REG 4 Flashcards
Green was unable to repay a loan from State Bank when due.
State refused to renew the loan unless Green provided an acceptable surety. Green asked Royal, a friend, to act as surety on the loan. To induce Royal to agree to become a surety, Green fraudulently represented Green’s financial condition and promised Royal discounts on merchandise sold at Green’s store. Royal agreed to act as surety and the loan was renewed. Later, Green’s obligation to State was discharged in Green’s bankruptcy. State wants to hold Royal liable.
Royal may avoid liability
If Royal can show that State was aware of the fraudulent representations.
A creditor is required to disclose any known material facts to a surety before the surety signs a loan agreement, if such facts will substantially increase the surety’s risks. When a creditor does not make such disclosures, the creditor has committed presumed fraud, and the surety may use this as a defense to repayment.
Sklar, Rich, and Cey own a building as joint tenants with the right of survivorship. Sklar gave Sklar’s interest in the building to Marsh by executing and delivering a deed to Marsh. Neither Rich nor Cey consented to this transfer. Rich and Cey subsequently died. After their deaths, Marsh’s interest in the building would consist of
A joint tenancy requires that all tenants acquire their interests at the same time. Since Marsh acquired his interest after the fact, he would be a tenant in common.
Unger owes a total of $50,000 to eight unsecured creditors and one fully secured creditor. Quincy is one of the unsecured creditors and is owed $6,000. Quincy has filed an involuntary bankruptcy petition against Unger under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. Unger has been unable to pay debts as they become due. Unger’s liabilities exceed Unger’s assets. Unger has filed papers opposing the bankruptcy petition.
Which of the following statements regarding Quincy’s petition is correct?
It will be dismissed because Unger’s debt to Quincy alone is less than the required limit to bring an involuntary petition.
An involuntary petition may succeed if the aggregate unsecured claims of the petitioners equals or exceeds $13,425. Quincy’s claim of $6000 alone does meet that limit.
Smith takes his grandfather clock to A.S. Clockwise, a seller of clocks, for cleaning and repairs. Clockwise has a clearly stated policy that all repairs must be paid for in cash unless prior credit arrangements have been approved. The estimated cost of the cleaning and repairs is stated as $100-$125. Clockwise makes the repairs and, with cleaning, the bill is $120. Smith owns a number of non-exempt assets. When Smith comes to pick up his grandfather clock, he refuses to pay cash, and Clockwise refuses to turn over the grandfather clock to Smith. Which of the following is the best lien remedy available for Clockwise?
Clockwise has a common-law possessory lien because Clockwise has made repairs to Smith’s grandfather clock, did not give approval for credit, and still has possession. Clockwise has an artisan’s lien and with proper notice can sell the clock to satisfy the lien.
A party involuntarily petitioned into bankruptcy under Chapter 7 of the Federal Bankruptcy Code who succeeds in having the petition dismissed could recover
The Code is potentially harsh on creditors who wrongfully file an involuntary petition, especially if it is done to harass the debtor. In such a case, the debtor can recover court costs and reasonable attorney’s fees, as well as compensatory and possibly even punitive damages.
What are Mechanic’s and Artisan’s liens?
A mechanic’s lien, one based on improvements to real property that have not been paid for, requires the holder to give notice before selling the property. An artisan’s lien, one based on amounts unpaid for work done on personal property, also requires notice be given before sale of the property.
On August 1, 2004, Hall files a voluntary petition under Chapter 7 of the Federal Bankruptcy Code.
Hall’s assets are sufficient to pay general creditors 40% of their claims.
The following transactions occurred before the filing:
- On May 15, 2004, Hall gave a mortgage on Hall’s home to National Bank to secure payment of a loan National had given Hall two years earlier. When the loan was made, Hall’s twin was a National employee.
- On June 1, 2004, Hall purchased a boat from Olsen for $10,000 cash.
