Reference no: EM131660258

Question: Pledge. On April 14, 1992, David and Myrna Grossman borrowed $10,000 from Brookfield Bank in Brookfield, Connecticut, and signed a note to repay the principal with interest. As collateral, the Grossmans gave the bank possession of stock certificates representing 123 shares in General Electric Co. The note was nonnegotiable and thus was not subject to Article 3 of the Uniform Commercial Code. On May 8, the bank closed its doors. The Grossmans did not make any payments on the note and refused to permit the sale of the stock to apply against the debt. The Grossmans' note and collateral were assigned to Premier Capital, Inc., which filed a suit in a Connecticut state court against them, seeking to collect the principal and interest due. The Grossmans responded, in part, that they were entitled to credit for the value of the stock that secured the note. By the time of the trial, the stock certificates had been lost. Should a creditor have a duty to preserve collateral that is transferred into the creditor's possession as security for a loan? How should the court rule, and why? [Premier Capital, Inc. v. Grossman, 68 Conn. App. 51, 789 A.2d 565 (2002)]