G.R. No. 138074, 15 August 2003


Petitioner Cely Yang and private respondent Prem Chandiramani entered into an agreement whereby the latter was to give Yang a PCIB manager’s check in the amount of P4.2 million in exchange for two (2) of Yang’s manager’s checks, each in the amount of P2.087 million, both payable to the order of private respondent Fernando David.

Yang and Chandiramani agreed that the difference of P26,000.00 in the exchange would be their profit to be divided equally between them. Yang and Chandiramani also further agreed that the former would secure from FEBTC a dollar draft in the amount of US$200,000.00, payable to PCIB FCDU, which Chandiramani would exchange for another dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong Kong.

Yang gave the aforementioned cashier’s checks and dollar drafts to her business associate, Albert Liong, to be delivered to Chandiramani by Liong’s messenger, Danilo Ranigo. Ranigo was to meet Chandiramani and would turn over Yang’s cashier’s checks and dollar draft to Chandiramani who, in turn, would deliver to Ranigo a PCIB manager’s check in the sum of P4.2 million and a Hang Seng Bank dollar draft for US$200,000.00 in exchange.

Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashier’s checks and the dollar draft bought by petitioner. It transpired, however, that the checks and the dollar draft were not lost, for Chandiramani was able to get hold of said instruments, without delivering the exchange consideration. Chandiramani delivered to respondent Fernando David said instruments. In exchange, Chandiramani got US$360,000.00 from David.

Consequently, Yang asked for the stoppage of payment of the checks she believe to be lost, relying on the report of her messenger. The stoppage order was eventually lifted by the banks and the drafts and checks were able to be encashed. Yang then filed an action for injunction and damages against the banks, Chandimari and David.

The trial court and CA held in favor of David as a holder in due course.


Whether or not David is a holder in due course.


Every holder of a negotiable instrument is presumed to be a holder in due course. This is especially true if one is a holder because he is the payee or indorsee of the instrument. In the case at bar, it is evident that David was the payee of the checks. The prima facie presumption of him being a holder in due course is in his favor.

Nonetheless, this presumption is disputable. On whether he took the check under the conditions set forth in Section 52 must be proven. Petitioner relies on two arguments on why David isn’t a holder in due course—first, because he took the checks without valuable consideration; and second, he failed to inquire on Chandimari’s title to the checks given to him.

The law gives rise to the presumption of valuable consideration. Petitioner has the burden of debunking such presumption, which it failed to do so. Her allegation that David received the checks without consideration is unsupported and devoid of any evidence.

Furthermore, petitioner wasn’t able to show any circumstance which should have placed David in inquiry as to why and wherefore of the possession of the checks by Chandimari. David wasn’t a privy to the transactions between Yang and Chandimari. Instead, Chandimari and David had the agreement between themselves of the delivery of the checks.

David even inquired with the banks on the genuineness of the checks in issue. At that time, he wasn’t aware of any request for the stoppage of payment. Under these circumstances, David had no obligation to ascertain from Chandimari what the nature of the latter’s title to the checks was, if any, or the nature of his possession.

*Case digest by Jelyn c. Ondong, JD-IV, Andres Bonifacio Law School, SY 2019-2020