Julian, Cornelia, and Sheila petitioned for a corporate charter for the purpose of conducting a retail shoe business. They complied with all the statutory provisions except having their charter recorded. This was simply an oversight on their part, and they felt that they had fully complied with the law. They operated the business for three years, after which time it became insolvent. The creditors desire to hold the members personally and individually liable. May they do so?
> W. J. Howey Co. and Howey-in-the-Hills Service, Inc., were Florida corporations under direct common control and management. The Howey Company owned large tracts of citrus acreage in Florida. The service company cultivated, harvested, and marketed the cro
> Texas Gulf Sulphur Company (TGS) was a corporation engaged in exploring for and mining certain minerals. A particular tract of Canadian land looked very promising as a source of desired minerals, and TGS drilled a test hole on November 8. Because the cor
> Dirks was an officer of a New York broker-dealer firm who specialized in providing investment analysis of insurance company securities to institutional investors. On March 6, Dirks received information from Ronald Secrist, a former officer of Equity Fund
> Acme Realty, a real estate development company, is a limited partnership organized in Georgia. It is planning to develop a 200-acre parcel of land for a regional shopping center and needs to raise $ 1.25 million. As part of its financing, Acme plans to o
> Kemp & Beatley was a company incorporated under the laws of New York. Eight shareholders held the corporation’s outstanding 1,500 shares of stock. Petitioners Dissin and Gardstein together owned 20.33 percent of the stock, and each had been a longtime em
> Tretter alleged that his exposure over the years to asbestos products manufactured by Philip Carey Manufacturing Corporation caused him to contract asbestosis. Tretter brought an action against Rapid American Corporation, which was the surviving corporat
> Mildred, Deborah, and Bob each own one-third of the stock of Nova Corporation. On Friday, Mildred received an offer to merge Nova into Buyer Corporation. Mildred, who agreed to call a shareholders’ meeting to discuss the offer on the following Tuesday, t
> Zenith Steel Company operates a prosperous business. The board of directors voted to spend $20 million of the company’s surplus funds to purchase a majority of the stock of two other companies—Green Insurance Company and Blue Trust Company. Green Insuran
> Johnson Company, a corporation organized under the laws of State X, after proper authorization by the shareholders, sold its entire assets to Samson Company, also a State X corporation. Ellen, an unpaid creditor of Johnson Company, sues Samson Company on
> Cutler Company was duly merged into Stone Company. Yetta, a shareholder of the former Cutler Company, having paid only one-half of her subscription, is now sued by Stone Company for the balance of the subscription. Yetta, who took no part in the merger p
> Robert in Chicago entered into a contract to sell certain machines to Terry in New York. The machines were to be manufactured by Robert and shipped F.O.B. Chicago not later than March 25. On March 24, when Robert was about to ship the machines, he receiv
> (a) When may a corporation sell, lease, exchange, mortgage, or pledge all or substantially all of its assets in the usual and regular course of its business? (b) When may a corporation sell, lease, exchange, mortgage, or pledge all or substantially all o
> In early 1984, Royal Dutch Petroleum Company (Royal Dutch), through various subsidiaries, controlled approximately 70 percent of the outstanding common shares of Shell Oil Co. (Shell). On January 24, 1984, Royal Dutch announced its intention to merge She
> The shareholders of Endicott Johnson who had dissented from a proposed merger of Endicott with McDonough Corporation brought a proceeding to fix the fair value of their stock. At issue was the proper weight to be given the market price of the stock in fi
> All Steel Pipe and Tube is a closely held corporation engaged in the business of selling steel pipes and tubes. Leo and Scott Callier are its two equal shareholders. Scott is Leo’s uncle. Leo is one of the company’s two directors and is president of the
> Acme Corporation’s articles of incorporation require cumulative voting for the election of its directors. The board of directors of Acme Corporation consists of nine directors, each elected annually. (a) Peter owns 24 percent of the outstanding shares of
> Mitchell, Nelson, Olsen, and Parker, experts in manufacturing baubles, each owned fifteen of one hundred authorized shares of Baubles, Inc., a corporation of State X that does not permit cumulative voting. On July 7, 2008, the corporation sold forty shar
> Gore had been the owner of 1 percent of the outstanding shares of the Webster Company, a corporation since its organization ten years ago. Ratliff, the president of the company, was the owner of 70 percent of the outstanding shares. Ratliff used the shar
