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IN THE COURT OF APPEALS OF IOWA No. 1-862 / 11-0367 Filed December 21, 2011

MICHAEL A. HILLMAN and PATRICIA J. ROZINEK, Plaintiffs-Appellants, vs. SCOTT CANNON, LORI CANNON, and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendants-Appellees. ________________________________________________________________

Appeal from the Iowa District Court for Fayette County, John Bauercamper, Judge.

The plaintiffs appeal a district court ruling in a personal injury action that found no partnership existed between the defendants and alleged tortfeasor. AFFIRMED.

Carter Stevens, Waterloo, and Harlan Holm and H. Daniel Holm Jr. of Ball, Kirk & Holm, P.C., Waterloo, for appellants. Douglas Henry, Dubuque, and Karla J. Shea of McCoy, Riley, Shea & Bevel, P.L.C., Waterloo, for appellees.

Considered by Vaitheswaran, P.J., and Potterfield and Doyle, JJ.

2 DOYLE, J. The issue presented by this case is whether Scott and Lori Cannon and their son-in-law, Christopher Lundgren, formed a partnership under Iowa Code section 486A.202 (2009) in their operation of a dairy farm. We agree with the district court that no partnership was formed and affirm its judgment so holding. I. Background Facts and Proceedings. Scott and Lori Cannon own a farm in northeast Iowa. In addition to

growing crops, the Cannons run a dairy operation, as well as a custom chopping and baling business on their farm. neighboring farm. In May 2007, Christopher Lundgren, who was engaged to the Cannons' daughter, Kimberly, expressed an interest in becoming involved in the dairy operation. Scott was around fifty years old at the time and was "looking to slow down." He and Lundgren discussed forming a partnership but ultimately decided not to. Instead, they agreed Lundgren would purchase a group of cows to bring into the Cannons' already-existing herd, and they would then own the entire herd jointly. Lundgren also purchased an interest in several pieces of machinery used by the Cannons in the dairy operation. Lundgren secured a loan to finance the purchase of the cows and machinery, which the Cannons co-signed. Lundgren and Scott each participated in the milking of the cows, with the assistance of several employees. They took turns paying the employees, with Lundgren paying them one week and the Cannons the next. Lundgren did not withhold taxes from the employees' checks, while the Cannons did. Lundgren and the Cannons split other expenses of the dairy operation as well, including They also have a beef operation on a

3 veterinary bills, feed for the cows, and routine maintenance of equipment used in the operation. Almost all of the companies that did business with Lundgren and Scott divided their bills in half and billed them separately. They also received separate checks for the milk produced by their herd. On October 6, 2008, Lundgren was driving to the Cannons' farm for the evening milking when he was involved in an accident with a motorcycle driven by Michael Hillman. Hillman and his passenger, Patricia Rozinek, were both injured. They sued Lundgren, claiming he was at fault for the accident. The petition was later amended to allege the Cannons were vicariously liable for Lundgren's negligence because they were his partners in the dairy operation on their farm. The Cannons filed two motions for summary judgment, both of which were denied by the district court. The parties subsequently entered into a stipulation in which they agreed that Lundgren's insurance company would pay $150,000 each to Hillman and Rozinek in exchange for a full release of Lundgren's liability for the accident. Lundgren was then dismissed from the suit. The parties further agreed that if the Cannons were found to be vicariously liable to the plaintiffs by virtue of a partnership with Lundgren, their insurance company would pay $250,000 each to Hillman and Rozinek. Thus, the sole issues presented to the district court at the bench trial in February 2011 were whether Lundgren was in a partnership with the Cannons and whether he was acting within the scope of that partnership at the time of the accident. The court found the parties had not formed a partnership under Iowa Code section 486A.202, reasoning:

4 There was no holding out to their lender, to the public, to the purchasers of their products, or to suppliers, that they were partners. In fact, they went out of their way to represent themselves as separate business entities and ask to be dealt with separately. None of the traditional indicia of partnership control of assets is present, such as using a firm or business name, keeping separate books for the business, accounting for the capital accounts of the partners, and filing partnership income tax returns. The evidence shows that the defendants Cannon consistently treated the dairy herd as property jointly owned by two distinct sole proprietorships, each operated by Scott Cannon and Christopher Lundgren, respectively. . . . The evidence is clear that the enterprise has never made a traditional calculation of profit and loss by the method of: income less expenses equals profit or loss. The respective shares of gross sales and gross expenses have all been accounted for in the parties' own tax returns, along with other expenses, unique to each and uncommon to the other, to determine their respective profit and loss. The court accordingly dismissed the plaintiffs' claims against the Cannons . The plaintiffs appeal. II. Scope and Standards of Review. When reviewing the judgment of a district court after a bench trial, our review is for the correction of errors at law. See Hansen v. Seabee Corp., 688 N.W.2d 234, 237 (Iowa 2004). The trial court's findings have the force of a jury verdict and are binding on the reviewing court if based upon substantial evidence. Id. We are not bound by the trial court's determinations of law,

however, nor precluded from examining whether the court applied erroneous rules of law that materially affected its decision. Chariton Feed & Grain, Inc. v. Harder, 369 N.W.2d 777, 782 (Iowa 1985).

5 III. Discussion. In order to establish that the Cannons and Lundgren created a partnership in their operation of the dairy farm, the plaintiffs were required to show: (1) an intent by the parties to associate as partners; (2) a business; (3) earning of profits; and (4) co-ownership of profits, property, and control. Id. at 785; Thorp Credit, Inc. v. Wuchter, 412 N.W.2d 641, 647 (Iowa Ct. App. 1987). The second and third elements are uncontested. We will accordingly focus on the remaining two. A. Intent to Associate. The district court found the Cannons and Lundgren did not intend to associate as partners because "[t]here was no holding out to their lender, to the public, to the purchasers of their products or to suppliers, that they were partners. In fact, they went out of their way to represent themselves as separate business entities." The plaintiffs argue this finding was in error because it "is in direct conflict with the plain language of

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