Real World Case Problems
3. Disposition of collateral. With a loan of 1.4 million euros from Barclays Bank, Thomas Poynter bought a yacht. The loan agreement gave Barclays multiple stand-alone options on default. One option required that it give ten day’s advance notice of a sale. A different option permitted the bank to avoid this requirement. When Poyntrs did not repay the loan, Barclays repossessed the yacht, notified Poynter that it would be sold but did not specify a date, time or place and sold it two moth later. Barclays got less than what Poynter owed. Is Barclays entitled to collect the deficiency even though it did not give Poynter ten day’s advance notice of the sale? Explain (see default).
5. Disposition of collateral. PRA Aviation, LLC, borrowed $3 million from Center Capital Corp. to buy a Gates Learjet 55B. Center perfected a security interest in the plane. Later, PRA defaulted on the loan, and Center obtained possession of the jet. The jet’s value was estimated at $1.4 million based on the market, design, and mechanical condition of similar aircraft. The jet was marketed in trade publications, on the Internet, and by direct advertising to select customers for 1.6 million. There were three offers. Center sold the jet to the highest bidder for $1.3 million. Was the sale commercially responsible? (see default).
3. Guaranty. Timothy Martinez, owner of Koeing & Vits, Inc. (K&V), guaranty K&V”s debt to Community Bank & Trust. The guaranty stated that the bank was not required to seek payment of the debt from any other source before enforcing the guaranty. K&V defaulted. The bank sought payment of $536,739.40 from Martinez. Martinez argued that the bank could not enforce his guaranty while other founds were available to satisfy K&V Debt, for example, the debt might be paid out of the proceeds of a sale of corporate assets. Is this an effective defense to guaranty? Why or why not? (see laws assisting creditors).
3. Discharge. Michael and Dianne Shankle divorced. An Arkansas state court ordered Michael to pay Diane alimony and child support and half of the couple’s $184,000 on their investment accounts. Instead, he withdrew more than half of their investment funds and spent them on himself. Over the next several years, the court repeatedly held Michael in contempt for failing to pay Diane. Six years later, Michael field for chapter 7 bankruptcy, including in the petition’s schedule the debt to Dianne of the unpaid alimony, child support, and investment funds. Is Michael entitled to discharge of this debt, or does it qualify as an exception? Why or why not? (see chapter 7 liquidation.)
5. Discharged. Caroline McAfee loaned $400,000 to Carter Oaks Crossing. Joseph Harman, Carter’s president, signed a personal guaranty for the loan. Later, Harman obtained a discharged in bankruptcy under chapter 7 for his personal debts. His petition did not list the guaranty among the debts. When Carter defaulted on the loan, McAfee sought to collect the unpaid amount from Harman based on the guaranty. Harman argued that the guaranty had been discharged in his bankruptcy proceedings. Is Harman correct? Why or why not? (see chapter 7 liquidation.)
3. Insurable interest. Donald Breeden and Willie Buchana were married in Marion County, Mississippi. They lived in a home in Sandy Hook. Nationwide Property & Casualty Insurance Co. insured the home under a policy provided that the spouse of the named insured was covered as an insured. After eight years of marriage, Breeden and Buchanan divorced. Breeden transferred his interest in the home to Buchanan as part of the couple’s property settlement. Less than a year later, a fire completely destroyed the home. A claim was filed with Nationwide. Who is entitled to the process? Why? (see insurance terminology and concepts.)
5. Defenses against payment. Leo and Mary Deters owned Deters Tower Service, Inc. The firm obtained a liability policy from USF Insurance Co. to cover its officers, including Leo. One afternoon, two Deters Tower employees were servicing a tower when they fell to their deaths. The workers’ families field a negligence suit against Leo. USF refused to defend Leo against the suit to pay any claim and did not provide a reason for this response. Is USF liable to Leo for this refusal? If so, on what basis, and how much might Leo recover? (see the insurance contract).
3. Gifts. Jennifer Koerner adopted dog the stig from the Anti-Cruelty Society in Chicago, Illinois, for $95. Koerner wrote a poem and presented it to Kent Nielsen, her live-in boyfriend. In the poem, she expressed her intent to give the Stig to him as a gift. While Koerner and Nielsen lived together, they were both involved in the Stig’s day-to-day care. They ended their relationship a year later, and Nielsen agreed to leave their shared residence. Can Nielsen take Stig with him, or is Koerner the Stig’s rightful owner? Explain. (see acquiring ownership of personal propertys.)
5. Gifts. John Wasniewski opened a brokerage account with Quick and Railly, Inc., in his son James’s name. Twelve years later, when the balance was $52,085,the account was closed, and the funds were transferred to an account in John’s name alone. Only after the transfer, when James was notified that the account had been closed, did he learn of its existence. He field suit against Quick and Reilly, arguing that John’s opening of the account had constituted a gift. Is James entitled to the amount that was in the account on its closing? Explain. (see acquiring ownership of personal propertys.)
3. Real estate sales contracts. A California state statute requires sellers to provide a real estate “transfer Disclosure Statement” (TDS) to buyers of residential property. Required disclosures include information about significant defects, including hazardous materials, encroachments, easements, fill, settling, flooding, drainage problems, neighborhood noise, damage from natural disasters, and lawsuits. Mark Hartley contracted with Randall Richman to by Richman’s property in Ventura, California. The property included a commercial building and a residential duplex. Richman did not provide a TDS, calming that it was not required because the property was “miss-used”. Harley refused to go through with the deal. Did Hartley breach their contract, or did Richman’s failure to provide a TDS excuse Hartley’s non-performance? Discuss. (see transfer of Ownership).
