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Court of Appeals of New York
December 4, 1928, Argued ; December 31, 1928, Decided
No Number in Original
[*461] [**545] On April 10, 1902, Louisa M. Gerry leased to the defendant Walter J. Salmon the premises known as the Hotel Bristol at the northwest corner of Forty-second street and Fifth avenue in the city of New York. The lease was for a term of twenty years, commencing May 1, 1902, and ending April 30, 1922. The lessee undertook to [**546] change the hotel building for use as shops [***8] 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 was a joint venture with terms embodied in a writing. Meinhard was to pay to Salmon half of the moneys requisite to reconstruct, alter, manage and operate the property. Salmon was to pay to Meinhard 40 per cent of the net profits for the first five years of the lease and 50 per cent for the years thereafter. If there were losses, each party was to bear them equally. Salmon, however, was to have sole power to "manage, lease, underlet and operate" the building. There were to be certain pre-emptive rights for each in the contingency of death.
The two were coadventurers, subject to fiduciary duties akin to those of partners ( King v. Barnes, 109 N. Y. 267). As to this we are all agreed. The heavier weight of duty rested, however, upon Salmon. He was a coadventurer with Meinhard, but he was manager as well. During the early years of the enterprise, the building, reconstructed, was operated [***9] at a loss. If the relation had then ended, Meinhard as well as Salmon would have carried a heavy burden. Later the profits became large with the result that for each of the investors there came a rich return. For each, the venture had its phases of fair weather and of foul. The two were in it jointly, for better or for worse.
When the lease was near its end, Elbridge T. Gerry had become the owner of the reversion. He owned much other property in the neighborhood, one lot adjoining the Bristol Building on Fifth avenue and four lots on Forty-second street. He had a plan to lease the entire tract for a long term to some one who would destroy the buildings then existing, and put up another in their place. In the latter part of 1921, he submitted such a project to several capitalists and dealers. He was unable to carry it through with any of them. Then, in January, 1922, with less than four months of the lease to run, he approached the defendant Salmon. The result was a new lease to the Midpoint Realty Company, which is owned and controlled by Salmon, a lease covering the [*463] whole tract, and involving a huge outlay. The term is to be twenty years, but successive covenants [***10] for renewal will extend it to a maximum of eighty years at the will of either party. The existing buildings may remain unchanged for seven years. They are then to be torn down, and a new building to cost $ 3,000,000 is to be placed upon the site. The rental, which under the Bristol lease was only $ 55,000, is to be from $ 350,000 to $ 475,000 for the properties so combined. Salmon personally guaranteed the performance by the lessee of the covenants of the new lease until such time as the new building had been completed and fully paid for.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
249 N.Y. 458 *; 164 N.E. 545 **; 1928 N.Y. LEXIS 830 ***; 62 A.L.R. 1
Morton H. Meinhard, Respondent, v. Walter J. Salmon et al., Appellants
Prior History: [***1] Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 28, 1928, modifying and affirming as modified a judgment in favor of plaintiff entered upon the report of a referee.
Meinhard v. Salmon, 223 App. Div. 663, modified.
Disposition: Judgment modified, etc.
lease, renewal, partnership, enterprise, partner, coadventurer, new lease, adventure, venture, lessor, manage, reversion, profits, equitable interest, good faith, expectancy, fiduciary, loyalty, parties, Hotel, joint venture, negotiations, alterations, adjoining, lessee, tenant, terms, rent, twenty years, good will
Business & Corporate Law, General Partnerships, Management Duties & Liabilities, General Overview, Governments, Fiduciaries, Joint Ventures, Management Duties & Liabilities, Fiduciary Duties, Duty of Good Faith & Loyalty, Contracts Law, Types of Contracts, Lease Agreements, Dissolution & Winding Up, Dissolution, Rights of Partners, Inspection Rights, Management & Voting, Transfers of Interests