The evening news was full of stories about how Levine sold fraudulent negotiable instruments to investors around the country. Two days later, Brighty, who did not hear the news reports, bought some of the fraudulent negotiable instruments from a swindled investor. Can Brighty claim the position of a holder in due course considering the publicity of the scam?

Question

A) Brighty is presumed to have knowledge of the scam and therefore did not purchase the instruments in good faith.
B) Although Brighty passes the subjective test of good faith, he fails the objective test and therefore cannot claim to have purchased the instruments in good faith.
C) Brighty can claim to have purchased the instruments in good faith if he subjectively believed the instruments were valid and if objectively his purchase of the instruments was commercially reasonable.
D) Brightly cannot be a holder in due course because once an action of fraud is discovered, no additional claims against that party can be sought.

Answer 1

C