DE OCAMPO v.
GATCHALIAN (b) That he became the holder of it before it was overdue, and
FACTS: Matilde Gonzales was a patient of the De Ocampo Clinic
owned by Vicente De Ocampo. She incurred a debt amounting to
P441.75. Her husband, Manuel Gonzales designed a scheme in
order to pay off this debt: In 1953, Manuel went to a certain Anita
Gatchalian. Manuel purported himself to be selling the car of
Vicente De Ocampo. Gatchalian was interested in buying said car
but Manuel told her that De Ocampo will only sell the car if
Gatchalian shows her willingness to pay for it. Manuel advised
Gatchalian to draw a check of P600.00 payable to De Ocampo so
that Manuel may show it to De Ocampo and that Manuel in the
meantime will hold it for safekeeping. Gatchalian agreed and gave
Manuel the check. After that, Manuel never showed himself to
Gatchalian.
Meanwhile, Manuel gave the check to his wife who in turn gave
the check to De Ocampo as payment of her bills with the clinic. De
Ocampo received the check and even gave Matilde her change
(sukli). On the other hand, since Gatchalian never saw Manuel
again, she placed a stop-payment on the P600.00 check so De
Ocampo was not able to cash on the check. Eventually, the issue
reached the courts and the trial court ordered Gatchalian to pay
De Ocampo the amount of the check.
Gatchalian argued that De Ocampo is not entitled to payment
because there was no valid indorsement. De Ocampo argued tha
he is a holder in due course because he is the named payee.
ISSUE: Whether or not De Ocampo is a holder in due course.
HELD: No. Section 52 of the Negotiable Instruments Law, defines
holder in due course, thus:
A holder in due course is a holder who has taken the instrument
under the following conditions:
(a) That it is complete and regular upon its face;
without notice that it had been previously dishonored, if such was
the fact;
(c) That he took it in good faith and for value;
(d) 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.
The Supreme Court emphasized that if one is such a holder in due
course, it is immaterial that he was the payee and an immediate
party to the instrument. The Supreme Court however ruled that
De Ocampo is not a holder in due course for his lack of good faith.
De Ocampo should have inquired as to the legal title of Manuel to
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
apprised De Ocampo; that the check did not correspond to Matilde
Gonzales’ obligation with the clinic because of the fact that it was
for P600.00 – more than the indebtedness; that why was Manuel
in possession of the check – all these gave De Ocampo the duty to
ascertain from the holder Manuel Gonzales what the nature of the
latter’s title to the check was or the nature of his possession.
MESINA v. IAC
FACTS: Jose Go maintains an account with Associated Bank. He
needed to transfer P800,000.00 from Associated Bank to another
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
P800,000.00. Associated Bank then issued the check but Jose Go
forgot to get the check so it was left on top of the desk of the bank
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
stolen from Uy by a certain Alexander Lim.
Jose Go learned that the check was stolen son he made a stop
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
FACTS:
 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.
alone.
 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.
proportion.
 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
administrator.
provided that
 (a) he made the payment by virtue of a judicial demand, or -
no judicial demand just voluntarily
 (b) a principal debtor is insolvent. - Varona is not insolvent
CRISOLOGO JOSE v. CA
FACTS: Plaintiff Ricardo S. Santos, Jr. was the vice-president of
Mover Enterprises, Inc. in-charge of marketing and sales; and the
president of the said corporation was Atty. Oscar Z. Benares. Atty.
Benares, in accommodation of his clients, the spouses Jaime and
Clarita Ong, issued check against Traders Royal Bank, payable to
defendant Ernestina Crisologo-Jose. Since the check was under
the account of Mover Enterprises, Inc., the same was to be signed
by its president, Atty. Oscar Z. Benares, and the treasurer of the
said corporation. However, since at that time, the treasurer of
Mover Enterprises was not available, Atty. Benares prevailed
upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check.
