CHARLES A. BLISS et al., Respondents, v. CALIFORNIA COOPERATIVE PRODUCERS (a Cooperative Corporation) et al., Defendants; I. C. SHIDLER et al., Appellants.
Sac. No. 5729
In Bank
June 3, 1947
240 Cal. 240
Charles A. Bliss, Irvin C. Ford and C. K. Curtright for Respondents.
CARTER, J.—Judgment was given for plaintiffs against defendants and appellants Shidler, Winchester and Galbreath on three promissory notes of which they were the makers. Their defenses, among others, were fraud and failure of consideration. Plaintiffs are the transferees of the notes, the payee being California Cooperative Producers, a corporation.
The series of events leading up to the execution of the notes had their beginning in 1926. In that year the idea was conceived by Mr. Johnson, president of the Union Construction Company, and a Mr. Campbell, to use the shipping terminal facilities and property at the harbor in Oakland, California, then held by the Union Construction Company under a lease from the city of Oakland, for a terminal for processing and shipping agricultural products. It was proposed to form a corporation to be known as California Cooperative Producers (hereinafter referred to as the corporation, which was later formed), as the instrumentality to conduct the enterрrise. A promotional firm, Allen, Hobson and Simons, a copartnership, was engaged under contract of April 15, 1927, to promote and organize the business and conduct a campaign to induce growers of agricultural products to let the corporation handle their products. The corporation was incorporated on April 26, 1927, with a capital stock of $15,000 under the then
The promotional firm launched its drive, made financial arrangements, and obtained manufacturing and marketing contracts, hereafter called marketing contracts, for the corporation from many producers of agricultural products, including the three appellants, in which the producers agreed
“In order to assist in the manufacturing and/or marketing of said products, and in further consideration of the payment of the premiums on policies of endowment life insurance on the life (name of defendant signing same) for the amount of (amount of insurance issued), if and when issued and assigned to California Cooperative Producers, said producer hereby extends his credit to California Cooperative Producers in the amount of a certain promissory note of even date herewith in the principal sum of $—— (amount of note executed, and sued for herein) made by said producer in favor of said California Cooperative Producers.”
The notes involved were executed in 1927 as a part оf the transaction by appellants and were noninterest bearing negotiable instruments payable in annual installments. The principal of the notes was arrived at by an estimate of the annual produce to be delivered by the producer and maker of the note to the corporation.
On April 17, 1928, the corporation pledged the notes to plaintiffs, together with others, as security for the payment of a note for $5,000 in which the corporation was maker and plaintiffs payees. The pledge was made in the usual course of business and under circumstances which would indicate that plaintiffs were holders in due course and thus the defenses urged would not be available unless some other factor took them out of the favored position.
The court found that plaintiffs acquired the notes in good faith and without notice of any defenses of appellants. (As above stated, the defenses were fraud and failure of consideration.) The first installment on the principal of appellants’ notes became due on January 2, 1928. The transfer (on April 17, 1928) was after that date, hence we have the issue of whether a transferee of an installment note is a holder in due course where the transfer is made after one or more but less than all of the installments are due. (In this connection
On the issue of whether or not the transferee of a negotiable installment note taken after the maturity of one or more or less than all of the installments, is a holder in due course, reference must first be made to the negotiable instruments law as embodied in our statutes: “A holder in due course is a holder who has taken the instrument under the following conditions: (1) . . . (2) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact“; (
It has been stated repeatedly, as a general proposition, under the negotiable instruments law and the common
The decision in this case must turn on whether the installment due on January 2, 1928, had been paid, and if not, whether plaintiffs had notice thereof. In regard to payment of the first installment, plaintiffs alleged in their complaint that no part of the principal had been paid on any of appellants’ notes, an allegation in substance that the first installment had not been paid. That allegation was denied by appellants, which amounts to an assertion that the installment had been paid. We thus have the peculiar situation of plaintiffs аnd appellants taking positions in their pleadings opposite to their interests under the rule of law as above stated. Under that rule plaintiffs’ position now requires a claim that the installment was paid, and appellants, that it was unpaid. The court found that all of plaintiffs’ allegations were true, thus finding that the first installment had not been paid. It also found (and it would seem to be conflicting) that pursuant to the marketing contracts appellants delivered produce to the corporation in 1927, and the corporation on August 31, 1928 (after the transfer of the notes) entered credits on its books for the first installment; that plaintiffs were not holders in due course because the notes were transferred after the first installment was due but that “plaintiffs were purchasers and holders of said notes in good faith and for value and without notice of any equity or defense in favor of defendants or any of them; and in this connection the court finds that in each instance said California Cooperative Producers had in its possession and under its control pursuant to and under the said Financing and Manufacturing and Marketing Agreement on said 2nd day of January, 1928, money, property or credits belonging to each of said defendants, being the products or the proceeds of the products of such defendants, delivered pursuant to said Financing and Manufacturing and Marketing Agreement sufficient in value or amount to pay, satisfy and discharge the amount of said First Installment
