Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie. The price of the shares is constantly fluctuating. Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase. Eppie agrees. Fund Investments buys the stock when the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services, which takes the check in good faith and without notice of Fund Investments's act. Hasty later learns that Fund Investments was not authorized to fill in the check for $1,000 over the price. Is Hasty an HDC? If so, for how much?
What will be an ideal response?
Hasty is an HDC to the extent of $5,000, the amount of the preexisting debt that Fund Investments owed Hasty, and for which Hasty accepted the check as payment. To qualify as an HDC, a holder must give value for a negotiable instrument. Taking an instrument as payment for an antecedent claim is giving value. Hasty accepted the $5,000 check from Fund Investments as payment for the debt. This is value. Hasty accepted this check before receiving notice of Eppie's defense against payment of it, so Hasty is an HDC for this amount. Even if Hasty had known that the check was incomplete when it was given to Fund Investments, Hasty would have qualified as an HDC. Knowledge that an incomplete instrument has been completed is not notice of a defense against payment. Eppie is liable to Hasty for the amount of the check as completed.
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