Roy Realtor, a respected real estate agent in Sussex County and the Mayor of Hewey Beach, sold George Buyer an ocean front house. Buyer had just moved to the area to start his own newspaper, The Sussex Scuttlebut, a sole proprietorship. Soon after closing, however, Buyer discovered major problems with the house. He blamed Realtor for his unhappiness with the house, and decided to seek revenge.
Buyer began investigating Realtor and his real estate business. Buyer's investigation, however, did not uncover any negative information about Realtor's business. To the contrary, he discovered that Realtor was recently honored for his ethical and successful practices by the Delaware Association of Realtors. Having failed to find any problem with Realtor's professional life, Buyer contacted the juvenile court in the jurisdiction where Realtor was raised. He surreptitiously obtained access to sealed juvenile records showing that Realtor had been adjudged delinquent on several occasions. In the course of his review, he also found the court's order directing that Realtor's juvenile record be expunged.
Buyer wrote and printed the following article in the February 1, 1996 edition of theSussex Scuttlebut (in pertinent part):
Sussex County is full of unscrupulous and fraudulent real estate agents. The worst example of this is Realtor, a real estate broker with an office in Hewey Beach. Realtor frequently misrepresents his clients' properties to make the quick sale and engages in other unscrupulous business activities, all to the detriment of home buyers. In addition, he was a juvenile delinquent who had many run-ins with the law.
After the article was published, Realtor received many calls canceling appointments to show houses. Realtor believed he suffered some temporary business losses, although he could not determine a specific amount because the article was published during the winter months when business is slow. The residents of Hewey Beach talked about the article and the revelations about Realtor's past for months but, because Realtor had successfully maintained the Town's finances and status as a premium vacation spot, he was reelected later that year. Realtor was nonetheless embarrassed and hurt by the accusations of the article, and became violently ill as a result of its publication. He despised the gossip and snickering behind his back.
In June of 1998, Sam Wealthy offered the use of his spacious Hewey Beach home for a charitable fundraiser sponsored by a non-profit organization. As Realtor was parking his car (having purchased a $100.00 ticket in advance), he saw Buyer's car parked nearby. He became so enraged at the thought of Buyer that he slammed his foot on the accelerator instead of the brake. His car crashed through the wall of Wealthy's crowded house, and pinned Wealthy's fiancee, Nora, under the car, severely injuring her. As he opened the car door, Realtor saw Buyer and charged at him, tripping over a loose floorboard in the process and smashing his face on the floor. Fortunately for Buyer, the floorboard caused Realtor to miss him by mere inches. As a result, Realtor broke his nose and lost several teeth. Buyer, terrified by Realtor's charge, fainted and struck his head, suffering a concussion. Wealthy exclaimed to Realtor, "I knew I should have that old floorboard fixed, but I'm glad you tripped over it, you juvenile delinquent! Look what you did to my house."
Later that night, Wealthy learned that Nora's injuries were serious and permanent, and he told her that he no longer wanted to marry her because of the injuries.
In July of 1998, Realtor, Buyer, Wealthy and Nora each visit their respective lawyers.
1. A. What claims could Realtor bring against Buyer? What defenses would Buyer raise? Discuss your answer.
B. What claims could Realtor bring against Wealthy? What defenses would Wealthy raise? Discuss your answer.
2. What claims (other than claims relating to the condition of the house) could Buyer bring against Realtor? What defenses could Realtor raise? Discuss your answer.
3. What claims could Nora bring against Realtor? What damages would Nora claim? What defenses could Realtor raise? Discuss your answer.
Anthony died at Hospital hours following heart surgery. The autopsy revealed that the sutures used in the operation were the cause of Anthony's death. Those sutures were sold to Hospital by Threads.
Anthony's wife Cara filed suit in Delaware Superior Court seeking damages from Hospital and Threads in connection with Anthony's death. In response to her subsequent request, Threads produced certain documents to Cara.
The documents produced by Threads include a memo from Threads' CEO to its production manager dated shortly following Anthony's death. That memo directs the production manager to begin using stronger nylon in the manufacture of sutures.
Threads withholds one document from production on the grounds of attorney-client privilege. That document is a recent memo from Threads' CEO to Lori Lawyer, Threads' general counsel, reporting that the CEO has become convinced that the defective sutures caused Anthony's death, and seeking Lawyer's advice.
Threads also provides Hospital with copies of the documents it produced to Cara; however, Threads inadvertently includes in its production to Hospital a copy of the memo from the Threads CEO to Lawyer, the document withheld from Cara on privilege grounds.
Cara and Hospital engage in settlement negotiations shortly before trial. In an effort to convince Cara that the party primarily responsible for Anthony's death is Threads, Hospital provides to Cara certain documents during the negotiations. Those documents include the memo from Threads' CEO to Lawyer that Threads inadvertently produced to Hospital in discovery.
They also include the following letter from Hospital's files:
To: General Counsels of Threads and Hospital
From: Jim Juris, joint defense counsel
Re: Anthony case
I have reviewed the case and believe that a contribution of 10% from Hospital and 90% from Threads toward any settlement would fairly reflect your relative responsibility for Anthony's death.
