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GATCHALIAN (b) That he became the holder of it before it was overdue, and
without notice that it had been previously dishonored, if such was
FACTS: Matilde Gonzales was a patient of the De Ocampo Clinic the fact;
owned by Vicente De Ocampo. She incurred a debt amounting to
P441.75. Her husband, Manuel Gonzales designed a scheme in (c) That he took it in good faith and for value;
order to pay off this debt: In 1953, Manuel went to a certain Anita (d) That at the time it was negotiated to him he had no notice of any
Gatchalian. Manuel purported himself to be selling the car of infirmity in the instrument or defect in the title of the person
Vicente De Ocampo. Gatchalian was interested in buying said car negotiating it.
but Manuel told her that De Ocampo will only sell the car if
Gatchalian shows her willingness to pay for it. Manuel advised The Supreme Court emphasized that if one is such a holder in due
Gatchalian to draw a check of P600.00 payable to De Ocampo so course, it is immaterial that he was the payee and an immediate
that Manuel may show it to De Ocampo and that Manuel in the party to the instrument. The Supreme Court however ruled that
meantime will hold it for safekeeping. Gatchalian agreed and gave De Ocampo is not a holder in due course for his lack of good faith.
Manuel the check. After that, Manuel never showed himself to De Ocampo should have inquired as to the legal title of Manuel to
Gatchalian. the said check. The fact that Gatchalian has no obligation to De
Ocampo and yet he’s named as the payee in the check hould have
Meanwhile, Manuel gave the check to his wife who in turn gave apprised De Ocampo; that the check did not correspond to Matilde
the check to De Ocampo as payment of her bills with the clinic. De Gonzales’ obligation with the clinic because of the fact that it was
Ocampo received the check and even gave Matilde her change for P600.00 – more than the indebtedness; that why was Manuel
(sukli). On the other hand, since Gatchalian never saw Manuel in possession of the check – all these gave De Ocampo the duty to
again, she placed a stop-payment on the P600.00 check so De ascertain from the holder Manuel Gonzales what the nature of the
Ocampo was not able to cash on the check. Eventually, the issue latter’s title to the check was or the nature of his possession.
reached the courts and the trial court ordered Gatchalian to pay
De Ocampo the amount of the check. MESINA v. IAC
Gatchalian argued that De Ocampo is not entitled to payment FACTS: Jose Go maintains an account with Associated Bank. He
because there was no valid indorsement. De Ocampo argued tha needed to transfer P800,000.00 from Associated Bank to another
he is a holder in due course because he is the named payee. bank but he realized that he does not want to be carrying that cash
so he bought a cashier’s check from Associated Bank worth
ISSUE: Whether or not De Ocampo is a holder in due course. P800,000.00. Associated Bank then issued the check but Jose Go
HELD: No. Section 52 of the Negotiable Instruments Law, defines forgot to get the check so it was left on top of the desk of the bank
holder in due course, thus: manager. The bank manager, when he found the check, entrusted
it to Albert Uy for the later to safe keep it. The check was however
A holder in due course is a holder who has taken the instrument
stolen from Uy by a certain Alexander Lim.
under the following conditions:
Jose Go learned that the check was stolen son he made a stop
(a) That it is complete and regular upon its face;
payment order against the check. Meanwhile, Associated Bank
received the subject check from Prudential Bank for clearing.
Apparently, the check was presented by a certain Marcelo Mesina  Sadaya filed a creditor's claim for the above sum of
for payment. Associated Bank dishonored the check. P5,746.12, plus attorneys fees in the sum of P1,500.00
 The administrator resisted the claim upon the averment that
When asked how Mesina got hold of the check, he merely stated
the deceased Victor Sevilla "did not receive any amount as
that Alfredo Lim, who’s already at large, paid the check to him for
consideration for the promissory note," but signed it only "as
“a certain transaction”.
surety for Oscar Varona
ISSUE: Whether or not Mesina is a holder in due course.  June 5, 1957: Trial court order the administrator to pay
HELD: No. Admittedly, Mesina became the holder of the cashier’s  CA reversed.
