Reference no: EM133247127

Scenario 1 - Liability on Negotiable Instruments

Porter Cable hired a bookkeeper, Gerald Smith, and gave him general authority to issue company checks drawn on First Bank so Smith could pay employees' wages and other company bills. Smith decided to cheat his employers out of $9,500 by issuing a check payable to Timkin Bearings, one of the suppliers of bearings. Smith does not intend for Timkin to receive any of the money, nor is Timkin entitled to the payment. Smith endorses the check in Timkin's name and deposits the check in an account that he opened in Sunny Bank in the name "Timkin Bearing Co.   Sunny Bank accepts the check and collects payment from the drawee bank, First Bank.   First Bank charges Porter Cable's account $9,500.  Smith transfers $9,500 out of the Timkin account and closes it. Porter Cable discovers the fraud and demands that their account be re-credited.

• Evaluate the arguments for Porter Cable and the banks.
• Determine which party should win and support your answer.
• Provide arguments for each party.  Determine which party will win.  Provide support for the arguments and the final answer with cases or scholarly articles from the South University Online Library.

Scenario 2 - Negotiable Instruments

Ginny DeWitt borrowed $30,000 from SunTrust Bank to pay for her first year of college and signed a promissory note that required payments to start six months after graduation or the student fails to enroll in at least one-half of the full time load.   Ginny dropped out of college to pursue her passion of opening a gift shop.   When Ginny failed to pay the debt, SunTrust transferred the note to First Bank in New York.  New York Bank obtained a  court order allowing it to garnish Ginny's wages and her federal income tax refund.  Ginny filed a lawsuit seeing to avoid the payment, claiming the debt was not valid because she did not sign any documentation promising to pay First Bank. She also argued that the note lacked consideration.

1. Explain the holder or holder in due course status of SunTrust when the bank took the note from Ginny and then First Bank when it took the note from SunTrust.
2. Address GInny's arguments concerning the validity of the debt.
3. Determine the outcome of the case and provide support for your answer.