30 November 1961, 3 SCRA 596
Gatchalian, was looking for a car for the use of her husband and the family and Manuel Gonzales (Manuel) who was accompanied by Emil Fajardois (personally known to Gatchalian) offered her a car. Manuel represented to Gatchalian that he was duly authorized by Ocampo Clinic, the owner of the car, to look for a buyer and negotiate for and accomplish the sale, but which facts were not known to De Ocampo. The next day, Gatchalian requested Manuel to bring the car the day following together with the certificate of registration of the car so that her husband would be able to see same but Manuel told her that unless there is a showing that the party interested in the purchase is ready he cannot bring the certificate of registration in lieu of which Gatchalian gave him a check which will be shown to the owner as evidence of buyer’s good faith in the intention to purchase, it being for safekeeping only of Manuel and to be returned.
Upon receipt of the check from the defendant, Manuel delivered the same to the Ocampo Clinic, in payment of the fees and expenses arising from the hospitalization of his wife. Manuel failed to appear the next day and on his failure to bring the car and its certificate of registration and to return the check, as previously agreed upon, Gatchalian issued a “Stop Payment Order” on the check, with the drawee bank. Said “Stop Payment Order” was issued without previous notice on De Ocampo not being known to Gatchalian and who furthermore had no reason to know check was already given to the former.
Gatchalian then filed with the Office of the City Fiscal of Manila, a complaint for Estafa against Manuel, however, the latter contended that the check is not a negotiable instrument, under the facts and circumstances stated in the stipulation of facts, and that De Ocampo is not a holder in due course. In support of the first contention, it is argued that Gatchalian had no intention to transfer her property in the instrument as it was for safekeeping merely and, therefore, there was no delivery required by law (Section 16, Negotiable Instruments Law); that assuming for the sake of argument that delivery was not for safekeeping merely, delivery was conditional and the condition was not fulfilled.
1. Whether De Ocampo can be considered as a holder in due course.
2. Whether prima facie holder in due course applies to the instant case.
1. No, De Ocampo can be considered as a holder in due course.Section 52, Negotiable Instruments Law, defines holder in due course as 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 had 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.
Considering that amount of the check did not correspond exactly with the obligation of Manuel’s wife to Dr. V. R. de Ocampo; and that 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 — all these circumstances should have put De Ocampo to inquiry as to the why and wherefore of the possession of the check by Manuel, and why he used it to pay his wife’s account. Further, it was the payee’s duty to ascertain from the holder Manuel what the nature of the latter’s title to the check was or the nature of his possession. Having failed in this respect, we must declare that De Ocampo, was guilty of gross neglect in not finding out the nature of the title and possession of Manuel, amounting to legal absence of good faith, and it may not be considered as a holder of the check in good faith.
Furthermore, in order to show that the defendant had “knowledge of such facts that his action in taking the instrument amounted to bad faith,” it is not necessary to prove that the defendant knew the exact fraud that was practiced upon the plaintiff by the defendant’s assignor, it being sufficient to show that the defendant had notice that there was something wrong about his assignor’s acquisition of title, although he did not have notice of the particular wrong that was committed. Thus, it is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted with fraud. It is not necessary that he should know the particulars or even the nature of the fraud, since all that is required is knowledge of such facts that his action in taking the note amounted bad faith. Such considerations would seem sufficient to justify the ruling that De Ocampo should not be allowed to recover the value of the check.
2. No, the rule that a possessor of the instrument is prima faciea holder in due course does not apply because there was a defect in the title of the holder (Manuel), because the instrument is not payable to him or to bearer.As holder’s title was defective or suspicious, it cannot be stated that the payee acquired the check without knowledge of said defect in holder’s 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.
In the case at bar as the payee acquired 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 devolved upon it, (De Ocampo), to prove that it actually acquired said check in good faith. The stipulation of facts contains no statement of such good faith. Hence the Court is forced to the conclusion that De Ocampo and Co., has not proved that it acquired the check in good faith and may not be deemed a holder in due course thereof.
*Case digest by Rezeile S. Morandarte, JD-IV, Andres Bonifacio College, SY: 2019-2020