check as endorsed by Alexander Lim who stole the check. Mesina
however refused to say how and why it was passed to him. Mesina ISSUE: W/N Sadaya can claim against the estate of Sevilla as co-
had therefore notice of the defect of his title over the check from accomodation party when Verona as principal debtor is not yet
the start. The holder of a cashier’s check who is not a holder in due insolvent
course cannot enforce such check against the issuing bank which
dishonors the same. The check in question suffers from the HELD: NO. Affirmed
 Varona is bound by the obligation to reimburse Sadaya
infirmity of not having been properly negotiated and for value by
 solidary accommodation maker — who made payment —
Jose Go who is the real owner of said instrument.
has the right to contribution, from his co-accommodation
SADAYA v. SEVILLA maker, in the absence of agreement to the contrary between
them, and subject to conditions imposed by law
 requisites before one accommodation maker can seek
 March 28, 1949: Victor Sevilla, Oscar Varona and Simeon
reimbursement from a co-accommodation maker.
Sadaya executed, jointly and severally, in favor of the BPI, or
 ART. 2073. When there are two or more guarantors of the
its order, a promissory note for P15,000.00 with interest at
same debtor and for the same debt, the one among them who
8% per annum, payable on demand.
has paid may demand of each of the others the share which is
 The P15,000.00 proceeds was received by Oscar Varona
proportionally owing from him.
 If any of the guarantors should be insolvent, his share shall
 Victor Sevilla and Simeon Sadaya signed the promissory note
be borne by the others, including the payer, in the same
as co-makers only as a favor to Oscar Varona.
 June 15, 1950: outstanding balance is P4,850.00. No
 (1) A joint and several accommodation maker of a negotiable
payment thereafter made.
promissory note may demand from the principal debtor
 Oct 16 1952: bank collected from Sadaya total
reimbursement for the amount that he paid to the payee;
of P5,416.12(w/ int)
 (2) a joint and several accommodation maker who pays on
 Varona failed to reimburse Sadaya despite repeated
the said promissory note may directly demand
demands. V
reimbursement from his co-accommodation maker without
 Victor Sevilla died Francisco Sevilla was named
first directing his action against the principal debtor
provided that
 (a) he made the payment by virtue of a judicial demand, or - instrument knew him to be only an accommodation party, does
no judicial demand just voluntarily not include nor apply to corporations which are accommodation
 (b) a principal debtor is insolvent. - Varona is not insolvent parties. This is because the issue or indorsement of negotiable
CRISOLOGO JOSE v. CA paper by a corporation without consideration and for the
accommodation of another is ultra vires. Hence, one who has
FACTS: Plaintiff Ricardo S. Santos, Jr. was the vice-president of taken the instrument with knowledge of the accommodation
Mover Enterprises, Inc. in-charge of marketing and sales; and the nature thereof cannot recover against a corporation where it is
president of the said corporation was Atty. Oscar Z. Benares. Atty. only an accommodation party. If the form of the instrument, or the
Benares, in accommodation of his clients, the spouses Jaime and nature of the transaction, is such as to charge the indorsee with
Clarita Ong, issued check against Traders Royal Bank, payable to knowledge that the issue or indorsement of the instrument by the
defendant Ernestina Crisologo-Jose. Since the check was under corporation is for the accommodation of another, he cannot
the account of Mover Enterprises, Inc., the same was to be signed recover against the corporation thereon. By way of exception, an
by its president, Atty. Oscar Z. Benares, and the treasurer of the officer or agent of a corporation shall have the power to execute
said corporation. However, since at that time, the treasurer of or indorse a negotiable paper in the name of the corporation for
Mover Enterprises was not available, Atty. Benares prevailed the accommodation of a third person only if specifically
upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check. authorized to do so. Corollarily, corporate officers, such as the
The check was issued to defendant Ernestina Crisologo-Jose in president and vice-president, have no power to execute for mere
consideration of the waiver or quitclaim by said defendant over a accommodation a negotiable instrument of the corporation for
certain property which the Government Service Insurance System their individual debts or transactions arising from or in relation
(GSIS) agreed to sell to the spouses Jaime and Clarita Ong, with the to matters in which the corporation has no legitimate concern.
understanding that upon approval by the GSIS of the compromise Since such accommodation paper cannot thus be enforced against
agreement with the spouses Ong, the check will be encashed the corporation, especially since it is not involved in any aspect of
accordingly. Since the compromise agreement was not approved the corporate business or operations, the inescapable conclusion
within the expected period of time, the aforesaid check was in law and in logic is that the signatories thereof shall be
replaced by Atty. Benares. This replacement check was also signed personally liable therefor, as well as the consequences arising
by Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr. from their acts in connection therewith.