Hospital and Cara reach a settlement shortly thereafter and Cara proceeds to trial against Threads. At that trial, the evidentiary issues described below arise. In answering the questions that follow, please note that no credit will be given for a discussion of general relevance where a specific rule governs.
Family-Run, Inc. ("Family-Run" or the "Company"), a Delaware corporation, has ten million shares of common stock outstanding, of which eight million shares are owned by members of the Close family, the founders of the corporation. The remaining two million shares of the common stock of Family-Run are held by public stockholders and are publicly traded on the NASDAQ exchange. Family-Run regularly makes all required SEC filings, and annually sends copies of its financial statements to all shareholders in connection with the annual meetings.
The Bylaws of Family-Run provide that the Board of Directors (the "Board") shall have six members. The Board consists of four Close family members, all of whom are officers of the Company, and two independent, outside directors. The Bylaws further provide that the Board may establish such committees as it deems appropriate. There are no standing committees of the Board.
The Certificate of Incorporation of Family-Run contains the following provision:
* * *
At a Board meeting in March 1998, at which all directors were present, the four Close family directors proposed a dividend on the common stock of Family-Run of $2 per share ($20 million in total). Counsel to the Company suggested that since the Close family directors were significant stockholders; it would be necessary to appoint a special committee of the Board to consider the proposed dividend. Accordingly, the Board unanimously adopted the following resolution:
Thereafter, the two outside directors contacted the Chief Financial Officer of Family-Run, C. Fiscal Overall, and requested him to prepare a report on the financial condition of the Company as it related to the ability to declare a dividend. Overall reported to the committee that (1) Family-Run had no net profits for fiscal year 1997 or, to date for fiscal year 1998; (ii) on a book value basis under Generally Accepted Accounting Principles ("GAAP"), the Company had $15 million in surplus; and (iii) a comprehensive review and valuation of the assets and liabilities of the Company prepared by Overall reflected that on a "fair value" basis the Company had $45 million in surplus. No discrepancy was apparent between the information reported by Overall and the Company's audited financial statements or other information known to the directors.
Based upon this information, on April 15, 1998, the outside directors, acting as a special committee of the Board of Family-Run, adopted the following resolutions:
FURTHER RESOLVED that the President of the Corporation be and hereby is authorized to take all actions necessary to effectuate the foregoing resolution.
On April 16, 1998, the dividend was paid to the shareholders of record.
* * *
Prior to the declaration of the dividend, on April 1, 1998, Greg duGood, a new assistant to C.F. Overall, discovered that for several years Overall had been "cooking the books" of Family-Run to overstate its financial performance. duGood reviewed his employee manual in search of an expression of company policy on reporting misconduct, and discovered that Family-Run has no established audit or review committee of the Board and no express policies with regard to reporting misconduct by employees. Mr. duGood sought an appointment with the Company's Treasurer (a Close family member and member of the Board) to report his discovery, but was told that no meeting could be arranged before April 20, 1998. On April 20, 1998, duGood reported his findings to the Treasurer.
The Treasurer immediately reported these facts to the other members of the Board. No member of the Board had prior knowledge of the inaccuracies in Overall's accounting practices. After consulting with an accounting firm to recreate accurate books and records for Family-Run, the Board learned that (i) applying GAAP, Family-Run had surplus of only $2 million before payment of the dividend, and (ii) on a "fair value" basis, there was a deficit of $4 million in the surplus account before payment of the dividend. The Company immediately made all required disclosures regarding these facts.
* * *
As a result of the misstatement of the financial reports of the Company, and the payment of the dividend, the Company was threatened with bankruptcy. The Company's President (a Close family member) reported to the Board that after exhaustive study (the details of which were fully disclosed to the Board), management determined that Family-Run had two options. Under Option One, Family-Run would enter bankruptcy and liquidate its assets for the benefit of creditors immediately, in which case the proceeds of liquidation would be sufficient to satisfy fully its debts, with no value remaining for distribution to the shareholders. Under Option Two, Family-Run would pursue a plan to revitalize its business through additional investment in plant and equipment. Management stated that Option Two had only a 40% chance of success, but were it successful, Family-Run would be able to pay its creditors in full and the value of the common stock would increase by 100%. In the event the revitalization plan failed, however, Family-Run would be forced into bankruptcy within 6 months, and would have depleted its assets to such an extent that creditors would receive far less than the stated value of their claims.
The Board voted unanimously to approve Option Two, but the revitalization plan failed. Thereafter, Family-Run and its directors consulted you. They have the following questions:
One of your first calls as a new member of the Delaware Bar is from a former high school classmate, Antoine. Antoine is the sole shareholder of Better BonBons, Inc., a Delaware corporation with its principal place of business in Seaford, Delaware. Better BonBons makes exclusive European-style chocolates for sale at the Maryland and Delaware beaches. Antoine lives in nearby Salisbury, Maryland.
Antoine tells you that he wants to file suit against a former employee, Carmela, for breach of her employment contract. He explains that Carmela left Better BonBons almost three years ago to join Divine Sweets, Inc. Divine Sweets is a competing business incorporated in Maryland with a principal place of business in Annapolis, Maryland. Divine Sweets also sells its expensive chocolates at the Maryland and Delaware beaches in direct competition with Better BonBons. Carmela lives in Annapolis, Maryland.
