Negotiable Instruments Case Digest: Vicente R. De Ocampo V.

Gatchalian (1961)
G.R. No. L-26767 February 22, 1968

Ocampo is not a holder in due course

Lessons Applicable: Rights of the holder (Negotiable Instruments Law)

no negotiation prior to acquiring the check

check is not a personal check of Manuel

FACTS:
Sept 8 1953 evening: Anita C. Gatchalian was looking for a car for the use of her husband
and the family and Manuel Gonzales who was accompanied by Emil Fajardois (personally
known to Anita) offered her a car
Manuel Gonzales represented to defendant Anita that he was duly authorized
by Ocampo Clinic, the owner of the car, to look for a buyer and negotiate for and accomplish
the sale, but which facts were not known to Ocampo
September 9 1953
Anita requested Manuel to bring the car the day following together with the certificate of
registration of the car so that her husband would be able to see same
Manuel Gonzales told her that unless there is a showing that the party interested in the
purchase is ready he cannot bring the certificate of registration

could have inquired why a person would use the check of another to pay his own
debt, Gatchalian being personally acquainted with V. R. de Ocampo
ISSUES:
W/N Ocampo is a holder in due course - NO
W/N prima facie holder in due course applies - NO
HELD:
NO
Sec. 191
holder - payee or indorsee of a bill or note, who is in possession of it, or the bearer
Sec. 52

Anita gave him a check which will be shown to the owner as evidence of buyer's GF in the
intention to purchase, it being for safekeeping only of Manuel and to be returned

holder in due course - holder who has taken the instrument under the ff conditions:

For the hospitalization of the wife of Manuel, he paid the check to Ocampo clinic
That it is complete and regular on its face
P441.75 - payment of said fees and expenses
P158.25 -given to Manual as balance

That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, it such was the fact.

Next Day: Manual did not appear so Anita issued a stop payment order

That he took it in good faith and for value.

Anita filed with the Office of the City Fiscal of Manila, a complaint for estafa against Manuel

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
circumstances

Appeal Manuel contends that:

the check is not a negotiable instrument, under the facts and circumstances stated in
the stipulation of facts - no delivery (Section 16, Negotiable Instruments Law) because only
for safekeeping (conditional delivery)

the amount of the check did not correspond exactly with the obligation of Matilde Gonzales
to Dr. V. R. de Ocampo

check had two parallel lines in the upper left hand corner, which practice means that the
check could only be deposited but may not be converted into cash
It was payee's duty to ascertain from the holder Manuel what the nature of his title to the
check was or the nature of his possession. - failure: guilty of gross neglect and legal absence
of GF
In order to show that the defendant had 'knowledge of such facts that his action in taking the
instrument amounted to BF it is not necessary to prove that the defendant knew the exact
fraud
It is sufficient that the buyer of a note had notice or knowledge that the note was in some
way tainted with fraud
2. NO
Sec. 59
every holder is deemed prima facie to be a holder in due course
a possessor of the instrument is prima facie a holder in due course does not apply because
there was a defect in the title of the holder (Manuel Gonzales) because the instrument is not
payable to him or to bearer.

suspicious circumstance
VICENTE R. DE OCAMPO & CO. v. ANITA GATCHALIAN. G.R. No. L-15126. November 30, 1961.
FACTS:
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.

RULING:
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.
SALAS V. CA
181 SCRA 296
FACTS:
Petitioner bought a car from Viologo Motor Sales Company, which was
secured by a promissory note, which was later on indorsed to Filinvest
Finance, which financed the transaction. Petitioner later on defaulted in
her installment payments, allegedly due to the fraud imputed by VMS in
selling her a different vehicle from what was agreed upon. This default in
payment prompted Filinvest Finance to initiate a case against petitioner. The trial cour
t decided in favor of Filinvest, to which the appellate court upheld by increasing the
amount to be paid.
It is the contention of petitioner that since the agreement between her and
the motor company was inexistent, none had been assigned in favor of private
respondent.
HELD:
Petitioners liability on the promissory note, the due execution and genuineness of
which she never denied under oath, is under the foregoing factual milieu, as inevitable as it is
clearly established.
The records reveal that involved herein is not a simple case of assignment
of credit as petitioner would have it appear, where the assignee merely
steps into the shoes of, is open to all defenses available against and can enforce
payment only to the same extent as, the assignor-vendor.
The instrument to be negotiable must contain the so-called words of
negotiability. There are only 2 ways for an instrument to be payable to order. There
must always be a specified person named in the instrument and the bill or note is to be paid
to the person designated in the instrument
or to any person to whom he has indorsed and delivered the same. Without the
words or order or to the order of, the instrument is payable

only to the person designated therein and is thus non-negotiable. Any

subsequent purchaser thereof will not enjoy the advantages of being a
holder in due course but will merely step into the shoes of the person
designated in the instrument and will thus be open to the defenses available against
the latter.
In the case at bar, the promissory notes is earmarked with negotiability and Filinvest is
a holder in due course.
Stelco vs CA
Stelco Marketing vs. CA
GR 96160, 17 June 1992, 210 scra 51
--accommodation party
FACTS:
Stelco Marketing Corporation sold structural steel bars to RYL Construction Inc. RYL gave
Stelcos sister corporation, Armstrong Industries, a MetroBank check from Steelweld
Corporation. The check was issued by Steelwelds 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.
STATE INVESTMENT HOUSE V. CA
217 SCRA 32