The check was issued to defendant Ernestina Crisologo-Jose in
consideration of the waiver or quitclaim by said defendant over a
certain property which the Government Service Insurance System
(GSIS) agreed to sell to the spouses Jaime and Clarita Ong, with the
understanding that upon approval by the GSIS of the compromise
agreement with the spouses Ong, the check will be encashed
accordingly. Since the compromise agreement was not approved
within the expected period of time, the aforesaid check was
replaced by Atty. Benares. This replacement check was also signed
by Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr.
When defendant deposited this replacement check with her
account at Family Savings Bank, Mayon Branch, it was dishonored
for insufficiency of funds. The petitioner filed an action against the
corporation for accommodation party.
ISSUE: WON the corporation can be held liable as accommodation
party?
HELD: No. Accommodation party liable on the instrument to a
holder for value, although such holder at the time of taking the
instrument knew him to be only an accommodation party, does
not include nor apply to corporations which are accommodation
parties. This is because the issue or indorsement of negotiable
paper by a corporation without consideration and for the
accommodation of another is ultra vires. Hence, one who has
taken the instrument with knowledge of the accommodation
nature thereof cannot recover against a corporation where it is
only an accommodation party. If the form of the instrument, or the
nature of the transaction, is such as to charge the indorsee with
knowledge that the issue or indorsement of the instrument by the
corporation is for the accommodation of another, he cannot
recover against the corporation thereon. By way of exception, an
officer or agent of a corporation shall have the power to execute
or indorse a negotiable paper in the name of the corporation for
the accommodation of a third person only if specifically
authorized to do so. Corollarily, corporate officers, such as the
president and vice-president, have no power to execute for mere
accommodation a negotiable instrument of the corporation for
their individual debts or transactions arising from or in relation
to matters in which the corporation has no legitimate concern.
Since such accommodation paper cannot thus be enforced against
the corporation, especially since it is not involved in any aspect of
the corporate business or operations, the inescapable conclusion
in law and in logic is that the signatories thereof shall be
personally liable therefor, as well as the consequences arising
from their acts in connection therewith.
TRAVEL-ON v. CA
FACTS: Petitioner Travel-On Inc. is a travel agency from which
Arturo Miranda procured tickets on behalf of airline passengers
and derived commissions therefrom. Miranda was sued by
petitioner to collect on the six postdated checks he issued which
were all dishonored by the drawee banks. Miranda, however,
claimed that he had already fully paid and even overpaid his
obligations and that refunds were in fact due to him. He argued
that he had issued the postdated checks not for the purpose of
encashment to pay his indebtedness but for purposes of
accommodation, as he had in the past accorded similar favors to
petitioner. Petitioner however urges that the postdated checks
are per se evidence of liability on the part of private respondent
and further argues that even assuming that the checks were for
accommodation, private respondent is still liable thereunder
considering that petitioner is a holder for value.
ISSUE: Whether Miranda is liable on the postdated checks he
issued even assuming that said checks were issued for
accommodation only.
RULING: There was no accommodation transaction in the case at
bar. In accommodation transactions recognized by the
Negotiable Instruments Law, an accommodating party lends his
credit to the accommodated party, by issuing or indorsing a check
which is held by a payee or indorsee as a holder in due course,
who gave full value therefor to the accommodated party. The
latter, in other words, receives or realizes full value which the
accommodated party then must repay to the accommodating
party. But the accommodating party is bound on the check to the
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
all six (6) checks, it presented these checks for payment at the
drawee bank but the checks bounced. Travel-On obviously was
not an accommodated party; it realized no value on the checks
which bounced. Miranda must be held liable on the checks
involved as petitioner is entitled to the benefit of the statutory
presumption that it was a holder in due course and that the checks
were supported by valuable consideration.
