CO Code § 4-3-302 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 3 - Negotiable Instruments|Part 3 - Enforcement of Instruments|§ 4-3-302. Holder in Due Course

  Subject to subsection (c) of this section and section 4-3-106 (d) “holder in due course” means the holder of an instrument if:   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    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 4-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in section 4-3-305 (a).       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.    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.    If, under section 4-3-303 (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.    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.    To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.    This section is subject to any law limiting status as a holder in due course in particular classes of transactions.     History. Source: L. 94: Entire article R&RE, p. 853, § 1, effective January 1, 1995.    Editor's note:   This section is similar to former § 4-3-302 as it existed prior to 1994.   Cross references:   For the effect of the “Uniform Consumer Credit Code” on holder in due course, see § 5-3-303 .   OFFICIAL COMMENT   1. Subsection (a)(1) is a return to the N.I.L. rule that the taker of an irregular or incomplete instrument is not a person the law should protect against defenses of the obligor or claims of prior owners. This reflects a policy choice against extending the holder in due course doctrine to an instrument that is so incomplete or irregular “as to call into question its authenticity.” The term “authenticity” is used to make it clear that the irregularity or incompleteness must indicate that the instrument may not be what it purports to be. Persons who purchase or pay such instruments should do so at their own risk. Under subsection (1) of former Section 3-304, irregularity or incompleteness gave a purchaser notice of a claim or defense. But it was not clear from that provision whether the claim or defense had to be related to the irregularity or incomplete aspect of the instrument. This ambiguity is not present in subsection (a)(1).   2. Subsection (a)(2) restates subsection (1) of former Section 3-302. Section 3-305(a) makes a distinction between defenses to the obligation to pay an instrument and claims in recoupment by the maker or drawer that may be asserted to reduce the amount payable on the instrument. Because of this distinction, which was not made in former Article 3, the reference in subsection (a)(2)(vi) is to both a defense and a claim in recoupment. Notice of forgery or alteration is stated separately because forgery and alteration are not technically defenses under subsection (a) of Section 3-305.   3. Discharge is also separately treated in the first sentence of subsection (b). Except for discharge in an insolvency proceeding, which is specifically stated to be a real defense in Section 3-305(a)(1), discharge is not expressed in Article 3 as a defense and is not included in Section 3-305(a)(2). Discharge is effective against anybody except a person having rights of a holder in due course who took the instrument without notice of the discharge. Notice of discharge does not disqualify a person from becoming a holder in due course. For example, a check certified after it is negotiated by the payee may subsequently be negotiated to a holder. If the holder had notice that the certification occurred after negotiation by the payee, the holder necessarily had notice of the discharge of the payee as indorser. Section 3-415(d). Notice of that discharge does not prevent the holder from becoming a holder in due course, but the discharge is effective against the holder. Section 3-601(b). Notice of a defense under Section 3-305(a)(1) of a maker, drawer or acceptor based on a bankruptcy discharge is different. There is no reason to give holder in due course status to a person with notice of that defense. The second sentence of subsection (b) is from former Section 3-304(5).   4. Professor Britton in his treatise Bills and Notes 309 stated: “A substantial number of decisions before the [N.I.L.] indicates that at common law there was nothing in the position of the payee as such which made it impossible for him to be a holder in due course.” The courts were divided, however, about whether the payee of an instrument could be a holder in due course under the N.I.L.. Some courts read N.I.L. § 52(4) to mean that a person could be a holder in due course only if the instrument was “negotiated” to that person. N.I.L. § 30 stated that “an instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof.” Normally, an instrument is “issued” to the payee; it is not transferred to the payee. N.I.L. § 191 defined “issue” as the “first delivery of the instrument * * * to a person who takes it as a holder.” Thus, some courts concluded that the payee never could be a holder in due course. Other courts concluded that there was no evidence that the N.I.L. was intended to change the common law rule that the payee could be a holder in due course. Professor Britton states on p.318: “The typical situations which raise the [issue] are those where the defense of a maker is interposed because of fraud by a [maker who is] principal debtor * * * against a surety co-maker, or where the defense of fraud by a purchasing remitter is interposed by the drawer of the instrument against the good faith purchasing payee.”   