Chan Wan v. Tan Kim [G.R. No. L-15380.

September 30, From the beginning, Atrium was aware of the fact that the
1960]
FACTS
Checks payable to cash or bearer were drawn by defendant
Tan Kim and were all presented for payment by Chan Wan to
the drawee bank, but they were all dishonored. Defendant
argued that plaintiff is a holder not in due course.
ISSUE
Whether or not a holder not in due course is barred from
collecting the value of checks issued to him.
RULING
NO. It does not that simply because he was not a holder in
due course Chan Wan could not recover on the checks. 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 only disadvantage of holder
who is not a holder in due course is that the negotiable
instrument is subject to defense as if it were non- negotiable.
Atrium Management v. Court of Appeals [G.R. No.
109491. February 28, 2001]
FACTS
Checks were crossed checks and specially indorsed for
deposit to payees account only, E.T. Henry. The checks were
further indorsed to Atrium Management for valuable
consideration. Payment was denied because of payment
stopped.
ISSUE
Whether or not Atrium Management is a holder in due
course.
RULING
checks were all for deposit only to payees account, meaning
E.T. Henry. Clearly, then, Atrium could not be considered a
holder in due course. However, it does not follow as a legal
proposition that simply because petitioner Atrium was not a
holder in due course for having taken the instruments in
question with notice that the same was for deposit only to
the account of payee E.T. Henry that it was altogether
precluded from recovering on the instrument.
Mesina v. Intermediate Appellate Court [G.R. No.
70145. November 13, 1986]
FACTS
Petitioner became the holder of the cashiers check as
endorsed by Alexander Lim who stole the check. He refused
to say how and why it was passed to him.
ISSUE
Whether or not petitioner 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. He had therefore notice
of the defect of his title over the check from the start. The
holder of a cashiers check who is not a holder in due course
cannot enforce such check against the issuing bank which
dishonors the same.
De Ocampo v. Gatchalian [G.R. No. L-15126. November
30, 1961]
FACTS
Appellant Gatchalian drew check worth P600 which was
received by plaintiff-appellee in Vicente R. de Ocampo & Co.
(VRDO & Co.) payment of indebtedness of certain Matilde
Gonzales. Plaintiff-appellee even gave a change of P158.25
to Gonzales.
ISSUE
Whether or not VRDO & Co.s defense of good faith is
tenable.
RULING
NO. The irregularity is evident. As holders title was defective
or suspicious, it cannot be stated that the payee acquired the
check without knowledge of said defect in holders title, and
for this reason the presumption that it is a holder in due
course or that it acquired the instrument in good faith does
not exist. And having presented no evidence that it acquired
the check in good faith, it (payee) cannot be considered as a
holder in due course.
Yang v. Court of Appeals [G.R. No. 138074. August
15, 2003]
FACTS
Petitioner Cely Yang and private respondent Prem
Chandiramani entered into an agreement where Yangs
managers checks shall be payable to the order of private
respondent Fernando David. Dispute between Yang and
Chandiramani arose, stopping payment of Davids checks.
David was not notified, and the stopping failed.
ISSUE
Whether or not David is grossly negligent amounting to legal
absence of good faith.
RULING
NO. David had no obligation to ascertain from Chandiramani
what the nature of the latters title to the checks was, if any,
or the nature of his possession. He cannot be guilty of gross
neglect amounting to legal absence of good faith, absent any
showing that there was something amiss about
Chandiramanis acquisition or possession of the checks.
Bataan Cigar and Cigarette Factory, Inc. v. Court of
Appeals [G.R. No. 93048. March 3, 1994]
FACTS
Petitioner BCCFI issued crossed checks to George King in
consideration of tobacco bales, which the latter sold to
respondent SIHI in a discounted price. George King failed to
deliver the consideration. BCCFI ordered to stop payment.
SIHI failed to encash the crossed checks.
ISSUE
Whether or not respondent SIHI here have shown legal
absence of good faith.
RULING
YES. In failing to inquire about crossed checks, the holder
SIHI is declared guilty of gross negligence amounting to legal
absence of good faith, contrary to Sec. 52(c) of the
Negotiable Instruments Law, and as such the consensus of
authority is to the effect that the holder of the check is not a
holder in due course
Stelco Marketing Corporation v. Court of Appeals [G.R.
No. 96160. June 17, 1992]
FACTS
Petitioner STELCO claimed it was a holder in due course and
for value of a check that had been deposited and dishonored.
STELCO came into possession of it in some way, and was
able, several years after the dishonor of the check.
ISSUE State Investment House v. Intermediate Appellate
Court [G.R. No. 72764. July 13, 1989
Whether or not STELCO may be considered a holder of the
check for value. FACTS
RULING New Sikatuna Wood Industries, Inc. (NSWI) secured a loan
from respondent Anita Chua in the form of crossed checks.
