assured the witness that the representations appearing in the prospectus were true; that Douglas represented that the president of the Colombian Timber Company was worth $100,000; and that the vice-president was worth $40,000 or more. Toft also says that he was induced by the statements appearing in the prospectus and the representations made by Douglas to indorse the note for the purpose of giving credit to the paper, and he admits that he received 5,000 shares of stock for indorsing the note. Toft claims that he first suspected that the note might be tainted with fraud when Farrell informed him that the paper could be purchased for $4,000, and it was not until after that conversation that he ascertained the falsity of the statements printed in the prospectus and the falsehoods uttered by Douglas.

1. The defenses interposed by both the maker and the indorser involve two elements: (1) Fraud; and (2) notice to the plaintiff. The maker alleges that the note was induced by fraud, and the indorser avers that the indorsement was brought about by the same means. The perpetration of fraud will not alone defeat the holder of a negotiable instrument, but it must be supplemented by notice to the holder. In the final analysis, the correctness of the ruling on the motion to strike out the testimony relating to the fraud and on the motion for a directed verdict depends upon whether there was any evidence showing notice to the plaintiff when it acquired the note. Everding & Farrell bought the paper before maturity and is a holder in due course, unless the instrument was taken with knowledge of facts amounting to bad faith. There was evidence tending to show that the capital stock of the Colombian Timber Company was worthless, and that the issuance of the note was induced by false representations; and

it now becomes necessary to refer to the statute which defines what constitutes notice, and then to determine whether there is any evidence bringing the plaintiff within the rule.

2. A person is not a holder in due course if he does not take a note in good faith without notice of any infirmity in the instrument or defect in the title of the person negotiating it: Section 5885, L. O. L.

3. A person who takes a note has notice of an infirmity in the instrument or defect in the title to the paper if at the time he took the note he "had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith." Neither of the answering defendants argue that the plaintiff had actual knowledge of the alleged infirmity in the note itself or in the indorsement, and consequently the plaintiff did not take the paper with notice, unless it had knowledge of such facts that its action in taking the instrument amounted to bad faith.

4. The plaintiff argues that it did not have knowledge of any facts, and that at the most it only had notice of a suspicion or opinion on the part of Toft that possibly something was wrong with the note. The knowledge must be of such facts that the act of taking the instrument amounts to bad faith, and hence the ultimate inquiry is whether on account of the facts known to him the holder was guilty of bad faith. It may be conceded that knowledge of facts which are calculated to arouse the suspicions of an ordinarily prudent man does not as a matter of law constitute bad faith, nor does the owner of commercial paper necessarily forfeit the rights of a holder in due course merely because he neglected to make inquiries or failed to use the caution of that fictitious person known as the

"ordinarily prudent man": Matlock v. Scheuerman, 51 Or. 49, 56 (93 Pac. 823, 17 L. R. A. (N. S.) 747); Triphonoff v. Sweeney, 65 Or. 299, 305 (130 Pac. 979); Bond v. Ellison, 80 Or. 634 (157 Pac. 1103); Bowman v. Metzger, 27 Or. 23 (39 Pac. 3, 44 Pac. 1090); 3 R. C. L. 1072). As said in Bowman v. Metzger:

"It is the policy of the law to eliminate from the consideration of the jury the question of common prudence as the measure of good faith, and with it the question of negligence, except in so far as it may be taken as indicative of bad faith."

While negligence is not synonymous with bad faith, yet a person who takes a note under suspicious circumstances, and, having the means of knowledge, willfully abstains from making inquiries, then his intentional ignorance may result in bad faith, because the final question is one of honesty and good faith: 3 R. C. L. 1075; 8 C. J. 505; Griffith v. Shipley, 74 Md. 591 (22 Atl. 1107, 14 L. R. A. 405); Bowman v. Metzger, 27 Or. 23 (39 Pac. 3, 44 Pac. 1090); Benton v. Sikyta, 84 Neb. 808 (122 N. W. 61, 24 L. R. A. (N. S.) 1057); 7 Cyc. 946. Even though the existence of suspicious circumstances does not necessarily spell bad faith, and negligence is not a synonym for bad faith, and failure to make inquiries does not inevitably create an irresistible force which compels a finding of bad faith, nevertheless since the ultimate inquiry is one of honesty and good faith, it is competent to show the existence of suspicious circumstances, failure to make inquiries and want of prudence, and it then becomes the province of the jury to say whether a person taking with knowledge of those facts is guilty of bad faith: 8 C. J. 501, 502, 503; Arnd v. Aylesworth, 145 Iowa, 185 (123 N. W. 1000, 29 L. R. A. (N. S.) 638); McPherrin v. Tittle, 36 Okl. 510 (129 Pac. 721, 44 L. R. A. (N. S.) 395);

