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Weldpower Industries, Inc. v. Kimball (In re Weldpower Industries, Inc.)
Citations: 39 B.R. 613; 1984 Bankr. LEXIS 5509Docket: Bankruptcy No. 82-0025; Adv. No. 83-00225
Court: United States Bankruptcy Court, D. New Hampshire; June 12, 1984; Us Bankruptcy; United States Bankruptcy Court
A complaint for turnover of funds was filed by the Chapter 7 trustee against Forest Kimball, seeking $6,000 plus interest based on a promissory note payable to Weldpower Industries, Inc., which Kimball executed on December 17, 1980. Kimball admitted to never making any payments on the note but argued that the transaction pertained to an unexercised option to purchase corporate stock, although no written option agreement existed. Evidence indicated that Kimball received the corporate stock in December 1980, and as of January 18, 1982, when bankruptcy proceedings were filed, he still possessed the stock while the promissory note remained with Weldpower. Corporate records classified the note as an outstanding debt owed by Kimball. Although Kimball testified to oral discussions with Weldpower's president about returning the stock for forgiveness of the note, no definitive agreement was proven prior to the bankruptcy filing. The court questioned the enforceability of any alleged oral agreement under RSA 382-A:8-319. Assuming an oral repurchase agreement existed, the court found that it did not constitute a true "option." The stock had been issued over a year before bankruptcy, and Kimball held the stock until that date. The court stated that if the corporation had been profitable, Kimball would have benefited from it, thus he could not claim his stock ownership was merely an option to avoid obligations to creditors once the corporation failed. Additionally, Kimball's argument that his promissory note was rendered unenforceable due to subsequent stock issuances without pre-emptive rights was rejected, as it mischaracterized a completed stock sale as an option. The court concluded that any violations regarding additional stock transactions could provide grounds for a separate action but did not negate the enforceability of Kimball's note obligation. The findings of fact and conclusions of law were established, and the parties were instructed to settle on a judgment form within ten days.