Facts

Defendants Terrence and Stacie Medeiros bought defendant Sunbow Inc. in March 1993. Sunbow serviced and repaired small aircrafts at the San Carlos Airport. On Nov. 15, 2004, Sunbow sold certain assets to plaintiff Pars Aviation Inc. for $1.8 million. Pars Aviation paid $1.62 million in cash and gave a promissory note for the remaining $180,000. Sunbow continued to receive payments for work that was in progress at the time of escrow. Pars Aviation secured a small business administration (SBA) loan through Wachovia Bank to finance the purchase. Pars Aviation used its business assets, deeds of trust against cross-defendants' John Doe and Jane Doe's residence and rental properties in Emeryville, and their personal guaranties.

A second loan was secured from Deep Green Financial to secure the purchase. The written promissory note for $180,000 was executed on Nov. 15, 2004, with the principal paid with eight percent interest, amortized over 10 years, with monthly payments of $2,184 (due starting 60 days after close of escrow). The promissory note included a charge of $200 for any payment received five days or more after monthly due date and a provision for the recovery of attorney fees. The promissory note was secured against Pars Aviation's business assets with no personal guaranties.

Pars Aviation experienced difficulties due to certain actions. As well, Pars Aviation was unable to secure the services of one of its key employees, who then moved to a new employer (along with a number of Pars Aviation's customers).

In 2006, Pars Aviation requested to delay payment due on the promissory note, which was refused. After this point, Pars Aviation's payments were incomplete and/or late until July 9, 2006, when it made its final payment despite a balance owing of $162,351. Pars Aviation also owed late charges of $1,400.

Pars Aviation filed suit for breach of contract, intentional misrepresentation, and negligent misrepresentation.

PLAINTIFF'S CONTENTIONS:
Pars Aviation Inc. contended that defendants did not disclose that Camph would leave the firm and take the customers along with him.

DEFENDANTS' CONTENTIONS:
The defendants contended that the failure to secure Camph was a faulty business decision on the part of plaintiff and there was no guaranty made that Camph would continue to remain at plaintiff. As well, defendants argued that plaintiff failed to make the required payments on the promissory note.

Result

Pars Aviation Inc. voluntarily dismissed their complaint on March 3, 2008. The court found for defendants in the amount of $163,751, which constituted $162,351 due on the promissory note, $1,400 in late fees, and $12,988 in prejudgment interest. The court found that Pars Aviation's shareholders were personally liable for plaintiff's debts to defendants.

Other Information

The judgment has been appealed and is pending in the First Appellate District, Division 2 of the California Court of Appeal.