Choice "C" is correct. Reed met all four requirements to be a holder in due course: (i) Reed was the holder of a negotiable instrument (the note); (ii) Reed gave value (receiving from the transferor a note as payment for the transferor's debt owed to the transferee constitutes value); (iii) nothing in the facts indicates that Reed lacked good faith; and (iv) Reed had no notice of Blake's nonperformance of services. Nonperformance of services is a personal defense and not a real defense. A holder in due course takes free of personal defenses and is subject only to real defenses. Thus, Train will have to pay Reed.
Choices "a" and "b" are incorrect because both indicate that Train will not have to pay Reed. Train will have to pay Reed due to Reed's status as a holder in due course.
Choice "d" is incorrect. Train must pay Reed because Reed was a holder in due course, not because the note was bearer paper.