978-1285770178 Lecture Note BL ComLaw 1e IM-Ch20 Part 3

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subject Authors Roger LeRoy Miller

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CHAPTER 20: CREDITORS’ RIGHTS AND REMEDIES 19
whole or in part.
2. How does an artisan’s lien work? Through an artisan’s lien, a creditor (a jeweler with whom a customer
leaves jewelry to be repaired, for instance) can recover payment for labor and materials furnished to repair personal
property. Normally, the creditor must have possession of the property and have agreed to provide services on a cash,
not credit, basis. The lien exists as long as the creditor has possession and terminates when possession is
voluntarily, permanently surrendered. The lien is lost if a third party obtains rights in the property while it is out of the
creditor’s possession. (To protect the lien and surrender possession at the same time, a creditor must record notice of
the lien under state lien law.) The creditor may foreclose on the property (after notice to the owner) and sell it to
satisfy the debt.
3. How does attachment work? The creditor files with the court an affidavit stating that the debtor is in default
amount of the debt plus interest and costs). If the debtor does not or cannot pay, a creditor goes back to court and
obtains a writ of execution. The writ, usually issued by the clerk of the court, directs the sheriff or other officer to seize
and sell any of the debtor’s nonexempt property that is within the court’s geographic jurisdiction (usually the county in
which the courthouse is located). Sale proceeds are used to pay the judgment and the costs of the sale. Any excess
is paid to the debtor.
states, a creditor must go to court for a separate order of garnishment for each pay period.
6. What are the differences between contracts of suretyship and guaranty contracts? Contracts of surety-
ship and guaranty contracts involve third parties’ promises to be responsible for principals’ obligations. Under a
contract of suretyship, the third partythe suretyis primarily liable. When a debt is due, the creditor can hold the
7. What types of property are exempt from attachment or levy of execution? Each state provides a home-
stead exemption, which permits a debtor to retain the family home, either in its entirety or up to a specified dollar
amount, free from the claims of unsecured creditors or trustees in bankruptcy. (Some states allow the exemption only
if the debtor has a family.) Personal property that is most often exempt (up to at least a specified dollar amount)
includes: (1) household furniture; (2) clothing and certain personal possessions (family pictures, a Bible); (3) a vehicle
page-pf2
20 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
difference through a deficiency judgment, which is obtained in a separate action. A deficiency judgment entitles the
creditor to recover this difference from a sale of a debtor’s other nonexempt property. Before a foreclosure sale, a
mortgagor can redeem the property by paying the debt, plus any interest and costs. (This right is known as the equity
of redemption. In some states, a mortgagor may redeem property within a certain timecalled a statutory period of
redemptionafter the sale.)
9. How might a notice of default and foreclosure actually benefit a debtor? A debtor benefits most from
having a debt forgiven and paying a debt is the most common method to accomplish this end. If a notice of default
and foreclosure prompts an otherwise tardy debtor into paying down a debt, the debtor benefits by preventing
damage to his or her credit ratings. Other debtors also benefit because creditors are encouraged to make more credit
might resemble those that already exist to regulate real estate and mortgages and other advertising at the federal
level. No, although some applicable federal regulation of marketing already exists, because the states should more
appropriately regulate the advertising of real property and mortgages and other aspects of such transactions that
occur within their borders.
tend to arise.
2. Ask students to find and read their state’s garnishment statutes to identify dollar exemptions and local
garnishment procedure, and to determine whether a creditor has to return to court for separate orders to garnish, for
example, an employee’s paychecks.
5. Have students research local cases concerning the mortgages, foreclosures, and laws discussed in this
chapter. In some communities, there is an abundance of such cases. Local newspapers and local courthouses are
potential sources. Specific topics or specific cases could be assigned to students individually, in small groups, or to
the class as a whole. Once they have looked at some of the cases, ask students under what common fact situations
page-pf3
whole or in part.
EXPLANATIONS OF SELECTED FOOTNOTES IN THE TEXT
VERNON’S TEXAS STATUTES AND CODES ANNOTATED
CONSTITUTION OF THE STATE OF TEXAS 1876
ARTICLE XVI. GENERAL PROVISIONS
§ 28. Garnishment of wages
Sec. 28. No current wages for personal service shall ever be subject to garnishment, except for the en-
forcement of court-ordered child support payments.
