worth of the paper. A restrictive indorsement is such only when it prohibits further negotiation of the paper, constitutes the indorser merely the agent of the owner, or vests the title in the indorsee in trust for, or to the use of some other person. Rev. Stat. 1908, 4499. The authorities are practically unanimous that indorsements such as the ones under consideration can have no such limited or restricted effect. Crawford Neg. Inst. 1916 ed. 78, 79, 130, 132; National Bank v. Bossemeyer, 101 Neb. 96, L. R. A. 1917 E, 374, 162 N. W. 503; First Nat. Bank v. First Nat. Bank, 58 Ohio St. 207, 41 L. R. A. 584, 65 Am. St. Rep. 748, 50 N. E. 723; First Nat. Bank v. First Nat. Bank, 4 Ind. App. 355, 51 Am. St. Rep. 221, 30 N. E. 808; Woods v. Colony Bank, 114 Ga. 683, 56 L. R. A. 929, 40 S. E. 720; New York Produce Exch. Bank v. Twelfth Ward Bank, 135 App. Div. 52, 119 N. Y. Supp. 988.

"In National Bank v. Bossemeyer, 101 Neb. 100, L. R. A. 1917E, 374, 162 N. W. 503, the court, in discussing the effect of the indorsement, 'Pay to any bank or banker; all previous indorsements guaranteed,' said: 'Is the indorsement restrictive?' Whatever may have been held before the enactment of the Negotiable Instruments Act, it is clear that the question must be determined by the provisions of that statute, as follows: 'An indorsement is restrictive which either: First, prohibits the further negotiation of the instrument; or, second, constitutes the indorsee the agent of the indorser; or, third, vests the title in the indorsee in trust for or to the use of some other person. But the mere absence of words implying power to negotiate does not make an indorsement restrictive.'

"There is nothing on the face of this indorsement which prohibits the further negotiation of the instrument, or constitutes the indorsee the agent of the indorser or vests title in the indorsee in trust for or to the use of some other person; and hence, by the most elementary principles of statutory construction, the plain meaning of the language must be observed, and it must be held that the indorsement was not restrictive.'

"It is also urged by plaintiffs in error that by reason of certain rules and regulations of the Denver Clearing House, with which all banks are familiar, the indorsements in question are taken to be collection indorsements only, and therefore, regardless of what the law may be, defendants in error are in effect estopped to deny that the indorsements are collection indorsements only. It is well settled, however, that unrestricted indorsement cannot be varied, either by parol evidence, or evidence of custom in business, for the reason that the statute definitely defines their meaning and controls their effect. Martin v. Cole, 3 Colo. 113; Dunn v. Ghost, 5 Colo. 134; Torbert v. Montague, 38 Colo. 327, 87 Pac. 1145; Corn Exch. Bank v. Nassau Bank, 91 N. Y. 74, 43 Am. Rep. 655; Moody v. First Nat. Bank, 19 Tex. Civ. App. 278, 46 S. W. 660; State Bank v. Cumberland Sav. & T. Co., 168 N. C. 605, L. R. A. 1915D, 1138, 85 S. E. 5; National Bank v. Bossemeyer, supra; New York Produce Exch. Bank v. Twelfth Ward Bank, 135 App. Div. 52, 119 N. Y. Supp. 988."

Question 471: If an indorsement is restrictive, can the party to whom so restrictively indorsed hold the indorser on the indorsement? What was the indorsement in the above case? Was it restrictive?

(Note: There is a difference of opinion whether such an indorsement is restrictive though weight of authority apparently supports above view. See Note 10 A. L. R. p. 709.)

§ 466.

§ 467.

Transferee must acquire instrument before overdue.
Indorsement requisite.

§ 468.

§ 469.

§ 470.

Transferee of holder in due course as holder in due course.
Burden of proof as to whether one is holder in due course.
Amount recoverable by holder in due course.

§ 461. (Nego. Instru., Sec. 69.) Introduction. (Note: It is important to appreciate what is connoted by the term "holder in due course."

In the first place we should notice that one may acquire by negotiation a good title to negotiable paper who is not a holder in due course. That is, a negotiable instrument may be the subject of a gift (there being consideration in its inception between the original parties) and may be transferred after it is mature. We consider whether one is a holder in due course in order to ascertain whether such holder is subject to the "equities" or defenses to which the party from whom he acquired the paper would have been subject. If there are no such equities or defenses to be raised, the holder may recover although he cannot qualify as a holder in due course. The question whether a holder is a holder in due course is material only when defenses are sought to be raised against him which could have been raised against the payee or other prior party.)

52.

§ 462. Who is holder in due course.

Case 472. Uniform Negotiable Instruments Act, Sec.

"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 been previously 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."

§ 463. (Nego. Instru., Sec. 71.) To be a holder in due course the holder must acquire an instrument that is complete and regular upon its face.

Case 473. In re Philpott's Estate, 169 Iowa Reports, 555, 151 N. W. 825.

Facts: Defendant is executrix of estate of C. H. Philpott who on June 12, 1911, entered into a contract with American-Canadian Land Company, a partnership, for purchase of certain Texas lands and executed, among others, the note described below. October 25, 1911, this contract was cancelled by a written agreement and the company agreed to return Philpott his notes. The return was never made. The plaintiff Leclerc acquired the note and claims to be a holder in due course. The note read that it was payable "on or before four after date." Defense that the claimant is not a holder in due course because of the incompleteness on the face of the note.

EVANS, J.:

66*

It does not appear therein whether it was to become payable four days, four months This note was not 'complete

*

or four years. and regular' upon its face. we think it quite clear that this irregularity upon the face of the note prevented its taker from being a holder in due course. It could not be deemed a demand note. *

Question 473: What was the irregularity of the note in question? Was the purchaser a holder in due course?

Case 474. Elias v. Whitney, 98 N. Y. Supp. 667.

TRUAK, J.: "The evidence showed that the check in suit had been changed before it reached the plaintiff, and that a mere inspection of the check showed such change. There is no evidence showing that the defendant authorized or assented to the alteration, but the appellant says that he is 'a holder in due course,' and not a party to the alteration, and that under Sec. 205 of the Negotiable Instruments Law (Laws, 1897) p. 745 (c. 612), he may enforce the payment of the check, according to its original tenor. Sec. 91, p. 732, of the Negotiable Instruments Law, states what constitutes a holder in due course. According to that section, a holder in due course is a holder who has taken an instrument that is complete and regular on its face. This instrument was not complete and regular on its face at the time the defendant took it. As we have stated before, a mere inspection of the instrument showed its defect, and, therefore, under subdivision 41 of the negotiable instruments law, plaintiff had notice of an infirmity in the instrument at the time he took it."

Question 474: How was the above instrument irregular? Did it prevent plaintiff from becoming a holder in due course?

§ 464. (Nego. Instru., Sec. 72.) To be a holder in due course the transferee must give value.

(Note: As to inadequacy of value as constituting notice of defect, see next section.)

Case 475. Daniels on Negotiable Instruments, 6th Ed., Sec. 777, p. 902.

it has been said that 'the consideration for the transfer must be full and fair as well as valuable' (citing cases in foot note) while in another case it is said that 'when a parting with value is proved the amount of the consideration is not otherwise important than as bearing on the question of actual or constructive notice' (citing Gould v. Segee, 5 Duer, 260). This latter view seems to us the correct one. The owner of a bill or note