On the subject of notice to plaintiffs of appellants’ failure to pay the first installment, the findings are unsatisfactory. It is found that they (plaintiffs) were bona fide holders without notice of any defenses, but it is also found that they were not holders in due course. They may not have had notice of any defenses, yet they may have had notice of the default and thus were put upon inquiry. In the latter event they would not be holders in due course. It is evident from the findings that the court did not consider the case in the light of the law as heretofоre stated. The evidence with reference to the existence of notice is sketchy. Precisely what
Thus turning to appellants’ defenses, the court found that the corporation and its officers were the agents of appellants in the marketing of their products. The stock of the corporation was to be issued to associations of producers. The corporation was “in effect owned” by the associations of which appellants were membеrs. The notes executed by appellants were part of the same transaction in which they executed the marketing and association contracts. The interest on the $5,000 note delivered to plaintiffs by the corporation was paid until July 17, 1930, but none of the principal was paid although $4,000 of it became due before that date. On the issue of appellants’ defense of failure of consideration or failure by the corporation to perform under the marketing contract, it appears that the corporation failed to pay the premiums on the insurance policies after July, 1930; that because of its insolvency, it has failed to and could not since then pay such premiums or process, manufacture or market appellants’ products. Failure of consideration is a good defense to an action on a negotiable instrument by one not a holder in due course. (
The breach of the marketing contracts consisted of the failure after 1930 to handle appellants’ products and maintain the insurance policies in force arising from the voluntary bankruptcy of the corporation in that year rendering it incapable of further performance. The insolvency of a promisor in a bilateral continuing contract is tantamount to a breach of the contract by him. (Caminetti v. Pacific Mut. Life Ins. Co., 23 Cal.2d 94; Central Trust Co. v. Chicago Auditorium Assn., 240 U.S. 581.)
Plaintiffs urge that the asserted failure of consideration did not occur until after appellants had notice of the transfer of their notes to plaintiffs and thus the failure of consideration is not a defense. The general rulе is that an assignee of a chose in action is subject to all equities and defenses existing at or before the notice of the assignment. (
“On the other hand, payment to the assignor or other defenses acquired by the debtor against the assignor after notice of the assignment are invalid, unless the defense, though acquired after notice, is based on a right of the defendant inherent in the contract by its terms. Thus if payments under an executory contract are assigned, the debtor may set up failure of the assignor to fulfill his part of the contract though such failure occurs after notice of the assignment, for the assignor cannot give another a larger right than he has himself; . . .” [Emphasis added.] (Williston on Contracts (rev. ed.), vol. 2, § 433.)
In Stern v. Sunset Road Oil Co., 47 Cal.App. 334, the court held that recoupment was available to the debtor against the assignee although the
Plaintiffs contend that there was no failure of consideration when the notes were pledged to them. (That, as we have seen, is immaterial.) And further, that appellants have enjoyed the fruits of the marketing contract with the corporation and hence are estopped to raise the defense of failure of consideration. The failure of consideration was, as above shown, the failure and inability after insolvency of the corporation to continue to accept, process and market appellants’ products and maintain the life insurance policies in effect. In this connection the court found: “That on or about the 21st day of May, 1928, [appellants] became aware of the transfer of their respective notes . . . to plaintiffs, . . . ; that said [corporation] was declared a bankrupt on its volun-
“. . . That [appellants], by the execution of said . . . Marketing [contract] . . . by the execution of said notes, and by delivering the same to said corporation for the purpose of extending to it their credit in the amount of said notes, thereby enabling said corporation to borrow said $5,000 from plaintiffs; by the receipt of the benefits of life insurance on their respective lives, and the benefits of said loan by plaintiffs to said defendant corporation, and by all other benefits provided in said . . . Marketing [contract]; and by continuing as members of said corporation after the borrowing of said money as aforesaid, and after they had knowledge of the borrowing of said money as aforesaid, and after having knowledge of the transfer of their notes as security therefor, and all of the other matters and things herein found to be true, said [appellants], ratified the acts of said corporation in borrowing said money from plaintiffs, and transferring said notes to plaintiffs as security for its repayment; and they are by their said acts and conduct, and by the benefits they received as herein found, estopped from setting up any defense to this action on the ground of any alleged fraud . . . , or from making any other defense thereto, . . . and that by their said acts and conduct as herein found, said defendants waived any and all rights that they may or might have had to set up any defense to this action on the ground of any alleged fraud practiced by their said agent, California Cooperative Producers, or its agent, or from making any other defenses
thereto, as to the matters hereinabove found.”
