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Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm's length are forbidden to those bound by fiduciary ties. 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.
A joint venture existed in which two partners pooled their money in order to lease a building for shops and offices. Salmon (defendant) was more business savvy and, in an effort to increase his wealth, he entered into an agreement with another businessperson to purchase surrounding property as a leasehold estate. The specifics of this transaction were not disclosed to Meinhard (plaintiff), and he subsequently sued for breach of the joint venture agreement when he discovered the transaction. Litigation ensued and Meinhard received a substantial judgment for breach of contract. The case was appealed.
Was Meinhard 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?
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. Accordingly, after lessening stock distribution, the Court reaffirmed the lower tribunal's finding on behalf of the Meinhard.