thereon, must show that he is bona fide purchaser or derived title from such a purchaser.-First Natl. Bank v. Warsaw Drug Co., 166 N. C. 99,. 81 S. E. 993.

Fidelity Trust Co. v. Whitehead, 165 N. C. 74, 80 S. E. 1065.

Merchants Natl. Bank of Indianapolis v. Branson, 165 N. C. 344, 81 S. E.

410.

J. L. Smathers & Co. v. Toxaway Hotel Co., 168 N. C. 69, 84 S. E. 47. Bills and Notes § 351. A transferee of notes and mortgages after maturity holds them subject to any defenses existing against the transferor.Wilkins-Ricks Co. v. Welch, 179 N. C. 266, 102 S. E: 316.

Bills and Notes §§ 214, 330. An indorsement written on a note payable to order, but not signed by the payee, or by any one in his behalf, does not make the transferee of the note a holder in due course, but gives him only an equitable title thereto.-Critcher v. Ballard, 180 N. C. 111, 104 S. E. 134.

Bills and Notes § 337. A purchaser of a negotiable instrument in due course before maturity does not have notice of equities, merely because he knows facts which would put a reasonably prudent man on inquiry which would result in ascertaining the equities.-Ibid.

Banks and Banking § 165. A bank acquiring in due course a draft for price of goods, with bill of lading attached, is the owner thereof, and the proceeds in the possession of another bank collecting the draft cannot be attached as the property of the seller; but, where the bank merely took the draft and bill of lading as a collecting agent, it acquires no property right in proceeds.-Elm City Lumber Co. v. Childerhose & Pratt, 167 N. C. 34, 83 S. E. 22.

Bills and Notes § 330. An indorsee of a negotiable instrument is not de prived of the position as holder in due course by the fact, and that alone, that said indorsement is in form "without recourse.''-Bank of Sampson v. Hatcher, 151 N. C. 359, 66 S. E. 308.

Bills and Notes § 330. Where a note was payable to a certain person or order, its indorsement was necessary to transfer title.-Myers v. Petty, 153 N. C. 462, 69 S. E. 417.

Bills and Notes § 330. The holder of a draft, payable to order, in the absence of proof of indorsement by the payee, was not a bona fide purchaser for value without notice.-Mayers v. MeRimmon, 140 N. C. 640, 53 S. E. 447.

Bills and Notes § 330. The transfer without indorsement of a negotiable instrument payable to order does not pass the legal title, and hence the transferee is not a bona fide holder.-Breese v. Crumpton, 121 N. C. 122, 28 S. E. 351.

Bills and Notes § 351. Where purchase money notes secured by deed of trust, under which a purchaser of the notes proposed to sell the lands so incumbered, were past due at the time of his purchase, he took them subject to any equities and defenses existing in favor of the land purchaser against the vendor, such as the latter's agreement that prior liens created by deeds of trust to secure notes executed by him should be dis charged before the purchase money notes should be valid obligations, and in such case the purchaser of the notes might be restrained from exercising the power of sale in the trust deed.-Guthrie v. Moore, 182 N. C. 10, 108 S. E. 334.

Bills and Notes § 375. The principle that a note for a gambling debt cannot be collected does not extend to suits by an innocent indorsee for

value and holder in due course, against the indorser on his contract of indorsement, which is by virtue of C. S. 3047, a contract independent of the instrument on which it appears, and guarantees that the note is a valid and subsisting obligation.-Wachovia Bank & Trust Co. v. Crafton, 181 N. C. 404, 107 S. E. 316.

370. 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.

C. S., s. 3034; Rev., s. 2202; 1899, c. 733, s. 53.

Bills and Notes § 348. In determining what is a reasonable or unreasonable time, regard is to be had to the nature of the instrument and the facts of the particular case; and where a party obtained a cashier's check from a bank in this state and negotiated the same to a party residing in Virginia in five days thereafter, such negotiation was within a reasonable time. Singer Mfg. Co. v. Summers, 143 N. C. 102, 55 S. E. 522.

371. Notice before full amount paid. Where the transferee has received 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.

