ASSIGNMENT
1. 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 Maryland, Cranson paid for and received a stock certificate evidencing his ownership of shares. The business of the new venture was conducted as if it were a corporation. Cranson was elected president, and he conducted all of his corporate actions, including those with IBM, as an officer of the corporation. At no time did he assume any personal obligation or pledge his individual credit to IBM. As a result of an oversight of the attorney, of which Cranson was unaware, the certificate of incorporation, which had been signed and acknowledged prior to May 1, was not filed until November 24. Between May 1 and November 8, the “corporation” purchased eight computers from IBM. The corporation made only partial payment. Can IBM hold Cranson personally liable for the balance due? Explain.
2. Berger was planning to produce a fashion show in Las Vegas. In April 1965, Berger entered into a written licensing agreement with CBS Films, Inc., a wholly owned subsidiary of CBS, for presentation of the show. In 1966, Stewart Cowley decided to produce a fashion show similar to Berger’s and entered into a contract with CBS. CBS broadcast Cowley’s show but not Berger’s, and Berger brought an action against CBS to recover damages for breach of his contract with CBS Films. Berger claimed that CBS was liable because CBS Films was not operated as a separate entity and that the court should disregard the parent-subsidiary form. In support of this claim, Berger showed that the directors of CBS Films were employees of CBS, that CBS’s organizational chart included CBS Films, and that all lines of employee authority from CBS Films passed through CBS employees to the CBS chairman of the board. CBS, in turn, argued that Berger had failed to justify piercing the corporate veil and disregarding the corporate identity of CBS Films in order to hold CBS liable. Decision?
3. 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 presented a written agreement for the subscribers to sign. The agreement provided that the subscribers would pay $100 per share for stock in the corporation in consideration of McAnarney and Lemon’s agreement to organize the corporation and advance the preincorporation expenses. Thomas Jordan signed the agreement, making application for one hundred shares of stock. After the articles of incorporation were filed with the Secretary of State but before the charter was issued to the corporation, Jordan died. The administrator of Jordan’s estate notified McAnarney and Lemon that the estate would not honor Jordan’s subscription.
After the formation of the corporation, Franklin Adams signed a subscription agreement making application for one hundred shares of stock. Before the corporation accepted the subscription, Adams informed the corporation that he was canceling it.
a. Can the corporation enforce Jordan’s stock subscription against Jordan’s estate? Explain.
b. Can the corporation enforce Adams’s stock subscription? Explain.
4. Green & Freedman Baking Company (Green & Freedman) was a corporation owned by the Elmans that produced and sold baked goods. The terms of a collective bargaining agreement required Green & Freedman Baking Company to make periodic payments on behalf of
its unionized drivers to the New England Teamsters and Baking Industry Health Benefits and Insurance Fund (Health Fund). After sixty years of operation, Green & Freedman experienced financial difficulties and ceased to make the agreed-upon contributions. The Elmans mixed their own finances with those of Green & Freedman’s. The Elmans, through their domination of Green & Freedman, caused the corporation to make payments to themselves and their relatives at a time when the corporation was known to be failing and could be expected to default or was already in default on its obligations to the Health Fund. It then transferred all remaining assets to a successor entity named Boston Bakers, Inc. (Boston Bakers). Boston Bakers operated essentially the same business as Green & Freedman until its demise two years later. The Health Fund sued Green & Freedman, Boston Bakers, and the two corporations’ principals, Richard Elman and Stanley Elman, to recover the payments owed by Green & Freedman with interest, costs, and penalties. There was no evidence of financial self-dealing in the case of Boston Bakers. Both corporate defendants conceded liability for the delinquent contributions owed by Green & Freedman to the Health Fund. The suit against the Elmans was based on piercing the corporate veil with respect to Green & Freedman and Boston Bakers. The Elmans, however, denied they were personally liable for these corporate debts. Are the Elmans liable? Explain.
5. Ronald Nadler was a resident of Maryland and the CEO 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, Maryland, and in Cranberry Mall, located in Westminster, Maryland. Tiller Construction Corporation and Nadler entered into two contracts for the construction of movie theaters at these locations, one calling for Tiller to do “the work” for Nadler at Westridge for $637,000 and the other for Tiller to do “the work” for Nadler at Cranberry for $688,800. Ronald Nadler requested that Tiller send all bills to Glenmar, the lessee at both shopping malls, but agreed to be personally liable to Tiller for the payment of both contracts. All inventory was bought and paid for locally, and Tiller paid sales tax in Maryland. Although there was no formal office in the state, Tiller leased a motel room for a considerable period of time, posted a sign at the job site, and maintained telephone numbers listed in information. In addition, Tiller engaged in fairly pervasive management functions, and the value of the projects comprised a substantial part of Tiller’s revenues during the period. At the time of the suit, there was a net balance due for the Cranberry project in the amount of $229,799.46 and on the Westridge project for the sum of $264,273.85, which Nadler refused to pay even though he had approved all work and the work had been performed in a timely, good, and workmanlike manner. Tiller Construction Corporation sued Ronald Nadler and Glenmar Cinestate, Inc., for breach of contract. Nadler filed a motion to dismiss based on Maryland’s business corporation statute, which prohibits a foreign corporation that conducts intrastate business in Maryland from maintaining a suit in Maryland courts if the corporation fails to register or qualify under Maryland law. Nadler asserted that Tiller was a New York corporation that had never qualified to transact business in the state of Maryland. Tiller conceded that the corporation had not qualified to do business in Maryland but argued that Tiller was not required to qualify because its activities did not constitute, in the contemplation of the statute, doing business in the state as Tiller just had occasional business in Maryland. Discuss whether Tiller could bring suit in Maryland.
6. Harold Lang Jewelers, Inc. (Lang), a Florida corporation, through its single employee, had sold and consigned merchandise to jewelry stores in western North Carolina for almost thirty years. Lang’s employee came frequently to North Carolina for the purpose of transacting business. When the employee came to North Carolina, he always brought jewelry with him for delivery. When he visited jewelry stores in the State, he would either
(a) make a direct sale on the spot without any confirmation from any other person or (b) consign the jewelry, also without any further confirmation or approval from any other person. When the employee took orders, he either shipped the ordered items to the business in North Carolina or personally delivered the merchandise. He also took returns of merchandise from customers in the State. Lang filed suit against Johnson, alleging that Johnson owed Lang $160,322.90 plus interest for jewelry sold or consigned. Johnson asserted as one of its defenses that Lang could not sue in a North Carolina court because Lang had failed to obtain a certificate of authority to transact business in the State. Explain whether the court should dismiss Lang’s action.
