Question 172. - An insurance agent discounts with a bank notes in payment of premiums on a policy which it turns out was, for some reason, not issued. The bank takes the notes in good faith, asking no questions, as the maker is undoubted for the amount involved. At maturity the maker refuses payment, saying he did not receive the policy, and therefore did not get "value" for his notes. Has the bank as holder in due course the right to enforce payment by law if necessary against the maker, and is not a person who gives notes bound to pay them when they come into the hands of a third party?

Answer. - If the bank discounted the notes before maturity and thus became the holder for valuable consideration and without notice of any defect, the maker has no defence. If the third party mentioned is a holder for valuable consideration before maturity and is at the time of his acquiring title without notice of any defect in title, the maker has no defence. See section 66, Bills of Exchange Act.