VII. Notes And Electronic Funds Transfers

A.      Negotiable Instruments, PETE, and Holder in Due Course

– Colonial Funding Network, Inc. v. Epazz, Inc., 16 Civ. 5948, _ F.Supp. 4th (S.D.N.Y 2017) – Under New York law, there cannot be usury if there is no “loan or forbearance.” For there to be a loan or forbearance, the amount must be “repayable absolutely.” An obligation arising as the payment of the price in a “purchase” is not a loan or forbearance. If the obligor does not have a usury defense, neither does a guarantor. Any reliance by a seller on pre- contractual statements by a buyer is not justifiable when “an express provision is a written contract contradicts a prior alleged oral representation in a meaningful fashion.”*

– Turner v. Wells Fargo Bank, _ F.3d _ (9th Cir. 2017) – The transfer of a note and deed of trust not in compliance with a pooling and servicing agreement made the transfer voidable, but not void. As a result the trustor did not have standing to complain.

– 2023 BR Holdings, LLC v. Williams, 2017 WL 5009261 (D. Md. 2017) – Even though the holder of a guaranteed note had executed an allonge by which it “collaterally assigned” the note to a lender pursuant to a “Security Agreement,” the holder had standing to enforce the note and guaranty. The assignment was only a partial assignment, and thus the holder retained sufficient rights to be a real party in interest.

– Ag Resource Management, LLC v. Southern Bank, 2017 WL 2927477 (E.D. Ark. 2017) – A secured party with a security interest in the debtor’s crops, and which was listed as a co-payee on thirteen checks issued by a buyer of the crops, had a cause of action for conversion against the bank that allowed the debtor to deposit the checks into an account at the bank without the endorsement of the secured party. Although checks written to alternative payees may be endorsed by any one of them, and any ambiguity about whether payees are joint payees or alternative payees will be resolved in favor of the latter, the secured party was a joint payee even though its name was indicated on a lower line because its name and the debtor’s name were connected by the conjunction “and.”

– Wall v. Altium Group, LLC, 2017 WL 123779 (W.D. Pa. 2017) – A couple who purchased payments under a structured settlement from an intermediate buyer but who received no payments when a court vacated the order approving an earlier sale had no cause of action against the intermediate buyer for breach of transfer warranties because the initial assignment of the annuity was not a negotiable instrument and the couple was not a party to it. However, the couple did state a cause of action against the intermediate buyer for breach of contract.

– Dobson Bay Club II DD, LLC v. La Sonrisa De Siena, LLC, 393 P.3d 449 (Ariz. 2017) – A lender sought to enforce a five percent late-fee provision in a promissory note, which obligated a commercial borrower to pay nearly $1.4 million when it was late in submitting a balloon payment on the note.The court held that the late fee was an unenforceable penalty. Because “. . . the late fee neither reasonably forecasted anticipated damages for the losses identified in the late fee provision nor reasonably approximated the actual losses”. The court observed that “the difficulty of proving [the lender’s] loss as identified in the late fee provision was slight.”

– Zelby Holdings, Inc. v. Videogenix, Inc., 92 Mass. App. Ct. 86, 2017 WL 3574199 (2017) – Common law partial payment rule for purposes of tolling the statute of limitations applies under UCC Article 3.

B.       Electronic Funds Transfer

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2017-2018 Commercial Law Developments

I. PERSONAL PROPERTY SECURED TRANSACTIONS 
II. REAL PROPERTY SECURED TRANSACTIONS
III. GUARANTIES
IV. FRAUDULENT TRANSFERS AND VOIDABLE TRANSACTIONS
V. CREDITOR AND BORROWER LIABILITY
VI. U.C.C. – SALES AND PERSONAL PROPERTY LEASING
VII. NOTES AND ELECTRONIC FUNDS TRANSFERS
VIII. LETTERS OF CREDIT, INVESTMENT SECURITIES, AND DOCUMENTS OF TITLE
IX. CONTRACTS
X. OTHER LAWS AFFECTING COMMERCIAL TRANSACTIONS