De Ocampo Vs Gatchalian

12/10/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 003
596 SUPREME COURT REPORTS ANNOTATED

Vicente R. de Ocampo & Co. vs. Gatchalian
No. L-15126. November 30, 1961.
VICENTE R. DE OCAMPO & Co., plaintiff-appellee, vs.

ANITA GATCHALIAN, ET AL., defendants-appellants.
Bills, notes and checks; Negotiable instruments; Holder in due

course.—Section 52(c) provides that a holder in due course is one
who takes the instrument “in good faith and for value”;
597
VOL. 3, NOVEMBER 30, 1961 597
Section 59, “that every holder is deemed prima facie to be a holder

in due course”; and Section 52(d), that in order that one may be a
holder in due course it is necessary that “at the time the
instrument was negotiated to him he had no notice of any x x x
defect in the title of the person negotiating it”; and lastly Section
59, that every holder is deemed prima facie to be a holder in due
course.
Same; Same; When a holder is not a holder in due course.—
Where a holder’s title is defective or suspicious, it cannot be
stated that the payee acquired the check without the knowledge,
of said defect in holder’s title, and for this reason the presumption
that it is a holder in due course or that it acquired the instrument
in good faith does not exist.
Same; Same; Holder in due course; When proof of good faith
required.—Where the payee required the check under
circumstances which should have put it to inquiry, why the holder
had the check and used it, to pay his own personal account, the
duty developed upon it to prove that it actually acquired said
check in good faith.
www.central.com.ph/sfsreader/session/0000016eed464b2eb43e9b90003600fb002c009e/t/?o=False 1/15
APPEAL from a judgment of the Court of First Instance of

Manila. Velasquez, J.
The facts are stated in the opinion of the Court.

Vicente Formoso, Jr. for plaintiff-appellee.
Reyes & Pangalañgan for defendants-appellants.
LABRADOR, J.:
Appeal from a judgment of the Court of First Instance of

Manila, Hon. Conrado M. Velasquez, presiding, sentencing
the defendants to pay the plaintiff the sum of P600, with
legal interest from September 10, 1953 until paid, and to
pay the costs.
The action is for the recovery of the value of a check for
P600 payable to the plaintiff and drawn by defendant Anita
C. Gatchalian. The complaint sets forth the check and
alleges that plaintiff received it in payment of the
indebtedness of one Matilde Gonzales; that upon receipt of
said check, plaintiff gave Matilde Gonzales P158.25, the
difference between the face value of the check and Matilde
Gonzales’ indebtedness. The defendants admit the
execution of the check but they allege in their answer, as
affirmative defense, that it was issued subject to a
condition, which was not fulfilled, and that plaintiff was
guilty of gross negligence in not taking steps to protect
itself.
598

At the time of the trial, the parties submitted a stipulation

of facts, which reads as follows:
“Plaintiff and defendants through their respective undersigned

