Business Law 12th Edition by Roger LeRoy Miller ,Frank Cross

Exercise 10

The Brown family owns several companies, including the J. H. Stevedoring Company and Penn Warehousing and Distribution, Inc. Many aspects of the companies' operations and management are intertwined. Dennis Bishop worked for J. H. and Penn for more than ten years until by 2011, he had become the financial controller at J. H., where he was responsible for approving invoices for payment and reconciling the corporate checkbook. In December 2012, Bishop began stealing from Penn and J. H. by writing checks on the corporate accounts and using the funds for his own benefit (committing the crime of embezzlement). Several members of the Brown family signed the checks for Bishop without hesitation because he was a longtime, trusted employee. Over the next two years, Bishop embezzled $1,209,436, of which $670,632 was used to buy horses from the Fasig-Tipton Company and Fasig-Tipton Midlantic, Inc., with Penn and J. H. checks made payable to those fi rms. When Bishop's fraud was revealed, J. H. and Penn fi led a suit in a federal district court against the Fasig-Tipton firms (the defendants) to recover the amounts of the checks made payable to them. Using the information presented in the chapter, answer the following questions.
Do the defendants in this situation (the two Fasig-Tipton firms) meet the requirements of an HDC? Why or why not?
DEBATE THIS: We should eliminate the status of holder in due course for those who possess negotiable instruments.