Week 4- Textbook Exercise

Required- Critical thinking- answer with brief description
of each highlighted questions.
22.1 NoteSandra McGuire and her husband entered into a
contract to purchase the inventory, equipment, accounts receivable, and name of
“Becca’s Boutique” from Pascal and Rebecca Tursi. Becca’s Boutique was a
clothing store that was owned as a sole proprietorship by the Tursis. The
McGuires agreed to purchase the store for $75,000, with a down payment of
$10,000 and the balance to be paid at a specified date in the future. The
promissory note signed by the McGuires read: “For value received, Thomas J.
McGuire and Sandra A. McGuire, husband and wife, do promise to pay to the order
of Pascal and Rebecca Tursi the sum of $65,000.” Is the note an order to pay or a promise to pay?P. P. Inc. v. McGuire,509
F.Supp. 1079,Web1981 U.S. Dist. Lexis 17984 (United
States District Court for the District of New Jersey)

22.2 Negotiable InstrumentWilliam H. Bailey, M.D., executed a
note payable to California Dreamstreet, a joint venture that solicited
investments for a cattle breeding operation. Bailey’s promissory note read:
“Dr. William H. Bailey hereby promises to pay to the order of California Dreamstreet
the sum of $329,800.” Four years later, Dreamstreet negotiated the note to
Cooperative Centrale Raiffeisen-Boerenleenbank B.A. (Cooperatieve), a foreign
bank. A default occurred, and Cooperatieve filed suit against Bailey to recover
on the note. Is the
noteexecuted by Bailey a negotiable instrument? Coop-eratieve
Centrale Raiffeisen-Boerenleenbank B.A. v. Bailey, 710 F.Supp. 737, Web 1989
U.S. Dist. Lexis 4488 (United States District Court for the Central District of
California)

22.5 Order to PaySana Travel Services, Ltd. (Sana), was a travel
agency located in New York. Sana was negotiating with Al-Bank Turismo, a
Brazilian company, to secure additional business in that country. To expedite
negotiations, one of Sana’s directors, Attaullah Paracha, made out a check for
$33,000, payable to the order of “Jamil Ahmed Kahn, Al-Bank Turismo.” On the
check Paracha wrote “Just to hold for the security of future business.” Paracha
then sent the check to Kahn in Brazil. Kahn, Al-Bank’s owner, indorsed the
check and sold it to Jurandi Carador, a Brazilian citizen. Carador then
arranged for the check to be presented to the National Bank of Pakistan, Sana’s
New York bank. When the bank received the check, it telephoned Sana, which
directed the bank to dishonor the check. Sana claims that the notation on the
check “Just to hold” rendered the instrument conditional and made it a
nonnegotiable instrument. Is
the check a negotiable instrument?Carador
v. Sana Travel Services, Ltd., 876 F.2d 890,Web1989 U.S. App. Lexis 10488 (United
States Court of Appeals for the Second Circuit)

25.1 Cashier’s
CheckDr. Graham Wood purchased a cashier’s check in
the amount of $6,000 from Central Bank of the South (Bank). The check was made
payable to Ken Walker and was delivered to him. Eleven months later, Bank’s
branch manager informed Wood that the cashier’s check was still outstanding.
Wood subsequently signed a form, requesting that payment be stopped and a
replacement check issued. He also agreed to indemnify Bank for any damages
resulting from the issuance of the replacement check. Bank issued a replacement
check to Wood. Seven months later, Walker deposited the original cashier’s
check in his bank, which was paid by Bank. Bank requested that Woods repay the
bank $6,000. When he refused, Bank sued Woods to recover this amount. Who wins?Wood v. Central Bank of the South,
435 So.2d 1287,Web1982 Ala. Civ. App. Lexis 1362 (Court
of Civil Appeals of Alabama)

25.2 OverdraftLouise Kalbe maintained a checking account at the
Pulaski State Bank (Bank) in Wisconsin. Kalbe made out a check for $7,260,
payable in cash. Thereafter, she misplaced it but did not report the missing
check to the bank or stop payment on it. One month later, some unknown person
presented the check to a Florida bank for payment. The Florida bank paid the
check and sent it to Bank for collection. Bank paid the check even though it
created a $6,542.12 overdraft in Kalbe’s account. Bank requested Kalbe pay this
amount. When she refused, Bank sued Kalbe to collect the overdraft. Who wins?Pulaski State Bank v. Kalbe,
122 Wis.2d 663, 364 N.W.2d 162,Web1985 Wisc.App. Lexis 3034 (Court of
Appeals of Wisconsin)

25.5 Postdated
CheckDavid Siegel maintained a checking account with
the New England Merchants National Bank (Bank). On September 14, Siegel drew
and delivered a $20,000 check payable to Peter Peters. The check was dated
November 14. Peters immediately deposited the check in his own bank, which
forwarded it for collection. On September 17, Bank paid the check and charged
it against Siegel’s account. Siegel discovered that the check had been paid
when another of his checks was returned for insufficient funds. Siegel informed
Bank that the check to Peters was postdated November 14 and requested that the
bank return the $20,000 to his account. When Bank refused, Siegel sued for
wrongful debit of his account. Must Bank recredit Siegel’s account?Siegel v. New England Merchants
National Bank, 386 Mass. 672, 437 N.E.2d 218,Web1982 Mass. Lexis 1559 (Supreme
Judicial Court of Massachusetts)

27.5 Purchase
Money Security InterestPrior
Brothers, Inc. (PBI) began financing its farming operations through Bank of
California, N.A. (Bank). Bank’s loans were secured by PBI’s equipment and
after-acquired property. Bank immediately filed a financing statement,
perfecting its security interest. Two years later, PBI contacted the
International Harvester dealership in Sunny-side, Washington, about the
purchase of a new tractor. A retail installment contract for a model 1066
International Harvester tractor was executed. PBI took delivery of the tractor
“on approval,” agreeing that if it decided to purchase the tractor, it would
inform the dealership of its intention and would send a $6,000 down payment.
The dealership received a $6,000 check. The dealership immediately filed a
financing statement concerning the tractor. Subsequently, when PBI went into
receivership, the dealership filed a complaint, asking the court to declare
that its purchase money security interest in the tractor had priority over
Bank’s security interest. Does
it?In the Matter
of Prior Brothers, Inc., 29 Wn.App. 905, 632 P.2d 522,Web1981 Wash.App. Lexis 2507 (Court of
Appeals of Washington)

27.7 Buyer in
the Ordinary Course of BusinessHeritage
Ford Lincoln Mercury, Inc. (Heritage) was in the business of selling new cars.
Heritage entered into an agreement with Ford Motor Credit Company (Ford),
whereby Ford extended a continuing line of credit to Heritage to purchase
vehicles. Heritage granted Ford a purchase money security interest in all motor
vehicles it owned and thereafter acquired and in all proceeds from the sale of
such motor vehicles. Ford immediately filed its financing statement with the
secretary of state. When the dealership experienced financial trouble, two
Heritage officers decided to double finance certain new cars by issuing dealer
papers to themselves and obtaining financing for two new cars from First
National Bank & Trust Company of El Dorado (Bank). The loan proceeds were
deposited in the dealership’s account to help with its financial difficulties.
The cars were available for sale. When the dealership closed its doors and
turned over the car inventory to Ford, Bank alleged that it had priority over
Ford because the Heritage officers were buyers in the ordinary course of
business. Who wins?First National Bank and Trust
Company of El Dorado v. Ford Motor Credit Company, 231 Kan. 431, 646 P.2d
1057,Web1982 Kan. Lexis 280 (Supreme Court of
Kansas)

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