1991 Pocket Part Credit(s)
Amended Nov. 8, 1983.
HISTORICAL NOTES
1991 Pocket Part Historical Notes
Amendment adopted in 1983 was proposed by H.J.R. No. 1, Acts 1983, 68th Leg., p. 6693.
the payment of debts through garnishment. Under the Consumer Credit Protection Act, for example, a debtor can
retain a certain amount of income. The following is 15 U.S.C.A. Section 1673that is, Section 1673 of Title 15 of the
United States Code (which sets out that specific restriction) as it appears in United States Code Annotated.
UNITED STATES CODE ANNOTATED
TITLE 15. COMMERCE AND TRADE
CHAPTER 41CONSUMER CREDIT PROTECTION
SUBCHAPTER IIRESTRICTIONS ON GARNISHMENT
§ 1673. Restriction on garnishment
(a) Maximum allowable garnishment
Except as provided in subsection (b) of this section and in section 1675 of this title, the maximum part of the
aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not
exceed
(1) 25 per centum of his disposable earnings for that week, or
(2) the amount by which his disposable earnings for that week exceed thirty times the Federal minimum
hourly wage prescribed by section 206(a)(1) of Title 29 in effect at the time the earnings are payable,
page-pf4
22 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whichever is less. In the case of earnings for any pay period other than a week, the Secretary of Labor shall
by regulation prescribe a multiple of the Federal minimum hourly wage equivalent in effect to that set forth in
paragraph (2).
(b) Exceptions
(1) The restrictions of subsection (a) of this section do not apply in the case of
(A) any order for the support of any person issued by a court of competent jurisdiction or in accordance with
an administrative procedure, which is established by State law, which affords substantial due process, and
which is subject to judicial review.
(B) any order of any court of the United States having jurisdiction over cases under chapter 13 of Title 11.
(C) any debt due for any State or Federal tax.
(2) The maximum part of the aggregate disposable earnings of an individual for any workweek which is
subject to garnishment to enforce any order for the support of any person shall not exceed
(A) where such individual is supporting his spouse or dependent child (other than a spouse or child with
respect to whose support such order is used), 50 per centum of such individual’s disposable earnings for that
week; and
(B) where such individual is not supporting such a spouse or dependent child described in clause (A), 60 per
centum of such individual’s disposable earnings for that week;
except that, with respect to the disposable earnings of any individual for any workweek, the 50 per centum
specified in clause (A) shall be deemed to be 55 per centum and the 60 per centum specified in clause (B)
shall be deemed to be 65 per centum, if and to the extent that such earnings are subject to garnishment to
enforce a support order with respect to a period which is prior to the twelve-week period which ends with the
beginning of such workweek.
(c) Execution or enforcement of garnishment order or process prohibited
No court of the United States or any State, and no State (or officer or agency thereof), may make, execute, or
enforce any order or process in violation of this section.
(Pub. L. 90-321, Title III, § 303, May 29, 1968, 82 Stat. 163; Pub. L. 95-30, Title V, § 501(e)(1)-(3), May 23,
1977, 91 Stat. 161, 162; Pub. L. 95-598, Title III, § 312(a), Nov. 6, 1978, 92 Stat. 2676.)
HISTORICAL NOTES
HISTORICAL AND STATUTORY NOTES
References in Text. Chapter 13 of Title 11, referred to in subsec. (b)(1)(B), is § 1301 et seq. of Title 11,
Bankruptcy.
1978 Amendment. Subsec. (b)(1)(B). Pub.L. 95-598 substituted “court of the United States having jurisdiction
over cases under chapter 13 of Title 11” for “court of bankruptcy under chapter XIII of the Bankruptcy Act”.
1977 Amendment. Subsec. (b). Pub.L. 95-30, § 501(e)(1), (2), designated existing provisions as par. (1) and
existing pars. (1), (2), and (3) as subpars. (A), (B), and (C) thereof, substituted “for the support of any person
issued by a court of competent jurisdiction or in accordance with an administrative procedure, which is
page-pf5
whole or in part.
page-pf6
24 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
page-pf7
whole or in part.
ANSWERS TO QUESTIONS
 SPECIAL CASE ANALYSIS 
Case No. 20.2
McLean v. JPMorgan Chase Bank, N.A.
District Court of Appeal of Florida, 2012.
