PROOF OF GOOD FAITH

Authors

Jason L. Honigman, University of Michigan Law School

Abstract

Section 59 of the Uniform Negotiable Instruments Law provides, that, "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 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." Numerous questions of interpretation have arisen in connection with this section. There is for instance, the question as to what is meant by "shown," and the courts have with surprising uniformity held that a defective title is "shown" when sufficient evidence is adduced from which the jury might reasonably find a defective title. Then, too, the query has arisen as to what amounts to a "defective" title. The courts have quite generally been satisfied to point to section 55 of the Act as concluding the matter and have accordingly held that mere proof of lack of consideration or failure of consideration is not a showing of such defective title as will repel the presumption that the plaintiff is a holder in due course, though the question as to what amounts to a fraud or negotiation in breach of faith such as is recognized to be a defect in title is still a fruitful source of litigation. Moreover, where the defect in title arose subsequent to the time at which defendant became bound. that is, when the defense is that of a collateral equity existing in favor of other parties to the instrument, the last sentence of section 59 leaves little room for doubt that the burden of proof throughout is on the defendant.

Recommended Citation

Jason L. Honigman, PROOF OF GOOD FAITH, 23 Mich. L. Rev. 870 (1925).
Available at: https://repository.law.umich.edu/mlr/vol23/iss8/3