John Haley hired Mary Black as a bookkeeper at Florida Dental Center, Inc. Haley fired Black when he learned that she embezzled more than $200,000 and did not pay over $150,000 in state and federal taxes owed by the business. Haley said that if Black did not repay the embezzled funds, he would notify law enforcement. Black started working as a bookkeeper for Senior Daycare, a business owned by her father. Without proper authorization, Black wrote a check to Florida Dental for $175,000 out of Senior Daycares account and deposited the check directly into Florida Dentals checking account. Black told Haley that the funds were a loan from her family so she could repay Florida Dental. Haley used the funds to pay the back taxes owed. Two years later, Blacks father discovered her theft and sued both Haley and Florida Dental for conversion because Black did not have authority to take the funds.

Evaluate Florida Dentals status as a holder in due course (HDC) of the funds Mary repaid.

Since Haley knew that Black previously embezzled funds from Florida Dental when she was an employee, should Haley have been suspicious about the source of the funds that Black used to repay the debt? Could this knowledge impact the courts decision?

Provide support for your answers.