In light of the text and history, we conclude that, when the legislature used the phrase "good faith" in ORS 90.130 and defined it as "honesty in fact" in ORS 90.100(19), it intended to follow the URLTA in incorporating the meaning of "good faith" in UCC section 1-201(19). This court has previously interpreted that UCC provision, originally codified in Oregon at ORS 71.2010(19) (1963).See U.S. National Bank v. Boge , 311 Or. 550, 814 P.2d 1082 (1991) ; Community Bank v. Ell , 278 Or. 417, 564 P.2d 685, reh'g den. , 279 Or. 245, 566 P.2d 903 (1977). In Community Bank , we explained that the appropriate standard for "good faith" under ORS 71.2010(19) (1977) is a "subjective one, looking to the intent or state of mind of the party concerned."
In that case, however, the court was faced with a negotiable instrument. Because the note in this case is not a "sum certain," it is not negotiable, and the principles of United Overseas would not apply. Additionally, in Community Bank v. Ell, 564 P.2d 685, reh'g denied, 566 P.2d 903 (Or. 1977), the Supreme Court of Oregon held that a setoff may be asserted in an action by the transferee of a negotiable instrument, unless the transferee is a holder in due course. Setoff is usually allowed where, through a course of separate transactions, two parties become indebted to each other. If one of the parties becomes insolvent, the other, instead of paying his debt in full and receiving a dividend on what is owed him, is held only for the difference, if any, between his debt and the insolvent's.
The background of the Bank's December 17 decision has been described in our opinions in those cases and need not be repeated. See Community Bank v. Jones, 278 Or. 647, 566 P.2d 470 (1977); Community Bank v. Ell, 278 Or. 417, 564 P.2d 685, rehearing den., 279 Or. 245, 566 P.2d 903 (1977). See also Community Bank v. U.S. Bank, 276 Or. 471, 555 P.2d 435 (1976).
Furthermore, while we might agree with the bank that, standing alone, neither its indulgence of a chronically overdrawn depositor, St. Cloud National Bank Trust Co. v. Sobania Construction Co., Inc., 302 Minn. 71, 224 N.W.2d 746 (1974) nor its failure to observe the normal commercial practices of waiting for the checks to clear and determining the balance in Seinfeld's account before paying on them might not have been sufficient evidence of "bad faith," see Frantz v. First National Bank of Anchorage, supra; Exchange National Bank of Winter Haven v. Beshara, 236 So.2d 198 (Fla.2d DCA 1970), the coexistence of all these factors raises at least a reasonable inference that the bank acted as precipitately and "foolishly" as it did in order to attempt to shift to Seinfeld its own probable loss from Wolfson's machinations — an intent and motivation which demonstrate the antithesis of good faith. Community Bank v. Ell, 278 Or. 417, 564 P.2d 685, 691-92 (1977), rehearing denied, 279 Or. 245, 566 P.2d 903 (1977). It is true that the Florida version of the holder in due course provision of the U.C.C. does seem to protect the objectively stupid so long as he is subjectively pure of heart.