BPI v. CA
FACTS: Salazar had in her possession three crossed checks with
an aggregate amount of P267, 692.50. These checks were payable
to the order of JRT Construction and Trading which was the name
of Templonuevo’s business. Despite lack of knowledge and
endorsement of Templonuevo, Salazar was able to deposit the
checks in her personal savings account with BPI and encash the
same. The three checks were deposited in three different
occasions over the span of eight months. A year after the last
encashment, Templonuevo protested the purportedly
unauthorized encashments and demanded from BPI the aggregate
amount of the checks. BPI complied with Templonuevo’s demand.
Since the money could no longer be debited from the account of
Salazar where she deposited the checks, they froze her other
account with them. Later on, BPI issued a cashier’s check in favor
of Templonuevo for the aggregate amount and debited P267,
707.70 from Salazar’s account representing the aggregate amount
and the bank charges for the cashier’s check. Salazar filed a
complaint against BPI. Trial court ruled in favor of her which was
affirmed by CA. Hence, this petition.
ISSUE/S:
1. Did BPI have the authority to unilaterally withdraw from
Salazar’s account the amount it has previously paid upon certain
unendorsed order instrument?
2. Did BPI act judiciously in debiting Salazar’s account?
HELD: 1. Yes. Records show that no prior arrangement existed
between Salazar and Templonuevo regarding the transfer of
ownership of the checks. This fact is crucial as Salazar’s
entitlement to the value of the instruments is based on the
assumption that she is a transferee within the contemplation of
Section 49 of the NIL. Section 49 of the NIL contemplates a
situation where the payee or endorsee delivers a negotiable
instrument for value without endorsing it. The underlying
premise of this provision, however, is that a valid transfer of
ownership of the negotiable instrument in question has taken
place. Transferees in this situation do not enjoy the presumption
of ownership in favor of holders since they are neither payees nor
endorsees of such instruments. Mere possession of a negotiable
instrument does not in itself conclusively establish either the right
of the possessor to receive payment, or of the right of one who has
made payment to be discharged from liability. Something more
than mere possession is necessary to authorize payment to such
possessor.
The one-year delay of Templonuevo in asserting ownership over
the checks is not enough to prove that there has a valid transfer of
ownership has taken place. Salazar failed to discharge the burden
of presumption of ownership in Templonuevo’s favor as the
designated payee. Thus, the return of the check proceeds to
Templonuevo was therefore warranted. It is immaterial that the
account debited by BPI was di fferent from the original account to
which the proceeds of the check were credited because both
belonged to Salazar anyway.
2. No. Solely upon the prompting of Templonuevo, BPI debited the
account of Salazar without even serving due notice upon her.
Consequently, this caused damage to Salazar such as having
checks she issued dishonored because she was not given prior
notice of the deduction from her account. As such, the award of
damages must be sustained.
STELCO MARKETING v. CA
FACTS: Stelco Marketing Corporation sold structural steel bars to
RYL Construction Inc. RYL gave Stelco’s “sister corporation,”
Armstrong Industries, a MetroBank check from Steelweld
Corporation. The check was issued by Steelweld’s President to
Romeo Lim, President of RYL, by way of accommodation, as a
guaranty and not in payment of an obligation. When Armstrong
deposited the check at its bank, it was dishonored because it was
drawn against insufficient funds. When so deposited, the check
bore two indorsements, i.e. RYL and Armstrong. Subsequently,
Stelco filed a civil case against RYL and Steelweld to recover the
value of the steel products.
ISSUE: Whether Steelweld as an accommodating party can be held
liable by Stelco for the dishonored check.
RULING: Steelweld may be held liable but not by Stelco. Under
Section 29 of the NIL, Steelweld Corp. can be held liable for having
issued the subject check for the accommodation of Romeo
Lim. An accommodation party is one who has singed the
instrument as maker, drawer, acceptor, or indorser, without
receiving valued therefor, and for the purpose of lending his name
to some other person. Such a person is liable on the instrument to
a holder for value, notwithstanding such holder, at the time of
taking the instrument, knew him to be only an accommodation
party. Stelco however, cannot be deemed a holder of the check
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
overdue, and without notice that it had been previously
dishonored,” and that it did not take the check “in good faith and
for value.”
