Being sued for a corporate debt

[tony_apples]

What is the name of your state? NYS

Hi All. My brother and I are partners in a NJ S-Corp - 50% each. We ceased operations in Nov. 2004 because biz had slumped and we couldn't survive. We found jobs.

The business still owes money to vendors. One of them, in CA, has filed a lawsuit, and named the corp., me and my brother. This debt WAS NOT personally guaranteed.

The complaint was filed in April...I just learned of it in July because we never received it. They claim somebody in my brother's aptmt bldg signed for the certified mail, but we have no idea who signed for it (his landlord says that no such person lives in his bldg)...so perhaps we have an angle because we weren't properly served...

My local attorney told me that I should retain a CA attorney to represent me. The problem is those I spoke to want a $4K - $5K retainer, and we just don't have it...

How sucessfully (if at all) can we defend against this ourselves - not being lawyers, and not being in CA?

Appreciate any advice...Thanks!

 

[TigerD]

Did the corp file bankruptcy? Were you careful to keep all corp business seperate from personal? If their attorney can peirce the veil -- you're screwed.

You need to be talking to your corporate attorney.

DC

 

[tony_apples]

Hello, and thanks for your reply.

The corp. didnt' file bankruptcy...there isn't any money to pay attorney fees, and it has perhaps $2K in total assets (some inventory, 2 desks, a computer and printer).

We don't have access to these assets, small as they are, because we couldn't pay the back rent, and the landlord changed the locks and moved all of the stuff into storage.

There wasn't any comingling of personal and corporate funds.

Our attorney in NJ (who said he really can't do much because the suit has been brought in CA) said it seems cut-and-dried that we can't be liable for the debt, but he said they probably named my partner and I in the suit to get a default judgment, maybe figuring that we weren't going to have the funds for an attorney...

...they are right there, because we don't have the $5K retainer the California attorney wants...

The other thing is that we weren't properly served...they sent the complaint out certified mail to my brother's apartment bldg (so they claim). We have no idea who signed for it - nobody recognizes the name of the signer on the proof of service (the bldg manager said nobody by that name lives in the bldg). So, i just learned of the suit about 3 weeks ago because they sent proof of service via regular mail to my brother. The complaint was file in April, so obviously if we had 30 days to reply...we didn't, since we never got it!!!!!

Did the corp file bankruptcy? Were you careful to keep all corp business seperate from personal? If their attorney can peirce the veil -- you're screwed.

You need to be talking to your corporate attorney.

DC