Nature of the Case
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Facts
P was formed as a promotional venture by Ira Adler, Frank Billitz and J. Daniel Quinn. P came up with a publicity stunt to have a party sit in a specially constructed flagpole and then to set the world record for flag pole sitting and gain profits from the publicity generated. In November 1974, the three principals met with D at his home and reviewed the promotional scheme with him. They indicated that they needed to sell stock to the public in order to raise the $250,000 necessary to finance the project. Shortly thereafter, the law firm prepared and filed the articles of incorporation and P came into existence on November 6, 1974. The Articles of Incorporation authorized the issuance of one million shares of stock of the par value of 10 cents per share, or a total of $100,000.00. The man who would perform this feat would be known as 'Woody Hightower.' With an initial investment of $20,000, they opened a corporate account at Maryland National Bank and an office in the Pikesville Plaza Building. Then began the search for 'Woody Hightower.' They hired John Jordan to be the Woody character. They obtained a company to construct the premises to house Woody. This consisted of a seven-foot-wide perch that was to include a bed, toilet, water, refrigerator, and heat. The accommodations were atop a hydraulic lift system mounted upon a flatbed tractor-trailer. P employed two public relations specialists to coordinate press and public relations efforts and to obtain major corporate backers. 'Woody' received a proclamation from the Mayor and City Council of Baltimore and after a press breakfast at the Hilton Hotel on 'All Fools Day' ascended his home in the sky. P obtained a live appearance for 'Woody' on the Mike Douglas Show, and a commitment for an appearance on the Wonderama television program. P raised $43,000.00 by selling stock in the corporation. Within two weeks of the start, another stockholders' meeting was scheduled, because the corporation was low on funds. D then informed the principals that no further stock could be sold, because the corporation was 'structured wrong,' and it would be necessary to obtain the services of a securities attorney to correct the problem. P had failed to prepare and file proper offering memorandums and to make required disclosures to the investors. The parties were informed that they could not spend money already raised and would need between $10,000 and $15,000 to fix the problems, as well as any exhibitions by Woody, could not be made across state lines. P hired another attorney who confirmed the problems faced and a six to eight-week time frame to fix it. Faced with these problems the shareholders decided to discontinue the enterprise. P then filed suit against D for negligence and breach of contract. P introduced into evidence its obligations and expenditures incurred in reliance D’s creation of a corporation authorized to raise $250,000 necessary to fund the project. The development costs incurred included corporate obligations amounting to $155,339 including initial investments by Adler and Billitz, $20,000; shareholders, excluding the three promoters, $43,010; outstanding liabilities exclusive of salaries, $58,929; liability to talent consultants, $25,000; and accrued salaries to employees, $8,400. Individual liabilities to the three promoters, Adler, Billitz, and Quinn, totaled $88,608, including loans to the corporation, $44,692; repayment of corporate debt to Maryland National Bank, $8,016; and loss of salaries, $36,000. The only claim submitted for the jury's consideration was the claim of P against D, the law firm. The jury returned a verdict for P for $170,508.43. D appealed.
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