Indorsements. Denise and Nick Purificato signed a note secured by real property in Florida. The note was transferred through several parties to Aurora Loan Services, LLC. The Purificatos defaulted on the payments. Aurora filed a suit in a Florida state court against them, seeking a judgment of foreclosure to recover the unpaid debt. While proceedings were pending, Nationstar Mortgage, LLC, succeeded Aurora and became the plaintiff in the suit. At trial, Nationstar provided a screen shot of the note and an allonge, which had been imaged as a single document before Aurora filed the complaint against the Purificatos. Nationstar also provided the original note and allonge, which ended in a blank indorsement. The allonge stated that it was "affixed and a permanent part of said note." Did this evidence establish that the allonge was sufficiently affixed to the note to prove Nationstar's status as the holder with the right to enforce it? Discuss.

Warranties. Milan purchased saffron extract, marketed as "America's Hottest New Way to a Flat Belly," online from Dr. Chen. The website stated that recently published studies showed a significant weight loss (more than $25$ percent) for people who used pure saffron extract as a supplement without diet or exercise. Dr. Chen said that the saffron suppresses appetite by increasing levels of serotonin, which reduces emotional eating. Milan took the extract as directed without any resulting weight loss.

(a) The first group will determine whether Dr. Chen's website made any express warranty on the saffron extract or its effectiveness in causing weight loss.

(b) The second group will discuss whether the implied warranty of merchantability applies to the purchase of weightloss supplements.

(c) The third group will decide if Dr. Chen's sale of saffron extract breached the implied warranty of fitness for a particular purpose.

(d) The fourth group will evaluate the possible success of a suit against a company that offers weight-loss products requiring no diet or exercise given that, according to current common knowledge, people must burn more calories than they consume to lose weight.

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.

With regard to signature liability, which provision of the Uniform Commercial Code (UCC) discussed in this chapter applies to this scenario?

Security Interests. Nick Sabol, doing business in the recording industry as Sound Farm Productions, applied to Morton Community Bank for a $\$ 58,000$ loan to expand his business. Besides the loan application, Sabol signed a promissory note that referred to the bank's rights in "any collateral." Sabol also signed a letter authorizing Morton Community Bank to execute, file, and record all financing statements, amendments, and other documents required by Article $9$ to establish a security interest. Sabol did not sign any other documents, including the financing statement, which contained a description of the collateral. Two years later, without having repaid the loan, Sabol filed for bankruptcy. The bank claimed a security interest in Sabol's sound equipment. (See Creation of a Security Interest.)

(a) The first group will list all the requirements of an enforceable security interest and explain why each of these elements is necessary.

(b) The second group will determine if Morton Community Bank had a valid security interest.

(c) The third group will discuss whether a bank should be able to execute financing statements on a debtor's behalf without the debtor being present or signing them. Are there are any drawbacks to this practice? Explain.

Agents' Signatures. Robert Helmer and Percy Helmer, Jr., were authorized signatories on the corporate checking account of Event Marketing, Inc. The Helmers signed a check drawn on Event Marketing's account and issued to Rummel Technologies, Inc. (RTI), in the amount of $\$ 84,965$. The check was signed on July $13, 2022$, but dated August $14$ . When RTI presented the check for payment, it was dishonored due to insufficient funds. RTI filed a suit in a Georgia state court against the Helmers to collect the amount of the check. (See Signature Liability.)

(a) The first group will determine whether an authorized signatory on a corporate account can be held personally liable for corporate checks returned for insufficient funds.

(b) The second group will decide if the Helmers were personally liable on Event Marketing's check in this situation.

