G.R. No.

L-15380 September 30, 1960

CHAN WAN, plaintiff-appellant, vs. TAN KIM and CHEN SO, defendants-appellees.

Tan Kim and her husband (Chen So) issued 11 checks payable to cash or bearer to be drawn against their
account with the Equitable Banking Corporation. The checks were negotiated to the White House Shoe Supply
(company). White House then deposited the checks to their China Bank account. China Bank then presented
the checks to Equitable Bank but the checks were returned because Equitable Bank then had no funds to cover
the checks. China Bank then stamped the checks with Account Closed and Non negotiable China Bank
Corporation.

But somehow, Chan Wan got hold of these checks (Chan Wan was not able to explain in court how he got hold
of the checks). Chan Wan now wants to encash the checks but Equitable Bank refused accept the said checks.

ISSUE: Whether or not Chan Wan is a holder in due course.

HELD: No. As a general rule, a dishonored check/instrument may still be negotiated either by indorsement or
delivery and the holder may be a holder in due course provided that he received no notice regarding the
dishonor of the instrument. In this case, the checks were already crossed on their face hence Chan Wan was
properly notified of the dishonor of the checks at the time of his acquisition.

But may Chan Wan still recover?

Yes. The Negotiable Instruments Law does not provide that a holder who is not a holder in due course, may not
in any case, recover on the instrument. The holder may recover directly from the drawee, in this case Tan Kim
and Chen So, unless the drawees have a valid excuse in refusing payment. The only disadvantage of a holder
who is not a holder in due course is that the negotiable instrument is subject to defense as if it were non-
negotiable. The case was remanded to the lower court for a proper determination as to how Chan Wan acquired
the checks and to determine if he is indeed entitled to payment based on some other transactions involving
those checks.

[G.R. No. 109491. February 28, 2001]

ATRIUM MANAGEMENT CORPORATION, petitioner, vs. COURT OF APPEALS, E.T. HENRY AND CO.,
LOURDES VICTORIA M. DE LEON, RAFAEL DE LEON, JR., AND HI-CEMENT
CORPORATION, respondents.

In 1981, Hi-Cement Corporation through Lourdes De Leon (its Treasurer) and Antonio De Las Alas (its
Chairman, now deceased) issued four postdated checks to E.T. Henry and Co. The checks amount to P2 million.
The checks are crossed checks and are only made payable to E.T. Henrys account. However, E.T. Henry still
indorsed the checks to Atrium Management Corporation (AMC). AMC then made sure that the checks were
validly issued by requesting E.T. Henry to get some confirmation from Atrium. Interestingly, De Leon confirmed
the checks and advised that the checks are okay to be rediscounted by AMC notwithstanding the fact that the
checks are crossed checks payable to no other accounts but that of E.T. Henry. So when AMC presented the
check, it was dishonored because Hi-Cement stopped payment. Eventually, AMC sued Hi-Cement, E.T. Henry,
and De Leon. The trial court ruled in favor of AMC and made all the respondents liable.
On appeal, Hi-Cement averred that De Leons act in signing the check was ultra vires hence De Leon should be
personally liable for the check. De Leon, on the other hand, insisted that the checks were authorized by the
corporation.

ISSUE: Is a corporation to which four crossed checks were indorsed by the payee corporation a holder in due
course and hence entitled to recover the amount of the checks when the same had been dishonored for the
reason of payment stopped?
RULING:
The checks were crossed checks and specifically indorsed for deposit to payees account only. From the
beginning, the corporation was aware of the fact that the checks were all for deposit only to payees account.
Clearly then, it could not be considered a holder in due course. However, it does not follow as a legal proposition
that simply because it was not a holder in due course for having taken the instruments in question, with notice
that the same was for deposit only, that it was altogether precluded from recovering on the instrument. The
disadvantage in not being a holder in due course is that the negotiable instrument is subject to defenses as if it
were non-negotiable.
G.R. No. 70145 November 13, 1986

MARCELO A. MESINA, petitioner,

vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, HON. ARSENIO M. GONONG, in his capacity as
Judge of Regional Trial Court Manila (Branch VIII), JOSE GO, and ALBERT UY, respondents.

FACTS:
Jose Go purchased from Associated Bank a cashier's check for P800,000.00. Unfortunately, he left said check
on the top of the desk of the bank manager when he left the bank. The bank manager entrusted the check for
safekeeping to a bank official, a certain Albert Uy. While Uy went to the men's room, the check was stolen by his
visitor in the person of Alexander Lim. Upon discovering that the check was lost, Jose Go accomplished a
"STOP PAYMENT" order. Two days later, Associated Bank received the lost check for clearing from Prudential
Bank. After dishonoring the same check twice, Associated Bank received summons and copy of a complaint for
damages of Marcelo Mesina who was in possession of the lost check and is demanding payment. Petitioner
claims that a cashier's check cannot be countermanded in the hands of a holder in due course.

ISSUE:
Whether or not petitioner can collect on the stolen check on the ground that he is a holder in due course.

RULING:
No. Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or value as
shown by the established facts of the case. Admittedly, petitioner became the holder of the cashier's check as
endorsed by Alexander Lim who stole the check. He refused to say how and why it was passed to him. He had
therefore notice of the defect of his title over the check from the start. The holder of a cashier's check who is not
a holder in due course cannot enforce such check against the issuing bank which dishonors the same.

**A person who became the holder of a cashier's check as endorsed by the person who stole it and who refused
to say how and why it was passed to him is not a holder in due course.

G.R. No. L-15126 November 30, 1961

VICENTE R. DE OCAMPO & CO., plaintiff-appellee, vs. ANITA GATCHALIAN, ET AL., defendants-appellants.

FACTS:
Anita Gatchalian was interested in buying a car. Manuel Gonzales offered to her a car owned by plaintiff.
Gonzales claimed that he was authorized by the plaintiff to sell the car. Gonzales order 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 never appeared after, defendant issue a stop payment order on the check. She found out that
Gonzales used the check as payment to plaintiff's clinic for his wife's fees. Plaintiff now demands defendant for
payment of the check, in which defendant refused citing that plaintiff is a not a holder in due course. The lower
court held that defendant should pay plaintiff.

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

HELD:

The Supreme Court emphasized that if one is such a holder in due course, it is immaterial that he was the payee
and an immediate party to the instrument. The Supreme Court however ruled that De Ocampo is not a holder in
due course for his lack of good faith. De Ocampo should have inquired as to the legal title of Manuel to the said
check. The fact that Gatchalian has no obligation to De Ocampo and yet hes named as the payee in the check
hould have apprised De Ocampo; that the check did not correspond to Matilde Gonzales obligation with the
clinic because of the fact that it was for P600.00 more than the indebtedness; that why was Manuel in
possession of the check all these gave De Ocampo the duty to ascertain from the holder Manuel Gonzales
what the nature of the latters title to the check was or the nature of his possession.