Capital Stack UT v. Reddy

2025 UT App 103
THE UTAH C OURT OF APPEALS
C APITAL STACK UT LLC,
Appellee,
v.
G OWTHAM R EDDY; G ENESIS C APITAL INVESTMENTS , LLC;
JGA D EVELOPMENT , LLC; G ENESIS OPPORTUNITY ZONE FUND;
SHIVA HOLDINGS , LLC; AND P ROJECT 557 FIRST ST D EVELOPMENT ,
Appellants.
Opinion
No. 20240538-CA
Filed July 10, 2025
Third District Court, Salt Lake Department
The Honorable Patrick Corum
No. 230905758
Kennedy D. Nate and Austin C. Nate,
Attorneys for Appellants
Erik A. Christiansen, Alan S. Mouritsen, and
Alex N. Vandiver, Attorneys for Appellee
J UDGE A MY J. OLIVER authored this Opinion, in which
J UDGES D AVID N. MORTENSEN and R YAN M. HARRIS concurred.
OLIVER, Judge:
¶1 	Gowtham Reddy entered into a loan agreement with
Capital Stack UT LLC (Capital Stack) on behalf of his companies
Genesis 	Capital 	Investments, 	LLC; 	JGA 	Development, 	LLC;
Genesis Opportunity Zone Fund; Shiva Holdings, LLC; and
Project 557 First St Development (collectively, Reddy). When
Reddy defaulted, Capital Stack filed a confession of judgment in
district court and obtained a judgment against Reddy. Reddy then
filed a motion under rule 60(b) of the Utah Rules of Civil
Procedure to set aside the judgment. The district court denied the
motion, and Reddy now appeals. We affirm.

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BACKGROUND
Reddy Signs the Loan Agreement and Defaults
¶2 	Reddy acquired numerous investment properties, many of
which were “not tenanted and required significant renovations to
make them revenue producing.” Due to the status of these
properties, traditional bank funding was not available, and Reddy
had to seek loans from other sources.
¶3 	On February 17, 2022, Reddy signed a loan agreement with
Capital Stack (the Loan Agreement). Reddy signed the Loan
Agreement as the “Borrower” and “Guarantor,” with Capital
Stack defined as the “Lender.” He borrowed $750,000, which he
agreed to pay back over seven months at an annual interest rate
of 146.44%. Including interest and fees, Reddy agreed to repay a
total of $1,050,000. Section 40 of the Loan Agreement stated, in
part, that the Loan Agreement “is made in Utah (that is, no
binding contract will be formed until Lender receives and accepts
Borrower’s 	signed 	Agreement 	in 	Utah).” 	Additionally, 	the
signature page had a separate signature line below the statement
“For Lender’s Use Only: This [Loan] Agreement has been received
and accepted by Lender in Utah after being signed by Borrower
and any Guarantor(s).” That signature line remained blank.
¶4 	Reddy also signed a stipulated confession of judgment (the
Confession of Judgment) pursuant to section 51 of the Loan
Agreement. That section provided that if Reddy defaulted on the
Loan Agreement, the Confession of Judgment would be filed in
Utah’s Third District Court in the amount of $1,050,000 “amended
by any payments made.” In the Confession of Judgment, Reddy
acknowledged that it “may be entered against [him] without
further notice.”
¶5 	In February 2023, Capital Stack’s loan servicer (Servicer)
contacted 	Reddy 	via 	email 	regarding 	missed 	payments. 	In
response, Reddy informed Servicer in an email, “[I]t is not that we

