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Originally Posted by Grits
It is quite possible that when Mr.Reddam paid for the horse last June there was no problem with the transaction, certainly not any that he was aware of. The sale went through fine, everybody's happy.
Now, here's a scenario, and not to say that this is the case, but I assure, it happens.
Customers walk into banks every day for commercial borrowing. In doing so, they must present their current personal financial statement listing all of their assets, (personal property, business, etc.) and their liabilities, (if any and there usually are). Now, this person's net worth/assets indicate, or qualify as evidence of his ability to repay monies to the bank.
You could call it borrowing against one's name, one's reputation, even.
In doing so, the bank will extend that individual an annual "Line of Credit", which must be paid out, once a calendar year for 30 days, consecutively, in order for it to be renewable. If this individual has borrowed against his line of credit during that year, it is due on a given date.
Ok, now, let's say this person encountered financial trouble--a cash flow problem after having used, already, what the bank has extended to him. He's got a buyer for a horse that he owns. He knows this can pull him out. All of this takes place several months, weeks or whatever, prior to his annual note/line of credit coming due.
He sells his horse for $500K, as happened in the case of Mr.Reddam purchasing Great Hunter. There is NO LIEN at the Jockey Club Registry because the loan held by the bank to the previous owners is NOT IN DEFAULT at the time of the sale.
Only when the loan has become past due does it go into default. And in this case, the Whetstone's are apparently on the lam.
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