- On July 1, 2004, Hall paid off an outstanding credit card balance of $500. The original debt had been $2,500.
The payment to Olsen was
When a debtor declares bankruptcy, the debtor cannot prefer one antecedent creditor over another. Antecedent creditors hold debts at the time of the bankruptcy. Transactions, or contemporaneous exchanges for new value, may be performed without giving preference. It is only payments made to “old” creditors that are preferential payments.
In a voluntary bankruptcy proceeding under Chapter 7 of the Federal Bankruptcy Code, which of the following claims, filed within 90 days of the filing for bankruptcy, will be paid first?
The bankruptcy establishes an order of priority for claims like these. After administrative expenses are paid, unpaid wages earned for 90 days prior to filing of the petition, up to $10,950 per employee, are paid; then, unpaid contributions to employee benefit plans, up to $10,950 per employee, are paid; then, taxes are paid; lastly, utility bills with the general creditors are paid.
On February 28, 2005, Master, Inc. has total assets with a fair market value of $1.2mn and total liabilities of $990,000.
On January 15, 2005, Master made a monthly installment-note payment to Acme Distributors Corp., a creditor holding a properly perfected security interest in equipment having a fair market value greater than the balance due on the note.
On March 15, 2005, Master voluntarily files a petition in bankruptcy under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. One year later, the equipment was sold to Acme for less than the balance due on the note .
Which of the following statements correctly describes Acme’s distribution from Master’s bankruptcy estate?
Acme will have the same priority as unsecured general creditors, to the extent that the proceeds from the sale of its collateral are insufficient to satisfy the amount owed by Master.
Which of the following claims would have the highest priority in the distribution of a bankruptcy estate under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code if the petition was filed June 1, 2005?
A secured creditor with a perfected interest will generally have top priority. After secured creditors are paid, the bankruptcy code sets forth an order of importance for unsecured creditors. The administrative expenses would come first among the unsecured claims, followed by the wages, and the tax lien would come last.
A claim will not be discharged in a bankruptcy proceeding if it
Arises from an extension of credit based upon false representations.
Claims based on fraud or other intentional wrongdoing by the debtor will not be discharged. If a debtor commits fraud, that debtor cannot take advantage of the bankruptcy laws when it comes time to pay the defrauded party.
Which of the following would not have capacity to create an agency relationship?
An unincorporated association does not have capacity, because it is not an individual or an entity and therefore has no contractual capacity.
Ogden Corp. hires Thorp as a sales representative for nine months at a salary of $3,000 per month, plus 4% of sales.
Which of the following statements is correc
Thorp is an agent, as he has been hired to act on Ogden’s behalf by representing it. A primary duty of an agent is one of loyalty - an agent must act in his principal’s interests and not his own when participating in matters affecting the principal’s business.
Bolt Corp. dismisses Ace as its general sales agent and notifies all of Ace’s known customers by letter.
Young Corp., a retail outlet located outside of Ace’s previously assigned sales territory, had never dealt with Ace.
Young knew of Ace as a result of various business contacts.
After his dismissal, Ace sold Young goods, to be delivered by Bolt, and received from Young a cash deposit for 20% of the purchase price. It is not unusual for an agent in Ace’s previous position to receive cash deposits.
In an action by Young against Bolt on the sales contract, Young will
If an agent has authority of some kind, he can bind a company to contracts he makes on their behalf. This is true even if the professional relationship has been terminated. Apparent authority may remain effective after a termination. To end all authority, a company must give appropriate notice to EVERYONE, not just to existing customers. The company must give PUBLICATION notice to all businesses of the termination. Otherwise, the dismissed agent retains the power to bind his ex-employer to contracts.
What are the elements of an investment conract?
All the elements of an investment contract are present. There was an investment of money ($5,000 each) in a common enterprise (all would profit or lose, depending on how the lawsuit came out), with an expectation of profit ($594,000 in this case), to be derived primarily from the efforts of others (Sam and his attorney).