BATAAN CIGAR v. CA
FACTS:
 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 P820K
 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 1979.
 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
HELD: YES. GRANTED. RTC reversed.
 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, George.
CONSOLIDATED PLYWOOD v. IFC LEASING
FACTS: Consolidated Plywood Industries Inc. (CPII) is a
corporation engaged in the logging business. It had for its
program of logging activities for the year 1978 the opening of
additional roads, and simultaneous logging operations along the
route of said roads, in its logging concession area at Baganga,
Manay, and Caraga, Davao Oriental.
For this purpose, it needed 2 additional units of tractors.
Cognizant of CPII’s need and purpose, Atlantic Gulf & Pacific
Company of Manila, through its sister company and marketing
arm, Industrial Products Marketing (IPM), a corporation dealing
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
that the “Used” Allis Crawler Tractors which were being offered
were fit for the job, and gave the corresponding warranty of 90
days performance of the machines and availability of parts. With
said assurance and warranty, and relying on the IPM’s skill and
judgment, CPII through Henry Wee and Rodolfo T. Vergara,
president and vice-president, respectively, agreed to purchase on
installment said 2 units of “Used” Allis Crawler Tractors. It also
paid the down payment of P210,000.00. On 5 April 1978, IPM
issued the sales invoice for the 2 units of tractors. At the same
time, the deed of sale with chattel mortgage with promissory note
was executed.
Barely 14 days had elapsed after their delivery when one of the
tractors broke down and after another 9 days, the other tractor
likewise broke down. IPM sent to the jobsite its mechanics to
conduct the necessary repairs, but the tractors did not come out
to be what they should be after the repairs were undertaken
because the units were no longer serviceable. Because of the
breaking down of the tractors, the road building and simultaneous
logging operations of CPII were delayed and Vergara advised IPM
that the payments of the installments as listed in the promissory
note would likewise be delayed until IPM completely fulfills its
obligation under its warranty.
Since the tractors were no longer serviceable, on 7 April 1979,
Wee asked IPM to pull out the units and have them reconditioned,
and thereafter to offer them for sale. The proceeds were to be
given to IFC Leasing and the excess, if any, to be divided between
IPM and CPII which offered to bear 1/2 of the reconditioning cost.
No response to this letter was received by CPII and despite several
follow-up calls, IPM did nothing with regard to the request, until
the complaint in the case was filed by IFC Leasing against CPII,
Wee, and Vergara. The complaint was filed by IFC Leasing against
CPII, et al. for the recovery of the principal sum of P1,093,789.71,
accrued interest of P151,618.86 as of 15 August 1979, accruing
interest thereafter at the rate of 12% per annum, attorney’s fees
of P249,081.71 and costs of suit.
CPII, et al. filed their amended answer praying for the dismissal of
the complaint. In a decision dated 20 April 1981, the trial court
rendered judgment, ordering CPII, et al. to pay jointly and
severally in their official and personal capacities
On 17 July 1985, the Intermediate Appellate Court issued the
decision affirming in toto the decision of the trial court.
ISSUE: Whether the promissory note in question is a negotiable
instrument.
HELD: No. The pertinent portion of the note provides that “”FOR
VALUE RECEIVED, I/we jointly and severally promise to pay to the
INDUSTRIAL PRODUCTS MARKETING, the sum of P1,093,789.71,
Philippine Currency, the said principal sum, to be payable in 24
monthly installments starting July 15, 1978 and every 15th of the
month thereafter until fully paid.” Considering that paragraph (d),
Section 1 of the Negotiable Instruments Law requires that a
promissory note “must be payable to order or bearer,” it cannot
be denied that the promissory note in question is not a negotiable
instrument.