C. S., s. 3035; Rev., s. 2203; 1899, c. 733, s. 54.

Bills and Notes § 352. Where the original consideration of the paper is illegal or fraudulent, or it is taken as collateral security, the right of recovery is restricted to the consideration actually paid by the indorsee before notice of the fraud, or the amount of the debt to which it is collateral.-U. S. Natl. Bank of N. Y. v. McNair, 116 N. C. 550, 21 S. E. 389.

372. When title defective. The title of a person 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 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. C. S., s. 3036; Rev., s. 2204; 1899, c. 733, s. 55.

Moon v. Simpson, 170 N. C. 335, 87 S. E. 118.

Bills and Notes § 351. The familiar general rule is that an indorsee of negotiable paper for value before maturity, without notice of any infirmity, takes it clear of all equities and defenses between antecedent parties, and is, of course, entitled to recover the full amount of the same, according to its tenor. The execptions to this rule are:

(1) When by statute the paper is void in whole or in part from its inception, as for usury. In such cases it is void to the same extent into whomsoever hands it may pass, even if acquired before maturity, for value and without notice, and the sole remedy of the holder for the deficiency is against the indorser.

(2) Where the original consideration of the paper is illegal or fraudulent, or it is taken as collateral security, the right of recovery is restricted

to the consideration actually paid by the indorsee before notice of the fraud.

But the exception does not extend further, not even to cases where the the note was issued without any consideration, though it may be purchased by the indorsee for less than its face value.-U. S. Natl. Bank of N. Y. v. McNair, 116 N. C. 550, 21 S. E. 389.

373. What constitutes notice of defect. To constitute a 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.

C. S., s. 3037; Rev., s. 2205; 1899, c. 733, s. 56.

Bills and Notes § 337. A purchaser of a negotiable instrument in due course before maturity does not have notice of equities, merely because he knows facts which would put a reasonably prudent man on inquiry which would result in ascertaining the equities.-Critcher v. Ballard, 180 N. C. 111, 140 S. E. 134.

Bills and Notes § 525. In an action by an indorsee of notes, evidence held to show that the indorsee was a bona fide purchaser for value without notice of any infirmity.-Franklin Nat. Bank v. Roberts Bros. Co., 168 N. C. 473, 84 S. E. 706.

Bills and Notes § 525. Where the plaintiff sues on a negotiable note, claiming to be a holder in due course, and fraud in its execution is shown, the defendant may prove actual or constructive notice of fraud in rebuttal of the plaintiff's evidence, if he has offered sufficient proof to require it, or he may rely upon plaintiff's own evidence upon the issue as to whether he knew or should have known of it.-Merchants Nat. Bank v. Branson, 165 N. C. 344, 81 S. E. 410.

Bills and Notes § 525. Where fraud in the executior of a negotiable note has been shown, the burden of proof is on the plaintiff, an indorser thereof, and claiming as a holder in due course, to show not only that he acquired the paper for value before maturity, but also without notice of the infirmity of the instrument.-Ibid.

Bills and Notes § 525. In an action on a note by an indorsee, evidence held insufficient to charge plaintiff with knowledge of any fraud in its inducement.-First Nat. Bank v. Brown, 160 N. C. 23, 75 S. E. 1086.

Bills and Notes § 497. The burden was on the maker of a note, in a suit thereon by a purchaser for value before maturity from one to whom the maker gave the note, to show that plaintiff knew of the infirmity relied on by the maker, or acted in bad faith.-Ibid.

Bills and Notes § 339. A holder of a note has notice of infirmity in the instrument or defect in the title of the person negotiating only when he has actual knowledge of the infirmity or defect, or the facts are such that the mere taking of the instrument amounts to bad faith, and he cannot be held to have notice of the facts which an inquiry would reveal.-J. L. Smathers & Co. v. Toxaway Hotel Co., 162 N. C. 346, 78 S. E. 224.

Bills and Notes § 332. A mala fide purchaser is made out only by proof of actual knowledge of the infirmity or defect or knowledge of such facts that the taking of the instrument amounted to bad faith.-Ibid.

