Checks

STATE INVESTMENT HOUSE vs. INTERMEDIATE APPELLATE COURT, ANITA PEÑA CHUA and
HARRIS CHUA
G.R. No. 72764 | 13 JULY 1989

Petition to review the decision of the CA

Fernan, C.J.

FACTS:
 Before 5 September 1980, New Sikatuna Wood Industries, Inc. (New Sikatuna) requested for a loan from Harris
Chua (Harris), which the latter agreed to, on the condition that the former should wait until December 1980 when
he would have the money.
 Anita Peña-Chua (Anita, Harris’ wife) issued 3 crossed checks payable to New Sikatuna all postdated 22
December 1980; with the total amount of P299,450.00.
 Subsequently, New Sikatuna entered into an agreement with State Investment House, Inc. (State Investment)
whereby for and in consideration of the sum of P1,047,402.91 under a deed of sale --- i.e., New Sikatuna assigned
and discounted with State Investment 11 postdated checks, which included those issued by Anita.
 When deposited, said 3 checks were dishonored due to “insufficient funds,” “stop payment” and “account closed,”
respectively.
 State Investment claims that despite demands, Anita failed to pay, necessitating them to file an action for
collection against Anita and Harris before RTC Manila.
 Spouses Chua filed a third-party complaint against New Sikatuna; and for failure of the latter to answer, it was
declared in default.
 RTC rendered judgment against the spouses – i.e. spouses to pay State Investment, and for New Sikatuna to pay
spouses.
 CA reversed – i.e. complaint is dismissed.

ISSUE: Whether State Investment is a holder in due course and is thus entitled to hold the spouses liable for the
dishonored crossed checks.
HELD: NO. CA judgment AFFIRMED.

RATIO:
 State Investment is not a holder in due course and cannot allege that it had no knowledge of the
transaction/arrangement between New Sikatuna and spouses Chua because the checks in question are crossed
checks. When it rediscounted the checks knowing that it was crossed checks, it was knowingly violating the
avowed intention of crossing the check. Its failure to inquire from New Sikatuna the purpose of the crossed
checks prevents him from being considered in good faith and is thus not a holder in due course.
 Sec. 541, NIL provides that the maker or any legal holder of a check is entitled to indicate that such be paid to a
certain banker or institution, by writing across the face the name of said banker or institution, or only the words
“and company.” Under usual practice, crossing a check is done by placing two parallel lines diagonally on the left
top portion of the check.
 The effect of crossing a check relates to the mode of its presentment for payment. Under Sec. 72, NIL
presentment for payment is sufficient when it is made by the holder, or by some authorized person to receive
payment. Who the holder or authorized person is depends on the instructions on the face of the check.
 In the present case, said 3 crossed checks were issued payable to New Sikatuna and only means that the drawer
had intended the same for deposit only by the rightful person (payee named therein). It was not the payee who
presented, therefore, there was no proper presentment, and the liability did not attach to the drawer.
 In the absence of due presentment, the drawer does not become liable. No right of recourse is available to State
Investment against the drawer, Anita. It was not the proper party authorized to make presentment of the checks.

*State Investment may recover from New Sikatuna, especially if it has no valid excuse for refusing payment.