Corporations

Brief

Meinhard v. Salmon

Procedural History:

• Meinhard initiated the litigation, suing for an interest in the new, expanded development

Facts:

• Walter Salmon was a real estate developer and wanted to rent a 7 story building for a 20 year term.
• Salmon could not afford the improvements needed.
• Salmon ended up leasing the building from Gerry and also entered a separate agreement with Morton Meinhard, a wool merchant.
• The agreement
  • Meinhard provided the money for the renovations in exchange for the profits from the building over the court of the 20 year lease.
  • The two were to share any loses equally but that Salmon had the sole power to manage the building.
  • Right before the 20 year lease was going to end, Gerry approached Salmon with a proposition.
  • Gerry, who also owned 5 other buildings in the area wanted someone to lease all the buildings, eventually destroy the existing properties to have a single building built.
  • Salmon knew this was valuable real estate.
  • Salmon agreed and entered into an agreement with Gerry without Meinhards knowledge.
  • The lease went through Midpoint Realty, which is owned by Salmon.
  • It was signed and delivered on January 25, 1922.
  • When Meinhard found out about it he made a demand on the defendants that the lease be held in trust as an asset of the venture, making offer upon the trial to share the personal obligations incidental to the guaranty.
    • This was refused.

Issue:

• Is Meinhard entitled to partnership in the new venture?

Holding:

• Yes.

Reasoning:

• Coadventures owe to one another the finest loyalty.
• The trouble with his conduct is that he excluded his coadventurist.
• He was under a duty to concede.
• The fact that Salmon was in fact in control of business operations made it more apparent that he needed to disclose the terms of the leasing agreement.
• One partner may not appropriate to his own use a renewal of a lease, though its term is to begin at the expiration of the partnership.
• If the new deal had been for a building far removed then this might not be an issue but because it was an extension and expansion of the current building, he owed loyalty.

Dissenting:

• No general partnership, only a joint venture.
• If this were a partnership, he would agree with the result.
• There was no fraud, no deceit, no calculated secrecy found.