NO. It is clear from the relevant circumstances that STELCO
NWSI negotiated the checks to petitioner. The checks were
cannot be deemed a holder of the check for value. It does not
dishonored.
meet two of the essential requisites prescribed by the
statute. It did not become the holder of it before it was
overdue, and without notice that it had been previously
ISSUE
dishonored, and it did not take the check in good faith and
for value. Whether or not petitioner may be considered a holder in due
course.
RULING
Salas v. Court of Appeals [G.R. No. 76788. January
22, 1990] NO. Petitioners failure to inquire from the holder, party
defendant NWSI, the purpose for which the three checks
were cross despite the warning of the crossing, prevents him
FACTS from being considered in good faith and thus he is not a
holder in due course. Being not a holder in due course,
Petitioner claims she be released of liability because of fraud,
plaintiff is subject to personal defenses, such as lack of
bad faith and misrepresentation of Violago Motor Sales (VMS)
consideration between appellants and New Sikatuna Wood
Corporation, which delivered the motor vehicle after she
Industries.
executed a promissory note with private respondent.
ISSUE
Prudencio v. Court of Appeals [G.R. No. L-34539. July
Whether or not such fraud would relieve petitioner of her
14, 1986]
liability from private respondent
FACTS
RULING
Petitioners were induced to sign a promissory note after a
NO. The fraud in this case is with the contractual relations
Deed of Assignment was executed by the Construction
with VMS and not to the promissory note. Respondent
Company in favor of PNB. Later, PNB approved release of
corporation holds the instrument free from any defect of title
payments in contravention of the tenor of the said deed.
of prior parties, and free from defenses available to prior
parties among themselves, and may enforce payment of the ISSUE
instrument for the full amount thereof. This being so,
Whether or not PNB may be considered as a holder in due
petitioner cannot set up against respondent the defense of
course after fraudulent inducement
nullity of the contract of sale between her and VMS.
RULING
NO. PNB is not a holder in due course. Not only was PNB an
immediate party or in privy to the promissory note that is, it
had dealt directly with the petitioners knowing fully well that
the latter only signed as accommodation but petitioners
were made to believe and on that belief entered into the
agreement that no other conditions would alter the terms
thereof and yet, PNB altered the same.
Fossum v. Hermanos [G.R. No. L-19461. March
28, 1923]
FACTS
Appellant was himself a party to the contract which supplied
the consideration for the draft, albeit he there acted in a
representative capacity. He procured the instrument to be
indorsed by the bank and delivered to himself without the
payment of value, after it was overdue, and with full notice
that, as between the original parties, the consideration had
completely failed. Petitioner invoked the shelter rule.
ISSUE
Whether or not petitioner may hide under the shelter rule.
RULING
NO. While it is true that a person who is not himself a holder
in due course may yet recover against the person primarily
liable where it appears that such holder derives his title
through a holder in due course, there are exceptions. Here,
the holder was party to the contract which participated to the
defect of the instrument. Hence, shelter rule finds no
application here.
Jai-Alai Corporation v. BPI [G.R. No. L-29432. August
6, 1975]
FACTS
Petitioner deposited to respondent bank several checks
acquired through forged indorsements. The respondent bank
debited petitioners account.
ISSUE
Whether or not there exists creditor-debtor relationship
between petitioner and respondent
RULING
No. There was no creditor-debtor relationship created
between the parties. When the petitioner deposited the
checks with the respondent, the nature of the relationship
created at that stage was one of agency, that is, the bank
was to collect from the drawees of the checks the
corresponding proceeds. The petitioner must in turn shoulder
the loss of the amounts which the respondent; as its
collecting agent, had to reimburse to the drawee-banks.
Philippine National Bank v. Picornell [G.R. No. L-
18751. September 26, 1922]
FACTS
Picornell delivered a bill of exchange to Philippine National
Bank (PNB) which was later presented to and accepted by
Hyndman Tavera Y Ventura. The drawee-acceptor refused to
pay PNB.
ISSUE
Whether or not a drawee is liable to the payee upon
acceptance.
RULING
YES. The drawee, by acceptance, becomes liable to the
payee or his indorsee and also to the drawer himself. Here,
the drawee accepted the bill and is primarily liable for the
value of the negotiable instrument, while the drawer,
Picornell, is secondarily liable. Upon the non-payment of the
bill by the drawee-acceptor, the bank had the right of
recourse, which it exercised, against the drawer. (Sec. 84,
Negotiable Instruments Law)
Philippine National Bank v. Court of Appeals [G.R. No.
L-26001. October 29, 1968]
FACTS
A GSIS check with petitioner PNB as the drawee bank was
deposited by a payee in his current account with the private
respondent PCIB. PNB paid PCIB the amount in the check
without returning the same in the course of clearing. The
check was later discovered to have forged signatures.
