Topic: Holder

Vicente R. de Ocampo & Co. vs. Gatchalian

GR No. L-15126. November 30, 1961
Labrador J.

Plaintiff-Appellee: VICENTE R. DE OCAMPO & Co.

Defendants-Appellants: ANITA GATCHALIAN, ET AL.

FACTS:
Plaintiff Dr. Vicente de Ocampo authorized Manuel Gonzales to look for a buyer of his car and to
accomplish the sale.

Gonzales offered the car to defendant Anita Gatchalian, who was then looking for a car.
Satisfied with the quoted price, Gatchalian requested that the car be brought together with its
certificate of registration.

Gonzales advised Gatchalian that the owner, de Ocampo, would only be willing to give the
certificate unless the party interested is ready and willing to make the purchase. With this,
Gonzales advised Gatchalian to issue a check which will be shown to de Ocampo as proof of her
intention to buy the car.

Gatchalian drew and issued a check with value of P600 to Manuel Gonzales to be returned when
Gonzales would bring the car and its certificate of registration. However, the following day,
Gonzales failed to bring the promised items which caused Gatchalian to issue a Stop Payment
Order on the check with the drawee bank.

The said Order was issued without prior notice on de Ocampo who then held the check, not
being known by Gatchalian that Gonzales gave it to de Ocampo.

Gonzales delivered the check to Ocampo Clinic, owned by de Ocampo, as payment of the
hospitalization fees of his wife. De Ocampo accepted the check and applied P441.75 to it as
payment, giving P158.25 to Gonzales representing the balance of the check.

De Ocampo sued Gatchalian before the CFI-Manila, seeking recovery of the value of the check
for P600. The trial court decided in favour of de Ocampo.

On appeal, Gatchalian contended, among others, that de Ocampo was not a holder in due
course of the check because (1) de Ocampo acquired it with notice of defect in the title of the
holder Gonzales--- that the instrument is not payable to Gonzales or to bearer; and because (2)
there exist suspicious circumstances against Gonzales possession of the check --- that the
drawer was not Gonzales himself, that the drawer Gatchalian had no obligation or liability to
Ocampo Clinic nor to Gonzales, that the amount of the check did not correspond exactly with
the obligation of Gonzales to the clinic, and that the check had two parallel lines in the upper
left hand corner signifying that the check could only be deposited and not be converted to cash.
ISSUE: Whether de Ocampo was a holder in due course.

RULING:

No.

Under Section 52 of the Negotiable Instruments Law, a holder in due course is one who took
the negotiable instrument in good faith and for value (Sec 52(c)), and at the time the instrument was
negotiated to him, he had no notice of any infirmity in it or any defect in the title of the person
negotiation it (Sec 52(d)).

In the present case, the Court agreed with defendants contentions. As holders (Gonzales) title
was defective or suspicious, it cannot be stated that the payee (de Ocampo) acquired the check without
knowledge of said defect in holders 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. And having presented no evidence
that it acquired the check in good faith, it (payee) cannot be considered as a holder in due course.

In other words, under the circumstances of the case, instead of the presumption that payee was
a holder in good faith, the fact is that it acquired possession of the instrument under circumstances that
should have put it to inquiry as to the title of the holder who negotiated the check to it. The burden was,
therefore, placed upon it to show that notwithstanding the suspicious circumstances, it acquired
the check in actual good faith.

The trial courts decision was reversed and absolved defendant from the complaint.