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prepared to go along with UPE’s new venture. On April 30, 1990,
Stewart arranged for a second loan from Grocers to petitioner in
the amount of $475,000. The loan proceeds were, in turn,
advanced to UPE and/or used in connection with UPE as follows:
$300,000 for UPE’s working capital; $100,000 for the purchase of
UPE’s equipment; and $75,000 to buy out Vernor’s and Busch’s
interests and shares in UPE. Petitioner’s loan from Grocers was
secured by petitioner’s inventory, cash, checks, and receivables.
The proceeds were advanced to UPE without a note.
In May of 1990, Vernor’s and Busch’s UPE shares were
redeemed with $75,000 from petitioner’s $475,000 loan from
Grocers. After the other two shareholders were bought out,
Stewart named himself president and demoted Goolsby from
president to vice president.
After Stewart gained control of UPE, he negotiated a loan
from Grocers. Although it was not Grocers’ normal business
practice to lend money to entities outside of the grocery
industry, UPE requested and received a loan in the amount of
$218,000 on September 5, 1990. That loan was designated for the
purchase of construction equipment, and Grocers received a
security interest in UPE’s equipment. A $111,984.67 balance
remaining on UPE’s loan from Grocers was eventually satisfied by
petitioner when UPE and Stewart could no longer afford to repay
the debt.
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