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Answers To Chapter 27 and 28 Cases
Answers To Chapter 27 and 28 Cases
Such stop-payment order shall be effective if it was issued before the bank
or financial institution has processed the transaction, and shall be effective for
only six months, which may be renewed for another six months.
B. What else could RPM have done to prevent this check from being cashed?
Stop-payment order may also be done orally. RPM could have called Bank
One Cambridge in order to effectuate a stop-payment order for the check it has
issued to Systems Marketing. However, such oral form of stop-payment shall only
be valid for 14 calendar days, and in order to extend its effectivity it must be
confirmed in writing subsequently.
2) What would happen if it turned out that RPM did not have a legitimate reason for
stopping payment on the check?
Generally, RPM, being the drawer of the check, has a legal right to order a
stop-payment to Bank One Cambridge, being the drawee, for the check it has
issued to Systems Marketing regardless of the former’s reason.
A presumption that once the check has been issued by the drawer to a
payee whom the drawer shall subsequently order its corresponding drawee to the
stop-payment of the check before actual encashment thereof, it shall bear no
liability for the drawer as the check would be deemed dishonored.
B. Should Bank One have contacted RPM before paying the check? Why or why
not?
Yes, before paying the check, Bank One is should have contacted and
informed RPM about it. Although the Bank One Cambridge is left with the
discretion whether or not to accept or dishonor payment of the stale check
presented by Rierson of Systems Marketing, they shall be liable, however, to
RPM if they fail to consult with RPM for verification of the stale check presented
for payment, as such would constitute bad faith on the part of Bank One
Cambridge.
4) Assume that Rierson’s indorsement on the check was a forgery. Would a court be
likely to hold the bank liable for the amount of the check because it failed to verify
the signature on the check? Why or why not?
Yes, Bank One Cambridge may be held liable for failure of verification as
to the signature written on the check. Generally, when a bank pays a check with a
forged signature of its drawer, it is the bank who suffers the loss, not the drawer
whom they will have to refund for the money taken from the latter’s account.
Such rule bears with it the presumption of good faith in the part of the drawer, that
he/she is not negligent or in at least has not substantially contributed to the
forgery.
The failure of verification by Bank One Cambridge before paying on the
check presented is prima facie evidence that they have not exercised due
diligence. Although the liability may be litigated, as jurisprudence provides,
should the bank be able to present evidence of RPM’s failure to notify the bank of
such forged or altered check as this may constitute to negligence on the part of the
drawer.
1) For which of Barton's purchases (the surround-sound system, the kayak, the 4-
Runner, and the six iMacs) would the creditor need to file a financing statement to
perfect its security interest?
A security interest is perfected by a creditor, usually, through filing a financing
statement. This constitutes public notice to third parties informing them about the secured
party’s security interest therein. The financing statement must bear the following:
(1) name of the debtor ,
(2) name of the secured party, and
(3) particular collateral which it covers.
2) Suppose that Barton's contract for the office computers mentioned only the name
Brighton Homes. What would be the consequences if KDM Electronics filed a
financing statement that listed only Brighton Homes as the debtor's name?
As a general rule, under UCC 9-503 (c), merely writing either a: (1) trade name or
(2) fictitious name sufficient for the perfection of a financing statement. And such
constitutes an improper filing thereof. This effectively renders a secured party’s interest
as unperfected which in turn shall reduce his claim in case of debtor’s bankruptcy to that
of an unsecured creditor.
The financing statement that mentions only Brighton Homes is not sufficient to
identify Barton as the actual debtor of KDM electronics.
All of the purchases of Barton qualify as PMSI in consumer goods, except: (1) the
six iMacs of KDM Electronics which was bought for his office and the Toyota 4-Runner
financed of Bridgeport Auto which is a vehicle subject to a certificate of title.
As a general rule, however, such secured party is allowed to retain the collateral
rather than selling it, if: (1) it do not consist of any consumer good and (2) 60% or more
of the purchase price has not yet been paid by the debtor thereof.
Thus, KDM cannot validly keep the surround-system rather than sell it because
such is a consumer good which is an exception to the general rule aforementioned.