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Collection of Total Principal Amount, Service Charges, and Fees & Costs in Situation Where Contractor’s Major Asset was Sold

    At the beginning of February credit managers for two different suppliers - clients of our office called regarding a delinquent contractor who owed a total of approximately $88,000 to them. Our office was advised that the principal of the business was selling his personal residence valued at over one million dollars and the suppliers would like to be paid the substantial delinquent amounts due.  One client had both the principal and wife on personal guarantees while the other one had only the principal as a guarantor.  Both clients waived conflicts and requested our office to represent both.  In fact, it was beneficial to both as each had valuable information which in aggregate was critical in tracking assets and the status of the house sale.  

    Our office suggested the unusual, but appropriate, remedy of pre-judgment attachment of the residence to insure payment of the account guaranteed by both principal and wife.  That supplier paid the $8,000 premium to post the attachment bond on a property of that value.  Our office prepared a prejudgment attachment suit and handled getting a Judge to sign the order attaching the house or its proceeds to pay the debt due one supplier.  For the other supplier with only the principal as guarantor a standard lawsuit was filed.   

    From our clients’ and our office’s perspective there was a dearth of actionable information as to the status of the residence sale process, parties handling any closing and service addresses for the principal and his wife.  With the assistance of a private investigator and real estate agent we found that the closing had occurred, the business owner and his wife were divorcing and found possible addresses for each.  A number of service attempts were required to successfully serve the necessary parties.  Using public records we obtained some leads on closing agents and issued a  subpoena duces tecum to determine the entity holding the sales proceeds in escrow as the parties’ divorce attorneys negotiated disposition.  The subpoena duces tecum in the attachment suit disclosed that the escrow agent was holding sufficient funds to pay both clients’ accounts.  Although the residence was sold and deed recorded prior to recording our Memorandum of Attachment our office pursued the sales proceeds which were also covered by the Attachment Order.

    In one case we obtained judgment and in the attachment case we reached a settlement for a sum greater than the principal.  With no payment forthcoming our office used a post judgment garnishment of the escrow agent for the one amount due and the Memorandum of Attachment for the other due.  We thus had sufficient frozen funds to pay the amounts due while the parties negotiated disposition.  By the end of May, less than four months after beginning the collection process, both of our clients were paid in full, including service charges, as well as all attorney’s fees and the $8,000 attachment bond premium.


© 2015 Eugene W. Shannon, PLC


Eugene W. Shannon, PLC
ATTORNEY AT LAW

Suite 200
426 East Freemason Street
Norfolk, Virginia 23510

Phone: 757-625-1771
 
Fax: 757-622-1703



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