Antoine explains that almost three years ago, and before Carmela left, Carmela had developed for Better BonBons a secret nonfat filling for chocolate truffles that Antoine estimates would have doubled its sales. Divine Sweets began using such a filling in its truffles immediately after Carmela joined Divine. Antoine believes Carmela revealed the secret formula to Divine in violation of the non-disclosure provisions of her employment contract with Better BonBons.
You determine that the three year statute of limitations applicable to a breach of contract claim has nearly run, so you quickly file a complaint on behalf of Better BonBons against Carmela and Divine Sweets in the United States District Court for the District of Delaware. The Complaint alleges that Carmela breached her employment contract and that Divine Sweets induced the breach of contract. Federal court jurisdiction was based on diversity of citizenship. The Complaint seeks $200,000 in damages.
1. Before Carmela responds to the Complaint, you realize that Better BonBons also has a claim against Carmela and Divine Sweets for misappropriation of trade secrets. You pullout your calendar and confirm what you feared: the statute of limitations on the trade secret claim ran out a few days previously. Discuss whether Better BonBons can bring the trade secrets claim at this point in time. If so, what procedural steps should you take to bring this claim?
2. Assume that Better BonBons is successful in maintaining the trade secret allegations against Carmela and Divine Sweets. Carmela, through her lawyer, files a timely answer and alleges, by counterclaim, that Better BonBons has never paid Carmela certain bonuses promised under her employment contract. Carmela also raises a third party claim against Antoine individually. This claim alleges that Antoine has breached a separate contract between him and Carmela under which he agreed to convey to Carmela some of his stock in Better BonBons. Assume that the statute of limitations has not run on these claims. You file a motion to dismiss both counterclaims based on lack of subject matter jurisdiction. Will the motion be successful? Why or why not?
3. Assume that the motion to dismiss Carmela's counterclaims is denied. After you file replies to both claims, Carmela moves for judgment on the pleadings, claiming that Better BonBons' claims are barred by laches. Carmela has not previously raised this defense in her answer or any other pleading. Discuss what procedural defense, if any, is available to Better BonBons to defeat this motion?
4. Assume that the Court denies all motions. Carmela seeks to amend her answer to add a defense alleging that she was never properly served with the complaint, because the summons and complaint were left at her house when no one was home. Should the court allow the amendment? Why or why not?
5. The case does not settle and Better BonBons prevails at trial. Judgment in the amount of $300,000 is entered in favor of Better BonBons and against Carmela only. Carmela is furious with the loss as she believes the verdict in favor of Better BonBons is not justified under the law and that the damages awarded are excessive. What relief, if any, can Carmela seek from the trial court? Are there any prerequisites to her seeking this relief?
6. Assume that all post-trial motions are denied, and the time period in which to file an appeal has expired. Carmela thereafter speaks with another former Better BonBons employee, who states that he told everyone the "secret" recipe for nonfat filling, and it was taken from a public cookbook. What motion could Carmela file at this time to review the judgment? Discuss the standards for any motion, and whether the motion would be successful.
7. Assume that the stress of the litigation with Carmela has taken its toll on Antoine's marriage and he has retained you to represent him in a divorce action. You file a Petition for Divorce requesting that the court enter a decree dissolving the bonds of matrimony between the parties and order such other and further relief as the court may deem proper under the circumstances. Antoine's wife does not file an Answer and the uncontested divorce is granted on October 1, 1998. On November 1, 1998, you meet with Antoine to discuss the division of marital property and realize that you failed to request this relief in the divorce petition. What recourse, if any, is available in Family Court to correct this oversight? Explain your answer.
Sally Seller ("Seller") has come to you seeking advice. Seller has a specific problem and needs to know her rights and obligations under Delaware law.
Seller recently inherited an undeveloped lot ("Lot") located in the Industrial Park of New Castle Delaware (hereinafter "the Park"). Seller, having no experience with property like this, decided to sell Lot.
Seller was aware that the Park was overseen by an association of all lot owners. She called the president of the Park to ask about information and was told that lots in the Park were zoned for commercial uses, but were subject to restrictions on things such as loading and storage dock placement and improvement. Seller contacted the County clerk and was told that commercial zoning allowed for, among other things, above ground storage of coal, coke, and other petroleum products. Seller placed a "For Sale" sign directly on Lot indicating the commercial zoning and nothing more.
Buyer, the owner of a Delaware company that marketed and stored petroleum products, spotted the sign one Sunday afternoon. Buyer planned to relocate the company to an area that would allow for above ground storage of petroleum products in 75-gallon drums and 12,000-gallon tanks. Noticing that the property next to Lot had above ground storage in 100-gallon drums and 15,000-gallon tanks, Buyer decided to investigate purchasing Lot.
Buyer contacted Seller by telephone. Buyer told Seller about his requirement for commercial zoning and above ground storage of petroleum products. Seller told Buyer that Lot was zoned for commercial uses, and that several properties in the Park had above ground storage. Seller also told Buyer about the restrictions, stating "I believe there are restrictions only on the placement and improvement of loading and storage docks, but I have not read these myself." Seller promised to send Buyer a copy of the restrictions if she could find a copy. Buyer suggested that they meet in Buyer's attorney's office to discuss a possible sale the following week.
