NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANI’S BOOK AND ATTY. MERCADO’S LECTURES

Page 78 of 190

BY: MA. ANGELA LEONOR C. AGUINALDO

ATENEO LAW 2D BATCH 2010

her account. Thereafter, petitioner presented the checks for payment but these were dishonored. This prompted the petitioner to initiate an action against Moulic. HELD: A prima facie presumption exists that a holder of a negotiable instrument is a holder in due course. The burden of proving that State is not a holder in due course is upon Moulic. In this regard, she failed to do so. The evidence shows that the dated checks were complete and regular; petitioner bought the checks from Victoriano before their due dates; it took the checks in good faith and for value; and it was never informed nor made aware that these checks were merely issued to payee as security. Consequently, State is a holder in due course. Moulic cannot set up the defense that there was failure or want of consideration. It can only invoke the defense if State was a privy to the purpose for which they were issued and therefore is not a holder in due course. Furthermore, the mere fact that the checks were issued as security is not sufficient ground to discharge the instrument as against a holder in due course. And also, Moulic was responsible for the dishonor of her checks. She withdrew her funds from her account and could not have expected her checks to be honored by then.

99 BANCO ATLANTICO V. AUDITOR GENERAL 81 SCRA 335

FACTS: Boncan was the Finance Officer of the Philippine Embassy in Madrid who on many occasions negotiated with Banco Atlantico checks, allegedly endorsed to her by the embassy. On these occasions, the bank allowed the payment of the checks, notwithstanding the fact that the drawee bank has not yet cleared the checks for collection. This was premised on the finding that Boncan had special relations with the employees of the bank. And that upon presentment to the drawee bank, the checks were dishonored due to non-acceptance allegedly on the ground that the drawer has ordered the stoppage of payment. This prompted Banco Atlantico to collect from the Philippine Embassy for the funds released to Boncan but the latter refused. This eventually led to filing of money claim of the bank with the Auditor General.

HELD: On whether or not Banco Atlantico was a holder in due course, it is not. Following the decision of the Auditor General in denying the claim of the bank, the checks were demand notes. It should have been put on guard when Boncan negotiated the checks with them and subsequently deposited the same to her account. Even though it were demand notes, she instructed the bank that the same be not presented for collection till a later date. The fact that the amount was quite big and it was the payee herself who made the request that the same be not presented for collection until a fixed date in the future was proof of a glaring infirmity or defect in the instrument. It loudly proclaims “Take me at your own risk.” It was obvious by then that the bank had knowledge of the infirmity or defect of the checks. Furthermore, what it did when it allowed payment before clearing is beyond the normal and ordinary banking practice especially when the bank involved is a foreign bank and the amounts involved were large. Boncan wasn't even a client of the bank but was someone who had special relations with its officers. In view of the foregoing, the embassy as the drawer of the 3 checks in question cannot be held liable. It is apparent that the said 3 checks were (fraudulently altered) by Boncan as to their accounts and therefore wholly inoperative (note: should be “avoided”).

100 SALAS V. CA 181 SCRA

FACTS: Petitioner bought a car from Viologo Motor Sales Company, which was secured by a promissory note, which was later on indorsed to Filinvest Finance, which financed the transaction. Petitioner later on defaulted in her installment payments, allegedly due to the fraud imputed by VMS in selling her a different vehicle from what was agreed upon. This default in payment prompted Filinvest Finance to initiate a case against petitioner. The trial court decided in favor of Filinvest, to which the appellate court upheld by increasing the amount to be paid. It is the contention of petitioner that since the agreement between her and the motor company was inexistent, none had been assigned in favor of private respondent. HELD: Petitioner’s liability on the promissory note, the due execution and genuineness of which she never denied under oath, is under the foregoing factual milieu, as inevitable as it is clearly established.