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.

Disposition of Collateral. With a loan of $1.4$ million euros from Barclays Bank, PLC, Thomas Poynter bought a yacht. The loan agreement gave Barclays multiple stand-alone options on default. One option required the lender to give ten days' advance notice of a sale. A different option permitted the lender to avoid this requirement. When Poynter did not repay the loan, Barclays repossessed the yacht and notified Poynter that it would be sold-but did not specify a date, time, or place. Two months later, the yacht was sold. The sale price was less than Poynter owed, and Barclays filed a suit in a federal district court for the deficiency. Is Barclays entitled to collect even though it did not give Poynter ten days' advance notice of the sale? Explain.

Material Alteration. Williams purchased a used car from Stein for $\$ 1,000$. Williams paid for the car with a check (written in pencil) payable to Stein for $\$ 1,000$. Stein, through careful erasures and alterations, changed the amount on the check to read $\$ 10,000$ and negotiated the check to Boz. Boz took the check for value, in good faith, and without notice of the alteration. He thus met the Uniform Commercial Code's requirements for the status of a holder in due course. Can Williams successfully raise the universal (real) defense of material alteration to avoid payment on the check? Explain. (See Defenses and Limitations.)

What might have been the result if the assignments of the note had ended with the indorsement on the fifth allonge?

Court Opinions. Read through the subsection in this chapter entitled "Decisions and Opinions." (See How to Read and Understand Case Law.)

• One group will explain the difference between a concurring opinion and a majority opinion.
• Another group will outline the difference between a concurring opinion and a dissenting opinion.
• A third group will explain why judges and justices might write concurring and dissenting opinions, given that these opinions will not affect the outcome of the case at hand, which has already been decided by majority vote.

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.

Thomas Huskin and his wife entered into a contract to have their home remodeled by House Medic Handyman Service. Todd Hall signed the contract as an authorized representative of House Medic. It turned out that House Medic was a fictitious name for Hall Hauling, Ltd. The contract did not indicate this, however, and Hall did not inform the Huskins about Hall Hauling. When a contract dispute later arose, the Huskins sued Todd Hall personally for breach of contract. Can Hall be held personally liable? Why or why not?(See Liability for Contracts.)

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

The Brown family owns several companies, including the J. H. Stevedoring Company and Penn Warehousing and Distribution, Inc. Many aspects of the companies' operations and management are intertwined. Dennis Bishop worked for J. H. and Penn for more than ten years before he became the financial controller at J. H. His responsibilities included approving invoices for payment and reconciling the corporate checkbook. In December of the following year, Bishop began stealing from Penn and J. H. by writing checks on the corporate accounts and using the funds for his own benefit (committing the crime of embezzlement). Several members of the Brown family signed the checks for Bishop without hesitation because he was a longtime, trusted employee. Over the next two years, Bishop embezzled more than $\$ 1.2$ million. He used $\$700,000$ to buy horses from the Fasig-Tipton Company and Fasig-Tipton Midlantic, Inc., with Penn and J. H. checks made payable to those firms. When Bishop's fraud was revealed, J. H. and Penn filed a suit in a federal district court against the Fasig-Tipton firms (the defendants) to recover the amounts of the checks made payable to them. Using the information presented in the chapter, answer the following questions.

In whose favor should the court rule, and why?

26-4. *Business Case Problem with Sample AnswerNegotiation. Sandra Ford signed a note and a mortgage on her home in Westwood, New Jersey, to borrow $\$ 403,750$ from Argent Mortgage Co. Argent transferred the note and mortgage to Wells Fargo Bank, N.A., without indorsement. The following spring, Ford stopped making payments on the note. Wells Fargo filed a suit in a New Jersey state court against Ford to foreclose on the mortgage. Ford asserted that Argent had committed fraud in connection with the note by providing misleading information and charging excessive fees. Ford contended that Wells Fargo was subject to these defenses because the bank was not a holder in due course of the note. Was the transfer of the note from Argent to Wells Fargo a negotiation or an assignment? What difference does that make? If Argent indorsed the note to Wells Fargo now, would the bank's status change? Discuss

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?

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.

Lynne Meyer, on her way to a business meeting and in a hurry, stopped at a Buy-Mart store for a new car charger for her smartphone. There was a long line at one of the checkout counters, but a cashier, Valerie Watts, opened another counter and began loading the cash drawer. Meyer told Watts that she was in a hurry and asked Watts to work faster. Instead, Watts slowed her pace. At this point, Meyer hit Watts. It is not clear whether Meyer hit Watts intentionally or, in an attempt to retrieve the car charger, hit her inadvertently.

In response, Watts grabbed Meyer by the hair and hit her repeatedly in the back of the head, while Meyer screamed for help. Management personnel separated the two women and questioned them about the incident. Watts was immediately fired for violating the store's no-fighting policy. Meyer subsequently sued Buy-Mart, alleging that the store was liable for the tort (assault and battery) committed by its employee. Using the information presented in the chapter, answer the question.

What is the key factor in determining whether Buy-Mart is liable under this doctrine?

Kindred Nursing Centers East, LLC, owns and operates Whitesburg Gardens, a long-term care and rehabilitation facility, in Huntsville, Alabama. Lorene Jones was admitted to the facility following knee-replacement surgery. Jones's daughter, Yvonne Barbour, signed the admission forms required by Whitesburg Gardens as her mother's representative in her presence. Jones did not object. The forms included an "Alternative Dispute Resolution Agreement," which provided for binding arbitration in the event of a dispute between "the Resident" (Jones) and "the Facility" (Whitesburg Gardens). Six days later, Jones was transferred to a different facility. After recovering from the surgery, she filed a suit in an Alabama state court against Kindred, alleging substandard care on a claim of negligence. Can Jones be compelled to submit her claim to arbitration? Explain.