Meinhard v. Salmon

Brief Fact Summary.

Meinhard (P) and Salmon (D) were co-adventurers on a lease to a hotel. Prior to the expiration of the lease, Salmon (D), without Meinhard’s (P) awareness, agreed to lease the same and adjacent property.

Synopsis of Rule of Law.

While still partnered, joint adventurers owe a duty of finest loyalty and a standard of great discretion towards one another.

Facts.

Geery leased to Salmon (D) a New York hotel on Fifth Avenue for twenty years. Meinhard (P) entered into a joint venture with Salmon (D), contributing money while Salmon (D) ran the enterprise. Near the end of the lease, Gerry, who owned the hotel and adjacent property, wanted to destroy all the buildings to construct one large building. Gerry couldn’t find a new lease to agree to this. Instead, he approached Salmon (D) with the plan when there was less than four months left on Salmon’s (D) joint lease with Meinhard (P). Salmon (D) ended up with a twenty year lease to own and control Midpoint Realty Company. Meinhard (P) was never informed of any of this. When he learned of it, Meinhard (P) demanded Salmon (D) hold the lease in a trust as an asset to the venture, but was refused. The following action awarded Meinhard (P) a 25% interest in the lease, one-half of his value in the hotel lease proportionate to the new lease, this was increased to 50% on appeal. Salmon (D) appealed stating he hadn’t breached duty to Meinhard (P).

Issue.

While still partnered, do join adventurers owe a duty of finest loyalty and a standard of great discretion towards one another?

Held.

(Cardozo, C.J.) Yes. While still partnered, joint adventurers owe a duty of finest loyalty and a standard of great discretion towards one another. Salmon (D) excluded his co-adventurer in this new opportunity. Likely, Salmon (D) thought that with the end of his lease with Meinhard (P) approaching soon, he owed no duty to Meinhard (P). However, the subject matter of the new lease involved the subject matter of the old one. In addition, Meinhard’s remedy should have been one share less than half of the shares in Midpoint Realty Company. Reversed, and new trial ordered.

Dissent.

(Andres, J.) The venture ended by its own express terms. The contract made no provision for Meinhard (P) to continue to hold expectancy of partnership relations.

Discussion.

An important aspect in the partnership is broad fiduciary duty between partners. “Each partner is roughly a principal and an agent, a trustee and a beneficiary, towards the other because they have property, authority and confidence invested towards the other. They share profits, losses, and are held to each other’s actions. Without the protection of fiduciary duty, each is at the other’s mercy.†J. Crane.