ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 25
TRANSFERABILITY AND
HOLDER IN DUE COURSE
25-1A. Requirements for HDC status
(Chapter 25—Pages 487–490)
Bierhaus was not a holder in due course on this instrument. The court reasoned that, although “signing
25-2A. Requirements for HDC status
(Chapter 25—Page 487)
The court held that the bank was a holder in due course (HDC) and thus the supplier was not entitled to
recover the payments. Under the UCC, an HDC takes an instrument free from all claims to it on the part
of any person. An HDC is a holder who takes an instrument for value, in good faith, and without notice
of a claim against it by any person. The central issue in determining whether the bank was an HDC was
B-108 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 25
25–3. Indorsements
(Chapter 25—Pages 485–486)
On appeal, the state appellate court held that the bank was not negligent in not requiring Fidelity and
JHL Associates to indorse. The check had been indorsed to “Fidelity/JHL Associates.” Mumma
disregarded “the plain meaning of the slash symbol, which two federal courts and courts in two other
states have unanimously held to mean ‘or’ in the same context presented here.” The court pointed out
that the decision in each case rested on dictionaries’ definitions of the term “virgule,” all of which
25-4. Requirements for HDC status
(Chapter 25—Pages 489–493)
Yes. The Supreme Court of New York, Appellate Division, held that the casino was entitled to payment.
The court framed the issue as follows: Did the casino have “knowledge of some fact which would
prevent a commercially honest individual from taking up the instruments”? The court pointed out that
25–5. Requirements for HDC status
(Chapter 25—Page 487)
No. The court did not agree with Trail Leasing’s argument. The bank gave value for the checks and was
a holder in due course. UCC 3–303 states that a holder “takes the instrument for value to the extent
25-6A. Transfer of instruments
(Chapter 25—Pages 479–480)
Although the court dismissed Credit Recoveries’ suit and denied its subsequent motions to set aside the
judgment and grant a new trial, Credit Recoveries appealed to a state intermediate appellate court,
which reversed the judgment of the lower court and remanded the case for further proceedings. The
appellate court noted that under UCC 3–109(a), “A promise or order is payable to bearer if it: (1) states
that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession
of the promise or order is entitled to payment; (2) does not state a payee; or (3) states that it is payable
25-7A. Requirements for HDC status
(Chapter 25—Page 493)
The Pennsylvania state court in which Triffin filed the collection suit issued judgments against Dillabough
and Lynn, but entered a verdict in favor of American Express. On Triffin’s appeal, the state intermediate
appellate court reversed the decision of the lower court, holding that the money orders were negotiable
instruments and that Triffin had the status of a holder in due course. American Express appealed to the
Supreme Court of Pennsylvania, which affirmed the decision of the intermediate appellate court. The
state supreme court applied the requirements of negotiability to the money orders and concluded that
but the result would likely be the same under the revised Article 3.)
25-8A. Indorsements
B-110 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 25
(Chapter 25—Pages 479–480)
The court ruled in York’s favor, holding in part that the drafts were negotiable. Universal appealed. The
25-9A. Requirements for HDC status
(Chapter 25—Pages 490–492)
The court granted a summary judgment in favor of General Credit, holding that the plaintiff was a holder
in due course and entitled to payment of the check. General Credit was a good faith purchaser that
25-10A. A QUESTION OF ETHICS
1. According to the court, significant practical considerations supported its conclusion. When a
payee (the state in this case) has never possessed a check, it is more likely that any forged indorsement
2. No, it doesn’t matter. As the court pointed out, “[i]t is a general rule that putting a check in
the hands of the drawer’s own agent for purpose of delivery to the payee does not constitute delivery to