> X Corporation manufactures machine tools. Its two principal competitors are Y Corporation and Z Corporation. The five directors of X Corporation are Black, White, Brown, Green, and Crimson. At a duly called meeting of the board of directors of X Corporat
> Raphael, a minority shareholder of the Sample Corporation, claims that the following sales are void and should be annulled. Explain whether Raphael is correct. (a) Smith, a director of the Sample Corporation, sells a piece of vacant land to the Sample C
> Zenith Steel Company operates a prosperous business. In January, Zenith’s CEO and president, Roe, who is also a member of the board of directors, was voted a $1,000,000 bonus by the board of directors for valuable services he provided to the company duri
> The ABC Company, located in Chicago, contracted to sell a carload of television sets to Dodd in St. Louis, Missouri, on sixty days’ credit. ABC Company shipped the carload to Dodd. On arrival of the car at St. Louis, Dodd paid the freight charges and res
> Bernard Koch was president of United Corporation, a closely held corporation. Koch, James Trent, and Henry Phillips made up the three-person board of directors. At a meeting of the board, Trent was elected president, replacing Koch. At the same meeting,
> A, B, C, D, and E constituted the board of directors of the X Corporation. While D and E were out of town, A, B, and C held a special meeting of the board. Just as the meeting began, C became ill. He then gave a proxy to A and went home. A resolution was
> Klinicki and Lundgren, both furloughed Pan Am pilots stationed in West Germany, decided to start their own charter airline company. They formed Berlinair, Inc., a closely held Oregon corporation. Lundgren was president and a director in charge of develop
> Donald J. Richardson, Grove L. Cook, and Wayne Weaver were stockholders of Major Oil. They brought a direct action, individually and on behalf of all other stockholders of Major, against certain directors and other officers of the corporation. The compla
> Pritchard & Baird was a reinsurance broker. A reinsurance broker arranges contracts between insurance companies so that companies that have sold large policies may sell participations in these policies to other companies in order to share the risks. Prit
> Muller, a shareholder of SCM, brought an action against SCM over his unsuccessful negotiations to purchase some of SCM’s assets overseas. He then formed a shareholder committee to challenge the position of SCM’s management in that suit. To conduct a prox
> Riffe, while serving as an officer of Wilshire Oil Company, received a secret commission for work he did on behalf of a competing corporation. Can Wilshire Oil recover these secret profits and, in addition, recover the compensation Wilshire Oil paid to R
> Minority shareholders of Midwest Technical Institute Development Corporation, a closed-end investment company owning assets consisting principally of securities of companies in technological fields, brought a shareholder derivative suit against officers
> Neese, trustee in bankruptcy for First Trust Company, brings a suit against the directors of the company for losses the company sustained as a result of the directors’ failure to use due care and diligence in the discharge of their duties. The specific a
> A bylaw of Betma Corporation provides that no shareholder can sell his shares unless he first offers them for sale to the corporation or its directors. The bylaw also states that this restriction shall be printed or stamped upon each stock certificate an
> Jane sells and delivers to Gerald on June 1 certain goods and receives from Gerald at the time of delivery Gerald’s check in the amount of $9,000 for the goods. The following day, Gerald is petitioned into bankruptcy; and Gerald’s bank dishonors the chec
> Brown, the president and director of a corporation engaged in owning and operating a chain of motels, was advised, on what seemed to be good authority, that a superhighway was to be constructed through the town of X, which would be a most desirable locat
> Sayre learned that Adams, Boone, and Chase were planning to form a corporation for the purpose of manufacturing and marketing a line of novelties to wholesale outlets. Sayre had patented a self-locking gas tank cap but lacked the financial backing to mar
> Almega Corporation, organized under the laws of State S, has outstanding 20,000 shares of $100 par value nonvoting preferred stock calling for noncumulative dividends of $5 per year; 10,000 shares of voting preferred stock of $50 par value, calling for c
> Alpha Corporation has outstanding 400 shares of $100 par value common stock, which has been issued and sold at $105 per share for a total of $42,000. Alpha is incorporated in State X, which has adopted the earned surplus test for all distributions. At a
> Paul Bunyan is the owner of noncumulative 8 percent preferred stock in the Broadview Corporation, which had no earnings or profits in 2013. In 2014, the corporation had large profits and a surplus from which it might properly have declared dividends. How
> For five years, Henry and James had been engaged as partners in building houses. They owned the equipment necessary to conduct the business and had an excellent reputation. In March, Joyce, who previously had been in the same kind of business, proposed t
