Both common law, as derived from law-merchant, and the Negotiable Instruments Act agree1 that the holder must take without notice of the defense sought to be interposed, in order to be a bona fide holder. If he has notice of defense he is not a bona fide holder, even if he pays full value.2 Actual notice given by the maker of an instrument to one who subsequently purchases it, is sufficient to prevent the latter from being a bona fide holder.3 One who knows of fraud or unfair dealing in securing a negotiable instrument, is not a bona fide holder thereof, although he does not know the exact way in which the fraud was committed.4 If the holder knows that a surety executed a note for the purpose of having it discounted for value, and that it has been indorsed without consideration,5or that an indorser for accommodation has ordered that his name should be erased before the note was negotiated,6 or that a note was to be held in escrow until the maker thereof was released from liability upon another instrument,7 he can not enforce the note against such party. If a note is obtained by false representations, one who took part in making such representations,8 or who knew that they had been made,9 can not be a bona fide holder. If a bank accepts checks for deposit, knowing that its depositor is "kiting" checks, it does not become a holder for value by giving credit.10

West Virginia. Marion National Bank v. Harden, - W. Va. - , 97 S. E. 600.

See, Holder in Due Course, by A. M. Hamilton, 24 Juridical Review, 41.

3 Vaughn v. Johnson, 20 Ida. 660, 37 L. R. A. (N.S.) 816, 119 Pac. 879.

4 Allen v. Johnson, 20 Ohio C. C. 8. 5Paika v. Perry, 225 Mass. 563, 114

N. E. 830.

6 Sutton v. Beckwith, 68 Mich. 303, 13 Am. St. Rep. 344, 36 N. W. 79.

1 See Sec. 1301, 2354.

2 United States. Hanauer v. Doane, 79 U. S. (12 Wall.) 342, 20 L. ed. 439; In re Continental Engine Co.. 234 Fed. 58, 148 C. C. A. 74.

California. Braly v. Henry, 71 Cal. 481, 60 Am. Rep. 543, 11 Pac. 385, 12 Pac. 623.

Georgia. Heard v. Shedden, 113 Ga.

162, 38 S. E. 387; Linderman v. Atkins, 143 Ga. 366, 85 S. E. 101.

Iowa. Wray v. Warner, 111 Ia. 64, 82 N. W. 455.

Kansas. Brook v. Teague. 52 Kan. 119, 34 Pac. 347.

Kentucky. Eichberg v. Board of Education, 165 Ky. 814, 178 S. W. 1075.

Maryland. Maitland v. Bank. 40 Md. 540, 17 Am. Rep. 620.

Massachusetts. Fisher v. Leland, 58 Mass. (4 Cush.) 456, 50 Am. Dec. 805; Cheney v. Taber, 221 Mass. 332, 108 N. E. 1072; Paika v. Perry, 225 Mass. 563, 114 N. E. 830.

Michigan. McNamara v. Gargett, 68 Mich. 454, 13 Am. St. Rep. 355, 36 N. W. 218.

Nebraska. Marshall v. Kirschbraun, 100 Neb. 876, L. R. A. 1917E, 788, 161 N. W. 577; Hatfield v. Jakway, 102 Neb. 831, 170 N. W. 181.

The actual knowledge of facts which do not affect the validity of the instrument, does not prevent the holder from taking in due course.11 The actual kuowledge of the fact that the negotiable instrument has been given without consideration to the indorser,12

Nevada. Swinney v. Patterson, 25 Nev. 411, 62 Pac. 1.

New York. Schlesinger v. Lehmaier, 191 N. Y. 69, 123 Am. St. Rep. 591, 16 L. R. A. (N.S.) 626, 83 N. E. 657.

Oklahoma. Hardin v. Dale, 45 Okla. 694, L. R. A. 1915D, 1099, 146 Pac. 717; Nichols v. Thomas, 51 Okla. 212, 151 Pac. 847.

South Carolina. Greenville v. Or-mand, 51 S. Car. 58, 64 Am. St. Rep. 663, 39 L. R. A. 847, 28 S. E. 50.

South Dakota. Barnard v. Tidrick, 35 S. D. 403, 152 N. W. 690.

Tennessee. Hickerson v. Raiguel, 49 Tenn. (2 Heisk.) 329.

Utah. Gregg v. Groesbeck, 11 Utah 310, 32 L. R. A. 266, 40 Pac. 202.

See also, First National Bank v. Lyons Exchange Bank, 100 Kan. 194, 164 Pac. 137; Marion National Bank v. Harden, - W. Va. - , 97 S. E. 600.

3 Barnard v. Tidrick, 35 S. D. 403,

152 N. W. 690.

4Paika v. Perry, 225 Mass. 563, 114 N. E. 830.

5 Greenville v. Ormand, 51 S. Car. 58, 64 Am. St. Rep. 663, 39 L. R. A. 847, 28 S. E. 50.

6 Gregg v. Groesbeck, 11 Utah 310, 32 L. R. A. 266, 40 Pac. 202.

7 De Garmo v. Kay, - Utah, - , 173 Pac. 129:

8 Gwinn v. Ford, 91 Wash. 498, 158 Pac. 536 [affirming judgment on rehearing, Gwinn v. Ford, 85 Wash. 571, 148 Pac. 891].

9 Gwiifn v. Ford, 91 Wash. 498, 158 Pac. 536 [affirming judgment on rehearing, Gwinn v. Ford, 85 Wash. 571, 148 Pac. 891].

10 People's State Bank v. Miller, 185 Mich. 565, 152 N. W. 257.

11 Elmo State Bank v. Hildebrand, - Kan. - , 177 Pac. 6; White v. Wad-hams, - Mich. - , 170 N. W. 60; Whitney v. Day, 86 Or. 268, 168 Pac. 295.

12 White v. Wadhams, - Mich. - , 170 N. W. 60.

or that the maker may have a set-off against the holder before the note comes due,13 does not prevent the holder from taking in due course. Knowledge that the payee is heavily indebted does not prevent an indorsee who has paid full value for a negotiable instrument from taking in good faith if he did not know that the transfer of the instrument was made to defraud the creditors of the payee.14