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thank you everyone I'm delighted to be here we were like crispy zoom in on my lovely appearance so make sure that our friends online can participate fully one of the things i want to do to start with is correct something in your intimate irials I'm afraid very first to cover page I want to point out that our firm which field and Eddie is no longer at 317 sixth Avenue I had a correction page I was hoping was going to be inserted and unfortunately it didn't make it and we are with building Eddie is currently at 699 walnut sweet two thousand we're in the hub power now has a three months ago so anybody who didn't know that that's where we are and second thing i wanted it kind of ask is matt door a in the room by chance professor Matt Doering I'm great at bowery are you here I didn't think they would be they got things to do in there in the respective law school but I'm going to send this first case to them because if this isn't a law school exam question for secure transactions I've never seen one I had the privilege and honor to actually do replace if you will Matt Dory for a year while he was on sabbatical and teaching secured transactions is great I can appreciate how difficult it is to prepare law school exam questions and then to actually grade the darn thing so this is one of them I think that you might find interesting if you take the time to read this is a fairly complex and long case it's very first thing but let's talk about it what this case is about is it's the ability to secure an interest in a commercial tort claim but what the case also presents is all sorts of issues regarding article 9 priority of claims whether filing or perfection when is something perfected when do proceeds actually get you something more than actually the original security interests after-acquired property attachment it is just one of those those and Acacius where everything seems to be discussed but let me read a little bit I put in here this little longer presentation of fact and normally because I think they're important for you to get the gist of what we're trying to do here Texas rice mill and Texas right team without that text texana we're going to call those sued bear that's the big bear company in state court and removed as you got removed to federal court they brought five claims against bear including negligence per se and strict liability private nuisance and what this was really about is it was claiming that there was a deep when their costs to decontaminate the property from the rice that was provided by bear it was treated rights and all these things damaged their property cause them loss of income so what they provided here is then asserted as they had property damage plant equipment from bare rice has to be replaced lost profits unrecovered costs do the Unruh marketability of its contaminated rice loss or damage emanation of value of its plant equipment and improvement lost future profits including financing costs and others I point that out because what they did is that they had some property it damaged they also had some claims for just money damages keep in mind this lost property damage property issue well after about five years of litigation the case settled and all the parties to the bear suit basically authorized the court to distribute some of the proceeds and then there's about nine hundred thousand dollars left over and to creditors started fighting over and that's what this case is about this priority right to that leftover proceeds of about 900,000 a maegi who is a bank loaned texana two million dollars in 2006 secured by collateral including inventory accounts equipment furniture fixtures just the normal stuff well texano defaulted on the loan in 2006 and in 2007 texana and I meggie entered into a forbearance agreement not an unusual situation you've all done and you're left these guys have a little bit more time 2006 they said they're going to do that in exchange for a security interest in the bear suit remember said the Bears who didn't settle till 2012 but it was in existence at this time so a mega he perfected his interest in the claims agreement by filing a you see financing statement specifically describing this bear multi-state lawsuit now Stearns is the other creditors turns bank is the other creditor and they loaned texana the debtor 2.6 million dollars in September 2002 that's way before I meggie loan the money to that was a they were in 2006 so they had a granted a security agreement describing fixtures chattel paper equipment general intangibles I point that out excluding excluding inventory and accounts receivable and the description also included proceeds which you don't have to put in the security agreement your automatic secured proceeds for the most part stearns filed a financing statement describing the collateral 2002 cisterns had this description of all this equipment and also all of this gentleman tangibles well before a maegi did but a Maggie did have one thing in their security agreement that wasn't in the stern security human and that's this bear lawsuit now after texana texana defaulted on the stern suit it turns went to got a judgment in 2010 3 million dollars plus and for closed on an even trust and the security agreement three days later fought all the collateral a foreclosure sale for 268 thousand dollars so they've already got their collateral back in from the form of equipment next what's going on here Stearns has moved that they're entitled to the proceeds of this what they call a general tangible these proceeds from their lawsuit the court recites are really a plethora of UCC law so if you want to read it sometime maybe you find it interesting the court also notes that you can't just described to get a security interest in a in a lawsuit you have to specifically describe it you can't just described it general