of the maker and acceptor is a primary liability is recognized by the following sections: Section 60. 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. Section 62. The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance, and admits (1) the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument, and (2) the existence of the payee and his then capacity to indorse. The most distinctive feature of the law of negotiable instruments is the special position accorded to the holder in due course. The Negotiable Instruments Law provides as follows: Section 57. 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 themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon. Section 58. 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 non-negotiable. Defenses which cannot be set up to defeat the claim of the holder in due course are called personal defenses; defenses which may be successfully interposed against the holder in due course are called real defenses. All defenses and claims not real are personal. Real defenses divide themselves into three groups: (1) Those where in reality there never was a contract executed by the party sued; (2) those where there is a contract but for reasons of public policy the holder in due course is not permitted to enforce it; (3) where there was a contract but the party suing had no title thereto. The first group-where there never was a contract executed by the defendant-is further divided into three groups: (a) Where the defendant's name was forged or otherwise placed upon the instrument without his authority; (b) where the defendant did. sign the instrument, but did so under such circumstances that he had no reason to suppose that he was executing a negotiable instrument; (c) where the defendant knowingly signed a negotiable instrument, but left it in an incomplete state, the instrument getting into circulation without the authority of the maker and without negligence on his part. In the second group of cases-where there was a real contract executed by the defendant-we have two types of situations: (a) Certain kinds of illegal contracts; (b) contracts executed by persons who do not have full capacity to contract. In the third class, the party attempting to enforce the instrument is claiming title through a forged indorsement, or is himself a thief or other converter of bearer paper. SECTION 2.-DEFENSES AND CLAIMS OF OWNERSHIP NOT AVAILABLE AGAINST HOLDERS IN DUE COURSE (a) ABSENCE OF CONSIDERATION INTERSTATE FINANCE CO. v. SCHROEDER. (Supreme Court of Appeals of West Virginia, 1914. 74 W. Va. 67, 81 S. E. 552.) MILLER, P. The action, begun before a justice, was upon three negotiable instruments, drafts or inland bills of exchange, dated Chicago, Ill., March 31, 1910, and payable in six, eight and ten months respectively, at the office of the drawer, drawn in its favor, by Commercial Jewelry Company, on the defendant Henry A. Schroder, and by him duly accepted, and each for the sum of forty-eight dollars. The case was tried in the circuit court * * * resulting in a verdict and judgment for plaintiff for $151.92, the full amount sued for. * * * * * ** The first complaint is that the circuit court erred in refusing to permit defendant to prove by his own evidence as against plaintiff, failure of consideration, as between drawer and drawee; and also to exhibit and show in evidence certain goods sold him by the drawer and payee, and that there was fraud and misrepresentation practiced upon him by said drawer "at the time he accepted said negotiable instruments." By section 59, every holder of a negotiable instrument ist prima facie holder in due course; and by section 28, thereof, failure of consideration is not a defense as against a holder in due course. By section 57, * "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 themselves and may enforce payment of the instrument for the full amount thereof against all parties liable thereon." These provisions of our new negotiable instruments law, are merely declaratory of the law as it previously existed. Said section 59 further provides that if it be "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 failure of consideration does not render title to an instrument defective. By section 55 of that act, "the title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for any illegal consideration or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud." * * If failure of consideration is admissible under the general issue, it is not available as against a holder in due course. * * * In view of these provisions of the statute law, the court below, we think, properly ruled that the proposed proof of failure or partial failure of consideration was not admissible in evidence as against plaintiff. It would follow that, if the absence of consideration is a personal defense, the defenses of nonfulfillment of conditions, of breach of contract, rights of set-off, of counterclaim, and recoupment would also be defenses not available against a holder in due course. (b) FRAUD Transactions involving the procuring of negotiable instruments by fraudulent representations are as varied as human ingenuity can devise. Frequently the misrepresentations take the form of untrue statements knowingly made concerning the value or general characteristics of the property offered in exchange for the instrument. Sometimes the fraud consists in misrepresenting the solvency or the identity of the person who obtains the instrument. In whatever form the fraud arises, so long as the party signing the negotiable instrument did so under circumstances where it was fair to assume that the signer knew, or by the exercise of reasonable care should have known, that he was executing a negotiable instrument, his defense is a purely personal defense, not available against a holder in due course. A few courts have reached a result contrary to that reached in the first case, but it is believed that the Colorado case represents the better rule. If the law throws the loss upon the maker in such a case as this, it follows quite clearly that, in the more common types of fraudulent procurement of a negotiable instrument, the defense of fraud is purely personal, not available against a holder in due course. The case is not one where a holder in due course sues the drawer, but the result would have been the same, had the suit arisen in this way. TWYMAN v. AVERA LOAN & INVESTMENT CO. (Court of Appeals of Georgia, 1918. 