of the person negotiating the same before he has paid the full amount agreed to be paid therefor he will be deemed a holder in due course only to the extent of the amount theretofore paid by him."

Applying the provisions of § 4102, Revised Laws 1910, to the facts in this case, we must determine whether the bank is an innocent purchaser before maturity for a valuable consideration, and without notice of the defense and equity urged against this note.

There is no contention here that the instrument is not complete and regular upon its face, or that the bank became the holder of it before it was due, and without notice that it had been previously dishonored. But it is a disputed fact as to the bank acquiring this note for value, and without notice of defenses.

It is the contention of the defendant in error that inasmuch as West, the president of the bank, had a general knowledge of the methods of Givens in transacting his business with his customers, that was sufficient to put the bank upon inquiry, and, inasmuch as Givens himself was the vice president of the bank, that these facts were sufficient to impute knowledge to the bank of the illegal consideration of said note. Inasmuch as Givens was not an active officer of the bank, and in no manner had charge of the discounting of notes for it, we are of the opinion that the president of bank is not bound or charged knowledge by reason of his conduct, nor do we believe that the general knowledge of West as to the methods of Givens in the transaction of his business was sufficient to impute bad faith to the bank in the purchase of this note. In the case of First Nat. Bank v. Dikeman, 96 Kan. 765, 153 Pac. 559, it is said: "A bank which buys a negotiable note is not prevented from becoming a holder in due course by the fact that its cashier, through whom the purchase is made,

Notice to vice

bank.

Evidence-bad

faith.

with

was a director of the bank to which the note was given, at the time of its execution; he having no actual notice of any defect or defense. Nor is such bank prevented from becoming a holder in due course by the fact that its cashier knew the note was given as the result of a settlement between the maker and the payee, and that, knowing of the pendency of negotiations to that end, he had agreed with the payee to purchase the note."

And in 1 Michie on Banks & Bkg. p. 830, it is said: "The rule seems to be that knowledge or notice on the part of an officer or agent with respect to discounts and securities, when such matters are within the scope of his duties or agency, are chargeable to the bank, and bind it in subsequent proceedings. But the rule cannot hold good when the officer is also acting, in part, for himself and in his own behalf. The bank whose president has knowledge of a defect in a guaranty on negotiable bonds at the time that it, acting through him, makes a loan thereon, is not charged with notice, he being a part owner in the bonds and the loan being in part for his benefit. The knowledge of an officer of a bank, being also a member of its discount committee, who takes part in discounting a note made to him individually for an unlawful purpose, in which he participates, is not imputable to the bank."

And in Davis v. Boone County Deposit Bank, 25 Ky. L. Rep. 2078, 80 S. W. 161, the court of appeals of Kentucky said: "Where the interest of the president of a bank, who was also its attorney, in the dis-. count of a note sued on, was adverse to the bank, his knowledge of an infirmity in the paper was insufficient to charge the bank therewith."

And in Union State Bank v. First Nat. Bank, 122 Ark. 612, 184 S. W. 411, the Arkansas supreme court said: "Where the president of an insurance company, who had knowledge that its agent had misrepresented the value of corporate stock sold, was also the president of the

bank to which the certificate of deposit of the proceeds of the sale of the stock in another bank was assigned, the president's knowledge of the fraud is not imputed to the bank, if he, in assigning the certificate to the bank, acted only for the insurance company."

And in Guaranty State Bank v. Bland, Tex. Civ. App. -, 189 S. W. 546, it is said: "A bank taking a note was not taxed with notice of facts relative to fraud in the inception of the note, kno. to its cashier, whose knowledge was acquired when acting solely in his individual capacity, for himself and another concern in which the bank had no interest."

See also Rusmissell v. White Oak Stove Co. 80 W. Va. 400, L.R.A. 1917F, 453, 92 S. E. 672; Corcoran v. Snow Cattle Co. 151 Mass. 74, 23 N. E. 727; Wardlaw v. Troy Oil Mill, 74 S. C. 368, 114 Am. St. Rep. 1004, 54 S. E. 658.

And in 10 Cyc. 1063, the law is laid down as follows: "If a corporate officer or agent acts avowedly for himself in a transaction with the corporation, he is regarded as a stranger to the corporation, dealing as if he had no official relation with it."

And further in said Cyc.: "If, therefore, it is desired to charge the corporation with a knowledge of such facts, affirmative evidence must be given that the officer has made a disclosure thereof to other and disinterested officers of the corporation, whose knowledge may properly be said to be that of the corporation, or at least that he made such disclosures as ought to have put them on inquiry."

And it is further said in Cyc.: "When, therefore, an officer, director, or agent of a corporation deals with the corporation for himself in his private capacity, any uncommunicated knowledge which he may have in respect of the transaction will not be imputed to the latter by reason of his possession of it."

This court in the case of Forbes v. First Nat. Bank, 21 Okla. 206,

sufficient to defeat the right of the holder to recover, and the court may direct a verdict in favor of the holder, when the circumstances surrounding the transaction are not sufficiently strong for. it to be said as a matter of law that bad faith may be reasonably inferred therefrom."

