was executed and delivered at the time of the false and fraudulent representations. In this claim there is no merit. So far as the testimony is concerned, there is no showing that Edwin Acker, the agent of the Donald-Richards Company, ever had any negotiations with the defendant except the time when the contract and note were procured. The only inference from the testimony that can be drawn is that the contract and note in question were signed at about the time, and after, the false and fraudulent representations were made. If they were made at any other time, the burden was upon the plaintiff to so show, and he has not done so.

The question of the delivery of the goods or articles to the defendants is not, by any means, in this case, a controlling one; it is not really an issue in the case. It is only material, if at all, to show the good faith of the indorsee. He has wholly failed to show by a preponderance of evidence his good faith. The principal questions in this

ings not inconsistent with this opinion.

The defendants are entitled to statutory costs on appeal.

Robinson and Bronson, JJ., con

cur.

Birdzell, J., dissenting (December 6, 1919):

The deposition of G. S. Krouth of Iowa City shows that he is cashier of the Iowa City State Bank; that on behalf of the bank he took the note in question before maturity as collateral security for a loan made to the Donald-Richards Company; and that at the time he took it he had no knowledge whatever of the transaction between the Donald-Richards Company and the defendants, and

knowledge of any defenses. Stevens, the plaintiff, who also testified by deposition, stated that he took up the loan of the DonaldRichards Company at the bank, paying the full cash consideration; also, that he obtained the note in suit as collateral and became the owner of both notes. M. H. Taylor, the assistant manager of the DonaldRichards Company, in his deposition, testified that the goods for which the note was given were shipped to the defendants, and that the defendants have never returned them, or any portion thereof, nor offered to do so. No evidence was offered on the part of the defendants to dispute the testimony of Taylor with reference to the goods; nor was there any testimony given or offered with reference to any damages incident to any alleged fraudulent representations; nor did the defendants attempt to make any showing that a rescission had either been made or attempted. In this state of the record, it seems to us that no defense was made out which would defeat the right of the plaintiff, if he be considered merely the assignee of the purchase-price obligation signed by the defendants, and that it is immaterial whether the instrument in suit be regarded as negotiable or not.

The testimony for the plaintiff is nearly all in the shape of depositions,

which accounts for the fact that it embraces questions and answers going to establish good faith out of the regular order of proof. The evidence for the defendant, with the exception of five preliminary questions and answers in connection with the examination of the witness,

Mrs. Wrede, consists of a stipulation as to what Mrs. Wrede would testify to. Accepting as facts all that it is stipulated she would testify to, there would, in our opinion, be lacking proof of facts sufficient to constitute a defense as hereinbefore indicated. Christianson, Ch. J., concurs.

I. General rules:

a. Under law merchant, 18.

b. Under Negotiable Instruments Act, 25.

c. Contra decisions, 29.

II. Instrument fraudulently put in circulation, 31.

III. Reasons for rule, 37.

IV. What holder must prove:
a. Under law merchant, 38.

1. General rules.

a. Under law merchant.

In some cases the position has been taken that when any valid defense, good as between immediate parties, is shown to exist, the holder must show that he is a bona fide holder. Chambers v. Falkner (1880) 65 Ala. 448. The court in Bunting v. Mick (1892) 5 Ind. App. 289, 31 N. E. 378, says: "The law is undoubtedly well settled in this state that if the holder of paper negotiable by the law merchant, and to which the maker has a valid defense, relies upon the fact that he. is a bona fide holder thereof for value, the burden is upon him to aver and prove that he obtained such paper before maturity, without notice of the equities or defenses of the maker, and that he paid a valuable consideration therefor." While the rule is thus stated broadly by the court, the defense in this action was that the payee procured the note from the maker "by means of certain fraudulent representations going to the consideration." It seems probable that the court's statement of the rule was in view of this defense; at least, it seems clear

IV. continued.

b. Under Negotiable Instruments

Act, 48.

V. What constitutes fraud within the rule:

a. In general, 52.

b. Fraud in the execution of partnership and corporate notes, 57.

c. Illustrative cases of fraud, 58. d. Illustrative cases showing no fraud, 61.

from other cases in this jurisdiction that the broad rule that any defense, good as against the payee, casts upon the holder the burden of showing that he is a bona fide holder, does not prevail. It is believed that the theory that any defense destroys the presumption of bona fides rests upon a fundamental error. The character of bona fide holder, or holder in due course, need be invoked only when there is some defense good as between immediate parties; there is use for the presumption, therefore, only when there is some defense. If, therefore, the showing of any defense destroys the presumption, it is destroyed in every case in which there is any use for it. The manifest result of this theory is to destroy the usefulness of the presumption altogether. However this may be, it is apparent that in any case that adheres to the theory a showing of fraud would destroy the presumption of bona fides, not because of its character as fraud, but because it is a defense as between the immediate parties.

