47-3302

47-3302. Holder in due course

A. Subject to subsection C of this section and section 47-3106, subsection D,
"holder in due course" means the holder of an instrument if:

1. The instrument when issued or negotiated to the holder does not bear such
apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete
as to call into question its authenticity; and

2. The holder took the instrument:

(a) For value;

(b) In good faith;

(c) Without notice that the instrument is overdue or has been dishonored or that
there is an uncured default with respect to payment of another instrument issued as part
of the same series;

(d) Without notice that the instrument contains an unauthorized signature or has
been altered;

(e) Without notice of any claim to the instrument described in section 47-3306; and

(f) Without notice that any party has a defense or claim in recoupment described in
section 47-3305, subsection A.

B. Notice of discharge of a party, other than discharge in an insolvency
proceeding, is not notice of a defense under subsection A of this section, but discharge
is effective against a person who became a holder in due course with notice of the
discharge. Public filing or recording of a document does not of itself constitute notice
of a defense, claim in recoupment or claim to the instrument.

C. Except to the extent a transferor or predecessor in interest has rights as a
holder in due course, a person does not acquire rights of a holder in due course of an
instrument taken:

1. By legal process or by purchase in an execution, bankruptcy or creditor's sale
or similar proceeding;

2. By purchase as part of a bulk transaction not in ordinary course of business of
the transferor; or

3. As the successor in interest to an estate or other organization.

D. If, under section 47-3303, subsection A, paragraph 1, the promise of performance
that is the consideration for an instrument has been partially performed, the holder may
assert rights as a holder in due course of the instrument only to the fraction of the
amount payable under the instrument equal to the value of the partial performance divided
by the value of the promised performance.

E. If the person entitled to enforce an instrument has only a security interest in
the instrument and the person obliged to pay the instrument has a defense, claim in
recoupment or claim to the instrument that may be asserted against the person who granted
the security interest, the person entitled to enforce the instrument may assert rights as
a holder in due course only to an amount payable under the instrument which, at the time
of enforcement of the instrument, does not exceed the amount of the unpaid obligation
secured.

F. To be effective, notice must be received at a time and in a manner that gives a
reasonable opportunity to act on it.

G. This section is subject to any law limiting status as a holder in due course in
particular classes of transactions.