UCC9 and Security Devices and what they mean

Topics: Money, Default, Negotiable instrument Pages: 9 (1607 words) Published: March 22, 2014
MR. RUBIN’S SECURITY DEVICES CLASS
CLASS HYPOTHETICAL FOR LESSONS 2 and 3
HYPOTHETICAL #1
You have been retained to represent BigCreditor Bank. In 2011, BigCreditor’s junior loan officer, Evan Elpus, made a $800,000 loan to international teen singing sensation Bee Yonsay.
Bee signed a negotiable promissory note for the $800,000 loan; the money was to be used for Bee to create a new recording studio. In addition to the note representing the loan, Evan prepared the following document for Bee and her manager, Aie Jent. UNCONDITIONAL AGREEMENT

I, we, and all of us unconditionally promise that any and all obligations that Bee Yonsay owes to BigCreditor Bank, whether incurred in the past or in the future, will be timely paid. Our promise is made unconditionally and without reservation, and each of us warrant and represent our promise and agreement. Done and signed this 15th day of June, 2011, in Baton Rouge, Louisiana.

s/ Bee Yonsay
Bee Yonsay
s/ Aie Jent
Aie Jent
Accepted: s/ Evan Elpus
Evan Elpus
Loan Officer
BigCreditor Bank.

Hypotheticals for Lessons 2 and 3

Page 1 of 9

Question #1
The negotiable note that Bee signed was dated June 20th 2011 (five days after the “Unconditional Agreement” was signed) and payment in full was due June 20, 2013. In June of 2013, however, Bee couldn’t pay the note, so Evan, the Bank’s loan officer, sent Bee this letter:

June 1, 2013
Dear Bee Yonsay:
This letter confirms BigCreditor Bank’s agreement that
your negotiable note, which was due in full on June 20, 2013, will now be extended. We agree that you may make monthly
payments of $1000, which will not even cover all the interest that is accruing on the loan. All unpaid interest and entire principal balance will be due in full on January 10, 2014.
All of us here at the Bank wish you continued success in
your singing career; you’re an outstanding teenager!
Sincerely

Evan Elpus
Evan Elpus
Loan Officer
BigCreditor Bank.
When she gets the letter from Evan, Bee writes a handwritten note on the bottom of the letter: “It’s a deal! Agreed. Love, Bee.” She mails the letter back to Evan. It is now past January 10, 2014, and Bee not made any of the monthly interest payments and she hasn’t paid the principal balance on the negotiable note of $800,000 or the additional interest owed (which now totals $25,000). The Bank is demanding immediate payment from Aie Jent.

Aie has come to you for advice. Advise Aie Jent.

Hypotheticals for Lessons 2 and 3

Page 2 of 9

QUESTION 1(B). Would your answer be any different if the June 15, 2011 agreement had been as follows?
UNCONDITIONAL AGREEMENT
I, we, and all of us unconditionally promise that any obligation that Bee Yonsay owes to BigCreditor Bank, to the extent that any such obligation is represented by a promissory note due on or before June 20, 2013. Our promise is made unconditionally and without reservation, and each of us warrant and represent our promise and agreement.

Done and signed this 15th day of June, 2011, in Baton Rouge, Louisiana.
s/ Bee Yonsay
Bee Yonsay
s/ Aie Jent
Aie Jent
Accepted: s/ Evan Elpus
Evan Elpus
Loan Officer
BigCreditor Bank.

Hypotheticals for Lessons 2 and 3

Page 3 of 9

HYPOTHETICAL #2
Marine supplier, Ruff, Inc., is owned by the following individuals: Caesar Ruff, 60% of the stock
Candy Ruff, 30% of the stock
Paula Ruff, 9% of the stock
Larry Longtimeworker, 1% of the stock
In 2003, Ruff, Inc. borrowed money from Last National Bank (LNB) and obtained a line of credit loan. In 2003, the stockholders signed the following document: CONTINUING GUARANTY

In consideration of loans that have been made and may be made in the future by LNB to Ruff, Inc., I, we, and all of us agree in solido to pay any and all debts that Ruff, Inc. owes to LNB and its transferees and assigns. Thus done and signed on this 10th day of January, 2003.

e

Caesar Ruff
Caesar Ruff

Candy Ruff

e

Candy Ruff

Paula Ruff

e

Paula...
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