BONA FIDE HOLDER FOR VALUE. The Negotiable Instruments Act provides, § 52: A holder in due course is a holder who has taken the instrument under the follow ing 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 dishonored, 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 had no notice of any infirmity in the instru ment or defect in the title of the person ne gotiating it.
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.
If he has had notice of any infirmity in the instrument or defect in the title of the person he took it from before he had paid the full amount agreed to be paid, he is a holder in due course only to the amount theretofore paid by him. The title of a per son who negotiates an instrument is defec tive when he obtained it, or any signature to it, by fraud, duress, or force and fear, or other unlawful means, or for an illegal cou sideration, pr when he negotiates it in breach of faith, or under such circumstances as amount to a fraud. To constitute notice of
an infirmity, etc., 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 in strument amounted to bad faith.
In the hands of any holder other than a holder in due course, a negotiable instru ment 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 is not himself party to any fraud or illegality affecting the instrument, has al/ the rights of such former holder in respect of all parties prior to the latter.
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 ne gotiated the instrument is defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course ; but this does not apply in favor of a party who be came bound on the instrument prior to the acquisition of such defective title. See NE GOTIABLE INSTRUMENTS for the States, etc., in which it is enacted.