VICENTE R. DE OCAMPO & CO. vs. GATCHALIAN, et al.

Facts: Anita Gatchalian was interested in buying a car when she was offered by Manuel Gonzales to a car owned by the Ocampo Clinic. Gonzales claim that he was duly authorized to look for a buyer, negotiate and accomplish the sale by the Ocampo Clinic.Anita accepted the offer and insisted to deliver the car with the certificate of registration the next day but Gonzales advised that the owners would only comply only upon showing of interest on the part of the buyer. Gonzales recommended issuing a check (P600 / payable-tobearer /cross-checked) as evidence of the buyers good faith. Gonzales added that it will only be for safekeeping and will be returned to her the following day. The next day, Gonzales never appeared. The failure of Gonzales to appeal resulted in Gatchalian to issue a STOP PAYMENT ORDER on the check. It was later found out that Gonzales used the check as payment to the Vicente de Ocampo (Ocampo Clinic) for the hospitalization fees of his wife (the fees were only P441.75, so he got a refund of P158.25). De Ocampo now demands payment for the check, which Gatchalian refused, arguing that de Ocampo is not a holder in due course and that there is no negotiation of the check. The Court of First Instance ordered Gatchalian to pay the amount of the check to De Ocampo. Hence this case. Issue: Whether or not De Ocampo is a holder in due course. Held: NO. De Ocampo is not a holder in due course. De Ocampo was negligent in his acquisition of the check. There were many instances that arouse suspicion: the drawer in the check (Gatchalian) has no liability with de Ocampo ; it was cross-checked(only for deposit) but was used a payment by Gonzales; it was not the exact amount of the medical fees. The circumstances should have led him to inquire on the validity of the check. However, he failed to exercise reasonable prudence and caution. In showing a person had knowledge of facts that his action in taking the instrument amounted to bad faith need not prove that he knows the exact fraud. It is sufficient to show that the person had NOTICE that there was something wrong. The bad faith here means bad faith in the commercial sense obtaining an instrument with no questions asked or no further inquiry upon suspicion. The presumption of good faith did not apply to de Ocampo because the defect was apparent on the instruments face it was not payable to Gonzales or bearer. Hence, the holders title is defective or suspicious. Being the case, de Ocampo had the burden of proving he was a holder in due course, but failed.