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State Investment v.

GR. No. 101163 | SCRA | January 11, 1993 | Bellosillo, J
Petition: Petition for Review
Petitioners: State Investment House, Inc
Respondents: CA and Nora Moulic

Relevant Provision
Sec. 52. NIL What constitutes a holder in due course. 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
was 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
Sec. 119. Instrument; how discharged. A negotiable instrument is
discharged: (a) By payment in due course by or on behalf of the principal
debtor; (b) By payment in due course by the party accommodated,
where the instrument is made or accepted for his accommodation; (c) By
the intentional cancellation thereof by the holder; (d) By any other act
which will discharge a simple contract for the payment of money; (e)
When the principal debtor becomes the holder of the instrument at or
after maturity in his own right
Sec. 114. When notice need not be given to drawer. Notice of
dishonor is not required to be given to the drawer in the following cases:
(a) Where the drawer and the drawee are the same person; (b) When
the drawee is a fictitious person or a person not having capacity to
contract; (c) When the drawer is the person to whom the instrument is
presented for payment: (d) Where the drawer has no right to expect or
require that the drawee or acceptor will honor the instrument; (e) Where
the drawer had countermanded payment.


Upon presentment for payment, the checks were dishonored for

insufficiency of funds.
a. State then allegedly notified Moulic of such dishonor but the
latter avers that she did not receive such notice

1. W/N private respondent is liable to petitioner despite issuing the check
merely for security- YES


1. Facts


Corazon Victoriano provided pieces of jewelry to Private

Respondent Nora Moulic so that the latter may sell the same
a. As security for pieces of jewelry to be sold on commission,
Moulic issued two (2) post-dated Equitable Banking
Corporation checks in the amount of Fifty Thousand Pesos
(P50,000.00) each in favour of Victoriano
b. Victoriano negotiated the checks to petitioner State
Investment House. Inc.
Moulic failed to sell the pieces of jewelry, so she returned them to
the payee before maturity of the checks
a. The checks, however, could no longer be retrieved as they
had already been negotiated.
b. Hence, Moulic withdrew all her funds from the bank


a. The negotiability of the instrument is not in dispute since pre-trial
b. Petitioner is a holder in due course
a. A prima facie presumption exists that the holder of a negotiable
instrument is a holder in due course
b. The evidence clearly shows that: (a) on their faces the postdated checks were complete and regular: (b) petitioner bought
these checks from the payee, Corazon Victoriano, before their
due dates; (c) petitioner took these checks in good faith and for
value, albeit at a discounted price; and, (d) petitioner was never
informed nor made aware that these checks were merely issued
to payee as security and not for value
c. State, as holder in due course, holds the instruments free from any
defect of title of prior parties, and from defenses available to prior parties
among themselves; STATE may, therefore, enforce full payment of the
a. MOULIC cannot set up against STATE the defense that there
was failure or absence of consideration
b. That the post-dated checks were merely issued as security is
not a ground for the discharge of the instrument as against a
holder in due course under Sec 119 of NIL (see relevant prov)
d. The failure to give Notice of Dishonor to MOULIC is of no moment
a. Need for notice is not absolute (see Sec 114)
b. After withdrawing her funds, she could not have expected her
checks to be honored.
e. The holder who takes the negotiated paper makes a contract with the
parties on the face of the instrument. There is an implied representation
that funds or credit are available for the payment of the instrument in the
bank upon which it is drawn.
WHEREFORE, the petition is GRANTED. The decision appealed from is
REVERSED and a new one entered declaring private respondent NORA
B. MOULIC liable to petitioner STATE INVESTMENT HOUSE, INC., for
the value of EBC Checks Nos. 30089658 and 30089660 in the total
amount of P100,000.00, P3,000.00 as attorney's fees, and the costs of
suit, without prejudice to any action for recompense she may pursue
against the VICTORIANOs as Third-Party Defendants. Costs against
private respondent. SO ORDERED.
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