attorney’s respectfully submit the following Agreed Stipulation of
Facts;
First.—That on or about 8 September 1953, in the evening,
defendant Anita C. Gatchalian who was then interested in looking
for a car for the use of her husband and the family, was shown
and offered a car by Manuel Gonzales who was accompanied by
Emil Fajardo, the latter being personally known to defendant
Anita C. Gatchalian;
Second.—That Manuel Gonzales represented to defendant
Anita C. Gatchalian that he was duly authorized by the owner of
the car, Ocampo Clinic, to look for a buyer of said car and to
negotiate for and accomplish said sale, but which facts were not
known to plaintiff;
Third.—that defendant Anita C. Gatchalian, finding the price
of the car quoted by Manuel Gonzales to her satisfaction,
requested Manuel Gonzales 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; that on this request of
defendant Anita C. Gatchalian, Manuel Gonzales advised her that
the owner of the car will not be willing to give the certificate of
registration unless there is a showing that the party interested in
the purchase of said car is ready and willing to make such
purchase and that for this purpose Manuel Gonzales requested
defendant Anita C. Gatchalian to give him (Manuel Gonzales) a
check which will be shown to the owner as evidence of buyer’s
good faith in the intention to purchase the said car, the said check
to be for safekeeping only of Manuel Gonzales and to be returned
to defendant Anita C. Gatchalian the following day when Manuel
Gonzales brings the car and the certificate of registration, but
which facts were not known to plaintiff;
Fourth.—That relying on these representations of Manuel
Gonzales and with his assurance that said check will be only for
safekeeping and which will be returned to said defendant the
following day when the car and its certificate of registration will
be brought by Manuel Gonzales to defendants, but which facts
were not known to plaintiff, defendant Anita C. Gatchalian drew
and issued a check, Exh. ‘B’; that Manuel Gon-zales executed and
issued a receipt for said check, Exh. ‘1’;
Fifth.—That on the failure of Manuel Gonzales to appear the
day following and on his failure to bring the car and its certificate
of registration and to return the check, Exh. ‘B’, on the following
day as previously agreed upon, defendant Anita C. Gatchalian
issued a ‘Stop Payment Order’ on the check, Exh. ‘3’, with the
drawee bank. Said ‘Stop Payment Order’ was issued without
previous notice on plaintiff not being known
599
VOL. 3, NOVEMBER 30, 1961 599

to defendant, Anita C. Gatchalian and who furthermore had no

reason to know check was given to plaintiff;
Sixth.—That defendants, both or either of them, did not know
personally Manuel Gonzales or any member of his family at any
time prior to September 1953, but that defendant Hipolito
Gatchalian is personally acquainted with V. R. de Ocampo;
Seventh.—That defendants, both or either of them, had no
arrangements or agreement with the Ocampo Clinic at any time
prior to, on or after 9 September 1953 for the hospitalization of

the wife of Manuel Gonzales and neither or both of said
defendants had assumed, expressly or impliedly, with the Ocampo
Clinic, the obligation of Manuel Gonzales or his wife for the
hospitalization of the latter;
Eight.—That defendants, both or either of them, had no
obligation or liability, directly or indirectly with the Ocampo
Clinic before, or on 9 September 1953;
Ninth.—That Manuel Gonzales having received the check Exh.
‘B’ from defendant Anita C. Gatchalian under the representations
and conditions herein above specified, delivered the same to the
Ocampo Clinic, in payment of the fees and expenses arising from
the hospitalization of his wife;
Tenth.—That plaintiff for and in consideration of fees and
expenses of hospitalization and the release of the wife of Manuel
Gonzales from its hospital, accepted said check, applying P441.75
(Exhibit ‘A’) thereof to payment of said fees and expenses and
delivering to Manuel Gonzales the amount of P158.25 (as per
receipt, Exhibit ‘D’) representing the balance on the amount of the
said check, Exh. ‘B’;
Eleventh.—That the acts of acceptance of the check and
application of its proceeds in the manner specified above were
made without previous inquiry by plaintiff from defendants:
Twelfth.—That plaintiff filed or caused to be filed with the
Office of the City Fiscal of Manila, a complaint for estafa against
Manuel Gonzales based on and arising from the acts of said
Manuel Gonzales in paying his obligations with plaintiff and
receiving the cash balance of the check, Exh. ‘B’ and that said
complaint was subsequently dropped;
Thirteenth.—That the exhibits mentioned in this stipulation
and the other exhibits submitted previously, be considered as
parts of this stipulation, without necessity of formally offering
them in evidence;
WHEREFORE, it is most respectfully prayed that this

agreed stipulation of facts be admitted and that the parties
hereto be given fifteen days from today within which to
submit simultaneously their memorandum to discuss the
issues of law arising from the facts, reserving to either
party the right to submit reply memorandum, if necessary,
within ten days from
receipt of their main memoranda.” (pp. 21-25,
Defendant’s Record on Appeal)
600

