to the action, unless, as contended by plaintiffs, the subsequent indorsement, in form, by the railroad company, after Osgood was informed of Artt's defense, has relation back to the time when the former, without notice of such defense, purchased the note for value then paid.

"I am of the opinion that the facts which came to Osgood's knowledge prior to the indorsement, and which, in substance, constitute the defense set out in the third plea, furnished notice that the company had, by reason of fraud and failure of consideration, lost its right to demand payment of the note from Artt. By the indorsement, after such notice, Osgood could not acquire any greater rights than the company possessed. He did not become the holder of the note by indorsement, as required by the law-merchant, until after he had notice that the company could not rightfully pass the legal title, so as to defeat Artt's defense.

"While the adjudged cases are not in harmony upon some of these propositions, the conclusions indicated are, in the opinion of the Court, consistent with sound reason, and are sustained by the great weight of authority."

Question 493: What was the transfer relied on in this case as equivalent to an indorsement? In what physical manner must the indorsement be made to satisfy the rule? What is an allonge?

§ 468. (Nego. Instru., Sec. 76.) Transferee of holder in due course as holder in due course.

Case 494. Woodworth et al. v. Huntoon et al., 40 Ill. 131.

Facts: Purchase of a note negotiable in form, but past due, from an indorsee thereof, who acquired it before maturity. Defense that the note was in fact (though not in form) usurious.

Point Involved: Whether one who purchases under circumstances (as after maturity) which would prevent him from being a holder in due course if he purchased

from one subject to defenses, but who takes from a holder in due course, takes the title of his transferror.

CHIEF JUSTICE WALKER: A note, tainted with a fraud or other infirmity, passing into the hands of an innocent purchaser, not chargeable with notice, and for a valuable consideration, he acquires it purged of the defense, and any other person acquiring it of him succeeds to his rights in the same condition he held them. A defense to the instrument in the hands of the original holder, having been thus cut off, is not revived by the note being again transferred.

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Question 494: (1) State the facts, the question presented and the Court's decision in this case.

(2) A made a note payable to B or order and acquired by B through fraud. B sold to C, a holder in due course. C negotiated the note to D, who acquired the instrument after its maturity, who gave no value, and who had notice of the fraud. Can D enforce this note against A?

Case 495. Andrews et al. v. Robertson, 111 Wisc. 334.

Facts: The payee of the paper sued on was subject to the defense of fraud. He transferred to another who was a holder in due course, and then re-acquired it.

Point Involved: Whether such a party could invoke the rule in favor of purchaser from a holder in due course if he was formerly a holder against, whom such defense would have been available.

* *

MARSHALL, J.: “* The further claim is made that the plaintiffs are bona fide holders of the paper because they purchased it from their indorsee, who was an innocent holder thereof, paying full value therefor, and that the trial Court erred in refusing to permit proof of such repurchase for value. In fact, they invoke the familiar common-law rule, which has recently been added to the statute law of the state, Sec. 1676-28, ch. 356, Laws of 1899, that the holder of commercial paper may recover on the strength of the title of a precedent innocent holder, regardless of knowledge on his part of fraud which would

defeat it in the hands of the payee named therein. Verbeck v. Scott, 71 Wis. 59, 64. That rule is stated in the books, particularly in judicial opinions, generally in such a way as to lead one astray who is not familiar with the law on the subject, as to the extent of its application. It is not a universal rule. It does not apply to a case like this, where the payee of the paper, being so circumstanced at the start that he cannot recover thereon, transfers it to an innocent third party for value and subsequently purchases it back for value. Under such circumstances the payee cannot lean for support on the innocence of his vendee. His position is the same when he comes into possession of the paper the second time as when he first possessed it. One would say that must be the law without reference to authority; otherwise a person might become possessed of a promissory note of another by the grossest of frauds and by selling it to an innocent third person for value and subsequently repurchasing it enforce the same against the maker. The law contains no such open door as that for the successful perpetration of fraud.

Question 495: How did this case differ in fact from the one just preceding? Did this difference in fact produce a dif ferent outcome? Why?

§ 469. (Nego. Instru., Sec. 77.) Burden of proof as to whether one is a holder in due course.

59.

Case 496. Uniform Negotiable, Instruments Law, Sec.

"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 other person, under whom he claims acquired title as holder in due course. But the last mentioned rule does not apply in favor of a party who became bound on this instrument prior to the acquisition of such defective title.

Question 496: M makes a note to order of P. P indorses to H. H sues M. M seeks to set up a defense not good against

H if he is a holder in due course. Does M have to prove H is not a holder in due course or H have to prove that he is a holder in due course?

§ 470. (Nego. Instru., Sec. 78.) Amount recoverable by holder in due course.

Case 497. States, 51.

Cromwell v. County of Sac, 96 United

Point Involved: Whether a purchaser for value is, in the case of defense made by the party liable, to be limited in his recovery to the amount paid by him.

MR. JUSTICE FIELD: "The plaintiff, therefore, holds the bonds and the subsequent coupons as his vendor held them, freed from all infirmities attending their original issue. Nor is he limited in his recovery upon them, or upon the other two bonds, as contended by counsel for the county, to the amount he paid his vendor. Clark had given full value for those he purchased, and could have recovered their amount from the county, and hi's right passed to his vendee. But independently of the fact of such full payment, we are of the opinion that a purchaser of a negotiable security before maturity, in cases where he is not personally chargeable with fraud, is entitled to recover its full amount against the maker, though he may have paid less than its par value, whatever may have been its original infirmity. We are aware of numerous decisions in conflict with this view of the law; but we think the sounder rule, and the one in consonance with the common understanding and usage of commerce, is that the purchaser, at whatever price, takes the benefit of the entire obligation of the maker. Public securities, and those of private corporations are constantly fluctuating in price in the market, one day being above par and the next below it, and often passing within short periods from one-half of their nominal to their full value. Indeed, all sales of such securities are made with reference to prices current in the market, and not with reference to their par value. It would introduce, therefore, incon