However, under Illinois law, a buyer who obtains financing through an entity closely connected to the seller may use the seller's breach of its duties to the buyer as a defense to liability under the financing instrument. Christinson v. Venturi Const. Co., 109 Ill. App.3d 34, 64 Ill.Dec. 674, 440 N.E.2d 226 (5th Dist. 1982). This so-called "close connection doctrine" was designed to allow a consumer to implement what is often its only realistic remedy when the seller breaches its duty:

Leaving aside the dispute concerning whether or not the note was in arrears at the time it was assigned to Magnacard, see Ill.Rev.Stat. ch. 26, § 3-302, we find that the relationship between the assignor Bliss and the assignees Magnacard — an 80 to 90% subsidiary of Bliss — and then the plaintiffs, Magnacard's officers, was sufficiently "intimate" to invalidate any claim the plaintiffs might have to holder in due course status. Christinson v. Venturi Constr. Co., 109 Ill. App.3d 34, 37, 64 Ill.Dec. 674, 676, 440 N.E.2d 226, 228 (5th Dist. 1982).1. Securities Law Violations

In Gruss, the Seventh Circuit rejected the argument that the "test of notice is essentially one of good faith or honesty in fact," stating rather that the concepts of notice and good faith are separate under the Code and that "either actual or constructive notice will prevent one from obtaining the favored status of bona fide purchaser." Id. at 431 (emphasis added); see also Miriani v. Rodman and Renshaw, Inc., 358 F. Supp. 1011, 1013 (N.D.Ill. 1973); Erlich v. Nyberg, 78 Ill.App.3d 500, 33 Ill.Dec. 549, 396 N.E.2d 1273 (1st Dist. 1979); cf. Hatton v. Money Lenders Associates, Ltd., 127 Ill. App.3d 577, 82 Ill.Dec. 826, 469 N.E.2d 360 (1st Dist. 1984) (holders in due course); Christinson v. Venturi Construction Co., 109 Ill.App.3d 34, 64 Ill.Dec. 674, 440 N.E.2d 226 (5th Dist. 1982) (holder in due course). Thus, good faith under the Code is based on a subjective view of the facts, whereas notice is based on an objective view.

The mere fact of prior dealings, or close connections, between movant and debtors does not by itself justify denial of holder in due course status. Christinson v. Venturi Construction, 109 Ill.App.3d 34, 64 Ill.Dec. 674, 676-677, 440 N.E.2d 226, 228-29 (1982). No particular factors are present which would mandate additional investigation by Palo Verde.