acquired in the instrument. Kinney v. Kruse, 28 Wis. 183, 190191. See also Boyd v. McCann, 10 Md. 118. Thus, if A gives to B his note, and C becomes the holder thereof in due course, any subsequent holder could stand on C's title and enforce the note against A, though before taking the same he had notice of a defense which A had to the note as against B. But if, in the case supposed, the note should be indorsed by C to D, and by the latter to E, and by him to F, under circumstances which would give D a defense as a party thereto, then if F had notice of the equities of both A and D he could enforce the note against A, but not against D.

§ 98. Who deemed holder in due course.- Every holder is deemed prima facie to be a holder in due course (a); 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 as a holder in due course (b). But the last-mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title (c).

(a) It is not necessary for the holder to offer in the first instance any proof that he is an innocent purchaser. Kerr v. Anderson, N. D. 111, N. W. Rep. 614. The presumption is that he received it bona fide and for value. Gray's Admr, v. Bank of Kentucky, 29 Pa. St. 365; Wilson v. Lazier, 11 Gratt. 477.

(b) Statute applied in German Am. Bank v. Cunningham, 97 App. Div (N Y.) 244; Mitchell v. Baldwin, 88 (Id.) 265, 269; Hodge v. Smith, 130 Wis. 326; Singer Manufacturing Co. v. Summers, 143 N. C. 102; McKnight v. Parsons (Iowa), 113 N. W. Rep. 858; Rovicz v. Nichells, 9 N. D. 536; Regester's Sons Co. v. Reed, 185 Mass. 226, 227; Cook v. Am. Tubing & Webbing Co. (R. I.) 65 Atl Rep. 641; Keene v. Behan, 40 Wash. 505; Kerr v. Anderson (N. D.), 111 N. W. Rep. 614. The holder may make out his title by presumption until it is impeached by evidence showing the paper had a fraudulent or illegal inception. When this is done he can no longer rest upon presumption, but

it is incumbent upon him to show the circumstances under which it came into his possession, and that he has acted in good faith. Canajoharie National Bank v. Diefendorf, 123 N. Y. 191; Joy v. Diefendorf, 130 N. Y. 6; Jordan v. Grover, 99 Cal. 194; Market and Fulton Nat. Bank v. Sargent, 85 Me. 349; Haines v. Merrill, 56 N. J. Law, 312; Sullivan v. Langley, 120 Mass. 437; Merchants' National Bank v. Haverhill Iron Works, 159 Mass. 158; Conant v. Johnston, 165 Mass. 450, 452; National Revere Bank v. Morse, 163 Mass. 381, 385; Williams v. Huntington, 68 Md. 590; Griffith v. Shipley, 74 Md. 591; Ellicott v. Martin, 6 Md. 509; Hutchinson v. Boggs & Kirk, 28 Pa. St. 294; Wilson v. Lazier, 11 Gratt. 477; Vathir v. Zane, 6 Gratt. 246. The statute requires the holder to show affirmatively the facts constituting good faith upon his part; and it is not sufficient for him to prove that he acquired the note before maturity for value. Keene v. Behan, 40 Wash. 505. And where the plaintiff seeks to establish this by his own testimony, the credibility of such testimony, though it is undisputed, is for the jury. Jay v. Diefendorf, supra. Where negotiable securities have been stolen and negotiated, the burden is upon the holder to show that he is himself a holder in due course, or that he claims under such a holder; and there is no presumption that the thief negotiated the securities before they became due. Northampton Nat. Bank v. Kidder, 106 N. Y. 221; Hinckley v. Merchants' Nat. Bank, 131 Mass. 147.

The rule adopted in the statute was the one which prevailed in New York and many other States. The rule which obtains in the Federal Courts imposes upon the defendant the burden of proving bad faith. First Nat. Bank v. Moore, 148 Fed. Rep. 953, 957; Murray v. Lardner, 2 Wall. 110; Hotchkiss v. National Bank, 21 Wall. 354; Collins v. Gilbert, 94 U. S. 753; King v. Doane, 139 U. S. 166. Where an inference may be drawn from the surrounding circumstances that on the one hand tends to discredit plaintiff's testimony as to his lack of knowledge concerning the infirmity in the paper and his good faith in taking it, and on the other hand tends to establish lack of good faith, the question is for the jury. Matlock v. Scheuerman (Ore.), 93 Pac. Rep. 823; McKnight v. Parsons (Iowa), 113 N. W. Rep. 858; M. Groh's Son's Co. v. Schneider, 34 Misc. (N. Y.) 195. Under this section an instruction that the burden is on the holder to show that some person under whom he claims acquired the title in good

faith" is erroneous. Hawkins v. Young (Iowa), 114 N. W. Rep. 1041. That the payee is described as "trustee" does not let in defenses against a bona fide holder for value. Bank v. Looney, 99 Tenn. 278.

(c) The last sentence is necessary to qualify the general statement. If A issues his note to B, and C gets possession of it and fraudulently negotiates it to D, the fraud of C in nowise affects A, and is no defense to him when sued on the instrument by D. Thus, it has been held that the fact that one who held possession of a note for the payee puts it in circulation in fraud of his rights is no defense in a suit by the holder against the maker; nor does it change the burden of proof, so as to require the plaintiff to show in the first instance that he is a bona fide holder for value. Kinney v. Kruse, 28 Wis. 183.

ARTICLE VI.

LIABILITY OF PARTIES.

Section 110. Liability of maker.
III. Liability of drawer.

112. Liability of acceptor.

113. When person deemed indorser.

114. Liability of irregular indorser.

115. Warranty; where negotiation by delivery, et

cetera.

116. Liability of general indorsers.

117. Liability of indorser where paper negotiable
by delivery.

118. Order in which indorsers are liable.

119. Liability of agent or broker.

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

(a) An indorsee of a promissory note cannot maintain a joint action against the ten makers of the note, where the note on its face states that the liability of each of the makers is limited to one-tenth of the amount of the note. National Bank of Phoenixville v. Buckwalter, 214 Pa. St. 289. The fact that the holder had other collateral securities for the same debt more than sufficient to cover it, from which, however, the debt had not been realized, is not a ground of defense on the part of the maker. Lord v. Ocean Bank, 20 Pa. St. 384.

(b) If the payee is a fictitious or non-existing person the instrument is payable to bearer. Section 9. Where the name of the payee is a trade or assumed name, and the instrument is issued for value, the maker is estopped from setting up that the instru

4

ment is payable to a fictitious payee, if by such averment the instrument would be defeated. Jones v. Home Furnishing Co.,

9 App. Div. (N. Y.) 103.

§ 111. Liability of drawer.-The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages that on due presentment the instrument will be accepted and* 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.

§ 112. Liability of acceptor.- The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance (a); and admits :

1. The existence of the drawer, the genuineness of his signature (b), and his capacity (c) and authority (d) to draw the instrument; and

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

(a) The discounting of a bill by the drawee who has not accepted it is neither payment nor a promise to pay according to its tenor and effect, but puts him in the position of an indorsee for value, with right of action against drawer and indorser. Swope v. Ross, 40 Pa. St. 186.

(b) National Park Bank v. Ninth National Bank, 46 N. Y. 77; Marine National Bank v. National City Bank, 59 N. Y. 67; Bank of St. Albans v. Farmers' and Mechanics' Bank, 10 Vt. 141; Bank of U. S. v. Bank of Georgia, 10 Wheat. 333. In Pennsylvania this

* Error in engrossing. The word in the Commissioners' draft is "or." The mistake was not corrected by Laws N. Y. 1898, c. 336. It occurs only in the New York statute.