Martin borrows $15, 000 from Tom, in the form of a check, and signs a promissory note, promising to pay Tom this amount plus 10 percent interest in one year.Tom indorses the note and negotiates it to Fronston.Fronston indorses the note and negotiates it to Liza.Liza presents the note to Martin for payment when the note is due.Martin refuses to pay the note.Who is secondarily liable to pay Liza?
A)Tom
B)Frontston
C)all liabilities lie with Martin
D)the bank that issued the check to Tom

Question

Quizplus · Accepted Answer

Frontston is secondarily liable for the promissory note as they were the last indorser before Liza. If Martin refuses to pay, Liza can then seek payment from Frontston, who can in turn seek payment from Tom. However, Tom is only secondarily liable if Frontston is unable to pay. The bank that issued the check to Tom is not liable for the promissory note as it is a separate transaction.

Martin Borrows $15, 000 from Tom, in the Form of a Check