you can't take this commercial tort claim you can't just say obligations have come from lawsuits down the line you have to have something specific named in order to do that that's a restriction of the article 90 students argue that it filed first and perfected its security interest in the settlement Namath at two different forms one they described it first they had after quired general intangible well the court very very correctly notes that payment intangibles are a subset of general tan jewels and there's under which the account debtors principal obligation is a money obligation Stearns contends that it was it has a security interest in the Selma payment because it said it's a settled tort action and that's a payment intangible and the comment to the UCC actually you know uses that as an example it is a payment intangible so we're going to ask a required payment intangible at stake here for security grant attaches aren't they first they filed first that's not what happens here call court ultimately decided that a maggie has superior security interest and what they said wasn't it quote here I think it's important that I put it in the settlement payments proceeds of the bear suits Meggie's interest in the settlement payment was perfected when its interest in the bear suit itself was perfected and at that time Stearns didn't have a security interest at all in that collateral so we've got perfected security interest in the original collateral and when it turned into proceeds the procede statute simply lets you go back to the time when you rich make file and Stearns couldn't say that they ever had that collateral as a rich of collateral and the fact that it was at required payment tangibles means that that omega always did and first had security interest perfected in the original collateral and that's why they want as of as of the point in time when the lawsuit existed before it was settled Maggie was the secured creditor and technically because there was no description of a court a tort claim in stirring security agreement they were an unsecured creditor as to that cloud and that's the point where it goes forward and anything after that it just proceeds and priority after that so they open we found that a maegi remain the sole holder the perfected security interest in the settlement payment and they want anything occur to you or anything it's have questions regarding that particular sequence did you get did you get what I just presented all right let's go on the second cage is actually a subsequent reiteration of the bear case and I only put it in there to correct what the court made a misstatement about in the prior appeal about conflicting forces of perfected security interests in proceeds so I just put that in there as it as something that I thought was interesting for purposes of corruption we had a proceeds issue here in Iowa four years back in there in 1990 1980s excuse me we had some Farm Credit cases that went up on appeal and the court made what I thought at the time was a misstatement of the law regarding proceeds and the priority in proceeds and what and had to do with course of stealing well the court never did have an opportunity or nobody ever corrected it and until I had a chance to have an Impella case about four years ago or so and they ass you actually came up and I'll be darned is the Iowa Supreme Court didn't say you know we were wrong back in 1989 they actually said that they said we were wrong back in 99 when we said that we should have said that here they went right up here dude the appellate issue came right up afterwards and they corrected it right away so the next case is in rain night and this is the case involving liquidation of crops and equipment secured parties lenders collateral that the debtor went liquidated the collateral and after you got done liquidating the collateral he goes and says well I can't make my payments and oh oh by the way lender you were involved in his liquidation and you didn't send out a sale notice you didn't send out the UCC sale notice that I'm supposed to get I'm entitled to not have to pay for the deficiency because that's commercially unreasonable well court didn't have anything that didn't buy that and what really happened here was that the debtor was actually the one that's doing the liquidation dadar went to the lender and say hey I'm not going to farm anymore and yet the lender was involved had knowledge of what was going on the lender said yeah that's great go ahead go ahead and liquidate thing the lender actually knew who the auctioneer was going to be and had conversations with the auctioneer and but the question really was who was selling this who was selling this collateral and so for the debtors counsel and for the creditors counseling room make sure that when you're counseling your clients that that issue is made clear so that they don't have is kind of Appeal it actually takes place here they went through an evidentiary chain of what actually occurred there was a lot of evidence reputation on what actually occurred so they could identify who sold the cloud was at the lender or what's the debtor the debtor voluntarily contacted the lender informed him about his discontinuing farming operation the lender didn't withdraw its financial support of the debtor operation or forced into ceased farming there was an evidentiary presentation on that I mean there was no you could have solved all of this without any real difficulty by simply having a short agreement about who was going to be doing this second the debtor proceeded to mark and sell the crop without intervention or orders oversight by the lender 30 the land that lender never resorted to engaging an attorney what if they had what at the end they likely would have in a lot of cases well that may be a factor in determining whether or not the lender was actually involved in the sale for the