Rights in Holder

1. CHAN WAN V. TAN KIM GR NO. 15380

FACTS:

Tam Kim issued 11 checks payable to cash or bearer. Chan Wan presented these for payment but
were dishonored for insufficiency of funds. This prompted Chan Wan to institute an action
against Tam Kim. She didn't take the witness stand and merely presented the checks for payment.
Tan Kim on the other hand alleged that the checks were for mere receipts only. The trial court
dismissed the complaint as Chan Wan failed to show that she was a holder in due course.

HELD:

Eight of the checks were crossed checks specially to Chinabank and should have been presented for
payment by Chinabank and not by Chan Wan. Inasmuch as Chan Wan didn't present them for
payment himself, there was no proper presentment, and the liability didn't attach to the drawer.

The facts show that the checks were indeed deposited with Chinabank and were by the latter presented
for collection to the drawee bank. But as the account had no sufficient funds, they were unpaid and
returned, some of them stamped “account closed”. How it reached the hands of Chan Wan, she didn't
indicate. Most probably, as the trial court surmised, she acquired them after they have been
dishonored.

Chan Wan is then not a holder in due course. Nonetheless, it doesn't mean that she couldn't collect on
the checks. He can still collect against Tan Kim if the latter has no valid excuse for refusing
payment. The only disadvantage for Chan Kim is that she is susceptible to defenses of Tan Kim
but what are the defenses of latter? This has to be further deliberated by the trial court.

2. ATRIUM MANAGEMENT CORP. V. CA, G.R. NO. 109491, FEB. 28, 2001

Is a corporation to which four crossed checks were indorsed by the payee corporation a holder in due
course and hence entitled to recover the amount of the checks when the same had been dishonored for
the reason of “payment stopped”?

The checks were crossed checks and specifically indorsed for deposit to payee’s account only. From the
beginning, the corporation was aware of the fact that the checks were all for deposit only to payee’s
account. Clearly then, it could not be considered a holder in due course. However, it does not follow as a
legal proposition that simply because it was not a holder in due course for having taken the instruments
in question, with notice that the same was for deposit only, that it was altogether precluded from
recovering on the instrument. The disadvantage in not being a holder in due course is that the
negotiable instrument is subject to defenses as if it were non-negotiable. (Atrium Management Corp. v.
CA, G.R. No. 109491, Feb. 28, 2001)