APPLICATION OF SECTION 27
• Suppose that A makes a note in the sum of P1000 payable to the order of B. B owes C P600. C is said to have a lien on the note to the extent of P600 only, and to that extent, he is a holder for value.• Can C as indorsee collect the whole amount of P1000 from A, or only P600? It depends. If A maker, has defenses against B indorser, such as absence of consideration, C, even if a holder in due course can collect only P600 from A, the extent of his lien.
• Reason for the rule: C is actually a holder in due course for P600 only. He is a holder in due course for such as he is a holder for value for only P600. For the balance of P400 he is not a holder for value, and since being a holder for value is one of the requisites of a holder in due course, he cannot be a holder in due course as far as the P400 is concerned.
• If A has personal defenses, he cannot use such as far as the P600 is concerned.
• If A on the other hand has real defenses, C cannot collect anything.
• But if A maker doesn't have any defenses at all against B indorser, then C can collect the whole amount of P1000 and hold the P400 for
the benefit of B.