And in McPherrin v. Tittle, 36 Okla. 510, 44 L.R.A. (N.S.) 395, 129 Pac. 721, the court says: "Suspicion of defect of title, or the knowledge of circumstances which would excite such suspicion in the mind of a prudent man, or of circumstances sufficient to put him upon inquiry, will not defeat his title; that result can be produced only by bad faith on his part."

See also Citizens Sav. Bank v. Landis, 37 Okla. 530, 132 Pac. 1101; First State Bank v. Tobin, 39 Okla. 96, 134 Pac. 395.

The question arises here as to whether, under this evidence, it can be said that the bank was the holder of this note for value.

The court has laid down the rule that the mere discounting of an undue note for a customer by the bank, -discountingand crediting the

purchase.

amount to be paid therefor to the customer's account, does not of itself make the bank a purchaser for value, but such transaction creates the relation of debtor and creditor.

And under § 4104, Rev. Laws 1910, a bank, in that state of case, will only be deemed a holder in due course when it has paid the full amount agreed to be paid for said note, or, in other words, when the money thus deposited to the credit. of the assignor has been paid to him. See Morrison v. Farmers &

-

M. Bank, 9 Okla. 697, 60 Pac. 273, and National Bank v. Armbruster, 42 Okla. 656, 142 Pac. 393, and Southwestern Nat. Bank v. Ambruster, Okla., 157 Pac. 1146. The facts here disclose that when the bank bought this note from Givens it deposited the amount thereof to his credit, and the relation of debtor and creditor was thereby established to this extent, and, under the rule thus announced, the bank could not become an innocent holder for value unless it paid to the seller of the note the amount due for the same before notice of infirmities and defenses was acquired by it. Section 4105, Rev. Laws 1910, provides: "The title of a person who negotiates an instrument is defective within the meaning of this chapter -defective title. when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to fraud."

Under the evidence here, and under the finding of the court, the total consideration for the note in question was usury, and illegal. That being true, then, then, under the statute above quoted, the title of Givens to said note was defective within the meaning of said statute. And under § 4109, Revised Laws 1910, when the title is defective, the burden is on the holder to den of proof- prove that he, or some person under whom he claims, acquired the title as a holder in due course. That being true, then it was incumbent upon the state here to show that the

Evidence-bur

consideration.

In holding that the mere deposit of the proceeds of a negotiable note in a deposit account is not such a payment of value as will constitute the bank a holder in due course, but that it will be such if the entire amount of the proceeds is drawn out on the faith of the instrument, the court, in the reported case (STATE v. EMERY, ante, 234), is in harmony with practically all of the decisions in this country (see note to OLD NAT. BANK v. GIBSON, post, 252, especially II. c, and III. a). But the holding that the "entire consideration" must have been paid out would be, if no statute had been involved, contrary to the weight of authority. See III. e, and IV. of the note. But see VI. as to effect of statute upon the question.

695; Missouri K. & T. R. Co. v. Newton, 60 Tex. Civ. App. 116, 127 S. W. 873; Crilly v. Gallice, 78 C. C. A. 525, 148 Fed. 835; Stoy v. Bledsoe, 31 Ind. App. 643, 68 N. E. 907; Marion Bond Co. v. Blakely, 30 Ind. App. 374, 65 N. E. 291, 66 N. E. 71; 1 Dan. Neg. Inst. p. 924; Noell v. Gaines, 68 Mo. 649; Hodge v. Wallace, 129 Wis. 84, 116 Am. St. Rep. 938, 108 N. W. 212; Merchants Nat. Bank v. Brisch, 154 Mo. App. 631, 136 S. W. 28; Indiana Bond Co. v. Bruce, 13 Ind. App. 550, 41 N. E. 958; Ft. Wayne, C. & L. R. Co. v. Woodward, 112 Ind. 119, 13 N. E. 260; Buchanan v. Berkshire L. Ins. Co. 96 Ind. 510; Green v. Louthain, 49 Ind. 139; First Nat. Bank v. Peck, 8 Kan. 660; Lewis v. Lewis, 58 Kan. 563, 50 Pac. 454; Douthitt v. Farrell, 60 Kan. 195, 56 Pac. 9; Wheeler & W. Mfg. Co. v. Howard, 28 Fed. 742; Tiedeman, Com. Paper, 297; 2 Randolph, Com. Paper, 2d ed. § 1047; Hart v. Stickney, 41 Wis. 630, 22 Am. Rep. 728; Newell v. Gregg, 51 Barb. 263; Peat v. Chicago, M. & St. P. R. Co. 128 Wis. 92, 107 N. W. 355; First Nat. Bank v. Forsyth, 67 Minn. 258, 64 Am. St. Rep. 415, 69 N. W. 909; Joyce, Defenses to Com. Paper, $$ 472-474; Nashville Trust Co. v. Smythe, 94 Tenn. 513, 27 L.R.A. 663, 45 Am. St. Rep. 748, 29 S. W. 903; Ray v. Baker, 165 Ind. 74, 74 N. E. 624; State v. Baltimore & O. C. R. Co. 120 Ind. 298, 22 N. E. 307; First Nat. Bank v. Ruhl, 122 Ind. 279, 23 N. E. 766; Moore v. Sargent, 112 Ind. 484, 14 N. E. 466; 1 Pom. Eq. Jur. 439; Malcolm v. Allen, 49 N. Y. 448; Bradley v. Whicker, 23 Ind. App. 380, 55 N. E. 490; Bunting v. Mick, 5 Ind. App. 289, 31 N. E. 378, 1055; Parker v. Hickman, 61 Ind. App. 159, 111 N. E. 649; McMillan v. Gardner, 88 Kan. 279, 128 Pac. 391, Ann. Cas. 1914B, 755; Snyder v. Miller, 71 Kan. 410, 69 L.R.A. 250, 114 Am. St. Rep. 489, 80 Pac. 970; Voris v. Ferrell, 57 Ind. App. 12, 103 N. F. 122; Horn v. Bennett, 135 Ind. 158, 24 L.R.A. 800, 34 N. E. 321, 956; Bank of Bushnell v. Buck Bros. 161 Iowa, 362, 142 N. W. 1004; McNight v. Parsons, 136 Iowa, 390, 22 L.R.A. (N.S.) 718, 125 Am. St. Rep. 265, 113 N. W. 858, 15 Ann. Cas. 665.

