violation of some statute, as, for example, where the instrument is given for a gambling debt, or is tainted with usury. In Wirt v. Stubblefield, 17 App. Cas. D. C. 283, it was held that under the Negotiable Instruments Law a bona fide holder may enforce a promissory note against the maker, even though the note was given for a gambling debt, and that this statute has repealed the statutes of 16 Car. 2 Ch. 7 and 9 Anne, Ch. 14, which were in force in the District of Columbia. In the course of the opinion it was said by Alvey, C. J.: "We know, moreover, that the great and leading object of the act, not only with Congress, but with the large number of the principal commercial States of the Union that have adopted it, has been to establish a uniform system of law to govern negotiable instruments wherever they might circulate or be negotiated. It was not only uniformity of rules and principles that was designed, but to embody in a codified form, as fully as possible, all the law upon the subject, to avoid conflict of decisions, and the effect of mere local laws and usages that have heretofore prevailed. The great object sought to be accomplished by the enactment of the statute, was to free the negotiable instrument, as far as possible, from all latent or local infirmities that would otherwise inhere in it to the prejudice and disappointment of innocent holders as against all the parties to the instrument professedly bound thereby. This clearly could not be effected so long as the instrument was rendered absolutely null and void by local statute, as against the original maker or acceptor, as is the case by the operation, indeed, by the express provision, of the statutes of Charles and Anne."

And in the late case of Schlesinger v. Lehmaier (191 N. Y. 69) the Court of Appeals of New York held that the provisions of the State Banking Law on the subject of usury are to be construed in connection with section 96 of the Negotiable Instruments Law, and that a bank which had purchased paper infected with usury, could not recover on the same without showing that it became a holder in due course. The court said: "It pertains to negotiable instruments, and should be construed in connection with the other legislation upon the same subject. In the Negotiable Instruments Law it is expressly provided that a holder, who becomes such before maturity in good faith and for value without notice of any infirmity, holds the same free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce the payment of the instru

ment for the full amount thereof against all parties liable thereon.' Here we have the legislative intent expressed in clear and unmistakable language. It establishes a just and proper rule which protects the bank in making purchases of commercial paper in good faith before maturity, for value and without notice of infirmity. But where it purchases with actual knowledge of the infirmity or defect or knowledge of such facts that its acticu in taking the instrument amounted to bad faith, it is not protected." See also Schlesinger v. Gilhooly, 189 N. Y. 1, 34; Schlesinger v. Kelly, 114 App. Div. (N. Y.) 546, 552-555; Broadway Trust Co. v. Manheimer, 47 Misc. (N. Y.) 465.

But, on the other hand, it has been held in Kentucky that this section applies only to paper that might have been obligatory between the parties to it, and that hence a holder in due course cannot recover upon a note given for a gambling debt, or given in violation of the statute respecting peddlers' notes." Alexander v. Hazelrigg, 97 S. W. Rep. 353; Lawson v. First Nat. Bank, 102 S. W. Rep. 324. In the case first cited, the court said: "It has been the policy of this State to suppress gaming, and the statutes making gaming contracts void were founded upon what the Legislature has for many years deemed to be sound public policy. It is not conceivable that the General Assembly, in the passage of the Act of 1904 for the protection of innocent holders of negotiable instruments, intended to or did repeal section 1955, Ky. St. 1903, which declares all gaming contracts void. In our opinion, the disappointment now and then of an innocent holder of a negotiable instrument would not be as hurtful and injurious to the best interests of the State as the removal of the ban from gaming contracts." And in the other Kentucky case cited it was said: "The negotiable instruments statute is a most comprehensive piece of legislation. It goes into minutest detail in dealing with the subjects embraced by it. The whole scope of it is shown to be the dealing with commercial paper, so as to protect innocent purchasers of such against mere defenses available as between the original parties. It gives such paper currency, free from original defenses. But it applies only to paper that might have been obligatory between the parties. But, where the parties were never bound because the law made the note void, as contrary to public policy as expressed in the statutes, the negotiable instruments act does not apply, and ought not to. The prevention

of crime is of more importance than the fostering of commerce. The later act should be read in view of its purpose, and not as intending to repeal other statutes passed in the exercise of the police power of the State to suppress crime and fraud."

The subject is one, perhaps, upon which the courts will never agree; for they will construe the section with reference to the policy of their respective States. In some States, the requirements of commerce will be the controlling consideration; in others, the protection of the weak and the ignorant. The modern view is admirably expressed in Chemical Nat. Bank v. Kellogg (183 N. Y. 92), where it was said by Vann, J.: "The business of the country is done so largely by means of commercial paper that the interests of commerce require that a promissory note, fair on its face, should be as negotiable as a government bond. Every restriction upon the circulation of negotiable paper is an injury to the State, for it tends to derange trade and hinder the transaction of business." And it is plain that if a negotiable instrument is to be void in the hands of a holder in due course, because it was given for a usurious loan, or for a gambling debt, or to a "peddler," or for the price of a stallion, or for a lightningrod, it is not merely that instrument alone that is affected, but a doubt is cast upon all commercial paper originating in that community. For other cases applying local statutes, see Quiggle v. Herman, 131 Wis. 379 (note given for a stallion), Arndt v. Sjoblom, 131 Wis. 642 (note given for lightning-rods) National Bank of Commerce v. Pick, 13 N. D. 74 (note given to foreign corporation having no State license), Sullivan v. German Nat. Bank, 18 Colo. App. 99 (certificate of deposit transferred for gambling debt), Gordon v. Levine, 194 Mass. 418 (note made on Sunday).

