Review the case of Meinhard v. Salmon. Suppose that Salmon had disclosed Gerry's proposal to Meinhard, who had said that he was not interested. Would the result in this case have been different? Explain your answer.
Walter Salmon negotiated a twenty-year lease for the Hotel Bristol in New York City. To pay for the conversion of the building into shops and of?ces, Salmon entered into an agreement with Morton Meinhard to assume half of the cost. They agreed to share the pro?ts and losses from the joint ven-ture (a joint venture is similar to a partnership but typically is created for a single project, whereas a partnership usually involves an ongoing business), but Salmon was to have the sole power to manage the building. Less than four months before the end of the lease term, the building’s owner approached Salmon about a project to raze the converted structure and construct a new building. Salmon agreed and signed a new lease in the name of his own business, Midpoint Realty Company, without telling Meinhard. When Meinhard learned of the deal, he filed a suit against Salmon. From a judgment in Meinhard’s favor, Salmon appealed. Meinhard v. Salmon Court of Appeals of New York, 249 N.Y. 458, 164 N.E. 545 (1928). ISSUE Did Salmon breach his ?duciary duty of loyalty to Meinhard? DECISION Yes. The Court of Appeals of New York held that Salmon had breached his ?duciary duty by failing to inform Meinhard of the business opportunity and secretly taking advan-tage of it for himself. The court therefore granted Meinhard an interest “measured by the value of half of the entire lease.” REASON The court stated, “Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the ?nest loyalty.” Salmon’s conduct excluded Meinhard from any chance to compete and from any chance to enjoy the opportunity for bene?t. As a partner, Salmon was bound by his “obligation to his copartners in such dealings not to separate.