No other evidence was submitted and upon said stipulation

the court rendered the judgment already alluded to above.
In their appeal defendants-appellants contend that the
check is not a negotiable instrument, under the facts and
circumstances stated in the stipulation of facts, and that
plaintiff is not a holder in due course. In support of the the
first contention, it is argued that defendant Gatchalian had
no intention to transfer her property in the instrument as
it was for safekeeping merely and, therefore, there was no
delivery required by law (Section 16, Negotiable
Instruments Law); that assuming for the sake of argument
that delivery was not for safekeeping merely, the delivery
was conditional and the condition was not fulfilled.
In support of the contention that plaintiff-appellee is not
a holder in due course, the appellant argues that plaintiff-
appellee cannot be a holder in due course because there
was no negotiation prior to plaintiff-appellee’s acquiring
the possession of the check; that a holder in due course
presupposes a prior party from whose hands negotiation
proceeded, and in the case at bar, plaintiff-appellee is the
payee, the maker and the payee being original parties. It is
also claimed that the plaintiff-appellee is not a holder in
due course because it acquired the check with notice of
defect in the title of the holder, Manuel Gonzales, and
because under the circumstances stated in the stipulation
of facts there were circumstances that brought suspicion
about Gonzales’ possession and negotiation, which
circumstances should have placed the plaintiff-appellee
under the duty, to inquire into the title of the holder. The
circumstances are as follows:
“The check is not a personal check of Manuel Gonzales.

(Paragraph Ninth, Stipulation of Facts). Plaintiff could have
inquired why a person would use the check of another to pay his
own debt. Furthermore, plaintiff had the ‘means of knowledge’
inasmuch as defendant Hipolito Gatchalian is personally
acquainted with V. R. de Ocampo (Paragraph Sixth, Stipulation of
Facts.)
“The maker Anita C. Gatchalian is a complete stranger to
Manuel Gonzales and Dr. V. R. de Ocampo (Paragraph Sixth,
Stipulation of Facts).
601
VOL. 3, NOVEMBER 30, 1961 601

“The maker is not in any manner obligated to Ocampo Clinic

nor to Manuel Gonzales. (Par. 7, Stipulation of Facts.)
“The check could not have been intended to pay the hospital
fees which amounted only to P441.75. The check is in the amount
of P600.00, which is in excess of the amount due plaintiff. (Par.
10, Stipulation of Facts).
“It was necessary for plaintiff to give Manuel Gonzales change
in the sum of P158.25 (Par. 10, Stipulation of Facts). Since
Manuel Gonzales is the party obliged to pay, plaintiff should have
been more cautious and wary in accepting a piece of paper and
disbursing cold cash.
“The check is payable to bearer. Hence, any person who holds it
should have been subjected to inquiries. EVEN IN A BANK,
CHECKS ARE NOT CASHED WITHOUT INQUIRY FROM THE
BEARER. The same inquiries should have been made by
plaintiff.” (Defendants-appellants’ brief, pp. 52-53).
Answering the first contention of appellant, counsel for

plaintiff-appellee argues that in accordance with the best
authority on the Negotiable Instruments Law, plaintiff-
appellee may be considered as a holder in due course, citing
Brannan’s Negotiable Instruments Law, 6th edition, page
252. On this issue Brannan holds that a payee may be a
holder in due course and says that to this effect is the
greater weight of authority, thus:
“Whether the payee may be a holder in due course under the N. I.

L., as he was at common law, is a question upon which the courts
are in serious conflict. There can be no doubt that a proper
interpretation of the act read as a whole leads to the conclusion
that a payee may be a holder in due course under any
circumstance in which he meets the requirements of Sec. 52.
“The argument of Professor Brannan in an earlier edition of
this work has never been successfully answered and is here
repeated
“Section 191 defines ‘holder’ as the payee or indorsee of a bill or
note, who is in possession of it, or the bearer thereof. Sec. 52
defines a holder in due course as ‘a holder who has taken the
instrument under the following conditions: 1. That it is complete
and regular on 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’
“Since ‘holder’, as defined in sec. 191, includes a payee who
602

