Question

Due to the threat of C to his life if he does not pay his debt, both D and C went to E from whom D requested a pronmissory note in the amount of P10,000. Fearing that C would kill D, E acceded to the request. She affixed her signature on a piece of paper with the assurance of D that he will just fill it up later. D then filled up the blank paper, making a promissory note in the amount of P100,000 and indorsed the same to C who accepted it as payment of D's debt. Which of the following is correct?

A. E is liable to D for the whole amount of the note since she voluntarily issued the same
B. C is a holder in due course because D voluntarily indorsed a complete note to him
C. E is liable to C in the amount of P100,000 as an accomodated party
D. C is not a holder in due course

Answer 1

C is not a holder in due course because the promissory note was not completed according to the issuer's authorization, and the act of filling in an unauthorized amount makes C's acceptance of the note not in good faith.

Step-by-step explanation:

The correct answer is option D. C is not a holder in due course. According to the principles of negotiable instruments, for C to be a holder in due course, the promissory note must have been complete and regular on its face when C acquired it.

However, E only signed a blank paper, which D later filled in with an amount (P100,000) that was not authorized by E. Moreover, D's action of filling in an unauthorized amount could be considered fraudulent. The original intention was to issue a note for P10,000, and since C was aware of this fact when accepting the note as payment, C is not a holder in due course. This consequently affects the liabilities that would be enforced in this scenario.