Quality Car & Truck Leasing, Inc. v. Sark
Michael Sark operated a logging business as a sole proprietorship. To acquire equipment for the business, Sark (and his wife, Paula) borrowed money from Quality Car & Truck Leasing, Inc. When the business encountered financial difficulties, Sark became unable to pay his creditors, including Quality. The Sarks sold their house (valued at $203,500) to their son Michael Jr. for one dollar but continued to live in it. Three months later, Quality obtained a judgment against the Sarks for $150,481.85 and then filed a claim to set aside the transfer of the house to Michael Jr. as a fraudulent conveyance. The court issued a decision in Quality’s favor. The Sarks appealed, arguing that they were not actually Quality’s debtors.
A state intermediate appellate court affirmed. The Sarks “are clearly judgment debtors to Quality Leasing and the judgment has not been satisfied.”
Please answer the following questions:
- What advantages and disadvantages are associated with the sole proprietorship?
- What might the Sarks have done to avoid this dispute, as well as the loss of their home and their apparently declining business?
- Why did the Sarks take the unethical step of fraudulently conveying their home to their son? What should they have done instead?