Fraud is of various kinds, and may be such as to vitiate entirely the instrument, even in the hands of a bona

fide holder. Under some statutes the defense of fraud is good as against a bona fide holder. Hubbard v. Rankin (1873) 71 Ill. 129; Hewitt v. Jones (1874) 72 Ill. 218. This statute is again referred to in Mann v. Merchants' Loan & T. Co. (1902) 100 Ill. App. 224, and in Kennedy v. Jones (1901) Miss. -, 29 So. 819. If the fraud is such as to render the note void even in the hands of a holder in due course, or bona fide holder, the question annotated herein does not arise, and cases dealing with such fraud have been excluded. The present annotation is concerned with the evidentiary question which arises. when, in an action on a note by a subsequent holder, there is shown fraud in the inception such as is a defense as between the immediate parties and those with notice, but which does not avoid the note as against the holder in due course.

Both under the law merchant and under the Negotiable Instruments Act, it appears that, according to the practically uniform line of authorities, when there is shown to have been fraud in the inception of an instrument, the presumption that the plaintiff is a holder in due course is destroyed, and he must then establish his character as a holder in due course by proof.

Taking up, first, the cases decided prior to the Negotiable Instruments Act, it appears that the rule just stated is supported by a multitude of authorities.

United States.-Smith v. Sac County (1871) 11 Wall. 139, 20 L. ed. 102; Marion County v. Clark (1876) 94 U. S. 278, 24 L. ed. 59; Collins v. Gilbert (1877) 94 U. S. 753, 24 L. ed. 170; Stewart v. Lansing (1881) 104 U. S. 505, 26 L. ed. 866; King v. Doane (1890) 139 U. S. 166, 35 L. ed. 84, 11 Sup. Ct. Rep. 465; McClintick v. Cummins (1840) 2 McLean, 98, Fed. Cas. No. 8,698; Bailey v. Lansing (1876) 13 Blatchf. 424, Fed. Cas. No. 738; Tracey v. Phelps (1885) 22 Fed. 634; National Exch. Bank v. White (1887) 30 Fed. 412, reversed on other grounds in (1892) 145 U. S. 513, 36 L. ed. 795, 12 Sup. Ct. Rep. 928; Ameri

can Exch. Nat. Bank v. Oregon Pottery Co. (1892) 55 Fed. 265; Simons v. Fisher (1893) 20 L.R.A. 554, 5 C. C. A. 311, 17 U. S. App. 1, 55 Fed. 905; Louisville, N. A. & C. R. Co. v. Ohio Valley Improv. & Contract Co. (1893) 57 Fed. 42, affirmed in (1899) 174 U. S. 552, 43 L. ed. 1081, 19 Sup. Ct. Rep. 817; Atlas Nat. Bank v. Holm (1896) 19 C. C. A. 94, 34 U. S. App. 472, 71 Fed. 489; McVicar Realty Trust Co. v. Union R. Power & Electric Co. (1905) 136 Fed. 678; Mills v. Keep (1912) 197 Fed. 360.

Alabama.-Wallace v. Branch Bank (1840) 1 Ala. 565; Ross v. Drinkard (1860) 35 Ala. 434; Wetumpka v. Wetumpka Wharf Co. (1879) 63 Ala. 632; Reid v. Bank of Mobile (1881) 70 Ala. 199; Gilman v. New Orleans & S. R. Co. (1882) 72 Ala. 566; Woodall & Sons v. People's Nat. Bank (1907) 153 Ala. 576, 45 So. 194; Elmore County Bank v. Avant (1914) 189 Ala. 418, 66 So. 509; Sample v. Tennessee Valley Bank (1917) 200 Ala. 578, 76 So. 936; Deshazo v. Lamar (1920) Ala. App. -, 85 So. 586.

Arkansas. Tabor V. Merchants Nat. Bank (1886) 48 Ark. 454, 3 Am. St. Rep. 241, 3 S. W. 805; Roberts v. Padgett (1907) 82 Ark. 331, 101 S. W. 753; Arkansas Nat. Bank v. Martin (1914) 110 Ark. 578, 163 S. W. 795; Harbison v. Hammons (1914) 113 Ark. 120, 167 S. W. 849; Cochran v. Shull (1914) 115 Ark. 226, 170 S. W. 997.

