Small Claims Court

[TPK]

Soc,

This is a business related situation. My brother-in-law (wife's sister's husband) owes me money on joint ventures between our businesses. Amount owed is about $3000.00. The paper trail is there, he just figures now that I'm not with wife that he has no obligation to pay.

His co. is in NY mine is in NJ.

1. Can I pursue this in NJ or does it have to be done in NY?


2. Is it true that in small claims court that if you're going legal on a business that you must have a lawyer?


I have taken him to collection (D&B) on some of it, but still no payment yet.


3. I'd like to know if I file for damages wether this would exceed the limit allowed in small claims court? and what is the dollar limit for small claims court?


4. Can you advise what type of damages I could file suit for if any?



5. In other words, what can I sue him for if I want to go after him for $50K?

I had offered him a proposal to settle on the amount owed, but he laughed it off and said he won't pay because "he didn't have to"


I'd really like to nail this guy, what are my options and how can I WIN?


Thanks

TPK

[socrateaser]

>1. Can I pursue this in NJ or does it have to be done in NY?

It depends on the facts surrounding the contract, i.e., where it was made, where most of the evidence/witnesses for the contract exists, whether the defendant co. is registered to do business in NJ, whether your loan was really to the defendant as a person or to his corporation. I could drone on, but you would need to tell me all the facts in order to tell you if you could sue in NJ.

If you want to make things easy, however, sue in NY, because that's where the defendant resides personally, and where his corp's principal place of business is located.

>2. Is it true that in small claims court that if you're going
>legal on a business that you must have a lawyer?

No. A corporation may be represented by an attorney or a nonlawyer employee/director/officer/agent etc., but an attorney is not required. Obviously, if you are faced by an attorney on the other side, you will have difficulty prevailing, however small claims judges usually tell an attorney to "shut up" and let the other party make their case. And, the judge will try to keep things on an even level, by refusing evidence that would ordinarily be objectionable, when the layperson doesn't know how to object, whereas the attorney does.

>I have taken him to collection (D&B) on some of it, but still
>no payment yet.

Most corps don't care about their D&B rating. You need to ding his personal credit record, and that means you better be able to prove the debt was personal or you'll get the snot sued outta ya.

>
>3. I'd like to know if I file for damages wether this would
>exceed the limit allowed in small claims court? and what is
>the dollar limit for small claims court?

The limit is different in every state. Call the small claims court clerk in the county where you want to sue, and they will tell you the limit.
>
>4. Can you advise what type of damages I could file suit for
>if any?

Well, if this is an unsecured loan and the borrower has refused to pay, then he is in default on the contract (breach of contract), and you are entitled to get your money back, plus statutory attorney fees permitted in a small claim action, plus any special damages, i.e., damages that were reasonably foreseeable at the time that the contract was made and which flow naturally from the breach.

If you had to go to NY, you might be able to obtain the reasonable cost of transportation, to and from court, and costs of service of summons, but not general attorney fees for consultation, or lost wages.

Now, if you could prove, for example by his admission, that the brother-in-law is refusing to pay the loan "because" you and your spouse are divorcing, well that would be an entirely different matter.

If you show that your reason for making the loan was due to your "special relationship" with the brother-in-law by way of marriage, rather than because of any reasonable business purpose, and that the bro-in-law's breach is not for a proper purpose, then you can sue for tortious breach of the duty of good faith and fair dealing, and perhaps even for breach of an oral trust or fiduciary. Under these theories, you could ask the court, not only for compensation on the loan, but also for punitive damages to encourage the bro-in-law to not repeat this sort of behavior in the future.

The small claims judge might not entertain this sort of action, even if it is legitimate, but I would plead it anyway along with the loan default because it will put the judge on notice of that this is a family deal, and not just an arm's length transaction between two business people.

>5. In other words, what can I sue him for if I want to go
>after him for $50K?

No. "The law of contracts abhorres a penalty." You cannot get more than what you are owed, unless you can prove that the other person has injured you in some manner completely seperate of the loan contract.

