home / study / business / operations management / operationsmanagement questions and answers / Mr. And Mrs. Burton Opened AJoint Bank Account With Davidson State Bank In February Of 2013....

Your question has been answered

Let us know if you got a helpful answer. Rate thisanswer

Question: Mr. and Mrs. Burton opened a joint bankaccount with Davidson State Bank in February of 2013. The...

Mr. and Mrs. Burtonopened a joint bank account with Davidson State Bank in February of2013. The names on the account were listed as Benjie F. Burton andDebbie C. Burton. A short time after opening the account, thecouple purchased a lawn equipment business in the nearby town ofPlum Creek. From January of 2014 until October of 2016 the Burtonsexecuted and delivered five separate promissory notes to the bank.In each note, they promised to pay the bank the amount of the noteplus interest. For each of these notes the

bank prepared a UCC-1form giving the bank a security interest in one or more the assetsowned by the Burtons, whether consumer goods or an asset of thelawn equipment business. The Burtons signed each of these UCC-1forms 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 statementin the correct office (the Secretary of State for the Commonwealthof 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 thosenames. All five of the agreements were in effect at the time of thelawsuit.

In November of 2016the Burtons were seeking additional financing from City Bank &Trust. City Bank & Trust agreed to extend them credit, prepareda promissory note, security agreement, and UCC-1, and had eachsigned by the Burtons. Mr. Burton signed these documents “BenjaminBurton,” 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 theBurtons defaulted on their loans from Davidson State Bank and fromCity Bank & Trust. Each bank claimed priority on thecollateral. Davidson State Bank asserted that it was “first in timeand first in right.” City Bank & Trust asserted that, whileState Bank had indeed filed first, it filed incorrectly. Accordingto City Bank & Trust, Mr. Burton’s legal name, as shown on hisbirth 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 Bankcountered that Mr. Burton’s driver’s license, and federal incometax returns were acquired and/or filed under the name “Benjie F.Burton,” making its filing sufficiently accurate and legallyeffective.

Required: How shouldthis case be resolved? Which Bank should prevail against theBurtons? Be certain that you adequately explain and justify youranswer.