79 So.3d 170
(a) Issue: The dispute in this case focused on an attempt to enforce an unpaid note. Who argued that
the note should not be enforced, and on what ground? Robert McLean, the appellant in this case and the
party against whom enforcement of the note was sought, contended that the note should not be enforced on
the ground that JPMorgan Chase Bank, the appellee and the party attempting to enforce the note, did not
have standing.
Chase had filed a foreclosure action in a Florida state court against McLean. The complaint alleged that
Chase was entitled to enforce a mortgage and note on which McLean had defaulted. But the mortgage that
Chase showed to the court identified a different mortgagee and lender, and Chase claimed that the note had
been “lost, stolen, or destroyed.” Later, Chase produced a mortgage assignment that was dated three days
after the bank had initiated foreclosure. Eventually, Chase filed the original note but it was undated. Despite
the discrepancies, the court granted a summary judgment in Chase’s favor. McLean appealed.
(b) Rule of Law: What must a party prove at the time that a complaint is filed to be entitled to enforce
a note? In any foreclosure proceeding, the party seeking foreclosure must demonstrate that it has standing to
foreclose. And a party’s standing is determined at the time the complaint was filed.
There are several ways that the holder of a mortgage note might show standing to foreclose. If an
indorsement of the note shows that its holder is entitled to payment, the holder can establish standing by
showing that the indorsement occurred before the suit. For example, if the note reflects on its face that the
indorsement occurred before the filing of the complaint, this would establish standing. Or a holder might
provide correspondence or some other affidavit of ownership to prove its status as a holder of the note on the
date the suit was filed.
(c) Applying the Rule of Law: How did the court apply the rule of law to the circumstances in this
case? The court applied the rule of lawthat a party seeking foreclosure must have standing to foreclose
when it files its complaintto the circumstances in this case to reverse a lower court’s judgment in favor of
JPMorgan Chase Bank and remand the case. Chase had not shown it had standing at the time the complaint
was filed. To establish standing, on remand Chase would have to prove that it owned the note at the time of
the complaint or file a new complaint.
Here, Chase had filed a foreclosure action in a Florida state court against Robert McLean. The complaint
alleged that Chase was entitled to enforce a note on which McLean had defaulted. But the mortgage that
Chase showed to the court identified a different mortgagee and lender, and the mortgage assignment that
Chase eventually provided was dated three days after Chase had filed its complaint. The note that Chase
showed the court was undated.
(d) Conclusion: After applying the rule of law to the case, what did the court conclude? Who
benefited from this decision? After applying the rule of law, the court concluded that Chase would be
page-pf8
whole or in part.
entitled to summary judgment, if the bank could show that it was the holder of the note on the date the
complaint was filed. “By contrast, if the evidence shows that the note was endorsed to Chase after the lawsuit
was filed, then Chase had no standing at the time the complaint was filed, in which case the trial court should
dismiss the instant lawsuit and Chase must file a new complaint.”
Robert McLean, the appellant in this case and the party against whom enforcement of the note was
sought, benefited from this decision. At least temporarily, he avoided foreclosure. This allowed him more time
to obtain funds to pay the note or to negotiate more favorable terms with Chase (or whichever other party
might have been entitled to enforce the note). The delay might have been enough to stop foreclosure
proceedings altogether, subject to the decision of the party who could prove standing and thereby foreclose.

20 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
difference through a deficiency judgment, which is obtained in a separate action. A deficiency judgment entitles the
creditor to recover this difference from a sale of a debtor’s other nonexempt property. Before a foreclosure sale, a
mortgagor can redeem the property by paying the debt, plus any interest and costs. (This right is known as the equity
of redemption. In some states, a mortgagor may redeem property within a certain timecalled a statutory period of
redemptionafter the sale.)
9. How might a notice of default and foreclosure actually benefit a debtor? A debtor benefits most from
having a debt forgiven and paying a debt is the most common method to accomplish this end. If a notice of default
and foreclosure prompts an otherwise tardy debtor into paying down a debt, the debtor benefits by preventing
damage to his or her credit ratings. Other debtors also benefit because creditors are encouraged to make more credit
might resemble those that already exist to regulate real estate and mortgages and other advertising at the federal
level. No, although some applicable federal regulation of marketing already exists, because the states should more
appropriately regulate the advertising of real property and mortgages and other aspects of such transactions that
occur within their borders.
tend to arise.