is in possession the word holder in the first clause of sec. 52 and

in the second subsection may be replaced by the definition in sec.
191 so as to read ‘a holder in due course is a payee or indorsee
who is in possession,’ etc.” (Brannan’s on Negotiable Instruments
Law, 6th ed., p. 543).
The first argument of the defendants-appellants, therefore,

depends upon whether or not the plaintiff-appellee is a
holder in due course. If it is such a holder in due course, it
is immaterial that it was the payee and an immediate
party to the instrument.
The other contention of the plaintiff is that there has
been no negotiation of the instrument, because the drawer
did not deliver the instrument to Manuel Gonzales with the
intention of negotiating the same, or for the purpose of
giving effect thereto, for as the stipulation of facts declares
the check was to remain in the possession of Manuel
Gonzales, and was not to be negotiated, but was to serve
merely as evidence of good faith of defendants in their
desire to purchase the car being sold to them. Admitting
that such was the intention of the drawer of the check
when she delivered it to Manuel Gonzales, it was no fault
of the plaintiff-appellee drawee if Manuel Gonzales
delivered the check or negotiated it. As the check was
payable to the plaintiff-appellee, and was entrusted to
Manuel Gonzales by Gatchalian, the delivery to Manuel
Gonzales was a delivery by the drawer to his own agent; in
other words, Manuel Gonzales was the agent of the drawer
Anita Gatchalian insofar as the possession of the check is
concerned. So, when the agent of drawer Manuel Gonzales
negotiated the check with the intention of getting its value
from plaintiff-appellee, negotiation took place through no
fault of the plaintiff-appellee, unless it can be shown that
the plaintiff-appellee should be considered as having notice
of the defect in the possession of the holder Manuel
Gonzales. Our resolution of this issue leads us to a
consideration of the last question presented by the
appellants, i.e., whether the plaintiff-appellee may be
considered as a holder in due course.
Section 52, Negotiable Instruments Law, defines holder
in due course, thus:
“A holder in due course is a holder who has taken the
603
VOL. 3, NOVEMBER 30, 1961 603

instrument under the following conditions:
(a) That it is complete and regular upon its face;

(b) 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;
(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 stipulation of facts expressly states that plaintiff-

appellee was not aware of the circumstances under which
the check was delivered to Manuel Gonzales, but we agree
with the defendants-appellants that the circumstances
indicated by them in their briefs, such as the fact that
appellants had no obligation or liability to the Ocampo
Clinic; that the amount of the check did not correspond
exactly with the obligation of Matilde Gonzales to Dr. V. R.
de Ocampo; and that the 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—all these circumstances should have put the
plaintiff-appellee to inquiry as to the why and wherefore of
the possession of the check by Manuel Gonzales, and why
he used it to pay Matilde’s account. It was payee’s 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. Having failed in this respect, we must
declare that plaintiff-appellee was guilty of gross neglect in
not finding out the nature of the title and possession of
Manuel Gonzales, amounting to legal absence of good faith,
and it may not be considered as a holder of the check in
good faith. To such effect is the consensus of authority.
“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. Paika v. Perry, 225 Mass. 563, 114 N.E. 830.
“It is sufficient that the buyer of a note had notice or
604

knowledge that the note was in some way tainted with fraud. It is
not necessary that he should know the particulars or even the
nature of the fraud, since all that is required is knowledge of such
facts that his action in taking the note amounted to bad faith.
Ozark Motor Co. v. Horton (Mo. App.), 196 S.W. 395. Accord.
Davis v. First Nat. Bank, 26 Ariz. 621, 229 Pac. 391.
“Liberty bonds stolen from the plaintiff were brought by the
thief, a boy fifteen years old, less than five feet tall, immature in
appearance and bearing on his face the stamp of a degenerate, to
the defendants’ clerk for sale. The boy stated that they belonged
to his mother. The defendants paid the boy for the bonds without
any further inquiry. Held, the plaintiff could recover the value of
the bonds. The term ‘bad faith’ does not necessarily involve furtive
motives, but means bad faith in a commercial sense. The manner
in which the defendants conducted their Liberty Loan department
provided an easy way for thieves to dispose of their plunder. It
was a case of ‘no questions asked.’ Although gross negligence does
not of itself constitute bad faith, it is evidence from which bad
faith may be inferred. The circumstances thrust the duty upon the
defendants to make further inquiries and they had no right to
shut their eyes deliberately to obvious facts. Morris v. Muir, 111
Misc. Rep. 739, 181 N.Y. Supp. 913, affd. in memo., 191 App. Div.
947, 181 N.Y. Supp. 945.” (pp. 640-642, Brannan’s Negotiable
Instruments Law, 6th ed.).
The above considerations would seem sufficient to justify

our ruling that plaintiff-appellee should not be allowed to
recover the value of the check. Let us now examine the
express provisions of the Negotiable Instruments Law
pertinent to the matter to find if our ruling conforms
thereto. Section 52 (c) provides that a holder in due course
is one who takes the instrument “in good faith and for
value;” Section 59, “that every holder is deemed prima facie
to be a holder in due course;” and Section 52 (d), that in
order that one may be a holder in due course it is necessary
that “at the time the instrument was negotiated to him “he
had no notice of any x x x defect in the title of the person
negotiating it;” and lastly Section 59, that every holder is
deemed prima facie to be a holder in due course.
In the case at bar the rule that 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
605
VOL. 3, NOVEMBER 30, 1961 605

to him or to bearer. On the other hand, the stipulation of

facts indicated by the appellants in their brief, like the fact
that the drawer had no account with the payee; that the
holder did not show or tell the payee why he had the check
in his possession and why he was using it for the payment
of his own personal account—show that holder’s title was
defective or suspicious, to say the least. As holder’s title
was defective or suspicious, it cannot be stated that the
payee acquired the check without knowledge of said defect
in holder’s title, and for this reason the presumption that it
is a holder in due course or that it acquired the instrument
in good faith does not exist. And having presented no
evidence that it acquired the check in good faith, it (payee)
cannot be considered as a holder in due course. In other
words, under the circumstances of the case, instead of the
presumption that payee was a holder in good faith, the fact
is that it acquired possession of the instrument under
circumstances that should have put it to inquiry as to the
title of the holder who negotiated the check to it. The
burden was, therefore, placed upon it to show that
notwithstanding the suspicious circumstances, it acquired
the check in actual good faith.
The rule applicable to the case at bar is that described in
the case of Howard National Bank v. Wilson, et al., 96 Vt.
438, 120 At. 889, 894, where the Supreme Court of
Vermont made the following disquisition:
“Prior to the Negotiable Instruments Act, two distinct lines of

cases had developed in this country. The first had its origin in Gill
v. Cubitt, 3 B. & C. 466, 10 E. L. 215, where the rule was
distinctly laid down by the court of King’s Bench that the
purchaser of negotiable paper must exercise reasonable prudence
and caution, and that, if the circumstances were such as ought to
have excited the suspicion of a prudent and careful man, and he
made no inquiry, he did not stand in the legal position of a bona
fide holder. The rule was adopted by the courts of this country
generally and seem to have become a fixed rule in the law of
negotiable paper. Later in Goodman v. Harvey, 4 A. & E. 870, 31
E. C. L. 381, the English court abandoned its former position and
adopted the rule that nothing short of actual bad faith or fraud in
the purchaser would deprive him of the character of a bona fide
purchaser and let in defenses existing between prior parties, that
no circumstances of suspicion merely, or want of proper
606

caution in the purchaser, would have this effect, and that even
gross negligence would have no effect, except as evidence tending
to establish bad faith or fraud. Some of the American courts
adhered to the earlier rule, while others followed the change
inaugurated in Goodman v. Harvey. The question was before this
court in Roth v. Colvin, 32 Vt. 125, and, on full consideration of
the question, a rule was adopted in harmony with that announced
in Gill v. Cubitt, which has been adhered to in subsequent cases,
including those cited above. Stated briefly, one line of cases
including our own had adopted the test of the reasonably prudent
man and the other that of actual good faith. It would seem that it
was the intent of the Negotiable Instruments Act to harmonize
this disagreement by adopting the latter test. That such is the
view generally accepted by the courts appears from a recent
review of the cases concerning what constitutes notice of defect.
Brannan on Neg. Ins. Law, 187-201. To effectuate the general
purpose of the act to make uniform the Negotiable Instruments
Law of those states which should enact it, we are constrained to
hold (contrary to the rule adopted in our former decisions) that
negligence on the part of the plaintiff, or suspicious circumstances
sufficient to put a prudent man on inquiry, will not of themselves
prevent a recovery, but are to be considered merely as evidence
bearing on the question of bad faith. See G. L. 3113, 3172, where
such a course is required in construing other uniform acts.
“It comes to this then: When the case has taken such shape
that the plaintiff is called upon to prove himself a holder in due
course to be entitled to recover, he is required to establish the
conditions entitling him to standing as such, including good faith
in taking the instrument. It devolves upon him to disclose the
facts and circumstances attending the transfer, from which good
or bad faith in the transaction may be inferred.”
In the case at bar as the payee acquired the check under

circumstances which should have put it to inquiry, why the
holder had the check and used it to pay his own personal
account, the duty devolved upon it, plaintiff-appellee, to
prove that it actually acquired said check in good faith. The
stipulation of facts contains no statement of such good
faith, hence we are forced to the conclusion that plaintiff
payee has not proved that it acquired the check in good
faith and may not be deemed a holder in due course
thereof.
For the foregoing considerations, the decision appealed
from should be, as it is hereby, reversed, and the defen-
607
VOL. 3, NOVEMBER 30, 1961 607

dants are absolved from the complaint. With costs against

plaintiff-appellee.
Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L.,

Barrera, Paredes, Dizon and De Leon, JJ., concur.
Bengzon, C.J., concurs in the result.
Decision reversed.
ANNOTATION
HOLDER IN DUE COURSE UNDER THE NEGOTIABLE

INSTRUMENTS LAW
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 of the
negotiable instrument as defined in Section 191 of the
Negotiable Instruments Law (Fossum vs. Fernandez, 44
Phil. 713). Under Section 191 of the said law, a holder
means a payee or indorsee of a bill or note who is in pos-
session of it or the bearer thereof. Therefore, one who is not
a payee or indorsee of a check can not be considered a
holder and invoke the presumption. (Montinola vs.
Philippine National Bank, 88 Phil. 178). The presumption
does not arise in favor of a person who is no longer in
possession of the instrument (Fossum v. Fernandez, supra).
Since Section 191 of the Negotiable Instruments Law
defines “holder” as the payee or indorsee of a bill or note,
one who received a check by indorsement to him of only
part of its face value, and who was not the payee, could not
be considered a holder of the instrument. An indorsement
which purports to transfer to the indorsee only a part of the
amount payable does not operate as a negotiation of the
instrument. The transferee could not be considered an
indorsee and at most was a mere assignee subject to all the
defenses available to the drawer. (Montinola vs. Philippine
National Bank, supra). Where, however, the transferee
receives notice of any infirmity in the instrument or defect
in the title of the person negotiating the same before he has
paid the full amount agreed to be paid therefor, the
transferee will be deemed a holder in due
608