Disposition of Collateral. Dustin Mosely financed the purchase of two cars with a loan from Show-Me Credit Union (SMCU). When Mosely stopped making payments on the loan, SMCU notified him that it intended to repossess the cars and dispose of them at a "private or public" sale. After the sale, the creditor filed a suit in a Missouri state court to recover the difference between the sale price and the outstanding debt. Mosely counterclaimed that SMCU had failed to give proper notice before repossessing the vehicles. Public and private sales of collateral are significantly different methods of disposition. Did SMCU's failure to specify the type of sale, either public or private, at which the creditor would dispose of the collateral violate the UCC's notice requirement? Explain

Transfer by Negotiation. Thao Thi Duong signed a note in the amount of $\$ 200,000$ in favor of Country Home Loans, Inc., to obtain a loan to buy a house in Marrero, Louisiana. The note was indorsed "PAY TO THE ORDER OF [blank space] WITHOUT RECOURSE COUNTRY HOME LOANS, INC." Almost five years later, Duong defaulted on the payments. The Federal National Mortgage Association (Fannie Mae) had come into possession of the note. Fannie Mae wanted to foreclose on the house and sell it to recover the balance due. Duong argued that the words "to the order of [blank space]" in the indorsement made the note an incomplete order instrument and that Fannie Mae thus could not enforce it. What is Fannie Mae's best response to this argument?

If the series of indorsements on the note had ended with a blank indorsement, would the lower court's holding have been in error?

Negotiation. Bertram writes a check for $\$ 200$ payable to "cash." He puts the check in his pocket and drives to the bank to cash the check. As he gets out of his car in the bank's parking lot, the check slips out of his pocket and falls to the pavement. Jerrod walks by moments later, picks up the check, and later that day delivers it to Amber, to whom he owes $\$ 200$. Amber indorses the check "For deposit only, [signed] Amber Dowel" and deposits it into her checking account. In light of these circumstances, answer the following questions:

(a) Is the check a bearer instrument or an order instrument?

(b) Did Jerrod's delivery of the check to Amber constitute a valid negotiation? Why or why not?

(c) What type of indorsement did Amber make?

(d) Does Bertram have a right to recover the $\$ 200$ from Amber? Explain. (See Negotiation.)

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.

Based on these facts, describe any transfer or presentment warranties that Mahar may have violated.

On Evans's motion for summary judgment, what evidence did the opposing parties emphasize? Based on this evidence, what did the court conclude?

Business Case Problem with Sample AnswerReading Citations. Assume that you want to read the entire court opinion in the case of Ryan Data Exchange, Ltd. v. Graco, Inc., $913$ F.$3$d 7$26$ ($8$th Cir. $2019$). Refer to the subsection entitled "Finding Case Law" in this chapter, and then explain specifically where you would find the court's opinion. (See How to Find Primary Sources of Law.)

• For a sample answer to Problem $1-5$, go to Appendix C at the end of this text.

Residents of the city of Madison, Wisconsin, became concerned about overconsumption of liquor near the campus of the University of Wisconsin (UW). The city initiated a new policy, imposing conditions on area bars to discourage reduced-price "specials" that were believed to encourage high-volume and dangerous drinking. Later, the city began to draft an ordinance to ban all drink specials. Bar owners responded by announcing that they had "voluntarily" agreed to discontinue drink specials on Friday and Saturday nights after $8:00$ P.M. The city put its ordinance on hold. Several UW students filed a lawsuit against the local bar owners' association, alleging violations of antitrust law.

(a) The first group will identify the grounds on which the plaintiffs might base their claim for relief and formulate an argument on behalf of the plaintiffs.

(b) The second group will determine whether the defendants are exempt from the antitrust laws.

(c) The third group will decide how the court should rule in this dispute and provide reasons for the ruling.

Business Case Problem with Sample AnswerDefenses. Thomas Klutz obtained a franchise from Kahala Franchise Corporation to operate a Samurai Sam's restaurant. Under their agreement, Klutz could transfer the franchise only if he obtained Kahala's approval and paid a transfer fee. Without telling Kahala, Klutz sold the restaurant to William Thorbecke. Thorbecke signed a note for the price. When Kahala learned of the deal, the franchisor told Thorbecke to stop using the Samurai Sam's name. Thorbecke stopped paying on the note, and Klutz filed a claim for the unpaid amount. In defense, Thorbecke asserted breach of contract and fraud. Are these defenses effective against Klutz? Explain.