May 15, 2017 · Meinhard v. Salmon Case Brief. Statement of the facts: Salmon and Meinhard entered into a joint venture at the same time Salmon entered into a 20 year commercial lease with the Bristol hotel. The agreement between Salmon and Meinhard outlined that Meinhard would pay half of the operating and managing expenses to Salmon, while Salmon paid …
View Full Point of Law. Facts. Walter J. Salmon (Defendant) entered into a lease for a hotel. Defendant, while in course of treaty with the lessor as to the execution of the lease, was in course of treaty with Meinhard (Plaintiff), for the necessary funds. Plaintiff and Defendant were involved in a joint venture in regards to the property, for better or worse.
The lessee undertook to change the hotel building for use as shops and offices at a cost of $200,000. Alterations and additions were to be accretions to the land. Salmon, while in course of treaty with the lessor as to the execution of the lease, was in course of treaty with [*462] Meinhard, the plaintiff, for the necessary funds. The result ...
Facts. Salmon (defendant) executed a 20-year lease (Bristol Lease) for the Bristol Hotel which he intended to convert into a retail building. Concurrent with his execution of the Bristol Lease, Salmon formed a joint venture with Meinhard (plaintiff). The joint venture’s terms provided that Meinhard would pay Salmon half the amount required to ...
Conclusion: The Court held that Meinhard was entitled to proceeds resulting from Salmon's purchase of a leasehold estate where Salmon's lucrative position arose from the creation of a joint venture. Salmon would not have been in the rewarding leasehold position if it were not for the joint venture.
Judge Cardozo described a fiduciary duty as “Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.” A fiduciary owes a duty of care to execute his or her duties in an informed manner and to act as an ordinary prudent person.
Meinhard claimed that his former business partner, Salmon, had violated a fiduciary duty by taking an opportunity to renew a lease in his own name without sharing the benefits.
An individual named as a trust or estate trustee is the fiduciary, and the beneficiary is the principal. Under a trustee/beneficiary duty, the fiduciary has legal ownership of the property or assets and holds the power necessary to handle assets held in the name of the trust.
Meinhard claimed that his former business partner, Salmon, had violated a fiduciary duty by taking an opportunity to renew a lease in his own name without sharing the benefits. In 1902, Salmon bought a 20-year lease for the Hotel Bristol, owned by Elbridge Thomas Gerry, at 5th Avenue and 42nd Street in New York. Salmon wished to convert the hotel into shops and offices. To raise money, he entered a joint venture with Meinhard. They put the terms of their relationship in writing. Meinhard provided the investment capital while Salmon managed the business. The first five years, Meinhard would receive 40% of the profits and 50% every year after until the twentieth year. Meinhard was given the sole power to assign the lease during the term of the venture. The venture was created to terminate at the end of the lease.
Initially, Salmon was unhappy about the decision. But when the Great Depression began shortly after the decision, Salmon came to view his loss as a surprise victory. Since Meinhard was now a half owner in the joint enterprise, he was not only entitled to half of the profits but also required to pay half of the losses. During much of the Great Depression, this property lost money. Salmon's finances were thus assisted by Meinhard's financial contributions.
It held that Salmon, as the managing partner, owed Meinhard, as the investing partner, a fiduciary duty, and that this included a duty to inform Meinhard of the new leasing opportunity. Joint venturers owe each other the highest duty of loyalty and Salmon, as managing partner has assumed a responsibility by which Meinhard must rely on him to manage the partnership. As Chief Judge Benjamin Cardozo said,
A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior… the level of conduct for fiduciaries [has] been kept at a level higher than that trodden by the crowd.
A three-judge dissent, written by Judge Andrews, contended that any duty following from the partnership ended at the end of the twenty-year period; because the partnership was created to manage the building for the twenty-year term, the dissent felt that deals involving events to occur after the expiration of that term were of no matter to the partnership.