The instrument in order to be considered negotiable must contain
the so called “words of negotiability” — i.e., must be payable to
“order” or “bearer.” These words serve as an expression of
consent that the instrument may be transferred. This consent is
indispensable since a maker assumes greater risk under a
negotiable instrument than under a non- negotiable one. Without
the words “or order” or “to the order of,” the instrument is payable
only to the person designated therein and is therefore non-
negotiable. Any subsequent purchaser thereof will not enjoy the
advantages of being a holder of a negotiable instrument, but will
merely “step into the shoes” of the person designated in the
instrument and will thus be open to all defenses available against
the latter.
Therefore, considering that the subject promissory note is not a
negotiable instrument, it follows that IFC Leasing can never be a
holder in due course but remains a mere assignee of the note in
question. Thus, CPII may raise against IFC Leasing all defenses
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
CPII’s defenses apply to both or either of them.
STATE INVESTMENT HOUSE v. CA
FACTS: Corazon Victoriano provided pieces of jewelry to Nora
Moulic so that the latter may sell the same. As security for the
jewelries, Moulic issued to Victoriano two post-dated checks in
the aggregate amount of P100,000.00. Moulic was not able to sell
the jewelries so she returned the same to Victoriano. Victoriano
was however unable to return the checks hence Moulic withdrew
all her funds from the bank.
Apparently, the checks were negotiated by Victoriano to State
Investment House, Inc. So when the checks were dishonored,
State Investment demanded Moulic to pay. Moulic refused to pay
because she said the checks were merely used as security for the
jewelry. Moulic further averred that she received no notice of
dishonor.
ISSUE: Whether or not State Investment House is entitled to be
paid.
HELD: Yes. State Investment is a holder in due course as it met all
the requirements to be one pursuant to Section 52 of the
Negotiable Instruments Law. In particular, it is clearly shown that:
(a) on their faces the post-dated checks were complete and
regular: (b) State Investment bought these checks from
Victoriano, before their due dates; (c) State Investment took these
checks in good faith and for value, (d) State Investment was never
informed nor made aware that these checks were merely issued
to Victoriano as security and not for value.
Further, there is no need to issue a notice of dishonor to Moulic.
After Moulic withdrew her funds, she could not have expected her
checks to be honored. It would only be futile for State Investment
to be sending her notices of dishonor for the two checks.
YANG v. CA
FACTS:
 December 22, 1987: Cely Yang and Prem Chandiramani
entered into an agreement whereby Yang was to give
2 P2.087M PCIB managers check in the amount of P4.2
million both payable to the order of Fernando David. Yang
and Chandiramani agreed that the difference of P26K in the
exchange would be their profit to be divided equally between
them.
 Yang and Chandiramani also further agreed that the Yang
would secure from FEBTC a dollar draft in the amount of
US$200K, payable to PCIB FCDU Account No. 4195-01165-2,
which Chandiramani would exchange for another dollar draft
in the same amount to be issued by Hang Seng Bank Ltd. of
Hong Kong.
 December 22, 1987, Yang procured the ff:
a) Equitable Cashiers Check No. CCPS 14-009467 in the sum
of P2,087,000.00, dated December 22, 1987, payable to the order
of Fernando David;
b) FEBTC Cashiers Check No. 287078, in the amount
of P2,087,000.00, dated December 22, 1987, likewise payable to
the order of Fernando David; and
c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New
York, in the amount of US$200,000.00, dated December 22, 1987,
payable to PCIB FCDU Account No. 4195-01165-2.
 December 22, 1987 1 p.m.: Yang gave the cashiers checks
and dollar drafts to her business associate, Albert Liong, to
be delivered to Chandiramani by Liongs messenger, Danilo
Ranigo
 Ranigo was to meet Chandiramani at 2 p.m. at Philippine
Trust Bank, Ayala Avenue, Makati where he would turn over
Yangs cashiers checks and dollar draft to Chandiramani who,
in turn, would deliver to Ranigo a PCIB managers check in
the sum of P4.2 million and a Hang Seng Bank dollar draft for
US$200K in exchange but Chandiramani did not appear
 December 22, 1987 4 p.m.: Ranigo reported the alleged loss
of the checks and the dollar draft to Liong. Liong, in turn,
informed Yang, and the loss was then reported to the police.
