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.)

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.)

Negotiability. Juan Sanchez writes the following note on the back of an envelope: "I, Juan Sanchez, promise to pay Kathy Martin or bearer $\$ 500$ on demand." Is this a negotiable instrument? Discuss fully.

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?

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.

What is the rule set forth by that provision?

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.)

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.

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. [In re Carmichael, 443 Bankr. 698 (E.D.Pa. 2011)]

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.

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.

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.

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

Indorsements. 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.

(b) Was the transfer from Jordan's landlord to Deborah, without indorsement, an assignment or a negotiation? Explain.

What is the rule set forth by that provision?