Former Section 3-302(2) stated: “A payee may be a holder in due course.” This provision was intended to resolve the split of authority under the N.I.L. It made clear that there was no intent to change the common-law rule that allowed a payee to become a holder in due course. See Comment 2 to former Section 3-302. But there was no need to put subsection (2) in former Section 3-302 because the split in authority under the N.I.L. was caused by the particular wording of N.I.L. § 52(4). The troublesome language in that section was not repeated in former Article 3 nor is it repeated in revised Article 3. Former Section 3-302(2) has been omitted in revised Article 3 because it is surplusage and may be misleading. The payee of an instrument can be a holder in due course, but use of the holder-in-due-course doctrine by the payee of an instrument is not the normal situation.   The primary importance of the concept of holder in due course is with respect to assertion of defenses or claims in recoupment (Section 3-305) and of claims to the instrument (Section 3-306). The holder-in-due-course doctrine assumes the following case as typical. Obligor issues a note or check to Obligee. Obligor is the maker of the note or drawer of the check. Obligee is the payee. Obligor has some defense to Obligor's obligation to pay the instrument. For example, Obligor issued the instrument for goods that Obligee promised to deliver. Obligee never delivered the goods. The failure of Obligee to deliver the goods is a defense. Section 3-303(b). Although Obligor has a defense against Obligee, if the instrument is negotiated to Holder and the requirements of subsection (a) are met, Holder may enforce the instrument against Obligor free of the defense. Section 3-305(b). In the typical case the holder in due course is not the payee of the instrument. Rather, the holder in due course is an immediate or remote transferee of the payee. If Obligor in our example is the only obligor on the check or note, the holder-in-due-course doctrine is irrelevant in determining rights between Obligor and Obligee with respect to the instrument.   But in a small percentage of cases it is appropriate to allow the payee of an instrument to assert rights as a holder in due course. The cases are like those referred to in the quotation from Professor Britton referred to above, or other cases in which conduct of some third party is the basis of the defense of the issuer of the instrument. The following are examples:   Case #1. Buyer pays for goods bought from Seller by giving to Seller a cashier's check bought from Bank. Bank has a defense to its obligation to pay the check because Buyer bought the check from Bank with a check known to be drawn on an account with insufficient funds to cover the check. If Bank issued the check to Buyer as payee and Buyer indorsed it over to Seller, it is clear that Seller can be a holder in due course taking free of the defense if Seller had no notice of the defense. Seller is a transferee of the check. There is no good reason why Seller's position should be any different if Bank drew the check to the order of Seller as payee. In that case, when Buyer took delivery of the check from Bank, Buyer became the owner of the check even though Buyer was not the holder. Buyer was a remitter. Section 3-103(a)(11). At that point nobody was the holder. When Buyer delivered the check to Seller, ownership of the check was transferred to Seller who also became the holder. This is a negotiation. Section 3-201. The rights of Seller should not be affected by the fact that in one case the negotiation to Seller was by a holder and in the other case the negotiation was by a remitter. Moreover, it should be irrelevant whether Bank delivered the check to Buyer and Buyer delivered it to Seller or whether Bank delivered it directly to Seller. In either case Seller can be a holder in due course that takes free of Bank's defense.   Case #2. X fraudulently induces Y to join X in a spurious venture to purchase a business. The purchase is to be financed by a bank loan for part of the price. Bank lends money to X and Y by deposit in a joint account of X and Y who sign a note payable to Bank for the amount of the loan. X then withdraws the money from the joint account and absconds. Bank acted in good faith and without notice of the fraud of X against Y. Bank is payee of the note executed by Y, but its right to enforce the note against Y should not be affected by the fact that Y was induced to execute the note by the fraud of X. Bank can be a holder in due course that takes free of the defense of Y. Case #2 is similar to Case #1. In each case the payee of the instrument has given value to the person committing the fraud in exchange for the obligation of the person against whom the fraud was committed. In each case the payee was not party to the fraud and had no notice of it.   