Ohio Code 1303.32 – Holder in due course – UCC 3-302
(A) Subject to division (C) of this section and division (D) of section 1303.05 of the Revised Code, “holder in due course” means the holder of an instrument if both of the following apply:
Terms Used In Ohio Code 1303.32
- Another: when used to designate the owner of property which is the subject of an offense, includes not only natural persons but also every other owner of property. See Ohio Code 1.02
- Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Forgery: The fraudulent signing or alteration of another's name to an instrument such as a deed, mortgage, or check. The intent of the forgery is to deceive or defraud. Source: OCC
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Party: means a party to an instrument. See Ohio Code 1303.01
- Person: includes an individual, corporation, business trust, estate, trust, partnership, and association. See Ohio Code 1.59
- Promise: means a written undertaking to pay money that is signed by the person undertaking to pay. See Ohio Code 1303.01
(1) The instrument when issued or negotiated to the holder does not bear evidence of forgery or alteration that is so apparent, or is not otherwise so irregular or incomplete as to call into question its authenticity;
(2) The holder took the instrument under all of the following circumstances:
(a) For value;
(b) In good faith;
(c) 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;
(d) Without notice that the instrument contains an unauthorized signature or has been altered;
(e) Without notice of any claim to the instrument as described in section 1303.36 of the Revised Code;
(f) Without notice that any party has a defense or claim in recoupment described in division (A) of section 1303.35 of the Revised Code.
(B) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under division (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.
(C) 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 under any of the following circumstances:
(1) By legal process or by purchase in an execution, bankruptcy, or creditor’s sale or similar proceeding;
(2) By purchase as part of a bulk transaction not in ordinary course of business of the transferor;
(3) As the successor in interest to an estate or other organization.
(D) If, under division (A)(1) of section 1303.33 of the Revised Code, 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.
(E) If the person entitled to enforce an instrument has only a security interest in the instrument and 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 that, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
(F) To be effective, notice must be received at a time and in a manner that gives the recipient a reasonable opportunity to respond to the notice.
(G) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.