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14. Filmore had a negotiable instrument in its posses. sion which it had received in payment of certain equip. ment it had sold to Marker Merchandising. The instru ment was originally payable to the order of Charles Danforth or bearer. It was indorsed specially by Dan-forth to Marker which in turn negotiated it to Filmore via a blank indorsement. The instrument in question, along with some cash and other negotiable instruments, was stolen from Filmore on October 1, 1981. Which of the following is correct?

a. A holder in due course will prevail against

Filmore's claim to the instrument.

. Filmore's signature was necessary in order to further negotiate the instrument.

c. The theft constitutes a common law conversion which prevents anyone from ab. taining a better title to the instrument than the owner.

d. Once an instrument is bearer paper it is always bearer paper.

15. Johnson lost a check that he had received for professional services rendered. The instrument on its face was payable to Johnson's order. He had indorsed it on the back by signing his name and printing *for deposit only" above his name. Assuming the check is found by Alcatraz, a dishonest person who attempts to cash it, which of the following is correct?

a. Any transferee of the instrument must pay or apply any value given by him for the instrument consistent with the indorse-ment.

b. The indorsement is a blank indorsement and a holder in due course who cashed it for Alcatraz would prevail.

C. The indorsement prevents further transfer or negotiation by anyone.

d. If Alcatraz simply signs his name beneath Johnson's indorsement, he can convert it into bearer paper and a holder in due course would take free of the restriction.

16. A holder in due course will take an instrument free from which of the following defenses?

a. Discharge in insolvency proceedings.

B. Infancy of the maker or drawer.

C. Claims of ownership on the part of other persons.

D. The forged signature of the maker or drawer.

17. industrial Factors, Inc.. discounted a 54 000 promissory note, payable in two years, for $3,000. It paid $1,000 initially and promised to pay the balance ($2,000) within 30 days. Industrial paid the balance within the 30 days, but before doing so learned that the note had been obtained originally by fraudulent misrepresentation in connection with the sale of land which induced the maker to issue the note. For what amount will Industrial qualify as a holder in due course?

A. None because the 25% discount is pre sumptive or prima facie evidence that Industrial is not a holder in due course.

B. $1,000.

C. 3,000

D. $4,000.

18.

Who among the following can personally qualify as a holder in due course?

A payee.

b. A reacquirer who was not initially a holder in due course,

c. A holder to whom the instrument was negotiated as a gift.

d A holder who had notice of a defect but who took from a prior holder in due course

19. Your client, Globe, Inc., has in its possession an undated instrument which is payable 30 days after date. It is believed that the instrument was issued on or about August 10, 1980, by Dixie Manufacturing.

Inc., to Harding Enterprises in payment of goods pur-chased. On August 13, 1980, it was negotiated to Desert Products, Inc., and thereafter to Globe on the 15th. Globe took for value, in good faith and without notice of any defense. It has been learned that the goods shipped by Harding to Dixie are defective.

Which of the following is correct?

a. Since the time of payment is indefinite, the instrument is non-negotiable and Globe can not qualify as a holder in due course.

b. By issuing an undated instrument payable.

30 days after date, Dixie was reserving the right to avoid liability on it until it filled in ar authorized the filling in of the date.

c. since the defense invilves a rightful rejection of the goods delivered it is valid against globe

D. globe can validly fill in the data and will quality as holder in dur course

20. Barber has in his possession a negotiable instrument which he purchased in good faith and for value.

The drawer of the instrument stopped payment on it and has asserted that Barber does not qualify as a holder in due course since the instrument is overdue. In determining whether the instrument is overdue, which of the following is incorrect?

A. A reasonable time for a check drawn and payable in the United States is presumed to be 30 days after issue.

B. A reasonable time for a check drawn and payable in the United States is presumed to be 20 days after the last negotiation.

C. All demand instruments, other than checks. are not overdue until a reasonable time after their issue has elapsed.

d. The instrument will be deemed to be overdue if a demand for payment had been made and Barber knew this.

21. Ajax, Inc., sold a refrigerator to Broadway Bill's Restaurant and accepted Broadway's negotiable promissory note for $600 as payment. The note was payable to Ajax's order one year after the date of issue.

Thirty days after receiving the note, Alax indorsed the note with a blank indorsement and sold it to National Bank for $550. National credited Ajax's checking account with $550, which brought Ajax's balance to

5725. Ajax drew checks for a total of $675 which National honored. National then learned that the refrigerator had not been delivered by Alax. The note is now due and unpaid. When National brings suit. Broadway pleads lack of consideration on the note. Which of the following is a valid statement with respect to the above facts?

a. The discount on the note is so great as to

'impugn National's taking in good faith.

B. In ascertaining the extent, to which value had been given by National, the FIFO rule will apply to checks or notes deposited and the proceeds withdrawn.

C. Broadway has no liability on the note since it never received the refrigerator.

d. Broadway has only secohdary liability on the note in question.

22. Marlin ordered merchandise frok Plant to be delivered the following day and gave Plant a check

payable to its order drawn on Marlin's account in First Bank. It was agreed that the check would not be transferred unless delivery was received and ac-cepted. The goods were not delivered and Marlin notified Plant that he exercised his right to rescind. Plant, nevertheless, negotiated the check for full value to Rose who took it in good faith and without notice of any defense. Rose then negotiated it for full value to Quirk who knew of Plant's breach of the agreement.

Marin promptly stopped payment on the check and refuses to pay it. Under these circumstances, which of the following statemerts is correct?

A. Marlin would have a valid defense in a sult by Rose for the amount of the check.

B. Marlin would have a valid defense in a suit by Quirk for the amount of the check.

C. Despite the fact that Quick can-not-per sonally qualify as a holder in due course. he can assert Rose's standing as such.

D. A stop payment order will not prevent a holder in due course from collecting from the bank.

23. Cindy Lake is a holder in due course of a negotiable promissory note for $1,000. Which of the following defenses of the maker may be validly asserted against her?

A. a total failure of consideration on the part of the party to whom it was issued.

B. A wrongful filling in of the amount on the instrument by the party to whom it was issued.

C. Nonperformance of a condition precedent to its transfer by the party to whom it was issued

D. Infancy If the maker to the extent that it is a defense to a simple contract.

24. Harrison obtained from Bristow his $11,500

check drawn on the Union National Bank in payment for bogus uranium stock. He immediately negotiated it by a blank indorsement to Dunlop in return for $1,000 in cash and her check for $10,400. Dunlop quallfied as a holder in due course. She deposited the check in her checking account in the Oceanside Bank. Upon discovering that the stock was bogus, Bristow-notified Union National to stop payment on his check, which it did. The check was returned to Oceanside Bank, which in turn debited Dunlop's account and returned the check to her. Which of the following statements is correct?

A. Dunlop can collect from Union National Bank since Bristow's stop payment order was invalid in that the defense was only a personal defense.

B. oceanside debiting of dunlop account was improper since the qualified as a holder in due course

C. dunlop can recover 11,500 from bristow despite the stop order since she qualified as a holder in due course

D. dunlop will be entitled to collect only 1,000

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