Phyllrox Co., a large manufacturer, purchased a forklift from Brown's Equipment Co.Phyllrox made a $14,500 down payment and signed a promissory note for $3,500.Brown's sold the note to Corporate Bank and received $3,400.After Phyllrox used the forklift for two weeks, it broke down and could not be repaired.Phyllrox refuses to make any more payments to Corporate Bank.In this case:

Question

Quizplus · Accepted Answer

Corporate Bank is a holder in due course because it purchased the promissory note in good faith, for value, and without notice of any defects. As a holder in due course, it is protected from certain defenses that Phyllrox might assert against Brown's Equipment Co., such as the failure of the forklift.