The New York Fiduciary Concept in Incorporated Partnerships and Joint Ventures
![handle is hein.journals/flr30 and id is 313 raw text is: THE NEW YORK FIDUCIARY CONCEPT IN
INCORPORATED PARTNERSHIPS AND
JOINT VENTURES
FRANCIS X. CON WAY*
THEt basic problem considered in this article is fairly limited in scope.
It concerns the almost total failure of the New York courts to
enforce fiduciary obligations, or agreements giving rise to such, between
the co-owners of a business venture where they have seen fit to carry
it on as partners or joint adventurers under the corporate form.
The prevalent view of the New York courts regarding this problem was
epitomized four years ago in a pithy statement by the then Chief Judge
of the New York Court of Appeals, in Wcisman v. Awnzair Corp. of
America.' Refusing to recognize the creation of a joint venture
corporation by the co-owners of a business, Judge Conway stated:
[T]he rule is well settled that a joint venture may not be carried on by
individuals through a corporate form.2
The present Chief Judge, Desmond, in a lone dissent, expressed what
this writer and, it would appear, the majority of jurisdictions,3 consider
to be the more logical, and certainly the more realistic approach:
* Associate Professor of Law, Fordham University, School of Law.
1. 3 N.Y.2d 444, 144 N.E.2d 415, 165 N.Y.S.2d 745 (1957).
2. Id. at 449, 144 N.E.2d at 413, 165 N.Y.S.2d at 749. Judge Conway emphasized the
word through apparently to make it clear, as he stated later in the majority opinion,
that corporations may be parties to a joint venture. The general rule at common law
denied corporations the power to be partners, since this would involve an abdication by the
board of directors of their exclusive right to manage corporate affairs, partners being
mutual general agents for each other while acting in the general business of the partnership.
No such broad agency exists in the case of the joint venture, which, for our purpov-zs, may
be defined as an arrangement between or among individual firms or corporations to
carry on for profit a single business enterprise, be it great or small. Being thus limited in
scope, the extent of the legal incidents are similarly limited, such as the fiduciary duty and
the power of representation of the adventurers. Compared to the partnership, the joint
venture is a relatively modem concept. Generally speaking, the prn dple of the law
of partnership apply, at least by analogy, Mechem, The Law of Joint Adventure, 15 Blinn.
L. Rev. 644 (1931); Comment, The Joint Venture: Problem Child of Partner-hip, 33
Calif. L. Rev. 860, 870-74 (1950). For purposes of this paper any distinction between the
partnership and joint venture may be ignored. In fact the distinction mentioned above is
today somewhat academic and in 1963 will be obsolete in New York. See Comment, Joint
Venture or Partnership, 1S Fordham L. Rev. 114, 127-23 n.75 (1949) where it is said: How-
ever, since the distinction between the power of representation in the two relations is
principally a matter of degree, it would seem that the joint venture concept has merely
furnished the courts with a means of holding intra vires a transaction which by precedent
would be considered as ultra vires. There is no practical business reason why a corporation
should not be permitted to be a partner. Note, The Corporate Partner: An Exercise In
Semantics, 35 N.Y.U.L. Rev. 54S (1960). The recently enacted N.Y. Bus. Corp. Law
§ 202(15) provides that a corporation shall have power to be a partner.
3. Ballantine, Corporations § 183(6), at 423 (rev. ed. 1946); 1 O'Neal, Close Corpo-
rations § 1.06, at 11 n34 (1958).](ViewImageLocal?handle=hein.journals/flr30&div=19&collection=&method=preview&ext=.png&size=3)
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The New York Fiduciary Concept in Incorporated Partnerships and Joint Ventures
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