Phyllrox Co.,a large manufacturer,purchased a forklift from Brown's Equipment Co.Phyllrox made a down payment in cash and signed a promissory note for $7,500.For $7,200 Brown's sold the note to Corporate Bank,who took it in good faith without notice of any problems with it.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, which means they took the promissory note in good faith, for value, and without notice of any defenses. The fact that the forklift broke down has no bearing on the validity of the promissory note, and therefore Phyllrox cannot assert it as a defense to making payments. Corporate Bank is entitled to the full amount owed on the promissory note.