> Hyperion Company has an authorized capital stock of 1,000 shares with a par value of $100 per share, of which 900 shares, all fully paid, were outstanding. Having an ample surplus, Hyperion Company purchased from its shareholders 100 shares at par. Subse
> Doris subscribed for 200 shares of 12 percent cumulative, participating, redeemable, convertible, preferred shares of the Ritz Hotel Company with a par value of $100 per share. The subscription agreement provided that she was to receive a bonus of one sh
> XYZ Corporation was duly organized on July 10. Its certificate of incorporation provides for a total authorized capital of $1 million, consisting of ten thousand shares of common stock with a par value of $100 per share. The corporation issued for cash a
> Smith’s Food & Drug Centers, Inc. (SFD) is a Delaware corporation that owns and operates a chain of supermarkets in the Southwestern United States. Jeffrey P. Smith, SFD’s chief executive officer, and his family hold common and preferred stock constituti
> Henry and Mary entered into a written contract whereby Henry agreed to sell and Mary agreed to buy a certain automobile for $8,500. Henry drove the car to Mary’s residence and properly parked it on the street in front of Mary’s house, where he tendered i
> International Distributing Export Company (IDE) was organized as a corporation on September 7, 2008, under the laws of New York and commenced business on November 1, 2008. IDE formerly had existed as a sole proprietorship. On October 31, 2008, the newly
> Wood, the receiver of Stanton Oil Company, sued Stanton’s shareholders to recover dividends paid to them for three years, claiming that at the time these dividends were declared, Stanton was in fact insolvent. Wood did not allege that the present credito
> Olympic National Agencies was organized with an authorized capitalization of preferred stock and common stock. The articles of incorporation provided for a 7 percent annual dividend for the preferred stock. The articles further stated that the preferred
> Amalgamated Corporation, organized under the laws of State S, sends several traveling salespersons into State M to solicit orders, which are accepted only at the home office of Amalgamated Corporation in State S. Riley, a resident of State M, places an o
> Arthur, Barbara, Carl, and Debra decided to form a corporation for bottling and selling apple cider. Arthur, Barbara, and Carl were to operate the business, while Debra was to supply the necessary capital but was to have no voice in the management. They
> Wayne signed a subscription agreement for one hundred shares of stock of the proposed ABC Company, at a price of $18.00 per share. Two weeks later, the company was incorporated in a state that has adopted the Revised Act. A certificate was duly tendered
> Todd and Elaine purchased for $300,000 a building that was used for manufacturing pianos. Then, as promoters, they formed a new corporation and resold the building to the new corporation for $500,000 worth of stock. After discovering the actual purchase
> Ronald Nadler was a resident of Maryland and the chief executive officer of Glenmar Cinestate, Inc., a Maryland corporation, as well as its principal stockholder. Glenmar leased certain space in the Westridge Square Shopping Center, located in Frederick,
> C. A. Nimocks was a promoter engaged in organizing the Times Printing Company. On September 12, on behalf of the proposed corporation, he made a written contract with McArthur for her services as comptroller for a one-year period beginning October 1. The
> Sims contracted in writing to sell Blake 100 electric motors at a price of $100 each, freight prepaid to Blake’s warehouse. By the contract of sale, Sims expressly warranted that each motor would develop twenty-five brake horsepower. The contract provide
> Green & Freedman Baking Company (Green & Freedman) was a family-owned Massachusetts corporation that produced and sold baked goods. The terms of a collective bargaining agreement required Green & Freedman Baking Company to make periodic payments on behal
> Frank McAnarney and Joseph Lemon entered into an agreement to promote a corporation to engage in the manufacture of farm implements. Before the corporation was organized, McAnarney and Lemon solicited subscriptions to the stock of the corporation and pre
> Berger was planning to produce a fashion show in Las Vegas. In April, Berger entered into a written licensing agreement with CBS Films, Inc., a wholly owned subsidiary of CBS, for presentation of the show. The next year, Stewart Cowley decided to produce
> MPL Leasing Corporation is a California corporation that provides financing plans to dealers of Saxon Business Products. MPL invited Jay Johnson, a Saxon dealer in Alabama, to attend a sales seminar in Atlanta. MPL and Johnson entered into an agreement u
> Healthwin-Midtown Convalescent Hospital, Inc. (Healthwin), was incorporated in California for the purpose of operating a health care facility. For three years thereafter, it participated as a provider of services under the federal Medicare Act and receiv