lender not been repossessed or to dispose of the equipment didn't exercise actual or constructive possession of it constructive possession what are they required sorry I made certain requirements and restrictions on the sale pointing out how it could happen the debtor voluntarily assembled the equipment veterans up shows the auctioneer but in this case they also showed that the bank had some suggestion as who that should be or might be so when does that one is the pigs become a hog their seventh the debtor and the auctioneer spoke by telephone at least 17 times that was probably I saw in the evidentiary presentation probably the kicker it was the debtor who was calling the shots with the auctioneer ultimately in this case the court and I think very correctly found that it that there was no sale by the lender the lender didn't control is sale and the court I think correctly found that when the debtor is doing the liquidation the UCC requirement for this UCC notice of sale not required and there's no violation of commercial reasonably Stephen if the sale doesn't turn out well so that's one way that you can as creditors as a creditors council guide your client to to get to a amicable and maybe risk risk free method of liquidating collateral as long as you trust your debtor to do it well you think that the collapse going to be sold in a proper manner commercially reasonable manner and he's going to turn over the proceeds so that's left this next case is an article article to article 9 case really it to begin with and it's one I think it's worth we're talking about in a couple discipline BMW financial services had a loan with a woman named Nelson to finance the purchase ova 2011 chrysler 200 and according to Nelson the MW accepted those payments failed a notifier that her strict compliance with the payment schedule would be required in the loan what she was doing it was she was making late payments and they were letting her make let late payments for what what the problem is is that there's the case out there in Minnesota and it's applicable a lot of different jurisdictions it says something to this effect this is Cobb versus Midwest recovered Bureau company which held that quote the repeated acceptance of late payments by a creditor who has the contractual right to repossess the property imposes a duty on the creditor to notify the debtor that strict compliance with the contract terms will be required before the creditor can lawfully repossess the cloud if you've got a course of dealing with your between the lender and the debtor you've got to give the debtor notice that strict compliance is going to be required to bet on you can't just declare the false because they've been making late payments the whole time you got to undo your course of dealing and then once you've given that notice and then they continue to violate the strict compliance of the terms that's when you have a default so that's the real question that's what really happened here is when does a lender when is a creditor secured creditor have a right to go and repossess a simple law school question to under article 9 upon default you have a right to possession as a secured party upon default and here the initial discussion was you didn't have a default so what happened here the creditor goes and tries and repossessions the vehicle and they repossess without undoing this is course dealing it's commercially unreasonable repossession automatically all of a sudden there are damages being asserted and there you sir this is the consumer context of consumer damages are actually going to be at issue but they make it a little more complicated than that because the creditor does it go out as the creditor bank go out and actually send one of their employees out to pick up the vehicle which by the way was done with over the objection of the of the owner debtor well no they sent out all wheels all wheels went out and did the repossession there a contractor all wheels then is tarred and feathered with the commercial unreasonableness and lack of default that the lender is both parties are going to get tagged potentially for doing something that the law prohibits that's what the next part of the case is about it says that if you're going to go out as a contractor I would suggest if you're representing contractors who do this kind of work they need to have an indemnity agreement with the bank or with a lender conversely the bank probably wants to have a similar contract that says hey if you do something that breaches the piece we're asking you not to breach
the peace you do something that breaks the peace it's on you and you got to identify us now those indemnity they're only as good as the party's ability to pay but it's something you should consider when you're using contractors to do collection works all meals was being is that that's the third part of this case is that the consumer debtor would say hey we I have consumer damages I have damages under article 9 6 25 which say damages for noncompliance loss is subject to subject subsection c e and f vs liable for damages in the amount of any loss caused by failure to comply with this article loss caused by favorite reply may include loss resulting from the debtors and ability to obtain or increase costs of alternative financing men under seat to it says if the collateral is consumer good a person that has it that was a debtor or a secondary obligor at the time of the secured party failed to comply with this part may recover for that failure in any event and amount not less than a credit service charge the interest the amount of the interest has been charged plus ten percent of the principal amount of the obligation or the time priced international interests differential they can get this big and get the financing charges as damages against the lender well in this case the lender actually was you know those would