California.-Sperry v. Spaulding (1873) 45 Cal. 544; Jordan v. Grover (1893) 99 Cal. 194, 33 Pac. 889; Eames v. Crosier (1894) 101 Cal. 260, 35 Pac. 873; Sinkler v. Seljan (1902) 136 Cal. 356, 68 Pac. 1024; Blochman Commercial & Sav. Bank v. Moretti (1918) 177 Cal. 256, 170 Pac. 419; Meyer v. Lovdal (1907) 6 Cal. App. 369, 92 Pac. 322; Hall v. Wells (1914) 24 Cal. App. 238, 141 Pac. 53; Tidewater Southern R. Co. v. Harney (1916) 32 Cal. App. 253, 162 Pac. 664; Curran v. Wilson (1918) 36 Cal. App. 208, 171 Pac. 817; Burns v. Bauer (1918) 37 Cal. App. 251, 174 Pac. 346.

County Sav. Bank v. Mendell (1911) 36 App. D. C. 413.

Georgia. Sheffield V. Jackson County Sav. Bank (1907) 2 Ga. App. 221, 58 S. E. 386 (recognizing the above as the general rule in most of the American states, "and possibly in Georgia." But see Georgia cases, infra, I. c).

Illinois.-Wright v. Brosseau (1874) 73 Ill. 381; Charles v. Remick (1895) 156 Ill. 327, 40 N. E. 970; Hodson v. Eugene Glass Co. (1895) 156 Ill. 397, 40 N. E. 971; Warman v. First Nat. Bank (1900) 185 Ill. 60, 49 L.R.A. 412, 57 N. E. 6 (obiter); Finegan v. Green (1906) 130 Ill. App. 445; McClory v. Towne (1912) 173 Ill. App. 113.

Indiana.—Harbison v. Bank of State (1867) 28 Ind. 133, 92 Am. Dec. 308; Zook v. Simmonson (1880) 72 Ind. 83; Baldwin v. Fagan (1882) 83 Ind. 447; Mitchell v. Tomlinson (1883) 91 Ind. 167; Eichelberger v. Old Nat. Bank (1885) 103 Ind. 401, 3 N. E. 127; Tesche v. Merea (1889) 118 Ind. 586, 21 N. E. 316; Giberson v. Jolley (1889) 120 Ind. 301, 22 N. E. 306; Palmer v. Poor (1889) 121 Ind. 135, 6 L.R.A. 469, 22 N. E. 984; First Nat. Bank v. Ruhl (1890) 122 Ind. 279, 23 N. E. 766; Schmueckle v. Waters (1890) 125 Ind. 265, 25 N. E. 281; Citizens Bank v. Leonhart (1890) 126 Ind. 206, 25 N. E. 1099; Shirk v. Mitchell (1894) 137 Ind. 185, 36 N. E. 850; Shirk v. Neible (1900) 156 Ind. 66, 83 Am. St. Rep. 150, 59 N. E. 281; Ray v. Baker (1905) 165 Ind. 74, 74 N. E. 619; Johnson v. Harrison (1912) 177 Ind. 240, 39 L.R.A. (N.S.) 1207, 97 N. E. 930; First Nat. Bank v. Rupert (1912) 178 Ind. 669, 100 N. E. 5; Zink v. Dick (1890) 1 Ind. App. 269, 27 N. E. 622; Kain v. Bare (1891) 4 Ind. App. 440, 31 N. E. 205; Bunting v. Mick (1892) 5 Ind. App. 289, 31 N. E. 378, 1055; State Nat. Bank v. Bennett (1893) 8 Ind. App. 679, 36 N. E. 551; Pope v. Branch County Sav. Bank (1899) 23 Ind. App. 210, 54 N. E. 835; Bradley v. Whicker (1899) 23 Ind. App. 380, 55 N. E. 490; Batesville Bank v. Lehner (1909) 43 Ind. App. 457, 87 N. E. 990; Hill v. Ward (1910) 45 Ind. App. 458, 91 N. E. 38; Union Trust Co. v. Adams (1913) 54 Ind.

App. 166, 101 N. E. 741; Bright Nat. Bank v. Hartman (1915) 61 Ind. App. 440, 109 N. E. 846; Bright Nat. Bank v. Hanson (1916) 68 Ind. App. 61, 113 N. E. 435; Brumbaugh v. Mellinger (1918) 68 Ind. App. 410, 120 N. E. 676.

