Tilda purchases an automobile from Ronston. At the time of sale, Ronston tells Tilda that the car has had only one previous owner and has been driven only 25,000 miles. Tilda, relying on these statements, purchases the car. She pays 10 percent down and signs a promissory note to pay the remainder of the purchase price, with interest, in fifteen equal monthly installments. Ronston transfers the note to Patty. Tilda then discovers that the car has actually had three previous owners and has been driven 250,000 miles. Which of the following is the legal outcome if Patty is a holder in due course (HDC)?
A) Tilda must pay Patty; find recourse with Ronston.
B) Patty must pay Tilda; find recourse with Ronston.
C) Patty pays no one; indorsement is considered void.
D) Tilda can rescind the note; refuse to pay Patty.

Question

Quizplus · Accepted Answer

If Patty is a holder in due course, she has the right to collect on the promissory note, despite Tilda's claims of fraud. Tilda can seek recourse from Ronston for his misrepresentations, but she must still pay the remaining balance to Patty according to the terms of the note.

Tilda Purchases an Automobile from Ronston