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 De Ocampo. Gonzales claimed that he was authorized by the plaintiff to sell
the car. Gonzales ordered 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 did not appear the day after, defendant issued a stop payment order on the
check. She later found out that Gonzales used the check as payment to plaintiff De Ocampo’s clinic
for his wife's fees. Plaintiff now demands defendant for payment of the check, in which defendant
refused, citing that plaintiff is not a holder in due course.

ISSUE:
Whether or not plaintiff De Ocampo is a holder in due course.

HELD:

The SC held that plaintiff is a not a holder in due course.

Section 52 of the Negotiable Instruments Law provides that,

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;
(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 Court ruled that there were circumstances that should have put plaintiff 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. These include 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.
It was the 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, the
Court declared that plaintiff 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.
State Investment House Inc. vs. CA
GR No. 101163 January 11, 1993

Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewelry 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 (State).
When Moulic failed to sell the jewelry, she returned it to Victoriano before the maturity of
the checks. The checks, however, could no longer be retrieved as they had already been negotiated
to State. Before the maturity date, Moulic withdrew her funds from the bank.
Upon presentment of State of the checks to the bank, the checks were dishonored for
insufficiency of funds. State sued to recover the value of the checks.
Moulic, on the other hand, contends that she incurred no obligation on the checks because
the jewelry was never sold and that the checks were negotiated without her knowledge and consent.

Issues:
Whether or not State Investment House Inc. was a holder of the check in due course.

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.