Holder in Due Course Questions

Holder in Due Course Questions

BUL II

Allison David, Esq.

1. Daniel has agreed to purchase a rare coin from Helen’s coin shop. The purchase price is to be determined by an independent appraisal. Payment is to be by Daniel’s check. Daniel is going out of town and informs Helen that his agent will bring her a check during his absence. Daniel draws up a check, payable to the order of Helen Ray, and leaves the amount blank. Max, without authority, fills in the amount for $10,000 and presents it to Helen who now has the appraisal. The appraisal price is $7,000. Max told (lied to) Helen that Daniel wanted to be sure the check covered the appraisal, and that he (Max) was authorized to receive the coin plus the cash balance. Helen gives max the coin plus $3000. When Daniel discovers Max’s fraud, Daniel stops payment on the check and offers $7000. Helen claims she is a HDC and is entitled to the face value of the check. Discuss these contentions.

1. In exchange for some home repairs, Janice Kurtz issued a 90-day negotiable promissory note in the amount of $500, payable to the order of Dennis Nolan. Two weeks later, Kurtz noticed that the repairs were defective. Nolan knows that he does not do a very good job, so he is anxious to sell the note. Nolan sells the note to Butkus in a bar for 4150. He tells Butkus that the reason he’s selling the note so cheap is because Butkus might have a tough time collecting from Kurtz who is unhappy with the repairs. Nevertheless, Butkus thinks it’s a good “risk” to buy the $500 note for only $150, so he makes the deal. When the note becomes due, Kurtz refuses to pay Butkus. Butkus claims that he is a HDC and can collect on the note. Is Butkus correct? What rights to collection does he have? Could he collect something?

3. Mike is intoxicated at a bar when he agrees to purchase a car from Cindy for $2000. Although he is drunk, he writes a check for the purchase price, and knows exactly what he is doing. The next day he thinks it over and decides that he doesn’t have enough money to pay for the car and puts a stop payment on the check. That same day, Cindy deposits the check in her bank, PNB. Because Cindy is a valued customer, PNB gives Cindy immediate cash for the check, and does not put a hold on the check. When PNB attempted to collect the funds from Mike’s Bank, it learned that there was a stop payment order. PNB now intends to sue Mike for the $2000. Assume PNB is a HDC. Mike claims he does not have to pay PNB because he was drunk at the time the check was written, and because Cindy and he were in a bar at the time of the deal. Also, Mike thinks PNB was pretty stupid to give Cindy the $2000 in cash, and claims the bank should just debit Cindy’s account. Is Mike correct?