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20240538-CA 	3 	2025 UT App 103
don’t want to pay, but that we can’t with the market squeeze
going on as it is.” In March 2023, Servicer informed Reddy that
his “lack of repayment . . . placed [his] account at risk of escalation
for breach of contract.” Reddy did not respond.
¶6 	On August 7, 2023, Capital Stack filed the Confession of
Judgment with the district court, without notice to Reddy. The
district 	court 	entered 	a 	final 	judgment 	against 	Reddy 	for
$694,999.90 (accounting for payments made) on August 16, 2023.
The Rule 60(b) Motion
¶7 	On December 20, 2023, Reddy filed a motion pursuant to
rule 60(b) of the Utah Rules of Civil Procedure to set aside the
judgment. Reddy argued that the judgment should be set aside
because (1) the annual interest rate of 146.44% was substantively
unconscionable 	on 	its 	face, 	(2) 	the 	Loan 	Agreement 	was
procedurally unconscionable because Capital Stack “chose Utah
as the venue to avoid the usury laws in either New York or New
Jersey that likely would have barred the unconscionable rate
included in the loan,” and (3) there was “no evidence that the
Loan Agreement was ‘signed in Utah’ as required by the express
terms of the Loan Agreement.”
¶8 	Capital Stack responded that Reddy “mooted and waived
any argument that 	the terms of 	the [Loan] 	Agreement are
unconscionable” when he signed the Confession of Judgment. It
then argued that the Loan Agreement was fully executed but,
even if it was not, it would be enforceable under theories of
equitable estoppel or unjust enrichment.
¶9 	After holding a hearing, the district court denied Reddy’s
motion. The court found that Reddy signed the Loan Agreement,
which “has all the details very, very carefully and clearly spelled
out.” The court found that the Loan Agreement was accepted and
received in Utah and that the signature block at issue “was only
for Lender’s purposes.” The court stated that because Capital

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20240538-CA 	4 	2025 UT App 103
Stack fully performed, it could not find that there was no binding
agreement “given the course of conduct between the parties” and
“the signed signature page from” Reddy. The court also declined
to conclude that the interest rate was unconscionable based on
Utah 	caselaw. 	The 	court 	found 	that 	the 	parties 	were 	all
sophisticated and that the Loan Agreement appeared “to fall
squarely in the norm.”
ISSUE AND STANDARD OF REVIEW
¶10 	Reddy challenges the district court’s denial of his rule 60(b)
motion. “We review a district court’s denial of a rule 60(b) motion
for relief from judgment for an abuse of discretion.” Lewis v. U.S.
Bank Trust, NA, 2024 UT App 3, ¶ 16, 542 P.3d 988 (cleaned up).
ANALYSIS
I. The Rule 60(b) Motion
¶11 	“Rule 60(b) is an equitable rule designed to balance the
competing interests of finality and fairness,” and in “balancing
these competing interests, the district court must consider all of
the attendant circumstances.” Menzies v. Galetka, 2006 UT 81, ¶ 63,
150 P.3d 480. “Because of the equitable nature of the rule, a district
court has broad discretion to rule on a 60(b) motion.” Id.
¶12 	Reddy argues that the district court abused its discretion in
denying his motion. He asserts that the Loan Agreement had an
unconscionable interest rate and was never signed and accepted
in Utah, which he claims “justifies relief” under rule 60(b). See
Utah R. Civ. P. 60(b)(6). Capital Stack contends that the rule 60(b)
motion was itself improper because Reddy alleges “errors of law”
and he was required to raise such arguments in a direct appeal.
Because we can easily resolve Reddy’s arguments on the merits,

