Briefing Cases

TIMOTHY V. KEETCH

COURT OF APPEALS OF UTAH

251 P.3d 848 (Utah Ct. App. 2011)

Fact: Skeetch wanted to start a therapeutic horse ranch business and borrowed $102,000 from MSF and pledged a stallion (Hesa Son of Dun) as collateral for the loan; a transaction which was filed under UCC. Timothy agreed to give Keetch a bridge loan relying on Defendants’ offer of the stallion as loan collateral and statement of “free and clear” ownership. Keetch defaulted on the MSF and the stallion was seized. He later defaulted on the bridge loan but the horse was already loan. Timothy sued Keetch and the court judged in favor of Timothy. Keetch appealed.

Procedural history: Court of Utah

Issues: Is it reasonable to bank on representation that an asset is owned “free and clear” even when public record check would prove otherwise?

Rule: Parties can avoid contracts where there is misrepresentation, fraud, intentional mistakes, duress or undue influence. If real consent is absent, then contracts can also be avoided. A person who intentionally commits misrepresentation or fraud may be liable in tort for damages including punitive damages.

Application: He used a breeder horse for two separate collaterals of loans. It was not the duty of Timothy to investigate the truthfulness of Keetch’s claims. Keetch’s case was that of telling lies and misrepresentation. Timothy may justifiably depend on positive claims of fact even without independent investigation because nothing could have served as a warning to Timothy that he was being deceived. Keetch was liable to Timothy for fraud and breach of contract.

Conclusion: The court affirmed in favor of Timothy

 

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