Suppose in Case #2 that the note does not meet the requirements of Section 3-104(a) and thus is not a negotiable instrument covered by Article 3. In that case, Bank cannot be a holder in due course but the result should be the same. Bank's rights are determined by general principles of contract law. Restatement Second, Contracts § 164(2) governs the case. If Y is induced to enter into a contract with Bank by a fraudulent misrepresentation by X, the contract is voidable by Y unless Bank “in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction.” Comment e to § 164(2) states:   "This is the same principle that protects an innocent person who purchases goods or commercial paper in good faith, without notice and for value from one who obtained them from the original owner by a misrepresentation. See Uniform Commercial Code §§ 2-403(1), 3-305. In the cases that fall within [§ 164 (2)], however, the innocent person deals directly with the recipient of the misrepresentation, which is made by one not a party to the contract."   The same result follows in Case #2 if Y had been induced to sign the note as an accommodation party (Section 3-419). If Y signs as co-maker of a note for the benefit of X, Y is a surety with respect to the obligation of X to pay the note but is liable as maker of the note to pay Bank. Section 3-419(b). If Bank is a holder in due course, the fraud of X cannot be asserted against Bank under Section 3-305(b). But the result is the same without resort to holder-in-due-course doctrine. If the note is not a negotiable instrument governed by Article 3, general rules of suretyship apply. Restatement, Security § 119 states that the surety (Y) cannot assert a defense against the creditor (Bank) based on the fraud of the principal (X) if the creditor “without knowledge of the fraud * * * extended credit to the principal on the security of the surety's promise * * *.” The underlying principle of § 119 is the same as that of § 164(2) of Restatement Second, Contracts.   Case #3. Corporation draws a check payable to Bank. The check is given to an officer of Corporation who is instructed to deliver it to Bank in payment of a debt owed by Corporation to Bank. Instead, the officer, intending to defraud Corporation, delivers the check to Bank in payment of the officer's personal debt, or the check is delivered to Bank for deposit to the officer's personal account. If Bank obtains payment of the check, Bank has received funds of Corporation which have been used for the personal benefit of the officer. Corporation in this case will assert a claim to the proceeds of the check against Bank. If Bank was a holder in due course of the check it took the check free of Corporation's claim. Section 3-306. The issue in this case is whether Bank had notice of the claim when it took the check. If Bank knew that the officer was a fiduciary with respect to the check, the issue is governed by Section 3-307.   Case #4. Employer, who owed money to X, signed a blank check and delivered it to Secretary with instructions to complete the check by typing in X's name and the amount owed to X. Secretary fraudulently completed the check by typing in the name of Y, a creditor to whom Secretary owed money. Secretary then delivered the check to Y in payment of Secretary's debt. Y obtained payment of the check. This case is similar to Case #3. Since Secretary was authorized to complete the check, Employer is bound by Secretary's act in making the check payable to Y. The drawee bank properly paid the check. Y received funds of Employer which were used for the personal benefit of Secretary. Employer asserts a claim to these funds against Y. If Y is a holder in due course, Y takes free of the claim. Whether Y is a holder in due course depends upon whether Y had notice of Employer's claim.   5. Subsection (c) is based on former Section 3-302(3). Like former Section 3-302(3), subsection (c) is intended to state existing case law. It covers a few situations in which the purchaser takes an instrument under unusual circumstances. The purchaser is treated as a successor in interest to the prior holder and can acquire no better rights. But if the prior holder was a holder in due course, the purchaser obtains rights of a holder in due course.   