Posted: March 16th, 2015

Write responses to the following end-of-chapter questions. Submit the answers to Dropbox entitled Week 3: Assignment

Write responses to the following end-of-chapter questions. Submit the answers to Dropbox entitled Week 3: Assignment. The ideal answers will identify the applicable issue, propose a solution, and state a justification.
End-of-Chapter Questions:
1.    Chapter 22.10
2.    Chapter 23.8
3.    Chapter 24.13
4.    Chapter 27.2
Your responses should be well-rounded and analytical, and should not just provide a conclusion or an opinion without explaining the reason for the choice. For full credit, you need to use the material from the week’s lectures, text, and/or discussions when responding to the questions. It is important that you incorporate the question into your response (i.e., restate the question in your introduction) and explain the legal principle(s) or concept(s) from the text that underlies your judgment. For each question (and each component if there are multiple sections of one question), you should provide at least one reference in APA format (in-text citations and references as described in detail in the Syllabus). Each answer should be double-spaced in 12-pt. font and your response to each question should be between one and three paragraphs in length.
22.10
Reference to Another Agreement Holly Hill Acres, Ltd. (Holly Hill), purchased land from Rogers and Blythe. As part of its consideration, Holly Hill gave Rogers and Blythe a promissory note and purchase money mortgage. The note read, in part, “This note with interest is secured by a mortgage on real estate made by the maker in favor of said payee. The terms of said mortgage are by reference made a part hereof.” Rogers and Blythe assigned this note and mortgage to Charter Bank of Gainesville (Charter Bank) as security in order to obtain a loan from the bank. Within a few months, Rogers and Blythe defaulted on their obligation to Charter Bank. Charter Bank sued to recover on Holly Hill’s note and mortgage. Does the reference to the mortgage in the note cause it to be nonnegotiable? Holly Hill Acres, Ltd. v. Charter Bank of Gainesville, 314 So.2d 209, Web 1975 Fla.App. Lexis 13715 (Court of Appeal of Florida)

23.8
Business Ethics Anthony and Dolores Angelini entered into a contract with Lustro Aluminum Products, Inc. (Lustro). Under the contract, Lustro agreed to replace exterior veneer on the Angelini home with Gold Bond Plasticrylic avocado siding. The cash price for the job was $3,600, and the installment plan price was $5,363.40. The Angelinis chose to pay on the installment plan and signed a promissory note as security. The note’s language provided that it would not mature until 60 days after a certificate of completion was signed. Ten days after the note was executed, Lustro assigned it for consideration to General Investment Corporation (General), an experienced home improvement lender. General was aware that Lustro (1) was nearly insolvent at the time of the assignment and (2) had engaged in questionable business practices in the past. Lustro never completed the installation of siding at the Angelini home. General, as a holder in due course, demanded payment of the note from the Angelinis. Who wins? General Investment Corporation v. Angelini, 278 A.2d 193, Web 1971 N.J. Lexis 263 (Supreme Court of New Jersey)

24.13
Business Ethics Warren and Kristina Mahaffey were approached by a salesman from the Five Star Solar Screens Company (Five Star). The salesman offered to install insulation in their home at a cost of $5,289. After being told that the insulation would reduce their heating bills by 50 percent, the Mahaffeys agreed to the purchase. To pay for the work, the Mahaffeys executed a note promising to pay the purchase price with interest, in installments. The note, which was secured by a deed of trust on the Mahaffeys’ home, contained the following language: “Notice: Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds thereof.” Several days after Five Star finished working at the home, it sold the installment note to Mortgage Finance Corporation (Mortgage Finance).
There were major defects in the way the insulation was installed in the Mahaffeys’ home. Large holes were left in the walls, and heater blankets and roof fans were never delivered, as called for in the purchase contract. Because of these defects, the Mahaffeys refused to make the payments due on the note. Mortgage Finance instituted foreclosure proceedings to collect the money owed. The Mahaffeys alleged that the Federal Trade Commission rule protects them and allows them to assert the defense of breach of contract by Five Star against the enforcement of the note by Mortgage Finance. Did Five Star Solar Screens Company act ethically in this case? Can the Mahaffeys successfully assert the defense of breach of contract by Five Star against the enforcement of the note by Mortgage Finance? Mahaffey v. Investor’s National Security Company, 103 Nev. 615, 747 P.2d 890, Web 1987 Nev. Lexis 1875 (Supreme Court of Nevada)
27.2
Priority of Security Agreements World Wide Tracers, Inc. (World Wide), sold certain of its assets and properties, including equipment, furniture, uniforms, accounts receivable, and contract rights, to Metropolitan Protection, Inc. (Metropolitan). To secure payment of the purchase price, Metropolitan executed a security agreement and financing statement in favor of World Wide. The agreement, which was filed with the Minnesota secretary of state, stated that “all of the property listed on Exhibit A (equipment, furniture, and fixtures) together with any property of the debtor acquired after” the agreement was executed was collateral.
One and one-half years later, State Bank (Bank) loaned money to Metropolitan, which executed a security agreement and financing statement in favor of Bank. Bank filed the financing statement with the Minnesota secretary of state’s office one month later. The financing statement contained the following language describing the collateral: “All accounts receivable and contract rights owned or hereafter acquired.  431432All equipment now owned and hereafter acquired, including but not limited to, office furniture and uniforms.”
When Metropolitan defaulted on its agreement with World Wide six months later, World Wide brought suit, asserting its alleged security agreement in Metropolitan’s accounts receivable. Bank filed a counterclaim, asserting its perfected security interest in Metropolitan’s accounts receivable. Who wins? World Wide Tracers, Inc. v. Metropolitan Protection, Inc., 384 N.W.2d 442, Web 1986 Minn. Lexis 753 (Supreme Court of Minnesota)

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