WARRANTY ON ASSIGNMENT. Upon the sale of a promissory note for its face value there is an implied warranty that it has not been paid.

Re-issue by prior party.--Where an instrument is negotiated back to a prior party such party may, subject to the provisions of this act, reissue and further negotiate the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable.

SECTION VI.

RIGHTS OF THE HOLDER.

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Holder may sue. The holder of negotiable instrument may sue thereon in his own name; and payment to him in due course discharges the instrument.

NOTE-MAY SUE. The holder of an instrument as collateral (pledgee) may sue and collect the whole debt, being liable only for a surplus over the claim. Demand paper may be sued at once. PAYMENT TO HIM. Where payments are made in good faith to the holder of a promissory note, payable to bearer, the maker's liability is discharged to the extent of such payments; and he cannot recover back the money so paid from the person to whom they were paid, on the ground that the latter was not the real owner of the note.

HOLDER. The fact that securities were taken by one person in the name of another who had no interest in them, does not invalidate the securities or prevent the person beneficially interested from enforcing payment of them by action.

Holder in due course.-A holder in due course is a holder who has taken the instrument under the following conditions:

1. That it is complete and regular upon its face:

2. That he became the holder of it before it was overdue and without notice that it had previously been dishonored, if such was the fact;

3. That he took it in good faith and for value.

4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

5. That he took it in the usual course of business. NOTE-PARTNERS. Individual partners, indorsees of the firm, who are payees, cannot be holders in due course as to any equities or infirmities of which the firm had notice. Notice to one is notice to all.

One who takes in payment of the individual note of A for his private debt, notes of third parties running to A, but which are in fact the property of a copartnership of which A is a member, is protected as a bona fide holder for value, if he was ignorant of the existence of such copartnership.

BEFORE OVERDUE. Where an indorsee takes several notes, secured by one mortgage, some due and others not, he is holder in due course as to such as are not due, but not as to those overdue.

HOLDER AS COLLATERAL. Is a holder in due course. One who received the notes of a third person, a part of which are past due, as collateral security for a preexisting debt due him from the holder thereof, who had notice of equities in favor of the maker, is not a bona fide purchaser.

WITHOUT NOTICE OF INFIRMITY. A bank discounted a note for a company, and credited it with the amount, the credit subsequently increasing, so that, at the time of the suit on the note, the bank had parted with nothing of value for it. Held, that the bank was not a bona fide purchaser, for value.

Where a note is given to a company, constructive notice of infirmity therein to the officers of the company does not in itself import notice to a bank discounting the note, of which also, they are directors and officers.

The mere fact that the officers of the bank knew in a general way, that the company was in the habit of selling machinery, and taking notes therefor, and then discounting the same at the bank, was not equivalent to actual notice of the infirmity attaching to this particular note.

INFIRMITY. Where an accommodation indorsement was made for a specific purpose, and the note was negotiated by the maker in violation of the agreement with the indorser, the holder cannot recover unless he took the note in good faith for a valuable consideration, without notice of the agreement.

When the general manager of a bank taking an instrument as collateral shortly after its execution, took the acknowledgment of a mortgage securing the paper, and had full knowledge of the incapacity of the maker, this is notice to the bank. The transaction being a recent one (the transfer being eleven days after execution) the bank was bound, though the notice was gained in another transaction.

It seems that where A makes his note payable to X or bearer, and procures B to sign it for his accommodation, and for the purpose of enabling him to negotiate said note to X, and afterwards A negotiates it in fact to Y for the payment of a different debt, this is a fraud upon B, which if known to Y when he took the note, will prevent a recovery thereon against B.

INTEREST DUE. A promissory note matures only when, by its terms the principal becomes due; and one who purchases it in good faith for value, before maturity, is within the protection of the law merchant, although interest is overdue at the time of such purchase.

USUAL COURSE OF BUSINESS. This means according to the customs and uses of the law merchant, without anything unusual on the face of the paper or mode of transfer. A transfer from a receiver, assignee in insolvency, etc., is not in due course.

When not a holder in due course. When an instrument payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed in due course.