Subsection (c) applies to a purchaser in an execution sale or sale in bankruptcy. It applies equally to an attaching creditor or any other person who acquires the instrument by legal process or to a representative, such as an executor, administrator, receiver or assignee for the benefit of creditors, who takes the instrument as part of an estate. Subsection (c) applies to bulk purchases lying outside of the ordinary course of business of the seller. For example, it applies to the purchase by one bank of a substantial part of the paper held by another bank which is threatened with insolvency and seeking to liquidate its assets. Subsection (c) would also apply when a new partnership takes over for value all of the assets of an old one after a new member has entered the firm, or to a reorganized or consolidated corporation taking over the assets of a predecessor.   In the absence of controlling state law to the contrary, subsection (c) applies to a sale by a state bank commissioner of the assets of an insolvent bank. However, subsection (c) may be preempted by federal law if the Federal Deposit Insurance Corporation takes over an insolvent bank. Under the governing federal law, the FDIC and similar financial institution insurers are given holder in due course status and that status is also acquired by their assignees under the shelter doctrine.   6. Subsection (d) and (e) clarify two matters not specifically addressed by former Article 3:   Case #5. Payee negotiates a $1,000 note to Holder who agrees to pay $900 for it. After paying $500, Holder learns that Payee defrauded Maker in the transaction giving rise to the note. Under subsection (d) Holder may assert rights as a holder in due course to the extent of $555.55 ($500 divide; $900 = .555 X $1,000 = $555.55). This formula rewards Holder with a ratable portion of the bargained for profit.   Case #6. Payee negotiates a note of Maker for $1,000 to Holder as security for payment of Payee's debt to Holder of $600. Maker has a defense which is good against Payee but of which Holder has no notice. Subsection (e) applies. Holder may assert rights as a holder in due course only to the extent of $600. Payee does not get the benefit of the holder-in-due-course status of Holder. With respect to $400 of the note, Maker may assert any rights that Maker has against Payee. A different result follows if the payee of a note negotiated it to a person who took it as a holder in due course and that person pledged the note as security for a debt. Because the defense cannot be asserted against the pledgor, the pledgee can assert rights as a holder in due course for the full amount of the note for the benefit of both the pledgor and the pledgee.   7. There is a large body of state statutory and case law restricting the use of the holder in due course doctrine in consumer transactions as well as some business transactions that raise similar issues. Subsection (g) subordinates Article 3 to that law and any other similar law that may evolve in the future. Section 3-106(d) also relates to statutory or administrative law intended to restrict use of the holder-in-due-course doctrine. See Comment 3 to Section 3-106.   ANNOTATION   I.GENERAL CONSIDERATION.   Law reviews. For note, “Judicial Limitations on Holder in Due Course Claims”, see 42 U. Colo. L. Rev. 439 (1971).   Annotator's note. The following annotations include cases decided under former provisions similar to this section.   Applied in Hollemon v. Murray, 666 P.2d 1107 (Colo. App. 1982); La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986).   II.HOLDER IN DUE COURSE.   A.In General.   It is axiomatic that in order for one to be a holder in due course he must first be a holder. Walter E. Heller Co. v. Mesa Bldg. Prods. Co., 233 F. Supp. 434 (D. Colo. 1964 ).   All presumptions under this section are in favor of the holder of an instrument. Civic Fin. Co. v. Meintzer, 137 Colo. 572 , 328 P.2d 379 (1958).   Person can qualify as holder in due course through constructive possession. Person was holder in due course of check deposited into its bank account by authorized agent of another person despite fact that agent wrote check for own benefit. Physical possession of check was not required. Georg v. Metro Fixtures Contractors, Inc., 178 P.3d 1209 (Colo. 2008).   A payee on an instrument who deals directly with the drawer or issuer is not typically entitled to assert the rights of a holder in due course. Flatiron Linen, Inc. v. First Amer. State Bank, 1 P.3d 244 (Colo. App. 1999), rev'd on other grounds, 23 P.3d 1209 (Colo. 2001).   Allegation that payee was “holder in due course” is not a mere conclusion of law insufficient to state a claim for relief. Blake v. Samuelson, 34 Colo. App. 183, 524 P.2d 624 (1974).   Burden of proof is on holder where title is defective. When it is shown that the title of any individual who has negotiated a promissory note is defective, the burden is on the holder to prove that he acquired the title as a holder in due course. Delaney v. Brownwood, 73 Colo. 83 , 213 P. 578 (1923).   Assignee of negotiable instrument suing thereon need not plead specific facts from which his assignor derives the status of a holder in due course. Blake v. Samuelson, 34 Colo. App. 183, 524 P.2d 624 (1974).   