tutes value; and is deemed such, whether the instrument is payable on demand or at a future time." This changes the law on this subject in New York State. As stated in the text and several times by way of illustration, a preexisting debt of the drawer, maker, or acceptor is sufficient value to support an instrument; and the creditor who receives such a bill or note is a bona fide holder for value, and fully protected from all equities as between the original parties.

Suppose A. gives P. a note for $1,500, due in ninety days, and tells him to use it to settle a particular debt owed by them jointly. P. does not do this, but goes to H. and borrows from him $750, giving him the note of A.'s as collateral security. H., upon P.'s failure to repay the loan, sues A., and tries to recover the full amount. A. proves misapplication by P. The court held that, though H. was a bona fide holder, he could recover only the amount advanced on the note. The rule, then, stands that whoever takes an instrument from a wrongful indorser as collateral security or as conditional payment, can recover only the amount of his advances. We have stated before that, had the instrument been free from restrictions-i.e., in delivery, one could recover its full value, no matter what price he had paid for it, so long as the price was not so small as to carry on its face notice of fraud.

Suppose, again, that A. indorses a note to B. for $100, to be paid for by two installments

of $50. At the time B. gets the note, he pays one installment. Before he pays the second, he receives notice that A. obtained the note by fraud. B. subsequently pays the second installment. B. is a bona fide holder to the extent of $50 only. B. paid the second installment knowing the fraud, and he is not an honest purchaser for value beyond the $50, and he can not recover more. (Sec. 93.)

We have now reached our third step in the statement-a bona fide holder for value. The holder in due course must be such that, at the time the instrument was negotiated to him, he had no notice of any infirmity in the instrument, or defect in the title of the person negotiating it. This last clause brings us to the somewhat extensive question of notice.

Notice. A bona fide holder for value without notice is one who has taken the instrument honestly, and paid value for it, and who takes it without notice of any infirmity in the instrument, or any defect in the title of the person negotiating it. Notice is of two kinds-actual or constructive. Actual notice means that kind which is so evident upon the face of the instrument, or is so attached to the circumstances surrounding the transfer of the instrument, that the purchaser or holder has deliberately and dishonestly shut his eyes in order to avoid it. For instance, A. transfers a note for $100 to B. for the sum of $10; B. suspects that A. obtained the note by fraudulent representations, but makes no inquiries. In fact,

A. stole the note. B. is not a bona fide holder, being affected with notice. His suspicion and the small consideration asked was enough to put him to inquiry.

Actual bad faith must be shown in order to deprive a holder for value of the character of bona fide holder. (Sec. 95.) Neglect to inquire into the facts on the part of the holder is not conclusive of notice. Suppose a note had been lost, and the loser had advertised it in the newspapers. A. finds it, takes it to a bank, and has it discounted. If the bank can show that it took the note in good faith, and without notice of the way A. came by it, it can recover the amount of the note. This was gross carelessness, but even gross carelessness does not amount to notice. The bank, or any other purchaser for value without notice, does not owe it to the party who puts the instrument afloat the duty of active inquiry, to avert the imputation of bad faith. (Sec. 96.)

Suppose, again, that B., for an illegal consideration, accepts a draft drawn on him by A. A. indorses it before maturity to C., who takes it for value and without notice. C. indorses the bill, when overdue, to D. D. acquires a good title, for C. had a good title. It seems that D.'s title would be good even had he known the circumstances of the illegal consideration, because he secures by transfer all the title which C. (who gave value and had no notice) had. (Sec. 97.)

One who purchases an instrument is con

clusively taken to have read it. There are certain facts stated in every instrument, and apparent upon the face of the instrument. A purchaser must take notice of these to his peril. Among them may be enumerated: (1) a restrictive indorsement, (2) a conditional indorsement, (3) time of payment, (4) marks of dishonor, (5) a signature "per procuration." In such cases, no direct information has come to the purchaser, but he is charged with knowledge of the defect whether he knows it or not. This kind of notice is called "constructive." Partnership paper used to pay a private debt of one of the partners is a somewhat troublesome question. The rights of a creditor who takes such an instrument will vary greatly according to the form of the instrument. Perhaps the best that can be said of such paper is, do not take it unless there accompanies it a statement showing it was issued by the authority of all of the partners.

The same statement holds true in the matter of paper upon which a partnership name appears evidently as an accommodation indorser. In such a case, the purchaser must prove at his peril that it was given with the consent of all of the partners.

The words "without recourse" added to an indorsement do not carry either express or constructive notice of any infirmity in the paper. Nor does the mention in an instrument of the consideration affect a purchaser with notice of its failure. Under such condi

tions, we have a bona fide holder for value without notice. Every holder is deemed to be such a holder unless it is shown to the contrary. If this is shown, then the burden is on the holder to prove his position. (Sec. 98.)

Defenses or equities." In an action upon a negotiable instrument, the plaintiff must show (1) execution of the instrument by the defendant, (2) its transfer to himself through the proper parties, (3) presentment of the instrument for payment, (4) refusal, (5) protest (when necessary), and (6) notice of dishonor (when necessary). Despite all this, the defendant may have a valid defense; and, while not disputing the plaintiff's title, he may bring forward certain facts which may render the plaintiff's title worthless. There are certain defenses which are good as against the world. It does not matter then whether the plaintiff be an immediate or a remote party, or even a purchaser for value without notice, so far as the maker, or drawer, or acceptor, as the case may be, of the instrument is concerned. Such defenses are:

Infancy.

Married woman (in States where no statute exists to the contrary).

Insanity.

Extreme intoxication.

(In all of the above cases, none of the parties can make a binding contract.)

Usury.