When defendant deposited this replacement check with her
account at Family Savings Bank, Mayon Branch, it was dishonored TRAVEL-ON v. CA
for insufficiency of funds. The petitioner filed an action against the
corporation for accommodation party. FACTS: Petitioner Travel-On Inc. is a travel agency from which
Arturo Miranda procured tickets on behalf of airline passengers
ISSUE: WON the corporation can be held liable as accommodation and derived commissions therefrom. Miranda was sued by
party? petitioner to collect on the six postdated checks he issued which
were all dishonored by the drawee banks. Miranda, however,
HELD: No. Accommodation party liable on the instrument to a claimed that he had already fully paid and even overpaid his
holder for value, although such holder at the time of taking the obligations and that refunds were in fact due to him. He argued
that he had issued the postdated checks not for the purpose of to the order of JRT Construction and Trading which was the name
encashment to pay his indebtedness but for purposes of of Templonuevo’s business. Despite lack of knowledge and
accommodation, as he had in the past accorded similar favors to endorsement of Templonuevo, Salazar was able to deposit the
petitioner. Petitioner however urges that the postdated checks checks in her personal savings account with BPI and encash the
are per se evidence of liability on the part of private respondent same. The three checks were deposited in three different
and further argues that even assuming that the checks were for occasions over the span of eight months. A year after the last
accommodation, private respondent is still liable thereunder encashment, Templonuevo protested the purportedly
considering that petitioner is a holder for value. unauthorized encashments and demanded from BPI the aggregate
amount of the checks. BPI complied with Templonuevo’s demand.
ISSUE: Whether Miranda is liable on the postdated checks he Since the money could no longer be debited from the account of
issued even assuming that said checks were issued for Salazar where she deposited the checks, they froze her other
accommodation only. account with them. Later on, BPI issued a cashier’s check in favor
of Templonuevo for the aggregate amount and debited P267,
RULING: There was no accommodation transaction in the case at 707.70 from Salazar’s account representing the aggregate amount
bar. In accommodation transactions recognized by the and the bank charges for the cashier’s check. Salazar filed a
Negotiable Instruments Law, an accommodating party lends his complaint against BPI. Trial court ruled in favor of her which was
credit to the accommodated party, by issuing or indorsing a check affirmed by CA. Hence, this petition.
which is held by a payee or indorsee as a holder in due course,
who gave full value therefor to the accommodated party. The ISSUE/S:
latter, in other words, receives or realizes full value which the 1. Did BPI have the authority to unilaterally withdraw from
accommodated party then must repay to the accommodating Salazar’s account the amount it has previously paid upon certain
party. But the accommodating party is bound on the check to the unendorsed order instrument?
holder in due course who is necessarily a third party and is not the
accommodated party. In the case at bar, Travel-On was payee of 2. Did BPI act judiciously in debiting Salazar’s account?
all six (6) checks, it presented these checks for payment at the
drawee bank but the checks bounced. Travel-On obviously was HELD: 1. Yes. Records show that no prior arrangement existed
not an accommodated party; it realized no value on the checks between Salazar and Templonuevo regarding the transfer of
which bounced. Miranda must be held liable on the checks ownership of the checks. This fact is crucial as Salazar’s
involved as petitioner is entitled to the benefit of the statutory entitlement to the value of the instruments is based on the
presumption that it was a holder in due course and that the checks assumption that she is a transferee within the contemplation of
were supported by valuable consideration. Section 49 of the NIL. Section 49 of the NIL contemplates a
situation where the payee or endorsee delivers a negotiable
BPI v. CA instrument for value without endorsing it. The underlying
premise of this provision, however, is that a valid transfer of
FACTS: Salazar had in her possession three crossed checks with ownership of the negotiable instrument in question has taken
an aggregate amount of P267, 692.50. These checks were payable place. Transferees in this situation do not enjoy the presumption
of ownership in favor of holders since they are neither payees nor Stelco filed a civil case against RYL and Steelweld to recover the
endorsees of such instruments. Mere possession of a negotiable value of the steel products.
