Section 24 For Value

• Library: Commercial Law 2007

To qualify as a holder in due course under UCC Article 3, a holder must take the instrument for “value.” Section 400.3-302(a)(2)(i), RSMo 2000. A fundamental objective of the holder in due course doctrine is to protect those persons who part with something of value in reliance on the negotiability of an instrument, not persons who have nothing at risk or who give up nothing and thus do not need protection. Mo. Ann. Stat. § 400.3-303 cmt. 3 (Westlaw through 2006 legislation); Godat v. Mercantile Bank of Nw. County, 884 S.W.2d 1 (Mo. App. E.D. 1994) (holder of cashier’s check, which was issued by bank at behest of holder’s stockbroker in accordance with broker’s check-kiting scheme, was not a holder in due course because holder gave nothing of value for cashier’s check). With this in mind, § 400.3-303(a), RSMo 2000, provides that an instrument is issued or transferred for value if:

(1) the instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;

(2) the transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;

(3) the instrument is issued or transferred as payment of, or as security for, an antecedent claim against any person, whether or not the claim is due;

(4) the instrument is issued or transferred in exchange for a negotiable instrument; or

(5) the instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument.

In general, this section recognizes that the value that renders the possessor of an instrument its holder must have some meaning to the maker or transferor of the instrument and that a person can only take for value by giving in return something of value to the person from whom the instrument is taken. Blue Cross Health Servs., Inc. v. Sauer, 800 S.W.2d 72 (Mo. App. E.D. 1990). If an instrument is negotiable, that fact signifies that the instrument has been issued for valuable consideration given or received. Edmiston v. J.C.G.-Medallion, Inc., 570 S.W.2d 306 (Mo. App. W.D. 1978); Sloan v. Paris, 541 S.W.2d 316 (Mo. App. W.D. 1976). That an instrument has been purchased at a discount or at less than face value does not preclude the purchaser from being a holder in due course. Holt v. Queen City Loan & Inv., Inc., 377 S.W.2d 393 (Mo. 1964); Bolten v. Colburn, 389 S.W.2d 384 (Mo. App. W.D. 1965). In all cases, the question of value is to be...