The plaintiff bank was not a purchaser for value or a holder in due course.

1 Dan. Neg. Inst. p. 909; Joyce, Defenses to Com. Paper, p. 243; Union Nat. Bank v. Winsor, 101 Minn. 470, 118 Am. St. Rep. 641, 112 N. W. 999, 11 Ann. Cas. 204; Manufacturers Nat. 6 A.L.R.-16.

Bank v. Newell, 71 Wis. 309, 37 N. W. 422.

It was the duty of the bank to know what the terms of the deed of trust were, and especially so in the state of Indiana, where the conditions of this deed of trust were to be performed.

Stoy v. Bledsoe, 31 Ind. App. 643, 68 N. E. 907; Billingsley v. Dean, 11 Ind. 331; Brown v. Maulsby, 17 Ind. 10; Jones v. Schulmeyer, 39 Ind. 119; Buchanan v. Berkshire L. Ins. Co. 96 Ind. 510.

The burden of proof was upon the plaintiff bank to prove that it was a holder of said notes in due course.

Bank of Bushnell v. Buck Bros. 161 Iowa, 362, 142 N. W. 1004; McNight v. Parsons, 136 Iowa, 390, 22 L.R.A. (N.S.) 718, 125 Am. St. Rep. 265, 113 N. W. 858, 15 Ann. Cas. 665.

Messrs. Brown, Jackson, & Knight, for defendant in error:

Plaintiff became a holder of the notes before they were overdue, and without notice that they had been previously dishonored.

1 Dan. Neg. Inst. p. 945; Pape v. Hartwig, 23 Ind. App. 333, 55 N. E. 271; Johnson County Sav. Bank v. Capito, 47 Ind. App. 461, 94 N. E. 797: Wilson v. National Fowler Bank, 47 Ind. App. 689, 95 N. E. 269; First Nat. Bank v. Rupert, 178 Ind. 669, 100 N.. E. 5.

The plaintiff bank took them in good faith, and for value.

Mayer v. Heidelbach, 123 N. Y. 332. 9 L.R.A. 850, 25 N. E. 416; Greenwood v. Lowe, 7 La. Ann. 197; Mickles v. Colvin, 4 Barb. 304; Bacon v. Holloway, 2 E. D. Smith, 159; Howlett v. Fitzgibbon, 1 N. Y. Supp. 321; Adams v. Soule, 33 Vt. 538; Lally v. Colgate, 10 Jones & S. 544; Russell v. Hadduck, 8 Ill. 233, 44 Am. Dec. 693; Matlock v. Scheuerman, 51 Or. 49, 17 L.R.A. (N.S.). 747, 93 Pac. 823; 2 Randolph, Com. Paper, § 479.

At the time the notes were negotiated to it, the bank had no notice of any infirmity in them, or defect in the title of the person negotiating them.

Tescher v. Merea, 118 Ind. 586, 21 N. E. 316; Wilson v. National Fowler Bank, 47 Ind. App. 689, 95 N. E. 269: Parker v. Hickman, 61 Ind. App. 152, 111 N. E. 649; Colvert v. Harrington. 61 Ind. App. 608, 112 N. E. 249; First Nat. Bank v. Rupert, 178 Ind. 669, 100 N. E. 5; 1 Dan. Neg. Inst. § 796; Merchants & M. Nat. Bank v. Ohio Valley Furniture Co. 57 W. Va. 625, 70 L.R.A. 312, 50 S. E. 880; Shaw v. North Penn