have applied to the lender then the next question is do they apply to all wheels the contractor the court found that the c2 doesn't say anything about contractors that talks about the secured party so if also making critical concluded that while all wheels was potentially liable for actual damages it's not liable for the statutory damages that we just wrapped contractor is not covered by the statute the secured party any questions next case this is actually an Iowa case Des Moines flying service and it's an article 2 case but it's got a little wrinkle to it that I frankly didn't I actually didn't know I like to think I have a lot of experience in some of these lean cases but there was a statute of which I was not aware I hope you learned it to today maybe you already know about case is about the replaced airplane windshield replaced airplane windshield the airplane owner went in and said you know got a little something's going on here I think you better have this replace the one flying service replaces the aircraft windshield and then it cracked in flight because of a manufacturer's defect it didn't crack because of the installation and Des Moines flying service didn't manufacture the windshield more flying services defendant plaintiff sought recovery from the Installer Des Moines client service not the manufacturer and that the court tries to determine whether and they sue them for breach of implied warranty of merchantability he said that they didn't have to pay for the installation costs they shouldn't have to because it you know it cracked the court stated that the eye of a UCC applies to mixed contracts of goods and services citing another Iowa case this is the weather and they any determine which actually applies though whether this article 2 applies as to whether it applies to good article 2 doesn't apply to services if you recall so the Purdue you have to determine what the predominant factor the thrust the purpose reasonably stated and it is whether it's the rendition of services which is good incidentally involved or is the transaction sale with labor incidentally involved this is an evidentiary question that came up the evidence that they showed was that the total bill was like 19 thousand dollars only 6,000 of that or so was for labor most of it was for the price of the windshield so they call it seyla goods they saw that article 2 does in fact apply so the question is that was a predominant factor so they said well the implied warrant in plain warranty of merchantability should then apply but the defendant asserted that it was a home run from that warranty and here's why there is a specific statute in Iowa chapter 6 13 it's section 18 1 a the code of Iowa and it says the file a person who is not the assembler designer or manufacturer and has wholesales retails distributes or otherwise sales products is among other things immune from any suit based on strict liability in tort or breach of implied warranty of merchantability which arises solely from the alleged defect in the order in the origin original design or manufacture the product there's an out clause in the statute for article tomb implied warranty of merchantability I don't know how many of you knew that but I didn't so it has to do with with product liability and they put that in there some years ago on product liability issues so those kind of things but basically the defendant one because the court found that in fact that that gets basically apply it was not something that could be read around found the statute to be clearly stated article didn't article 2 didn't apply after all because of another statute the next case is one of the plethora of cases from the how many people have been involved AG of processors case raise your hand about three-fourths of the room as well as on I keep getting information from that too so it I put this agri process this case in here it's kind of long and I actually included a lot of what the court said because the court is such a nice job of describing what I think is something that a lot of lawyers even those who work in commercial lawyers really don't get and don't really understand and that's how the processing and negotiation of checks through banks actually works and what their obligations are I thought the court you did a really fairly nice job and what's being what this case is really about is it's not so much a UCC case as it is a preference case in bankruptcy what the assertion was is that these deposits that are going in there into a bank we're going through kind of a delayed process of going from one account to another account on kind of a sweet that was what was the transaction was a legitimate purpose for it there wasn't something that we're trying to hide the money but there were being transferred from one account to another well there's there's a period of time in which something's deposited in which it becomes a final payment from that deposit and that's where we they talk about the article the article for transaction and how that works there's a two day two day period in which it becomes a final and it was being asserted that that two day period and that periodic wait to go to the other account which isn't the same bank was a debt was creating an antecedent debt and because they were in favor they were rejecting it sometimes at times and getting an insufficient funds because of it and the long and short of what the court decided here was that no that isn't an antecedent that there's plenty of case law that says so and they ultimately said that overdraft don't rise to debt and determined that the intraday overdraft Debbie constitute an annuity death there was no preferential transfer so I don't go through the entire case very much because I think it is a fairly complex case much more so than I've actually included in the materials but I refer to your attention for a fairly good review