 Chandiramani was able to get hold of the instruments
 Chandiramani delivered the 2 cashiers checks to Fernando
David at China Banking Corporation branch in San Fernando
City, Pampanga
 In exchange, he got US$360K from David, which he deposited
in the savings account of his wife, Pushpa; and his mother,
Rani Reynandas, who held FCDU Account No. 124 with the
United Coconut Planters Bank branch in Greenhills
 He also deposited FEBTC Dollar Draft No. 4771, dated
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.
 Yang requested FEBTC and Equitable to stop payment on the
instruments she believed to be lost
 Both banks complied with her request
 Yang filed against David and Chandiramani
 CA affirms RTC: in favor of David
ISSUE: W/N David is a holder in due course
HELD:
 Although negotiable instruments do not constitute legal
tender, they often take the place of money as a means of
payment
 checks were crossed
 Section 24 of the Negotiable Instruments Law creates a
presumption that every party to an instrument acquired the
same for a consideration or for value
 David took the step of asking the manager of his bank to
verify from FEBTC and Equitable as to the genuineness of the
checks and only accepted the same after being assured that
there was nothing wrong with said checks
 David did not close his eyes deliberately to the nature or the
particulars of a fraud allegedly committed by Chandiramani
upon the petitioner, absent any knowledge on his part that
the action in taking the instruments amounted to bad faith
PATRIMONIO v. GUTIERREZ
FACTS: The petitioner and the respondent Gutierrez entered into
a business venture under the name of Slam Dunk Corporation, a
production outfit that produced mini-concerts and shows related
to basketball.
Patrimonio pre-signed several checks to answer for the expenses
of Slam Dunk. Although signed, these checks had no payee’s name,
date or amount. The blank checks were entrusted to Gutierrez
with the specific instruction not to fill them out without previous
notification to and approval by the petitioner.
Without the petitioner’s knowledge and consent, Gutierrez went
to Marasigan to secure a loan in the amount of P200,000.00 on the
excuse that the petitioner needed the money for the construction
of his house. In addition to the payment of the principal, Gutierrez
assured Marasigan that he would be paid an interest of 5% per
month.
Marasigan acceded to Gutierrez’ request and gave him
P200,000.00. Gutierrez simultaneously delivered to Marasigan
one of the blank checks the petitioner pre-signed with Pilipinas
Bank with the blank portions filled out with the words “Cash”
“Two Hundred Thousand Pesos Only”, and the amount of
“P200,000.00.”
Marasigan deposited the check but it was dishonored for the
reason “ACCOUNT CLOSED.” It was later revealed that petitioner’s
account with the bank had been closed.
Marasigan sought recovery from Gutierrez, to no avail. He
thereafter sent several demand letters to the petitioner asking for
the payment of P200,000.00, but his demands likewise went
unheeded. Consequently, he filed a criminal case for violation of
B.P. 22 against the petitioner.
RTC— in favor of Marasigan. It found that the petitioner, in issuing
the pre-signed blank checks, had the intention of issuing a
negotiable instrument, albeit with specific instructions to
Gutierrez not to negotiate or issue the check without his approval.
RTC declared Marasigan as a holder in due course and accordingly
dismissed the petitioner’s complaint for declaration of nullity of
the loan. It ordered the petitioner to pay Marasigan the face value
of the check with a right to claim reimbursement from Gutierrez.
CA— affirmed the RTC ruling.
ISSUE: Whether or not Marasigan is a holder in due course thus
may hold Patrimonio liable.