>
>I had offered him a proposal to settle on the amount owed, but
>he laughed it off and said he won't pay because "he didn't
>have to"

Too bad you didn't get it on tape after you told him you were recording him.

[TPK]

Soc,

I wouldn't call it a "loan" so to speak.

We would buy equipment (machinery) together at auction sales. We would agree ahead of time what to buy together and what we were buying seperate. Sounds like collusion but we call it "joint venturing".

We both had different bidder numbers at these sales. Sometimes equipment purchased together would be on my invoice, sometimes on his invoice.

Example: We bought a machine at an auction 4/2003. Item was on his invoice. I paid him $850.00 via co. check for my 1/2 of the machine. He in turn sent an invoice marked as "paid" for my 1/2. Machine was never sold and is at his shop. I also paid 1/2 of the rigging of the machine $100.00 cash to him. The market value of the machine is $6000.00, so I was wondering if I could sue him for fair market value of what machine is worth.

I asked him to "buy me out" or I'd "buy him out" but he's refusing any negotiation.

There are a 2 more open deals like the example above. 1 machine in question was sold for $2600.00 and I invoiced him for my 1/2 of the sale in Sept 04, but he's refusing to pay. Although I don't have a paid invoice from him on this deal, I have witnesses from that auction that knew we were buying equipment together.

Sometimes the joint ventures and what was owed each other would even out so no money was exchanged or checks & invoices issued. I know, bad business on my part, but I never imagined he would mix business with family and not pay cuz I'm not around anymore.


His quote that "he didn't have to pay" was not over the phone. It was actually at the NY 12/23 hearing when my father approached him about the money owed. He said this to my father, and my father told me what he said.

Insights??

Could you draft a short letter that I could send to him? If not no problem, I know you're busy.



TPK

[socrateaser]

See below...

>Soc,
>
>I wouldn't call it a "loan" so to speak.

Yes, what a difference some specific facts make to my analysis.

>
>We would buy equipment (machinery) together at auction sales.
>We would agree ahead of time what to buy together and what we
>were buying seperate. Sounds like collusion but we call it
>"joint venturing".

No, the legal term is "partnership," i.e., an agreement between two or more people to carry on a business for profit. And THIS changes everything!

>
>We both had different bidder numbers at these sales. Sometimes
>equipment purchased together would be on my invoice, sometimes
>on his invoice.
>
>Example: We bought a machine at an auction 4/2003. Item was on
>his invoice. I paid him $850.00 via co. check for my 1/2 of
>the machine. He in turn sent an invoice marked as "paid" for
>my 1/2. Machine was never sold and is at his shop. I also paid
>1/2 of the rigging of the machine $100.00 cash to him. The
>market value of the machine is $6000.00, so I was wondering if
>I could sue him for fair market value of what machine is
>worth.

If you can prove that you were acting in concert at the sales to buy various merchandise that you both could use or sell, etc., then your partnership, even between two corporations, supplies you with much more powerful rights than a simple loan agreement would create.

Partners have a legal DUTY of care, loyalty, observance of the other partner's best interests, and notice about all things concerning the partnership. You are joint owners of EVERYTHING, regardless of whose money paid for something, and you are entitled to an equal share of the profits from all of the merchandise, and you are both jointly and severally liable for any debts created by either of you in advancing the partnership.

The failure to act in your best interests, is called a breach of fiduciary, and that provides you the right to equitable relief before a judge and without a jury trial. Partnership and family law have a lot in common -- in fact, just about everything except for the duty of support after the partnership dissolves.

If you can show that the machine has a fair market value greater than its purchase price, then you are entitled to 1/2 of that excess value, and you can force the machine's sale, or demand the equivalent in cash or other property, or ask the court to impose a constructive trust on the machine and order your partner to give you the machine.

You could also ask for punitive damages to encourage him to not repeat any of these activities in the future. And, you can ask the court to order him to reimburse you for any of your out-of-pocket costs as required to advance your partnership rights -- including equitable attorney fees and costs of suit.

>
>I asked him to "buy me out" or I'd "buy him out" but he's
>refusing any negotiation.
>
>There are a 2 more open deals like the example above. 1
>machine in question was sold for $2600.00 and I invoiced him
>for my 1/2 of the sale in Sept 04, but he's refusing to pay.
>Although I don't have a paid invoice from him on this deal, I
>have witnesses from that auction that knew we were buying
>equipment together.

If you have invoices and payments for past deals, that would be sufficient to prove the partnership exists. Prima facie evidence is proof of a sharing of profits, which is what the sale of a machine would be, assuming that you received on sale, more than you paid for it.

>
>Sometimes the joint ventures and what was owed each other
>would even out so no money was exchanged or checks & invoices
>issued. I know, bad business on my part, but I never imagined
>he would mix business with family and not pay cuz I'm not
>around anymore.
>
>
>His quote that "he didn't have to pay" was not over the phone.
>It was actually at the NY 12/23 hearing when my father
>approached him about the money owed. He said this to my
>father, and my father told me what he said.

Your father could testify, but he is clearly a biased witness, so the court's not gonna pay much attention. Concentrate on the paper trail.

>
>Insights??

You have them.

>
>Could you draft a short letter that I could send to him? If
>not no problem, I know you're busy.

There's a limit to my charitable nature, and you've just reached it. When people seek help and they clearly have very limited resources, and/or there's an issue of a child involved, I do lots o free stuff.

Here, we are talking about capital assets for a business with quantifiable market value -- totally different deal. I must get paid, or I'm a dork.

[TPK]

Soc,

1. Now knowing the facts, should I pursue this in NY or NJ?

Keep in mind equipment is at his shop in NY. I do have a NY lawyer now (1 of 3) so maybe I should use him as he's in same county as bro-in-law. Maybe I answered question #1 already myself.

According to what I have read about NY small claims, $3000.00 is the limit and you have file elsewhere if it's more.

We're right at that $3K mark, but if we go after market value then we're over the limit.

2. Do we have to specify damage amounts before going to court?

3. If you were my lawyer for this, where would you file? (small claims or elsewhere)

I just might take you up on your offer of a letter, and will gladly pay for it as well. I might be pissin in the wind sending a letter to him Pro Se, but if you think it would help any I'd do it.

True Story
___________

Re Collusion, there was a time back in the 1980s that "bid rigging" and collusion was common practice at auctions.  There was a certain ring of dealers around here that would agree not to bid against each other, have 1 guy buy the machine and then hold their own auction at a nearby street corner.  This got so out of control that the Feds got involved.  One place NOT to bid rig is at bankruptcy sales, there's always a bean-counter there and it was easier to get caught. These dealers became so blatant they they were finally caught, and a lot of guys did prison time for it. These are people I know, mostly older guys though.

The GREED of money will make people do anything!

Nowadays we call it joint venturing or partnerships as you say. But you still have to be careful about it. I've been accused of collusion a few times, but it's so hard to prove anymore.

And auctioneers, in my industry anyway, are of the sleeziest ilk out there.

Cheers!

TPK

[socrateaser]

>Soc,
>
>1. Now knowing the facts, should I pursue this in NY or NJ?
>
>Keep in mind equipment is at his shop in NY. I do have a NY
>lawyer now (1 of 3) so maybe I should use him as he's in same
>county as bro-in-law. Maybe I answered question #1 already
>myself.

Well, if you win, you will have to collect, and to do that would mean registering your judgment in NY, so you may as well start there and save the extra step.

>2. Do we have to specify damage amounts before going to
>court?

Yes, unless you only want the property conveyed to you (which ain't gonna happen, unless you pay for your half, because you is partnerds).

>
>3. If you were my lawyer for this, where would you file?
>(small claims or elsewhere)

Not enough facts. Probably small claims, because if he shows up on his own, he's not gonna understand what your pleading is about, and he'll be off balance about how to defend himself. It's one thing to plead breach of a loan contract -- quite another to plead breach of fiduciary.

>I just might take you up on your offer of a letter, and will
>gladly pay for it as well. I might be pissin in the wind
>sending a letter to him Pro Se, but if you think it would help
>any I'd do it.

You must send a demand letter to him as evidence that you attempted to mitigate your damages, or the court won't give them to you. Send it certified.

>True Story
>___________
>
>Re Collusion, there was a time back in the 1980s that "bid
>rigging" and collusion was common practice at auctions.  There
>was a certain ring of dealers around here that would agree not
>to bid against each other, have 1 guy buy the machine and then
>hold their own auction at a nearby street corner.  This got so
>out of control that the Feds got involved.  One place NOT to
>bid rig is at bankruptcy sales, there's always a bean-counter
>there and it was easier to get caught. These dealers became so
>blatant they they were finally caught, and a lot of guys did
>prison time for it. These are people I know, mostly older guys
>though.
>
>The GREED of money will make people do anything!
>
>Nowadays we call it joint venturing or partnerships as you
>say. But you still have to be careful about it. I've been
>accused of collusion a few times, but it's so hard to prove
>anymore.

Well, your "partner" isn't gonna march into court and tell the judge, "But your honor, my partner and I were bid rigging," is he? If he is, then the judge will dismiss your action on the ground that you come to court with unclean hands, and you are both in pari delicto, such that the court should leave you where it found you.

However, your partner risks that the NY district attorney will get wind of it and then both of you could be in some hot water. So, assuming that he's not gonna self destruct in order to keep from paying you, then you are "partners" and that's all that the judge is gonna know or care about.

[TPK]

Did this already. I sent a certified letter that was "refused" and returned. I faxed it to him and while he stated he rec'vd it, I have no real proof that he did. Only have proof he refused it.

The letter was a proposal outlining what was owed and where the equipment was located. I made a proposal where very little money would exchange hands by him giving me the partnered equipment for the money he owed me.

He now has his fax turned off.

1. Was my letter enough?

I still have the returned refused letter.

2. I'm a little unclear about mitigating damages. Are you saying that my letter should've contained some reference to market value I want for the equipment and breach of fudiciary mentioned, or additional damages I intend to pursue?

If you think you can draft me a better letter or something more detailed with some legal lingo attached I'd be interested.

However, I would prefer to discuss your costs for this by email and not in this forum. I am also unclear if the letter would be sent to him by me Pro Se or would it be a Soc-issued letter.

I just want to see if it's cost effective for me to have you write a letter.

It's up to you. If you'd rather not bother I wil understand, no offense taken.

TPK

[socrateaser]

>1. Was my letter enough?

OK, send the letter again, only this time by certified mail, no return receipt. The letter will be delivered, and you will have a tracking number, from which you can obtain a printout from //www.usps.com, which will be conclusive proof that the letter was delivered. Make sure to get the pre-printed blank USPS certified mail receipt that you will put on the envelope BEFORE you mail it, and write/print that tracking number on the letter and make a copy of it. That will show that the tracking number from the post office is the same as that printed on the letter itself.

After that, if he doesn't read his mail that will be his problem.

>2. I'm a little unclear about mitigating damages. Are you
>saying that my letter should've contained some reference to
>market value I want for the equipment and breach of fudiciary
>mentioned, or additional damages I intend to pursue?

Well, technically you want to ask for what you want, and then sue if you don't get it. So, make sure your new letter asks for anything that you want.

>>I just want to see if it's cost effective for me to have you
>write a letter.

You can do it. This is not that big a deal. You just want to show that you made a good faith effort to resolve the issue prior to bringing suit.

[TPK]

Ok Soc, I'll do as you have advised.

Many thanks for your input, you're always very helpful.

Cheers

TPK

[TPK]

Soc,

I talked my NY lawyer today about the breach of fiduciary. After reading up on this myself, it seemed like the right approach. I told him the same story I told you. He stated BOF was not the way to go, rather a "dissolution of partnership" was what he suggested.

Spoke to my Pa. lawyer and he said BOF was the right approach. I'll bet if I asked my NJ lawyer he'd chime in different as well....good gawd!


1. Can what bro-in-law and I had be considered a legal partnership?

I know you called it a partnership in a previous post, but it is not by written contract, it was by verbal agreement.

2. Opinion on dissolution of partnership as opposed to BOF?

3. Where can I get one of those Uzis you highly recommend?? :)

TPK