82 Or.-2

Matlock v. Scheuerman, 51 Or. 49 (93 Pac. 823, 17 L. R. A. (N. S.) 747); Harrington v. Butte & Boston Min. Co., 33 Mont. 330 (83 Pac. 467, 114 Am. St. Rep. 821); Canajoharie Nat. Bk. v. Diefendorf, 123 N. Y. 191 (25 N. E. 402, 10 L. R. A. 676); Bowman v. Metzger, 27 Or. 23 (39 Pac. 3, 44 Pac. 1090); 3 R. C. L. 1075.

5. The question of good or bad faith is peculiarly one for the jury and not the court, especially when the burden rests upon the owner of the note to show that he became a holder in due course: Arnd v. Aylesworth, 145 Iowa, 185 (123 N. W. 1000, 29 L. R. A. (N. S.) 638); Union Investment Co. v. Rosenzweig, 79 Wash. 112 (139 Pac. 874); Rohweder v. Titus, 85 Wash. 441 (148 Pac. 583).

6. Section 5892, L. O. L., provides that:

"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 a holder in due course.'

And, therefore, when it is shown that a note had its origin in fraud, the burden is then placed upon the owner to prove that he or some person under whom he claims acquired the note as a holder in due course: 3 R. C. L. 1039; Matlock v. Scheuerman, 51 Or. 49, 53 (93 Pac. 823, 17 L. R. A. (N. S.) 747); Sink v. Allen, 79 Or. 78 (154 Pac. 415); Griffith v. Shipley, 74 Md. 591 (22 Atl. 1107, 14 L. R. A. 405); Arnd v. Aylesworth, 145 Iowa, 185 (123 N. W. 1000, 29 L. R. A. (N. S.) 638); Canajoharie Nat. Bk. v. Diefendorf, 123 N. Y. 191 (25 N. E. 402, 10 L. R. A. 676); Union Investment Co. v. Rosenzweig, 79 Wash. 112 (139 Pac. 874). There was ample evidence, if believed, to warrant the jury in finding that the note was induced by

fraudulent representations, and that the capital stock issued to Hoffman was utterly worthless, and consequently by force of the statute Everding & Farrell assumed the burden of showing that it purchased the paper as a holder in due course.

7. The plaintiff admits that it paid $4,000 for a $5,000 note. The instrument was purchased after Everding & Farrell had ascertained from a bank that a $5,000 note would be worth face value if Toft signed it. It is not necessary to decide whether the discount was of itself enough to compel a finding of bad faith, but it is sufficient for the purposes of this controversy to say that evidence of the discount was admissible, especially when viewed in the light of the information received from the bank relative to Toft and the inquiries made or omitted concerning the other indorsers and maker of the note, and the jury was entitled to consider the fact of the discount along with the other evidence already narrated in determining whether the holder was chargeable with bad faith: 8 C. J. 509; McNamara v. Jose, 28 Wash. 461 (68 Pac. 903); 3 R. C. L. 1051, 1079; 7 Cyc. 930, 949. See, also, note to Hogg v. Thurman, as reported in 17 Ann. Cas. 383.

8. A person is permitted to resort to circumstantial evidence to show that the owner of a negotiable instrument is not a holder in due course, and indeed in many cases it is the only kind of evidence available to a party: 8 C. J. 496; 3 R. C. L. 1041; Arnd v. Aylesworth, 145 Iowa 185 (123 N. W. 1000, 29 L. R. A. (N. S.) 638); Union Inv. Co. v. Rosenzweig, 79 Wash. 112 (139 Pac. 874); Bowman v. Metzger, 27 Or. 23 (39 Pac. 3, 44 Pac. 1090); Farmers' State Bk. v. West, 77 Or. 602, 606 (152 Pac. 238).

9. The trial court properly refused to strike out the evidence relating to the fraud charged by the defend