instrument does not in itself conclusively establish either the right
of the possessor to receive payment, or of the right of one who has ISSUE: Whether Steelweld as an accommodating party can be held
made payment to be discharged from liability. Something more liable by Stelco for the dishonored check.
than mere possession is necessary to authorize payment to such
possessor. RULING: Steelweld may be held liable but not by Stelco. Under
Section 29 of the NIL, Steelweld Corp. can be held liable for having
The one-year delay of Templonuevo in asserting ownership over issued the subject check for the accommodation of Romeo
the checks is not enough to prove that there has a valid transfer of Lim. An accommodation party is one who has singed the
ownership has taken place. Salazar failed to discharge the burden instrument as maker, drawer, acceptor, or indorser, without
of presumption of ownership in Templonuevo’s favor as the receiving valued therefor, and for the purpose of lending his name
designated payee. Thus, the return of the check proceeds to to some other person. Such a person is liable on the instrument to
Templonuevo was therefore warranted. It is immaterial that the a holder for value, notwithstanding such holder, at the time of
account debited by BPI was di fferent from the original account to taking the instrument, knew him to be only an accommodation
which the proceeds of the check were credited because both party. Stelco however, cannot be deemed a holder of the check
belonged to Salazar anyway. for value as it does not meet two essential requisites prescribed
by statute, i.e. that it did not become “the holder of it before it was
2. No. Solely upon the prompting of Templonuevo, BPI debited the overdue, and without notice that it had been previously
account of Salazar without even serving due notice upon her. dishonored,” and that it did not take the check “in good faith and
Consequently, this caused damage to Salazar such as having for value.”
checks she issued dishonored because she was not given prior
notice of the deduction from her account. As such, the award of BATAAN CIGAR v. CA
damages must be sustained.
 Bataan Cigar & Cigarette Factory, Inc. (BCCFI), a corporation
FACTS: Stelco Marketing Corporation sold structural steel bars to involved in the manufacturing of cigarettes purchased from
RYL Construction Inc. RYL gave Stelco’s “sister corporation,” King Tim Pua George (George King) 2,000 bales of tobacco
Armstrong Industries, a MetroBank check from Steelweld leaf to be delivered starting October 1978.
Corporation. The check was issued by Steelweld’s President to  July 13, 1978: it issued crossed checks post dated sometime
Romeo Lim, President of RYL, by way of accommodation, as a in March 1979 in the total amount of P820K
guaranty and not in payment of an obligation. When Armstrong  George represented that he would complete delivery w/in 3
deposited the check at its bank, it was dishonored because it was months from Dec 5 1978 so BCCFI agreed to purchase
drawn against insufficient funds. When so deposited, the check additional 2,500 bales of tobacco leaves, despite the previous
bore two indorsements, i.e. RYL and Armstrong. Subsequently, failure in delivery
 It issued post dated crossed checks in the total amount of 1. check may not be encashed but only deposited in the bank
P1.1M payable sometime in September 1979. 2. check may be negotiated only once — to one who has an
 July 19, 1978: George sold to SIHI at a discount check account with a bank
amounting to P164K, post dated March 31, 1979, drawn 3. act of crossing the check serves as warning to the holder
by BCCFI w/ George as payee. that the check has been issued for a definite purpose - he
 December 19 and 26, 1978: George sold 2 checks both in the must inquire if he has received the check pursuant to that
amount of P100K, post dated September 15 & 30, 1979 purpose, otherwise, he is not a holder in due course
respectively, drawn by BCCFI w/ George as payee
 Upon failure to deliver, BCCFI issued on March 30, 1979 and  crossing of checks should put the holder on inquiry and upon
September 14 & 28, 1979 a stop payment order for all checks him devolves the duty to ascertain the indorser's title to the
 SIHI failing to claim, filed a claim against BCCFI check or the nature of his possession - failure = guilty of
 RTC: SIHI = holder in due course. Non-inclusion of Gearoge gross negligence amounting to legal absence of good faith,
as party is immaterial to the case contrary to Sec. 52(c) of the Negotiable Instruments Law
 SIHI is not a holder in due course. Consequently, BCCFI
ISSUE: W/N SIHI is a holder in due course beign a second cannot be obliged to pay the checks. However,
indorser and a holder of crossed checks that SIHI could not recover from the checks. The only
disadvantage of a holder who is not a holder in due course is
that the instrument is subject to defenses as if it were non-
HELD: YES. GRANTED. RTC reversed. negotiable. Hence, SIHI can collect from the immediate
 Sec. 52 indorser, George.
1. That it is complete and regular upon its face
2. That he became the holder of it before it was overdue, and CONSOLIDATED PLYWOOD v. IFC LEASING
without notice that it had been previously dishonored, if
such was the fact FACTS: Consolidated Plywood Industries Inc. (CPII) is a
3. That he took it in good faith and for value corporation engaged in the logging business. It had for its
4. That at the time it was negotiated to him he had no notice program of logging activities for the year 1978 the opening of
of any infirmity in the instrument or defect in the title of additional roads, and simultaneous logging operations along the
the person negotiating it route of said roads, in its logging concession area at Baganga,
 Sec. 59 Manay, and Caraga, Davao Oriental.
 every holder is deemed prima facie a holder in due course
 However, when it is shown that the title of any person who For this purpose, it needed 2 additional units of tractors.
has negotiated the instrument was defective, the burden is Cognizant of CPII’s need and purpose, Atlantic Gulf & Pacific
on the holder to prove that he or some person under whom Company of Manila, through its sister company and marketing
he claims, acquired the title as holder in due course. arm, Industrial Products Marketing (IPM), a corporation dealing
 effect of crossing of a check in tractors and other heavy equipment business, offered to sell to
CPII 2 “Used” Allis Crawler Tractors, 1 an HD-21-B and the other
an HD-16-B. After conducting said inspection, IPM assured CPII interest thereafter at the rate of 12% per annum, attorney’s fees
that the “Used” Allis Crawler Tractors which were being offered of P249,081.71 and costs of suit.
were fit for the job, and gave the corresponding warranty of 90
days performance of the machines and availability of parts. With CPII, et al. filed their amended answer praying for the dismissal of
said assurance and warranty, and relying on the IPM’s skill and the complaint. In a decision dated 20 April 1981, the trial court
judgment, CPII through Henry Wee and Rodolfo T. Vergara, rendered judgment, ordering CPII, et al. to pay jointly and
president and vice-president, respectively, agreed to purchase on severally in their official and personal capacities
installment said 2 units of “Used” Allis Crawler Tractors. It also
paid the down payment of P210,000.00. On 5 April 1978, IPM On 17 July 1985, the Intermediate Appellate Court issued the
issued the sales invoice for the 2 units of tractors. At the same decision affirming in toto the decision of the trial court.
time, the deed of sale with chattel mortgage with promissory note
was executed. ISSUE: Whether the promissory note in question is a negotiable
Barely 14 days had elapsed after their delivery when one of the
tractors broke down and after another 9 days, the other tractor HELD: No. The pertinent portion of the note provides that “”FOR
likewise broke down. IPM sent to the jobsite its mechanics to VALUE RECEIVED, I/we jointly and severally promise to pay to the
conduct the necessary repairs, but the tractors did not come out INDUSTRIAL PRODUCTS MARKETING, the sum of P1,093,789.71,
to be what they should be after the repairs were undertaken Philippine Currency, the said principal sum, to be payable in 24
because the units were no longer serviceable. Because of the monthly installments starting July 15, 1978 and every 15th of the
breaking down of the tractors, the road building and simultaneous month thereafter until fully paid.” Considering that paragraph (d),
logging operations of CPII were delayed and Vergara advised IPM Section 1 of the Negotiable Instruments Law requires that a
that the payments of the installments as listed in the promissory promissory note “must be payable to order or bearer,” it cannot
note would likewise be delayed until IPM completely fulfills its be denied that the promissory note in question is not a negotiable
obligation under its warranty. instrument.