23 Ga. App. 136, 98 S. E. 239.) Action by the Avera Loan & Investment Company against Reuben Twyman. Judgment for plaintiff upon a directed verdict, and defendant excepts and brings error. BLOODWORTH, J. The motion for rehearing in this case is based upon the ground that the court overlooked the following evidence of defendant: "He just handed me the deed and the other papers, and said, 'Sign here, right here,' and I thought I was signing a receipt for the deed. * ** * He did not read to me this paper. I did not read the paper. Mr. Walker did not read it to me. I could not read it. No one read it to me." * * * On cross-examination the defendant said: "I can write and read the English language. I can write some and read a little bit-nothing to amount to anything." In the evidence there is nothing to show that the defendant made any effort to read the note and found that he could not do so, or that at the time he signed it there existed any emergency which would excuse his failure to read, or that his failure to read was brought about by any "misleading artifice or device perpetrated by the opposite party, amounting to actual fraud such as would reasonably prevent him B.& B.BUS.LAW-51 1 from reading it." On the contrary, it clearly appears that he signed the note upon presentation, without apprising himself of its contents otherwise than by accepting statements with reference thereto made by the representative of the opposite party, and between whom and defendant there existed no fiduciary or confidential relation. * * * Rehearing denied. BOATSMAN v. STOCKMEN'S NAT. BANK. (Supreme Court of Colorado, 1914. 56 Colo. 495, 138 Pac. 764, Action by John Boatsman, administrator of Carroll Nichols, deceased, against the Stockmen's National Bank. Judgment for defendant, and plaintiff brings error. BAILEY, J. Carroll Nichols, a real estate dealer at the town of Morrill, Scotts Bluff County, Nebraska, died in April, 1911. John Boatsman, as administrator of his estate, brought this action in the district court of Morgan County, against the Stockmen's National Bank of Brush, Colorado, by which it is sought to recover $1,500.00 and interest alleged to have been wrongfully paid out by it on account of Nichols to one H. M. Warren on a forged deed. The quarter section of land involved in the controversy is situate in Scotts Bluff County, Nebraska, and is owned by Charles E. Murphy, a resident of Utah. Warren was also a real estate dealer, residing at Mitchell, Nebraska, near Morrill. Nichols knew Warren, but did not know Murphy. On May 23d, 1910, Warren wrote Nichols a letter in the name of Murphy, proposing a quick sale of the land and soliciting an offer therefor. The name of Murphy was wrongfully used, without his knowledge or consent, throughout the whole transaction. In answer to that letter Nichols telegraphed an offer of $2,500.00 for the land. Warren acknowledged receipt of the offer in a letter dated May 25th, 1910. Four days later Warren again wrote Nichols, directing him to send the deed to the defendant bank at Brush, Colorado, for execution, with draft to pay for the land. The deed, naming Boatsman as grantee, who loaned Nichols the money to buy, was accordingly mailed by Nichols to Murphy at Brush, Colorado, which Warren received and thereupon executed, as Murphy, acknowledged the same before a Notary Public, presented it to the defendant bank and requested payment of the $2,500.00. Finding no money at the bank, he requested it to telegraph to the Farmers & Merchants Bank of Morrill, Nebraska, with whom Nichols did business, with the following result: "Brush, Colo. 6-1st '10 "Farmers and Merchants Bank Morrill Nebraska "Deed Chas Murphy to John Boatsman duly executed and in our hand Murphy wants money wired to this bank at once or will call deal off. Stockmens Natl. Bank." "Stockmens National Bank, Brush, Colo. "June 2, 1910. "If warranty deed is regular, pay Charles Murphy twenty-five hundred dollars. We remit. Register deed to us. "Farmers & Merchants Bank "Morrill, Nebraska." The defendant bank thereupon paid Warren $1,500.00 cash and a $1,000.00 draft on the City National Bank of Omaha, Nebraska, and took the deed for delivery. The following September the imposition was discovered and payment stopped on the draft. Soon thereafter Warren was tried, convicted and sentenced to a term in the Colorado penitentiary on a plea of guilty to a charge of forgery. Nichols demanded of the defendant bank the return of the $1,500.00 paid to Warren believing him to be Murphy. The bank refused payment and this suit followed. A demurrer to the complaint was interposed and sustained upon the ground that it stated no cause of action. Plaintiff elected to stand by his case as made, the action was dismissed, and he brings the case here to review such judgment. The gist of the complaint is that the defendant bank negligently paid the imposter $1,500.00. In such cases the controlling inquiry is whether the drawer, by failure to use ordinary diligence to avert a loss, has so increased the risk and responsibility of the drawee as to take the case out of the general rule of liability for payment of money on a forged instrument. When the facts show that such is the case, it is uniformly held that the drawer must bear the loss. It will be presumed that the defendant bank had full knowledge of all dealings between Nichols and Warren, pretending to be Murphy, which the complaint discloses. The deception was complete as to both the defendant bank and Nichols. Warren appeared at the bank with the deed which Nichols had prepared and forwarded, purporting to be duly executed by Charles E. Murphy before a Notary Public. The defendant bank telegraphed the Nebraska bank, with whom Nichols did business, that Charles Murphy had presented the deed and awaited immediate remittance or the deal would fail. Nichols forthwith sent the money, and the defendant bank thereupon accepted the deed and made payment. By the letter of May 29th, 1910, Warren requested Nichols to make the draft payable to bearer to avoid identification, as he was not known in that community, and stated that he was very anxious to get the matter off his hands, that the acceptance of the price offered was a great sacrifice on his part and must be acted upon immediately if at all. This is substantially a reiteration in these particulars of the letter of May 25th, four days earlier. Such statement might well have aroused the suspicion of an ordinary business man in dealing with a stranger and put him on inquiry. But the attitude of Nichols is shown by the fact that he acted in harmony with every suggestion of Warren. The record fails to show that he took any precaution for his own protection against this stranger. Evidently the price asked was low, and Nichols was so thoroughly interested in making an advantageous deal that he completely lost sight of the possibility of deception. By mailing the deed to the stranger for execution, he not only placed in his hands an instrument peculiarly well adapted to perpetrate a fraud upon the bank, but so increased its ordinary risk as to take the case out of the general rule applicable in cases of payment of money on forged instruments. The bank was fully justified, in the circumstances of this case, in paying the money to the person presenting the deed duly acknowledged, and it discharged every duty imposed upon it by law to escape liability. The law will not permit a drawer who has, through lack of diligence, been misled into making a direction for the payment of money on a forged deed, to shift the burden of loss by placing an undue and |