Notice of infirmity in the instrument.---Where the transferee receives notice of an infirmity in the instrument or defect in the title of the person negotiating the same before he has paid therefor the full amount agreed to be paid he will be deemed a holder in due course only to the extent of the amount theretofore paid by him.

NOTE-Where a bank discounts a note and carries the proceeds to the credit of the indorser, who does not draw out the money, the bank is not a holder in due course. But if it pays out the full amount before notice of infirmity it becomes such a holder.

Defective title.---The title of a person who negotiates an instrument is defective within the meaning of this act when he obtains the instrument, or any signature thereto by fraud, duress, or force or fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud and the title of such person is absolutely void when such instrument or signature was so procured from a person who did not know the nature of the instrument and could not have obtained such knowledge by the use of ordinary

care.

NOTE-A note procured by duress is not void but only voidable, and in an action thereon the duress is not a defense if the maker retains a valuable consideration received by him therefor.

So where, in consideration of a note alleged to have been given under duress, the payee surrendered to the maker prior valid notes executed by the latter for the same amount, the duress is not a defense to an action on the new note if the maker retains the notes so surrendered. But if those notes have been lost or destroyed without his agency by mere accident, it may be that the duress will be a defense, provided the maker does all he can to put the payee in as good condition as he was before the note in suit was given.

Actual knowledge of infirmity necessary to notice. -To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.

NOTE-Mere suspicion of infirmity is immaterial. A holder not in due course takes the paper subject to equities even though he paid full value. Rights of holder in due course. A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior par

ties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon except as provided in sections 1944 and 1945 of these statutes, relating to insurance premiums, and also in cases where the title of the person negotiating such instrument is void under the provisions of section 1676-25 of this act.

NOTE-Holder in due course not having actual notice is not affected by pending suit.

A set-off against the payee of a note cannot be claimed against a bona fide purchaser thereof before due, although he had knowledge of such set-off.

Holder, other than in due course. 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 nonnegotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud, duress or illegality affecting the instrument, has all the rights of such former holder in respects of all parties prior to such holder.

NOTE-A note dated on a secular day, but actually made and delivered on Sunday is valid in the hands of an innocent holder.

An indorser who entrusts the instruments to another for delivery only on condition is bound by an unauthorized delivery, as against a bona fide holder.

FRAUD, DURESS, ETC. It is settled in Wisconsin that if the maker's signature is procured by false representations as to the character of the paper itself, he being ignorant of its true character, and having no intention to sign such paper, and being guilty of no negligence in doing so, the paper is void even in the hands of an innocent holder. So held where the custodian delivers the paper without authority. This is not a valid delivery. Also where notes were fraudulently obtained for the ostensible purpose of making copies.

Where the maker could not read without her glasses, which had been left at a neighbor's, and did not read the paper she signed, a verdict that she was not negligent was sustained, although she had two children present who could read, but were not asked to read the paper.

ILLEGALITY. Will not defeat an action upon a note by a holder in due course, without notice of the defect. One who puts in circulation a note dated on a week day is estopped to claim that it was made Sunday.

PURCHASER WITH NOTICE from one in due course is protected. But where the payee transfers paper void in his hands to a holder in due course, and re-purchases it from him or a subsequent holder, he is not protected.

Burden of proof as to title.-Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the

instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title in due course. But the last mentioned rule does not apply in favor of a party who became bound on the instrustrument prior to the acquisition of such defective title.

SECTION VII.

LIABILITY OF PARTIES.

Maker. The maker of a negotiable instrument by making it engages that he will pay it according to its tenor; and admits the existence of the payee and his then capacity to indorse.

Drawer.-The drawer by drawing the instrument admits the existence of the payee and his then capacity to endorse; and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder.

Acceptor.-The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and admits:

1. The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument: and,

2. The existence of the payee and his then capacity to indorse.

Indorser.-A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.

NOTE-This expresses the law of this state, except in the United States Courts, and will, if adopted, control those courts also in regard to Wisconsin contracts.

Liability of indorser in blank. Where a person not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser in accordance with the following rules: