Bataan Cigar and Cigarette Factory, Inc. vs.

Court of Appeals
230 SCRA 63
FA!CS"
Bataan Cigar & Cigarette Factory, Inc., a corporation manufacturing cigarettes
ordered from its supplier King Tim Pua George 2, 000 ales of toacco leaf, on !uly "#,
"$%& issued crossed c'ec(s post dated sometime in )arc' "$%$ in t'e total amount of
P&20,000.00. *espite t'e non+ deli,ery, still t'e company ordered for additiona ales
and issued anot'er crossed c'ec(s in t'e total amount of P","00,000.00, payale
sometime in -eptemer "$%$. .ll t'ese post dated c'ec(s /ere sold to -T.T0
I120-T)01T 345-0, I1C 6-I3I7 y King Tim Pua George. *ue to t'e failure of King
Tim Pua George to deli,er t'e goods to t'e company, t'e latter ordered a stop payment
on t'e c'ec(s issued to t'e former. -I3I 'a,ing failed to collect from Bataan Cigar &
Cigarette Company, institute t'e present case.
ISS#$"
8'et'er or not -I3I, a second indorser, a 'older of crossed c'ec(s, is a 'older
in due course, to e ale to collect from t'e dra/er, BCCFI.
SC R#%I&'"
. 'older of a crossed c'ec(s ecame a 'older of due course only9
-ec. :2 ; . 'older in due course is a 'older /'o 'as ta(en t'e instrument under t'e
follo/ing conditions9
6a7 T'at it is complete and regular upon its face<
67 T'at 'e ecame t'e 'older of it efore it /as o,erdue, and /it'out notice t'at it
'ad een pre,iously dis'onored, if suc' /as t'e fact<
6c7 T'at 'e too( it in good fait' and for ,alue<
6d7 T'at at t'e time it /as negotiated to 'im 'e 'ad no notice of any infirmity in t'e
instrument or defect in t'e title of t'e person negotiating it.
-ection :$ of t'e 1I= furt'er states t'at e,ery 'older is deemed prima facie a
'older in due course. 3o/e,er, /'en it is s'o/n t'at t'e title of any person /'o 'as
negotiated t'e instrument /as defecti,e, t'e urden is on t'e 'older to pro,e t'at 'e or
some person under /'om 'e claims, ac>uired t'e title as 'older in due course.
It is t'en settled t'at crossing of c'ec(s s'ould put t'e 'older on in>uiry and
upon 'im de,ol,es t'e duty to ascertain t'e indorser?s title to t'e c'ec( or t'e nature of
'is possession. Failing in t'is respect, t'e 'older is declared guilty of gross negligence
amounting to legal asence of good fait' and as suc' t'e consensus of aut'ority is to
t'e effect t'at t'e 'older of t'e c'ec( is not a 'older in due course.
In t'e case at ar, t'e c'ec(s /ere issued /it' t'e intention t'at George King
/ould supply BCCFI /it' t'e ales of toacco leaf. T'ere eing failure of consideration,
-I3I is not a 'older in due course. Conse>uently, BCCFI cannot e oliged to pay t'e
c'ec(s.