Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

تمرين 22

FACTS Miracle Faith World Outreach, Inc., borrowed nearly two million dollars to buy buildings and land in Monroe, Connecticut. The church signed a note payable to Silicon Valley Bank in Santa Clara, California. In the seventh year of the note's ten-year term-with more than $1.6 million owing on the principal and almost $60,000 owing on unpaid interest-Miracle Faith defaulted on the note.
Silicon Valley filed an action in a Connecticut state court to foreclose. Eugene Wong, an associate at the bank, provided the court with only a copy of the note because, as he explained, he was unable to locate the original, despite efforts to find it at several of the bank's offices and at a third-party storage facility. On appeal from a judgment in the bank's favor, Miracle Faith argued that "the [lower] court abused its discretion by determining that the plaintiff was the owner and holder of the note" when it could produce only a copy of the note, and not the original.
ISSUE Despite having lost the original note, could Silicon Valley enforce its right to collect on the debt?
DECISION Yes. A state intermediate appellate court concluded that the lower court did not abuse its discretion in admitting a copy of the note and affirmed the judgment.
REASON A note is not a debt-it is only evidence of a debt. The loss of the original copy of a note does not affect the rights of the owner. The general rule is that a party must hold an instrument to enforce its payment. But under UCC 3-309(a), a party who does not possess an instrument can enforce it if he or she was entitled to enforce it when its possession was lost, its loss was not the result of a transfer or a seizure, and the instrument was destroyed, cannot be found, or is in the "wrongful possession of an unknown person" from whom it cannot be obtained.
Here, Silicon Valley showed that the note was lost and that the copy it produced was authentic. The bank established that it had entered into a transaction with Miracle Faith that included the note. Wong explained how the bank filed and stored its documents. He checked "all the places where the note could possibly be" but was unable to locate it. The copy of the note produced at the trial had been kept in the plaintiff's credit file. The copy was not "in any way inaccurate," nor did Miracle Faith claim that it was.
FOR CRITICAL ANALYSIS-Legal Environment Consideration Wong testified that he had looked for the note at a third-party storage facility. If the note had been found there, would it mean that the note had been "transferred" to the facility, making the storage company the holder of the instrument? Explain your answer.