Salma Arranged with ABC Bank for a Revolving Line of Credit

question 55

Multiple Choice

Salma arranged with ABC Bank for a revolving line of credit up to $50,000 for her antique shop. The bank required that she provide a promissory note promising payment of $50,000 to the bank or as much as may be outstanding in amounts owed to the bank payable on demand. The note allowed for partial early prepayment and for interest after default. A few months later, although Salma was not in default, the bank canceled the line of credit and demanded payment of all amounts due based on the promissory note. If the reasoning of the case in the text Reger Development, LLC v. National City Bank is followed, which of the following is the most likely result of the dispute between Salma and ABC Bank?

• A) Salma will prevail because she was current on payments, and the bank did not exercise good faith in calling the note.
• B) Salma will prevail because the reference to prepayment destroyed the note's negotiability.
• C) Salma will prevail because the reference to interest after default destroyed the note's negotiability.
• D) The bank will prevail because, although the note is not a negotiable instrument, the bank has an enforceable contract.
• E) The bank will win because it had the right to call for payment of the demand instrument.

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