Seller made no attempt to find a copy of the restrictions prior to meeting with Buyer. Buyer's attorney drafted a sales agreement ("Sales Agreement") based upon information provided by Buyer. The Sales Agreement stated:
Buyer shall purchase Lot in the Park for the sum of $5,000,000 (FIVE MILLION DOLLARS). At settlement, Buyer shall pay to Seller $1,000,000 (ONE MILLION DOLLARS) in cash. Seller shall record the remaining balance of $4,000,000 (FOUR MILLION DOLLARS) as a mortgage against the property to be paid by Buyer to Seller in equal monthly installments over 30 (THIRTY) years at 4.7 annual percentage of interest. Settlement shall occur within 2 months from the date of the last party to execute this SALES AGREEMENT.
Title to be good marketable, fee simple title, zoned for commercial uses, allowing for above ground storage of petroleum products, free and clear of all liens and encumbrances except existing easements and restrictions of record.
Buyer and Seller met in the office of Buyer's attorney and executed the Sales Agreement. They never discussed the agreement before or after they executed it, and Buyer never asked Seller for a copy of the restrictions.Two weeks later, Buyer's attorney initiated a title search on Lot. The attorney discovered that Lot was zoned for commercial uses, and that it was free and clear of any encumbrances, liens, or easements. However, the recorded restrictions on Lot required pre-approval of the Park association for any above ground storage of petroleum products in addition to any improvements to loading and storage docks. Buyer immediately applied for approval from the association and was denied. This process took approximately one month from the date of signing the Sales Agreement.Within two weeks following the execution by both parties of the Sales Agreement, a third party offered Seller $8 million for Lot. The payment terms were cash at settlement. Seller turned this offer down based upon the existing Sales Agreement. Seller also arranged to take the vacation of her dreams. Anticipating the receipt of $l,000,000 in cash, Seller booked a twelve month around the world tour at a cost of $800.000. Seller was required to give the Travel Agent a $1,000 non-refundable deposit upon booking, pay one half of the remaining balance within two months and the other half one week before the tour began. Three days after Seller booked the tour and two weeks before the proposed settlement date, Buyer told her "The deal's off. You lied to me about the restriction and Lot is worthless to my company."
1. Discuss whether there is an enforceable contract between Buyer and Seller.
2. Discuss whether Buyer can avoid his obligations under the contract.
3. Assuming that a valid contract existed between Buyer and Seller that was breached by Buyer, discuss what remedies are available to Seller.
Erica, Fred and Grace were childhood friends who decided to set up a carpet cleaning business. Erica would be primarily responsible for setting up a telemarketing operation to solicit customers; Fred would supervise the carpet cleaning; Grace would be a passive investor. They agreed that Erica would manage the affairs of the business and would consult with Fred for all major business decisions. They further agreed that Erica would use a spare room in her home as office space (a contribution to which they attributed no value) and that her only financial interest in the business would be a small salary with a bonus based on the number of customers she brought in; that Fred would contribute to the business a van and equipment agreed to be worth $20,000 and would receive a salary for supervising the steam-cleaning; and that Grace would contribute $50,000 in start-up capital. They did not sign any written agreement. However, Erica went to the library and examined a book discussing partnership-related matters. Erica then drafted a document stating that she was the sole general partner of "EF&G Technical Services, L.P." With the approval of Fred and Grace, Erica signed the document and filed it with the Office of the Delaware Secretary of State.
(B) Did Erica make a sufficient contribution to the limited partnership to be a general partner? Explain.
(C) Can Fred properly be considered a limited partner given the form of his contribution to the limited partnership? Explain.
Regardless of your answers to question 1, assume that the necessary papers have been drafted and/or filed, either originally or by amendment, making EF&G Technical Services, L.P. a valid Delaware limited partnership, with Erica as the sole general partner and Fred and Grace as limited partners.
Erica begins rounding up customers. The limited partnership is immediately profitable and is doing well until one customer, Harry, wants his handwoven, silk carpets steam cleaned. Harry asks whether his carpets are suitable for steam cleaning. Erica consults with Fred and then tells Harry that she and Fred have determined that they can do the job. When the steam cleaning crew is finished, Harry's carpet is reduced to tangled strands of silk. Harry sues EF&G Technical Services, L.P., Erica and Fred for negligent steam cleaning and seeks $30,000 in damages.
(B) Can Fred be held liable for the obligations of the limited partnership? Explain why or why not.
(C) What is the extent, if any, of Grace's potential liability?
The business grows. Fred feels that a disproportionate burden of the expanding business falls on him, since he is the one supervising the steam cleaning. He also feels that he is not seeing a large enough return on his investment. Fred tells Erica and Grace that he is not going to devote so much of his time and resources to the business unless he is satisfied that the business is being well-managed. Fred writes a letter to Erica demanding that she provide him with copies of the financial statements for the previous fiscal year. Erica believes that Fred may leave and start up his own steam-cleaning business, especially since Fred has never signed a non-compete agreement. Erica therefore does not provide the documents to Fred. Fred files suit in the Court of Chancery to require Erica to provide him with the documents he demanded.
