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I want to pay, my partner doesn't

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deckscrew

Member
What is the name of your state? CA. I am partners in a small business corporation. We were recently sued in small claims court and lost the case. My business partner is very upset and does not want to pay the amount owed ($2,500). We both found the entire process somewhat sloppy, sort of an our word against theirs, and were surprised that we lost the case.

Anyway, he's refusing to pay and says if they want their money they'll have to work for it. My feeling is that we should appeal the case, and if we lose the appeal we should pay it and get on with our business. He's against it, says its a waste of time and since we are a corporation with little in the ways of assets or need for credit, and if it goes to collection who cares.

The problem is we both have assets outside the corporation (homes, cars, investment, etc.), My question is: Are the assets outside of the corporation also at risk? I don't want a lien on my house and will probably end up paying the money myself if we lose the appeal.

My partner is not a bad guy, just a stubborn, hot head who hates to lose (these are good qualities in our business)

ThanksWhat is the name of your state?
 


dcatz

Senior Member
I am partners in a small business corporation.

Impossible. You are either in a partnership or you are possibly co-owners of a corporation. For the remainder of the response, I’ll assume the latter. If it’s the former, I suggest that you make that clear, as much said will change.

Anyway, he's refusing to pay and says if they want their money they'll have to work for it.

Not the sharpest knife in the drawer (feel free to quote). CA has more enforcement options than any other state and, intelligently used, all are extremely effective. For example, if you’re in manufacturing, all of your equipment gets taken and enough sold to pay the judgment. If it’s leased, secured lien holders can prevent the sale of what they have secured by UCC-1 filings, but you stop working while it happens. Corporate bank accounts get levied. (Of course, one or the other gets ordered into court to identify all assets and gets a contempt warrant issued for failure to cooperate.) If you’re manufacturing or service, customers can be ordered to pay the creditor instead of paying money owed to you and now know that you have a judgment that you’re not paying (bad PR). Liens get put on all hard and soft unsecured assets. The cost of doing all this gets added to the judgment. Avoid it by dissolving the corporation. If you continue operating one day after that happens, the judgment becomes personal to you. That’s the easy part of “working for it”. Post back, if you want to know when it gets ugly.

If you’re a partnership, everything said continues but enlarges. Just change “corporate bank account” to personal bank account(s), add liens on personal property and real property (the real property will exist anyway, if the corporation owns any) and the right to go after community property. (Are you married and do wives work?) If it’s a general partnership, both are equally liable. If one has more toys, one loses more toys and can sue the other for indemnification, if it helps.

Are the assets outside of the corporation also at risk?

If the corporate composition is solid, the judgment remains confined to the corporation and you are not at risk of the judgment creditor “piercing the veil” but, there are so many alternatives to that expense, I wouldn’t bother to try. Now, if you tried to dissolve or were suspended, the consequences of that have been explained.

Long and short? If you lose the appeal and continue to operate, it can be collected but at much greater cost to you.

Judgment for $2,500? That suggests that was either the exact amount of the claim or that you were sued by a “frequent filer” who was already limited to that amount before the first quarter of the year. If it was the latter, the plaintiff probably understands most of what I’ve explained. Otherwise they have to learn.

Good luck on the appeal. Sincerely. Probably not what you wanted to hear, but it is the response to your question.
 

deckscrew

Member
Thanks for the reply. He's calmed down a bit today, and agreed to the appeal. If we lose we'll chalk it up to "doing business" and will be more careful with whom we do business.

That said I was really surprised by the sloppy and rushed manner in which our case was heard. No evidence was asked for, and the claims of the person suing us were never backed up with any evidence.
 

dcatz

Senior Member
While your description goes a little too far, SC is fast and informal. Evidentiary rules are relaxed and there is no procedural record. The judge is listening, making notes, trying to separate the wheat from the chaff and figure out what the case is REALLY about to apply the proper law. An appeal is a new trial; you have one more chance.

Most litigants talk too much and verbally wander around. The trick to winning is to know what your case is about and what legal elements must be proven or rebutted and focus on that. Then stop, listen to the other side and rebut anything that undermines you. Then stop completely. If the judge still has questions, focus on those. Many litigants create their story, memorize it, can’t deviate and don’t listen to the other side. They may be right in their hearts, but they lose to skill and experience.

You’ve heard the case once, when you lost. It’s unlikely to change much for a trial de novo (appeal). Organize your evidence in a three-ring binder. Make another for the court. Tab it. The claimant will go first. Offer a binder to the court as you begin to testify and walk the court through the evidence that proves your defense as you recite. If you need corroborating testimony from subpoenaed witnesses, make sure they’re there.

If the claimant never pays bills on time or if you went to grammar school together, but it isn’t relevant to the case, skip it.
 

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