We do not find any estoppel or reason springing from the foregoing circumstances which prevent appellants defending on the ground of failure of consideration. The awareness on their part of the pledge of their notes to secure the payment of the $5,000 did not impose upon them any duty with respect to the assignees. They could assume that inasmuch as the assignees had no greater rights then, and were subject to the same defenses as the corporation-assignor, they would govern their acts and protect themselves accordingly. Certainly they continued as members of the associations, which were stockholders in the corporation, and delivered their products to the corporation. They were bound to do that under the marketing and association contracts and were privileged to assume that the corporation would continue its performance and that the plaintiffs-assignees would be subject to the defenses arising from the failure of the corporation-assignor to perform. Appellants did receive the benefits of the marketing contracts prior to insolvency but they were entitled to receive them under those contracts. Plaintiffs cite Maddock v. Russell, 109 Cal. 417, and Rohrbacher v. Kleebauer, 119 Cal. 260, for the proposition that appellants cannot complain because they have enjoyed the fruits of the contracts. Those cases are not in point inasmuch as the contracts here involved are the marketing contracts and there has been a failure of consideration therein as above stated. The corporation has been unable to perform since 1930. Appellants did not rescind the contracts. They had no grounds for doing so insofar as failure of consideration is concerned. There was no failure of consideration until the insolvency of the corporation. Appellants did nothing to mislead plaintiffs. It is not found that they promised to pay the $5,000 the corporation borrowed or to pay to plaintiffs the notes executed by them. Prior to the insolvency they did not waive the defense of failure of consideration. It had not failed as yet and there is nothing to indicate that they did so as to a future possibility of a breach by the corporation.
Running through the above quoted finding of the court is an undercurrent intimating that the corporation was the alter ego of the appellants-producers and the associations to which they belonged; that the insolvency was their act; and, that hence the $5,000 note was really their note. The court also found that the corporation “was in effect owned by
“It should also be borne in mind that this is not an action to enforce shareholders’ liability, although a number of the statements in the opening brief might lead the casual reader to so believe. As appellants have stated, it had already been decided that the shareholders were liable on the Corporation note here involved; but they have not met that obligation. This is an action upon promissory notes executed by Appellants to the California Cooperative Producers and by that organization pledged to the Plaintiffs and Respondents. By reason of the nature of the defenses interposed by the Defendants, it has become necessary to show that they were so closely related to the Cooperative that they cannot escape liability on those notes by the defenses relied upon.”
The judgment is reversed and the case may be retried only upon the issue of notice of nonpayment of the first installment at the time of the transfer, and judgment may thereafter be entered in accordance with the views expressed herein in the light of the determination of the issue of notice.
Gibson, C. J., Shenk, J., Schauer, J., and Spence, J., concurred.
TRAYNOR, J.—I dissent.
In my opinion it is unnecessary to remand this case to the trial court for a finding on the question of notice, since the findings and the evidence show that plaintiffs took the notes without notice that the first installments had not been paid. Moreover, I do not understand by what reasoning my associates reach the conclusion that despite a finding that the transferee of an installment note acted in good faith and the fact that an inquiry would have revealed no defenses he cannot as a matter of law be a holder in due course if he acquires the note with notice of the nonpayment of a past due installment.