During the pendency of the litigation, Erica, Fred and Grace execute a written agreement formally admitting Fred as a general partner, in exchange for services valued at $5,000, and further providing that Fred cannot compete with the limited partnership for three years. After this agreement is reached, Fred renews his demand for the financial statements. Erica again refuses.
The business becomes profitable enough so that a total of $15,000 can be distributed to partners each month.
Within a year of being named a general partner, Fred becomes fed up with the business. He assigns all of his interests in the limited partnership to Ira. Ira immediately begins telling Erica how things will be run now that he is a general partner. Ira also demands that he receive the monthly distributions that previously had been received by Fred.
B) Is Ira entitled to exercise the powers of a general partner? Explain.
(C) Can Fred continue to exercise the powers of a general partner? Explain.
D) Is Ira entitled to receive in the future the same percentage allocation of distributions previously received by Fred? Explain.
Grace does not like Ira. Grace also believes that Ira does not have the experience or time to operate the steam cleaning business, and that without Fred the business cannot be run profitably. Grace would like to liquidate her investment and get out of the limited partnership.
7. Does Grace have any recourse to dissolve the limited partnership? Explain.
In 1975, Stan purchased a lot in the community of Blueville, Delaware from Bob who subdivided his own larger lot because of a deep ravine running through his original parcel. Stan's lot had no road frontage and the ravine made it impracticable for Stan to use the lot Bob had retained for access to the public road. Therefore, Stan started crossing Charlie's lot which, because of topography, was his only option.
Stan promptly built his house and used Charlie's lot as the only access to his residence.
Charlie, from time to time, objected to Stan's driveway across his lands, but Stan continued.
Stan's house burned to the ground in 1992. Stan promptly cleaned up the fire debris and did nothing more with the lot until early 1997 when he decided to rebuild.
Stan had always been concerned about access to his lot. Before he started rebuilding, he contacted Charlie and told him of his plans to rebuild. He asked Charlie if he could use the same access across Charlie's lands and Charlie told him that he could. When the house was finished, Stan resumed using the same driveway.
Early in 1998, Stan agreed to sell the house to Harry. A week before closing on the contract between Stan and Harry, Charlie informed Stan and Harry that he would not allow access to the new home across his lands.
1. Does Stan have an easement by prescription across Charlie's lands? Explain.
2. Does Stan have an easement by implication or necessity across Charlie's lands? Explain.
3. Did Charlie's statement to Stan that he could resume the use of his driveway constitute a legally enforceable grant of easement? Explain.
4. Assume that none of these three theories provides access. What other argument(s) does Stan have for an access easement across Charlie's land? Would Stan prevail? Explain.
Stan and Harry proceed to closing where Harry reviews the deed which incorporates by reference the Blueville Home Owners Association restrictive covenants which were recorded by the developer before the sale of any houses in Blueville. A copy of the restrictive covenants is not available at closing. Not wanting to delay the closing, Harry settles on his new home.
After closing, Harry's new neighbor, Ned, starts building a 7-foot stone wall around his house. Harry immediately expresses to Ned his objection that erection of the wall is an eyesore and asks whether such a wall is permitted in the neighborhood. Ned responds that he previously obtained Stan's approval and the other surrounding neighbors also consented to the erection of the wall. Thereafter, Harry obtains a copy of the Home Owners Association restrictive covenants which include the following provision:
The land in Blueville shall be used for residence purposes only and no building, fence, wall, or other structure shall be commenced, erected or maintained, until the plans shall be submitted to and approved in writing by the Blueville Home Owners Association Board of Directors. The Association Board of Directors shall have the right to refuse to approve any such plans which are not suitable or desirable, in its opinion, for aesthetic or other reasons. Upon review of such plans, the Association Board of Directors shall have the right to take into consideration the suitability of the proposed structure, the harmony thereof with the surroundings and the effect of such a structure on the outlook from the adjacent and neighboring property and, any and all factors which in its opinion would effect the desirability or suitability of the proposed improvement, erection, alteration or change.
Harry also learns that two other residents in Blueville have built additions to their homes without obtaining the approval of the Blueville Home Owners Association Board.
Question B: What causes of action and remedies does Harry have with respect to the wall? What defenses may be raised? Note: assume there are no applicable zoning ordinances.
Assume Harry decides to live with the wall. One evening when Harry returns home, he is greeted by high-pitched squealing and an offensive stench. Ned has decided to raise hogs. Although Harry cannot see the hog activity over the wall, he can hear and smell it. Harry immediately checks the restrictive covenants but is surprised to find no provision specifically dealing with farm animals in Blueville.
Question C: Absent an express prohibition for farm animals in the Home Owner Association restrictive covenants, does Harry have any claims or rights with respect to Ned's hog raising? Explain. Note: assume there are no applicable zoning ordinances.
Assume Harry elects to move from Blueville. He decides to lease his home and agrees to a 12-year lease of the property to Larry Lessee. After being in the house for a year, Larry decides to do some renovations, and to finance the cost, he takes out a mortgage on the property in the amount of $50,000 from Home Remodeling Mortgage Company. In connection with Larry's application for a mortgage, Home Remodeling is provided with a copy of Larry's Lease with Harry, which does not include a provision addressing any conditions under which the property may be mortgaged. Before the work is commenced, Larry disappears with the cash. Several months later, Home Remodeling comes knocking on Harry's door for payments.
