EXAMPLES:
(1) P obtained the note of M through (simple) fraud, and
negotiates it to A, A to B, B to C, and C to D, the present holder.
The presumption is that D is a holder in due course. But once
M proves the fraud committed by P, the burden is shifted to D to prove
that he is actually a holder in due course or that C, from whom he
acquired title, is a holder in due course.
(2) Suppose the fraud was committed by A against P, the
presumption that D is a holder in due course is not destroyed because
M became bound on the instrument before the acquisition of the
defective title by A.
Note that P is similarly situated as M in the first example. As
P became bound on the instrument contemporaneous (not prior to)
with the acquisition of A's defective title, the presumption of due course
holding does not accrue in favor of D as far as P is concerned once P
shows that the title of A was defective.
(3) Let us suppose now that the fraud was committed by B
against A. In this case, the situation of A is the same as that of M in the
first example, and P, the same as that of M in the second example.