Final answer:
The question revolves around the legal status of a negotiable instrument that may have been involved in fraudulent activities and the protections provided to a holder in due course. Sanford, as an HDC, is shielded from previous claims, but Doris's rights could be different and may require legal counsel. The student’s query is a legal matter, specifically concerning the laws governing negotiable instruments and their holders.
Step-by-step explanation:
The student's question pertains to the legal status and protections afforded to a holder in due course (HDC) of a negotiable instrument that may have been involved in a fraudulent or illegal transaction. According to the principles of justice in acquisition and transfer, a person is entitled to a holding if it is acquired justly from someone also entitled to it. In the case of Sanford, who is an HDC, the legal protections would likely shield him from claims against the instrument that arose before he acquired it. However, since Doris is not mentioned as an HDC, she may not be afforded the same protections and should seek legal advice regarding her rights and potential remedies related to this suspect negotiable instrument.
As an example, when a bank, such as Singleton Bank, issues a loan, it records this transaction as an asset on its balance sheet. In our provided context of Singleton Bank's loan to Hank's Auto Supply, the bank wouldn't let Hank leave with $9 million in cash but would issue a cashier's check instead. This transaction increases the deposits and reserves of Hank's bank, First National, which is then required to keep a portion (10%) as required reserves and is permitted to loan out the remaining funds.