Iowa.-Lane v. Krekle (1867) 22 Iowa, 399; Woodward v. Rodgers (1870) 31 Iowa, 342; Rock Island Nat. Bank v. Nelson (1875) 41 Iowa, 563; Averill v. Boyles (1879) 52 Iowa, 672, 3 N. W. 731; Frank v. Blake (1882) 58 Iowa, 750, 13 N. W. 50; United States Nat. Bank v. Crosley (1892) 86 Iowa, 633, 53 N. W. 352; Commercial Bank v. Paddick (1894) 90 Iowa, 63, 57 N. W. 687; Galbraith v. McLaughlin (1894) 91 Iowa, 399, 59 N. W. 338; Bennett State Bank v. Schloesser (1897) 101 Iowa, 571, 70 N. W. 705; State Bank v. Gates (1901) 114 Iowa, 323, 86 N. W. 311; State Bank v. Cook (1904) 125 Iowa, 111, 100 N. W. 72; McNight v. Parsons (1907) 136 Iowa, 390, 22 L.R.A. (N.S.) 718, 125 Am. St. Rep. 265, 113 N. W. 858, 15 Ann. Cas. 665; City Deposit Bank v. Green (1908) 138 Iowa, 156, 115 N. W. 893.

Kansas. Brook v. Teague (1893) 52 Kan. 119, 34 Pac. 347; Kennedy v. Gibson (1904) 68 Kan. 612, 75 Pac. 1044; Abmeyer v. First Nat. Bank (1907) 76 Kan. 877, 92 Pac. 1109; Tredick v. Walters (1910) 81 Kan. 828, 106 Pac. 1067.

Kentucky.-Early v. McCart (1834) 2 Dana, 414; Breckenridge v. Moore (1843) 3 B. Mon. 629; David v. Merchants Nat. Bank (1898) 103 Ky. 586, 45 S. W. 878.

Louisiana.-Bowen v. Viel (1828) 6 Mart. N. S. 565; Morgan v. Yarborough (1839) 13 La. 74, 33 Am. Dec. 553; Louisiana Union Bank v. Ryan (1869) 21 La. Ann. 551.

Maine.-Aldrich v. Warren (1840) 16 Me. 465; Perrin v. Noyes (1855) 39 Me. 384, 63 Am. Dec. 633; Roberts v. Lane (1874) 64 Me. 108, 18 Am. Rep. 242; Kellogg v. Curtis (1879) 69 Me. 212, 31 Am. Rep. 273; Market & F. Nat. Bank v. Sargent (1893) 85 Me. 349, 35 Am. St. Rep. 376, 27 Atl. 192.

22, 3 Atl. 300; Rhinehart v. Schall (1888) 69 Md. 352, 16 Atl. 126; Griffith v. Shipley (1891) 74 Md. 591, 14 L.R.A. 405, 22 Atl. 1107; Cover v. Myers (1892) 75 Md. 406, 32 Am. St. Rep. 394, 23 Atl. 850; Banks v. McCosker (1896) 82 Md. 518, 51 Am. St. Rep. 478, 34 Atl. 539, s. c. on subsequent appeal in (1896) 84 Md. 292, 35 Atl. 935; Ebert v. Gitt (1902) 95 Md. 186, 52 Atl. 900.

Massachusetts.-Munroe v. Cooper (1828) 5 Pick. 412; Bissell v. Morgan (1853) 11 Cush. 198; Sistermans v. Field (1857) 9 Gray, 331 (obiter); Tucker v. Morrill (1861) 1 Allen, 528; Smith v. Edgeworth (1861) 3 Allen, 233 (obiter); Smith v. Livingston (1873) 111 Mass. 342; Sullivan v. Langley (1876) 120 Mass. 437; National Security Bank v. Cushman (1877) 121 Mass. 490 (obiter); Bill v. Stewart (1892) 156 Mass. 508, 31 N. E. 386; Conant v. Johnston (1896) 165 Mass. 450, 43 N. E. 192; Holden v. Phoenix Rattan Co. (1897) 168 Mass. 570, 47 N. E. 241 (obiter); Savage v. Goldsmith (1902) 181 Mass. 420, 63 N. E. 918.

