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1. The following are the conditions to constitute a holder in due course, C) To constitute a notice of defect, holder must have actual knowledge.
except:
a. Only A and B are incorrect.
a. He took the instrument in good faith and for value. b. Only A and C are correct.
b. He has knowledge of infirmity in the instrument. c. All are correct.
c. He took the instrument complete and regular in its face. d. All are incorrect.
d. He became the holder of the instrument before it was overdue.

Answer: b. He has knowledge of infirmity in the instrument. The NIL in Sec. 5. Jeff issues a promissory note payable to the order of Ancheta. Ancheta
52 par. 5 provides that at the time of negotiation, the holder in due course must indorses in blank to Ryan. Paul stole the promissory note from Ryan and
not have notice of infirmity or defect in the title of the person negotiating it. delivered the note to Mansano, a holder in due course. Mansano
delivered to Joseph, who was informed by Ryan that said note was
stolen.
2. A obtained the note of M through simple fraud and negotiates it to Z, Z
to Y, Y to X, and X to E, the present holder. Which is correct? a. Joseph can collect from Jeff.
b. Joseph cannot collect from Jeff.
a. E is presumed a holder in due course. c. Joseph should ran after Paul for payment.
b. E is a mere holder for value only. d. Both B and C are collect.
c. E must prove that he is actually a holder in due course.
d. All are correct. Answer: a. Joseph can collect from Jeff. Joseph delivered his title through a
holder in due course and was not a part a party to any fraud or illegality
Answer: a. E is presumed a holder in due course. Every holder is prima facie affecting the instrument. Hence, Joseph is subrogated to the rights of a
presumed a holder in due course (sec. 59, NIL) holder in due course. Jeff cannot raise the personal defense of complete and
undelivered.

3. The following are the rights of an ordinary holder, except:

6. Dan, a holder in due course, came to Nick, the maker, for collection of
a. He may sue on the instrument on his own name. payment. In order for Nick to escape liability, which defense can he
b. He may receive payment in due course in effect discharges the interpose against Dan.
instrument.
c. He may enforce payment for the full amount thereof against all parties a. Failure of consideration
liable thereon. b. Want of delivery but complete instrument
d. He holds the instrument subject to the same defenses as if it were non- c. Fraud in essecontractus
negotiable. d. Spoliation

Answer: c. He may enforce payment for the full amount thereof against all Answer: C. Fraud in essecontractus. This is a real defense which can stand
parties liable thereon. An ordinary holder cannot enforce payment against a against a holder in due course.
party who has a defense.

7. Joey upon hearing that his best friend is in need of money issued a check
4. A) Notice of defect or infirmity to an agent is deemed a notice to the payable to his best friend Romel. Romel, for consideration, indorsed it
principal. to Dondy, an ordinary holder. The following are all correct, except:
B) Notice to a partner is a notice to the partnership.