State Investment House vs.

Intermediate Appellate Court, Anita Peña Chua and Harris Chua

G.R. No. 72764 July 13, 1989
FERNAN, C.J.:

DOCTRINE:
Section 52(c) of the Negotiable Instruments Law defines a holder in due course as one who takes the
instrument "in good faith and for value". On the other hand, Section 52(d) provides 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 defect in the title of the person negotiating it."

FACTS:
New Sikatuna Wood Industries, Inc. (NSWI) secured a loan from the spouses Anita and Harris Chua in
the form of crossed checks. NWSI negotiated the checks to State Investment House, Inc. The checks were
then dishonored by reason of "insufficient funds", "stop payment" and "account closed".

ISSUE:
Whether or not petitioner is a holder in due course as to entitle it to proceed against private respondents
for the amount stated in the dishonored checks

RULING:
No. Petitioner’s failure to inquire from the holder, New Sikatuna Wood Industries, the purpose for which
the three checks were crossed despite the warning of the crossing, prevents him from being considered in
good faith and thus he is not a holder in due course. Being not a holder in due course, plaintiff is subject
to personal defenses, such as lack of consideration between appellants and New Sikatuna Wood
Industries.
ANG TEK LIAN vs. THE COURT OF APPEALS
G.R. No. L-2516 September 25, 1950
BENGZON, J.:

DOCTRINE:
Under the Negotiable Instruments Law, sec. 9 [d], a check drawn payable to the order of "cash" is a check
payable to bearer, and the bank may pay it to the person presenting it for payment without the drawer's
indorsement.

FACTS:
Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He said that he meant
to withdraw from the bank but the bank’s already closed. In exchange, he gave Lee Hua a check which is
“payable to the order of ‘cash’”. The next day, Lee Hua presented the check for payment but it was
dishonored due to insufficiency of funds. Lee Hua eventually sued Ang Tek Lian. In his defense, Ang Tek
Lian argued that he did not indorse the check to Lee Hua and that when the latter accepted the check
without Ang tek Lian’s indorsement, he had done so fully aware of the risk he was running.

ISSUE:
Whether or not Ang Tek Lian is correct.

RULING:
No. A check drawn payable to the order of “cash” is a check payable to bearer hence a bearer instrument,
and the bank may pay it to the person presenting it for payment without the drawer’s indorsement. Where
a check is made payable to the order of ‘cash’, the word “cash” does not purport to be the name of any
person, and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement
of the check, but may pay it to the person presenting it without any indorsement.