Cecilia made a check out to Gideon for $15.Gideon fraudulently changed the check to read $150,and cashed it at Corner Bank.Is Cecilia discharged from liability on the check?
A)Yes,Cecilia owes nothing on the check because alteration of a check is a real defense and real defenses are good even against holders in due course.
B)No,Cecilia pays $150 because of the impostor rule.
C)No,Cecilia pays $150 because she is not an indorser or accommodation party.
D)Yes,Cecilia owes nothing unless Corner Bank is a holder in due course,in which case she owes the original $15.

Question

Quizplus · Accepted Answer

Cecilia is not liable for the fraudulent alteration on the check unless Corner Bank is a holder in due course. As per the Uniform Commercial Code (UCC), real defenses like alteration, duress, and fraud are effective even against a holder in due course, who would otherwise have a superior right to enforce the instrument. However, if Corner Bank can prove that it took the check in good faith, for value, and without notice of the fraud, it may qualify as a holder in due course and be entitled to enforce the check for the full amount of $150.

Cecilia Made a Check Out to Gideon for $15