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  • Question On Small Claims Court

    I have a friend who had the following sequence of events happen:

    Friend owns a S-corporation, the S-Corp sells a service.
    The S-corp purchases advertising on a radio station.
    All 3 invoices are paid for the advertising.
    The radio station is sold to a new owner.
    The new owner claims payment #3 never arrived.
    New radio station owner engages a collection agency.
    My friend goes on vacation over seas for 60 days.
    Collection agency sues my friend personally in small claims court.
    My friend is overseas, never hears about the case, doesn't show up.
    Judgement is issued by default.
    My friend arrives back in US, gets letter about the court past date and
    judgement on the same day.

    Had the collection agent sued the company, the CIO would have received
    the summons, gone to court, and defended the company. Since the
    collection agent sued the wrong entity (my friend rather than the
    corporation), does my friend have any recourse?

    Any ideas on what to do?

    -john-

    --
    ================================================== ==================
    John A. Weeks III 952-432-2708 [email protected]
    Newave Communications http://www.johnweeks.com
    ================================================== ==================


  • #2
    Question On Small Claims Court

    John A. Weeks III <[email protected]> wrote:
    I have a friend who had the following sequence of events happen:Friend owns a S-corporation, the S-Corp sells a service.The S-corp purchases advertising on a radio station.All 3 invoices are paid for the advertising.The radio station is sold to a new owner.The new owner claims payment #3 never arrived.New radio station owner engages a collection agency.My friend goes on vacation over seas for 60 days.Collection agency sues my friend personally in small claims court.My friend is overseas, never hears about the case, doesn't show up.Judgement is issued by default.My friend arrives back in US, gets letter about the court past date andjudgement on the same day.Had the collection agent sued the company, the CIO would have receivedthe summons, gone to court, and defended the company. Since thecollection agent sued the wrong entity (my friend rather than thecorporation), does my friend have any recourse?Any ideas on what to do?
    Well, this is the kind of thing that is complicated enough your friend
    should really consult a lawyer to help him straighten it out.

    The basic idea is that your friend goes to the court that issued the
    judgement and asks for the default to be vacated because he was never
    notified of the case.

    But it seems to me there's something else wrong here. You say the
    collection agency sued your friend while he was overseas, then got a
    default judgement. The rules require that your friend be "served"
    with the "summons and complaint" before the case can be heard by the
    court. That requires that either someone hand him the papers
    personally(*), or send them by Certified Mail, Return Receipt
    Requested (which he has to sign for).

    (*) In some states, it is sufficient to deliver them to a responsible
    adult who lives at your friend's residence, but even then your friend
    can probably get the default vacated because he never had an
    opportunity to appear.

    So there may have been "sewer service", where somebody throws the
    papers in the garbage and signs the sworn statement that they have
    served them. Or there is some other defect in the service. In any
    case, your friend should be able to file a motion to quash the
    service. Then the default judgement will be vacated. If the
    collection agency still wants to proceed, it can then serve our
    friend, get a court date, and your friend can appear and explain that
    he is the wrong person to sue -- that the contracting party is the
    S-Corporation.

    Of course, then they will sue the S-Corporation, so the above is
    mostly a waste of time. But it might be worthwhile just to remind the
    collection agency that it should sue the correct entity.

    I assume that once they sue the right entity, your friend (or some
    officer of the corp.) can apepar with canceled checks or other proof
    of payment, and presumably win on the merits.

    But probably the best course of action (after getting the default
    judgement vacated) is to just send a copy of the proof to the
    collection agency. Then your friend avoids wasting time in court
    (unless the C.A. is *really* butt-headed).

    But again, this is complicated enough that paying for an hour of a
    lawyer's time is a *very* good idea.
    --
    I pledge allegiance to the Constitution of the United States of America, and
    to the republic which it established, one nation from many peoples, promising
    liberty and justice for all.
    Feel free to use the above variant pledge in your own postings.

