Equipment lease in question after Internet company sale

Marilyn Tennissen May 31, 2007, 10:00am

After selling their Internet company, an Orange couple has been left with a debt for equipment they say the new owner should have paid.

In 2004, Loretta Hughes and Jerry Glenn Hughes Jr. owned Internet Express Inc., an Internet service provider in Orange. Disagreements over the sale and who is responsible for the lease on equipment have led the Hugheses to file a lawsuit in Orange County District Court on May 25.

That year the Hugheses agreed to sell the company to DFW Internet Services, a wholly-owned subsidiary of Mobilepro Corp. The sale closed on March 1, 2004, for the sum of $300,000. Terms of the final sale were pursuant to the closing documents.

However, in the fall of 2005, the Hugheses accepted a payoff of the sales price for Internet Express Inc. for "far less than the agreed upon amount in the acquisition documents," the plaintiffs' original petition states. "By their acceptance of payoff of less than the amount called for in the original acquisition documents, the original agreement was abrogated."

At the time of the original sale, Internet Express had a lease agreement for equipment with TriStar Capital LLC, a California company. The lease had been effective since June 1, 2001, that required 36 monthly payments on the first of each month. Jerry and Loretta Hughes were personal guarantors of the lease agreement.

"The lease matured on June 1, 2004, and up until the time of the original sale, Internet Express made prompt payments on the lease," the petition states. "There was a small balance due on the lease at the time of the sale."

But by the fall of 2005, the plaintiffs say the $2,000 owed in June 2004 "had become almost $11,000 because no payments had been made on the lease and penalties and interest had been charged."

According to the petition, a series of e-mails then went back and forth between Geoffrey Amend, counsel for Mobilepro, and Byron Castro, counsel for TriStar Capital.

In November 2005, Amend wrote "Internet Express is still the primary obligor on the account and we have agreed to indemnify the Hughes."

No agreement could be reached, and the matter "continued to fester until late 2006, when TriStar Capital filed a lawsuit in the Superior Court of Orange County, Calif., for the full amount due on the lease, alleged to be $31,037.38 as of October 2006."

"At that point, a small debt had become a large one," the petition states.

The plaintiffs then engaged counsel of their own, John Cash Smith of the Bush Lewis law firm, and Smith made numerous attempts to contact the counsel at Mobilepro "in attempt to get it to meet its obligation as set forth in the e-mail of November 2005 to no avail."

After negotiations, the matter was settled between TriStar and the plaintiffs in January 2007 for $22,500, "an amount that should have been paid by the defendant," the suit says.

The plaintiffs allege that Mobilepro is obligated to pay them $22,500, the amount of the pay-off of the lease, attorney fees of $5,000 and other costs in the amount of $3,500 for breach of contract.

In addition, as a result of the settlement, the plaintiffs have been given a Bill of Sale for the property involved in the original purchase of equipment, and are asking the court for the defendants to return the property to them.

The Hugheses say Mobilepro committed fraud by failing to make the lease payments to TriStar, alleging that the "promise" to make the payments was an "integral part of the decision to sell Internet Express to the defendant.

The plaintiffs are demanding a trial by jury. The case has been assigned to the 163rd Orange County Judge Dennis Powell.

Case No. B070-266-c

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