When a directed verdict may be entered. Where there is not sufficient evidence before the jury to contradict plaintiff's testimony that he is a holder in due course, a directed verdict is right. Neal v. Wilson County Bank, 83 Colo. 118 , 263 P. 18 (1927). See Miller v. Farmers' Bank Trust Co., 82 Colo. 373 , 260 P. 112 (1927).   Where bank acquired a single promissory note from a trust, transaction could not be considered a bulk purchase under subsection (3)(c) because the successor organization did not acquire a substantial part of the paper held by the predecessor organization; and since it was not a bulk transaction, the purchase did not preclude the bank from becoming a holder in due course. First Nat. Bank v. Lohman, 827 P.2d 583 (Colo. App. 1992).   If the signers on a note are able to prove close connectedness between the original payee of the note and an assignee thereof, then such relationship effectively invalidates the assignee's claim to a holder in due course status and allows the defenses available against the payee also to be asserted against the assignee. Stotler v. Geibank Indus. Bank, 827 P.2d 608 (Colo. App. 1992).   Where bank acquired a single promissory note from a trust, transaction could not be considered a bulk purchase under subsection (3)(c) because the successor organization did not acquire a substantial part of the paper held by the predecessor organization; and since it was not a bulk transaction, the purchase did not preclude the bank from becoming a holder in due course. First Nat. Bank v. Lohman, 827 P.2d 583 (Colo. App. 1992) (decided under former § 4-3-302 (3)(c) ).   If the signers on a note are able to prove close connectedness between the original payee of the note and an assignee thereof, then such relationship effectively invalidates the assignee's claim to a holder in due course status and allows the defenses available against the payee also to be asserted against the assignee. Stotler v. Geibank Indus. Bank, 827 P.2d 608 (Colo. App. 1992).   The fact that an assignor and an assignee of a negotiable instrument are corporate siblings or have a corporate parent-subsidiary relationship is not enough to establish as a matter of law a close connection barring holder in due course status. There must be some other indicia that the related corporation knew or should have known that the instrument was infirm. Deutsche Bank Trust Co. Ams. v. Samora, 2013 COA 81 , 321 P.3d 590.   Applied in Terrell v. Walter E. Heller Co., 165 Colo. 463 , 439 P.2d 989 (1968).   B.For Value.   A bank does not become a holder for value merely by giving credit. Atkinson v. Englewood State Bank, 141 Colo. 436 , 348 P.2d 702 (1960). See Delaney v. Brownwood, 73 Colo. 83 , 213 P. 578 (1923).   Where a promissory note is given as collateral for a debt, the pledgee is a holder in due course for value, and he does not lose that character where the debt which is secured still exceeds the amount of the note although partly paid. Fredericksen v. City Nat'l Bank, 70 Colo. 553 , 203 P. 659 (1922).   Negotiable instrument in form of a check shows prima facie consideration and therefore, payee's assignee, alleging in his suit on the check that payee was a holder in due course, is not required to allege facts which, if proven, would show that the maker was indebted to payee. Blake v. Samuelson, 34 Colo. App. 183, 524 P.2d 624 (1974).   C.In Good Faith.   Proof of payment of full value by holder raises a presumption of good faith, which, if not overcome, entitles him to judgment. Delaney v. Brownwood, 73 Colo. 83 , 213 P. 578 (1923).   The “good faith” standard is a subjective one. Under a subjective standard, an absence of knowledge is not equivalent to a lack of good faith. Money Mart Check Cashing Center, Inc. v. Epicycle Corp., 667 P.2d 1372 (Colo. 1983).   If a note is taken by indorsement under circumstances which impute knowledge of infirmities in it so that the taking of it amounts to bad faith, the transferee is not a holder in due course. McClellan v. Morris, 71 Colo. 304 , 206 P. 575 (1922).   Suspicions and surmises cannot be made to take the place of evidence, and to defeat the note, there must be evidence of actual knowledge of such facts that the action of the indorsee in taking the note constituted bad faith. Hukill v. McGinnis, 70 Colo. 455 , 202 P. 110 (1921); Neal v. Wilson County Bank, 83 Colo. 118 , 263 P. 18 (1927).   Bad faith must be shown. An indorsee of a check is presumed to have received it in good faith, and it will not be invalidated in the hands of such indorsee by suspicious circumstances attending its indorsement unless the circumstances are sufficient to show that it was taken in bad faith. Wedge Mines Co. v. Denver Nat'l Bank, 19 Colo. App. 182, 73 P. 873 (1903).   Bad faith in fact, or mala fides, is the opposite of good faith and consists in guilty knowledge, or willful ignorance, showing a vicious or evil mind. Burnham Loan Inv. Co. v. Sethman, 64 Colo. 189 , 171 P. 884 (1918); Hendrickson v. Alpert, 159 Colo. 463 , 412 P.2d 433 (1966).   