V. Cameron

Michigan. Carrier (1875) 31 Mich. 373, 18 Am. Rep. 192; Mace v. Kennedy (1888) 68 Mich. 389, 36 N. W. 187; Ward v. Doane (1889) 77 Mich. 328, 43 N. W. 980; Goodrich v. McDonald (1889) 77 Mich. 486, 43 N. W. 1019; Drovers' Nat. Bank V. Blue (1896) 110 Mich. 31, 64 Am. St. Rep. 327, 67 N. W. 1105; Stevens v. McLachlan (1899) 120 Mich. 285, 79 N. W. 627; Detroit Nat. Bank v. Union Trust Co. (1906) 145 Mich. 656, 116 Am. St. Rep. 319, 108 N. W. 1092; Stouffer v. Fletcher (1906) 146 Mich. 341, 109 N. W. 684; Stouffer v. Clark (1906) 146 Mich. 345, 109 N. W. 685; Merchants' Nat. Bank v. Wadsworth (1911) 166 Mich. 528, 131 N. W. 1108. Minnesota.-Cummings v. Thompson (1872) 18 Minn. 246, Gil. 228; Merchants Exch. Bank v. Luckow (1887) 37 Minn. 542, 35 N. W. 434; MacLaren v. Cochran (1890) 44 Minn. 255, 46 N. W. 408; Bank of Montreal v. Richter (1893) 55 Minn. 362, 57 N. W. 61; First Nat. Bank v. Holan (1896) 63 Minn. 525, 65 N. W. 952; Dekalb Nat. Bank v. Thompson (1900)

79 Minn. 151, 81 N. W. 765; Robbins v. Swinburne Printing Co. (1904) 91 Minn. 491, 98 N. W. 331, 867; First Nat. Bank v. Person (1907) 101 Minn. 30, 111 N. W. 730 (obiter); First Nat. Bank v. Busch (1907) 102 Minn. 365, 113 N. W. 898 (obiter); Park v. Winsor (1911) 115 Minn. 256, 132 N. W. 264; Cochran v. Stein (1912) 118 Minn. 323, 41 L.R.A. (N.S.) 391, 136 N. W. 1037; First State Bank v. Pederson (1913) 123 Minn. 374, 143 N. W. 980; Cole v. Johnson (1914) 127 Minn. 291, 149 N. W. 467.

Mississippi.-Merchants & Farmers Bank v. Bank of Winona (1913) 106 Miss. 471, 64 So. 210.

Missouri. Hamilton V. Marks (1876) 63 Mo. 167; Cass County v. Green (1877) 66 Mo. 498; Johnson v. McMurry (1880) 72 Mo. 278; Henry v. Sneed (1889) 99 Mo. 407, 17 Am. St. Rep. 580, 12 S. W. 663; Famous Shoe & Clothing Co. v. Crosswhite (1894) 124 Mo. 34, 26 L.R.A. 568, 46 Am. St. Rep. 424, 27 S. W. 397; Campbell v. Hoff (1895) 129 Mo. 317, 31 S. W. 603; Keim v. Vette (1902) 167 Mo. 389, 67 S. W. 223; Clifford Bkg. Co. v. Donovan Commission Co. (1905) 195 Mo. 262, 94 S. W. 527; Carson v. Porter (1886) 22 Mo. App. 179; First Nat. Bank v. Stanley (1891) 46 Mo. App. 440; Jones v. Burden (1894) 56 Mo. App. 199; Smith v. Mohr (1895) 64 Mo. App. 39 (obiter); Goodin v. Buhler (1896) 65 Mo. App. 288; Ganz v. Weisenberger (1896) 66 Mo. App. 110; Adams County Bank v. Hainline (1896) 67 Mo. App. 483; Ern v. Rubinstein (1897) 72 Mo. App. 337; Hahn v. Bradley (1902) 92 Mo. App. 399; First State Bank v. Hammond (1904) 104 Mo. App. 403, 79 S. W. 493; Stewart v. Andes (1905) 110 Mo. App. 243, 84 S. W. 1134; First State Bank v. Hammond (1907) 124 Mo. App. 177, 101 S. W. 677; Penfield Invest. Co. v. Bruce (1900) 132 Mo. App. 257, 111 S. W. 888; National Bank v. Romine (1909) 136 Mo. App. 57, 117 S. W. 104; Merchants Nat. Bank v. Brisch (1909) 140 Mo. App. 246, 124 S. W. 76.

Montana. Thamling V. Duffey (1894) 14 Mont. 567, 43 Am. St. Rep. 658, 37 Pac. 363; Harrington v. Butte & B. Min. Co. (1897) 19 Mont. 411,