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corporations, petitioner’s only effort to enforce collection
occurred after it was clear that the sister corporations had
failed and were to become defunct, whereupon petitioner recovered
the only remaining asset-–the cash value of a life insurance
policy on Mr. Cerand.
Control of petitioner and its three sister corporations
rested with Mr. Cerand. He was the sole shareholder of
petitioner, the alleged creditor, and he was also the sole
shareholder of all three sister corporations, the alleged
debtors. Mr. Cerand in conjunction with petitioner as the equity
investor in its sister corporations, not only participated in the
management, but controlled all aspects of all four corporations.
Although petitioner contended it was the intent of the
parties to create debt, the alleged debt would have been
subordinate to any creditors the three sister corporations may
have had, because petitioner did not take the usual or ordinary
precautions to ensure its position vis-a-vis unrelated creditors.
Essentially, petitioner bankrolled a group of startup
corporations. If we accepted petitioner’s characterization that
all advances were loans, then the startup equity or capital was
less than thin--it was nonexistent. This may explain why
petitioner and its related entities did not try to obtain credit
from outside sources. Petitioner’s advances were used, initially
as startup capital and later for the operation and overhead of
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