Such as corporate president who indorses corporation check to himself. A president of a corporation who in such capacity indorses to himself a note payable to the corporation does not thereby become a holder in due course free from the defenses of the maker against the corporation. Denver Suburban Homes Water Co. v. Fugate, 63 Colo. 423 , 168 P. 33 (1917).   Knowledge of obtaining notes by false representations. Where a bank buys and discounts a note with knowledge that the indorser has obtained other similar notes by means of false representations, this constitutes evidence of bad faith so that the bank is not a holder in due course. Platte Valley State Bank v. Burge, 73 Colo. 296 , 215 P. 149 (1923).   Knowledge of fraud. In an action to obtain the return of a promissory note obtained by fraud, where the person obtaining the note had knowledge of such facts, his action in taking the instrument amounted to bad faith, and therefore he is not a holder in due course. Myers v. Griffith, 108 Colo. 218 , 115 P.2d 397 (1941).   In order to defeat a recovery on the ground of fraud in an action on a promissory note by one who acquired it for a consideration before maturity, the burden is on defendant to prove that at the time plaintiff acquired the note, he had actual knowledge of the fraud or knowledge of such facts that his action in taking the instrument amounted to bad faith. Abley v. Davies, 84 Colo. 398 , 270 P. 880 (1928).   One who cashes a check without knowledge of adverse facts is a holder in due course and entitled to recovery from the drawer. Levitt v. Kerrigan, 109 Colo. 129 , 122 P.2d 246 (1942).   “Good faith” unaffected by payee's account level. In the case of a bank cashing a check, if the bank establishes that the check was taken without notice of dishonor or of any other defense, this is sufficient to establish “good faith”. The issue of good faith, to establish that the bank is a holder in due course, is unaffected by the fact that the payee's account is low or overdrawn at the time the check is cashed. Vail Nat'l Bank v. J. Wheeler Constr. Corp., 669 P.2d 1038 (Colo. App. 1983).   D.Without Notice.   One who has knowledge of all the facts of a transaction is not a holder in due course free from the equities of the maker against the original payee, even though he holds the note for valid consideration as a subsequent indorsee. Reiter v. Pollard, 75 Colo. 203 , 225 P. 222 (1924).   One offered negotiable paper fair upon its face, and not due, is under no duty to inquire of the maker as to its validity. Burnham Loan Inv. v. Sethman, 64 Colo. 189 , 171 P. 884 (1918).   If there is nothing on the face of a negotiable instrument, or in the written indorsement or assignment, to notify the assignee that the instrument was originally given upon an illegal consideration (gambling debts excepted) or obtained through fraud, the assignee who pays value therefor, and takes the same in good faith before maturity, may recover as against the maker. And this fact is true even though such assignee be in possession of facts or circumstances sufficient to arouse suspicion in the mind of a person of ordinary prudence and though he is guilty of negligence in not first following up such information for the purpose of discovering the fraud or illegality to which the suspicious circumstances may point. This rule is founded upon commercial necessity, for the untrammeled circulation of these instruments is a matter of supreme importance in the vast field of mercantile transactions; drafts, bills of exchange and other negotiable instruments take the place of money, and circulate almost as freely. Hence, to hold that each assignee must, before accepting them, inquire into each and every suspicious circumstance bearing upon the original execution, or pointing to possible defenses in a suit between the original parties, would produce serious inconveniences to the commercial world. Hukill v. McGinnis, 70 Colo. 455 , 202 P. 110 (1921); Hendrickson v. Alpert, 159 Colo. 463 , 412 P.2d 433 (1966).   Even though bearing no revenue stamps. A promissory note, otherwise in due form, is complete and regular upon its face although it bears no revenue stamps, since the absence of revenue stamps is no notice to an indorsee of a promissory note of any infirmity in the instrument or defect in the title of the person negotiating it, is not a suspicious circumstance, and is no evidence that the note was taken in bad faith. Metro. State Bank v. McNutt, 73 Colo. 291 , 215 P. 151 (1923).   Whether an instrument is complete and regular on its face is questionable where an officer of a payee bank testifies that in 90 to 100 percent of similar cases where instruments are signed blank, they are filled in when delivered to the bank. Atkinson v. Englewood State Bank, 141 Colo. 436 , 34 P.2d 702 (1960).   