Lessons Applicable: Rights of the holder (Negotiable Instruments Law)
FACTS:
- December 22, 1987: Cely Yang and Prem Chandiramani entered into an agreement whereby Yang was to give 2 P2.087M PCIB managers check in the amount of P4.2 million both payable to the order of Fernando David. Yang and Chandiramani agreed that the difference of P26K in the exchange would be their profit to be divided equally between them.
- Yang and Chandiramani also further agreed that the Yang would secure from FEBTC a dollar draft in the amount of US$200K, payable to PCIB FCDU Account No. 4195-01165-2, which Chandiramani would exchange for another dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong Kong.
- December 22, 1987, Yang procured the ff:
b) FEBTC Cashiers Check No. 287078, in the amount of P2,087,000.00, dated December 22, 1987, likewise payable to the order of Fernando David; and
c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New York, in the amount of US$200,000.00, dated December 22, 1987, payable to PCIB FCDU Account No. 4195-01165-2.
- December 22, 1987 1 p.m.: Yang gave the cashiers checks and dollar drafts to her business associate, Albert Liong, to be delivered to Chandiramani by Liongs messenger, Danilo Ranigo
- Ranigo was to meet Chandiramani at 2 p.m. at Philippine Trust Bank, Ayala Avenue, Makati where he would turn over Yangs cashiers checks and dollar draft to Chandiramani who, in turn, would deliver to Ranigo a PCIB managers check in the sum of P4.2 million and a Hang Seng Bank dollar draft for US$200K in exchange but Chandiramani did not appear
- December 22, 1987 4 p.m.: Ranigo reported the alleged loss of the checks and the dollar draft to Liong. Liong, in turn, informed Yang, and the loss was then reported to the police.
- Chandiramani was able to get hold of the instruments
- Chandiramani delivered the 2 cashiers checks to Fernando David at China Banking Corporation branch in San Fernando City, Pampanga
- In exchange, he got US$360K from David, which he deposited in the savings account of his wife, Pushpa; and his mother, Rani Reynandas, who held FCDU Account No. 124 with the United Coconut Planters Bank branch in Greenhills
- He also deposited FEBTC Dollar Draft No. 4771, dated December 22, 1987, drawn upon the Chemical Bank, New York for US$200K in PCIB FCDU Account No. 4195-01165-2 on the same date.
- Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost
- Both banks complied with her request
- Yang filed against David and Chandiramani
- CA affirms RTC: in favor of David
ISSUE: W/N David is a holder in due course
HELD:
- Although negotiable instruments do not constitute legal tender, they often take the place of money as a means of payment
- checks were crossed
- Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value
- David took the step of asking the manager of his bank to verify from FEBTC and Equitable as to the genuineness of the checks and only accepted the same after being assured that there was nothing wrong with said checks
- David did not close his eyes deliberately to the nature or the particulars of a fraud allegedly committed by Chandiramani upon the petitioner, absent any knowledge on his part that the action in taking the instruments amounted to bad faith