of how the banking negotiation process works and may be of interest to the next case is a another article two case homeowner alleged that the defendant put in a PEC plumbing system failed and that it caused water damage and the issue in the case was whether or not this implied warranty required a pre suit notice of the breach of the warranty claim did you know that you had to provide a pre soup notice yes you do section 2 X 6 07 is adopted in Missouri provides that the buyer must within a reasonable time after he discovers or should have discovered any each notify the seller of the breach or be barred from the remedy well the plane of a series that he provided the notice by filing a lawsuit and apparently there's a split of authority on whether that's the case but in this particular instance the court decided that you got to provide specific notice filing the world is not good enough so I don't know that I've ever seen that done and then any of you ever provided that kind of notice here in Iowa I've never seen a case like this in Iowa and I don't know whether there is a dichotomy among from Missouri but I've never seen a case like that I'm curious if anybody else have anybody out there alright the next case we put in here also because it is also an article for case the article for cases are again a little more difficult for a lot of us to deal with because we don't see the transactions we don't work with article 3 & 4 as much as we do some of the other commercial statutes what happened here and then just to bury be very summery about this particular case there was a multi consumer class action this wasn't something that was just a minor problem these are multi multiple defendants going after a bank or changing their their procedure for post customer account balances they were taking care of every time they claimed that West Bank briefs the implied and expressed duties of good faith when it changed the sequencing order of bank credit card transactions and how they get apply to the balances that come in against their checking account against their a deposit account and West Bank argue there are four applied and the issue in the case is whether it implies dude you good face on our forums reserve the court went on find that there was an express duty of good faith written into the contract between the debtors them as the plaintiffs in the end of then that contract is the account agreement they said that there was an express violation of good faith but they said there's no implied violation of good site there's no implied warranty now I'll have to stand here and tell you that I don't see that's a big deal outcome of the case because they violated the good faith they ended up having damages they end up having to change and make sure that they set out notices in a way that apparently was more calculated to give everyone actual notice as opposed to just some sort of a lame effort so I included the hand you harvest bank case is a case your Arkansas to show that this same issue keeps coming up I don't put it in there to explain it anymore with the issue of this hi hello posting on debit account is apparently a continuing issue so you may want to watch for that and end the cases that are out there on this type of issue you may have clients bank clients or you may have bank customers or experiencing problems with this and these will be good resources just to look at and I refer them to you the next one is also an article suitcase the della versus walmart a buyer of work boots sued the seller walmart for breach of warranty under in mexico's version of the article to sought damages for personal injury alleging that the loose souls caused him to fall and suffer injuries while working on it as a tree trimmer can't you just imagine this guy's up in a tree boots don't work he's hanging by his suspenders maybe it's just the cartoonion me an issue was the proper statute of limitations for tort claim under the UCC as a breach of implied warranty and and fitness a particular purpose the tort statute of limitations in New Mexico was three years in the UC statute of limitation is four years well that was really one of the problems court described as there's a split and other jurisdictions as to when an action is governed by the limitation period in the UCC majority of you is that the UCC limitation period applies to all actions to preach warranties regardless of whether the debtor excuse me the plaintiff seeks personal injury damages or economic or contractual damages and essentially looked at the nature of the right asserted if the right is based on contract is subject to the UCC and that's what happened here the product was a subject of a purchase at walmart UCC apply and so that was maybe they went through an analysis of why they thought the four-year statute apply and the UC applied that you'll see that there is apparently a distinction or slit and authority as to which actually should be applied so this gives you some notice that maybe if you have that kind of a situation look to the lawyer state look to the law this day I don't know what I would say are there I don't know what I've seen a case on jag orthopedics it made the plaintiffs make claims against a defendant rose out of allegations that the defendants plaintiffs officer manager misappropriated embezzled hundreds of thousands of dollars from the plaintiff writing check yourself obtaining debit card forging the signature of plaintiff's owner and president so a company had a bad employee went and did a bunch of stuff at the bank and and the employer plaintiffs lost money and the plaintiff alleged that the bank and properly paid the checks forged by the office manager in violation of its obligations not to we'd gives you strict liability when you pay something that's not properly payable that's an art basic article 3 concept and bank moves for dismissal and under but one