Legal Question in Business Law in California

Sold My Business, Buyer Stopped Paying

I sold my music store to a man for whom this is a second location. According to our contract, if he pays late 3 months out of 12, or 2 months in a row, possession of the store reverts to me. He has paid timely for 2+ years. With only $7500 to go, he paid late in May, paid only 1/4 in June, and has not paid at all in July. He talked with me last week, but this week he has not returned my calls. May I lock him out and seize the contents? There may be enough there to make me whole, but not by much. I don't want the store back to run or even to sell - he has mismanaged it and ruined the business. It would be salvageable but only with a lot of work, and I have moved on.


Asked on 7/11/06, 2:27 pm

4 Answers from Attorneys
Larry Rothman Larry Rothman & Associates

Re: Sold My Business, Buyer Stopped Paying

Do you have a UCC 1 or any security agreement? I would need to review the contract in order to adivse you of your rights. You may be able to get a pre-judgment attachment. Please call me if you have any questions.

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Answered on 7/12/06, 4:22 pm
Ken Koenen Koenen & Tokunaga, P.C.

Re: Sold My Business, Buyer Stopped Paying

No you can't. You can sue him for the money.

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Answered on 7/11/06, 8:19 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Sold My Business, Buyer Stopped Paying

I don't think so, at least not without a strong possibility of liability for consequential damages. Repossessing a property generally requires legal action to establish your right to possession, either through an action for unlawful detainer, ejectment, or a similar action to establish your right.

Were, or are, you the owner of the business premises, or only a tenant? If it was a tenancy, did you sublet to the business buyer, or does he have a new lease?

Are the payments that are in arrears rent payments, payments on a mortgage or deed of trust, or simply payments on a promissory note or other kind of loan agreement? Is there a security agreement in your contract?

Unless the answers to these and related questions show that you have some direct right in the real property, you may have a long legal process ahead to enforce a claim to the building rather than just money damages.

Your business-sale contract, if well written, will protect you and give you a means to enforce your claim against some good collateral, and hopefully it contains an attorney-fee clause.

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Answered on 7/11/06, 8:26 pm
Terry A. Nelson Nelson & Lawless

Re: Sold My Business, Buyer Stopped Paying

You have no right to lock him out until you sue and get a court order of eviction. Contact me if interested in doing so.

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Answered on 7/11/06, 9:08 pm


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