ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 29
CREDITORS’ RIGHTS AND REMEDIES
29-1A. Rights of the guarantor
The trial court ruled in favor of the defendants on the ground, in part, that the changes Bear
Park and the Brunsons made in the amounts of the payments constituted a material change in
the terms of the note. Kirkland appealed. The court of appeals affirmed the decision of the trial
court, holding that the guarantors were discharged by the material alteration in the terms of
note. The appellate court explained that “[a]ny material alteration of the guarantor’s obligation
under the guaranty contract will discharge the guarantor, unless the guarantor has consented to
29-2A. Writ of attachment
The court invalidated all of the attachments on the grounds that they were not in compliance
with the state prejudgment attachment statute. The statute required application to the court for
B-2 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 29
29-3A. Guaranty
The court granted the McClintocks’ motion for summary judgment, and Jamieson-Chippewa
appealed to a state intermediate appellate court, which affirmed the decision of the lower court.
The appellate court held that a guaranty “must expressly indicate the intention of the parties that
the guaranty continue in order to hold the guarantor liable” for a lease renewal term. The court
29-4A. Garnishment
The federal district court denied Trail Creek’s motion to dismiss the complaint. Federal law
provides that “[n]o employer may discharge any employee by reason of the fact that his
earnings have been subjected to garnishment for any one indebtedness” [15 U.S.C. Section
1674(a)]. The law also defines garnishment as meaning “any legal or equitable procedure
through which the earnings of any individual are required to be withheld for payment of any
29-5A. Garnishment
The conveyance from John to his mother appears to have been fraudulent, but fraud is very
difficult to prove. There are, however, a number of elements that tend to prove fraud, and some
of those elements are present in this case. First, the transaction occurred between close
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 29 B-3
29-6A. Guaranty
The court issued a summary judgment in favor of the Wards in the amount of $46,252.98. Both
parties appealed (the Wards thought the damages amount was too low) to a state intermediate
29-7A. Right of subrogation
No. American Thermex had no legal right of subrogation. The right of subrogation is extended
29-8A. Guaranty
When a third person promises to pay a debt owed by another in the event the debtor does not
pay, a suretyship or guaranty relationship is created. With a guaranty arrangement, the
guarantor is secondarily liable. The guarantor can be required to pay the obligation after the
debtor defaults. A guaranty contract between the guarantor and the creditor must be in writing to
B-4 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 29
29–9A. Protection for debtors
The Mas were entitled to $100,000. Certain property of a debtor is exempt under state law from
creditors’ actions. In most states, certain types of property are exempt from writs of execution.
Each state permits a debtor to retain the family home, either in its entirety or up to a specified
29-10A. A QUESTION OF ETHICS
1. To obtain a foreclosure order, a creditor has to prove that it is the owner of the note
and mortgage and that the debtor has defaulted on the note. The most effective defenses to
such an action are payment, discharge, release, satisfaction, or the invalidity of the alleged
obligation.
2. The court acknowledged that Ryder had breached the settlement and stated that the
bank could have sought relief based on this breach. The court interpreted the bank’s motion to
reopen the case, however, as the bank’s seeking to enforce both some of Ryder’s original
obligations under the note and mortgage and some of his obligations under the settlement. The
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 29 B-5