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56 Cards in this Set

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  • Back
If the same person forges your signature a second time, how long do you have to notify the bank?
You have 30 days after 1st forgery to protect against the 2nd forgery
Two cases where forgery will transfer good title?
1. Fraud by impersonation
- in phony payee situation, GFpurchaser is protected, no intent that named payee has right to paper
2. Dishonest employee - bookeeper forges payroll checks
Before you can sue the guarantor or collection, what do you have to do?
You must exhaust all remedies against principal debtors
Who are real defenses against?
Who are personal defenses good against?
everybody (original parties) except HIDC
What is subrogation?
the right of surety to step into creditors shoes
- go after collatoral held by creditor
- once surety pays debt in full, can go after collatoral of debtor
What is assuming a mortgage?
-personally liable on mortgage debt
-original mortgator remains personally liable
-original mortgagor can be released by bank (novation)
-orig. mortgagor liable if new mort. defaults
What is taking subject to a mortgage?
-no personal liability on debt
-all you stand to lose is the land
What are the four remedies a surety has when a debtor defaults?
1. Indemnity - reimbursement, go after principal debtor for amt paid by surety to creditor
2. Contribution - more than 1 surety, seek recovery from other co-sureties when one has paid more
3. Exoneration - before anything takes place, surety wants out, most courts will not release
4. Subrogation - collateral. Upon paying debt in full, surety's right to seek recovery from collateral
What rights do a HUHIDC have?
Same rights as a HIDC - steps into their shoes.
- takes from HIDC but knows something is wrong, but doesnt meet test of HIDC (does not pay value)
What are the real defenses?
(IFMIF) or (FIMFI)-HIDC loses
Infancy, Insanity, Illegality, Insolvency
Forgery - no one can collect, HIDC gets no rights
Fraud in the Execution
Fraud in the inducement
Material alteration
What is a certified check?
Check agreed to by banks in writing "good as cash"
- certified at request of holder
- prior parties (prior to certification) released from liability
What is an acceleration clause?
Holder speeds up due date - perfectly acceptable, does not affect negotiablity
What are the elements of negotiation?
-Signed by maker or drawer
-Unconditional promise to pay
-Payable only in money
-Payable to bearer in good faith
-Payable to order, unless a check
What does "Pay to the Order of Kelly mean?"
Payable to Kelly or anyone she endorses "pay to"
Who is bearer paper payable to?
Anyone in possession
- does not require endorsement
- acting in good faith
Is pay to the "order of cash" considered bearer paper?
Does a check have to be payable to order or bearer?
no - impractical - checks already have "pay to the order of"
"Pay to ABC Co. or to XYZ"
Is this negotiable?
-not payable to order or bearer
Who needs to sign a negotiable instrument?
-maker if a note

-drawer if draft

-agent can sign as long it is indicate that he is "acting for"
Can a negotiable instrument be postdated or antedated?
Can a negotiable instrument "arise out of the sale of goods"
Can a negotiable instrument be secured by collateral?
How do the words "subject to" affect an instrument?
makes it non-negotiable
How many parties in a Promissory note?
2 - maker (promises to pay) and the payee (promise is made to)
How many parties in a draft and what are they?
Drawer - orders the 3rd person to pay
Drawee - ordered to pay
Payee - receives the money (endorser)
What is a check?
A draft, drawn on a bank, payable on demand
Can you pay a negotiable instrument with savings bonds?
No - must be payable in money
Are documents of title commercial paper?
no but they follow the same rules
Unless it is a check, what does a negotiable instrument have to be payable to?
Order or Bearer
Which type of instrument has special paper, special person, special rights?
Special paper - negotiable instrument
Special person - HIDC
Special rights for HIDC - collect face amt
Can negotiable instruments be payable six months after a persons death?
NO - must be definite time
What type of endorsement is one that says "for collection only"
What is a special endorsement?
specifies the person to whose order the instrument is now payable. a special endorsement on bearer paper converts it to order paper.
Under a nonnegotiable bill of lading, a carrier who accepts goods for shipment, must deliver the goods to whom?
the consignee of the bill of lading
Is a bill of lading negotiable if the goods are to be delivered to order or bearer?
"without recourse" usually indicates what type of endorsement, and what does it do
qualified - disclaims the endorser's secondary liability for payment on the instrument
In order for a transferee of a negotiable instrument to qualify as a holder, what requirements must be met if its order paper?
possession AND endorsement of transferor
In order for a person to qualify as a HIDC of a promissory note what 3 conditions must be met?
1. must qualify as holder
2. note must be negotiable
3. must take the note for Value, in Good Faith, and without notice that it is overdue, dishonored or defense against it
What does it mean if a negotiable document of title is "duly negotiated"?
It is negotiated to a holder who takes the document for value, in good faith, and without notice of any defense or claim to it.
What does a homestead exemption protect?
Homestead exemption legislation protects a debtor's property from seizure by unsecured creditors, but not a valid IRS lien. A secured creditor with a valid home mortgage lien could seize the property.
What is a writ of garnishment?
A writ of garnishment is served upon a debtor's employer, which results in part of the debtor's wages being paid to the creditor.
What is a mechanic's lien?
A mechanic's lien is a device that enables someone who has rendered services to real property to place a lien against the real property to secure payment for labor, materials or services provided.
Under the fair debt collection practices act, what would a collection service using improper debt collection practices be subject to?
civil lawsuit for damages for violating the act
What is a composition agreement?
a modification of the original credit agreement/contract whereby the creditors agree to accept an immediate payment of a lesser amount in satisfaction of the debt. If the debtor makes the payments due, then the debtor will be released from the debt.
What is an Assignment for the Benefit of Creditors?
a voluntary transfer of the debtor's nonexempt assets to an assignee who liquidates the assets and distributes the proceeds to the creditors. All of the debtor's general creditors participate; however, the debtor is not released from its debts if these are not satisfied as a result of the distribution.
What is attachment?
prejudgment, court-ordered seizure of property (including personal property) that is in controversy because of a debt. available to a creditor where the debtor owns no real property.
Does a surety have the right to compel
the creditor to collect from the principal debtor?
No - he has primary liability to the creditor
Does a surety have the right to compel the creditor to proceed against the principal debtor's collatoral?
How does the release of a cosurety affect the other cosureties?
Unless a creditor specifically preserves his/her/its rights, a release of a cosurety releases the other cosureties in the amount of the released surety's share.
Do State exemption statutes prevent all of a debtor's personal property from being sold to pay a federal tax lien?
No, since property exempt by statute may be retained by the debtor. They may protect some of a debtor's property from being sold.
Are Federal social security benefits received by a debtor exempt from garnishment by creditors?
When a principal debtor defaults and a surety pays the creditor the entire obligation, which remedy gives the surety the best method of collecting from the debtor?
Subrogation - When a principal debtor defaults and the surety pays the entire obligation, the surety inherits from the creditor all of the creditor's rights against the debtor.
What is an Order of Receivership?
allows a receiver appointed by the court to take possession but not title to the debtor's property.
What is a writ of execution?
allows the debtor's property to be seized and sold to satisfy a judgment.
What is a writ of attachment?
allows the debtor's property to be seized to secure payment of a judgment