HELD: No. Section 14 of the Negotiable Instruments Law provides
for when blanks may be filled. This provision applies to an
incomplete but delivered instrument. Under this rule, if the maker
or drawer delivers a pre-signed blank paper to another person for
the purpose of converting it into a negotiable instrument, that
person is deemed to have prima facie authority to fill it up. It
merely requires that the instrument be in the possession of a
person other than the drawer or maker and from such possession,
together with the fact that the instrument is wanting in a material
particular, the law presumes agency to fill up the blanks.
In order however that one who is not a holder in due course can
enforce the instrument against a party prior to the instrument’s
completion, two requisites must exist: (1) that the blank must be
filled strictly in accordance with the authority given; and (2) it
must be filled up within a reasonable time. If it was proven that
the instrument had not been filled up strictly in accordance with
the authority given and within a reasonable time, the maker can
set this up as a personal defense and avoid liability.
Section 52(c) of the NIL states that a holder in due course is one
who takes the instrument “in good faith and for value.” It also
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
him he had no notice of any infirmity in the instrument or defect
in the title of the person negotiating it.
Acquisition in good faith means taking without knowledge or
notice of equities of any sort which could beset up against a prior
holder of the instrument. It means that he does not have any
knowledge of fact which would render it dishonest for him to take
a negotiable paper. The absence of the defense, when the
instrument was taken, is the essential element of good faith.
In order to show that the defendant had “knowledge of such facts
that his action in taking the instrument amounted to bad faith,” it
is not necessary to prove that the defendant knew the exact fraud
that was practiced upon the plaintiff by the defendant’s assignor,
it being sufficient to show that the defendant had notice that there
was something wrong about his assignor’s acquisition of title,
although he did not have notice of the particular wrong that was
committed. In the present case, Marasigan’s knowledge that the
petitioner is not a party or a privy to the contract of loan, and
correspondingly had no obligation or liability to him, renders him
dishonest, hence, in bad faith.
Yet, it does not follow that simply because he is not a holder in due
course, Marasigan is already totally barred from recovery.
Notably, Gutierrez was only authorized to use the check for
business expenses; thus, he exceeded the authority when he used
the check to pay the loan he supposedly contracted for the
construction of petitioner’s house. This is a clear violation of the
petitioner’s instruction to use the checks for the expenses of Slam
Dunk. It cannot therefore be validly concluded that the check was
completed strictly in accordance with the authority given by the
petitioner.
PEOPLE v. WAGAS
FACTS: Gilbert Wagas ordered from Alberto Ligaray 200 bags of
rice over the telephone. As payment, Wagas issued a check in favor
of Ligaray. When the check was deposited it was dishonored due
to insufficiency of funds. Ligaray notified Wagas and demanded
payment from the latter but Wagas refused and failed to pay the
amount, Ligaray filed a complaint for estafa before the RTC. RTC
convicted Wagas of estafa because the RTC believed that the
prosecution had proved that it was Wagas who issued the
dishonored check, despite the fact that Ligaray had never met
Wagas in person. Hence, this direct appeal.
ISSUE: Whether or not Wagas is guilty beyond reasonable doubt
HELD: No. The Supreme Court acquitted Wagas. The check
delivered to Ligaray was made payable to cash. Under the
Negotiable Instruments Law, this type of check was payable to the
bearer and could be negotiated by mere delivery without the need
of an indorsement. This rendered it highly probable that Wagas
had issued the check not to Ligaray, but to somebody else like
Cañada, his brother-in-law, who then negotiated it to
Ligaray.1wphi1 Relevantly, Ligaray confirmed that he did not
himself see or meet Wagas at the time of the transaction and
thereafter, and expressly stated that the person who signed for
and received the stocks of rice was Cañada.
It bears stressing that the accused, to be guilty of estafa as
charged, must have used the check in order to defraud the
complainant. What the law punishes is the fraud or deceit, not the
mere issuance of the worthless check. Wagas could not be held
guilty of estafa simply because he had issued the check used to
defraud Ligaray. The proof of guilt must still clearly show that it
had been Wagas as the drawer who had defrauded Ligaray by
means of the check.