course to the extent of the amount therefor paid by him

(Sec. 54, Negotiable Instruments Law).
Where an instrument payable on demand is negotiated
an unreasonable length of time after its issue, the holder
thereof is not deemed a holder in due course (Section 53,
Negotiable Instruments Law). Where a check was issued by
the provincial treasurer on May 2, 1942 as drawer and the
check was transferred to plaintiff about the last days of
December 1944, or about two and one half years later, it
was held that since the check was already overdue when it
fell into the hands of the plaintiff, he could not be
considered a holder in due course (Montinola vs. Philippine
National Bank, supra). Also, one who purchased two
promissory notes without the necessary indorsement on the
part of the holder, after payment thereof had already been
one year overdue, and without having made inquiries about
the solvency of their makers, was not been considered a
holder in due course (Santos vs. Reyes and Reyes, 64 Phil.
383).
A person who had not paid the full amount of the check
and who should have known that the check could not have
been issued to the indorser in his private capacity but as a
government official was not considered a holder in good
faith; hence, not a holder in due course (Montinola vs. Phil-
ippine National Bank, supra).
The relinquishment by a bank of its possession of and
lien on several pounds of rubber in consideration for the
sight draft delivered to it is a valuable consideration. Value
may be some right, interest, profit or benefit to the party
who makes the contract or some forbearance, detriment,
loss, responsibility, on the other side. (Walker Rubber
Corporation vs. Redulandsel Indische & Handels Bank,
Nos. L-12502 and L-12513, May 29, 1959). One who
accepted checks that had passed the clearing office but
were unpaid and returned because the drawee had no
funds, some of them stamped “account closed”, was not a
holder in due course, since he knew upon taking them up
that the checks had already been dishonored (Chan Wan
vs. Tan Kim, No. L-15380, September 30, 1960).
609
VOL. 3, NOVEMBER 30, 1961 609

It does not follow that simply because a holder of a bearer

note is not a holder in due course, he can not recover on the
checks. If B purchases an overdue negotiable note signed
by A, he is not a holder in due course; but he may recover
from A if the latter has no valid excuse for refusing
payment. The only disadvantage of a holder who is not a
holder in due course is that the negotiable instrument is
subject to defenses as if it was non-negotiable. Therefore if
the overdue checks were issued in payment for shoes that
were never delivered, A would have a good defense as
against a holder who is not so in due course (Chan Wan v.
Tan Kim, L-15380, September 30, 1960).
A holder of a negotiable instrument not in due course,
but who derives title through a holder in due course, may,
therefore, recover against the person primarily liable,
though consideration for the same instrument has failed;
but the holder must have to prove as an independent
matter of fact that the previous holder was so in due course
(Fossum vs. Fernandez, supra).
Any promissory note, check, or order for the payment of
money given for money with which to gamble or for money
lost at gambling or as stake, is void (Section 9. Act 1757). It
was held that in the absence of the consent of the payor,
promissory notes representing gambling debts were
unenforceable in the hands of an assignee (Palma vs.
Canizares, 1 Phil. 602). However, in the hands of one
purchasing the same for a valuable consideration in good
faith before maturity and not knowing and having no
knowledge of facts sufficient to put them upon notice that
such promissory note, check or order for the payment of
money was given in consideration of a gambling debt for
money lost at gambling or as a stake, is the same is valid.
(Section 9, Act 1757).
All covenants and stipulations contained in bonds bills,
notes, etc. whereupon or whereby there shall be stipulated,
charged, demanded, reserved, secured, taken, or received
directly or indirectly, a higher rate or greater sum of value
for the loan or renewal or forbearance of money goods,
credits than is allowed by the Usury Law shall be void,
except as to an innocent purchaser for a valuable consider-
610

National Power Corporation vs. Valera
ation before maturity, when there has been no intention on

the part of said purchaser to evade the provisions of the
Usury Law and said purchaser was not a part of the

original usurious transaction (Sec. 7, Act 2655).—CAMILO
D. QUIASON.
Notes.—The preponderant weight of authority, both by

