ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 26
TRANSFERABILITY AND HOLDER IN DUE COURSE
26-1. Indorsements
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
26-2. Requirements for HDC status
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
B-2 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 26
26-3. Requirements for HDC status
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 that the agreed consideration has been performed or that he acquires a security
26-4A. Transfer of instruments
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
26-5A. Requirements for HDC status
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
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 26 B-3
26-6A. Indorsements
The court ruled in York’s favor, holding in part that the drafts were negotiable. Universal
appealed. The U.S. Court of Appeals for the Third Circuit reversed and remanded the case.
26-7A. Requirements for HDC status
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 “took the instrument for value and claims to have all the rights and defenses of a
26-8A. Alternative or joint payees
The court granted a summary judgment in favor of Provident. Pelican appealed to the Maryland
Court of Appeals, the state’s highest court, which affirmed the lower court’s judgment. Pelican
asserted that the listing of multiple payees in a stacked format on a check, without any terms or
B-4 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 26
26–9A. Holder in due course
Neither Triffin nor A-1 could claim holder in due course status and therefore had no right to have
the check cashed. Merriwether never signed the check. Even though this was apparently just an
oversight, the printing of his name on the check by an A-1 employee was not a proper signature,
26-10A. 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 resulted from the drawer’s negligence. This issue could not be readily
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 the payee; this is so because the drawer has control of the agent and the