The first question to determine is whether the first installments were due and unpaid at the time the notes were pledged. There is confusion in the findings as to whether under the marketing agreement, payment was made upon defendants’ delivering fruit of enough value to meet each installment as it became due or upon the payee‘s deducting the amount of each installment from the proceeds from the sale of the fruit. The trial court found that the payee had in its possession on the due date of the first installments, money and property or credits of defendants “sufficient in value or amount to pay, satisfy and discharge the amount of said First installment” payment of each of said respective promissory notes in full. The money, property, or credits referred to consisted of fruit as well as proceeds from the sale thereof. There was evidence that the proceeds alone would not cover the first installments on the due date thereof. It may be assumed for the purpose
A holder in due course is defined in
“A holder in due course is a holder who has taken the instrument under the following conditions:
“(1) That it is complete and regular upon its face;
“(2) That he became the hоlder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;
“(3) That he took it in good faith and for value;
“(4) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.”
No question is raised with respect to subdivisions (1) and (3). Any conclusion that plaintiffs are not holders in due course must therefore be based on subdivision (2) or (4).
The first major issue presented under these subdivisions is whether plaintiffs were precluded from being holders in due course merely because the maturity date of the first installments had passed before they acquired the notes.
Subdivision (2) specifies two conditions: The holder must have taken the instrument (a) before it was overdue and (b) without notice that it had been “previously dishonored, if such was the fact.”
Is an installment note overdue in its entirety when it is transferred after the due date of an installment? An installment note is of course overdue as to installments due before the date of transfer, and, under subdivision (2), a transferee thereof cannot be a holder in due course as to such installments. In the absence of the operation of an acceleration clause, however, the fact that the maturity date of one or more installments has passed cannot make the instrument overdue as to installments pаyable in the future. The instrument is in part overdue and in part not. Is it overdue within the meaning of subdivision (2)? An instrument is not overdue until the specified maturity of the principal obligation. An installment note, however, has several maturities, and if the maturity of each installment is regarded as the maturity of the instrument, then the instrument would be overdue after the maturity of the first installment. (See 40 Harv.L.Rev. 634, 636.) This interpretation would make the instrument
Is a transferee who has acquired the note after an instаllment has matured, without notice of its nonpayment, a purchaser with notice that the note has been previously dishonored? Even if it is assumed that the nonpayment of one or more installments is tantamount to dishonor of the whole instrument, the holder has no notice of dishonor unless he has notice of nonpayment. Circulation of the instrument after the due date of an installment except the last cannot serve as notice that the installment has not been paid, for the instrument was designed to circulate until the maturity date of the last installment. A transferee has no reason to conclude from the mere fact that the note circulates after the due date of one or more installments that such installments were not paid: He may assume that the ordinary course of business has been followed and that the installments have been paid. (
Does subdivision (4) of section 3133 preclude a transferee‘s being a holder in due course when he has no notice of the fact that an installment was not paid when due? Since the transferee may assume that the matured installments have been paid, and since he has no notice from the note itself of the nonpayment of past installments merely because the note is
We turn, therefore, to the second major issue in this case, namely, whether a purchaser can be a holder in due course as to unmatured installments if he has taken the note with knowledge that one or more installments were not paid when due. The majority opinion concludes that such a purchaser cannot be a holder in due course but does not еxplain upon what provision of the Uniform Negotiable Instruments Act its conclusion is based. It is necessary therefore to reexamine the pertinent provisions of that act to determine whether they afford any justification for that conclusion.
Does notice of the fact that an installment note is transferred after an installment has matured and is unpaid make the whole note overdue within the meaning of subdivision (2) of
If dishonor by nonpayment of an installment when due is tantamount to dishonor of the instrument as to future installments, it would follow that even if that installment were subsequently paid, the whole note would be regarded as “previously dishonored.” Consequently, knowledge of a transferee that one installment was paid late would preclude his being a holder in due course as to future installments, for he would have notice that the instrument was “previously dishonored.” It is settled, however, under the provisions of the Uniform Negotiable Instruments Act with respect to notice of dishonor to persons secondarily liable, that dishonor of an installment does not constitute dishonor of the note as to other installments.