> In April, Cranson was asked to invest in a new business corporation that was about to be created. He agreed to purchase stock and to become an officer and director. After his attorney advised him that the corporation had been formed under the laws of Mar
> Oahe Enterprises was formed by the efforts of Emmick, who acted as a promoter and contributed shares of Colonial Manors, Inc. (CM), stock in exchange for stock in Oahe. The CM stock had been valued by CM’s directors for internal stock option purposes at
> Little Switzerland Brewing Company was incorporated on January 28. On February 18, Ellison and Oxley were made directors of the company after they purchased some stock. Then, on September 25, Ellison and Oxley signed stock subscription agreements to purc
> An Arkansas statute provides that if any foreign corporation authorized to do business in the state should remove to the federal court any suit brought against it by an Arkansas citizen or initiate any suit in the federal court against a local citizen, w
> Dr. North, a surgeon practicing in Georgia, engaged an Arizona professional corporation consisting of twenty lawyers to represent him in a dispute with a Georgia hospital. West, a member of the law firm, flew to Atlanta and hired local counsel with Dr. N
> On January 10, Betty, of Emanon, Missouri, visited the showrooms of the Forte Piano Company in St. Louis and selected a piano. A sales memorandum of the transaction signed both by Betty and by the salesman of the Forte Piano Company read as follows: “Sol
> State whether the following provisions impair or preclude negotiability, the instrument in each instance being otherwise in proper form. Answer each statement with either “Negotiable” or “Nonnegotiable” and explain why. a. A note for $2,000 payable in tw
> After part of the shares of a proposed corporation had been successfully subscribed, the promoter hired a carpenter to repair a building that was intended to be conveyed to the proposed corporation. The promoter subsequently secured subscriptions to the
> Dale Fullerton was chairman of the board of Envirosearch and the sole stockholder in Westover Hills Management. James Anderson was president of AGFC. Fullerton and Anderson agreed to form a limited partnership to purchase certain property from WYORCO, a
> Dr. Vidricksen contributed $250,000 to become a limited partner in a Chevrolet car agency business with Thom, the general partner. Articles of limited partnership were drawn up, but no effort was made to comply with the state’s statutory requirement of r
> Albert, Betty, and Carol own and operate the Roy Lumber Company, a limited liability partnership. Each contributed one-third of the capital, and they share equally in the profits and losses. Their LLP agreement provides that all purchases over $2,500 mus
> Gordon is the only limited partner in Bushmill Ventures, a limited partnership whose general partners are Daniels and McKenna. Gordon contributed $10,000 for his limited partnership interest and loaned the partnership $7,500. Daniels and McKenna each con
> Kraft is a limited partner of Johnson Enterprises, a limited partnership. As provided in the limited partnership agreement, Kraft decided to leave the partnership and demanded that her capital contribution of $20,000 be returned. At this time, the partne
> Madison and Tilson agree to form a limited partnership with Madison as general partner and Tilson as the limited partner, each to contribute $12,500 as capital. No papers are ever filed, and after ten months the enterprise fails with liabilities exceedin
> Fox, Dodge, and Gilbey agreed to become limited partners in Palatine Ventures, a limited partnership. In a signed writing each agreed to contribute $20,000. Fox’s contribution consisted entirely of cash; Dodge contributed $12,000 in cash and gave the par
> A limited partnership was formed consisting of Webster as the general partner and Stevens and Stewart as the limited partners. The limited partnership was organized in strict compliance with the limited partnership statute. Stevens was employed by the pa
> John Palmer and Henry Morrison formed the limited partnership of Palmer & Morrison for the management of the Huntington Hotel. The limited partnership agreement provided that Palmer would contribute $400,000 and be a general partner and that Morrison wou
> The plaintiff contracted with the defendant to deliver liquid nitrogen to the defendant’s oil refinery production facility located in Belle Chase, Louisiana. The defendant uses liquid nitrogen to ensure the safe operation of its plant. The contract was a
> Glenn refuses an invitation to become a partner of Dorothy and Cynthia in a retail grocery business. Nevertheless, Dorothy inserts an advertisement in the local newspaper representing Glenn as their partner. Glenn takes no steps to deny the existence of
> Charles and Jack orally agreed to become partners in a tool and die business. Charles, who had experience in tool and die work, was to operate the business. Jack was to take no active part but was to contribute the entire $500,000 capitalization. Charles
> Adams, a consulting engineer, entered into a partnership with three others for the practice of their profession. The only written partnership agreement is a brief document specifying that Adams is entitled to 55 percent of the profits and the others to 1
