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Ely, Counselor at Law
Category: Legal
Satisfied Customers: 102141
Experience:  Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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In 2009 my company ( Delaware LLC ) provided collateral on

Customer Question

In 2009 my company ( Delaware LLC ) provided collateral on a third-party promissory note executed in Utah. I was not named as a Borrower. I operated the LLC out of my home office in California, but the collateral was / is held in storage in Utah. In 2010 there was an effort to settle the debt obligation via a Settlement Agreement. I acknowledged the settlement by signature, but under protest, because the Lenders were trying to force or compel me to buy back the collateral for an amount which is 20 x the principal loan amount. Ultimately to note went into default and the Lenders filed suit against the Borrowers. Without making any effort to collect and accept the collateral as payment in full against the debt , the Lenders amended the lawsuit, naming me personally. Since I signed the settlement acknowledgement on behalf of my company, how is it they can name me personally ? I have 28 days to provide the first set of discovery requests. Would it be appropriate for me to file a Motion for Declaratory Judgment ?
Submitted: 1 year ago.
Category: Legal
Expert:  Ely replied 1 year ago.
Hello and welcome to JustAnswer. Please note: (A) This is general information and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms; and (B) the site allows experts not participate in phone calls and I may or may not be able to participate in this feature.1) They are suing you personally. Correct? Not the company. Or both?2) Did you personally guarantee the loan at the time, or not?3) Is your LLC still up and running and all documents up to date with Delaware?This is not an answer, but an information request. I need this information to answer your question. Please reply, so I can answer your question. Thank you in advance.
Customer: replied 1 year ago.
1) personally, not the company
2) not named as Borrower, nor did I personally guarantee the loan
3) the LLC is not up and running, but at the time the loan was executed ( April 2009 ) my company was active
Expert:  Ely replied 1 year ago.
Thank you.Did you formally dissolve the LLC, or simply walk away from it but never officially terminated it with Delaware?
Customer: replied 1 year ago.
Just let the company dissolve , but not officially terminated on my end. Delaware most likely tanked it.
Expert:  Ely replied 1 year ago.
Thank you. I think that is where the mistake was made.Incorporated entities may be "pierced" and the individuals behind them personally liable if it can be shown that the corporate entity was a SHELL. See HERE. By letting the company "tank" and not filing any paperwork, the LLC was dissolved by the state, leaving the owner stripped of the limited liability granted by the LLC. Aside from this, they can also argue the other factors that the link discusses, as well.Someone in your situation may wish to (a) file to get the LLC back into status and (b) indeed file a motion to dismiss or for summary judgment stating that the LLC is liable, not the person behind it. The Court may or may not allow the personal liability to stand then, depending on the subjective factors behind the corporate veil doctrine.Please note: If I tell you simply what you wish to hear, this would be unfair to you. I want to be honest with you and sometimes this means providing information that is not optimal. Negative ratings are reserved for experts who are rude or for erroneous information. Please rate me on the quality of my information; do not punish me for my honesty.I hope this helps and clarifies. Gentle Reminder: Use the SEND or REPLY button to keep chatting, or please RATE when finished. You may always ask follow ups at no charge after rating. Kindly rate my answer as one of TOP THREE FACES/STARS and then SUBMIT, as this is how I get credit for my time with you. Rating my answer the bottom two faces/stars or failing to submit the rating does not give me credit and reflects poorly on me, even if my answer is correct. I work very hard to formulate an informative and honest answer for you; please reciprocate my good faith.