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we assume, without deciding, that the rule 60(b) motion was a
proper avenue to challenge the Confession of Judgment.
A. 	Unconscionable Interest Rate
¶13 	“A 	party 	claiming 	unconscionability 	bears 	a 	heavy
burden” because “with a few exceptions, it is still axiomatic in
contract law that persons dealing at arm’s length are entitled to
contract on their own terms without the intervention of the courts
for purpose of relieving one side or the other from the effects of a
bad bargain.” Cantamar, LLC v. Champagne, 2006 UT App 321, ¶ 31,
142 P.3d 140 (cleaned up). “In making an unconscionability
determination, Utah courts engage in a two-part analysis to
determine whether the contract, or a provision thereof, is void for
(1) 	procedural 	unconscionability 	or 	(2) 	substantive
unconscionability.” Knight Adjustment Bureau v. Lewis, 2010 UT
App 40, ¶ 7, 228 P.3d 754; see also Commercial Real Estate Inv., LC v.
Comcast of Utah II, Inc., 2012 UT 49, ¶ 42, 285 P.3d 1193. “[A]
determination of substantive unconscionability may by itself lead
to our concluding the contract was unconscionable . . . .”
Champagne, 2006 UT App 321, ¶ 32.
¶14 	Reddy argues that the 146.44% annual interest rate is
substantively unconscionable because (1) it is almost five times
the 30% annual interest rate this court considered in Champagne,
(2) “it is well above interest rates that other states have proscribed,
including by enacting usury laws,” and (3) enforcement of the
interest rate would be “one-sided and oppressive because it
creates a severe imbalance in the obligations between the parties.”
To 	evaluate 	his 	argument 	“under 	the 	substantive
unconscionability 	prong, 	we 	focus 	on 	the 	contents 	of 	the
agreement,” id. ¶ 33 (cleaned up), “examining the relative fairness
of the obligations assumed,” Knight, 2010 UT App 40, ¶ 7 (cleaned
up).
¶15 	First, there is a dearth of Utah caselaw that defines when
an 	interest 	rate 	crosses 	the 	line 	of 	unconscionability. 	Utah

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appellate 	courts 	have 	concluded 	that 	various 	interest 	rates
between 18% and 58% per annum were not unconscionable. See
Strohm v. ClearOne Commc’ns, Inc., 2013 UT 21, ¶ 69, 308 P.3d 424
(18% interest rate); Bekins Bar V Ranch v. Huth, 664 P.2d 455, 463
(Utah 1983) (58% interest rate); Knight, 2010 UT App 40, ¶ 9
(21.17% interest rate); Champagne, 2006 UT App 321, ¶ 34 (30%
interest rate). We can find only one court that has found an
interest rate unconscionable under Utah law. In Danjanovich v.
Robbins, No. 04-CV-623, 2005 WL 2457090 (D. Utah Oct. 5, 2005),
the federal district court found the interest rate of 100% per
month—1,200% per annum—unconscionable under Utah law. Id.
at *5.
¶16 	These cases thus provide what the district court aptly
described 	as 	the 	“bookends” 	of 	interest 	rates: 	58% 	on 	the
permissible end and 1,200% on the unconscionable end, with
quite the chasm in between. Recognizing this gulf, Reddy argues
that the 146.44% annual interest rate here is unconscionable
because it is nearly five times higher than the rate in Champagne.
But the reverse is true with respect to the interest rate in
Danjanovich, which was roughly eight times higher than the
interest rate here. And as between the bookends, the 146.44%
interest rate is far closer to 58% than it is to 1,200%.
¶17 	Next, Reddy directs us to usury statutes and cases from
other states to show that the interest rate in the Loan Agreement
is 	unconscionable. 	But 	what 	other 	states 	have 	done 	is 	not
determinative here. The Utah Legislature has made clear that
“[t]he parties to a lawful written . . . contract may agree upon any
rate of interest for the contract, including a contract for . . . a loan.”
Utah Code § 15-1-1(1) (emphasis added).
¶18 	Finally, Reddy asserts that enforcement of the interest rate
would be “one-sided and oppressive.” But Utah law “enables
parties to freely contract, establishing terms and allocating risks
between 	them. 	The 	law 	even 	permits 	parties 	to 	enter 	into

