Sec. 75. Indorsement Requisite

Where one's legal title is not complete (paper not payable to bearer) except upon indorsement, he is not a holder in due course until such indorsement has been made.

If indorsement is requisite to one's legal title to the paper, that is, if the paper is not indorsed in blank or otherwise payable to bearer, and is not indorsed to the holder, he cannot be a holder in due course until that is done.

Example 43. A makes his note to order of B who procures it by fraudulent statements. B sells to C before maturity and for value and C knows nothing of the fraud. The note is delivered to C unindorsed. C is then informed of the fraud. He then gets B to indorse the instrument. C is subject to A's defense even though the indorsement was omitted by mere oversight.

104. Justice v. Stonecipher, 267 111. 448, 108 N. E. 732. (The result reached in this case is right, but the reasoning is wrong and misleading.)

105. Nego. Instru. Act, SEC. 194.

The uniform act states this in the following language: "When the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferror had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferror. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made."106

Sec. 76. Transferee Of Holder In Due Course As Holder In Due Course

If one acquires negotiable paper from a holder in due course he takes the title and right of such holder in due course.

Example 44. M makes and delivers to P a promissory note payable to order of P. M has a defense to this note. P sells to H, who acquires under conditions making him a holder in due course. H transfers to S, who gives no value, acquires after maturity and has notice of the defense. S can enforce payment of the note.

The reason for this rule is that as the title in H is good and M must pay H, no harm comes to him in paying the transferee of H. Therefore, negotiation should not stop with H.

The Act says: "But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such prior holder in respect of all parties prior to the latter."107

106. Id. SEC. 49; Goshen Bank v. Bingham, 118 N. Y. 349; Osgood's Admr's v. Artt, 17 Fed. 575.

Sec. 77. Burden Of Proof As To Whether One Is Holder In Due Course

If it is shown that there is a defense that would be good against one not a holder in due course the plaintiff must show he is a holder in due course.

The law on this point is not entirely clear, but it seems sounder that plaintiff must establish by a preponderance of the evidence that he is a holder in due course.108

Sec. 78. Amount Recoverable By Holder In Due Course

The holder in due course may recover the full amount of the instrument.

While different rules have prevailed on this point the rule now is that if one is not subject to defenses as being a holder in due course he may recover the full amount of the instrument no matter what he gave therefor.109

107. Id. SEC. 58. See also following cases: Woodsworth v. Huntoon et al, 40 111. 131; Andrews v. Robertson, 111 Wis. 334.

108. Singer Mfg. Co. v. Summers, 143 N. C. 102, 55 S. E. 522.

109. Cromwell v. County of Sac, 96 U.S. 51, Jefferson Bank v. C. W. L Co., 123 S. W. {Tenn.) 641.