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Note: Marian Porter (Seller) was approached by Shyram Chetel on behalf of his company, United Capital Investments, Inc. (Purchaser), which offered to purchase her mining claims and pay the maintenance fees due and owing. As the president of a separate business entity, SmartTouch Systems, Inc. (Beneficiary), Chetel claimed to have entered into a USD 2,000,000,000 bank guarantee with Continent Finance Ltd of England (Guarantor). Guarantor sent documentary proof of the bank guarantee to Beneficiary, and agreed to wire the funds to Beneficiary's account. Purchaser attached documentary proof of the bank guarantee to its offer to demonstrate its ability to pay. Seller accepted Purchaser's offer. When Purchaser failed to make timely payments of maintenance fees, resulting in Seller's irrevocable loss of her mining claims, Seller sued Chetel, Purchaser, and Beneficiary for breach of contract and for fraud. Beneficiary moved to dismiss the claim, arguing that it was involved in the suit only as a "guarantor for a bank guarantee." The U.S. District Court for the District of Nevada, Hicks, J., denied the motion.

Seller's complaint alleged that she relied on Purchaser's proof of his ability to pay when she accepted his offer, and that at the time the bank guarantee issued, Guarantor had a total capacity of GBP 100.

The Judge noted that Seller's complaint stated "the circumstances under which [Beneficiary] falsely represented to [Seller] that Chetal and his business entities had sufficient financing available to timely purchase [Seller'] mining rights and pay the maintenance fees." The Judge ruled that Seller's complaint had specifically stated a claim for fraud by identifying the central role played by the bank guarantee in assuring "[Seller] that Chetal had the financial capability to render performance under the contract." Because Seller's complaint stated a valid claim for fraud against Beneficiary, Beneficiary's motion to be dismissed from the litigation was denied.

[MJS]

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