ASSIGNMENT
1. Peter Diamond owed Carter $500,000 secured by a first mortgage on Diamond’s plant and land. Stephens was a surety on this obligation in the amount of $250,000. After Diamond defaulted on the debt, Carter demanded and received payment of $250,000 from Stephens. Carter then foreclosed upon the mortgage and sold the property for $375,000. What rights, if any, does Stephens have in the proceeds from the sale of the property?
2. Paula Daniels purchased an automobile from Carey on credit. At the time of the sale, Scott agreed to be a surety for Paula, who is sixteen years old. The automobile’s odometer stated fifty-two thousand miles, but Carey had turned it back from seventy-two thousand miles. Paula refuses to make any payments due on the car. Carey proceeds against Paula and Scott. What defenses, if any, are available to (a) Paula and (b) Scott?
3. Stafford Surety Co. agreed to act as the conditional guarantor of collection on a debt owed by Preston Decker to Cole. Stafford was paid a premium by Preston to serve as surety. Preston defaults on the obligation. What are Cole’s rights against Stafford Surety Co.?
4. Campbell loaned Perry Dixon $7,000, which was secured by a possessory security interest in stock owned by Perry. The stock had a market value of $4,000. In addition, Campbell insisted that Perry obtain a surety.For a premium, Sutton Surety Co. agreed to act as a surety for the full amount of the loan. Prior to the due date of the loan, Perry convinced Campbell to return the stock because its value had increased and he wished to sell it to realize the gain. Campbell released the stock, and Perry subsequently defaulted. Is Sutton released from his liability?
5. Pamela Darden owed Clark $5,000 on an unsecured loan. On May 1, Pamela approached Clark for an additional loan of $3,000. Clark agreed to make the loan only if Pamela could obtain a surety. On May 5, Simpson agreed to be a surety on the $3,000 loan, which was granted that day. Both loans were due on October 1. On June 15, Pamela sent $1,000 to Clark but did not provide any instructions.
a. What are Clark’s rights?
b. What are Simpson’s rights?
