The opinion
PRETTYMAN, Circuit Judge
(dissenting) .
A holder in due course of a negotiable instrument, under the District of Columbia statute 1 must, among other things, be one who “took it in good faith”. The Tucker note for $9,500 was on its face a deed-of-trust note, secured by a piece of property described in it. Clarke’s note to Meredith explicitly so described the Tucker note. So Meredith knew the nature of the note he was accepting as collateral. He had inspected the property prior to October 2, 1951. He was an experienced real estate man. He knew the lot was worth only $1,000, that no house was on it, that only the footings for a house were in, and that the lot and the footings together were worth only $3,500. He gave Clarke the $6,000 and so came into possession as a holder of the collateral note on October 4, 1951. Thus, when he acquired this first-trust note of the Tuckers for $9,500, he knew the recited security for that note did not approach in value the face of the note. I think he did not take that collateral note in good faith.
As a matter of fact Meredith himself loaned Clarke money with which to build the house which, in turn, was to be security for the Tucker collateral note. The agreement between Clarke and Meredith specifically provided that the money given Clarke by Meredith would “be used only to pay for labor and materials going into the construction of a house” on this property. Meredith required Clarke to post a bond to secure the loan Meredith was making to Clarke. In other words Meredith loaned Clarke $6,000 to build the house which would have been the security for the Tucker note, but his opinion of the deal was such that he required Clarke to post a corporate surety bond to secure the loan made for that purpose.
Had Meredith, or some holder through him, merely taken this six-month note for $9,500, without investigation, and paid over the $6,000, the situation might have been different. But Meredith did not take this note without investigation. He examined the property. When he did so he obtained knowledge of facts which I think clearly negative his claim of good faith.
In my opinion Meredith was not a holder in due course. I would reverse the judgment.
. 31 Stat. 1401 (1901), D.C.Code § 28-402 (1951).