Effect of indorsement by infant or corporation. Forged signature; effect of. Presumption of consideration. Consideration; what constitutes. What constitutes holder for value. When lien on instrument constitutes holder for value. Effect of want of consideration. Liability of accommodation party. What constitutes negotiation. Sec. 3171. [Effect of indorsement by infant or corporation.] The indorsement or assignment of the instrument by a corporation or by an infant passes the property herein, notwithstanding that from want of capacity the corporation or infant may incur no liability thereon. Sec. 3171. [Forged signature; effect of.] Where a signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature. unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. RE-SUBDIVISION 2. Consideration. Sec. 3171. [Presumption of consideration.] Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. Section 3171r. [Consideration; what constitutes.] Value is any consideration sufficient to support a simple contract. An antecedent or preëxisting debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time. Sec. 3171. [What constitutes holder for value.] Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time. Sec. 3171. [When lien on instrument constitutes holder for value.] Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien. Sec. 3172. [Effect of want of consideration.] Absence or failure of consideration is matter of defense as against any person not a holder in due course and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise. Sec. 31720. [Liability of accommodation party.] An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party. RE-SUBDIVISION. 3. Sec. 3172b. [What constitutes negotiation.] An instrument is negotiated when it is transferred from one per son to another in such manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery. If payable to order it is negotiated by the indorsement of the holder completed by delivery. Sec. 3172c. how made. Indorsement; how made.] The indorse- Indorsement; ment must be written on the instrument itself, or upon a paper attached thereto. The signature of the indorser without additional words is a sufficient indorsement. must be of Sec. 3172d. [Indorsement must be of entire instru- Indorsement ment.] The indorsement must be an indorsement of the entire instruentire instrument. An indorsement which purports to trans- ment. fer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue. An indorse Sec. 3172e. [Kinds of indorsement.] ment may be either special or in blank; and it may also be either restrictive or qualified or conditional. Sec. 3172f. [Special indorsement; indorsement in blank.] A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable; and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery. Kinds of indorsement. Special in dorsement; endorsement in blank. to Blank indorsement; how changed Sec. 3172g. [Blank indorsement; how changed to special indorsement.] The holder may convert a blank indorsement into a special indorsement by writing over the to special insignature of the indorser in blank any contract consistent with the character of the indorsement. dorsement. Sec. 3172h. [When indorsement restrictive.] An in- When indorsedorsement is restrictive which either: 3. Prohibits the further negotiation of the instru Constitutes the indorsee the agent of the indorser; Vests the title in the indorsee in trust for or to the use of some other person. But the mere absence of words implying power to negotiate does not make an indorsement restrictive. Sec. 31721. [Effect of restricting indorsement; rights of indorsee. A restrictive indorsement confers upon the indorsee the right I. To receive payment of the instrument. 2. To bring any action thereon that the indorser could bring. 3. To transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so. But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement. ment restrictive. Sec. 3172j. [Qualified indorsement.] A qualified in- Qualified dorsement constitutes the indorser a mere assignor of the indorsement. Conditional indorsement. Indorsement of instru to bearer. or any title to the instrument. It may be made by adding to the Sec. 3172k. [Conditional indorsement.] Where an indorsement is conditional a party required to pay the instrument may disregard the condition and make payment to the indorsee or his transferee, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated, will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally. Sec. 3172l. [Indorsement of instrument payable to ment payable bearer.] Where an instrument payable to bearer is indorsed specially, it may nevertheless be further negotiated by de-` livery, but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement. Sec. 3172m. [Indorsement where payable to two or more persons.] Where an instrument is payable to the order of two or more payees, or indorsees who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others. Indorsement when payable to two or more persons. Effect of instrument drawn or indorsed to a person as cashier. Indorsement where name is Sec. 3172n. [Effect of instrument drawn or indorsed to a person as cashier.] Where an instrument is drawn or indorsed to a person as "cashier" or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer; and may be negotiated by either the indorsement of the bank or corporation or the indorsement of the officer. Sec. 31720. [Indorsement where name is misspelled, misspelled, etc. et cetera.] Where the name of a payee or endorsee is wrongly designated or misspelled, he may indorse the instrument as therein described, adding, if he think fit, his proper signature. Indorsement in representative capacity. Time of indorsement; presumption. Place of indorsement, presumption. Continuation of negotiable character. Striking out indorsement. Sec. 3172p. [Indorsement in representative capacity.] Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. Sec. 31729. [Time of indorsement; presumption.] Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed prima facie to have been effected before the instrument was overdue. Sec. 31727. [Place of indorsement; presumption.] Except where the contrary appears every indorsement is presumed prima facie to have been made at the place where the instrument is dated. Sec. 31728. [Continuation of negotiable character.] An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise. Sec. 3172t. [Striking out indorsement.] The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument. out endorse Sec. 3172u. [Transfer without endorsement; effect Transfer withof.] Where the holder of an instrument payable to his order ment; effect. transfers it for value without indorsing it, the transfer vests of. in the transferee such title as the transferrer had therein and the transferee acquires in addition the right to have the indorsement of the transferrer. 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. Sec. 31720. [When prior party may negotiate instrument.] Where an instrument is negotiated back to a prior party, such party may, subject to the provisions of this chapter, reissue and further negotiate the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable. RE-SUBDIVISION 4. Rights of the Holder. Sec. 3172w. [Rights of holder to sue: payment.] Th holder of a negotiable instrument may sue thereon in his own name; and payment to him in due course discharges the instrument. When prior negotiate in party may strument. Rights of holder to sue; payment. What consti Sec. 3172.x. [What constitutes a holder in due course.] A holder in due course is a holder who has taken the instru- te tutes a holder ment under the following conditions: 1. That it is complete and regular upon its face. 2. That he became the holder of it before it was overdue, and without notice that it had been previously dishoncred, if such was the fact. 3. That he took it in good faith and for value. 4. That at the time it was negotiated to him he ha no notice of any infirmity in the instrument or defect in the title of the person negotiating it. Sec. 3172y. [When person not deemed holder in due course.] Where an instrument payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed a holder in due course. Sec. 31722. [Notice before full amount paid.] Where the transferee receives notice of any infirmity in the instrument or defect in the title 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. course. When person holder in due course. not deemed defective. Sec. 3173. [When title defective.] The title of a per- When title son who negotiates an instrument is defective within the meaning of this chapter when he obtained the instrument. or any signature thereto, by fraud, duress, or force and What constitutes notice of defect. Rights of holder in due course. When sub defenses. 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 a fraud. Sec. 3173a. [What constitutes notice of defect.] To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith. Sec. 31736. [Rights of holder in due course.] A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties, among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon. Sec. 3173c. [When subject to original defenses.] In ject to original the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. 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 instru ment, has all the rights of such former holder in respect of all parties prior to the latter. Who deemed holder in due course. Liability of maker. Liability of drawer. Liability of acceptor. Sec. 3173d. [Who deemed holder in due course.] 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 person under whom he claims acquired the title as a holder in due course. But the last mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title. RE-SUBDIVISION 5. Liabilities of Parties. Sec. 3173e. [Liability of maker.] The maker of a negotiable instrument by making it engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse. Sec. 3173f. [Liability of drawer.] The drawer by drawing the instrument admits the existence of the paye and his then capacity to indorse; and engages that on de presentment the instrument will be accepted and paid, or both, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken he will pay the amount thereof to the holder, or to any sub sequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder. Sec. 3173g. [Liability of acceptor.] The acceptor by accepting the instrument engages that he will pay it accord ing to the tenor of his acceptance and admits: |