cases and by jurisdiction, sustains the view that a “payee”
may be a holder in due course (Merchants’ Nat. Bank v.
Smith, 59 Mont. 280, 196 Pa. 523, 15 A.L.R. 430). An
illustration of this view may be found in Boston Steel &
Iron Co. v. Stener (183 Mass. 140, 66 N.E. 646, 97 Am. St.
Rep. 426) where a woman delivered to her husband a check
made payable to a certain creditor, with instructions to pay
her debt with it. The husband gave the check to the
creditor in payment of his own debt to the same creditor
who accepted it as such in good faith. The creditor was held
to be a holder in due course. (Reyes, Notes on Negotiable
Instruments Law, pp. 72-73).
If the holder had actual knowledge of suspicious
circumstances, coupled with the means of readily informing
himself of the facts, and he wilfully abstains from making
inquiries, his intentional ignorance may amount to bad
faith (Hess v. Iowa Bankers’ Mortg. Co., 1924, 198 Ia. 1365,
201 N.W. 91; Marion Nat. Bank v. Harden, 1918, 83 W. Va.
119, 97 S.E. 600, 6 A.L.R. 240).
________________
© Copyright 2019 Central Book Supply, Inc. All rights reserved.

De Ocampo Vs Gatchalian

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

De Ocampo Vs Gatchalian

Enviado por

Direitos autorais:

Formatos disponíveis

12/10/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 003

596 SUPREME COURT REPORTS ANNOTATED

No. L-15126. November 30, 1961.

VICENTE R. DE OCAMPO & Co., plaintiff-appellee, vs.

Bills, notes and checks; Negotiable instruments; Holder in due

VOL. 3, NOVEMBER 30, 1961 597

Vicente R. de Ocampo & Co. vs. Gatchalian

Section 59, “that every holder is deemed prima facie to be a holder

APPEAL from a judgment of the Court of First Instance of

The facts are stated in the opinion of the Court.

Appeal from a judgment of the Court of First Instance of

598 SUPREME COURT REPORTS ANNOTATED

At the time of the trial, the parties submitted a stipulation

“Plaintiff and defendants through their respective undersigned

VOL. 3, NOVEMBER 30, 1961 599

to defendant, Anita C. Gatchalian and who furthermore had no

prior to, on or after 9 September 1953 for the hospitalization of

WHEREFORE, it is most respectfully prayed that this

600 SUPREME COURT REPORTS ANNOTATED

No other evidence was submitted and upon said stipulation

“The check is not a personal check of Manuel Gonzales.

VOL. 3, NOVEMBER 30, 1961 601

“The maker is not in any manner obligated to Ocampo Clinic

Answering the first contention of appellant, counsel for

“Whether the payee may be a holder in due course under the N. I.

602 SUPREME COURT REPORTS ANNOTATED

is in possession the word holder in the first clause of sec. 52 and

The first argument of the defendants-appellants, therefore,

“A holder in due course is a holder who has taken the

VOL. 3, NOVEMBER 30, 1961 603

instrument under the following conditions:

(a) That it is complete and regular upon its face;

The stipulation of facts expressly states that plaintiff-

604 SUPREME COURT REPORTS ANNOTATED

The above considerations would seem sufficient to justify

VOL. 3, NOVEMBER 30, 1961 605

to him or to bearer. On the other hand, the stipulation of

“Prior to the Negotiable Instruments Act, two distinct lines of

606 SUPREME COURT REPORTS ANNOTATED

In the case at bar as the payee acquired the check under

VOL. 3, NOVEMBER 30, 1961 607

dants are absolved from the complaint. With costs against

Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L.,

HOLDER IN DUE COURSE UNDER THE NEGOTIABLE

Every holder of a negotiable instrument is deemed prima

608 SUPREME COURT REPORTS ANNOTATED

Vicente R. de Ocampo & Co. vs. Gatchalian

course to the extent of the amount therefor paid by him

VOL. 3, NOVEMBER 30, 1961 609

It does not follow that simply because a holder of a bearer

610 SUPREME COURT REPORTS ANNOTATED

ation before maturity, when there has been no intention on

Usury Law and said purchaser was not a part of the

Notes.—The preponderant weight of authority, both by

© Copyright 2019 Central Book Supply, Inc. All rights reserved.

Você também pode gostar