§490:3-305  Defenses and claims in
recoupment.  (a)  Except as stated in subsection (b), the right to enforce
the obligation of a party to pay the instrument is subject to the following:



(1)  A defense of the obligor based on (i) infancy of
the obligor to the extent it is a defense to a simple contract, (ii) duress,
lack of legal capacity, or illegality of the transaction which, under other
law, nullifies the obligation of the obligor, (iii) fraud that induced the
obligor to sign the instrument with neither knowledge nor reasonable
opportunity to learn of its character or its essential terms, or (iv) discharge
of the obligor in insolvency proceedings;



(2)  A defense of the obligor stated in another
section of this article or a defense of the obligor that would be available if
the person entitled to enforce the instrument were enforcing a right to payment
under a simple contract; and



(3)  A claim in recoupment of the obligor against the
original payee of the instrument if the claim arose from the transaction that
gave rise to the instrument; but the claim of the obligor may be asserted
against a transferee of the instrument only to reduce the amount owing on the
instrument at the time the action is brought.



(b)  The right of a holder in due course to
enforce the obligation of a party to pay the instrument is subject to defenses
of the obligor stated in subsection (a)(1), but is not subject to defenses of
the obligor stated in subsection (a)(2) or claims in recoupment stated in
subsection (a)(3) against a person other than the holder.



(c)  Except as stated in subsection (d), in an
action to enforce the obligation of a party to pay the instrument, the obligor
may not assert against the person entitled to enforce the instrument a defense,
claim in recoupment, or claim to the instrument (section 490:3-306) of another
person, but the other person's claim to the instrument may be asserted by the
obligor if the other person is joined in the action and personally asserts the
claim against the person entitled to enforce the instrument.  An obligor is not
obliged to pay the instrument if the person seeking enforcement of the
instrument does not have rights of a holder in due course and the obligor
proves that the instrument is a lost or stolen instrument.



(d)  In an action to enforce the obligation of
an accommodation party to pay an instrument, the accommodation party may assert
against the person entitled to enforce the instrument any defense or claim in
recoupment under subsection (a) that the accommodated party could assert
against the person entitled to enforce the instrument, except the defenses of
discharge in insolvency proceedings, infancy, and lack of legal capacity. [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.