Defenses. Damion and Kiya Carmichael took out a loan from Ameriquest Mortgage Co. to refinance their mortgage. They signed a note to make monthly payments on the loan. Later, Deutsche Bank National Trust Co. acquired the note. The Carmichaels stopped making payments and filed for bankruptcy. Deutsche asked the court to foreclose on the mortgage. The Carmichaels asserted that they had been fraudulently induced to make the loan and sign the note. Was the bank free of this defense? Explain.

What evidence did the plaintiff offer to establish standing to enforce the note? Was this sufficient proof? Explain.

Decide whether the following statement is true or false. Explain your reasoning. No bank could afford to pay interest every trillionth of a second because, with compounding, it would soon owe everyone infinite dollars.

Which of the following is a nonprofit financial institution?

A. Saving bank.

B. Credit union.

C. Saving bank.

D. Commercial bank.

According to the National Center for Education Statistics, 18% of teachers work at non-school second jobs during the school year. You select an SRS of 50 teachers and let $\hat{p}=$ proportion of teachers in the sample who work at non-school second jobs during the school year.

Calculate the mean and the standard deviation of the sampling distribution of $\hat{p}$.

Indorsements. Angela Brock borrowed $\$ 544,000$ and signed a note payable to Amerifund Mortgage Services, LLC, to buy a house in Silver Spring, Maryland. The note was indorsed in blank and transferred several times "without recourse" before Brock fell behind on the payments. On behalf of Deutsche Bank National Trust Co., BAC Home Loans Servicing LP initiated foreclosure. Brock filed an action in a Maryland state court to block it, arguing that BAC could not foreclose because Deutsche Bank, not BAC, owned the note. Can BAC enforce the note? Explain.

The following data were accumulated for use in reconciling the bank account of Allenby Co. for August:

1. Cash balance according to the company’s records at August 31, $31,080.
2. Cash balance according to the bank statement at August 31,$38,280.
3. Checks outstanding, $12,460.
4. Deposit in transit, not recorded by bank,$5,850.
5. A check for $180 in payment of an account was erroneously recorded in the check register as$810.
6. Bank debit memo for service charges, $40.

a. Prepare a bank reconciliation, using the format shown in Exhibit 7.

Signature Liability. Waldo makes out a negotiable promissory note payable to the order of Grace. Grace indorses the note by writing on it "Without recourse, Grace" and transfers the note for value to Adam. Adam, in need of cash, negotiates the note to Keith by indorsing it with the words "Pay to Keith, Adam." On the due date, Keith presents the note to Waldo for payment, only to learn that Waldo has filed for bankruptcy and will have all debts (including the note) discharged. Discuss fully whether Keith can hold Waldo, Grace, or Adam liable on the note. (See Signature Liability.)

Waldo makes out a negotiable promissory note payable to the order of Grace. Grace indorses the note by writing on it “Without recourse, Grace” and transfers the note for value to Adam. Adam, in need of cash, negotiates the note to Keith by indorsing it with the words “Pay to Keith, Adam.” On the due date, Keith presents the note to Waldo for payment, only to learn that Waldo has filed for bankruptcy and will have all debts (including the note) discharged. Discuss fully whether Keith can hold Waldo, Grace, or Adam liable on the note.

Defenses. Niles sold Kennedy a small motorboat for $\$ 1,500$, telling Kennedy that the boat was in excellent condition. Kennedy gave Niles a check for $\$ 1,500$, which Niles indorsed and gave to Frazier for value. When Kennedy took the boat for a trial run, she discovered that the boat leaked, needed to be painted, and required a new motor. Kennedy stopped payment on her check, which had not yet been cashed. Niles had disappeared. Can Frazier recover from Kennedy as a holder in due course? Discuss. (See Defenses and Limitations.)

A check drawn by Cullen for $\$500$ is made payable to the order of Jordan and issued to Jordan. Jordan owes his landlord $\$500$ in rent and transfers the check to his landlord with the following indorsement: “For rent paid, [signed] Jordan.” Jordan’s landlord has contracted to have Deborah do some landscaping on the property. When Deborah insists on immediate payment, the landlord transfers the check to Deborah without indorsement. Later, to pay for some palm trees purchased from Better-Garden Nursery, Deborah transfers the check with the following indorsement: “Pay to Better-Garden Nursery, without recourse, [signed] Deborah.” Better-Garden Nursery sends the check to its bank indorsed “For deposit only, [signed] Better-Garden Nursery.” (See Indorsements.)

(a) Classify each of these indorsements.

Germanie Fequiere executed and delivered a promissory note in the principal amount of $240,000 to BNC Mortgage. As security for the note, Fequiere executed and delivered a mortgage on real property. BNC indorsed the promissory note in blank. Later, Chase Home Finance, LLC, became the holder in due course of the note and holder of the mortgage. When Fequiere failed to make payments on the note, Chase sought to foreclose on the property. Fequiere asserted that Chase could not foreclose on the property because the mortgage on the property had not been properly transferred from BNC to Chase. Assuming that is true, does it mean that Chase, as holder of the negotiable note, cannot foreclose on the collateral (the property secured by the mortgage)? Explain your answer. [Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 989 A.2d 606 (2010)]

Customer Negligence. Gary goes grocery shopping and carelessly leaves his checkbook in his shopping cart. His checkbook, with two blank checks remaining, is stolen by Dolores. On May 5, Dolores forges Gary's name on a check for $\$ 100$ and cashes the check at Gary's bank, Citizens Bank of Middletown. Gary has not reported the loss of his blank checks to his bank. On June $1$, Gary receives his monthly bank statement from Citizens Bank. The statement shows the forged check, but Gary does not examine it. On June $20$, Dolores forges Gary's last check for $\$ 1,000$ and cashes it at Eastern City Bank, a bank with which she has previously done business. Citizens Bank honors the check. On July $1$, Gary receives another bank statement, discovers both forgeries, and immediately notifies Citizens Bank. Dolores cannot be found. Gary claims that Citizens Bank must recredit his account for both checks, as his signature was forged. Discuss fully Gary's claim. (See The Bank's Duty to Honor Checks.)

Nancy Mahar was the office manager at Golden Years Nursing Home, Inc. She was given a signature stamp to issue checks to the nursing home's employees for up to $\$ 500$ as advances on their pay. The checks were drawn on Golden Years' account at First National Bank. Over a seven-year period, Mahar wrote a number of checks to employees exclusively for the purpose of embezzling funds for herself. She forged the employees' indorsements on the checks, signed her name as a second indorser, and deposited the checks in her personal account at Star Bank. The employees whose names were on the checks never actually requested them. When the scheme was uncovered, Golden Years filed a suit against Mahar, Star Bank, and others to recover the funds. Using the information presented in the chapter, answer the following questions.

Under the UCC, which party, Golden Years or Star Bank, must bear the loss in this situation? Why?