1. (a) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under subsection (a) of Section 65 of this act.

2. (b) If the validity of signatures is admitted or proved and there is compliance with subsection (a) of this section, a plaintiff producing the

   instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under Section 52 of this act, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.

   Oklahoma Code Comment

3. 1. Section

   3-308 is a modification of pre-revision Section 3-307. The last sentence of subsection (a) recognizes a situation under subsection 3-402(a) that allows an undisclosed principal to be liable on the instrument. The undisclosed principal admits the authenticity of the alleged agent's signature unless specifically denied, but does not admit the alleged agent's authority to sign for the undisclosed. The person seeking to enforce the instrument against the undisclosed principal must prove authority. The reference to "compliance with subsection (a)" in subsection (b) refers to this requirement to prove authority; producing the instrument is not enough.

4. 2. Subsection (b) would require a different result than the court reached in Friendly National

   Bank of Southwest Oklahoma City v. Farmers Insurance Croup, 630 P.2d 318 (Okla. 1981). The court held that "[i]f the facts show the possibility of a defense as between the defendant and the payees, this is all that is required by the law to place upon the plaintiff the burden of proving that it was in good faith and had no knowledge of the defense." Id., 603 P.2d at 321 (emphasis added).

   The Friendly National

   Bank court's statement of the law evolved from a series of cases beginning with Sanco Finance Co. v. Neal, 387 P.2d 113 (Okla. 1963). For further evolution, se also Peoples Bank of Aurora v. Haar, 421 P.2d 817 (Okla. 1966); Timeplan Corp. of Okla. City, Inc. v. Fuxa 9 U.C.C. Rep. Serv. 262, 42 Okla. B.J. 1217 (Okla. Ct. App. 1971), and Oklahoma Nat'l Bank v. Equitable Credit Fur Co., 489 P.2d 1331 (Okla. 1971).

   Under subsection (b), it is clearly only after the defendant proves a defense that the plaintiff must prove holder-in-due-course status. Proof of the possibility of a defense is not sufficient.

Laws 1991, SB 25, c. 117, § 59, eff. January 1, 1992.