    Comment


    • #3
      Question On Small Claims Court

      On Thu, 17 Jun 2004, "John A. Weeks III" <[email protected]>
      said/asked in substance:
      A friend owns and operates a service-providing S-corp. The successor owner of one of its customers referred an assertedly unpaid invoice to a collection agency which sued only my friend individually in small claims court while he was out of the country on vacation for 60-days and, since he therefore did not learn of the lawsuit in sufficiently timely fashion to defend, obtained a judgment on default against him during his absence. If he had been here to learn of the summons in time, he he would have tried to defend on grounds including that, procedurally, the S-corp, not he personally, was the only proper defendant and, in any event, that the claim was not substantively proper because the invoice in question had been paid. He further contends that if plaintiff had sued the S-corp., another company representative would have learned of the summons and gone to court and defended. Any ideas on what to do?
      Your reference to a "small claims" court relatedly suggests that, at
      least when measured in the overall Scheme of Things over time, the
      underlying claim itself, even if by now reduced to an interest and
      court-cost bearing judgment, is also comparatively "small" and so that
      the perhaps most practical "what to do?" alternative might be to try
      realistically/credibly to settle, including, in exchange for whatever
      compromise payement the parties agree to be fair and cost-effective
      (including after the S-corp. tax-effects whatever that payment may
      be), by obtaining a stipulation implemented by appropriate
      court-specific order vacating the judgment personally against the
      individually sued defendant.

      ( Note, however, that [significantly?] missing from your factual
      recital is any explanation why practical [regardless what the
      Epistemological Truth of the claimed past payment may be], for anyone
      to litigate further; and while you also choose not to say what the
      exact dollar sum now in dispute is, your reference to the involvement
      of a collection agency at least rasises the not by you answered
      question whether there was a pre-suit demand made to the S-corp.
      [whether or not your friend was in the country at that time] and, if
      so, why the S-corp. did not resolve the claim [whether or not in
      consultation by phone with him when he was on vacation] before a
      lawsuit was commenced. )

      Alternatively, your friend may move (including, if need be, by order
      to show cause including a termporary without prejudice stay of the
      judgment's enforcement pending the motion's consideration) to vacate
      the judgment on the very grounds you aptly summarize -- namely, that
      service of process on him, individually, was only by mail and, even if
      that method is generally valid for the "small claims" court to which
      you refer, in the particular circumstances (i.e., his comparatively
      long-term absence from the country and that he anyway is not a proper
      party defendant) makes the default "excusable" when considered in
      light of his further contention that a trial on the merits would
      enable him to prove that he is an improperly sued person (assuming you
      are referring to a sufficiently capitalized actually separate such
      enterprise operated as such) and, anyway, that the amount sued for was
      paid (albeit that plaintiff's new owners may claim to be ignorant of
      that fact perhaps, if so, because plaintiff's receivables/payables
      records were themselves inaccurate before they became the new owners).

      This sort of motion is comparatively very simple to make and, in
      general, is commonly granted (unless, of course, the motion generates
      a response which demonstrates clearly that what you contend to be the
      facts above are in material part not true).

      Comment


      • #4
        Question On Small Claims Court

        John,

        Someone owns a business. The business advertises and the billing for
        advertising may be in error.While he is on vacation he, personally, is sued
        successfully for services that may have been rendered and may have been paid
        for in connection with this advertising. You ask for ideas.
        If the sums of money involved justify it then your friend may appeal the
        judgment. Possible appeals are improper service ( he was not aware of or
        able to defend against the suit) or improper person ( it's not clear whether
        the business or your friend is responsible for the radio ads). A lawyer can
        sort this out and advise your friend, but consider the cost.
        I'm troubled that your friend and his business failed to take any steps
        to clear up this problem before it went to the collection agency and before
        it went to court. He has truly made a mountain out of a mole hill.

        Good luck,
        Dave M.

        Comment


        • #5
          Question On Small Claims Court

          John A. Weeks III wrote:
          New radio station owner engages a collection agency. My friend goes on vacation over seas for 60 days. Collection agency sues my friend personally in small claims court. My friend is overseas, never hears about the case, doesn't show up. Judgement is issued by default. My friend arrives back in US, gets letter about the court past date and judgement on the same day. Had the collection agent sued the company, the CIO would have received the summons, gone to court, and defended the company. Since the collection agent sued the wrong entity (my friend rather than the corporation), does my friend have any recourse?
          Well, if he was overseas and didn't know about the trial, he was never
          served with process. He should be able to get the judgment overturned
          on that basis.

          Stu

          Comment


          • #6
            Question On Small Claims Court

            In article <[email protected]>,
            John A. Weeks III <[email protected]> wrote:
            I have a friend who had the following sequence of events happen:Friend owns a S-corporation, the S-Corp sells a service.The S-corp purchases advertising on a radio station.All 3 invoices are paid for the advertising.The radio station is sold to a new owner.The new owner claims payment #3 never arrived.New radio station owner engages a collection agency.My friend goes on vacation over seas for 60 days.Collection agency sues my friend personally in small claims court.My friend is overseas, never hears about the case, doesn't show up.Judgement is issued by default.My friend arrives back in US, gets letter about the court past date andjudgement on the same day.Had the collection agent sued the company, the CIO would have receivedthe summons, gone to court, and defended the company. Since thecollection agent sued the wrong entity (my friend rather than thecorporation), does my friend have any recourse?Any ideas on what to do?
            A) Go to court, get the 'default judgement' set aside, on grounds of
            'defective service of notice'. There is a potential issue of 'fraud
            against the court', by the opposite party -- if they swore to the
            court that notice _had_ been properly given to the defendant.

