In: Accounting
. A promissory note was executed by Billy when he bought his house. He financed the purchase with No Fraud National Bank. This purchase was in 2017 and the note was for 360 equal monthly payments, with a fixed rate of interest, with the payments due the first of each month, beginning on February 1, 2017. No Fraud sold the note to Investments, Inc on February 15, 2017. Investments, Inc sold the note to We Buy Notes on July 1, 2017. On September 1, 2018, We Buy Notes sold the note to Individual Investor. Individual Investor gave the note to his son on the son’s 21st birthday on December 10, 2018. On January 1, 2019 Billy missed his house payment when he lost his job. He has not made a payment since that time.
A. Fully describe the commercial paper rules and draw the picture of each transfer and/or negotiation of this paper. What rights does son have as to payment of the commercial paper? Fully explain the rights and obligations of each purchaser of this paper as described in this question.
B. What rights and obligations does No Fraud National have in this case, solely dealing with the commercial paper which shows No Fraud National as the payee?
Person | Rights | Obligation | ||
Billy | Maker of note/payer | - | Obligation to pay all the principle amount to the holder/ endorser of the note along with interest and other charges such as attorney's fees collection fees which was incurred by the holder/ endorser in legal case. | |
TO | ||||
No Fraud National Bank | Drawee of note/payee | To Demand immediate repayment of the entire loan, including any late charges, collection costs and accrued interest, if the maker does not Make repayment i.e. billy. | Obligation to pay all the principle amount to the holder/ endorser of the note along with interest and other charges such as attorney's fees collection fees which was incurred by the holder/ endorser in legal case. | |
In case the note in secured by collatral security in form of house, the bank can also take possesion of the house with the help of legal routs. | ||||
TO | To collects all attorney's fees and other loan collection costs and charges same as above. | |||
Investment Inc | Purchaser of note | To Demand immediate repayment of the entire loan, including any late charges, collection costs and accrued interest, if the maker does not Make repayment i.e. billy. | Obligation to pay all the principle amount to the holder/ endorser of the note along with interest and other charges such as attorney's fees collection fees which was incurred by the holder/ endorser in legal case. | |
To Demand immediate repayment of the entire loan, including any late charges, collection costs and accrued interest, from No fraud national bank if the billy failed to make payment to him. The Investment Inc in this case in a Holder in Due course the same note is purchased by his for value in money. | ||||
TO | To collects all attorney's fees and other loan collection costs and charges same as above. | |||
We buy notes | Purchaser of note | To Demand immediate repayment of the entire loan, including any late charges, collection costs and accrued interest, if the maker does not Make repayment i.e. billy. | Obligation to pay all the principle amount to the holder/ endorser of the note along with interest and other charges such as attorney's fees collection fees which was incurred by the holder/ endorser in legal case. | |
To Demand immediate repayment of the entire loan, including any late charges, collection costs and accrued interest, from Investment Inc if the billy failed to make payment to him. The We bue notes in this case in a Holder in Due course the same note is purchased by his for value in money. | ||||
TO | To collects all attorney's fees and other loan collection costs and charges same as above. | |||
Individual Investor | Purchaser of note | No rights as all the rights is trasferred by him to his son. | ||
TO | ||||
Individual Investor's Son | Holder of note | To Demand immediate repayment of the entire loan, including any late charges, collection costs and accrued interest, if the maker does not Make a scheduled repayment on time. i.e. billy. | Obligation to pay all the principle amount to the holder/ endorser of the note along with interest and other charges such as attorney's fees collection fees which was incurred by the holder/ endorser in legal case. | |
To Demand immediate repayment of the entire loan, including any late charges, collection costs and accrued interest, from We Buy Notes if the billy failed to make payment to him. In this case his father transferred the note to him is in gratuitously and therefore not binding on father. in this case the son is holder in due course due to shelter rule because of which all rights of his father in the note is transferred to him. | ||||
To collects all attorney's fees and other loan collection costs and charges same as above. |