Tests other than “actual knowledge” may be used in resolving the issue of whether an endorsee of a promissory note is a holder in due course including whether the holder had in his possession facts from which he had reason to know of the defenses “at the time in question”. The critical time for such notice is when the party comes into possession of the note as a holder. Salter v. Vanotti, 42 Colo. App. 448, 599 P.2d 962 (1979).   Duty to inquire as to possible defenses. Where an instrument is regular on its face there is no duty on the part of a check cashing service to inquire as to possible defenses, unless circumstances of which the holder has knowledge are of such a nature that the failure to inquire reveals a deliberate desire to evade knowledge because of a fear that investigation would disclose the existence of a defense. Money Mart Check Cashing Center, Inc. v. Epicycle Corp., 667 P.2d 1372 (Colo. 1983).   When inquiry required. If the purchaser has actual knowledge of facts which would apprise him of possible irregularities some inquiry is required by the notice provisions of the UCC. Salter v. Vanotti, 42 Colo. App. 448, 599 P.2d 962 (1979).   Refusal to investigate. The protection afforded a holder in due course cannot be used to shield one who simply refuses to investigate when the facts known to him suggest an irregularity concerning the commercial paper he purchases. Salter v. Vanotti, 42 Colo. App. 448, 599 P.2d 962 (1979).   Party held to have notice of defense sufficient to deny status as holder in due course. Ackmann v. Merchants Mtg. Trust Corp., 659 P.2d 697 (Colo. App. 1982).   Party held to have notice of defense sufficient to deny status as holder in due course. See Ackmann v. Merchants Mtg. Trust Corp., 659 P.2d 697 (Colo. App. 1982), rev'd on other grounds sub nom. Kopeikin v. Merchants Mortg. Trust Corp., 679 P.2d 599 (Colo. 1984).   Instrument must be acquired before maturity. One of the essentials to constitute a holder in due course is that the instrument must have been acquired before maturity. First Nat'l Bank v. Lewis, 57 Colo. 124 , 139 P. 1102 (1914).   One who acquires a note after its maturity is not a holder in due course. See Vigil v. Pacheco, 95 Colo. 405 , 36 P.2d 766 (1934).   Certified check not mature before presentment. A check certified to the payee by the bank on which it is drawn as accepted payable at the same bank does not mature until presented to such bank for payment, and a purchaser by indorsement before such presentment is a holder in due course, but not after maturity. Citizens' Nat'l Bank v. First Nat'l Bank, 66 Colo. 426 , 182 P. 12 (1919).   Record supported the trial court's finding that the bank had no notice of any offset against the promissory note where the note was current in its payments at the time of the transfer, the maker of the note made another payment thereon subsequent to the transfer to the bank, and the note itself did not specify any offset against it. First Nat. Bank v. Lohman, 827 P.2d 583 (Colo. App. 1992).   E.Facts Not Constituting Notice.   The fact that a promissory note is indorsed without recourse is not in itself sufficient to put a purchaser on inquiry. Omaha Steel Works v. Martin, 78 Colo. 560 , 243 P. 619 (1926).   Knowledge that pledgor of note was treasurer of payee. Purchaser's knowledge, at the time of accepting a note, that the pledgor thereof was treasurer of the payee is not any evidence of bad faith on the part of the purchaser and insufficient to warrant any inference thereof where in pledging the note the pledgor exercised no function of treasurer. Burnham Loan Inv. Co. v. Sethman, 64 Colo. 189 , 171 P. 884 (1918).   Where director-purchaser relies on corporation's agents. The purchaser of a current note from an industrial corporation payee is not individually charged with knowledge of false representations made by agents of the corporation in procuring the note merely because he is a director in the corporation. Dodo v. Stocker, 74 Colo. 95 , 219 P. 222 (1923).   F.Recordation Not Notice.   Constructive notice given by the recordation of instruments does not impute such knowledge as is contemplated by this section. Metro. State Bank v. McNutt, 73 Colo. 291 , 215 P. 151 (1923).   G.Opportunity to Act.   An organization is charged with notice of infirmities relating to the procurement of a note when its principal officer obtains it, in which case, it is not entitled to protection as a holder in due course. Reserve Bldg. Loan Ass'n v. Jamison, 108 Colo. 503 , 119 P.2d 621 (1941).   When a company learns that its checks used in gambling by one of its employees have been paid by the bank, it cannot disaffirm and recover from the bank except by prompt action. Nat'l Surety Co. v. Stockyards Nat'l Bank, 84 Colo. 563 , 272 P. 470 (1928).   III.PAYEE MAY BE H.D.C.   Title of payee of promissory note is defective when he negotiates it fraudulently or in breach of trust. Delaney v. Brownwood, 73 Colo. 83 , 213 P. 578 (1923).   IV.WHEN NOT H.D.C.   A trustee in bankruptcy is not a bona fide purchaser for value but takes a note subject to all defenses the maker may have against the payee. Investors' Fin. Co. v. Bodnar, 87 Colo. 498 , 289 P. 599 (1930).