Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

Exercise 35

Eldon's Super Fresh Stores, Inc., is a corporation engaged in the retail grocery business. William Drexler was the attorney for and the corporate secretary of Eldon's and was also the personal attorney of Eldon Prinzing, the corporation's president and sole shareholder. From January 2013 through January 2014, Drexler maintained an active stock trading account in his name with Merrill Lynch. Eldon's had no such account. On August 12, 2013, Drexler purchased one hundred shares of Clark Oil Refining Company stock through his Merrill Lynch stockbroker. He paid for the stock with a check drawn by Eldon's, made payable to Merrill Lynch, and signed by Prinzing. On August 15, 2013, Merrill Lynch accepted the check as payment for Drexler's stock purchase. There was no communication between Eldon's and Merrill Lynch until November 2014, fifteen months after the issuance of the check. At that time, Eldon's asked Merrill Lynch about the whereabouts of the stock certificate and asserted a claim to its ownership. Does Merrill Lynch qualify as a holder in due course? Why?