164 N.E. 545
SYNOPSIS: Asserting that his outside business activities were not part of an agreed upon joint venture, defendant partner appealed from a judgment in which the Appellate Division of the Supreme Court in the First Judicial Department (New York) held that defendant partner was required to split profits with plaintiff partner.
- A joint venture existed in which two partners pooled their money in order to lease a building for shops and offices.
-Defendant partner 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 plaintiff partner, and he subsequently sued for breach of the joint venture agreement when he discovered the transaction.
- Litigation ensued and plaintiff received a substantial judgment for breach of contract.
-Upon final determination, the court affirmed the judgment, holding that defendant 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 plaintiff.
-Members of a partnership owe a duty of loyalty to each other and must disclose opportunities that arise in order for both to have an equal chance to take advantage of it.
-Joint adventurers owe to one another the duty of the finest loyalty while the enterprise continues.
-Partners in a joint venture have a fiduciary duty to e/o. When an opportunity arises that can benefit both partners but one takes advantage of it without informing the other, fiduciary duty is breached.
One partner cannot, directly or indirectly:
1. Use partnership assets for his own benefit.
2. In conducting partnership business, can not take any profit for himself.
3. Carry own the business of the partnership for his own private advantage.
4. Cannot carry on competitive/rival business against him.
5. Cannot secure for himself that which it is his duty to obtain for the firm.
OUTCOME: The court affirmed the judgment as modified on the grounds that plaintiff was entitled to proceeds resulting from defendant's purchase of a leasehold estate where defendant's lucrative position arose from the creation of a joint venture.
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?