An analogy is presented by the cases involving nonpayment of one of a series of notes. According to the cases decided under the Uniform Negotiable Instruments Act, knowledge of the dishonor of one of the notes does not constitute notice that all of the notes of the series are dishonored. (Hobart M. Cable Co. v. Bruce, 135 Okla. 170, 171; Morgan v. Farmington Coal & Coke Co., 97 W.Va. 83, 99; Brannan, Negotiable Instruments 566; cf., however, 64 A.L.R. 457, 458 (collection of cases decided under common law principles).)
The conclusion seems inescapable therefore that if knowledge of nonpayment of a past due installment precludes a purchaser from being a holder in due course as to unmatured installments, it is not because of the provisions of subdivision (2) of
Is notice of the nonpayment of an installment, as a matter of law, notice of “any infirmity in the instrument or defect in the title of the person negotiating” the note within the meaning of subdivision (4) of
Under subdivision (4) of
The mere fact that one or more installments of an installment note are unpaid when the note is negotiated does not convey knowledge to the transferee of a defense against the note; nor does it reveal such knowledge of circumstances that it can be said that the holder of the note shut his eyes to the facts and in bad faith sought to avoid the knowledge of a defense. In that respect there is no difference between a transferee of a negotiable instrument with knowledge that one or
Similarly, notice of a default in the payment of an installment of principal disconnected from other facts does not prevent the transferee from being a holder in due course. Nor does such notice alone constitute bad faith and put the holder under a duty to make an inquiry. Even if good faith would require the transferee to make an inquiry, it would not necessarily follow that he could not still be a holder in due course. The inquiry may reveal that the default is fully explained by the circumstances and that it constitutes no warning that the maker has a defense with regard to installments to mature in the future. Thus, it may appear that prompt payment has been waived and that the delay with regard to one or more past due installments does not exceed the delay in the payment of other installments that have been paid late in the past. Failure to pay a past due installment may arise from unexpected circumstances affecting the ability of a maker to pay rather than frоm an equitable defense. Many installment notes containing an acceleration clause provide that the holder can accelerate future installments only if one or more past installments remain unpaid for a specified period. In such cases installments are frequently paid in the interval between the maturity date of the installment and the date at which under the terms of the note the holder would be entitled to accelerate future payments. A rule would be contrary to common experience that held in each case in which a past due installment is unpaid, notice of such fact alone is notice that the maker has a defense against future installments payable under the note.
In my opinion, therefore, the rule set forth in the majority opinion that a purchaser of an installment note who has knowledge that a past due installment was unpaid when he acquired
The cases decided under common law principles, the one case deciding the question under the Uniform Negotiable Instruments Act, and the dicta in the other cases relied on in the majority opinion, are all based on the theory that the transferee was a purchaser of overdue paper or was a purchaser with notice of dishonor. (See Britton, Bills and Notes, 455.) It has already been observed that there is no support for either theory in the provisions of the Uniform Negotiable Instruments Act. The majority opinion cannot be brought within the purview of that act unless it is regarded as hold-
Plaintiffs gave a loan of $5,000 to a corporation in which they had no interest and with which they had no other business connections. Even if they knew that the first installments had not been paid and good faith required an inquiry when the notes were pledged, such an inquiry could not have revealed the defense of subsequent failure of consideration now set up to bar their recovery on the notes. Plaintiffs could not learn in advance that years later the corporation would become insolvent and be unable to perform its obligations under its contract with the makers. The rule adopted by the majority of this court actually empowers the maker of an installment note to render the note nonnegotiable by refusing to pay an installment, for knowledge of that fact precludes a transferee‘s being a holder in due course. Such a rule contradicts the basic principle of the statute that a transferee of a negotiable instrument is not required, except by considerations of honesty and good faith, to enter upon an inquiry with regard to transactions that have given rise to the issuance of the instrument.
