Legal Question in Business Law in California

I sold my clothing business 5 years ago to a former employee for $175,000.00. This included $100,000.00 of inventory $20,000.00 worth of store fixtures. The rest was blue sky for a successful operating business. She put $20,000.00 down and paid interest only for 3 years then stopped paying for the last 2 years. 10 days ago she cleaned out the building and took all the inventory and store fixtures. She and her parents personally guaranteed a promissory note. I don't have enough money to hire a lawyer right now to "go after" her. I want to take her to small claims court to get the store fixtures returned (or have her pay $5,000.00) so I can reopen the store myself. This is my question. If I sue her for the store fixtures now, will that make it legally impossible for me to sue her later (in a few months) for the $135,000.00 plus back interest she still owes? Do I have to sue all together or can a sue her in parts?



Asked on 10/30/11, 8:32 pm

3 Answers from Attorneys

Jeffrey Richter Finestone & Richter

Once you go to small claims court, you will be foregoing all other claims. Do not do that if you want to obtain full recovery. If the guarantors have assets, then make the claim via letter and threaten the suit. Perhaps you can avoid the suit with a structured recovery over time, starting with the fixtures. If they signed a guaranty that is bullet proof (not all are), and they have the assets, they would be smarter working with you. It is better than their hiring an atty and paying him to defend a case that they cannot win. Go about it that way with an appropriate demand letter (tough and meaningful--not just a simple demand), and do it NOW. Do not go to small claims court. If they won't settle, file anyway (in Superior Court), as there likely will not be a full case in front of you, with the attendant expense, as they will then likely settle once they know you are serious.

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Answered on 10/30/11, 10:22 pm

Anthony Roach Law Office of Anthony A. Roach

The fundamental rule that attorneys learn in law school is this: "Thou shalt not split your cause of action." In layman's terms, that means you need to sue for everything, now, and not in parts in a multiplicity of lawsuits.

That rules extends to small claims court. Filing a small claims action waives damages over the jurisdictional amount. (Jellinek v. Superior Court (1991) 228 Cal.App.3d 652, 656.)

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Answered on 10/31/11, 8:31 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

If you had separate contracts that could be separately breached for sale of the fixtures and sale of the (rest of the) business, maybe; but your suit would be for breach of the entire (single) contract, and filing suit in Small Claims would be an express statutory waiver of additional damages against any defendant.

I have just taken another case in Butte County Superior Court; yours sounds as though it might be pretty straightforward. If you'd like to share some details with me, maybe we could work out a deal to bring a breach of contract/enforcement of guaranty action on a modified contingency basis.

A couple of things to be considered are whether there is an attorney-fee clause in your business sale agreement, the likelihood of a cross-complaint (irrespective of validity) against you for misrepresentation or whatever, and whether the parents have assets with which to pay a settlement or respond in damages. Please feel free to contact me directly at no obligation.

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Answered on 10/31/11, 8:57 am

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