## Facts

- In 1981, Michael L. Doyle borrowed $54,000 from Trinity Savings & Loan Association to buy a home, executing an adjustable-rate promissory note and mortgage.
- The note stated an initial interest rate of 11.375%; Trinity later altered the note to 15.875% and forged Doyle’s initials next to the change.
- Trinity sold Doyle’s note and mortgage to the Federal National Mortgage Association (FNMA) as part of a loan package, representing the loans were valid and enforceable.
- Doyle’s note showed visible alteration (white-out and rewritten interest rate) and borrower initials beside the altered term.
- FNMA did not investigate the alteration before purchase, treating borrower-initialed corrections as common and not inherently suspicious in the mortgage market.
- Doyle sued Trinity for breach of contract and fraud; he later added FNMA and sought cancellation of the note and mortgage as to FNMA.
- A jury awarded Doyle actual and punitive damages against Trinity, and the district court entered judgment cancelling Doyle’s obligation to FNMA.
- After intervening Oklahoma authority recognized adjustable-rate notes could be negotiable instruments, the case was remanded for an evidentiary hearing on whether FNMA took the note with notice of the forged alteration.
- On remand, the district court found FNMA was a holder in due course without notice and could enforce the note according to its original terms; Doyle appealed.

## Issues

1. Whether FNMA took Doyle’s negotiable note for value, in good faith, and without notice of the unauthorized alteration and forged initials, thereby qualifying as a holder in due course under Oklahoma’s UCC.
2. Whether the district court clearly erred in finding that the visible alteration and initials did not give FNMA notice requiring further inquiry.

## Decision

- The court affirmed the district court’s post-remand judgment.
- It held the district court’s finding that FNMA lacked notice of the forgery was not clearly erroneous.
- It concluded FNMA qualified as a holder in due course and could enforce the note and mortgage despite Doyle’s defenses against Trinity.
- It held FNMA could enforce the instrument as originally executed, not at the fraudulently increased interest rate.
- It denied cancellation of Doyle’s obligation as to FNMA.

## Legal Principles

- Under Oklahoma’s UCC, holder-in-due-course status requires taking an instrument for value, in good faith, and without notice of claims, defenses, or unauthorized alterations.
- “Notice” includes actual knowledge and knowledge of facts that would lead a reasonable person to inquire; when required, failure to inquire can charge the purchaser with notice.
- Whether a purchaser had notice is a fact question reviewed for clear error on appeal.
- Visible alteration does not automatically establish notice when the surrounding circumstances and market practices support a reasonable belief the change was authorized.
- A holder in due course takes free of personal defenses available against the original lender, and may enforce the instrument according to the valid, original terms when an altered term was unauthorized.

## Conclusion

The Tenth Circuit affirmed that FNMA, despite purchasing a note with an apparent borrower-initialed alteration, took without notice of the forged change and therefore qualified as a holder in due course, permitting enforcement of the note and mortgage against Doyle according to the note’s original, authorized terms.


Doyle v. Resol. Tr. Corp., 999 F.2d 469 (10th Cir. 1993)