What are the facts and issues of the case?
3. Busy Beev. Joe Student et al (Secured Transactions) After graduation as a business student at SFU and taking a year off to travel, Joe Student decided that he wanted to go into business for himself. He was attracted to the franchise business and chose one that requires very little initial outlay. This involved the opening of a hot dog stand to be set up in front of a major sports retailing outlet recently opened in Burnaby. The franchising company, Ace, arranged for the site and supplied the cart itself, with a cooler, stove and storage area. It also supp led jumbo and regular wieners, buns, and condiments as well as soft drinks for a fee only slightly higher than would be available through normal wholesale outlets. Although Joe has no choice but to get his supplies from Ace, he considered this slightly higher cost was well compensated for by the convenience of getting them all from the same source of a consistent and known quality, and because of the other services supplied by Ace. Ace insisted on supplying the food inventory as a matter of quality control and to ensure product consistency between all of their franchised carts at various locations around the lower mainland. The franchise fee to be paid by Joe to start the business was $20,000 and for this in addition to the cart and an initial supply of buns and wieners, Ace would supply a limited amount of advertising and other services such as bookkeeping and tax preparation. Ace also was entitled to a set percentage of Joe's sales to pay for this service. Joe's initial problem was to raise the $20,000. He had no money himself, having just finished his bushiness program and travels and in fact owed about $15,000 in government student loans. He did however have a relatively new sports car worth in his estimation about $13,000. He also had an older cabin cruiser given to him by his grandparents, which he estimated to be of about $ 10,000 value. His mother had recently passed away and his father was a successful teacher in the Vancouver area. Although his father was encouraging in the business venture, he was not in a position to lend Joe any money. He did suggest, however, that Joe use a sound bus ness approach to the problem and arrange financing through a company recommended by a friend, the Busy Bee Trust Company. Joe took this advice and made an appointment to see June, a recently hired loans officer working for Busy Bee. When Joe showed up for his appointment she recognized him as one of her fellow students in the business program at SFU. She remembered him as an adequate student if not particularly a bright light. Joe did think to prepare a business plan and after some pleasantries presented it to June with a request for the loan. June could see that the business pan was quite optimistic, but recognized that there was a clear potential for success and leaned towards making the loan if she could be satisfied that the risk to Busy Bee was minimized. It was clear that the assets of the hot dog stand itself including the cart was of little value and that the $20,000 being paid by Joe was for the franchising services provided by Ace. What steps should June take in these circumstances to make the loan and also minimize the risk of loss to Busy Bee? Part 2 June made the loan to Joe, taking a chattel mortgage against the car and boat and getting Joe's father to guaranty the $20,000 loan. Unfortunately, when the chattel mortgage against the boat 7|page was registered (using the Finance statement under the PPSA) two numbers were inadvertently reversed and the security was registered under the wrong serial number. Joe continued in the business for some six months and by that time it became clear that the business was notas profitable as he hoped it would be. He needed more money to operate and wanted to sell the boat to generate more working capital. He approached his friend June at Busy Bee to get permission to do so and after reviewing the file she determined that the guaranty and the remaining chattel mortgage against the car satisfied Busy Bee's minimum requirements for security, and gave permission for the boat to be sold and the funds to be used by Joe in his business. About four months later, with the business still not doing as well as he hoped, Joe got bored and decided to go back to school and get a masters degree. He had also heard a rumor that the health departments in the various municipalities were planning a coordinated crack down on these road side food vendors, Without informing Busy Bee he sold the car to Mary for $10,000, abandoned the cart infront of the sports complex and caught a plane for Ireland where he has been admitted to pursue his further education. Mary quickly resold the car to her friend George for $10,500 who used it for the 3 summer months and resold it to Sam for $9,500. By this time June at Busy Bee found Joe in arrears, checked and upon some investigation found that he had abandoned his business and left the country. When they took steps to repossess the car, they discovered their error, corrected it and reregistered the Loan. This re-registration took place while the car was in the hands of George. After the correction and changes to the registration were made, George resold the car to Sam for $9,500. Neither George nor Sam knew of the claim against the car by Busy Bee at the time of the sale, but had Sam checked with the registry, the corrected information would have made it clear that busy Bee claimed a charge or lien against the car. Busy Bee repossessed the car from Sam and demanded payment of the remainder of the $20,000 loan from Joe's father on the guaranty. Discuss the legal position of the various parties.What are the legal issues that arise in this problem? Why are they important? What are the applicable legal rules? Is there a clear answer as to the operation of the law? If not, what are the potential legal outcomes and which is most likely? What is the objective or purpose behind the rules being applied? Will the purpose or objective behind the rule being applied likely affect the outcome of a court action? What effect can these outcomes have on the business involved? What is the best course of action for the business? (Why ?) Discuss the potential impact of the various possible courses of action that can be taken on the business. What should have been done (if anything) to avoid this problem in the first place? (risk analysis) What steps (if any) should be taken to avoid similar problems in the future? (risk avoidance)a. The facts and issues of the case b. Relation of this case to any of the topics studied in the class C. Laws enforced - applicable laws to address the situation d. Outcome of the case and the rationale followed by the judge for the decision along with whether we agree or disagree with the outcome e. References
