Week 3 Assignments
Yes, the reference to the mortgage does indeed make the promissory note nonnegotiable. On page 351 of our text it says that one of the formal requirements for a negotiable instrument is that it cannot require any undertaking in addition to the payment of money. By referencing the other mortgage it causes the parties to have to read and acquire information from a different document. From our class discussion I researched UCC 3-106 and it states that for a promise to pay to be unconditional it cannot be subject to or governed by any additional writing. The court would find in favor of Holly Hill Acres.
To qualify as a holder in due course one must be the holder of an instrument that was taken 1.) for value, 2.) in good faith, 3.) without notice that it is overdue, dishonored or encumbered in anyway, and 4.) that it bears no evidence of forgery or tampering of any sort. (pg. 364) Even though it would appear that General Investment Corp. might be considered a holder in due course, I feel that the court would not find in their favor. I think that the fact that they (General) knew that Lustro was nearly insolvent at the time of the assignment of the instrument and the fact that they had knowledge of his past questionable business practices, the court would feel that rule number 3 would not be met. The note also stipulated that the Angelini’s were to start paying after a certificate of completion was issued. The work was never completed by Lustro, so a certificate was never issued. General should have asked to see a certificate of completion when they accepted the instrument. My personal feeling is that they acted very unethically in this case.
Five Stars behavior is totally unethical. They promised to insulate the house, deliver heater blankets and roof fans that would lower their heating bills by 50%. I believe this could qualify as a fraudulent statement as there is no way for the salesman to be 100% sure of...