            B) Pull up the record of payment #3 having been *sent*, and the returned
            check showing it was *PAID*.

            C) With (b), consult a _real_ lawyer. In addition to his 'services' S-Corp,
            he just might end up owning a radio station.


            Comment


            • #7
              Question On Small Claims Court

              >All 3 invoices are paid for the advertising.
              The radio station is sold to a new owner.The new owner claims payment #3 never arrived.
              Can he produce the cancelled checks as proof there are no funds due?
              An appeal can be made within 30 days of a judgement. If the time to appeal has
              passed and he has proof of payment then file in small claims for the amount of
              the judgement.

              They tell you to be certain you're sueing the correct entity when fileing
              because you won't be able to collect if you get a judgement because it's
              somehow unenforceable but they don't say how to keep it off your credit report.

              The truth is heresay
              (This space intentionally left blank)

              Comment


              • #8
                Question On Small Claims Court

                Stuart Bronstein <[email protected]> wrote in message
                news:<[email protected]>. ..
                John A. Weeks III wrote:
                New radio station owner engages a collection agency. My friend goes on vacation over seas for 60 days. Collection agency sues my friend personally in small claims court. My friend is overseas, never hears about the case, doesn't show up. Judgement is issued by default. My friend arrives back in US, gets letter about the court past date and judgement on the same day. Had the collection agent sued the company, the CIO would have received the summons, gone to court, and defended the company. Since the collection agent sued the wrong entity (my friend rather than the corporation), does my friend have any recourse?
                Well, if he was overseas and didn't know about the trial, he was never served with process. He should be able to get the judgment overturned on that basis. Stu
                He could still have been served by "substituted service" (at least in
                California, and probably elsewhere). It would be sufficient in
                California to leave a copy with someone who appears to be responsible
                and send another copy via first-class mail. Even if Responsible Person
                forgets about it until Friend returns, he's still properly served.

                If service isn't defective, then it could turn on whether Collection
                Agency sued the right party. If he did all his transactions with Radio
                Station in the name of the corporation, did nothing to give them the
                impression he was acting in his own capacity rather than as the corp's
                agent, and did nothing to give them the impression he was going surety
                for the corp's account, then it sounds like he has a good case that he
                was never liable for the debt. Otherwise, Collection Agency may indeed
                have an argument that they should have recourse to him personally.

                Even if service was defective or he wasn't liable, he's still got that
                default judgment to deal with. There should be a procedure and
                deadlines to get a default judgment vacated. His state's Small Claims
                Court law and rules should determine what those are. Everything would
                seem to be in his favor, so long as he hasn't let a deadline slip. If
                he does that, he may be totally in the right and still SOL.

                --
                Not a lawyer,

                Chris Green

                Comment


                • #9
                  Question On Small Claims Court

                  Christopher Green wrote:
                  Stuart Bronstein <[email protected]> wrote
                  John A. Weeks III wrote:
                  New radio station owner engages a collection agency.My friend goes on vacation over seas for 60 days.Collection agency sues my friend personally in small claimscourt. My friend is overseas, never hears about the case,doesn't show up. Judgement is issued by default.My friend arrives back in US, gets letter about the courtpast date and judgement on the same day.
                  Well, if he was overseas and didn't know about the trial, hewas never served with process. He should be able to get thejudgment overturned on that basis.
                  He could still have been served by "substituted service" (at least in California, and probably elsewhere). It would be sufficient in California to leave a copy with someone who appears to be responsible and send another copy via first-class mail. Even if Responsible Person forgets about it until Friend returns, he's still properly served.
                  That's correct. I hadn't thought about that. To have substituted
                  service in California, it has to be at the person's business, unless
                  court permission is given to do it at his home.
                  If service isn't defective, then it could turn on whether Collection Agency sued the right party. If he did all his transactions with Radio Station in the name of the corporation, did nothing to give them the impression he was acting in his own capacity rather than as the corp's agent, and did nothing to give them the impression he was going surety for the corp's account, then it sounds like he has a good case that he was never liable for the debt. Otherwise, Collection Agency may indeed have an argument that they should have recourse to him personally.
                  Right. In order to vacate a judgment on the basis that he was not
                  actually served, he will have to show that he's got a good defense to
                  the action. At least that's the rule in California.

                  Stu

                  Comment

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