Rentoza, Michael Leandro F.

Vicente De Ocampo & Co. vs. Anita Gatchalian, et.al.

GR No. L-15126. 30 November 1961

Q: Manuel Gonzales, representing himself as a duly authorized representative of the owner of the car,
Ocampo Clinic, offered to Anita Gatchalian the said car for sale. To ensure that the sale will push
through, Gonzales requested that Gatchalian issue a check which will be shown to the owner of the
car as evidence of buyer’s good faith in purchasing the car. Gonzales assured that the check will only
be for safekeeping and will be returned the following day when Gonzales bring the car and the
certificate of registration. Gatchalian then issued a check with two parallel lines in the upper left hand
corner. Due to failure of Gonzales to appear the following day and present the car, Gatchalian issued
a “Stop Payment Order.” In the meantime, Gonzales was able to present the check to Ocampo Clinic
in which the hospital accepted as payment for the fees and expenses of the hospitalization of the
former’s wife. Since the amount represented in the check was more than the hospitalization fees, the
balance of which amounting to P158.25 was given to Gonzales as change. Ocampo Clinic now
demands for the payment of the check, in which defendant refused citing that the plaintiff is not a
holder in due course. May Ocampo Clinic be considered as a holder in due course, thus, has a right to
recover?

A: No, Ocampo Clinic is not a holder in due course and is not entitled to recover. Pursuant to Section
52 of the Negotiable Instruments Law, 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 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.

In this case, although Ocampo Clinic was not aware of the circumstances with respect to the delivery
of the check to Gonzales, there are circumstances that should have put on inquiry, such as the fact
that appellants had no obligation or liability to the Ocampo Clinic; that the amount of the check did
not correspond exactly with the obligation of Gonzales 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. 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,
contrary to the provision of Section 52(d) of the Negotiable Instruments Law.

Further, while there is a presumption of that a payee is a holder in good faith, here, 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 Ocampo Clinic to show that
notwithstanding the suspicious circumstances, it acquired the check in actual good faith. Having failed
to do so, it is not a holder in good faith and not entitled to recover.