Released from liability on the promissory notes

The client was partners with the adverse party in a company that marketed a particular kind of toy. This company (Company No. 1) had a history of unremarkable financial performance and rarely was profitable, though the company had greater earning potential. The client and the adverse party also each held an equity interest in a separate but highly profitable company (Company No. 2).

Company No. 1 had borrowed money from a third person, who also had an equity interest in Company No. 2, and the client and his partner in Company No. 1 personally guaranteed one of two notes that constituted the borrowing. Company No. 1 had gone into default on both notes

There were also allegations between the client and his partner in Company No. 1 that each had used company funds for their own personal expenses.

After some initial attempts at settling the case, Alan filed a petition to dissolve Company No. 1, the theory being that the adverse party viewed Company No. 1 as more profitable over the long term than did the client. The filing of the case—and the probability that a judge would order the company dissolved and the assets sold off—triggered an immediate response from the adverse party, the resumption of negotiations, and shortly thereafter, settlement whereby client sold his interest in Company No. 1 to his partner for $1.00, and except for a nominal payment, was released from substantial liability on the promissory notes.


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