Capital Stack v. Reddy
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unreasonable contracts or contracts leading to a hardship on one
party.” Ryan v. Dan’s Food Stores, Inc., 972 P.2d 395, 402 (Utah 1998)
(cleaned up). Thus, “even if a contract term is unreasonable or
more advantageous to one party, the contract, without more, is
not unconscionable.” Champagne, 2006 UT App 321, ¶ 33 (cleaned
up). “Instead, the terms must be so one-sided as to oppress or
unfairly surprise an innocent party or there exists an overall
imbalance in the obligations and rights imposed by the bargain
according to the mores and business practices of the time and
place.” Id. (cleaned up).
¶19 	Reddy borrowed $750,000 at an annual interest rate of
146.44% and agreed to pay Capital Stack $1,050,000 within seven
months. Such high interest rates and short repayment terms are
common for hard money loans like this one.1 Moreover, Reddy is
a sophisticated party with multiple businesses who willingly
entered into the Loan Agreement to obtain the capital he deemed
necessary for his businesses. There is no indication in the record
that Reddy was unaware of his obligations or unwilling to meet
them. Indeed, Reddy acknowledged that “it is not that we don’t
want to pay, but that we can’t with the market squeeze going on
as it is.”
¶20 	Therefore, the district court did not abuse its discretion in
determining 	that 	the 	146.44% 	annual 	interest 	rate 	is 	not
unconscionable and in denying the rule 60(b) motion on this
ground.
1. “Hard money loans are most commonly used in connection
with 	real 	estate 	transactions 	and 	offer 	an 	alternative 	to
conventional loans when financing is difficult to obtain.” State v.
Chapman, 2014 UT App 255, ¶ 2 n.2, 338 P.3d 230 (cleaned up).
They 	“carry 	much 	higher 	interest 	rates 	than 	conventional
loans.” Id. (cleaned up).

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B. 	Received and Accepted in Utah
¶21 	Reddy asserts that the district court abused its discretion
by ignoring the “specific language at issue” and looking “beyond
the four corners of the Loan Agreement” to conclude that an
agreement was formed. We read the district court’s analysis
differently. The district court looked to the express language in
the Loan Agreement to conclude that Capital Stack accepted and
received the Loan Agreement in Utah.
¶22 	Section 40 of the Loan Agreement states, “[T]he Loan is
made in Utah (that is, no binding contract will be formed until
Lender receives and accepts Borrower’s signed Agreement in
Utah).” The signature page of the Loan Agreement had signature
lines for the Borrower and Guarantor, as well as a separate
signature line below the following statement: “For Lender’s Use
Only: This [Loan] Agreement has been received and accepted by
Lender 	in 	Utah 	after 	being 	signed 	by 	Borrower 	and 	any
Guarantor(s).” Though the signature line below that statement is
blank, the wording indicates that once Reddy—the Borrower and
Guarantor—signed 	the 	Loan 	Agreement, 	it 	was 	considered
“received and accepted” in Utah. Additionally, because the
signature line was “For Lender’s Use Only,” a signature by
Capital Stack was not required for formation of the agreement.
¶23 	Furthermore, Capital Stack performed under the Loan
Agreement by lending Reddy $750,000. And Reddy partially
performed by paying back more than $350,000 of the $1,050,000.
Thus, as noted by the district court, even if the Loan Agreement
was 	not 	“received 	and 	accepted” 	in 	Utah, 	the 	parties
demonstrated the existence of the Loan Agreement through their
conduct. See Livingston v. Finco Holdings Corp., 2022 UT App 71,
¶ 16, 513 P.3d 94 (“It is fundamental contract law that the parties
may become bound by the terms of a contract even though they
did not sign the contract, where they have otherwise indicated

Capital Stack v. Reddy
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their acceptance of the contract, or led the other party to so believe
that they have accepted the contract.” (cleaned up)).
¶24 	Accordingly, the district court did not abuse its discretion
in determining that the parties entered into the Loan Agreement
and in denying the rule 60(b) motion on this ground.
CONCLUSION
¶25 	The district court did not abuse its discretion in denying
Reddy’s rule 60(b) motion. We affirm.