Since the tractors were no longer serviceable, on 7 April 1979, The instrument in order to be considered negotiable must contain
Wee asked IPM to pull out the units and have them reconditioned, the so called “words of negotiability” — i.e., must be payable to
and thereafter to offer them for sale. The proceeds were to be “order” or “bearer.” These words serve as an expression of
given to IFC Leasing and the excess, if any, to be divided between consent that the instrument may be transferred. This consent is
IPM and CPII which offered to bear 1/2 of the reconditioning cost. indispensable since a maker assumes greater risk under a
No response to this letter was received by CPII and despite several negotiable instrument than under a non- negotiable one. Without
follow-up calls, IPM did nothing with regard to the request, until the words “or order” or “to the order of,” the instrument is payable
the complaint in the case was filed by IFC Leasing against CPII, only to the person designated therein and is therefore non-
Wee, and Vergara. The complaint was filed by IFC Leasing against negotiable. Any subsequent purchaser thereof will not enjoy the
CPII, et al. for the recovery of the principal sum of P1,093,789.71, advantages of being a holder of a negotiable instrument, but will
accrued interest of P151,618.86 as of 15 August 1979, accruing merely “step into the shoes” of the person designated in the
instrument and will thus be open to all defenses available against checks in good faith and for value, (d) State Investment was never
the latter. informed nor made aware that these checks were merely issued
to Victoriano as security and not for value.
Therefore, considering that the subject promissory note is not a
Further, there is no need to issue a notice of dishonor to Moulic.
negotiable instrument, it follows that IFC Leasing can never be a
After Moulic withdrew her funds, she could not have expected her
holder in due course but remains a mere assignee of the note in
checks to be honored. It would only be futile for State Investment
question. Thus, CPII may raise against IFC Leasing all defenses
to be sending her notices of dishonor for the two checks.
available to it as against IPM. This being so, there was no need for
CPII to implead IPM when it was sued by IFC Leasing because YANG v. CA
CPII’s defenses apply to both or either of them.
STATE INVESTMENT HOUSE v. CA  December 22, 1987: Cely Yang and Prem Chandiramani
entered into an agreement whereby Yang was to give
FACTS: Corazon Victoriano provided pieces of jewelry to Nora 2 P2.087M PCIB managers check in the amount of P4.2
Moulic so that the latter may sell the same. As security for the million both payable to the order of Fernando David. Yang
jewelries, Moulic issued to Victoriano two post-dated checks in and Chandiramani agreed that the difference of P26K in the
the aggregate amount of P100,000.00. Moulic was not able to sell exchange would be their profit to be divided equally between
the jewelries so she returned the same to Victoriano. Victoriano them.
was however unable to return the checks hence Moulic withdrew
all her funds from the bank.  Yang and Chandiramani also further agreed that the Yang
Apparently, the checks were negotiated by Victoriano to State would secure from FEBTC a dollar draft in the amount of
Investment House, Inc. So when the checks were dishonored, US$200K, payable to PCIB FCDU Account No. 4195-01165-2,
State Investment demanded Moulic to pay. Moulic refused to pay which Chandiramani would exchange for another dollar draft
because she said the checks were merely used as security for the in the same amount to be issued by Hang Seng Bank Ltd. of
jewelry. Moulic further averred that she received no notice of Hong Kong.
 December 22, 1987, Yang procured the ff:
ISSUE: Whether or not State Investment House is entitled to be
paid. a) Equitable Cashiers Check No. CCPS 14-009467 in the sum
HELD: Yes. State Investment is a holder in due course as it met all of P2,087,000.00, dated December 22, 1987, payable to the order
the requirements to be one pursuant to Section 52 of the of Fernando David;
Negotiable Instruments Law. In particular, it is clearly shown that: b) FEBTC Cashiers Check No. 287078, in the amount
(a) on their faces the post-dated checks were complete and of P2,087,000.00, dated December 22, 1987, likewise payable to
regular: (b) State Investment bought these checks from the order of Fernando David; and
Victoriano, before their due dates; (c) State Investment took these
c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New  Yang requested FEBTC and Equitable to stop payment on the
York, in the amount of US$200,000.00, dated December 22, 1987, instruments she believed to be lost
payable to PCIB FCDU Account No. 4195-01165-2.
