In a promissory note chain, X steals a note made by M. The note is indorsed to A, then to B, making B the present holder in due course. Which of the following may be held liable to B?

In a promissory note chain, X steals a note made by M. The note is indorsed to A, then to B, making B the present holder in due course. Which of the following may be held liable to B?

• A. A only
• B. X only
• C. X and A only
• D. M, X and A

Answer: (D)

In a promissory note, liability runs from the maker to the holder, and anyone who signs or endorses the instrument along the transfer chain is also liable if the note is not paid. A holder in due course can collect from the maker and from each prior endorser. Here, the maker is M, and the note has passed through endorsers to reach the present holder in due course, B. Since X stole the note and the chain shows an endorsement to A and then to B, X and A are part of the transfer chain and thus share liability to B if the note is dishonored. M remains primarily liable as the maker. Therefore, B may collect from M, X, and A.

In a promissory note, liability runs from the maker to the holder, and anyone who signs or endorses the instrument along the transfer chain is also liable if the note is not paid. A holder in due course can collect from the maker and from each prior endorser.

Here, the maker is M, and the note has passed through endorsers to reach the present holder in due course, B. Since X stole the note and the chain shows an endorsement to A and then to B, X and A are part of the transfer chain and thus share liability to B if the note is dishonored. M remains primarily liable as the maker. Therefore, B may collect from M, X, and A.