Question
A group of friends, Adam, Patrick, Danica, Rodney and Stacy graduate from college together. After graduation, they are together at a party celebrating. Adam tells
A group of friends, Adam, Patrick, Danica, Rodney and Stacy graduate from college together. After graduation, they are together at a party celebrating. Adam tells the group about his neighbors house that is for sale and how it needs a lot of work and he was thinking about fixing it up and flipping it. After a few rounds of booze and talk about how horrible the groups business law professor was, they get back to talking about Adams neighbors house. Stacy talks about her dreams of fashion design and interior decorating. She tells Adam, she could help in the project. Rodney recalls his days in high school shop classes and how he worked on a framing crew one summer. He wants in too. Danica, a finance major, talks about how they could do more than one house if they leveraged money through investors and loans. And Patrick, the class president and resident prankster, talks about his marketing classes and ideas he has for selling the homes. The group raises another shot glass, Stacy spills hers and screams, Im so drunk, then Danica says, that business law guy wasnt so bad, maybe we should get him to help us with our business, and after a brief silence, the group breaks out in laughter. No way, that guy was an idiot, we can do this ourselves and save money. After one more toast, Adam asks, whos in? they all are speechless but each raises their glass for a toast. Stacy gets her glass half way up and drops it. She giggles and then falls to the floor. The group later leaves one by one.
The next week, Adam makes an offer on the neighbors home. He offers him $100,00.00 payable at closing. The neighbor says, that sounds good. They agree that closing will take place after the remodel is complete. They shake hands and the neighbor gives Adam the front door key and says, keep me posted. I hope it doesnt take more than a year or two, I really need the money next Christmas.
Thinking they have a deal, Adam talks to Danica about getting the funds to close. Danica goes to several banks and cannot obtain a loan. So, she goes to her uncle Buck (who is quit wealthy) and begs him for a loan. Uncle Buck has a soft spot in his heart for Danica, so he agrees to invest $100,000.00 in the project provided the group forms a business and then the business forms a partnership with uncle Buck. He doesnt want any liability for the project, but wants protection for his investment. Uncle Buck takes out a napkin and writes, I agree to invest $100,000.00 in Danicas project provided they form a business entity and the entity creates a partnership with me that limits my liability for the project. I want the loan paid back within 3 years with 25% interest and I want first right on future projects. But, you cannot tell my wife. The two sign the napkin.
After a group meeting, Adam goes to the old business law professor and gets him to draft a corporation for the group, called Houses2Homes, Inc. Adam couldnt remember what the professor had said about partnerships, so he simply asks him to create a partnership with H2H, Inc. and uncle Buck. The professor creates the corporation naming Adam as president, Patrick as vice president, Danica as treasurer, and Stacy as secretary. He then creates a general partnership between H2H and uncle Buck but doesnt specify who owns what interest.
Discuss the legal issues that the different parties may be facing thus far in the story.
While Adam is getting the purchase lined up, Stacy continues to work on financing options for future projects. She holds a meeting with several potential investors and she shares the concept of H2H, Inc. Before she begins, she asks them to sign a non-compete and non-disclosure agreement because H2H, Inc. has a unique method of making a profit off of the house flip market by using a special formula that she has created. The investors, including Ebineaser, sign the agreement. After the meeting, she develops several prospects. Ebineaser later thinks about the program and decides he can do it on his own and make more money. So, he takes to the streets and sets up competition with H2H, Inc. by forming Screws by Scrooge, Inc. Stacy later learns about this and is furious. She tells the group that they need to file a lawsuit against Ebineaser to protect their business. They file suit in a Texas state court, but Ebineaser is from Oklahoma. The meeting between Stacy and Ebineaser took place in Fort Worth. In the lawsuit, H2H relies upon a Texas statute designed to protect Texas businesses and Ebineaser claims that the Texas statute is invalid because it harms interstate commerce. After a jury trial, a verdict of 10-2 in favor of H2H is rendered.
Ebineaser comes to you and asks you what he should do at this point. He believes he had ineffective counsel and that federal regulations were violated. What do you tell him?
While the law suit is going on, Rodney hires a framing crew who goes to the house and begins work. He tells them about H2Hs deal and they agree to furnish the materials and labor and get paid when the work is done. About three months into the work, the framing crew foreman, Todd, demands a partial payment from Rodney. Rodney explains that there is this lawsuit going on and that its eating into their funding right now. He assures Todd that the money will come after they flip the house. Todd gets angry and pushes Rodney in the chest and raises his fist as though hes about to deck Rodney. Joe, a plumber working nearby sees the altercation. He runs over and steps in front of Rodney and hits Todd square in the jaw. Todd falls to the floor and blood flows from his mouth. Todd is taken to the hospital and later dies. Apparently, he was on blood thinning medication.
The district attorney doesnt know what to do because Joe is a popular person in town. He comes to you and asks for advice. What do you tell him?
Todds crew walks off the job believing they were not going to get paid. They have three months invested in the framing and want to get something for their trouble. Besides, they had to pay for the funeral of their beloved boss. They come to you and explain that H2H doesnt appear to have money, they did the work on the house, but felt they had to leave the project because of the altercation.
What advise do you the framing crew about their situation and their options at this point?
Before the altercation with Todd, Stacy meets with Joanna Gaines from the HGTV series Fixer Uper. Knowing Joanna is a designer and a family friend of Stacys, Stacy asks Joanna for help on H2Hs projects. The two reach an agreement where H2H will pay Joanna for consulting work on their projects. They sign a written agreement that outlines the terms, payments and details of the relationship. After Joanna goes home to Waco and tells Chip what she did, he says babe, theres no way you have time to do that. We have a new restaurant, a store and you need to be on the farm to take care of the kids. The two think about it for a while and decide to send Margaret, Joannas personal assistant, to work with Stacy. Stacy is furious because she had Patrick advertise that Joanna Gaines was helping design the homes and H2H had 4 new contracts for homes based upon Joannas involvement. They stand to lose $150,000.00 if they lose the contracts. H2H files another lawsuit against Chip and Joanna Gaines.
Joanna hears about the great advise you gave the District Attorney and the framing crew, so she comes to you for advice on what she and Chip can do and whether they are in trouble. What do you tell her?
While the house is being completed, Adam gets kicked out of his house by his parents. He decides to move into the upper floor of the H2H project house while the down stairs is under remodeling. One evening, he sees the framing crew out on the sidewalk with picket signs that read, Dont do business with H2H, they are deadbeats and dont pay their bills. Adam hears them chanting as cars drive by and honking in response to the framing crew. Adam opens a window and yells at them, go home and leave us alone. Your work was horrible and we arent going to pay for junk! One framer pulls out a toy gun he bought for his son and points it towards the house. Adam pulls a 380 from his pocket and shoots the framer. The framer dies.
The framers little boy comes to you and asks you at the funeral, is Adam responsible for my daddys death? Will he go to jail? How do you respond?
With two lawsuits and possible criminal charges pending, H2H decides it must file bankruptcy. They retain a lawyer who files the bankruptcy. When uncle Buck hears about this, he goes to the house, trips over a rolled up rug that Adam was using in the house for her personal living conditions, and uncle Buck breaks his leg. As he crawls out of the house, he has the locks changed and sends H2H a note that says, Im taking the house because Im a partner and because you owe me $100,000.00. I will consider that my property since $100,000.00 is what its worth.
When Charlie, the bankruptcy trustee, files a claim against uncle Buck, Buck comes to you for advice. He also asks you if there is any way he can get his medical expenses back for tripping over the rug and what options and issues he may have. What do you tell him?
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