Legal Question in Business Law in Massachusetts

Reply to Commercial Note Inquiry

To Answer your question I need more information about your "Commercial Note" and your business:

Is the "note" secured by a mortgage on real estate, equipment, accounts receivable or other assets of value? If the answer is yes to any of these questions then a "foreclosure" may make it possible for you to get some equity out of the secured property.

Does the debtor own any other assets other than the business? Maybe you could get an attachment on her other assets, such as her house, a bank account etc...

If Debtor lied on her loan application to you then the debt may not be dischargeable in Bankruptcy, do not count on that however; Bankruptcy court is a good forum for a debtor not a creditor.

Your best bet is to go after any secured property-- if any-- as soon as possible.

If you do nothing then the business at present will give you nothing. That seems obvious at this point. I see a lot for people lose a lot of money by doing nothing. If you do nothing you get nothing.

Maybe if you take over the business you could find someone willing to manage it for a stock interest.

Maybe you can arrange for a potential buyer before you begin to "foreclose" so the damage to the business is lessened by a quick take over.

Under Massachusetts Law if you get a judgement against a corporation and the corporation does not pay within thirty (30) days you can go to court and get a receiver appointed to take over the business; This solution would put her out of business and keep the operation running---Disadvantage-- expenses are very high for a receiver.

I cannot help you further without more specific information about your deal.

Watch out, if you wait too long you may be time barred by the statute of limitations !!

See an attorney--NOW-- to learn your rights, most lawyers offer a free inital consultation. I do.

Feel free to call me if you have any further questions.

Very truly yours,

Michael J Baldassarre

Larceny by False Pretences

It is a crime in Massachusetts to obtain property by false pretenses. This means ifshe made material misstatements of present or past fact to get you to make her aloan then she committed a criminal act. If the amount is over a certain amount, (Iassume it is) then it is a felony. However, a promise to pay in the future is not a falsestatement since it is a future fact and not past or present.

Taking paper back on sale of a business.

There is a small myriad of questions I would ask of you before I could give you advice. There isn't enough detail in your message to suggest which way would be best for you to go, strategy-wise. Please call me on SUNDAY, March 15th, or else Monday morning between 11 and 12, andbut remind me who you are when you call. In the Boston area, you may reach me at617-527-0050, and if you are in Western, Mass., dial 1-888-527-0050.

If you have a copy of the note (the "I O U"), which may just be part of the agreementto sell the business, please fax that first to me at 617-527-1763. If the agreementwas just verbal, try to find what if any letters, notes, or other written communications you may have copies of which acknowledge any details of the sale.

Questions I'll have to get answered by what you tell me or else by reading what you fax to me: What town is the business in? What town is the new owner in? Whose laws governed the purchase and whose laws govern the "loan"?How long ago exactly was the sale? (Month and year!) When did the buyer first default, exactly, and what legal stepshave been taken since?

Is the sale actually 'complete' before they've finished paying their part?

What are the terms of the note and what are the new terms you established (and with what written documentation)? In particular, over what time period is the note due and when was it first entered intoexactly?

What type of business is this? If it's got an inventory or other assets, then are the assets owned by the business or has new owner taken out a bank loan out for inventory or for collectibles?

Was the agreement for sale personally guaranteed by the buyer?(I'll look at the agreement to determine that since it may betrue even if it doesn't use such words.) Does the buyer have other assets, such as a house with equity, a car, bank accounts, bonds and stock, etc.?

Is that buyer competent to run the business? Is s/he putting in the kind of effort and time you expected?Did she or you ever incorporate the business? If so, as a C corp or an S corp? Or is it a partnership? With whom and what kind? (LLP, GP, etc.)

How do you know that she's, for example, paying herself? How do you that she's making money (before her salary)? Is she paying herself a lot?

Does her business badly need the money that's in it in order to maintain itself or to grow?

How exactly could buyer hurt the business?

Does the business have an trade secrets?

Think about liability, damages, and recovery

The other replies give you a lot to think about. When you approach these situations, you should consider whether the other party has done something that is actionable (in other words, can you prove they have done something wrong). If they said they would pay you back, and then later do not pay you back, then either (A) they knew that and lied (they have liability -- or -- (B) they intended to pay you back, but then later found they could not (they did not lie, in this case). Depending on what was in the note (there was a written promissory note, I hope), your rights are a fundction of what you agreed to in the note.

The second general thing to think about is what damages you have suffered. If the wrong they did has no effect on you, then you may win a lawsuit, but collect only a nominal sum of money. That will not pay for your lawyers to win for you, so the victory will be a hollow one. Litigation expenses can run several thousand dollars, in a simple case, and if your legal fees are more than your recovery, the only person to win is your lawyer (who gets paid).

The last thing to think about is recovery. You cannot get blood from a stone. If you win the lawsuit, you may not be able to collect. If this person has assets (as was emphasized in several other replies), this is an important factor to getting you some monetary damages. Civil lawsuits are about money, if you bring the action, the result will not be to put the other person in jail, but rather to have them pay you money. If they have money, and refuse to pay you, the court could find them in contempt, and put them in jail until they pay you, but this is way down the road. It will do you no good if the person you beat in court has no money and no assets of any kind.

These are some things to think about as you ponder your next step. If you are located in SouthEast Massachusetts, I would be happy to help you. The other replies are from other parts of the state, and may be more convenient to you. Do not procrastinate. Debts that are not promptly collected are often never paid.

This message is provided to assist you in structuring your thoughts when you speak with an attorney about your situation. I am not your attorney, and you are not my client, so this is not legal advice. Legal advice can only be given after a careful interview of the client by the attorney, and I have not had the opportunity to understand the significant issues that I must understand to render legal advice. You should contact an attorney in your state to discuss your situation. That attorney can give you the advice that your situation deserves, after carefully considering the issues that are legally significant in your situation.