact, however, we may properly decide the question as one of law when, as here, the facts are not in dispute. See id. One type of agency relationship is a joint venture, which is an association of two or more persons formed for the purpose of carrying out a particular business enterprise for profit. See Reuschlein & Gregory, supra, § 266, at 451; Hooper v. Yoder, 737 P.2d 852, 861 n. 4 (Colo.1987). Each partner in a joint venture is an agent of the other partners with respect to the joint venture. See Ball v. Carlson, 641 P.2d 303, 305 (Colo.App.1981).

Applying these principles to the facts of this case, the agreement created a joint venture in which the Foundation and Fey were partners. Hence, the ALJ correctly determined that the Foundation was an agent of Fey and Fey was an agent of the Foundation. No facts in the record suggest the existence of an agency agreement between the Foundation and the joint venture. The record discloses no evidence of a mutual agreement, explicit or implicit, between the Foundation and the joint venture to enter into an agency relationship. Thus, the ALJ’s findings of fact support her conclusion that the joint venture was not an agent or a subagent of Denver. Because Zoofest tickets were not sold by an agent of Denver, but were sold by the joint venture, the ALJ did not abuse her discretion in holding that the Zoofest concert series was subject to the seat tax.

The court of appeals reasoned that the Foundation was the “dominant” partner in the joint venture and that this allocation of duties in the joint venture contract rendered Fey an agent of the Foundation. We disagree with the court of appeals’ characterization of the Foundation as the “dominant” partner. Under the agreement, seventy percent of the profits and losses were allocated to Fey, and Fey possessed the authority to “make all decisions concerning the actual operation and production of the Event.” In addition, the agreement stated that Fey was an independent contractor of the Foundation rather than an employee. “A true independent contractor is the very antithesis of a servant.” Reuschlein & Gregory, supra, § 2, at 5. The ALJ found no facts to support a conclusion that the Foundation and the joint venture manifested a mutual intent to enter into an agency agreement. See Stortroen, 736 P.2d at 395. Because the ALJ’s findings of fact do not support the court of appeals’ conclusion that the Foundation and the joint venture entered into an agency relationship providing for control and operation of the Zoofest concert series to be exercised by Denver or its agent, the Foundation, we hold that the ALJ did not abuse her discretion when she concluded that the joint venture was not a subagent of Denver. Thus, we reverse the judgment of the court of appeals.

III.

In summary, we hold that the Zoofest concert series is not eligible for exemption from the Denver seat tax because the seller of tickets to the concert series was the joint venture, which neither acted on behalf of Denver nor was controlled by Denver. We therefore reverse the judgment of the court of appeals and remand this case to the court of appeals with directions to reinstate the judgment of the district court requiring the joint venture to pay the seat tax.

SCOTT, J., specially concurs.

1 . D.R.M.C. § 53-345 defines "admission” as "the right to an entrance ... to any entertainment, amusement, athletic event, exhibition or other production or assembly staged, produced, convened or held at or on any facility or property owned or leased by the city.” Section 53-345 defines "vendor” as "a person making a sale to a purchaser of the taxable privilege of admission.”

2 . Taxes and fees were to be paid out of ticket proceeds. If the ticket proceeds were insufficient to cover these costs, Fey was to assess each party its share of the losses with the Foundation paying thirty percent and Fey paying seventy percent.

3 . Fey first contacted the Denver Department of Revenue before reaching a final agreement with the Foundation. On that occasion, Fey presented the Department with a draft of the proposed agreement between Fey and the Foundation. This draft was not structured as a joint venture but as a contract in which the Foundation retained the services of Fey. The record reflects that the Department suggested to Fey that the formation of a joint venture might permit Fey to avoid collecting seat taxes. Although Fey amended the contract so that the final agreement created a joint venture, the Department, determined that the creation of the joint venture did not exempt Zoofest from the seat tax.

4 .C.R.C.P. 106(a)(4) provides in pertinent part:

Where any governmental body or officer or any lower judicial body exercising judicial or quasi-judicial functions has exceeded its jurisdiction or abused its discretion, and there is no plain, speedy and adequate remedy otherwise provided by la\y:

(I) Review shall be limited to a determination of whether the body or officer has exceeded its jurisdiction or abused its discretion, based on the evidence in the record before the defendant body or officer.

5 . The issues as framed on certiorari are:

1. Whether the court of appeals erred in holding that a joint venture agreement between Fey and the Denver Zoological Foundation to promote a concert series made the joint venture an agent of the Foundation.

2. Whether the court erred by ruling that the tickets sold to the concerts were not subject to the Denver seat tax.