My investor wanted to partner up instead of just investing, he hasn't met any of obligations as a partner and now I'm stuck with just 50% of my company. We didn't write up a contract so I only have a verbal (email) agreement. He wanted me to pay back the investment money if the startup didn't work. What should I do? I can't pay back the investment (although I'd love to).
My best answer for you is "Maybe you can turn it around by having a new partner buy him out."
I was also in this situation in 2005 and my partner threatened a lawsuit, but we did have a written contract by an attorney. We never had the lawsuit since the contract stipulated that neither party can commence a lawsuit.
My point is that a verbal agreement never works. It is a "he said she said" situation and the "other" party always think they are right and you are wrong. Plus, even if the other party knows they are wrong, they will not admit it. Verbal agreements just never work out.
Most of my business friends have paid under $500 for their contracts since the attorney already has a boiler plate. That amount will save you thousands in legal fees later.
In YOUR situation, I would firmly explain in a nice professional way, that he did not hold up his obligations and that you would only pay him back the investment if he met his obligations. Since he did not, you owe him nothing. If that fails, you may want to ask him why he did not meet his obligations and explain that you do not have the investment.
If all that fails, see my first sentence and tell him that you want a year to find a new partner to buy him out. Even smarter, do not even put a date on it. When you find a new partner, you will find one, even if it takes over one year.