The Supreme Court in CA 1886/97 gave an affirmative answer to the question. Case: Mordechai signed a check and delivered it to Haman without filling in the payee’s name. Haman wrote Esther’s name on the check and delivered it to her in exchange for goods he received from her. Esther presented the check for payment, but it was dishonored because Mordechai had canceled it. Esther filed a claim against Mordechai, who argued that Haman had defrauded him and therefore he was not obligated to honor the check. Does Esther have a defense based on the status of holder in due course? Analysis: The Bills of Exchange Ordinance provides that a condition for holding in due course is legal remoteness between the owner of the check and the holder in due course. According to this condition, a payee would ostensibly not qualify for the status of holder in due course. The court determined that remoteness or proximity is not determined by the form of the instrument, but rather by the legal relationship between the parties. Mordechai and Esther will be considered remote parties to the instrument if their legal relationship as parties to the instrument does not arise from a direct legal connection between them, but rather from a legal connection with others—in this case, Haman (the villain?). In the present case, there is no legal connection whatsoever between Mordechai and Esther. The connection exists between Mordechai and Haman, and an additional connection between Haman and Esther. Therefore, legally, Mordechai and Esther can be remote parties, and Esther can qualify for the status of holder in due course.
It is important to emphasize that a condition for Esther to obtain the status of holder in due course is the fact that the instrument was delivered to her by Haman when her name was already written on it. Had Haman delivered the document in question to Esther without her name, it would not have been an instrument at all—but rather a document. This state of affairs would have denied Esther her status as a holder in due course. See in this regard CA 2010/05 Shachaf v. Feldman, where the holder of the instrument was denied the status of holder in due course because he himself completed his name as payee on the instrument.
