Application-Alston/Lucy

Get Started. It's Free
or sign up with your email address
Rocket clouds
Application-Alston/Lucy by Mind Map: Application-Alston/Lucy

1. Fiduciary Duty

1.1. Duty of Loyalty

1.1.1. Partners owe each other loyalty. Placing the interests of the partnership above their own, holding any profit or benefit from the partnership as a trustee of the partnership, and avoiding any conflict between the partnership and the individual are all requirements under the duty of loyalty

1.1.1.1. Salmon was not only a co-adventurer, but a managing co-adventurer, for him the rule of loyalty is relentless and supreme

1.1.2. Gerry made the offer to Salmon while Salmon was still in a partnership with Meinhard, under the current lease

1.1.2.1. Gerry was ignorant of the partnership between Salmon and Meinhard, but made the offer to Salmon because he was the owner of the lease

1.1.2.1.1. When an opportunity to benefit from the property was presented to Salmon, it was his duty to recognize it as an opportunity for the partnership, rather than for himself

1.1.2.1.2. Meinhard and Salmon had a long and successful partnership that had been established in writing. Both parties had a Fiduciary Duty to remain loyal, and Meinhard had done his part for the whole of the joint venture

1.2. Communication

1.2.1. The partners owe each other information loyalty. If an opportunity or risk arises, it is the duty of either partner to inform the other

1.2.2. Gerry, unaware of the partnership between Meinhard and Salmon, presented a profitable redevelopment project to Salmon

1.2.2.1. Because Salmon and Meinhard were co-adventurers, Salmon had the fiduciary responsibility to inform Meinhard of the opportunity

1.2.2.1.1. Salmon was not required to present Gerry's offer as a deal for both of the partners, but, at a minimum, his duty was to inform Meinhard of the opportunity

2. Perspective of the Partners

2.1. Meinhard

2.1.1. Argued that Salmon owed him fiduciary duty of loyalty and that the lease belonged to the joint venture, especially because of their long-standing and successful partnership.

2.1.1.1. Meinhard sued Salmon (on grounds that the property belonged to the partnership) to have the lease transferred by the court to a constructive trust.

2.1.1.2. Meinhard argued that he could have offered better terms and financing to the lease but was not given the opportunity.

2.1.1.2.1. Additionally, Meinhard argued that as the expiration of the least neared its close, he assumed that the lessor was to extend the lease, since he had not heard otherwise and one would assume that if the business were coming to a close and his partnership were to vacate the land, he would have been informed.

2.2. Salmon

2.2.1. Argued that he did not act in bad faith because he expected the joint venture to terminate when the lease expired.

2.2.1.1. Salmon argued that the course of events were a mere coincidence and not intentional misconduct, since the owner of the land did not know about the partnership and Salmon was the “public” representative of business.

2.2.1.1.1. Essentially, Salmon believed that this opportunity was a NEW and distinct business proposal, not a reversion of the previous lease, to which he owned with Meinhard.

2.2.1.2. Additionally, he felt that as though Meinhard had given his capital to the business, he had given both his time and money, he had been the one to make the business a success, whereas Meinhard had been richly paid for his investment.

2.2.1.2.1. Perhaps most importantly, Salmon did not believe that Meinhard was an “interested trustee” since he had signed over all rights to the business to his wife in 1917 and Salmon made all subsequent payments to the wife instead of Meinhard. In fact, before bringing action against Salmon, Meinhard’s wife had resigned the business back to Meinhard. Because of this, Salmon did not believe Meinhard to be his partner and he did not believe he owed him duty of loyalty owed to coadventurers in a business venture.

3. The Court's Opinion

3.1. Majority Opinion

3.1.1. Both the lower court and the NY court of appeals held that coadventurers owe each other a fiduciary duty, of at the very least, communication of business affairs, and disclosure of new opportunities.

3.1.1.1. Even though Salmon was the public partner through his active management role, by keeping the opportunity and the transaction secret from his partner, he violated the terms of their partnership agreement.

3.1.1.1.1. Members of a joint venture owe the highest level of fiduciary duty to the other shareholding members.

3.2. Dissenting Opinion

3.2.1. The dissenting judge argued that fiduciary duty was not violated since the new lease would not start until the fulfillment of the initial lease.

3.2.1.1. Additionally, the dissenting opinion concluded that Salmon had fulfilled his fiduciary duty to Meinhard throughout the duration of the lease by managing the property, distributing profits, and respecting the terms of the original contract until the venture was schedule to terminate.