Date April 19,

Case Title Dino v. Judal-Loot 2020

Ponente Carpio, J. G.R. 170917

Doctrine
“Under usual practice, crossing a check is done by placing two parallel lines
diagonally on the left top portion of the check. The crossing may be special wherein
between the two parallel lines is written the name of a bank or a business institution,
in which case the drawee should pay only with the intervention of that bank or
company, or crossing may be general wherein between two parallel diagonal lines are
written the words "and Co." or none at all, in which case the drawee should not
encash the same but merely accept the same for deposit.” (State Investment House
v. IAC)
Facts
In December 1992, a syndicate posed as the owner of several parcels of land and
approached petitioner Roberto Dino and induced him to lend the group 3,000,000
PHP, to be secured by a real estate mortgage on the properties. One of the
syndicate’s members pretending to be Vivencia Ompok Consing offered to execute a
Deed of Absolute Sale covering the properties, instead of the usual mortgage
contract. Dino was enticed by the offer, so he issued 3 Metrobank checks totaling
3,000,000 PHP.

Dino scrutinized the documents and discovered that the properties sold to him are
owned by the government. Realizing he had been deceived, Dino advised Metrobank
to stop payment of his checks. However, only one of the checks was stopped, which
was drawn in the amount of 1,000,000 PHP. The 2 other checks were already
encashed.

Meanwhile, Lobitana negotiated and indorsed the remaining check to respondent-

spouses Maria Luisa Judal-Loot and Vicente Loot in exchange for cash in the sum of
948,000 PHP, which the spouses borrowed from Metrobank and charged against their
credit line. Before the spouses accepted the check, they first inquired from the drawee
bank, Metrobank, which is also their depositary bank, if the subject check was
sufficiently funded. Metrobank assured them that it is. However, when the spouses
deposited the check, the same was dishonored by the drawee bank for reason
"payment stopped."
Arguments
Dino (Petitioner): Loot Spouses (Respondents):
• He cannot be held liable for the • They are holders in due course and for
amount of the check because he is value, and they had no prior
not a party to the contract between information concerning the transaction
the spouses and Lobitana between Dino and Lobitana
• The Loot spouses are not holders in • They checked with Metrobank to
due course, and therefore, they ensure that the checks were valid and
cannot demand for the payment from sufficiently funded

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 them, and must instead demand • On the face of the check, no condition
payment from Lobitana or limitation was imposed
Lower Court Ruling(s)
Regional Trial Court: Court of Appeals:
Ruled in favor the Loot spouses and Affirmed the trial court’s decision.
declared them holders in due course,
since there was no privity between them,
Dino, and Lobitana.
Issue(s)
Whether or not the Loot spouses are holders in due course
Supreme Court Ruling
The spouses are not holders in due course.

Section 52 of the NIL enumerates the following conditions for a holder to be

considered as a holder in due course:
1. That it is complete and regular upon its face;
2. That he became the holder of it before it was overdue, and without notice that it
has been previously dishonored, if such was the fact;
3. That he took it in good faith and for value; and
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.

It must also be noted that a crossed check…

• May not be encashed but only deposited in the bank
• May be negotiated only once — to one who has an account with a bank
• Warns the holder that it has been issued for a definite purpose so that the
holder thereof must inquire if he has received the check pursuant to that
purpose; otherwise, he is not a holder in due course.

Based on the foregoing, the spouses had the duty to ascertain the Lobitana’s title to
the check or the nature of her possession as indorser, but they failed to do the same.
The spouses’ verification from Metrobank on the funding of the check does not
amount to determination of Lobitana's title to the check. Therefore, the spouses are
not deemed holders in due course of the subject check.

In State Investment House v. IAC, the Court expounded on the effect of crossing a
check: “Under usual practice, crossing a check is done by placing two parallel lines
diagonally on the left top portion of the check. The crossing may be special wherein
between the two parallel lines is written the name of a bank or a business institution,
in which case the drawee should pay only with the intervention of that bank or
company, or crossing may be general wherein between two parallel diagonal lines are
written the words "and Co." or none at all, in which case the drawee should not
encash the same but merely accept the same for deposit.”

In this case, it was not the payee who presented the check for payment; and thus,
there was no proper presentment. As a result, liability did not attach to the drawer.

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Accordingly, no right of recourse is available to the spouses against Dino as the
drawer of the check, since they are not the proper party authorized to make a
presentment of the subject check.

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