My brother let his boss borrow 125000 dollars as a loan payable and he didn’t pay it back.

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My brother let his boss borrow 125000 dollars as a loan payable and he didn’t pay it back.

So my brother works as a controller in a pool company. He lend 125,000 Dollars of my dad’s money to his boss and there was a contract where he would pay it back with 6 interest monthly for 5 years. And there were other conditions in the contract where he would pay him 20,000 on every million the company makes. Unfortunately, none of this happened. The company was later sold to a new owner for a quarter of the money. Now I’m not sure whether that ruins the chance of getting the money. If we were to sue him nobody knows what assets he has remaining to take it from him. I am foreign so I don’t know much. But there is a whole contract with a lawyer which states these conditions. Can someone please give me a rough overview on what can be done in order to take that money back. Note The new owner doesn’t really want to pay it back. He has set performance based incentives which my brother is trying to justify getting it back. I know its an extremely stupid situation and I warned him but now I still feel like something can be done.

Asked on March 2, 2018 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

1) The new owner of the company would NOT be liable or responsible for the loan if the new owner did not sign the loan agreement, unless a) the company was a corporation or LLC, b) the loan was not to the boss personally, but was to the corporation or LLC, *and* c) in buying the company, the owner bought the corporation or LLC (and not just its assets. If ALL those conditions are met, the company--not the new owner personally; the corporation or LLC--remains liable. But if the loan was to the old boss personally, only he is liable.
2) Your brother could sue his old boss for the money: he would sue for breach of contract, or violating the terms of the loan agreement, which is a contract. While as you point out, if the boss doesn't have sufficient assets to cover the debt, your brother may not get his money back, there is not necessarily any reason to think that he does not at this point (and after all--if he sold his company, presumably he received some amount of money for it), and in the course of the lawsuit, there are legal mechanisms ("discovery") to get information about the boss's assets. So the thing to do is sue for the money. For $125,000 (at least, since that is the principal; more with interest, etc.), it would be worthwhile for your brother to retain an attorney to help him.


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