Keller owned and operated the Serene Bed & Breakfast near Sarnia for many years. It was a…

Keller owned and operated the
Serene Bed & Breakfast near Sarnia for many years. It was a small business,
and her health was not good. She decided to sell but found the market very
limited. Jepson agreed to purchase Serene Bed & Breakfast from her for $195
000 if she agreed to take back a second mortgage. On March 31, Jepson paid
Keller $30 000 on closing, assumed the first mortgage of $150 000 held by Huron
Co-op Inc., and gave Keller a second mortgage for the balance of $15 000. The
spring and summer tourist seasons were very poor, and Jepson lost money during
the first six months.

Keller owned and operated the
Serene Bed & Breakfast near Sarnia for many years. It was a small business,
and her health was not good. She decided to sell but found the market very
limited. Jepson agreed to purchase Serene Bed & Breakfast from her for $195
000 if she agreed to take back a second mortgage. On March 31, Jepson paid
Keller $30 000 on closing, assumed the first mortgage of $150 000 held by Huron
Co-op Inc., and gave Keller a second mortgage for the balance of $15 000. The
spring and summer tourist seasons were very poor, and Jepson lost money during
the first six months. He defaulted on payments to both mortgagees and informed
them that he could not carry on. Huron replied that it intended to commence
foreclosure proceedings immediately. Both Jepson and Keller then met several
times with the manager of Huron at his office to try to work out the most
convenient arrangement and keep expenses to a minimum, avoiding court costs.
They agreed to avoid court proceedings by Jepsons conveying the property to
Huronand Keller would also transfer her interest as second mortgagee to Huron
in return for the nominal sum of $100. Several months later Keller learned that
Jepson owned a substantial interest in a large retail hardware store; Jepson
earned a good salary there as manager. She requested that he pay the unpaid
debt on the second mortgage, but he refused on the basis that Keller could no
longer reconvey the interest she held, having already transferred it to Huron.
Keller believed that she was entitled to repayment and sued Jepson. Give your
opinion of the defence raised by Jepson and whether Keller should succeed