Meinhard v. Salmon
164 N.E. 545


PROCEDURE: Asserting that his outside business activities were not part of an agreed upon joint venture, defendant partner appealed from a judgment in which the Appellate Division of the Supreme Court in the First Judicial Department (New York) held that defendant partner was required to split profits with plaintiff partner.

FACTS: Salmon (D) leased a hotel building from Louisa Gerry to convert it into a shopping and office building. At the same time, Salmon (D) entered into a joint venture with Meinhard (P) to finance one-half of the conversion expenses in exchange for a share of the profits. Each party bore equally any or the business' losses, but Salmon (D) possessed all management rights. When the lease approached termination, Elbridge Gerry, who had acquired the lease rights, planned to lease the property, along with other adjoining property he owned, to a developer intending to demolish the building and build a new building on the property. Unable to secure the necessary financing for his construction plans, the developer approached Salmon (D) about joining his project. Salmon (D) allowed his original lease with Louisa to terminate and executed a new lease between Elbridge and Salmon's (D) realty company. Salmon (D) never informed Meinhard (P) of the arrangement. Upon learning of the new lease, Meinhard (P) demanded that the lease was the joint venture's property. When Salmon (D) refused to hold the lease in trust, Meinhard (P) sued. A referee declared the new lease to be the property of the joint venture, and awarded Meinhard (P) a one-fourth interest.

ISSUE: Is a joint adventurer required to inform another co-adventurer of a business opportunity that occurs as a result of participation in a joint venture?


RULE: Coadventurers were subject to fiduciary duties akin to those of partners.


HOLDING: A joint venture existed in which two partners pooled their money in order to lease a building for shops and offices. Defendant partner was more business savvy and, in an effort to increase his wealth, he entered into an agreement with another businessperson to purchase surrounding property as a leasehold estate. The specifics of this transaction were not disclosed to plaintiff partner, and he subsequently sued for breach of the joint venture agreement when he discovered the transaction. Litigation ensued and plaintiff received a substantial judgment for breach of contract. Upon final determination, the court affirmed the judgment, holding that defendant would not have been in the rewarding leasehold position if it were not for the joint venture. Accordingly, after lessening stock distribution, the court reaffirmed the lower tribunal's finding on behalf of the plaintiff. The court affirmed the judgment as modified on the grounds that plaintiff was entitled to proceeds resulting from defendant's purchase of a leasehold estate where defendant's lucrative position arose from the creation of a joint venture.