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State Investment House Inc. vs.

CA

GR No. 101163 January 11, 1993

Bellosillo, J.:

Facts:
Nora Moulic issued to Corazon Victoriano, as security
for pieces of jewellery to be sold on commission, two
postdated checks in the amount of fifty thousand
each. Thereafter, Victoriano negotiated the checks to
State Investment House, Inc. When Moulic failed to
sell the jewellry, she returned it to Victoriano before
the maturity of the checks. However, the checks
cannot be retrieved as they have been negotiated.
Before the maturity date Moulic withdrew her funds
from the bank contesting that she incurred no
obligation on the checks because the jewellery was
never sold and the checks are negotiated without her
knowledge and consent. Upon presentment of for
payment, the checks were dishonoured for
insufficiency of funds.

Issues:
1. Whether or not State Investment House inc. was a
holder of the check in due course
2. Whether or not Moulic can set up against the
petitioner the defense that there was failure or
absence of consideration

Held:

Yes, Section 52 of the NIL provides what constitutes a


holder in due course. The evidence shows that: on
the faces of the post dated checks were complete
and regular; that State Investment House Inc. bought
the checks from Victoriano before the due dates; that
it was taken in good faith and for value; and there
was no knowledge with regard that the checks were
issued as security and not for value. A prima facie
presumption exists that a holder of a negotiable
instrument is a holder in due course. Moulic failed to
prove the contrary.
No, Moulic can only invoke this defense against the
petitioner if it was a privy to the purpose for which
they were issued and therefore is not a holder in due
course.

No, Section 119 of NIL provides how an instruments


be discharged. Moulic can only invoke paragraphs c
and d as possible grounds for the discharge of the
instruments. Since Moulic failed to get back the
possession of the checks as provided by paragraph c,
intentional cancellation of instrument is impossible.
As provided by paragraph d, the acts which will
discharge a simple contract of payment of money will
discharge the instrument. Correlating Article 1231 of
the Civil Code which enumerates the modes of
extinguishing obligation, none of those modes
outlined therein is applicable in the instant case.
Thus, Moulic may not unilaterally discharge herself
from her liability by mere expediency of withdrawing
her funds from the drawee bank. She is thus liable as
she has no legal basis to excuse herself from liability
on her check to a holder in due course. Moreover, the
fact that the petitioner failed to give notice of
dishonor is of no moment. The need for such notice is
not absolute; there are exceptions provided by Sec
114 of NIL.
______________________________________________________

FACT:
Moulic issued checks as security to Victoriano, for
pieces of jewelry to besold on commission. Moulic
failed to sell the pieces of jewelry, so she
returned them to Victoriano. The checks however
could not be recovered by Moulic as these have
been discounted already in favor of petitioner.
Consequently, before the maturity dates, Moulic
withdrew her funds from her account.
Thereafter, petitioner presented the checks for
payment but these were dishonored. This prompted
the petitioner to initiate an action
against Moulic.

HELD:
A prima facie presumption exists that a holder of a
negotiable instrument is a holder in due course. The
burden of proving that State is not a holder in due
course is upon Moulic. In this regard, she failed to do
so.

The evidence shows that the dated checks were


complete and regular; petitioner bought the checks
from Victoriano before their due dates; it took the
checks in good faith and for value; and it was never
informed nor made aware that these checks were
merely issued to payee as security.

Consequently, State is a holder in due course.


Moulic cannot set up the defense that there was
failure or want of consideration. It can only invoke
the defense if State was a privy to the purpose for
which they were issued and therefore is not a holder
in due course.

Furthermore, the mere fact that the checks were


issued as security is not sufficient ground to
discharge the instrument as against a holder in
due course.

And also, Moulic was responsible for the


dishonor of her checks. She withdrew her funds
from her account and could not have expected
her checks to be honored by then.

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