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Bank files lawsuit over alleged default by borrower

In order to carry out day-to-day operations or invest in new plant or equipment, a business owner may borrow money from a financial institution. According to the existing federal and Texas laws, the business must repay the loan according to the terms and conditions of the loan agreement. However, it is not uncommon for the business that borrowed the money to default on the loan and face legal action from the creditor. Sadly, such situations can cause the business and the business's owner to face major difficulties if the situation is not handled properly.

A recent incident in Texas is a good example of such a situation. According to a news report, the Community Bank of Texas recently filed a lawsuit in which it is accusing a consulting corporation and its owner of breach of contract and fiduciary negligence. The lawsuit alleges the consulting company borrowed $45,000 and signed a promissory note in November 2013. The lawsuit further alleges that the contract was personally guaranteed by the owner of the consulting firm. A news report on the lawsuit does not indicate the nature of the claimed fiduciary negligence.

The consulting firm allegedly defaulted on the loan and incurred late fees and interest, in addition to the principal amount that it had borrowed. In its petition, the bank alleges that the consulting firm failed to repay the loan, even after repeated requests from the bank. The lawsuit alleges breach of contract and the bank is seeking liquidated damages of $100,000 and a judgment for the principal amount due, which is approximately $38,500, among other damages.

Business owners in Houston should understand that in the event of commercial litigation stemming from accusations of breach of contract, fiduciary negligence or breach of fiduciary duty, a lot is at stake, including the reputation of the business and its owner. Therefore, if a business owner wants to protect the interests and the reputation of the business, it may be wise to retain an attorney who has experience with the particular type of business dispute at issue.

Source: Southeast Texas Record, "Community Bank charges firm with delinquent indebtedness in loan," Carol Ostrow, June 23, 2015

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