Legal Question in Civil Litigation in California

Can I sell property belonging to one of our business associates?

A company we distribute spas for has recently closed their doors, filed bankruptcy, and owe us over $10,000 for services we performed as well as bad checks that they wrote to us. We have 11 of their spas in our possession now and have been told that we can sell them to recoup our loss. Is this legal?

Asked on 12/02/08, 4:49 pm

2 Answers from Attorneys

Phillip Lemmons, Esq. Phillip Lemmons APC, Attorneys at Law

Re: Can I sell property belonging to one of our business associates?

I don't think so. Who said you could sell them? Was it the bankruptcy court trustee?

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Answered on 12/06/08, 11:49 pm
Edward Hoffman Law Offices of Edward A. Hoffman

Re: Can I sell property belonging to one of our business associates?

No. The spas are part of the bankruptcy estate, and the trustee controls what happens to them. As a creditor, you need to participate in the bankruptcy case if you want to get any part of this debt paid.

Your question doesn't explain why you have the spas. If the company properly used them as security for its debt the court will likely give you priority over unsecured creditors. Even then, the trustee will be the one to decide whether and how the spas should be sold. If you are an unsecured creditor (which seems likely) then you will have to wait your turn and hope the estate has the means to pay some or all of what the company owes you. If the business is liquidated, the trustee will sell its assets -- including the spas in question -- and distribute the proceeds among all the unsecured creditors. The fact that the spas are in your custody does not give you any more right to them than any of the other creditors.

What I have said is an oversimplification of a complex process. Depending upon the specifics of the case, your position may be better than what I have described. You should consult with a bankruptcy lawyer ASAP in order to protect your rights.

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Answered on 12/02/08, 5:00 pm

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