What to do about a small claims for a small business?
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What to do about a small claims for a small business?
My husband made an agreement with a gentlemen to purchase a limo company (two cars and outstanding contracts). The gentlemen stated he wanted to get out of the business due to health reasons. He claimed that he was making $4,000 per month. He agreed to change is answering machine to tell people he was no longer in the business and refer them to us, we agreed to pay a specific amount month. He did not refer anyone, so we stopped paying him. He took my husband to small claims. He wants the cars back, but they are in mine name and the suit is not against me. Do we have to give them back?
Asked on June 21, 2012 under Business Law, New York
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
He would not seem to have grounds to seek the return of the cars, unless there was an agreement (the agreement of sale for the business; a financing agreement) which made the cars collateral or security for your payments to him, and/or allowed him to recover the cars in the event of your default. If there is such an agreement, it would most likely be enforceable.
Apart from an agreement specifically doing this, he should not be able to get the cars, but could sue to enforce the agreement and/or for damages (the money he is owed) under it. Note that if there was such an agreement giving him the right to recover the cars, the fact that you put the cars in your name would likely not protect you--the transfer of the cars to your name when your husband made the agreement could be seen as a fraud on creditors, and thus might be something the courts would set aside.
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