BLISS v. CALIFORNIA COOPERATIVE PRODUCERS (1945)

On petition for rehearing it is ordered that the opinion which appears in 154 P.2d 929 be modified as follows:

On page 930, 1st Col., line 4 of opinion, after the word ‘plaintiffs' add an apostrophe and the word ‘assignor.’

On page 930, Col. 2, line 10 from the top, after the word ‘plaintiffs' add an apostrophe and the word ‘assignor.’

On page 933, Col. 2, last line, strike out the sentence ‘The judgment is affirmed’ and insert in lieu thereof the following: ‘The judgment is modified by striking out the language, ‘Helen A. Winchester, $6,253.31, together with interest on the sum of $3,750. from the 18th day of March, 1942, at the rate of 7% per annum, until the date of entry of this judgment;’ and inserting, ‘Helen A. Winchester, $5,877.56, which includes the balance of principal and interest thereon to date of entry of judgment;’. As so modified the judgment is affirmed.'

In response to the chief contention of petitioners that a note payable in installments, which is acquired after the date when the first installment is payable, is not held ‘in due course’ even though that payment was actually made on or before it became due, we have concluded that the instrument was so held because no installment was ‘overdue’, Sec. 3133, Civil Code, and it was not then subject to dishonor. That section determines that it is held in due course if it is acquired ‘before it was overdue, and without notice that it had been previously dishonored, if such was the fact.’ Section 3164 of the same code provides that an instrument may be dishonored only for nonpayment when payment is refused on presentment, or when it is ‘overdue and unpaid.’ It seems clear that if an installment note is acquired for a valuable consideration without notice of previous infirmity when no installment of principal or interest is unpaid and the note is therefore not subject to dishonor it is held in due course even though it is purchased after the date when the first installment was payable. In this case, while the notes were acquired shortly after the dates when the first installments were payable, they were neither overdue nor subject to dishonor since those installments had been previously paid in full from funds in the hands of the corporation which, by the terms of written contracts of which the purchasers had knowledge, was bound to satisfy the installments when they became due on January 2, 1928. We assume the word ‘overdue’, as it is used in Section 3133 of the Civil Code defining the term ‘holder in due course’, means with respect to installment notes, that they must be acquired before any installment is due and unpaid. The word overdue is defined in Webster's New International Dictionary, 2d Ed., page 1739, as ‘Due and more than due; delayed or unpaid.’ Every holder is deemed prima facie to be a holder in due course. Sec. 3140, Civil Code.

The foregoing construction of the meaning of the term overdue with reference to what constitutes a holder in due course appears to have been adopted by the text-writers and authorities. Hall v. E. W. Wells & Son, 24 Cal.App. 238, 248, 141 P. 53; Archibald Hardware Co. v. Gifford, 44 Ga.App. 837, 163 S.E. 254; 1 Daniel on Negotiable Inst., 5th Ed., p. 781, sec. 787; 10 C.J.S., Bills and Notes, p. 800, § 313; 8 Am.Jur. 178, sec. 432. In the Hall case, supra, the court quotes with approval from Daniels on Negotiable Instruments, as follows [24 Cal.App. 238, 141 P. 57]: “If the note be payable by installments, it is dishonored when the first installment becomes overdue and unpaid.” In 10 Corpus Juris Secundum, supra, at page 800 it is likewise said, ‘Where the principal of a note is payable in installments and one installment is overdue and unpaid at the time of transfer of the note, the transferee is not a holder before maturity.’ The converse of that language would necessarily be true. When the principal of a note is payable in installments and no installment is overdue and unpaid at the time of the transfer, the transferee is a holder in due course. It is inconsistent to say that an installment of a note is either due or overdue, when in fact it has been actually paid, particularly when payment is made before the date of maturity of the installment.

With the modifications of the opinion heretofore mentioned, the petition for rehearing is denied.

PER CURIAM.