What are Frederick’s rights, if any, against Anderson, Bylinski, Conrad, and D’Aveni on the note?

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What are Frederick’s rights, if any, against Anderson, Bylinski, Conrad, and D’Aveni on the note?

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On July 1, Anderson sold D’Aveni, a jeweler, a necklace containing imitation gems, which Anderson fraudulently represented to be diamonds. In payment for the necklace, D’Aveni executed and delivered to Anderson her promissory note for $25,000 dated July 1 and payable on December 1 to Anderson’s order with interest at 6 percent per annum. The note was thereafter successively indorsed in blank and delivered by Anderson to Bylinski; by Bylinski to Conrad; and by Conrad to Shearson, who became a holder in due course on August 10. On November 1, D’Aveni discovered Anderson’s fraud and immediately notified Anderson, Bylinski, Conrad, and Shearson that she would not pay the note when it became due. Bylinski, a friend of Shearson, requested that Shearson release him from liability on the note, and Shearson, as a favor to Bylinski and for no other consideration, struck out Bylinski’s indorsement. On November 15, Shearson, who was solvent and had no creditors, indorsed the note to the order of Frederick, his father, and delivered it to Frederick as a gift. At the same time, Shearson told Frederick of D’Aveni’s statement that D’Aveni would not pay the note when it became due. Frederick presented the note to D’Aveni for payment on December 1, but D’Aveni refused to pay. Thereafter, Frederick gave due notice of dishonor to Anderson, Bylinski, and Conrad. What are Frederick’s rights, if any, against Anderson, Bylinski, Conrad, and D’Aveni on the note?

Explanation & AnswerSolution by a verified expert

Explanation

Upon the transfer of the instrument from Individual S to Individual F, Individual F became the holder in due course and secured the right to recover the amount of the instrument from the maker and the endorsers of the instrument. Individual F can recover the amount of the instrument from Individual A, who is the drawee, or from Individual D, who is the drawer, or from Individual C, who is the endorser. Individual F has no right to recover the amount from Individual B as the name of Individual B has been struck off from the instrument by Individual S.

Verified Answer

Individual F became the holder in due course of the instrument, which was originally written by Individual D. As a result, Individual F can recover the payment against the instrument either from Individual A, Individual C, or Individual D but not from Individual B.

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