§490:3-302  Holder in due course.  (a) 
Subject to subsection (c) and section 490:3-106(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 (i) for value,
(ii) in good faith, (iii) 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, (iv) without notice that
the instrument contains an unauthorized signature or has been altered, (v)
without notice of any claim to the instrument described in section 490:3-306,
and (vi) without notice that any party has a defense or claim in recoupment
described in section 490:3-305(a).



(b)  Notice of discharge of a party, other than
discharge in an insolvency proceeding, is not notice of a defense under
subsection (a), 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 (i) by legal
process or by purchase in an execution, bankruptcy, or creditor's sale or
similar proceeding, (ii) by purchase as part of a bulk transaction not in
ordinary course of business of the transferor, or (iii) as the successor in
interest to an estate or other organization.



(d)  If, under section 490:3-303(a)(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 (i) the person entitled to enforce an
instrument has only a security interest in the instrument and (ii) 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. [L 1991, c 118, pt of §1]



 



Case Notes



 



  Where genuine issues of material fact existed as to whether
plaintiff was a holder in due course, including whether plaintiff took
mortgagor's note "for value" and whether plaintiff took the note
"in good faith" and "without notice that the note was
overdue" or that mortgagor had "a defense or claim in recoupment",
trial court erred in granting plaintiff's motion for summary judgment.  99 H.
173 (App.), 53 P.3d 312.