2. Ask students to find and read their state’s garnishment statutes to identify dollar exemptions and local
garnishment procedure, and to determine whether a creditor has to return to court for separate orders to garnish, for
example, an employee’s paychecks.
5. Have students research local cases concerning the mortgages, foreclosures, and laws discussed in this
chapter. In some communities, there is an abundance of such cases. Local newspapers and local courthouses are
potential sources. Specific topics or specific cases could be assigned to students individually, in small groups, or to
the class as a whole. Once they have looked at some of the cases, ask students under what common fact situations
whole or in part.
EXPLANATIONS OF SELECTED FOOTNOTES IN THE TEXT
VERNON’S TEXAS STATUTES AND CODES ANNOTATED
CONSTITUTION OF THE STATE OF TEXAS 1876
ARTICLE XVI. GENERAL PROVISIONS
§ 28. Garnishment of wages
Sec. 28. No current wages for personal service shall ever be subject to garnishment, except for the en-
forcement of court-ordered child support payments.
1991 Pocket Part Credit(s)
Amended Nov. 8, 1983.
HISTORICAL NOTES
1991 Pocket Part Historical Notes
Amendment adopted in 1983 was proposed by H.J.R. No. 1, Acts 1983, 68th Leg., p. 6693.
the payment of debts through garnishment. Under the Consumer Credit Protection Act, for example, a debtor can
retain a certain amount of income. The following is 15 U.S.C.A. Section 1673that is, Section 1673 of Title 15 of the
United States Code (which sets out that specific restriction) as it appears in United States Code Annotated.
UNITED STATES CODE ANNOTATED
TITLE 15. COMMERCE AND TRADE
CHAPTER 41CONSUMER CREDIT PROTECTION
SUBCHAPTER IIRESTRICTIONS ON GARNISHMENT
§ 1673. Restriction on garnishment
(a) Maximum allowable garnishment
Except as provided in subsection (b) of this section and in section 1675 of this title, the maximum part of the
aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not
exceed
(1) 25 per centum of his disposable earnings for that week, or
(2) the amount by which his disposable earnings for that week exceed thirty times the Federal minimum
hourly wage prescribed by section 206(a)(1) of Title 29 in effect at the time the earnings are payable,
22 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whichever is less. In the case of earnings for any pay period other than a week, the Secretary of Labor shall
by regulation prescribe a multiple of the Federal minimum hourly wage equivalent in effect to that set forth in
paragraph (2).
(b) Exceptions
(1) The restrictions of subsection (a) of this section do not apply in the case of
(A) any order for the support of any person issued by a court of competent jurisdiction or in accordance with
an administrative procedure, which is established by State law, which affords substantial due process, and
which is subject to judicial review.
(B) any order of any court of the United States having jurisdiction over cases under chapter 13 of Title 11.
(C) any debt due for any State or Federal tax.
(2) The maximum part of the aggregate disposable earnings of an individual for any workweek which is
subject to garnishment to enforce any order for the support of any person shall not exceed
(A) where such individual is supporting his spouse or dependent child (other than a spouse or child with
respect to whose support such order is used), 50 per centum of such individual’s disposable earnings for that
week; and
(B) where such individual is not supporting such a spouse or dependent child described in clause (A), 60 per
centum of such individual’s disposable earnings for that week;
except that, with respect to the disposable earnings of any individual for any workweek, the 50 per centum
specified in clause (A) shall be deemed to be 55 per centum and the 60 per centum specified in clause (B)
shall be deemed to be 65 per centum, if and to the extent that such earnings are subject to garnishment to
enforce a support order with respect to a period which is prior to the twelve-week period which ends with the
beginning of such workweek.
(c) Execution or enforcement of garnishment order or process prohibited
No court of the United States or any State, and no State (or officer or agency thereof), may make, execute, or
enforce any order or process in violation of this section.
(Pub. L. 90-321, Title III, § 303, May 29, 1968, 82 Stat. 163; Pub. L. 95-30, Title V, § 501(e)(1)-(3), May 23,
1977, 91 Stat. 161, 162; Pub. L. 95-598, Title III, § 312(a), Nov. 6, 1978, 92 Stat. 2676.)