Question D: What are Home Remodeling's claims and remedies? What are Harry's defenses? (ignore any criminal claims against Larry).
While on duty, Officers Apple and Orange, five year veterans of the Delaware State Police Department, receive a general broadcast that an armed robbery occurred in their immediate area approximately 20 minutes before. The broadcast reports that Victoria Victim was robbed at knife point, and that she has described the perpetrators as two males of medium height wearing ski masks. A short time later, the officers observe a vehicle containing two male occupants driving at an unusually slow rate of speed. The officers decide to stop the vehicle.
The occupants identify themselves as Dan Driver, who resides two blocks from the crime scene, and Pete Passenger. The officers question the occupants separately. Driver and Passenger give conflicting stories as to their destination and their activities earlier in the evening. The officers decide to investigate further.
Officer Apple performs a pat down search on Driver. He feels a hard object in Driver's coat pocket which he initially believes to be a comb. Officer Apple removes the object and discovers that it is a large folding knife.
Victoria Victim, still shaken from her ordeal, is brought to the scene. She says that she is "pretty sure" that Driver is the man who robbed her and that the knife seized from him by Officer Apple is the knife he used.
Driver and Passenger are placed under arrest and taken to the police station. They are separated and properly advised of their Miranda rights. Driver requests an attorney and refuses to speak further. Passenger voluntarily waives his right to an attorney and confesses to his role in the robbery. He also implicates Driver. Driver and Passenger are arrested and charged with a number of offenses relating to their allegedly joint participation in the armed robbery.
Officer Apple seeks a warrant to search Driver's apartment. In support of that application, he submits an affidavit that recites the occurrence of the crime, the arrests, and the information volunteered by Passenger. The affidavit also states that Driver lives near the crime scene, that the individuals were stopped within minutes of the robbery and close to both the crime scene and to Driver's apartment, and that Victoria Victim identified Driver upon being shown an array of photographs.
Upon presentation of the affidavit to the court, the officer realizes that he has left something out. He therefore tells the court that a knife was found on Driver and that Victoria Victim identified it as the one used in the robbery.
The search warrant is issued based upon all of the information provided by Officer Apple. The search of Driver's apartment produces incriminating evidence.
Officer Apple testifies at the preliminary hearing for Driver and Passenger. On cross-examination he admits that Victoria Victim did not identify Driver from an array of photographs, but at the scene of the arrest.
Driver and Passenger are bound over for trial. They are scheduled to be tried together six months thereafter.
Candy Jones owns The Cake Factory (Factory), a commercial bakery specializing in custom party and wedding cakes. Factory entered into a "Lease Agreement" with Computers-To-Go (CTG) by which Factory leased two computers, a printer and a two person computer desk for use in Factory's office. The lease was for a term of 3 years and required payment of $200 monthly. The lease agreement provided that Factory had the right to purchase the items at the end of the 3 year term for a total of $100.
Factory used the computes to keep track of all its recipes and to list the ingredients needed for each particular order. After making the monthly payments for 12 months, Factory's business suffered a downturn and it stopped making payments.
Subsequently, CTG's agents entered Factory's premises during daylight hours and took one of the computers and the printer. CTG has a "used computer" store where it sells computer equipment received as trade-ins. However, the Factory computer and printer were not sold at the used computer store but were sold for $500 to the son of CTG's sales manager (Son) for use at college with no notice to Factory of the sale. Without the computer that was taken by CTG, Factory could not respond to customers' inquiries as efficiently and lost a big order to supply cakes for a local corporation's annual customer appreciation party.
CTG agents attempted to enter Factory again to take the second computer and the desk, but were prevented from removing the equipment by Factory's employees. CTG brought a replevin action against Factory for return of the computer and desk retained by Factory and also sued for the difference between the amount realized from the sale of the equipment by CTG to Son and the amount remaining due under the lease. Factory counterclaimed for lost profits due to the lost party sale. Additionally, Factory sought to recover the computer and printer from Son.
B. Assume that CTG has a security interest in the property. Discuss the remedies which are available to Candy, Factory and CTG.
Factory' s business improved and Candy decided to buy a refrigerated truck so that she could sell ice cream cakes. If things went well, she knew she could sell ice cream cakes all over the county. Candy visited Truck Dealer (Dealer) and explained her plans and needs to Dealer. Dealer showed her two used refrigeration trucks and she decided to purchase one of them. She did not test the operation of the refrigerator or ask Dealer any questions about its use or reliability. The sales contract prepared by Dealer referred to the truck as a "used refrigeration truck" and contained a notation, "refrig. not tested" across the top of the contract.