If the principles set forth in the Uniform Negotiable Instruments Act are applied to this case, knowledge that the first installments were not paid would not as a matter of law prevent plaintiffs from being holders in due course. It would merely be evidence that plaintiffs might not have acquired the notes in good faith. Good faith may require a transferee to make an inquiry on the basis of such knowledge depending on the facts of the particular case. What constitutes good faith is essentially a question of fact and depends on the circumstances in each case. For examplе, if the purchaser knew that one or more installments were not paid on the due date and made a reasonable inquiry that revealed only that the payments had not been made because of some reason unconnected with any defense, he should not be barred from recovery on the note merely because of subsequent failure of consideration, a defense that could not have been known at the time. On the other hand, if the purchaser acquired the note with knowledge that several installments had not been paid, it would appear that he failed to act in good faith if he failed
Under the holding of the majority opinion, the negotiability of installment notes has been seriously impaired. After any installment has matured, it is unsafe for a purchaser, even though he acts in good faith, to acquire such a note without making certain that all past due installments have been paid. His rights as a holder in due course may be questioned at some future date by the maker‘s merely asserting that an installment was unpaid at the time of the transfer and that the transferee had knowledge of that fact. In such a situation, if the maker had a defense that involves the title of the payee, the holder would have the burden of showing that either the installment was paid when due or that he had no notice of that fact. (
Even under the rule of law announced in the majority opinion, it is unnecessary to remand this case to the trial court on the question of notice.
The trial court found “That the first installment of each of the said notes given to plaintiff as security for the note of said California Producers were past due on its face at the time of the transfer of said notes to plaintiffs, and that plaintiffs are not holders in due course of said collateral notes; but the court also finds that said plaintiffs were purchasers and holders of said notes in good faith and for value and without notice of any equity or defense of defendants or any of them. . . .” (Italics added.) It was the position of the defendants at the trial that the notice of nonpayment of the first installments was irrelevant since the date for the payment thereof had passed before the notes were transferred to plaintiffs. Under the principles already discussed, the effect of notice of nonpayment of a prior installment is pertinent only to the question whether or not the purchaser acquired the note in good faith. Since there was no evidence that
Since the trial court found that plaintiffs were holders of the notes in question “in good faith and for value without notice of an equity or defense of defendants,” it follows that the plaintiffs are holders in due course. This finding on its face, under the foregoing principles of law, can mean only one of two things: (1) plaintiffs purchased the notes without knowledge that the first installments were unpaid, or (2) even if the first installments were not paid when due and plaintiffs had knowledge of that fact, under the circumstances of the case, plaintiffs were none the less acting in good faith when they acquired the notes. Since either question is one of good faith, if either theory is supported by the evidence, the judgment must be affirmed, except to the extent that it allows plaintiffs to recover against defendant Winchester for the first installment of her note. This installment was either paid before the transfer of the note or was subject to defenses. Since it was overdue, plaintiffs were not holders in due course as to it.
Even if it is assumed that under the facts of the present case the trial court would not have found that plaintiffs were purchasers in good faith if it believed that the plaintiffs had notice of the nonpayment of the first installment, the reasonable construction of the finding in regard to the good faith of plaintiffs is that they acquired the notes without such notice.
A holder of a negotiable instrument is “deemed prima facie a holder in due course . . .” (
The remaining question is whether this construction of the finding is supported by the evidence. The principal plaintiff testified that he knew nothing of the status of the pledged
Defendants introduced no evidence sufficient to controvert this testimony. Mr. Anderson was called as defendants’ witness but he was able to state only that he advised one of the plaintiffs that the corporation would use the money to start a cannery in Sacramento and that it would be advantageous to the city and to this plaintiff. Mr. Anderson testified that he could not recall whether at that time he knew anything about the status of the growers’ notes. The testimony of this witness was struck from the record as irrelevant. Defendants contend that the testimony was admissible to show that the witness knew of the status of the notes and that he was plaintiffs’ agent. The only agency shown, however, was that the witness‘s bank was subsequently the agent for the delivery of the notes and none of the testimony struck tended to show that plaintiffs had any knowledge of the nonpayment or of any defense available to defendants at that time.
It is contended that an inference that plaintiffs had notice that the first installment was overdue could be drawn from the fact that the $5,000 note from the California Cooperative Producers contained a list of the installment notes transferred to plaintiffs as security, because this list designated the full face amount of each of the pledged notes. It is evident on the face of the principal note, however, that the full amounts were listed for purposes of identification. It was necessary to give the full face amount of each note, since the principal note executed by the corporation, after enumerating the notes given as security, stated, “The maker hereof may, while not in default, substitute as security hereunder, in place of any of said note or notes, note or notes of its grower members, of equal amount, form and character.” Even if the trial court could have reasonably inferred from the listing of the notes with their full amounts that plaintiffs had knowledge of the nonpayment of the first installments, it was free to draw or not to draw such an inference.
Edmonds, J., concurred.