04 Alvin PATRIMONIO, vs. Napoleon GUTIERREZ and Octavio
14 of the Negotiable Instruments Law,
MARASIGAN III
G.R. No. 187769 June 4, 2014 Brion, J.
Topic: Incomplete and Undelivered Instruments
Digested by: Lopez, A.
Doctrine: see in Held
Facts:
1. Petitioner Patrimonio and respondent Nap Gutierrez entered into a
business venture called “Slam Dunk” where they will produce mini-
concerts and shows related to basketball. Patrimonio was a
professional basketball player while Gutierrez was a well-known
sports columnist.
2. During their business, Patrimonio pre-signed several checks to
answer for Slam Dunk’s expenses. Although signed, the checks had
no payee’s name, date or amount. These were entrusted to Gutierrez
with the specific instruction not to fill them out without previous
notification to and approval by Patrimonio.
3. On 1993, without Patrimonio’s knowledge and consent, Gutierrez
went to Marasigan (Patrimonio’s former teammate) to secure a Php
200K loan since Patrimonio allegedlt needed the money for house
constructions.
4. Marasigan acceded and gave Php 200K to Gutierrez. Gutierrez
simultaneously delivered one of the blank checks with Patrimonio’s
signature, filling out the date and the payee’s name as “Cash”.
5. The next day, Marasigan deposited the check but it was dishonored
for “ACCOUNT CLOSED”.
6. Marasigan sought recovery from Gutierrez but such demands were
unheeded. Hence, Marasigan filed a criminal case for violation of
B.P. 22 against Patrimonio.
7. Patrimonio filed a Complaint for Declaration of Nullity of Loan and
Damages against Gutierrez and Marasigan, denying the
authorization of the loan, or the check’s negotiation, and asserted he
was not privy to the agreement.
8. RTC: in favor of Marasigan, stating that Patrimonio, in issuing the
blank checks, had the intention of issuing the negotiable instrument.
Also, although Gutierrez violated Patrimonio’s instruction, Marasigan
was a holder in due course.
9. CA: affirmed the RTC’s ruling, but on the ground that Gutierrez
strictly filled out the check in accordance with Patrimonio’s authority.
Issue: W/N Patrimonio is liable under the instrument
Held: No!
1. [DOCTRINE] Under Sec.
which applies to an incomplete but delivered instrument, if the maker
or drawer delivers a pre-signed blank paper to another person for the
purpose of converting it into a negotiable instrument, that person is
deemed to have prima facie authority to fill it up. It merely requires
that the instrument be in the possession of a person other than the
drawer or maker and from such possession, together with the fact
that the instrument is wanting in a material fact, the law presumes
agency to fill up the blanks.
2. [DOCTRINE] In order however that one who is not a holder in due
course can enforce the instrument against a party prior to the
instrument’s completion, two requisites must exist: (1) that the blank
must be filled strictly in accordance with the authority given; and (2) it
must be filled up within a reasonable time. If it was proven that the
instrument had not been filled up strictly in accordance with the
authority given and within a reasonable time, the maker can set this
up as a personal defense and avoid liability. However, if the holder is
a holder in due course, there is a conclusive presumption that
authority to fill it up had been given and that the same was not in
excess of authority.
3. In this case, Marasigan is not a holder in due course. Section 52(c)
of the NIL states that a holder in due course is one who takes the
instrument "in good faith and for value." It also provides in Section
52(d) that in order that one may be a holder in due course, it is
necessary 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.
4. Acquisition in good faith means taking without knowledge or notice of
equities of any sort which could beset up against a prior holder of the
instrument. It means that he does not have any knowledge of fact
which would render it dishonest for him to take a negotiable paper.
The absence of the defense, when the instrument was taken, is the
essential element of good faith.
5. In the present case, the testimony of Marasigan during trial shows
that the Patrimonio is not a party or a privy to the contract of loan,
and correspondingly had no obligation or liability to him, renders him
dishonest, hence, in bad faith.
6. Since he knew that the underlying obligation was not actually for the
Patrimonio, the rule that a possessor of the instrument is prima facie
a holder in due course is inapplicable. His inaction and failure to
verify, despite knowledge of that the petitioner was not a party to the
loan, may be construed as gross negligence amounting to bad faith.
7. Also, it is found that the check was not completed strictly under the
authority given by Patrimonio. Gutierrez has exceeded the authority
to fill up the blanks and use the check. Such use of the check is
 limited to the use for the operation of their business, and on the 3. Furthermore, that Patrimonio entrusted the blank pre-signed checks
condition that Patrimonio’s approval must first be secured. to Gutierrez is not legally sufficient because the authority to enter into
8. While under the law, Gutierrez had a prima facie authority to a loan can never be presumed. The contract of agency and the
complete the check, such prima facie authority does not extend to its special fiduciary relationship inherent in this contract must exist as a
use once the check is completed. In other words, only the authority matter of fact. The person alleging it has the burden of proof to show,
to complete the check is presumed. Further, the law used the term not only the fact of agency, but also its nature and extent.
"prima facie" to underscore the fact that the authority which the law
4. In addition, no contract of loan was perfected between Marasigan
accords to a holder is a presumption juris tantum only; hence,
and Patrimonio as the latter’s consent was not obtained, considering
subject to subject to contrary proof.
9. In the present case, no evidence is on record that Gutierrez ever that Gutierrez never had Patrimonio’s written/verbal authorization to
secured prior approval from the petitioner to fill up the blank or to use enter into the loan agreement.
the check. Notably, Gutierrez was only authorized to use the check
for business expenses; thus, he exceeded the authority when he
used the check to pay the loan he supposedly contracted for the
construction of Patrimonio's house. This is a clear violation of the
Patrimonio's instruction to use the checks for the expenses of Slam
Dunk.
10. Considering that Marasigan is not a holder in due course, the
Patrimonio can validly set up the personal defense that the blanks
were not filled up in accordance with the authority he gave.
Consequently, Marasigan has no right to enforce payment against
the Patrimonio and the latter cannot be obliged to pay the face value
of the check.

WHEREFORE, in view of the foregoing, judgment is hereby rendered

GRANTING the petitioner Alvin Patrimonio's petition for review on certiorari.

Side Held: Patrimonio cannot be held liable under the loan.

1. Patrimonio alleged that under Art. 1878 of the CC, written authority is
required when loan is contracted through an agent. Although it does
not state in the provisions that this authority must be written, it must
still be proven by competent and convincing evidence. In this case,
Gutierrez failed to prove that he had authority to borrow money in
favor of Patirmonio. There was no SPA executed, nor was there any
established authorization by Patrimonio. Patrimonio was not even
aware of any such transaction.
2. Marasigan alleged that Patrimonio’s act of pre-signing the checks
sufficiently establish Patrimonio’s authorization for Gutierrez to fill
them out and contract the loan. However, this is not persuading as in
the absence of any authorization, Gutierrez could not enter into a
contract of loan in behalf of the Patrimonio. In the absence of any
showing of any agency relations or special authority to act for and in
behalf of the Patrimonio, the loan agreement Gutierrez entered into
with Marasigan is null and void.