FACTS:
Moulic issued checks as security to Victoriano, for pieces of jewelry to be
sold on commission. Moulic failed to sell the pieces of jewelry, so she returned them
to Victoriano. The checks however could not be recovered
by Moulic as these have been discounted already in favor of petitioner. Consequently,
before the maturity dates, Moulic withdrew her funds from her account. Thereafter,
petitioner presented the checks for payment but these were dishonored. This prompted the
petitioner to initiate an action
against Moulic.

HELD:
A prima facie presumption exists that a holder of a negotiable instrument is a holder in due
course. The burden of proving that State is not a holder in due course is upon Moulic. In this
regard, she failed to do so.
The evidence shows that the dated checks were complete and regular; petitioner
bought the checks from Victoriano before their due dates; it took the checks in good faith
and for value; and it was never informed nor made aware that these checks were merely
issued to payee as security.

Consequently, State is a holder in due course. Moulic cannot set up the defense that
there was failure or want of consideration. It can only invoke the defense if State was a privy
to the purpose for which they were issued and therefore is not a holder in due course.
Furthermore, the mere fact that the checks were issued as security is not
sufficient ground to discharge the instrument as against a holder in due course.
And also, Moulic was responsible for the dishonor of her checks. She
withdrew her funds from her account and could not have expected her checks to be
honored by then.

State Investment House Inc. vs. CA

State Investment House Inc. vs. CA
GR No. 101163 January 11, 1993
Bellosillo, J.:
Facts:

Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on
commission, two postdated checks in the amount of fifty thousand each. Thereafter,
Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell
the jewellry, she returned it to Victoriano before the maturity of the checks. However, the
checks cannot be retrieved as they have been negotiated. Before the maturity date Moulic
withdrew her funds from the bank contesting that she incurred no obligation on the checks
because the jewellery was never sold and the checks are negotiated without her knowledge
and consent. Upon presentment of for payment, the checks were dishonoured for
insufficiency of funds.
Issues:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure
or absence of consideration

Held:
Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence
shows that: on the faces of the post dated checks were complete and regular; that State
Investment House Inc. bought the checks from Victoriano before the due dates; that it was
taken in good faith and for value; and there was no knowledge with regard that the checks
were issued as security and not for value. A prima facie presumption exists that a holder of a
negotiable instrument is a holder in due course. Moulic failed to prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose
for which they were issued and therefore is not a holder in due course.
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke
paragraphs c and d as possible grounds for the discharge of the instruments. Since Moulic
failed to get back the possession of the checks as provided by paragraph c, intentional
cancellation of instrument is impossible. As provided by paragraph d, the acts which will
discharge a simple contract of payment of money will discharge the instrument. Correlating
Article 1231 of the Civil Code which enumerates the modes of extinguishing obligation, none
of those modes outlined therein is applicable in the instant case. Thus, Moulic may not
unilaterally discharge herself from her liability by mere expediency of withdrawing her funds
from the drawee bank. She is thus liable as she has no legal basis to excuse herself from
liability on her check to a holder in due course. Moreover, the fact that the petitioner failed
to give notice of dishonor is of no moment. The need for such notice is not absolute; there
are exceptions provided by Sec 114 of NIL.
Atrium Management Corporation vs Court of Appeals
353 SCRA 23 Business Organization Corporation Law Ultra Vires Act Liability of
Corporate Officers

