Lawyer Dan Baren said the legal filing would in part ask for a restraining order against Fifth Third Bank that would prevent the financial institution from selling its alleged claim on the colt, who is a contender for the Kentucky Derby Presented by Yum! Brands (gr. I).
“Obviously, our fear is that they are going to sell the claim and then someone is going to try and take this horse,” said Baren. “It’s not just a fear. It’s something they have threatened to do. They have told me on several occasions that they have buyers lined up for this claim, and they are selling it as is. We obviously need to prevent that.”
Fifth Third Bank apparently claims Great Hunter was included in collateral used by the colt’s former owner, Ilona Whetstone, on since-defaulted loans extended by the financial institution to her and her husband, L. Eric Whetstone. When contacted, Fifth Third Bank director of corporate communications Debra DeCourcy reiterated the company’s policy of not discussing matters involving its customers.
The lawsuit, which was filed March 23 in Orange County (Calif.) Superior Court, claims Fifth Third Bank has at least two interested suitors willing to buy Great Hunter, and that the bank will sell its claim “unless Reddam immediately (agrees) to pay Defendant a large sum of money to release its purported security interest in Great Hunter…”
If the court doesn’t promptly respond in favor of the request, the lawsuit also claims Reddam could “miss out on a once-in-a-lifetime opportunity to win the Kentucky Derby,” and could prevent the colt from training and running in future events, “all of which could reduce the value of Great Hunter by several million dollars.”
Baren said the legal actions also seek a declaratory judgment ruling against Fifth Third Bank that declares Reddam “took title to the horse free and clear of the lien.”
“Nobody wanted this to go to litigation,” Baren added, claiming that Fifth Third Bank has rejected settlement offers from Reddam, who leads the nation in earnings by owner with $949,312 through March 25.
Reddam paid Whetstone $550,000 last June for Great Hunter, and in his last three starts, has watched the colt go on to win the 2006 Lane’s End Breeders’ Futurity (gr. I), finish third behind champion Street Sense in the 2006 Bessemer Trust Breeders’ Cup Juvenile (gr. I), and win the 2007 Robert B. Lewis Stakes (gr. II).
Great Hunter has earned all but $20,000 of his career bankroll of $750,000 while racing in Reddam’s silks. The colt is scheduled to make his next start in the Toyota Blue Grass Stakes (gr. I) April 14.
Equine interests are commonly used as loan collateral in Kentucky, said Sharlene Graham Lassiter, a law professor at Northern Kentucky University’s Chase School of Law.
And, she adds, such a borrower, like any business dealing with marketable inventory, can typically buy and sell additional horses without the lender’s approval -- as long as the value of the collective collateral meets or exceeds the loan amount.
“But if the security agreement has language that precludes the debtor from transferring property without the express permission of the secured creditor, then that would support what it appears this creditor is trying to do,” said Lassiter, whose resume includes a stint with the United States Department of Agriculture’s office of general counsel.
Fifth Third Bank has filed a lawsuit in a Kentucky circuit court that claims the Whetstones defaulted on more than $3 million in loans and a credit card account. Copies of the security agreement included in the case file neither mention specific horses used as collateral by the Whetstones, nor contain language that would preclude them from buying and selling horses.
The agreement does prohibit the entry of a horse into a claming race “which is less than the value of the racing stock,” and the bank sought a temporary restraining order to stop a Whetstone horse named Hayburner from running for a tag at Oaklawn Park Feb. 10. Hayburner was scratched from that race, but ran Feb. 22 in a starter allowance at Oaklawn, finishing fourth.
An appraisal figure included in the case file indicated collateral value of equine stock on Nov. 16, 2006 was about $3.15 million. The appraisal list did not include Great Hunter, who had been sold earlier to Reddam.
Trainer Ron McAnally once trained horses for Ilona Whetstone, but the Hall of Famer said the relationship ended when the owner fell behind on bills.
McAnally said he was contacted by Fifth Third Bank last summer while he still stabled some of Whetstone’s horses. The trainer claims he eventually worked out a deal where he sold one of their horses to a client, delivered an agreed amount to the bank, and kept the balance to cover lost training expenses.
Taft McKinstry, a Lexington attorney representing the Whetstones, countered that the deal for the horse, named Old Thunder, was a straight sales transaction. Fifth Third Bank received a portion of the sale funds because it had a security interest in the horse, and McAnally received funds for current training expenses, she said.
The Whetstones' golf course home near Nicholasville, Ky., which they acquired for $1.95 million in late 2004, is currently encumbered with liens from a $2.77 million Washington state judgment, and a $1.7 million Pennsylvania judgment, according to local property records. The property was once offered for sale at an asking price of $2.39 million, but the listing was withdrawn in early March.
Fasig-Tipton also has an active lawsuit against Ilona Whetstone, which alleges that the owner failed to pay the balance of a $60,000 purchase of the Distorted Humor mare Dis Miss at the company’s 2006 Kentucky February mixed sale.
Dis Miss is also among the 29 Whetstone horses of which Fifth Third Bank was given legal possession via court order March 2, a document that also lists a Candy Ride filly the mare foaled in January.
The Blood-Horse writer Jack Shinar contributed to this article.