Factory's new product was a success and orders for delivered ice cream cakes were pouring in. However, less than a week after the truck was delivered, it became obvious that the refrigeration unit was not working well. Cakes placed in the front of the truck were kept frozen but cakes placed in the back melted before they could be delivered. When Candy took the truck to a local mechanic, she was told that the refrigeration equipment appeared to be much older than the truck and was probably designed for a much smaller truck. Candy immediately sent Dealer written notice revoking her acceptance of the truck and demanding return of the purchase price. Dealer refused to return any part of the price. In order to continue in business, Candy had dividers placed in the truck's refrigerator compartment to make the space small enough to be chilled properly by the equipment that was in the truck. This limited the number of cakes that could be delivered on one trip. Four months later, Candy filed suit against Dealer seeking to rescind the sale and obtain the return of the purchase price as well as damages for breach of warranty. The truck had been driven 6,000 miles since the discovery of the defective refrigeration equipment.
Determined to raise money to invest in her thriving cake business, Candy decided to sell a partly damaged antique sideboard she had inherited from her mother. She took the sideboard to Ann's Antiques, where Ann agreed to make the needed repairs and then display the sideboard in her shop for sale on consignment. Unknown to Candy, Friendly Finance had a perfected security interest in Ann's inventory under an agreement that required Ann to remit 80% of each sale to Finance. Several days after Ann had repaired the sideboard and placed it in her shop, Betty Buyer purchased it, paying the entire price in cash and arranging with Ann to have it delivered on the following Saturday. Ann placed a "SOLD" sign on the sideboard. The next day, Ann's Antiques was permanently closed because of building code violations.
Candy sued Ann for recovery of the sideboard. Buyer and Finance intervened in the suit, also seeking possession of the sideboard.
Friendly Finance sued Ann for the proceeds of the sale of the sideboard and Candy intervened seeking the same funds.
In September 1997, Alice Agent, a well known basketball sports agent, contacted David Dunk, the best high school basketball player in the country. Alice said that she could represent his interests in pursuing a professional basketball career and related endorsements. She explained that she was well qualified because she had recently represented Yogi Bearant. Yogi had been the best high school basketball player in 1996, bypassed a collegiate career and decided to play professional basketball immediately. Yogi is now regarded as a rising superstar -- and very rich.
In mid-March 1998, Dunk called Alice on the telephone. He said: "I think I want to go pro like Yogi. I want you to help me. " Alice answered: "I will take care of you. My fee will be the standard fee charged by top agents." Dunk responded "Great, we have a deal." Alice then said: "I will send you the paperwork when I get around to it." Alice, however, forgot to send Dunk a written agreement.
Alice advised Dunk to attend a national collegiate championship game scheduled for March 30, 1998. She explained that he should attend the college championship game, and related social events, in order to develop contacts with professional scouts and other business representatives. Dunk expressed a concern that he did not know what to tell the scouts and business representatives about his plans. Alice told Dunk:
At one championship party held immediately after the game, Dunk and Alice met Sam Sneaker of Sneaker World, a nationwide athletic shoe manufacturer and distributor. They also met Owen Owner, owner of Beach Pizza in Rehovot Beach, Delaware, a regional pizza favorite. Dunk announced to Sneaker and Owner: "Alice is my Agent; she took care of Yogi; she will take care of me." Alice then coyly smiled and said: "I'm sure that we will talk later -- maybe sooner than you think." Everyone laughed, exchanged high fives and shouted "Rock and Roll."
Immediately after the party, without saying anything else to Dunk, Alice contacted Sam Sneaker and Owen Owner separately. She told them that Dunk was going to announce at a well-publicized news conference on April 1, 1998, in two days' time, that he was going to play professional basketball in the Fall of 1998. She also said "Boys, it's time to deal."
Sam Sneaker wanted to make a deal with Dunk immediately. Sneaker was still upset that Sneaker World had lost a similar opportunity two years ago with Yogi Bearant and Alice. In 1996, Sneaker failed to sign Yogi at the 1996 championship parties and lost Yogi to AAA Shoes a few weeks later. Therefore, after only a few hours of discussion, Alice leveraged this interest and signed a contract with Sneaker just before sunrise on March 31. The contract was structured in the same fashion as Yogi's contract with AAA shoes, but the financial terms were twice as favorable for Dunk.
Alice also contacted Owen Owner. Alice had never met Owner before the party. After an hour-long discussion, Owner offered to make Dunk a twenty percent owner of Beach Pizza and to transfer Beach Pizza's title to its prime property located on the Rehovot Beach boardwalk. In exchange, Dunk would be obligated to promote Beach Pizza for seven years. On the morning of March 31, 1998, Alice and Owner signed a contract containing these terms and Owner conveyed title to the real estate located in Rehovot Beach to Dunk.
Alice was unable to contact Dunk before signing the contracts with Sneaker World and Beach Pizza. Dunk had been traveling and visiting friends and family. Alice left messages with Dunk's family in Delaware for Dunk to call her. Dunk never got the messages.
On April 1, 1998, Dunk was ready for his "April Fool's" news conference and party. Shortly before the conference, Alice said "Happy birthday. I have two presents for you -- contracts with Sneaker World and Beach Pizza." Dunk became upset. He said "I did not want to do deals until after I made my announcement to turn professional." The press conference thereafter went forward at which Sneaker World and Beach Pizza actively promoted their association with Dunk. Dunk decided not to say anything more about the contracts with Sneaker World or Beach Pizza, reasoning that he really did not know their terms.
