01 State Investment House, Inc. vs.

Court of Appeals

STATE INVESTMENT HOUSE, INC., petitioner, vs. COURT OF APPEALS and NORA
B. MOULIC, respondents

217 SCRA 32 G.R. No. 101163 JANUARY 11, 1993

Drawer, Nora B. Moulic

Payee, Corazon Victoriano
STATE INVESTMENT, a holder in due course of the 2 checks

Dispositive Portion:

WHEREFORE, the petition is GRANTED. The decision appealed from is REVERSED

and a new one entered declaring private respondent NORA B. MOULIC liable to petitioner
STATE INVESTMENT HOUSE, INC., for the value of EBC Checks Nos. 30089658 and
30089660 in the total amount of P100,000.00, P3,000.00 as attorney’s fees, and the costs
of suit, without prejudice to any action for recompense she may pursue against the
VICTORIANOs as Third-Party Defendants.Costs against private respondent.

FACTS:
Corazon Victoriano provided pieces of jewelry to Nora Moulic so that the latter may sell
the same. As security for the jewelries, Moulic issued to Victoriano two post-dated checks
in the aggregate amount of P100,000.00. Moulic was not able to sell the jewelries so she
returned the same to Victoriano. Victoriano was however unable to return the checks
hence Moulic withdrew all her funds from the bank.

Apparently, the checks were negotiated by Victoriano to State Investment House, Inc. So
when the checks were dishonored, State Investment demanded Moulic to pay. Moulic
refused to pay because she said the checks were merely used as security for the jewelry.
Moulic further averred that she received no notice of dishonor.

ISSUE:
Whether or not State Investment House is entitled to be paid.

HELD:
Yes. State Investment is a holder in due course as it met all the requirements to be one
pursuant to Section 52 of the Negotiable Instruments Law. In particular, it is clearly shown
that: (a) on their faces the post-dated checks were complete and regular: (b) State
Investment bought these checks from Victoriano, before their due dates; (c) State
Investment took these checks in good faith and for value, (d) State Investment was never
informed nor made aware that these checks were merely issued to Victoriano as security
and not for value.

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Further, there is no need to issue a notice of dishonor to Moulic. After Moulic withdrew
her funds, she could not have expected her checks to be honored. It would only be futile
for State Investment to be sending her notices of dishonor for the two checks.

OTHER NEGOTIABLE INSTRUMENT DOCTRINES:

State Investment is holder in due course. Moulic must prove that the State is not a holder
in due course. Moulic failed to prove it.

Negotiable Instruments Law; Sec. 52 of the Negotiable Instruments Law provides

a prima facie presumption that the holder of a negotiable instrument is a holder in
due course.—Culled from the foregoing, a prima facie presumption exists that the
holder of a negotiable instrument is a holder in due course. Consequently, the
burden of proving that STATE is not a holder in due course lies in the person who
disputes the presumption. In this regard, MOULIC failed.

STATE INVESTMENT holds the instruments free from any defect of title of prior parties,
and from defenses available to prior parties among themselves. STATE INVESTMENT
may enforce full payment of the checks.

Being a holder in due course, State holds the instruments free from any defect of
title of prior parties and from defenses available to prior parties among
themselves.—Consequently, STATE is indeed a holder in due course. As such, it
holds the instruments free from any defect of title of prior parties, and from
defenses available to prior parties among themselves; STATE may, therefore,
enforce full payment of the checks.

Post-dated checks as security is not a ground for the discharge of the instrument as
against a holder in due course.

Fact that the post-dated checks were merely issued as security is not a ground for
the discharge of the instrument as against a holder in due course. The only
grounds are those outlined in Sec. 119 of the Negotiable Instruments Law.

The intentional cancellation contemplated under paragraph C, Sec. 119 is that

cancellation effected by destroying the instrument either by tearing it up, burning
it, or writing the word “cancelled” on the instrument.—Obviously, MOULIC may
only invoke paragraphs (c) and (d) as possible grounds for the discharge of the
instrument. But, the intentional cancellation contemplated under paragraph (c) is
that cancellation effected by destroying the instrument either by tearing it up,
burning it, or writing the word “cancelled” on the instrument. The act of destroying
the instrument must also be made by the holder of the instrument intentionally.
Since MOULIC failed to get back possession of the post-dated checks, the
intentional cancellation of the said checks is altogether impossible.

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The withdrawal of the money from the drawee bank to avoid liability on the checks cannot
prejudice the rights of holders in due course. Such withdrawal renders the drawer, Nora
B. Moulic, liable to STATE, a holder in due course of the checks.

The Negotiable Instruments Law was enacted for the purpose of facilitating, not
hindering or hampering transactions in commercial paper. Thus, the said statute
should not be tampered with haphazardly or lightly. Nor should it be brushed aside
in order to meet the necessities in a single case.

The withdrawal of the money from the drawee bank to avoid liability on the checks
cannot prejudice the rights of holders in due course. The drawing and negotiation
of a check have certain effects aside from the transfer of title or the incurring of
liability in regard to the instrument by the transferor. The holder who takes the
negotiated paper makes a contract with the parties on the face of the instrument.
There is an implied representation that funds or credit are available for the payment
of the instrument in the bank upon which it is drawn. Consequently, the withdrawal
of the money from the drawee bank to avoid liability on the checks cannot prejudice
the rights of holders in due course. In the instant case, such withdrawal renders
the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks.