After paying King $3,000, Ott learns that King stole the note. Ott makes no further payment to King. Ott is:

Answer: A holder in due course to the extent of $3,000. 

Explanation: Since Ott did not pay the full amount, he is only an HDC to the extent that he actually paid, $3000.

Becker Version (CPA-02071)

A $5,000 promissory note payable to the order of Neptune is discounted to Bane by blank endorsement for $4,000. King steals the note from Bane and sells it to Ott who promises to pay King $4,500.

After paying King $3,600, Ott learns that King stole the note. Ott makes no further payment to King. Ott is:

Answer: A holder in due course to the extent of $4000.

Explanation: When the HDC pays part of the agreed upon value and then receives notice of a defense or claim, he is considered an HDC in proportion to the consideration paid toward the agreed upon price.  Here, Ott paid $3,600 of the $4,500 agreed upon price, so he is an HDC in 4/5s of the $5,000 note, or $4,000.

What do you guys think?  Actual amount paid or proportionate amount?  Thanks!

I found this on Beckers 2011 book (page R6-17) and apparently there is a thing called "Partial HDC".

A endorses a $20,000 promissory note, due in one year, to B in exchange for $12,000 and B's promise to give A $4,000 the following week.  Before B pays the additional $4,000, he is a partial HDC in proportion to the percent of the agreed upon value that was paid (12/16 x $20,000 = $15,000). 

Explanation: "One may be a partial HDC if part of the agreed upon value is executory (i.e. has not yet been given).  Here, HDC status is proportinal to the percentage of the agreed upon value that was paid."