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the title vests at once in the survivor or survivors." I

Transfer by indorsement has already been discussed."

A bill or note payable to bearer may be transferred by mere delivery without indorsement.

SECTION 29. VALIDITY OF BILLS OR NOTES BETWEEN

IMMEDIATE PARTIES. As between the immediate parties to any bill or note, any defense can be set up which would invalidate any ordinary contract.

SECTION 30. BONA FIDE PURCHASERS FOR VALUE.

The above rule does not apply in the case of remote parties. A bona fide purchaser for value may hold a bill or note free from a defense which might have been set up against a prior party.

To be a bona fide holder for value, a person must either have given a valuable consideration for the bill or note and taken it without notice of facts which impeach its validity between antecedent parties, or have received the instrument from a bona fide holder. After a bill or note has once passed into the hands of a bona fide holder, it will not become invalidated upon a subsequent transfer merely because the new holder did not give a valuable consideration to such bona fide holder, or had knowledge of facts which would have been a defense between the parties antecedent to the bona fide holder.

SECTION 31. THE VALUABLE CONSIDERATION.

The holder of a bill or note, to take it free from defenses, must have given something of value for it. • Norton on Bills and Notes, Sec. • See Chapter IV.

The exact amount paid is immaterial except as evidence to be considered on the question of good faith. A note given in payment of a contemporaneously contracted debt is given for a valuable consideration. Where a bill or note is given before its maturity in payment and extinguishment of a pre-existing debt it is generally held to have been transferred for a valuable consideration, but there are some authorities to the contrary.

A distinction is sometimes drawn, more especially in New York, between cases where negotiable paper is received in absolute payment and extinguishment of a precedent debt and those wherein it is received in mere nominal or conditional payment, the right of the creditor to proceed upon the original indebtedness after the maturity of the paper remaining unimpaired. In the former case the creditor is unaffected by equities of which he has no notice. In the latter he holds subject to such equities.” 7 8

When a bill or note is transferred before maturity as collateral security for a debt contemporaneously contracted, the transferee is regarded as a bona fide holder for value,' and is entitled to hold the same even against a subsequent attaching creditor or payee.

Where a bill or note is given as collateral security for the existing debt of a third person, there must be a definite agreement for forbearance, or some other circumstance of detriment to the creditor or advantage

10

• Swift vs. Tyson, 16 Pet. (U. S.), 1; Barnum vs. Barnum,

8 Conn., 469, 21 Am. Dec., 689. • Townsley vs. Samrall, 2 Pet.

(Del.) (U. S.), 170; Bush vs. Peckard, 3 Harr (Del.), 385; Fay vs. Blackstone, 31 Ill., 538; Draper vs. Cowles, 27 kan. 484.

Rosa vs. Brotherson, 16 Wend.

(N. Y.), 77; Ferris vs. Ravel,

87 Tenn., 886.
Am. & Eng. Ency. of Law, Vol.

IV, p. 288.
Exchange Bank vs. Butner, 60

Ga., 654; Belmont Branch

Bank vs. 'Hoge, 35 N. Y., 65. 20 Davis vs. Carson, 69 Mo., 609.

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to the debtor, in order to render the creditor a holder for value. 11

SECTION 32. NOTICE. In order to constitute a person a bona fide holder for value, he must in addition to having acted in good faith, and having given a valuable consideration, have taken without notice of the existing defenses.

The notice may be either express or constructive. Constructive notice may arise either from the face of the bill or note, or from extrinsic circumstances. An indorsement, “For the account,” of indorser, gives notice of the lack of right of the indorsee to use it for his own purposes, but an indorsement without recourse is not sufficient to put the holder on inquiry as to equities between original parties. 18

The notice, whether express or constructive, need not particularize the defect; it is sufficient if it is enough to put an ordinary prudent man on his guard.“

The fact that interest on a bill or note is overdue is not of itself sufficient to constitute notice. A notice to an agent is a notice to his principal in this class of contracts as in others.16 The holder of a bill or note takes it unaffected by public records not referred to in the instrument.

18

SECTION 33. OVERDUE PAPER. The doctrine of bona fide holders for value only applies to negotiable instruments before their maturity. 11 Sumwalt vs. Ridgely, 20 Md., w Norwegian Plow Co. vs. Munger, 107; Mansfield vs. 'Corbin, z

52 Kan., 37;. Pittsburg Bank Cush. (Mass.), 151.

vs. Whitehead, 10 Watts (Pa.), Trettel vs. Barandon, 8 Taunt

397. 100; 4 E. C. L., 35.

10 Myers vs. Hazard, 4 McCrary W Bisbing vs. Graham, 14 Pa. St.,

(U. S.), 94; 50 Fed. Rep., 155; 56; 14, 53 Am. Dec., 510.

Warren County vs. Marcy, 91 w Whaley vs. Neill, 44 Mo. App.,

U. S., 96. 316; Myers vs. Bealer, 30 Neb.,

The holder of overdue negotiable paper always takes it subject to all equities existing between the original parties. The mere fact that the bill or note was not paid when due constitutes sufficient notice to put the holder on his guard." 17 Down vs. Halling, 4 B. & C., 330;

II., 542; Hinckley vs. Union 10 E. C. L., 347; Morgan vs.

Pac. R. Co., 129 Mass.. 52, United States, 113 U. S., 476;

37 Am. Rep., 297. Towner Vs. McClelland, 116

Vol. IX.

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