Commercial Law

Vicente De Ocampo vs Anita Gatchalian

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G.R. No. L-15126 – 3 SCRA 596 – Mercantile Law – Negotiable Instruments Law – Rights of the Holder – What Constitutes a Holder in Due Course – Is a payee a holder in due course? 

Matilde Gonzales was a patient of the De Ocampo Clinic owned by Vicente De Ocampo. She incurred a debt amounting to P441.75. Her husband, Manuel Gonzales designed a scheme in order to pay off this debt: In 1953, Manuel went to a certain Anita Gatchalian. Manuel purported himself to be selling the car of Vicente De Ocampo. Gatchalian was interested in buying said car but Manuel told her that De Ocampo will only sell the car if Gatchalian shows her willingness to pay for it. Manuel advised Gatchalian to draw a check of P600.00 payable to De Ocampo so that Manuel may show it to De Ocampo and that Manuel in the meantime will hold it for safekeeping. Gatchalian agreed and gave Manuel the check. After that, Manuel never showed himself to Gatchalian.

Meanwhile, Manuel gave the check to his wife who in turn gave the check to De Ocampo as payment of her bills with the clinic. De Ocampo received the check and even gave Matilde her change (sukli). On the other hand, since Gatchalian never saw Manuel again, she placed a stop-payment on the P600.00 check so De Ocampo was not able to cash on the check. Eventually, the issue reached the courts and the trial court ordered Gatchalian to pay De Ocampo the amount of the check.

Gatchalian argued that De Ocampo is not entitled to payment because there was no valid indorsement. De Ocampo argued tha he is a holder in due course because he is the named payee.

ISSUE: Whether or not De Ocampo is a holder in due course.

HELD: No. Section 52 of the Negotiable Instruments Law, defines holder in due course, thus:

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.

The Supreme Court emphasized that if one is such a holder in due course, it is immaterial that he was the payee and an immediate party to the instrument. The Supreme Court however ruled that De Ocampo is not a holder in due course for his lack of good faith. De Ocampo should have inquired as to the legal title of Manuel to the said check. The fact that Gatchalian has no obligation to De Ocampo and yet he’s named as the payee in the check should have apprised De Ocampo; that the check did not correspond to Matilde Gonzales’ obligation with the clinic because of the fact that it was for P600.00 – more than the indebtedness; that why was Manuel in possession of the check - all these gave De Ocampo the duty to ascertain from the holder Manuel Gonzales what the nature of the latter’s title to the check was or the nature of his possession.

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