under 406 the bank is excused from strict liability for paying on forged document where the customers own negatives contributes to allowing the alteration the check in the bank pays the check and good sake and section provides that the bank will not be held liable for paying on forrester on Audrey's unauthorized signatures where the bank has set state has that statements of a count to the customer and the customer failed to timely notify the bank well those are affirmative defense of two different seconds has 340 6 and 40 40 section the debtor the sameness got a show at the plaintiff was negligent and that the negligence led to be incorrect payment by the bank and with respect to 3406 Avenue with those bank statements is another defense you got affirmative restated and an assertive the bank can establish the fence under that section if it fails to show that it acted in good faith and accordance with reasonable commercial standards and you got to show some evidence of that this is a case where my main comment is when you have these commercial litigation cases these affirmative defenses have to have evidence presented you got to get somebody on the stand maybe an expert to show that these actions taken by the lender if you're on the lender side and I 329 you got to show that actions taken by the lender or those that are normal rank and reasonable lender would take many times you can get your own your own banker up there to show but a lot of times it will take someone who is either an expert or familiar and can show opinion testimony that the types of things that are being done in this case yet to show they were being done are actually commercially reasonable and and ordinary for purposes of the industry they didn't even do that the other thing that they were should have shown in Kuta shown is that they actually sent the bank statements to the borrower to the account holder I've had a case where that's in fact what we had happen is that I had several cases like this where someone goes and forges or alters charity runs it through another bank there on our account and then the the depositor goes this is hey you paid on it you improperly paid on those checks I want my money back and we say well wait a minute this is a year ago you did this we gave you your statement at 90 day you got 90 days look at your statements until if there's anything improper you didn't do that now in the case I had they actually have a case against the other bank who actually were they deposited because he actually looked at the checks they were actually hand hand deposited in the other bank before they were electronically passed through to to my client and by the way if if your client is accepting electronically transferred or negotiated deposits there is no obligation to look and observe the actual signatures on on an altar check in that case but the bank who first took still has that obligation and they're going to be on the hook for accepting porch endorsements or alter check in this case it was seventy-five thousand hundred thousand dollars with them all from checks it took place over about an 18-month period but the last one that occurred more than 90 days ago well my c
ient was able to show and what the bank is not showing for some reason didn't put it into evidence that they'd actually sent out the bank statements to the account holder this is an evidentiary presentation I'm just pointing it out that that's why they lost they didn't lose because the law was against them they lost because they did present the evidence the next case I wanted to present on is CH capital America versus hot tractor to Kentucky case this is a situation where hunt tractor had a wholesale security agreement with CHS corporate predecessor was called cnh for now they finance contractor and buying case inventory and equipment and I'm tractor granted security interest in inventory equipment all proceeds of inventory accounts things like that that's pretty normal in a financing transaction well then the sun in the appropriate ownership borrowed four thousand dollars from his father-in-law so we could buy contractor good family business then later contractor entered into a $500,000 line of credit with another Bank commonwealth bank and with the bank loans contractor maintains a checking account with Commonwealth of Commonwealth did a sweep on that periodically on that account deducted from the checking account on daily basis to pay down on the bank loan balance commonwealth bank held a security interest in the funds deposited in hunt tractors checking account now normally yes to the bank that has if you have two security agreements and one says we have a security interest in account and bank accounts deposit accounts you have to say deposit accounts not just account but about a bank in who is money in whose trust you are actually depositing those guns also as the security interest in them they are the higher perfecting and priority bank or secured party because they have the deposits in their possession as a result they have first priority even if you had a filing that took place earlier with a previous secured party so this bank is making these sweet they have the right to do so as a secured creditor however when do you have a right to take over your collateral what's the key default all right here's what happens Hunter tractor struggled to make payments and to pay CNA and they received a check from the Kentucky Department of Transportation on payments for a whole bunch of backhoes that they were selling it's a good thing great big receivable they deposit in the bank to bank sweat 340,000 forty-eight thousand dollars of it and then they took and applied the rest of it to the line of credit this bank had paying them off because they have a right to do that they set it off now here if that's the real problem is that the court found that article 9601 says that