What do I do if I sold a small business and the purchases is not paying me the money he owes?

Question

I sold a landscape business to an individual in 2011. We made a contract stating the terms for payment and listing all property included in the purchase. The contract was signed, dated and witnessed by a 3rd party as well as the puchaser and myself. The contract specifies that I have a lein against the physical property that was purchased until the terms are satisfied. The purchaser is currently extremely delinquent and has also sold some of the physical property (a trailer ) but did not use the proceeds from the sale for payment to me. What are my options at this point? The purchaser owns several pieces of machinery, can I force a sale of these assets to get payment? I live in North Carolina.

Austin Hirschhorn · Answer

If the purchaser has defaulted on the contract and is not paying, you will probably have to hire a lawyer in Michigan to file suit against the purchaser of your business. Depending on the paperwork that was involved in the sale and if the lien was properly recorded you would have rights against the property that was sold. If the machinery that the purchaser owns is titled in the name of the business or in his name individually there might be a difference in your rights against the machinery he owns, but the lawyer you hire should be able to determine that after reviewing the purchase documents.

Jeffrey Dworin · Answer

First, perfect your lien.  You and he saying there is a lien does not stop someone else from buying the property.  Record a UCC1 Financing Statement. This can be done on line at the state website, or have an attorney do it. it's easy.  Once you have a perfected lien, you can file suit for the money and to repossess the equipment.

Dennis P. Mikko · Answer

The good news is there is a written contract.  While you attempted to place a lien against the personal property, was the lien ever recorded?  Does the lien give you the right to peaceful reposession upon default.  You could sue the purchaser, however, it appears that he is fairly judgment proof.  You could also attempt to foreclose on your lien.  At the very least, if not "perfected" you should perfect the lien immediately by filing or recording it with the appropriate governmental office.

Edward Olson · Answer

It sounds like you did not have an attorney representing you in the closing.  Your rights are based entirely on the contracts you signed.  You need to contact an attorney to review your contracts.

Brett Alexander Pedersen · Answer

You may need to file a legal action to collect.

George Gingo · Answer

If you have a lien that was filed in the Official Records then you have taken the first step to protect yourself. Next, sue. If the lien wasn't filed, get it filed.  If the lien wasn't witnessed by the right parties or enough parties to be filed, then you don't have a lien.

James Dunn · Answer

Three choices 1. Take your lumps and do nothing 2. Work it out with the buyer 3. Get help. Without the docs it is hard to say if you have a security interest in the personal property. If there is a UCC1 and a financing statement, you do and can recover the property from the new buyer. If not, remember that the school of hard knocks has high tuition. Most problems that lawyers see could have been fixed for $250 if the lawyer is involved prior to the event. After, it can cost thousands. Look on the bright side, you saved $ by not hiring a lawyer in the first place to do it right.

Kevin Elliott Parks · Answer

I'd consult an attorney immediately. Much of your rights are going to depend on the wording of the contract itself. However, just because you have a contract that might state that you have a lien doesn't necessarily mean that a lien actually exists  and foreclosing on a security interest in property is also potentially problematic, depending on whether you perfected the security interest.  I don't mean to insinuate that you have no rights in this regard, of course, as you likely have a breach of contract claim, at the very least. But your options may not be as plentiful, or as easy to pursue, depending on the circumstances.

Gary Russell · Answer

Assuming this contract was executed in Michigan and is enforceable under Michigan law, your remedy lies in filing suit for breach of contract and other applicable causes of action.  Although your contract might state that you have a lien on the "physical property," that does not give you preference over a "bona fide purchaser" of the property.  Items with titles, like automobiles, boats, motorcycles, etc., can have written liens filed with the Secretary of State.  This lets potential buyers know that there is a security interest in the property.  If such is not on file, then there is no security interest to enforce against the purchaser.  Same goes if there is any real property involved.  Likewise, if you have not taken a security interest in the remaining property, you might continue to face having the property sold out from under you.   You should contact an attorney immediately, before all your security is gone.

Galen Hair · Answer

Under Louisiana law, the seller would ideally bring a suit for breach of contract and allege in the suit that the purchaser is selling of physical property. The seller should also file the liens with the appropriate parish office.

Alan Smith · Answer

Talk to a Florida-licensed attorney and sue him. I can't really be more detailed here without knowing more facts, and you don't want to give me more facts because that compromises your privilege. If you don't know where to start, I'd recommend calling the Florida Bar (see floridabar.org for contact information) and asking for a referral to an attorney in that practice and geographical area.

James Weiner · Answer

You apparently did not file a UCC financing statement when you sold the business or use an attorney.. Thus your "security" interest is not perfected and is potentially void.. Please contact an attorney immediately you will be forced to file a lawsuit.

Roberta Ohlinger-Johnson · Answer

Collateral is called in law a secured transaction.  It is very complicated and tricky and usually involve reading the Uniform Commercial Code closely and reading your contracts.    I would suggest you contact an attorney immediately.  Most likely you will need to sue depending on the collateral, and even if you can do a strict repossession you will need an attorney to tell you the legalities of your jurisdiction.  This is far beyond the public disclosure you would want on the internet or the general information this forum offers.  It requires a close application of law to the facts of your situation and a cost benefit analysis.  Godspeed in your recovery of the collateral.

John Brennan · Answer

If the business was sold in Michigan or to a current Michigan resident you can sue here by hiring an attorney.  This is an action of the contract.  You should have recorded your security interest in the property ageist to the title and/or with the State of Michigan (and if not should do so now).

Stuart Nachbar · Answer

In New Jersey, you would sue him for breach of Contract.

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