In 1981, Hi-Cement Corporation through Lourdes De Leon (its Treasurer) and Antonio De Las
Alas (its Chairman, now deceased) issued four postdated checks to E.T. Henry and Co. The
checks amount to P2 million. The checks are crossed checks and are only made payable to
E.T. Henrys account. However, E.T. Henry still indorsed the checks to Atrium Management
Corporation (AMC). AMC then made sure that the checks were validly issued by requesting
E.T. Henry to get some confirmation from Atrium. Interestingly, De Leon confirmed the
checks and advised that the checks are okay to be rediscounted by AMC notwithstanding the
fact that the checks are crossed checks payable to no other accounts but that of E.T. Henry.
So when AMC presented the check, it was dishonored because Hi-Cement stopped payment.
Eventually, AMC sued Hi-Cement, E.T. Henry, and De Leon. The trial court ruled in favor of
AMC and made all the respondents liable.
On appeal, Hi-Cement averred that De Leons act in signing the check was ultra vires
hence De Leon should be personally liable for the check. De Leon, on the other hand,
insisted that the checks were authorized by the corporation.
ISSUE: Whether or not De Leons act of signing the check constitutes an ultra vires act hence
making her personally liable.
HELD: No, the act is not ultra vires but De Leon is still personally liable. The act is not ultra
vires because the act of issuing the checks was well within the ambit of a valid corporate act.
De Leon as treasurer is authorized to sign checks. When the checks were issued, Hi-Cement
has sufficient funds to cover the P2 million.
As a rule, there are four instances that will make a corporate director, trustee or officer along
(although not necessarily) with the corporation personally liable to certain obligations. They
are:
He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross
negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;
He consents to the issuance of watered down stocks or who, having knowledge thereof, does
not forthwith file with the corporate secretary his written objection thereto;
He agrees to hold himself personally and solidarily liable with the corporation; or
He is made, by a specific provision of law, to personally answer for his corporate action.
In the case at bar, De Leon is negligent. She was aware that the checks were only payable to
E.T. Henrys account yet she sent a confirmation to Atrium to the effect that the checks can
be negotiated to them (Atrium) by E.T. Henry. Therefore, she may be held personally liable
along with E.T. Henry (but not with Hi-Cement where she is an officer).
Cely Yang vs. Court of Appeals, et, al. - GR No. 138074 Case Digest
Facts:
Petitioner Cely Yang agreed with private respondent Prem Chandiramani to procure from
Equitable Banking Corp. and Far east Bank and Trust Company (FEBTC) two cashiers checks
in the amount of P2.087 million each, payable to Fernando david and FEBTC dollar draft in
the amount of US$200,000.00 payable to PCIB FCDU account No. 4195-01165-2. Yang gave

the checks and the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to
meet Chandiramani to turn over the checks and the dollar draft, and the latter would in turn
deliver to the former Phil.
Commercial International Bank (PCIB) managers check in the sum of P4.2 million and the
dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of HongKong. But
Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashiers
checks and the dollar draft.
The loss was then reported to the police. It transpired, however that the checks and the
dollar draft were never lost, for Chandiramani was able to get hold of them without
delivering the exchange consideration consisting of PCIB Managers checks. Two hours after
Chandiramani was able to meet Ranigo, the former delivered to David the two cashiers
checks of Yang and, in exchange, got US $360,000 from David, who in turn deposited them.
Chandiramani also deposited the dollar draft in
PCIG FCDU No. 4194-0165-2.
Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she
believed to be lost. Both Banks complied with her request, but upon the representation of
PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft No. 4771,
thus, enabling the holder PCIB FCDU Account No. 4194-0165-2 to received the amount of US
$ 200, 000.

consideration. However, said presumption may be rebutted. Hence, what is vital to the
resolution of this issue is whether David took possession of the checks under the conditions
provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for
in Section 52 must concur in Davids case, otherwise he cannot be deemed a holder in due
course.
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. Thus, the law itself creates a
presumption in Davids favor that he gave valuable consideration for the checks in question.
In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks
absent said consideration. However, petitioner failed to discharge her burden of proof. The
petitioners averment that David did not give valuable consideration when he took
possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that
both the trial court and the appellate court found that David did not receive the checks
gratis, but instead gave Chandiramani US$ 360,000 as consideration for the said instruments.
Lessons Applicable: Rights of the holder (Negotiable Instruments Law)
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

Issue:

between them.
(1) Whether or not David may be considered a holder in due course.
(2) Whether or not the presumption that every party to an instrument acquired the same for
a consideration is applicable in this case.

dollar draft in the amount of US$200K, payable to PCIB FCDU Account No. 4195-011652, which Chandiramani would exchange for another dollar draft in the same amount to

Held:
(1) Every holder of a negotiable instrument is deemed prima facie a holder in due course.
However, this presumption arises only in favor of a person who is a holder as defined in
Section 191 of the Negotiable Instruments Law, meaning a payee or indorsee of a bill or
note, who is in possession of it, or the bearer thereof.
In the present case, it is not disputed that David was the payee of the checks in question. The
weight of authority sustains the view that a payee may be a holder in due course. Hence, the
presumption that he is a prima facie holder in due course applies in his favor.

Yang and Chandiramani also further agreed that the Yang would secure from FEBTC a

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

(2) The presumption is that every party to an instrument acquired the same for a

US$200,000.00, dated December 22, 1987, payable to PCIB FCDU Account No. 4195-01165-2.

Yang filed against David and Chandiramani

Danilo Ranigo

CA affirms RTC: in favor of David

Ranigo was to meet Chandiramani at 2 p.m. at Philippine Trust Bank, Ayala Avenue,

ISSUE: W/N David is a holder in due course

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,

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

HELD:

but Chandiramani did not appear

Although negotiable instruments do not constitute legal tender, they often take the

place of money as a means of payment

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

checks were crossed

Section 24 of the Negotiable Instruments Law creates a presumption that every party to

police.

Chandiramani was able to get hold of the instruments

Chandiramani delivered the 2 cashiers checks to Fernando David at China Banking

an instrument acquired the same for a consideration or for value

Corporation branch in San Fernando City, Pampanga

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

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

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

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