Daniel, Joel, and Claire Guerrette are the adult children of Elden Guerrette, who died on September 24, 1995. Before his death, Elden purchased a life insurance policy from Sun Life Assurance Company of Canada through a Sun Life agent, Steven Hall, and named his children as his beneficiaries. Upon his death, Sun Life issued three checks, each in the amount of $40,759.35, to each of Elden’s children. The checks were drawn on Sun Life’s account at Chase Manhattan Bank in Syracuse, New York. The checks were given to Hall for delivery to the Guerrettes. Hall and an associate, Paul Richard, then fraudulently induced the Guerrettes to indorse the checks in blank and to transfer them to Hall and Richard, purportedly to be invested in HER, Inc., a corporation formed by Hall and Richard. Hall took the checks from the Guerrettes and turned them over to Richard, who deposited them in his account at the Credit Union on October 26, 1995. The Credit Union immediately made the funds available to Richard.
The Guerrettes quickly regretted having negotiated their checks to Hall and Richard, and they contacted Sun Life the next day to request that Sun Life stop payment on the checks. Sun Life immediately ordered Chase Manhattan to stop payment on the checks. When the checks were ultimately presented to Chase Manhattan for payment, Chase refused to pay the checks, and they were returned to the Credit Union. The Credit Union received notice that the checks had been dishonored on November 3, 1995, the sixth business day following their deposit. By the time the Credit Union received notice, however, Richard had withdrawn from his account all of the funds represented by the three checks. The Credit Union was able to recover almost $80,000 from Richard, but there remained an unpaid balance of $42,366.56.
The Credit Union filed suit against Sun Life, and all of the parties became engulfed in litigation. The Credit Union indicated it was a holder in due course and was entitled to payment on the instrument. Sun Life alleged fraud. Is the Credit Union a holder in due course? Can the parties allege the fraud defense against it? [Maine Family Federal Credit Union v Sun Life Assur. Co. of Canada, 727 A2d 335 (Me)]