Here are selected April 2010 rulings of the Supreme Court of the Philippines on commercial law:
Negotiable Instruments Law
Holder in due course; crossed check. Section 52 of the Negotiable Instruments Law defines a holder in due course, thus: “A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.”
In the case of a crossed check, as in this case, the following principles must additionally be considered: A crossed check (a) may not be encashed but only deposited in the bank; (b) may be negotiated only once — to one who has an account with a bank; and (c) warns the holder that it has been issued for a definite purpose so that the holder thereof must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course.
Based on the foregoing, respondents had the duty to ascertain the indorser’s, in this case Lobitana’s, title to the check or the nature of her possession. This respondents failed to do. Respondents’ verification from Metrobank on the funding of the check does not amount to determination of Lobitana’s title to the check. Failing in this respect, respondents are guilty of gross negligence amounting to legal absence of good faith, contrary to Section 52(c) of the Negotiable Instruments Law. Hence, respondents are not deemed holders in due course of the subject check. Roberto Dino vs. Maria Luisa Judal-Loot, joined by her husband Vicente Loot, G.R. No. 170912, April 19, 2010.
Holder in due course; recourse if not holder in due course. The fact that respondents are not holders in due course does not automatically mean that they cannot recover on the check. 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 a holder who is not in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. Among such defenses is the absence or failure of consideration, which petitioner sufficiently established in this case. Petitioner issued the subject check supposedly for a loan in favor of Consing’s group, who turned out to be a syndicate defrauding gullible individuals. Since there is in fact no valid loan to speak of, there is no consideration for the issuance of the check. Consequently, petitioner cannot be obliged to pay the face value of the check.
Respondents can collect from the immediate indorser, in this case Lobitana. Significantly, Lobitana did not appeal the trial court’s decision, finding her solidarily liable to pay, among others, the face value of the subject check. Therefore, the trial court’s judgment has long become final and executory as to Lobitana. Roberto Dino vs. Maria Luisa Judal-Loot, joined by her husband Vicente Loot, G.R. No. 170912, April 19, 2010.