After the press conference, representatives of Pizza World, a world wide pizza chain, asked Dunk to endorse its pizza products. Pizza World told Dunk that Pizza World was willing to pay Dunk a multi-million dollar signing bonus to promote its products and provide nationwide exposure -- something not provided by Beach Pizza. Dunk would have to agree not to promote any other pizza. Dunk became upset again. He was concerned that a contract with Beach Pizza might stand in the way of Pizza World's more lucrative offer. AAA Shoes also approached Dunk stating that it was willing to offer Dunk three times the amount offered to Yogi.
Dunk sought a lawyer immediately. A week later, Dunk discussed the facts with you and a senior partner in your law firm. The senior partner asked you to give her a memorandum on the following matters:
A. During the holidays, the Town of Ames sets up a holiday display in front of the Ames Town Hall. It consists of a Christmas tree, a Menorah, a Nativity scene, Frosty the Snowman, Santa Claus with a sleigh full of presents led by Rudolph the Red nosed Reindeer, and a banner stating "Peace on Earth." Paul Plaintiff, a resident of Ames, is disturbed by the display and files suit in state court arguing that the display impermissibly entangles church and state and therefore violates both the First Amendment of the United States Constitution and a similar provision of the State Constitution.
The Town defends the suit on two grounds: (1) that Paul lacks standing; and (2) that a federal district court in another state has already held that a practically identical display did not violate the First Amendment of the United States Constitution.
The state court holds that Paul has standing. It also holds that the federal district court decision was erroneously decided and that the holiday display violates both the First Amendment of the United States Constitution and the similar provision of the State Constitution. The state supreme court affirms. The Town files a writ of certiorari with the United States Supreme Court.
1. Did the state court have subject matter jurisdiction to hear the dispute concerning the holiday display? Explain.
2. Was the state court correct in finding that Paul had standing to maintain the action? Explain.
3. Did the Town's holiday display violate the First Amendment to the United States Constitution? Explain.
4. Does the federal district court's previously issued opinion have any binding effect on the state court's consideration of the constitutionality of the holiday display under (a) the United States Constitution and (b) the State Constitution? Explain.
5. Can the United States Supreme Court grant the writ of certiorari? Explain.
B. The Town of Ames owns and operates a municipal office building in downtown Ames. To cover operating costs, it leases 10 retail spaces on the first floor to outside vendors. For a period of ten years, one such vendor, a restaurant operator, maintained a "whites only" luncheon counter in the Town's building. To remedy this past racial discrimination, the Town of Ames passes an ordinance that minorities must constitute at least 20% of the new hires of each of its lessees.
In addition, to promote economic development, the Town passes a second ordinance prohibiting its lessees from hiring persons who do not live in Ames.
1. Was the past racial discrimination by the restaurant owner actionable on the grounds that the "whites only" policy violated the United States Constitution? Explain.
2. Are the two restrictions that the Town now imposes on its lessees constitutional? Explain.
C. During a hotly contested mayoral election in the Town of Ames, proponents for the respective candidates have repeatedly destroyed and vandalized political signs erected on residential property that support their opponents. This has resulted in a number of violent incidents.
To restore peace, the Town of Ames enacts an ordinance that prohibits homeowners from displaying any sign on their property except for address information and "for sale" or "for rent" signs
A national organization called Americans United For Free Speech ("AUF"), the membership of which includes several prominent Ames citizens, files suit in federal court in Ames challenging the ordinance as a violation of free speech.
1. Does AUF have standing to maintain the suit? Explain.
2. Assuming that AUF has standing, is it likely to prevail on the merits of its challenge to the ordinance? Explain.
Oliver Outlaw and Larry Lawless were collaborators in various criminal activities, the purpose of which was to support themselves financially. It came to their attention that they might be able to obtain money and property at the office of Acme Automobile Insurance Company (AAIC) located in New Castle County Delaware, after business hours. They understood that the business kept a great deal of cash in a large safe. They discussed how to proceed and determined to break into the building late at night.
Pursuant to their preconceived plan, Outlaw and Lawless broke into the building. Once inside, they took computer equipment valued at $15,000.00 belonging to AAIC. From an office assigned to Suzanne Salesperson, they took $25.00 in cash belonging to her.
They found the safe. However, they were unable to find the combination. Unsatisfied with the proceeds thus far, they determined to go to the home of the owner, Vincent Victim in order to try to force him to provide the combination.
Fearing that Victim might resist, Outlaw armed himself with a knife and Lawless armed himself with a handgun. They went to Victim' s house where they arrived at 1:30 a.m. They forced open the door, awakening Victim. They confronted him, demanding to know the combination to the safe. When Victim refused, Lawless told Outlaw to "cut him". Outlaw slashed Victim across the face, causing a serious wound (that later required 100 stitches to close). Victim then provided the combination to the safe.
In order to give themselves time to get back to AAIC and open the safe, they took Victim to his basement where they tied him to a chair and placed duct tape over his mouth. They told him that they would return and untie him after they took the money from the safe. They also warned him not to try to free himself or to call the police.
Outlaw and Lawless were subsequently arrested.
Board of Bar Examiners of the Supreme Court of Delaware
The Renaissance Centre
405 North King Street, Suite 500
Wilmington, DE 19801