A QUESTION OF ETHICS Kirkman was involved in the horse business. He formed a business arrangement ...

A QUESTION OF ETHICS
1. In determining whether the bank had been negligent because it had not contacted Parker before disbursing the loan proceeds to Kirkman, it is important to realize that the note was complete when presented to the bank, and there were no obvious alterations on it. Also, it is significant that the bank loan officer had known Kirkman for a number of years and knew that he was in the horse business. In other words, there was no evidence before the bank that would put it on notice that there was anything wrong with, or unusual about, the note. In view of these circumstances, you could easily conclude that the bank should not be held negligent simply because it did not contact Parker about the loan transaction before it disbursed the proceeds. Even if the bank were deemed negligent in failing to contact Parker, it is doubtful that Parker would be relieved of liability for this reason, given his own negligence in signing a blank promissory note. Generally, the UCC has little sympathy for those who sign incomplete instruments, and those who do so are normally held liable for whatever negative conse-quences they might suffer from such negligence.
2. As mentioned before in this text, an underlying goal of the UCCand of the law generallyis to protect innocent parties from harm. Generally, if one of two innocent parties to a transaction must be forced to bear a loss, the UCC, in the interests of fairness, will hold that the party in the best position to prevent the loss should bear the loss. If a drawer or maker signs an incomplete instrument and the instrument is later completed in a way not contemplated or authorized by the drawer or maker, and then the instrument is transferred to a holder in due course (HDC), one of two innocent parties must bear the loss. (See UCC 3-407.) In such a case, the drawer or maker will normally have to bear the loss because he or she could have prevented the loss by exercising prudence and reasonable care in refusing to sign a blank instrument.
3. If you decided that Parker should be liable for the loss, you could justify your conclusion by referring to the UCC's policy discussed abovethat the party in the best position to prevent the loss should bear the loss. Obviously, Parker, by signing an incomplete instrument, opened himself to liability under the UCC. On the other hand, if you decided that the bank should be liable for the loss, you might argue that Roundtree, as an agent of the bank, should have taken more care and exercised more oversight over Kirkman's activities. If this had been the case, the damages incurred by Parker could have been avoided. Furthermore, one could maintain that Roundtree was a bit overzealous in his attempt to gain business for the bank in the form of loan agreements. In other words, Roundtree might have been more concerned with self-gain (success in negotiating loans, greater stature in the eyes of the bank, and thus possible future promotions) than with ordinary prudence in the conduct of his job. Although under the UCC these arguments would carry less weight than Parker's negligence, they could be used to justify your conclusion that the bank was more at fault here than Parker.