Charter Bank Case Study

22.10
Does the reference to the mortgage in the note cause it to be nonnegotiable?
1. Answer:
Holly Hill acres Ltd purchased the land from Rogers and Blythe. Holly Hill issued a promissory note for the mortgage to Rogers and Blythe, months later Rogers and Blythe got a loan from Charter Bank of Gainesville. In order for Rogers and Blythe to secure the loan they got from Charter Bank, they supposed to transfer the promissory note from Holly Hill, which made Rogers and Blythe defaulted on the loan. As a result of Charter Bank sued in order to get back on the Holly Hill’s promissory note.
The mortgage in the note is nonnegotiable. Charter Bank doesn’t have a negotiable contract because the initial contract from Holly Hill to Rogers and Blythe
However, the Mahaffey’s had to pay the note anyway. Five Stars would be responsible for the repairs and completion of the job. The Mahaffeys can also raise the defense that there was a breach of contract with Five Star and continue to fix any loss; however, Mortgage Finance would be able to continue to restore any financial deficit including Five Star.
2. Answer
No, in this case Five Star Solar Screen did not act ethically. Five Star jobs were not complete, they left several holes in the walls, and materials needed to finish the job were never delivered. However, the Federal Trade Commission regulation protects The Mahaffey’s since the Note contained the following clause.
“Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of the goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor
Answer:
World Wide Tracers, Inc. to Metropolitan Protection, Inc. completed a security agreement and financing statement in favor of World Wide. In order for the agreement to be valid, the collateral must be written clearly, consist of the debtors, promise of repayment, settle the creditor’s rights at the time of the debtor’s nonpayment and has to be signed by the debtor. Therefore, the security agreement was entered with the Minnesota secretary of state with all the documents needed.
State Bank eighteen months later loaned money to Metropolitan which also completed a security agreement and financing statement with State Bank. The Bank also registered with the Minnesota secretary of state. Metropolitan failure on the agreement with World Wide six months later and brought suit against Metropolitan. State Bank filed a counter claim emphasizing its perfected security interest in Metropolitans accounts receivables as well. In this situation World Wide would win because their security was first and it was filed with the Minnesota secretary of state first. The agreement included all the property listed on its Exhibit A list also with property of the debtor acquired after the agreement was executed.
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