The person in possession of a bill payable to bearer or indorsed in blank is entitled to receive payment in due course, and tho he may be a thief, the finder or a fraudulent holder, payment in good faith to him is valid.
A bill or note may be delivered to be held in escrow, that is, to be held as a mere blank writing until the happening of some event, or the fulfilment of some condition. Upon the happening of the event or the fulfilment of the condition, the bill or note becomes operative, and delivery is complete.
17. Holder in due holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following conditions, namely: (a) that he became the holder of it before it was overdue, and without notice that it had been pre viously dishonored, if such was the fact; (b) that he took the bill in good faith and for value, and that at the time the bill was negotiated to him he had no no tice of any defect in the title of the person who nego tiated it.
A holder in due course is to be distinguished from a mere holder. The holder of a bill or note is the payee or indorsee thereof who is in possession of it, or who is the bearer thereof. He may or may not be the legal owner. The term is a general one and may mean a holder in due course. A person is a holder if he has possession and is' entitled at law to recover or receive the contents of a bill or 'note from another person. Every holder of a bill is prima facie deemed to be a holder in due course, unless it is shown that the accept ance, issue or subsequent negotiation of the bill is affected with fraud or other irregularity, when the burden of proof is on the holder to show that he is a holder in due course, unless he can show that subse quent to the alleged fraud or irregularity, value in good faith has been given by some other holder in due course. The expression "holder in due course" is the equivalent of the expression "bona fide holder for value, l‘ithout notice." When value has, at any time, been given for a bill, the holder is deemed to be a holder for value as regards the acceptor, and all parties to the bill who became parties prior to such time. The holder for value may not be a holder in clue course ; he may only have come into possession of the bill or note after maturity and dishonor, but he can recover, tho he has not given value himself, if he can show that some previous holder has given value.
18. Regularity of face of instrument.—The statute requires that to constitute a person a holder in due course, he must take a bill complete and regular on the face of it, under the conditions above mentioned.
In other words, the instrument must fulfil the require ments of our definition of a bill or note. Thus, an instrument expressed to be payable on a contingency is not a bill, and the happening of the event does not cure the defect. If the bill contains an erasure or some ambiguous or uncertain clause, or if it is un dated and is payable at a fixed period after date, it is irregular. The transferee should be careful to dis cover whether the irregularities are due to the instru ment having been issued out of the regular course of business, or, if in the regular course of business, whether they can be corrected or explained.
A bill is not invalid merely because it is undated. If a person takes a bill which is not complete, it will not be enforceable against any person who became a party thereto prior to the completion, unless it is filled up and completed within a reasonable time, and strictly in accordance with the authority given. If, after completion, it is negotiated to a holder in due course, the latter may enforce it as though it had been filled up within a reasonable time, and strictly in ac cordance with the authority given. It has been held that a check is not irregular on its face if post-dated. The bill must not appear on its face to have been can celled; the cancelation, if made unintentionally or un der a mistake, or under the authority of the holder, is inoperative, but the burden of proof lies on the party who alleges the mistake or lack of authority.
19. holder in due course must be come the holder of the bill before it is overdue, other wise he is not a holder in due course. A note is due when the principal is to be paid. It has been laid down that, tho the interest may be overdue, this does not deprive a holder of his quality as a holder in due course. A bill payable on demand matures a reason able time after demand. It is deemed to be overdue when it can be seen from the instrument that it has been in circulation for an unreasonable time. When a note is payable on demand and has been indorsed, it must be presented for payment within a reasonable time, or the indorser is discharged. If, however, it has been delivered, with the assent of the indorser as a collateral or continuing security, it need not be pre sented for payment so long as it is held for such se curity.