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realistic possibility of a greater than $34 million claim that
would have rendered one of the Dart companies insolvent and
caused the circularity of payments to be broken.
Petitioners also suggest that a small decline in the
equipment values of HL and HS, or an economic slowdown in the
trucking business may have resulted in the elimination of
shareholder equity. Petitioners claim that with shareholder
equity gone, HL and HS may have been unable to repay Mr. Oren.
We disagree. Even if all the assets of HL and HS were to become
worthless, those companies would still hold the notes executed by
Dart. To repay its loans to Mr. Oren, HL and HS could have
simply passed on the Dart notes to Mr. Oren. Mr. Oren could then
offset his own obligations to Dart by canceling the Dart notes.
Only in a case where HL and HS were to become insolvent or
bankrupt; i.e., where outside liabilities were to exceed the
value of existing assets in those companies, might the chain of
offsetting obligations be upset. As stated above, this was
highly unlikely.24
24We also point out that Dart regained possession of the
funds it lent to Mr. Oren within days of the initial
disbursements. Following the return of the funds, Dart no longer
faced the risks normally associated with funds lent and retained
by third parties. The benefit of Dart’s “repossession” of the
loan proceeds not only accrued to Dart, but also to Mr. Oren
since it would be unlikely that Dart would pursue repayment of
the loan proceeds if it already possessed them.
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