> Lauren, Matthew, and Susan form a partnership, Lauren contributing $100,000; Matthew $50,000; and Susan her time and skill. Nothing is said regarding the division of profits. The firm later dissolves. No distributions to partners have been made since the
> Jones and Ray formed a partnership on January 1, known as JR Construction Co., to engage in the construction business, each partner owning a one-half interest. On February 10, while conducting partnership business, Jones negligently injured Ware, who bro
> Anthony and Karen were partners doing business as the Petite Garment Company. Leroy owned a dye plant that did much of the processing for the company. Anthony and Karen decided to offer Leroy an interest in their company, in consideration for which Leroy
> Simmons, Hoffman, and Murray were partners doing business under the firm name of Simmons & Co. The firm borrowed money from a bank and gave the bank the firm’s note for the loan. In addition, each partner guaranteed the note individually. The firm became
> In August, Victoria Air Conditioning, Inc. (VAC), entered into a subcontract for insulation services with Southwest Texas Mechanical Insulation Company (SWT), a partnership composed of Charlie Jupe and Tommy Nabors. In February of the following year, Jup
> Paula, Fred, and Stephanie agree that Paula and Fred will form and conduct a partnership business and that Stephanie will become a partner in two years. Stephanie agrees to lend the firm $50,000 and take 10 percent of the profits in lieu of interest. Wit
> Davis and Shipman founded a partnership under the name of Shipman & Davis Lumber Company. Seven years later, the partnership was dissolved by written agreement. Notice of the dissolution was published in a newspaper of general circulation in Merced Count
> Bishop Logging Company is a large, family-owned logging contractor formed in the low country of South Carolina. Bishop Logging has traditionally harvested pine timber. However, Bishop Logging began investigating the feasibility of a fully mechanized hard
> L. G. and S. L. Patel, husband and wife, owned and operated the City Center Motel in Eureka. On April 16, Rajeshkumar, the son of L. G. and S. L., formed a partnership with his parents and became owner of 35 percent of the City Center Motel. The partners
> Voeller, the managing partner of the Pay-Out Drive-In Theatre, signed a contract to sell to Hodgea small parcel of land belonging to the partnership. Except for the last twenty feet, which was necessary for the theatre’s driveway, the parcel was not used
> Phillips and Harris are partners in a used car business. Under their oral partnership, each has an equal voice in the conduct and management of the business. Because of their irregular business hours, the two further agreed that they could use any partne
> Adam, Stanley, and Rosalind formed a partnership in State X to distribute beer and wine. Their agreement provided that the partnership would continue until December 31, 2018. Which of the following events would cause the ABC partnership to dissolve? If s
> The articles of partnership of the firm of Wilson and Company provide William Smith to contribute $50,000; to receive interest thereon at 13 percent per annum and to devote such time as he may be able to give; to receive 30 percent of the profits. John J
> Ames, Bell, and Cole were equal partners in the ABC Construction Company. Their written partnership agreement provided that the partnership would dissolve upon the death of any partner. Cole died on June 30, and his widow, Cora Cole, qualified as executo
> Ben, Dan, and Lilli were partners sharing profits in proportions of one-fourth, one-third, and five-twelfths, respectively. Their business failed, and the firm was dissolved. At the time of dissolution, no financial adjustments between the partners were
> Martin, Mark, and Marvin formed a retail clothing partnership named M Clothiers and conducted a business for many years, buying most of their clothing from Hill, a wholesaler. On January 15, Marvin retired from the business, but Martin and Mark decided t
> Hanover leased a portion of his farm to Brown and Black, doing business as the Colorite Hatchery. Brown went upon the premises to remove certain chicken sheds that he and Black had placed there for hatchery purposes. Thinking that Brown intended to remov
> Albert, Betty, and Carol own and operate the Roy Lumber Company. Each contributed one-third of the capital, and they share equally in the profits and losses. Their partnership agreement provides that two partners must authorize all purchases over $2,500
> On December 15, Judy wrote a letter to David stating that she would sell to David all of the mine-run coal that David might need to buy during the next calendar year for use at David’s factory, delivered at the factory at a price of $50 per ton. David im
> In 2005, Gauldin and Corn entered into a partnership for the purpose of raising cattle and hogs. The two men were to share equally all costs, labor, losses, and profits. The business was started on land owned initially by Corn’s parents but later acquire
