NEGO Holder #01

Vicente R. De Ocampo v. Anita Gatchalian et. al.

GR No. L-15126 30Nov1961

J. Labrador

Parties:

Anita Gatchalian drawer of check Manuel Gonzales husband of Matilde G.; recipient of check from Anita Gonzales Matilde Gonzales wife of Manuel; her hospitalization expenses were paid by Manuel using the check

Vicente de Ocampo recipient and holder of check from Gonzales

FACTS

Manuel Gonzales offered to sell a car to Anita Gatchalian, who was looking for a car for her

husbands use. Manuel represented that he was duly authorized by Ocampo Clinic, the car owner, to look for buyer, negotiate and accomplish the sale of the car. Anita requested Manuel

to bring the car and Certificate of Registration for her husband to see; but Manuel said that he

can bring the car on the condition that Anita gives him a check to show to the owner as

evidence of Anitas good faith in the intention to buy the car. Anita gave Manuel a check in the amount of P600, on the condition that the check will only be

for safekeeping and will be returned to her the following day when the car and Certficate of

Registration will be brought by Manuel.

Manuel failed to appear the following day, so Anita issued a Stop Payment Order on the

check with the drawee bank, which was issued without previous notice to holder.

Meanwhile, Manuel delivered the check to Ocampo Clinic, in payment of the hospitalization

expenses of his wife, Matilde Gonzales. Vicente de Ocampo gave Manuel change of P158.25 difference of P600 value of check less P441.75 total hospitalization fees.

Vicente de Ocampo sued Manuel for estafa for not paying his obligations to the Ocampo Clinic

and for receiving the cash balance of the check.

Action in the CFI: recovery of the value of the P600 check

CFI decision: sentenced Anita Gatchalian et al to pay de Ocampo the P600 value of the check

plus legal interest plus costs of suit

On appeal: Defendants contend that the check is not a negotiable instrument because

Gatchalian had no intention to transfer the instruments as it was only for safekeeping so there is

no delivery required by law; and de Ocampo is not a holder in due course because there was no

negotiation prior to his acquiring the possession of the check and that he received it with notice

of defect in the title of the holder, Manuel Gonzales

NEGO Holder #01

ISSUE before the Supreme Court

Whether de Ocampo may be considered as a holder in due course and consequently recover the

value of the check (i.e. whether the presumption of holder in due course will apply)

HELD/RATIO

NO, because de Ocampo was guilty of gross negligence in not finding out the nature of the title

and possession of Manuel Gonzales, amounting to legal absence of good faith; hence he cannot

be considered as holder of the check in good faith.

The presumption does not apply in this case because there was a defect in the title of the holder

because the instrument is not payable to him or to bearer and the circumstances show that that

Manuels title is at least suspicious, if not defective.

***

Section 52(d) of the NIL provides that in order that one may be considered a holder in due

course, it is necessary that at the time the instrument was negotiated to him, he had no notice of any xxx defect in the title of the person negotiating it. Meanwhile, Section 59 of the NIL states that every holder is deemed prima facie to be a holder

in due course.

The Court found circumstances that should have put de Ocampo to inquiry as to why and

wherefore the possession of the check by Manuel and why he used it to pay Matildes hospitalization expenses:

De Ocampo was not aware of the circumstances how the check was delivered to Manuel

Gatchalian had no obligation whatsoever with Ocampo Clinic

The check had two parallel lines in the upper left hand corner, which practice means that the check could only be deposited but may not be converted into cash.

These considerations would seem sufficient to justify the ruling that Gatchalian should not be

allowed to recover the value of the check.

Where a holders title is defective or suspicious, it cannot be stated that the payee acquired the check without the 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.

Where the payee required the check under circumstances which should have put it to inquiry,

why the holder had the check and used it, to pay his own personal account, the duty developed

upon it to prove that it actually acquired said check in good faith.