secures party's rights upon default that's when they arise and after the fall party has the rights provided in the part which includes the right to take possession and the right to proceed to enforce against deposit accounts but the bank held at cnh had a perfect its purchase money security and its collateral and the proceeds the Commonwealth only had its superior rights to the deposit account if hunt track sir had default and in this case the bank couldn't show that there was any default so they got to give that money back to the secured creditor who has the have the accounts which had the account receivable and the end of deposit accounts instead because they did have a default on the payment again it's just a situation where I don't know whether there wasn't any default or whether they simply fail to prove there was it looks like there wasn't any default they tried to take the money fast the next case is one it seems to be pretty self-evident but I thought it was worth it was an interesting case for you to look at it's also an article a 2 k's plaintiff meet you can see by these facts i laid out the facts guys i thought they were kind of fun to look at and maybe find them interesting to plaintiff bought a used motor vehicle from the trend for 1895 dollars we are not talking about a maserati here the bill of sale indicated the vm resold well as is as seen the sale also includes the form from the new hansard division motor vehicle DMV titled and big bold letters notice of sale of unsafe motor vehicle guys this is getting better all the time which stated in pertinent part quote if you are considering the purchase of a used vehicle which may not pass New Hampshire safety inspection you have the right under our essay 358 days f to request that the dealer inspect the vehicle prior to sale and list the defects which must be corrected before the inspector sticker will be issue unquote the DMV form contain the following notice the motor vehicle describes will not pass a new hampshire inspection and it's unsafe for operation include how much notice do you really need folks I mean this reminds me of the of the cases where we have product liability cases that says you you have that you have a duty to warn somebody not distort gasoline next to a water here just hate those kicks why would you not know that apparently that's that's important but here i wondered i as i was reading it as it oh please don't please don't let the creditor lose here please anyways look by signing the form the plaintiff acknowledged that the beautiful wouldn't pass plaintiff actually signed this form well you can guess what happened the plaintiff throw the vehicles home discovered that it wouldn't pass inspection because the frame was completely rotted almost to the point where it was dangerous they alleged that the vehicle had two big rust holes on the size of softball and we caused the hole completely compromise the structural integrity integrity of the vehicle and failed inspection was unsafe plaintiff brought a small claims action yes this started in small planes the trial court ruled in favor of the defendant did they stay in small claims no let's file an appeal on this case the plaintiff argued that the trial court erred by failing to rule that the defendant breached the implied warranty of merchantability there we go again contending that to the extent that the trial court found that way this implied warranty the court was raw implied warranty of merchantability set forth in 3 2 314 of the of the UCC and I set it out there so you can see what it says it's got a lot of things that you would think yes a used car ought to this auto includes these warranties but the court referred to the additional comments which state that the question whether the warranty is imposed turns basically on the meaning of the terms of the agreement as recognized in the trade goods delivered under a grant made by a merchant in a given line trade must be at the quality comparable to that generally accepted in that line a trade with regard to use good the court found that the official stickers that such Goods quote involves only such obligation as is appropriate to such goods for that is their contract description in other words if you're buying used Goods this implied warranties may not be good at all it might not be good because in particular when you have a contract that tells you the very qualities that you're buying there's no warranty on anything to begin with so as I'm happy to find out that the defendant was actually exonerated again with the notes I put this next case in here not to describe it in detail but just let you see how complicated the Battle of the forms can get sometimes under Article 2 what we have here is we have a correspondence between parties in a good purchase of goods that you're normal here's my first purchase order now we've got some other things to talk about well here's my eat I email my second purchase order but the first purchase order has a whole bunch of terms on it that are not part of the second purchase order but they are certainly not withdrawn by the second purchase order and what we have with it we head back and forth emails going on between these two parties not only were the forms that they sent but the emails themselves became part of the total transaction so we have clients or when you're dealing with somebody and if you have to be selling something yourself be aware that that the courts going to take into consideration the entire circumstances of this trade off now generally speaking when you make a counteroffer it revoked the previous offer that's not really what happened here no one really revoke it they just kind of added in and moosh about some more terms and discussion about price and what what became the real issue is that the original purchase order had a venue provision second one didn't first one have these