Author Question: Securities do not include direct ownership in physical goods; they are an undivided interest in an ... (Read 97 times)

HCHenry · **on:** Jun 24, 2018

Securities do not include direct ownership in physical goods; they are an undivided interest in an asset.
a. True
b. False
Indicate whether the statement is true or false

Question 2

Rights of the Guarantor. Hallmark Cards, Inc, sued Edward Peevy, who had guaranteed an obligation owed to Hallmark by Garry Peevy. At the time of Edward's guaranty, Hallmark had in its possession property pledged as security by Garry. Before the suit was filed, Hallmark sold the pledged property without notifying Edward. Because the property sold did not cover the loan balance, Hallmark sued for the remainder, seeking a deficiency judgment. Edward contended that because Hallmark had sold the property pledged by Garry as security for the obligation without notifying him (Edward), Hallmark was not entitled to a deficiency judgment against him. Hallmark contended that Edward was not entitled to notice of the sale of the collateral and was not required to give consent. Which party will prevail in court? Discuss.

cegalasso · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

TRUE

Answer to Question 2

Rights of the guarantor
Edward Peevy prevailed in court. The trial court granted Peevy's motion for summary judgment, holding that notice to a guarantor of the sale of collateral was a necessary pre-requisite to seeking a deficiency judgment against the guarantor, and this ruling was upheld on appeal. The appellate court noted that state law requires a secured party to notify a debtor of the time after which any private sale or other intended disposition is to be made. Hallmark argued that Peevy was not a debtor. The court pointed out that other jurisdictions have heldvirtually unanimouslythat a guarantor is a debtor for purposes of the notice requirement. The court reasoned that simple fairness requires that the term debtor include one who is responsible for payment on default of a principal obligor.