$435,000 Preventable Lawsuit because they failed to Verify, Verify, Verify!

Posted by Nicole Call | Sep 29, 2020 | 0 Comments

Whatever the story, verify the facts before engaging in business with someone.

A recent Utah Supreme Court case was completely preventable if a party would have engaged in some simple due diligence. Wittingham v. TNE Limited PartnershipI'm not exaggerating on the simple part . . . . 

Probably ten minutes or less of verification could have saved

  • hundreds of thousands of dollars (if not, millions when considering litigation expenses), as well as,
  • years in time and resources.

So, what happened? Here's the basic facts:

A guy said he needed some money to release an encumbrance on some apartments his company owned - problem is that there was no such encumbrance and his company didn't own the property. There happened to be some collusion with another guy to make it sound like there was.

A "well meaning company" loaned him the $435,000 he asked for - without verifying the facts.

Of course, the company that actually owned the property found out, sued to void the transaction. Trial court agreed with the company that owned the property - so the "well meaning company" was out.

Of course, it doesn't end there. There was an appeal and the Utah Supreme Court concluded that it was voidable - not void.

So, the "well meaning company" may not be completely out. The case was remanded back to the trial court.

Some may think, "the good guy wins" meaning the "well meaning company" . . . .

The cost of litigating this . . . likely far exceeded the amount of the loan and has taken years to litigate. In fact, its still not over. In no way would I call this a "win," the most I could say is a best case scenerio under the circumstances. 

What expensive lessons can you learn for free from their experience? 

Lessons Learned

Before lending $435,000, if TNE Limited Partnership would have verified the entity and asset ownership by:
     1) Asking where the entity was registered, 
     2) Verifying that was true or not (easy to do on state websites), and
     3) Checking the county property records to verify it was owned by the entity (also easy to do on county websites) . . . .

Since TNE didn't take these simple steps, TNE was not aware that the entity had been

  •      Administratively dissolved two years earlier, and
  •      The asset's successor-in-interest was Wittingham, LLC

By finding out those 2 crucial facts, hopefully, TNE would have walked away and saved a ton of $$$, time and resources. 

Before doing business with an entity, choose to engage in due diligence to protect your business and your assets. 

Choose to make an informed decision on whether you want to do business with them by finding out what you need to know. 

We can help you protect your business and your assets, check out our Contract Packages and select one today.

About the Author

Nicole Call

BIZLAWGIC is the brainchild of Nicole R. Call, who has been active in the legal profession for two decades. In that time, she has served: businesses, nonprofits, quasi-governmental entities, governmental entities, judges, and individuals. With this wealth of experience she provides unique insight in meeting small businesses legal needs.


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