166

LAWS OF MARYLAND

[Ch. 49

character or its essential terns; and

(d)    Discharge in insolvency proceedings; and

(e)   Any other discharge of which the holder
has notice when he takes the instrument.

3—306. Rights of one not holder in due course.

Unless he has the rights of a holder in due course
any person takes the instrument subject to

(a)   All valid claims to it on the part of any
person; and

(b)   All defenses of any party which would be
available in an action on a simple contract; and

(c)    The defenses of want or failure of
consideration, non—performance of any condition
precedent, non—delivery, or delivery for a special
purpose (§ 3—408); and

(d)   The defense that he or a person through
whom he holds the instrument acquired it by theft, or
that payment or satisfaction to such holder would be
inconsistent with the terms of a restrictive indorsement.
The claim of any third person to the instrument is not
otherwise available as a defense to any party liable
thereon unless the third person himself defends the
action for such party.

3—307. Burden of establishing signatures, defenses and
due course.

(1)    Unless specifically denied in the pleadings
each signature on an instrument is admitted. When the
effectiveness of a signature is put in issue

(a)    The burden of establishing it is on the
party claiming under the signature; but

(b)   The signature is presumed to be genuine
or authorized except where the action is to enforce the
obligation of a purported signer who has died or become
incompetent before proof is required.

(2)    when signatures are admitted or established,
production of the instrument entitles a holder to recover
on it unless the defendant establishes a defense.

(3)   After it is shown that a defense exists a
person claiming the rights of a holder in due course has
the burden of establishing that he or some person under