On January 10,2011,Jonathan writes a check,payable to Josh in the amount of $500.00,drawn on Jonathan's account with MBNA bank.Josh,on the back of the check,writes,"Pay to the order of Brandi" and leaves the check on his night stand.Brandi comes to visit while Josh isn't home (she has a key)sees the check and takes it believing that it was indorsed to her a repayment of a debt.Brandi,then signs her name to the back of the check and hands it to Lori as a birthday present.If Lori sells the check to Faye,who knows nothing about what has previously occurred,:
A) Brandi would have a personal/limited defense against Faye.
B) Faye would be a holder in due course.
C) Brandi could buy it from Faye and become a holder in due course based on the re-acquirer rule.
D) Josh would have a fraud in the factum defense against Faye.
E) Faye would have no rights to the instrument because it was stolen.

Question

Quizplus · Accepted Answer

Faye would be a holder in due course because she acquired the check for value, in good faith, without notice of any defects or claims to the instrument. Brandi's prior endorsement would not be considered a personal/limited defense against Faye, as holders in due course take the instrument free from most defenses. Josh's potential fraud in the factum defense would also not be valid against Faye, as it would only apply if Faye had reason to believe that Josh did not intend to execute the instrument. Finally, the fact that the check was initially taken without Josh's consent does not affect Faye's rights as a holder in due course.

On January 10,2011,Jonathan Writes a Check,payable to Josh in the Amount