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Storage was owned 50 percent by the Laphams1 and 50 percent by an
unrelated shareholder. During 1991, the Laphams lent $806,000 to
Estate Storage. Monthly payments of principal and interest at
the rate of 10 percent were made until 1993, at which time the
balance was renegotiated with interest at 8 percent.
In 1994, the Laphams purchased the interest of the unrelated
shareholder and lent an additional $1 million to Estate Storage.
This loan was consolidated with the earlier obligation, and
monthly payments of principal and interest at 8 percent continued
until the balance was again renegotiated on December 30, 1998.
Following such renegotiation, the obligation was memorialized in
a promissory note in the face amount of $1,554,244. The maker of
the note was Estate Storage, and the Laphams were the named
payees. The note bore interest at the rate of 7.75 percent per
annum, payable in quarterly interest-only installments of
$30,113.48. The principal was due in full no later than December
30, 2013, and the note could be prepaid without penalty at the
option of Estate Storage. The instrument was executed by Mr.
Lapham in his capacity as president of Estate Storage. Estate
Storage holds a second-to-die life insurance policy sufficient in
1 The record in this case indicates that, at least as of
late 1999, the Laphams’ interests in Estate Storage were in fact
held through their respective revocable living trusts. For
convenience, we adopt the convention, employed with some
frequency throughout the administrative record, of simply
referring to the Laphams in their individual capacities.
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