 December 22, 1987 1 p.m.: Yang gave the cashiers checks  Both banks complied with her request
and dollar drafts to her business associate, Albert Liong, to
be delivered to Chandiramani by Liongs messenger, Danilo  Yang filed against David and Chandiramani
 CA affirms RTC: in favor of David
 Ranigo was to meet Chandiramani at 2 p.m. at Philippine
Trust Bank, Ayala Avenue, Makati where he would turn over ISSUE: W/N David is a holder in due course
Yangs cashiers checks and dollar draft to Chandiramani who,
in turn, would deliver to Ranigo a PCIB managers check in HELD:
the sum of P4.2 million and a Hang Seng Bank dollar draft for  Although negotiable instruments do not constitute legal
US$200K in exchange but Chandiramani did not appear tender, they often take the place of money as a means of
 December 22, 1987 4 p.m.: Ranigo reported the alleged loss
of the checks and the dollar draft to Liong. Liong, in turn,  checks were crossed
informed Yang, and the loss was then reported to the police.
 Section 24 of the Negotiable Instruments Law creates a
 Chandiramani was able to get hold of the instruments presumption that every party to an instrument acquired the
same for a consideration or for value
 Chandiramani delivered the 2 cashiers checks to Fernando
David at China Banking Corporation branch in San Fernando  David took the step of asking the manager of his bank to
City, Pampanga verify from FEBTC and Equitable as to the genuineness of the
checks and only accepted the same after being assured that
 In exchange, he got US$360K from David, which he deposited there was nothing wrong with said checks
in the savings account of his wife, Pushpa; and his mother,
Rani Reynandas, who held FCDU Account No. 124 with the  David did not close his eyes deliberately to the nature or the
United Coconut Planters Bank branch in Greenhills particulars of a fraud allegedly committed by Chandiramani
upon the petitioner, absent any knowledge on his part that
 He also deposited FEBTC Dollar Draft No. 4771, dated the action in taking the instruments amounted to bad faith
December 22, 1987, drawn upon the Chemical Bank, New
York for US$200K in PCIB FCDU Account No. 4195-01165-2
on the same date.
PATRIMONIO v. GUTIERREZ RTC— in favor of Marasigan. It found that the petitioner, in issuing
the pre-signed blank checks, had the intention of issuing a
FACTS: The petitioner and the respondent Gutierrez entered into negotiable instrument, albeit with specific instructions to
a business venture under the name of Slam Dunk Corporation, a Gutierrez not to negotiate or issue the check without his approval.
production outfit that produced mini-concerts and shows related RTC declared Marasigan as a holder in due course and accordingly
to basketball. dismissed the petitioner’s complaint for declaration of nullity of
the loan. It ordered the petitioner to pay Marasigan the face value
Patrimonio pre-signed several checks to answer for the expenses of the check with a right to claim reimbursement from Gutierrez.
of Slam Dunk. Although signed, these checks had no payee’s name, CA— affirmed the RTC ruling.
date or amount. The blank checks were entrusted to Gutierrez
with the specific instruction not to fill them out without previous ISSUE: Whether or not Marasigan is a holder in due course thus
notification to and approval by the petitioner. may hold Patrimonio liable.

Without the petitioner’s knowledge and consent, Gutierrez went HELD: No. Section 14 of the Negotiable Instruments Law provides
to Marasigan to secure a loan in the amount of P200,000.00 on the for when blanks may be filled. This provision applies to an
excuse that the petitioner needed the money for the construction incomplete but delivered instrument. Under this rule, if the maker
of his house. In addition to the payment of the principal, Gutierrez or drawer delivers a pre-signed blank paper to another person for
assured Marasigan that he would be paid an interest of 5% per the purpose of converting it into a negotiable instrument, that
month. person is deemed to have prima facie authority to fill it up. It
merely requires that the instrument be in the possession of a
Marasigan acceded to Gutierrez’ request and gave him person other than the drawer or maker and from such possession,
P200,000.00. Gutierrez simultaneously delivered to Marasigan together with the fact that the instrument is wanting in a material
one of the blank checks the petitioner pre-signed with Pilipinas particular, the law presumes agency to fill up the blanks.
