Simpson v. Richmond Worsted Spinning Company

Supreme Judicial Court of Maine · 1929 · Corporations

128 Me. 22 (1929)

Updated August 22, 2026

CorporationsJoint adventurePartnershipReleaseFiduciary dutyAccountingfull disclosurefraud

Facts

Simpson and Pond jointly acquired a sixty-day option on a mill property, with both named as optionees, after discussing a plan to establish a yarn-spinning business in which each expected some interest. Pond helped obtain the option and tried to finance the venture, while Simpson later negotiated separately with Haddon and Smeeton and agreed to transfer the option for consideration that ultimately amounted to $40,000 to Simpson. Pond, not told the terms of Simpson's agreement, signed a release for $1,000 and later learned of the undisclosed arrangement, after which he demanded an accounting. In the pleadings, Pond admitted Simpson's allegation that Simpson had become a member of the Richmond Worsted Spinning Company partnership.

Issue

Whether Pond and Simpson were joint adventurers in the option so that Simpson owed Pond fiduciary duties of full disclosure, and if so, whether Pond's release barred him from recovering part of the proceeds Simpson received for the option. A related issue was whether Simpson was a partner within the terms of the release.

Rule

A joint adventure is an association of two or more persons to carry out a single business enterprise for profit, and whether such a relation exists depends on the parties' actual intention as shown by the whole arrangement and their conduct. Joint adventurers stand in a fiduciary relation and owe each other fair, open, honest disclosure; one adventurer may not secure secret profits by suppression of material facts and holds such gains for the common benefit according to their respective interests. The law presumptively gives joint adventurers equal interests in property acquired for the venture unless an agreement fixes unequal shares. A release executed in ignorance of material facts because of a co-adventurer's breach of disclosure duty does not bar an action for accounting.

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

In Cleveland, Nora Benton and Luis Moreno spent months planning to acquire a vacant warehouse and convert it into a specialty food market. Luis located the property and negotiated a 45-day purchase option naming both of them as optionees, while Nora paid the option fee and both expected to profit if the project moved forward, although they never settled the exact percentages of any future business profits.

If a dispute later arises over whether Nora and Luis were joint adventurers with respect to the option, which is the strongest argument that they were?

Explanation. A joint adventure exists when parties associate to carry out a single business enterprise for profit, and the relation may be implied from the whole arrangement and conduct. Joint holding of venture property plus contributions of money or services support that intent. A formal partnership agreement is unnecessary, exact future profit shares need not be settled to establish the venture as to the option, and equal cash contributions are not required.