5. Adverse Possession. Charles Scarborough and Mildred Rollins owned adjoining properties. Rollins believed that their common boundary ran along the far edge of grassy area on north side of gravel road. Her deed indicated that she showed the grassy area and the road. For more than thirty-five years, she and her predecessors had used it exclusively and paid taxes on it, and no one else had claimed it. Scarborough, however believed that the property was his. Under the principles of advance possession, who owns the property? Explain. . (see transfer of Ownership).
3. Rent. Flawlace, LLC, leased unfinished commercial real estate in Las Vegas, Nevada, from Francis Lin to operate a beauty salon. The lease required Flawlace to obtain a “certificate of occupancy” from the city to commence business. This required the installation of a fire protection system. The lease did not allocate responsibility for the installation to either party. Lin voluntarily undertook to install the system. After month of delays, flawlace moved out. Three month later, the installation was completed, and Lin leased the premises to a new tenant. Did Flawlace owe rent for three month between the time it moved out and the new tenant moved in? explain. (see the landlord-tenant relationship)
5. Tenancy at sufferance. S&V Liquor, Inc., leased retail space from the Charles Downey Family Limited Partnership for a five-year term for $3,333.33 per month. Four month before the end of the term, Downey offered to renew the lease at a new rate of $9,167.67 per month. S&V did not respond. Five day before the lease expired, S&V told Downey that it would remain as a tenant for six month and then move out. Which monthly rental rate should apply? Explain. (see leasehold estates).
3. Undue influence. Susie Walker executed a will that left her entire estate to her grandson. When her grandson died, Susie executed a new will that named her great-grandson her only sole beneficiary and specifically disinherited her son, Tommy. At the time, Tommy’s ex-wife was living with Susie. After Susie died, Tommy field a suit, calming that her will was the product of undue influence on the part of his ex-wife. Several witnesses testified that Susie had been mentally competent when she executed her will. Does undue influence appear likely based on these facts? Explain. (see will).
3. Adjudication. Mechanics replaced a brake assembly on the landing gear of a CRJ-700 plane operated by GoJet Airlines, LLC. They installed gear pins to lock the assembly in place during the repair but then failed to remove one of the pins. After takeoff on the plane’s next flight, a warning light alerted the pilots that the landing gear would not retract. There was a potential for danger, but the pilots safely flew the CRJ-700 back to the departure airport. No one was injured, and no property was damaged. The Federal Aviation Administration (FAA) cited GoJet for violations of FAA regulations by “carelessly or recklessly operating an unairworthy airplane.” GoJet objected to the citation. To which court can GoJet appeal for review? On what ground might the court decline to review the case? (see the administrative process)
5. The freedom of information Act. Sikorsky Aircraft Corp. contracted with the U.S Department of Defense (DoD). Under the Freedom of Information Act, a reporter asked the DOD for copies of all DoD requests that Sikorsky fix problems with its Black Hawk helicopter. Sikorsky objected that the documents would expose trade secrets about its business operations. The DoD promised to remove sensitive information, but the copies given to the reporter revealed trade secrets. Sikorsky filed a suit, arguing that the DoD’s decision to release the documents was arbitrary and capricious. Was the reporter’s request legal? Was the DoD’s response sufficient? Explain. (see public accountability)
3. Section 1 of the Sherman Act. The National Collegiate Athletic Association (NCAA) and the National Federation of State High School Association (NFHS) set a standard for non-wood baseball bats to ensure that aluminum and composite bats performed like wood bats in an effort to enhance player safety and reduce technology-driven homeruns and other big hits. Maruci Sports, LLC, makes nonwood bats. Under the NCAA and NFHS’s standards, four of Marucci’s eleven products were decertified for use in high school and collegiate games. But many certified bats including seven of Marucci’s products were available. Marucci’s competitors did not drop out of the market, bat prices were not significantly changed, and bat quality was not affected. Did the NCAA and NFHS’s standard violate the Sherman Act? Explain. (see Sherman Act).
5. Monopolization. E.I. du Pont de Nemours and Co. manufactures a special fiber that is used to make body armor, fiber-optic cables and other products. In fact, DuPont controls more than 70 percent of the U.S market for this fiber. DuPont imposes multiyear agreements on customers for the fiber, requiring to purchase from 80 to 100 percent of the fiber they need from DuPont. This limits the ability of other producers of the fiber to compete. Do these agreements constitute monopolization and attempt to monopolize in violation of the Sharman Act? Explain. (see Sherman Act).
3. import controls. The Wind Tower Trade Coalition is an association of domestic manufacturers of utility-scale wind tower. The coalition filed a suit in the U.S Court of International Trade against the U.S Department of Commerce, challenging its decision to impose only prospective antidumping duties, rather than retrospective (retroactive) duties, on imports of utility-scale wind towers from China and Vietnam. The Commerce Department had found that the domestic industry had not suffered any “material injury” or “threat of material injury” and that it would be protected by prospective assessment. Can an antidumping duty be assessed retrospectively? If so, should it be assesse here? Discuss. (see regulation of international business activities.)
5. The Act of State Doctrine. Spectrum Stores, Inc., s gasoline retailer, filed a suit against Citgo Petroleum Corp. in a U.S. court. Spectrum alleged that Citgo conspired with other oil production companies to fix the price of petroleum products sold in the United States, primarily by limiting the production of crude oil. The government of Venezuela owns Citgo, and a government controls the resources within its territory. Does the act of state doctrine prevent a U.S. court from considering Spectrum’s claim? Explain. (see international Principles and Doctrines)