Who can claim the status as Holder in Due Course and status of parties?Does Simon have to pay off the note?

Question

Simon issues a ninety-day negotiable note payable to the order of Borges for him to purchase a car. Borges has already forged a relationship with a car dealer, and begins negotiating. Simon holds the amount of note blank, pending a determination of the amount of money he will need to purchase the car. Simon authorizes any amount that doesnt exceed $3,000. Without authority Borges fills in the note in the amount of $5,000, later sells the note toAbbott for $4,850. Borges doesnt buy the car andleaves the state, $5,000 richer. Abbott has no knowledge that the note was incomplete when issued or that he had no authority to complete the note in the amount of $5,000. Nevertheless,Abbott now holds the note and sells it to Sturrock for $4,700. Abbott and Sturrock negotiated a price at the Wooden Nickel, where they had a couple of beers. Sturrock, now the holder of the note, sells it to First National Bank at a discount of $4,500. First National Bank presents the note to Simon for payment.

Answer 1

simon is the originator of the transaction so he is totally responsible ti issue payment of the $5000. to the First National Bank. bettyk

Answer 2

I am not a Lawyer but my OPINION would be that Simon has to pay up for the full $5000. Giving a blank note is along the lines of giving someone a blank check...yes the verbal amount authorized is Greater but the origional person that the note was presented to did not know that and honored the note. Simon will have recourse against Borges. His error in not qualifying the note leaves him defensless from collection by First National Bank.

Answer 3

I never took Negotiable Instruments as a class in law school.

But from the limited studying I did for the bar, it seems like a Holder in Due Course follows all the same rules as a Bona Fide Purchaser did under property law.

Try doing the analysis that way, and see if it makes sense.