Bills and Notes § 537. Whether holder of a note, negotiated by one who participated in its execution in fraud of creditors, took it without notice of such fraud, held for the jury.—Ibid.

Bills and Notes § 351. Where purchase money notes secured by deed of trust, under which a purchaser of the notes proposed to sell the lands so incumbered, were past due at the time of his purchase, he took them subject to any equities and defenses existing in favor of the land purchaser against the vendor, such as the latter's agreement that prior liens created by deeds of trust to secure notes executed by him should be discharged before the purchase money notes should be valid obligations, and in such case the purchaser of the notes might be restrained from exercising the power of sale in the trust deed.-Guthrie v. Moore, 182 N. C. 24, 108 S. E. 334.

374. 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 them. selves, and may enforce the payment of the instrument for the full amount thereof against all parties liable thereon.

C. S., s. 3038; Rev., s. 2206; 1899, c. 733, s. 57.

Standing Stone Nat. Bank v. Walser, 162 N. C. 53, 77 S. E. 1006.

Bills and Notes § 443. The holder in due course of a note indorsed to it as collateral security has the legal right to collect it, and may maintain an action thereon against the maker; it not appearing the indorser's debt has been paid.-American Nat. Bank of Richmond v. Hill, 169 N. C. 235, 85 S. E. 209.

375. When subject to original defenses. In 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 nonnegotiable. 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 instrument has all the rights of such former holder in respect of all parties prior to the latter.

C. S., s. 3039; Rev., s. 2207; 1899, c. 733, s. 58.

Bills and Notes § 351. The purchaser of a note after its maturity takes it subject to all defenses available against it in the hands of the payee.Causey v. Snow, 122 N. C. 326, 29 S. E. 359.

Bills and Notes § 351. One taking a note by assignment after maturity takes it with notice of all equities, and other rights of the indorser, and subject to them.-Sykes v. Everett, 167 N. C. 600, 83 S. E. 585.

376. 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.

C. S., s. 3040; Rev., s. 2208; 1899, c. 733, s. 59.

Bills and Notes § 497. When there is evidence tending to show fraud in the execution of a note, the burden is on plaintiff to show that he was a bona fide purchaser of the note, and not on the defendants to establish the negative of that proposition.-Dennison v. Spivey, 180 N. C. 220, 104 S. E. 370.

Bills and Notes § 497. In an assignee's action on acceptances, defendant having pleaded fraud in execution and introduced evidence, burden was on plaintiff to prove by greater weight of evidence that it was holder in due course for value and without notice.-Metropolitan Discount Co. v. Baker, 176 N. C. 546, 97 S. E. 495.

Bills and Notes § 497. In an action by indorsees on notes, establishment of fraud held to cast burden on plaintiffs to show acquisition of notes before maturity in good faith for value, without notice of defect in title of indorser.-Wilson v. Lewis, 170 N. C. 47, 86 S. E. 804.

Bills and Notes § 497. Every holder of a note duly executed is prima facie a holder in due course. Gulf States Steel Co. v. Ford, 173 N. C. 195, 91 S. E. 844.

Bills and Notes § 497. It is error to place on an indorsee, who has proved the indorsement, the burden of proving that he is a bona fide purchaser; there being no evidence that his title is defective.-Moon v. Simpson, 170 N. C. 335, 87 S. E. 118.

Bills and Notes § 497. Where fraud in the procurement of note is pleaded as a defense to the payment of a note, with evidence tending to establish it, the burden of proof is on the plaintiff claiming to be a holder in due course, to show that he purchased in good faith and without notice of any infirmity or defect, for value and before maturity.-Fidelity Trust Co. v. Whitehead, 165 N. C. 74, 80 S. E. 1065.

ART. 6. LIABILITIES OF PARTIES.

377. 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.

C. S., s. 3041; Rev., s. 2209; 1899, c. 733, s. 60.

378. Liability of drawer. The drawer by drawing the instru ment admits the existence of the payee and his then capacity to indorse, and engages that on due presentment the instrument will be accepted or 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 subsequent 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.

C. S., s. 3042; Rev. s. 2210; 1899, c. 733, s. 61.