Smith v Firstbank Corp. Legal and Regulatory Issues - Case Study Example

Smith v Firstbank Corp. Issue The dispute involves the stock of Sparton Corporation held by the plaintiffs (Bradley Smith and John J. Smith Revocable Living Trust). The plaintiffs borrowed funds from the defendant (Firstbank Corporation) using their stock of Sparton Corporation and other collateral as security (Clarkson, Roger and Frank 592). The plaintiffs defaulted and after several considerations, the defendant disposed of the shares through two separate sales. The price per share in the two sales was lower than the closing price on the New York Stock Exchange for Sparton Corporation stock.

The plaintiffs held that the private bulk sale of the shares by the defendants was not reasonable. They also reasoned that if the sale was commercially reasonable, then, the way the sale was carried was not reasonable (Clarkson, Roger and Frank 592). They also argued that the defendant never sought multiple offers or even the best price for the stock. Rules(s) The provision for the disposition of collateral in a commercially reasonable manner is to provide protection to the owner of the property under disposition.

It is meant to ensure minimization of losses in the disposition. As a factor, price alone is not enough to prove reasonableness. Other factors such as the circumstances that surround other such sales and the effects of the use of other methods of sale would also affect commercial reasonableness of such a sale (Clarkson, Roger and Frank 592). Application The court considered several factors; Circumstances surrounding previous similar sale of shares necessitated the defendant’s choice The defendant sought multiple offers as evidenced by the e-mail to Oberon Securities The defendant sought the best price as indicated by the different in stock prices between the two sales (Clarkson, Roger and Frank 593).

Conclusion The plaintiffs’ appeal against the summary judgment could not hold as the court determined that the defendant carried out the disposition in a commercially reasonable manner. Works Cited Clarkson, Kenneth W., Roger L. Miller, Frank B. Cross Business Law: Text and Cases 13 ed. Boston: Cengage Learning, 2014. Print.