Bank with the blank portions filled out with the words “Cash”
“Two Hundred Thousand Pesos Only”, and the amount of In order however that one who is not a holder in due course can
“P200,000.00.” enforce the instrument against a party prior to the instrument’s
completion, two requisites must exist: (1) that the blank must be
Marasigan deposited the check but it was dishonored for the filled strictly in accordance with the authority given; and (2) it
reason “ACCOUNT CLOSED.” It was later revealed that petitioner’s must be filled up within a reasonable time. If it was proven that
account with the bank had been closed. the instrument had not been filled up strictly in accordance with
the authority given and within a reasonable time, the maker can
Marasigan sought recovery from Gutierrez, to no avail. He set this up as a personal defense and avoid liability.
thereafter sent several demand letters to the petitioner asking for
the payment of P200,000.00, but his demands likewise went Section 52(c) of the NIL states that a holder in due course is one
unheeded. Consequently, he filed a criminal case for violation of who takes the instrument “in good faith and for value.” It also
B.P. 22 against the petitioner. provides in Section 52(d) that in order that one may be a holder
in due course, it is necessary that at the time it was negotiated to PEOPLE v. WAGAS
him he had no notice of any infirmity in the instrument or defect
in the title of the person negotiating it. FACTS: Gilbert Wagas ordered from Alberto Ligaray 200 bags of
rice over the telephone. As payment, Wagas issued a check in favor
Acquisition in good faith means taking without knowledge or of Ligaray. When the check was deposited it was dishonored due
notice of equities of any sort which could beset up against a prior to insufficiency of funds. Ligaray notified Wagas and demanded
holder of the instrument. It means that he does not have any payment from the latter but Wagas refused and failed to pay the
knowledge of fact which would render it dishonest for him to take amount, Ligaray filed a complaint for estafa before the RTC. RTC
a negotiable paper. The absence of the defense, when the convicted Wagas of estafa because the RTC believed that the
instrument was taken, is the essential element of good faith. prosecution had proved that it was Wagas who issued the
dishonored check, despite the fact that Ligaray had never met
In order to show that the defendant had “knowledge of such facts Wagas in person. Hence, this direct appeal.
that his action in taking the instrument amounted to bad faith,” it
is not necessary to prove that the defendant knew the exact fraud ISSUE: Whether or not Wagas is guilty beyond reasonable doubt
that was practiced upon the plaintiff by the defendant’s assignor,
it being sufficient to show that the defendant had notice that there HELD: No. The Supreme Court acquitted Wagas. The check
was something wrong about his assignor’s acquisition of title, delivered to Ligaray was made payable to cash. Under the
although he did not have notice of the particular wrong that was Negotiable Instruments Law, this type of check was payable to the
committed. In the present case, Marasigan’s knowledge that the bearer and could be negotiated by mere delivery without the need
petitioner is not a party or a privy to the contract of loan, and of an indorsement. This rendered it highly probable that Wagas
correspondingly had no obligation or liability to him, renders him had issued the check not to Ligaray, but to somebody else like
dishonest, hence, in bad faith. Cañada, his brother-in-law, who then negotiated it to
Ligaray.1wphi1 Relevantly, Ligaray confirmed that he did not
Yet, it does not follow that simply because he is not a holder in due himself see or meet Wagas at the time of the transaction and
course, Marasigan is already totally barred from recovery. thereafter, and expressly stated that the person who signed for
and received the stocks of rice was Cañada.
Notably, Gutierrez was only authorized to use the check for
business expenses; thus, he exceeded the authority when he used It bears stressing that the accused, to be guilty of estafa as
the check to pay the loan he supposedly contracted for the charged, must have used the check in order to defraud the
construction of petitioner’s house. This is a clear violation of the complainant. What the law punishes is the fraud or deceit, not the
petitioner’s instruction to use the checks for the expenses of Slam mere issuance of the worthless check. Wagas could not be held
Dunk. It cannot therefore be validly concluded that the check was guilty of estafa simply because he had issued the check used to
completed strictly in accordance with the authority given by the defraud Ligaray. The proof of guilt must still clearly show that it
petitioner. had been Wagas as the drawer who had defrauded Ligaray by
means of the check.