HISTORICAL NOTES
HISTORICAL AND STATUTORY NOTES
References in Text. Chapter 13 of Title 11, referred to in subsec. (b)(1)(B), is § 1301 et seq. of Title 11,
Bankruptcy.
1978 Amendment. Subsec. (b)(1)(B). Pub.L. 95-598 substituted “court of the United States having jurisdiction
over cases under chapter 13 of Title 11” for “court of bankruptcy under chapter XIII of the Bankruptcy Act”.
1977 Amendment. Subsec. (b). Pub.L. 95-30, § 501(e)(1), (2), designated existing provisions as par. (1) and
existing pars. (1), (2), and (3) as subpars. (A), (B), and (C) thereof, substituted “for the support of any person
issued by a court of competent jurisdiction or in accordance with an administrative procedure, which is
whole or in part.
24 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
whole or in part.
ANSWERS TO QUESTIONS
 SPECIAL CASE ANALYSIS 
Case No. 20.2
McLean v. JPMorgan Chase Bank, N.A.
District Court of Appeal of Florida, 2012.
79 So.3d 170
(a) Issue: The dispute in this case focused on an attempt to enforce an unpaid note. Who argued that
the note should not be enforced, and on what ground? Robert McLean, the appellant in this case and the
party against whom enforcement of the note was sought, contended that the note should not be enforced on
the ground that JPMorgan Chase Bank, the appellee and the party attempting to enforce the note, did not
have standing.
Chase had filed a foreclosure action in a Florida state court against McLean. The complaint alleged that
Chase was entitled to enforce a mortgage and note on which McLean had defaulted. But the mortgage that
Chase showed to the court identified a different mortgagee and lender, and Chase claimed that the note had
been “lost, stolen, or destroyed.” Later, Chase produced a mortgage assignment that was dated three days
after the bank had initiated foreclosure. Eventually, Chase filed the original note but it was undated. Despite
the discrepancies, the court granted a summary judgment in Chase’s favor. McLean appealed.
(b) Rule of Law: What must a party prove at the time that a complaint is filed to be entitled to enforce
a note? In any foreclosure proceeding, the party seeking foreclosure must demonstrate that it has standing to
foreclose. And a party’s standing is determined at the time the complaint was filed.
There are several ways that the holder of a mortgage note might show standing to foreclose. If an
indorsement of the note shows that its holder is entitled to payment, the holder can establish standing by
showing that the indorsement occurred before the suit. For example, if the note reflects on its face that the
indorsement occurred before the filing of the complaint, this would establish standing. Or a holder might
provide correspondence or some other affidavit of ownership to prove its status as a holder of the note on the
date the suit was filed.
(c) Applying the Rule of Law: How did the court apply the rule of law to the circumstances in this
case? The court applied the rule of lawthat a party seeking foreclosure must have standing to foreclose
when it files its complaintto the circumstances in this case to reverse a lower court’s judgment in favor of
JPMorgan Chase Bank and remand the case. Chase had not shown it had standing at the time the complaint
was filed. To establish standing, on remand Chase would have to prove that it owned the note at the time of
the complaint or file a new complaint.
Here, Chase had filed a foreclosure action in a Florida state court against Robert McLean. The complaint
alleged that Chase was entitled to enforce a note on which McLean had defaulted. But the mortgage that
Chase showed to the court identified a different mortgagee and lender, and the mortgage assignment that
Chase eventually provided was dated three days after Chase had filed its complaint. The note that Chase
showed the court was undated.
(d) Conclusion: After applying the rule of law to the case, what did the court conclude? Who
benefited from this decision? After applying the rule of law, the court concluded that Chase would be
whole or in part.
entitled to summary judgment, if the bank could show that it was the holder of the note on the date the
complaint was filed. “By contrast, if the evidence shows that the note was endorsed to Chase after the lawsuit
was filed, then Chase had no standing at the time the complaint was filed, in which case the trial court should
dismiss the instant lawsuit and Chase must file a new complaint.”
Robert McLean, the appellant in this case and the party against whom enforcement of the note was
sought, benefited from this decision. At least temporarily, he avoided foreclosure. This allowed him more time
to obtain funds to pay the note or to negotiate more favorable terms with Chase (or whichever other party
might have been entitled to enforce the note). The delay might have been enough to stop foreclosure
proceedings altogether, subject to the decision of the party who could prove standing and thereby foreclose.


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