Mr. and Mrs. Burton opened a joint bank account with Davidson State Bank in February of...

Mr. and Mrs. Burton opened a joint bank account with Davidson State Bank in February of 2013. The names on the account were listed as Benjie F. Burton and Debbie C. Burton. A short time after opening the account, the couple purchased a lawn equipment business in the nearby town of Plum Creek. From January of 2014 until October of 2016 the Burtons executed and delivered five separate promissory notes to the bank. In each note, they promised to pay the bank the amount of the note plus interest. For each of these notes the

bank prepared a UCC-1 form giving the bank a security interest in one or more the assets owned by the Burtons, whether consumer goods or an asset of the lawn equipment business. The Burtons signed each of these UCC-1 forms at the time of the loan. All of the loan agreements, notes, and the UCC-1 forms were signed in the names “Benjie F. Burton” and “Debbie C. Burton.” The bank filed each UCC-1 financing statement in the correct office (the Secretary of State for the Commonwealth of Virginia in Richmond, VA) for each of the security agreements. In each filing, the bank listed the debtors as “Benjie F. Burton” and “Debbie C. Burton,” and each was signed by the couple in those names. All five of the agreements were in effect at the time of the lawsuit.

In November of 2016 the Burtons were seeking additional financing from City Bank & Trust. City Bank & Trust agreed to extend them credit, prepared a promissory note, security agreement, and UCC-1, and had each signed by the Burtons. Mr. Burton signed these documents “Benjamin Burton,” and his wife signed as “Debbie C. Burton.” City Bank & Trust then properly filed the UCC-1 in the appropriate office.

In July of 2017 the Burtons defaulted on their loans from Davidson State Bank and from City Bank & Trust. Each bank claimed priority on the collateral. Davidson State Bank asserted that it was “first in time and first in right.” City Bank & Trust asserted that, while State Bank had indeed filed first, it filed incorrectly. According to City Bank & Trust, Mr. Burton’s legal name, as shown on his birth certificate and his Social Security card was Benjamin Burton. Davidson State Bank had filed a financing statement against a “Benjie F. Burton,” and no such person existed. Last State Bank countered that Mr. Burton’s driver’s license, and federal income tax returns were acquired and/or filed under the name “Benjie F. Burton,” making its filing sufficiently accurate and legally effective.

Required: How should this case be resolved? Which Bank should prevail against the Burtons? Be certain that you adequately explain and justify your answer.

Homework Answers

Answer #1

As the Bruton's have defaulted they will have to pay for it .The question here is that which bank is to be paid first,the confusion on the name is the other aspect which has to be considered on this.First and formost the identity of both the husband and wife should be checked, the two banks have given loan to a persob with two names,so first if should be made sure that which name is correct and Mr Burton should be also blonded legally to use two different names to take a loane from two different banks.According to Mr Burtons driving license and federal income tax returns his name is correct in the State banks record .State Bank get be recover their money first as they had granted the loane first and the City Bank and trust will have recover the money from Mrs Burton as it is a joint account after the State Bank has recovered their money, City Bank and trust can also file for the wrong representation of name.

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