(c) This is the rule of the Supreme Court of the United States. Cromwell v. County of Sac, 96 U. S. 60. There is considerable conflict in the decisions of the State courts. In the case cited the Supreme Court said: "We are of opinion that a purchaser of a negotiable security before maturity, in cases where he is not personally chargeable with fraud, is entitled to recover its full amount against its maker, though he may have paid less than its par value, whatever may have been its original infirmity. We are aware of numerous decisions in conflict with this view of the law; but we think the sounder rule, and the one in consonance with the common understanding and usage of commerce, is that

the purchaser, at whatever price, takes the benefit of the entire obligation of the maker. Public securities and those of private corporations are constantly fluctuating in price in the market, one day being above par and the next below it, and often passing within short periods from one-half of their nominal to their full value. Indeed, all sales of such securities are made with reference to prices current in the market, and not with reference to their par value. It would introduce, therefore, inconceivable confusion if bona fide purchasers in the market were restricted in their claims upon such securities to the sums they had paid for them. This rule in no respect impinges upon the doctrine that one who makes a loan upon such paper, or takes it as collateral security for a precedent debt, may be limited in his recovery to the amount advanced or secured." See also Birrell v. Dickerson, 64 Conn. 61; Rowland v. Fowler, 47 Conn. 349; Williams v. Huntington, 68 Md. 590; Moore v. Baird, 30 Pa. 136. The statute changes the rule in New York. Harger v. Wilson, 63 Barb. 237; Huff v. Wagner, 63 Barb. 230; Todd v. Shelbourne, 8 Hun, 512. See also Holcomb v. Wyckoff, 35 N. J. Law 38; Bramhall v. Atlantic National Bank, 36 N. J. Law 243; Oppenheimer v. Farmers' and Mechanics' Bank, 97 Tenn. 19. Under this section, a bona fide purchaser of a note and mortgage, is not limited to a recovery of the amount paid therefor, but is entitled to enforce the same for the full amount due thereon, even though the execution of the note was induced by fraud, and it was bought at a heavy discount. Lassas v. McCarty, 47 Ore. 474. As to amount of recovery where instrument taken as collateral security, see section 53. For cases where the purchaser has paid only part of the amount agreed to be paid before receiving notice, see section 93.

§ 97. When subject to original defenses. In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable (a). But a holder who derives his title. through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has

all the rights of such former holder in respect of all parties prior to the latter (b).

(a) It was not deemed expedient to make provision as to what equities the transferee will be subject to; for the matter may be affected by the statutes of the various States relating to set-off and counter-claim. In an act designed to be uniform in the various States, no more can be done than fix the rights of holders in due course. On the question whether only such equities may be asserted as attach to the paper, or whether equities arising out of collateral matters may also be asserted, the decisions are conflicting. In England it was decided in Burroughs v. Moss, 10 Barn. & Cress. 558, that the indorsee of an overdue bill is liable to such equities only as attach on the bill or note itself, and not to claims arising out of collateral matters, such as a general set-off is. This is a leading case, and has since been uniformly followed in that country. Stein v. Yglesias, 1 Crom. Mees. & Ros. 565; Whitehead v. Walker, 10 Mees. & Welsb. 696. See also Hughes v. Large, 2 Pa. St. 103; Long v. Rhawn, 75 Pa. St. 128; Young v. Shriner, 80 Pa. St. 463; Davis v. Miller, 14 Gratt. 1; Kilcrease v. White, 6 Fla. 45; Cumberland Bank v. Haun., 3 Harrison, 223; Chandler v. Drew, 6 N. II. 469; Robertson v. Breedlone, 7 Porter, 541; Tuscumbia, Etc., R. R. Co. et al. v. Rhodes, 8 Ala. 206-224; Robinson v. Lymon, 10 Conn. 31; Steadman v. Jilman, Id., 56; Adair v. Lenox, 15 Oregon, 489. A person to whom the instrument is transferred as a gift takes it subject to all equities then existing between the original parties, but not subject to those which arise thereafter. First Nat. Bank of Champlain v. Wood, 128 N. Y. 35; Baxter v. Little, 6 Met. 7.

(b) Whenever negotiable paper has passed into the hands of a party unaffected by previous infirmities its character as an available security is established, and its holder can transfer it to others with the like immunity. Cover v. Myers, 75 Md. 406; Black v. First National Bank of Westminster, 96 Md. 399. The principle is, that the promise being good to the prior indorsee or holder, free from objection on the ground of fraudulent or illegal consideration, he has the power of transferring it to others, with the same immunity, as an incident to the legal right which he had