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No. L-15126. November 30, 1961.


Anita Gatchalian was interested in buying a car. Manuel Gonzales offered to her a car owned by
plaintiff. Gonzales claimed that he was authorized by the plaintiff to sell the car. Gonzales order
defendant to issue a cross-check to comply on showing interest in buying the car. Gonzales
promised to return the check the next day.

When Gonzales never appeared after, defendant issue a stop payment order on the check. She
found out that Gonzales used the check as payment to plaintiff's clinic for his wife's fees. Plaintiff
now demands defendant for payment of the check, in which defendant refused citing that plaintiff
is a not a holder in due course.

The lower court held that defendant should pay plaintiff.

ISSUE: Whether or not De Ocampo is a holder in due course.


The SC held that plaintiff is a not a holder in due course. There were obvious instances to show that
the check was negligently acquired like plaintiff having no liability with defendant and that the
check was crossed. Plaintiff failed to exercise prudence and caution. Plaintiff should have asked
questions to further inquire upon suspicion.

The presumption of good faith did not apply to plaintiff because the defect was apparent on the
instruments face – it was not payable to defendant or bearer.

Bataan Cigar V. CA
 Bataan Cigar & Cigarette Factory, Inc. (BCCFI), a corporation involved in the manufacturing of
cigarettes purchased from King Tim Pua George (George King) 2,000 bales of tobacco leaf to be
delivered starting October 1978.
 July 13, 1978: it issued crossed checks post dated sometime in March 1979 in the total amount of
 George represented that he would complete delivery w/in 3 months from Dec 5 1978 so BCCFI agreed
to purchase additional 2,500 bales of tobacco leaves, despite the previous failure in delivery
 It issued post dated crossed checks in the total amount of P1.1M payable sometime in September
 July 19, 1978: George sold to SIHI at a discount check amounting to P164K, post dated March 31,
1979, drawn by BCCFI w/ George as payee.
 December 19 and 26, 1978: George sold 2 checks both in the amount of P100K, post dated September
15 & 30, 1979 respectively, drawn by BCCFI w/ George as payee
 Upon failure to deliver, BCCFI issued on March 30, 1979 and September 14 & 28, 1979 a stop
payment order for all checks
 SIHI failing to claim, filed a claim against BCCFI
 RTC: SIHI = holder in due course. Non-inclusion of Gearoge as party is immaterial to the case
ISSUE: W/N SIHI is a holder in due course beign a second indorser and a holder of crossed checks


 Sec. 52
1. That it is complete and regular upon its face
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
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
 Sec. 59
 every holder is deemed prima facie a holder in due course
 However, when it is shown that the title of any person who has negotiated the instrument was
defective, the burden is on the holder to prove that he or some person under whom he claims, acquired
the title as holder in due course.
 effect of crossing of a check

1. check may not be encashed but only deposited in the bank

2. check may be negotiated only once — to one who has an account with a bank
3. act of crossing the check serves as warning to the holder that the check has been issued for a definite
purpose - he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a
holder in due course

 crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the
indorser's title to the check or the nature of his possession - failure = guilty of gross negligence
amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law
 SIHI is not a holder in due course. Consequently, BCCFI cannot be obliged to pay the
checks. However, 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-
negotiable. Hence, SIHI can collect from the immediate indorser.