Cardullo v. Landau

Supreme Judicial Court of Massachusetts · 1952 · Corporations

105 N.E.2d 843 (1952)

Updated August 22, 2026

Corporationsfiduciary relationshipsjoint adventurepartnershipdeceitreleasefiduciary dutyintent

Facts

The defendant induced the plaintiff to leave his job and manage a restaurant business, representing that the plaintiff would have an opportunity to buy a one-half interest in the corporation out of its profits. After the business prospered and the plaintiff sued to enforce the arrangement, the parties settled in writing in November 1946, and the plaintiff bought 35 shares based on the defendant's representation that all 70 shares had cost $48,000, when in fact they had cost $41,782.95. Later, in December 1947, the plaintiff bought the defendant's remaining 35 shares, and in January 1948 gave the defendant a broad general release. The plaintiff later learned of the earlier overstatement of cost and sought to recover the defendant's alleged secret profit.

Issue

Did the evidence support a finding that the parties were in a fiduciary relationship, as partners or joint adventurers, so that the defendant's overstatement of his stock cost constituted a recoverable secret profit notwithstanding the later release? Also, could the plaintiff recover for deceit on this record?

Rule

A fiduciary relationship between parties in a business venture here exists only if they intended to associate as partners or joint adventurers. As between the parties, joint adventure, like partnership, is a matter of intent; it is not established merely because one party finances the enterprise, the other manages it, they use the word partnership, or they become stockholders. A deceit claim also requires proof of damage.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Boston, Nolan Pierce agreed to buy all shares of a small catering corporation. He hired Elena Ortiz to run daily operations at a salary, and told her she could acquire half the stock from future profits; Elena contributed no money, could resign whenever she wished, and their arrangement said nothing about losses if the business failed.

If Nolan later sells Elena half the shares after falsely overstating his own purchase price, what is Elena's strongest argument for imposing fiduciary duties on Nolan, and how should a court likely rule?

Explanation. The controlling rule is that, as between the parties, partnership or joint adventure depends on intent to associate as such. Here, the financier supplied the capital, Elena was a salaried manager, she made no capital contribution, could quit at will, and there was no provision for losses. Under the majority's reasoning, those facts indicate employment plus a right to purchase stock out of profits, not a fiduciary relationship based on partnership or joint adventure.