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and enforceable debt obligations and that the purported loans
became worthless by December 31, 1995.
No written loan agreement or written line of credit
agreement was signed by petitioner. The two documents entitled
“revolving credit notes” were not negotiated on behalf of
Blackland. Rather, they were executed on behalf of Blackland at
the direction of petitioner. They provided no repayment
schedule, and one of the two notes provided no maturity date.
Petitioner never made a formal demand for repayment of the funds
he transferred to Blackland.
Not until 1995 did petitioner enter into a security
agreement with Blackland with regard to the approximate $1.5
million transferred to Blackland prior thereto, and there is no
evidence in the record that such security interest was ever
perfected.
Blackland initially recorded funds received from petitioner
as “shareholder loans”, even though petitioner claims never to
have been a shareholder of Blackland. As we have found, however,
regardless of the employees of Garland Farms who were named as
nominal shareholders of Blackland, petitioner controlled
Blackland. The evidence does not establish that the funds
petitioner transferred to Blackland constituted loans. Rather,
the funds appear to constitute transfers by petitioner to
Blackland of equity capital.
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