extra terms and a kind of I'll call it the boilerplate sheet and it had and it had a choice of venue provision well as it looked luck would turn out the purchaser didn't like what happened and started suing and the seller said hey wait a minute you're suing me in the wrong court the venue provision provides they say what venue provision we don't see that in the one we signed court found that the venue provisions from the original discussion was still applicable to make a very long story short and they took into consideration i described out in some of the courts very well stated discussion of law as to how you go about analyzing in an article to situation purchase the goods what's the deal what's the contract it could be very broad based on the negotiations of the parties unless they're care what the ultimate found was that as a matter of fact that the finished correspondence together with the conduct of the parties indicate that the parties had reached in agreement and that the defendant had accepted the offer the emails the additional forms and the second peo did not negate the initial p 0 but memorialized it the prior acceptance and finalize the details of the offer I said the moral of story is to be careful what you're accepting because the UCC may consider terms not in the original form or that you might think we're just new terms and discussions the following case is bmac trucking and this is a case which frankly you might find it a little bit more of a normal result in this battle of forms and what it ultimately found was that when you have two different purchase orders going back and forth when you make a counteroffer it rejects the first one that's what happened in be met so I guess I wanted to make sure that you see the economy between two cases one where there's a great deal of of of conversation another when there's really very succinct back and forth negotiation of them no I don't like that we reject that and they produce another one and the offer making a new offer basically is a rejection of the previous offer that doesn't happen that didn't that you can imagine this day and age where you have a lot of conversation going back and forth by email how many times you ask your client quit putting things on email you're just making yourself a paper trail well there it was in the first case we have this paper trail of conversation that actually became part of the entire environment of the negotiation and ultimately part of the terms where is in the second it was a much more succinct conversation about the fourth I don't like that here's my counteroffer second one became the actual offer the first one which was rejected therefore we had very succinct and understood terms so those are the cases I've selected for your entertainment today I don't have any other questions regarding UCC update differed that to your jag or cookies and the banks freeze woman in a chef turned it into a vegetable bit somebody sent me a bank draft on nationally recognized bank I take it to my bank and then I tell them the board of us or a mountain along the road they're Pankratz with field in any area Norton you negotiate bank grabbed I purchases and then my bank calls me up says you know somebody forge that bank routing that you deposited we need to pinch them usually usually the person who who first accepted that it's going to get on the hook for the most part the banks who improv that the home bank on column the payor thing is they say is the one where the account is they're responsible for making making only payments that are properly payable if you got a force endorsement alter check that's not properly payable and as a result they they have an obligation strict liability to make good on the check and the customer gets reimbursed but these are these defenses that you have to assert it and they are those defense now if it's one that just happened last week and that customer says hey that was improperly improperly paycheck the bank on the hook the bank with the accounts on the hook now they may actually have rights to go upstream to have renegotiated it to them because they're our warranties from those who bring it to you so they might be able to go and say to the bank that actually sent it on downstream to them for classes you've also breached your warranty on the negotiable instrument and you get to go against them we're here is the no extreme because it's a scam yeah did you get to a point where somebody's got a good laser perimeters spending not a bank of america that's right you get to a point where you get to the bad guy and the bad guys you either can't find him or it doesn't able to pay and then that happens quite a bit I've had cases I mean I've had a lot of cases like that over the years I had a right occasion Texas players were no less than eleven banks were involved around the country on the negotiation I shoot them all unfortunately it was also during the time when things were going rather badly for banks and the principal bank then against who i thought i had a sure collection with em Bank Dallas I don't know if you remember in bank Dallas but they went FDIC on us the day I sent out the discovery and so I didn't get to collect from them but the good news was that the depository bank in that particular case and insurance and they they able to pay who it was a nice payday for the client oh yeah you basically ended up suing the entire backfield throw for everybody else you find the ball any other questions folks well thank you for the opportunity to present here today I'm really do enjoy talking about these kind of things i did not channel steve turner and so he and our friends but that's what s worth stopped and I think that I hope that you learn a few things and if you have a chance to read these cases I like I think that they'll be good resources for you in the coming month thank you very much [Applause] you