ISSUE
Whether or not PNB may recover from PCIB.
RULING
YES. By not returning the check to the PCIB, by thereby
indicating that the PNB had found nothing wrong with the
check and would honor the same, and by actually paying its
amount to the PCIB, the PNB induced the latter, not only to
believe that the check was genuine and good in every
respect, but, also, to pay its amount to payee. In other words,
the PNB was the primary or proximate cause of the loss, and,
hence, may not recover from the PCIB.
Ang Tiong v. Ting [G.R. No. L-26767. February
22, 1968]
FACTS
Defendant Ting issued a check payable to cash or bearer.
appellant Ang indorsed the check to plaintiff-appellee Ang
Tiong. The check was dishonored.
ISSUE
Whether or not appellant Ang may be considered as a
general indorser.
RULING
YES. Nothing in the check in question indicates that the
appellant is not a general indorser within the purview of
section 63 of the Negotiable Instruments Law which makes a
person placing his signature upon an instrument otherwise
than as maker, drawer or acceptor a general indorser,
unless he clearly indicates plaintiff appropriate words his
intention to be bound in some other capacity, which he did
not do.
People v. Maniego [G.R. No. L-30910. February
27, 1987]
FACTS
Accused-appellant Maniego was an indorser of several checks
drawn by her sister, which were dishonored after they have
been exchanged with cash belonging to the Government.
ISSUE
Whether or not Maniego may not be made liable on account
of dishonor of checks indorsed by her.
RULING
NO. Appellants contention that as mere indorser, she may
not be made liable on account of the dishonor of the checks
indorsed by her is untenable. Under the law, the holder or
last indorsee of a negotiable instrument has the right to
enforce payment of the instrument for the full amount
thereof against all parties liable thereon.
Clark v. Sellner [G.R. No. L-16477. November 22, 1921]
FACTS
The defendant signed the following note in favor of the
plaintiff:
for value received, we jointly and
severally promise to pay to the order of R. N. Clark
Note matured but amount was not paid. Defendant contends accommodation parties. This is because the issue or
he only an accommodation party. indorsement of negotiable paper by a corporation without
consideration and for the accommodation of another is ultra
ISSUE
vires.
Whether or not defendant is liable as accommodation party.
Philippine National Bank v. Maza and Mecenas [G.R.
RULING No. L-24224. November 3, 1925]

YES. The liability of defendant, as one of the signers of the

note, is not dependent on whether he has, or has not,
FACTS
received any part of the amount of the debt. The defendant
is really and expressly one of the joint and several debtors on Appellants claim that they executed a promissory note sent
the note, and as such he is liable under the provisions of to them in blank by a certain Enrique Echaus, which they
section 60 of Act No. 2031, entitled The Negotiable neither did negotiate nor have received the value thereof.
Instruments Law, which provisions should be applied in this
ISSUE
case in view of the character of the instrument.
Whether or not appellants are liable as accommodation
Crisologo-Jose v. Court of Appeals [G.R. No. 80599.
parties.
September 15, 1989]
RULING
FACTS
YES. As accommodation parties, the defendants having
Petitioner avers that the accommodation party in this case is
signed the instruments without receiving value therefor and
Mover Enterprises, Inc. and not private respondent who
for the purpose of lending their names to some other person,
merely signed the check in question in a representative
are still liable on the instruments. The law now is that the
capacity, that is, as vice-president of said corporation, hence
accommodation party can claim no benefit as such, but he is
he is not liable thereon under the Negotiable Instruments
liable according to the face of his undertaking, the same as if
Law.
he were himself financially interested in the transaction.

ISSUE
Whether or not petitioner is not liable on the ground that he
Maulini v. Serrano [G.R. No. L-8844. December
is simply acting as an agent of a corporation.
16, 1914]
RULING
NO. An accommodation party is liable on the instrument to a
FACTS
holder for value, although such holder at the time of taking
the instrument knew him to be only an accommodation The note was indorsed on the back as follows:
party, does not include nor apply to corporations which are
Pay note to the order of Don Fernando Maulini, value
received. Manila, June 5, 1912. (Sgd.) A.G. Serrano.
ISSUE
Whether or not appellant is an accommodation indorser with
regard to plaintiff-appellee Maulini.
RULING
NO. Appellant is not an accommodation indorser in this case.
The accommodation to which reference is made in the
Section 29 of Negotiable Instruments Law is not one to the
person who takes the note that is, the payee or indorsee,
but one to the maker or indorser of the note. It may be true
that in the case at bar it was an accommodation to the
plaintiff, in a popular sense, to have the defendant indorse
the note; but it was not the accommodation described in the
law, but, rather, a mere favor to him and one which in no way
bound Serrano