Cengage Advantage Books: Law for Business 18th Edition by John Ashcroft ,Janet Ashcroft

Exercise 20

George Weast borrowed $140,000 from State National Bank of Maryland (SNB), and his wife, Ruth, cosigned for him. This debt later was in default, so George indorsed and delivered some notes made by Francis and Josephine Arnold and Randall Co. to the order of SNB. Payments were made on these notes for several years before default. Ruth and George got divorced. When Ruth paid off the amount owed on their debt, SNB indorsed the notes of the Arnolds and Randall to Ruth. She sued them for payment on the notes. They alleged that she was subject to a defense regarding the transaction that had given rise to the notes. Ruth claimed to be a holder through a holder in due course, so the defense would not be valid against her. Was Ruth a holder through a holder in due course when the notes had been indorsed to her after default? [Weast v. Arnold, 474 A.2d 904 (Md.)]