instructions FFP Operating Partners, LP. (FFP Operating) operates a number of co
ID: 355570 • Letter: I
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instructions FFP Operating Partners, LP. (FFP Operating) operates a number of convenience stores and gas stations. FFP Operating executed 31 promissory notes in favor of Franchise Mortgage Acceptance Company (FMAC). In connection with the notes, FFP Marketing Company, Inc. (FFP Marketing), executed guaranties of payment in favor of FMAC for all 31 notes. Loan and security agreements were also executed in connection with all 31 transactions. The promissory notes incorporated by reference the loan, security, and guaranty agreements, which included waivers, consents, and acknowledgments. Long Lane Master Trust IV (LLMT) became a successor in interest to FMAC with respect to the promissory notes, guaranties, and associated loan documents FFP Operating failed to make payments on the notes to LLMT LLMT gave notice to FFP Operating of the default accelerated the obligations under the promissory notes, and demanded payment. The notes went unpaid The outstanding principal of the notes was $13,212,199, with unpaid interest of $1,488.899. LLMT filed suit against FFP Operating and FFP Marketing. LLMT filed a motion for summary judgment on its claim of default under the 31 promissory notes and guaranties for the amount due. FFP Operating declared bankruptcy and was dismissed from this case. The trial court entered summary judgment in favor of LLMT against FFP Marketing. FFP Marketing appealed Why does LLMT want the notes to be found to be negotiable instruments? Are the 31 promissory notes negotiable instruments that can be enforced against FFP Marketing? FFP Marketing Company, Inc. v. Long Lane Master Trust V, 169 S.W 3d 402, 2005 Tex. App. Lexis 5277 (Court of Appeals of Texas, 2005) 4 Accepted file types doc, docx, pdf Close AssignmentExplanation / Answer
Why does LLMT want the notes to be found to be negotiable instruments?
Answer 1. Because LLMT became a successor in interest to FMAC, they wanted the maximum benefit out of the notes, which they wanted to utilize to their benefit.
2. Are the 31 promissory notes negotiable instruments that can be enforced against FFP Marketing?
Answer 2. No. The thirty-one promissory notes are not negotiable instruments and cannot be enforced against FFP Marketing Company, Inc. (FFP). To be subject to the Uniform Commercial Code (UCC) governance, a promissory note must be a negotiable instrument. A promissory note is a negotiable instrument subject to the UCC if it is a written unconditional promise to pay a sum certain in money, upon demand or at a definite time, and is payable to orderor to bearer.
In the case before us, the notes held by Long Lane Master Trust IV (LLMT) broadly define the maker’s liability to include obligations found outside the four corners of the notes. This defeats the sum certain requirement because one cannot determine from the face of each note the extent of the maker’s liability. In addition, the notes fail the requirement for an unconditional promise because each note specifically “incorporates by reference” the terms of other documents,requiring one to examine those documents to determine if they place conditions on payment. The court of appeals held that the 31 promissory notes were not negotiable instruments and therefore the provisions of the UCC regarding negotiable instruments did not apply
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