G.R. No. 101163 January 11, 1993
Lessons Applicable: Rights of the Holder (Negotiable Instruments Law)
FACTS:
- Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on commission,2 post-dated Equitable Banking Corporation checks OF P 50,000 each
- Corazon negotiated the checks to State Investment House. Inc. (State)
- MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks.
- The checks, however, could no longer be retrieved as they had already been negotiated
- before their maturity dates, MOULIC withdrew her funds from the drawee bank
- Upon presentment for payment, the checks were dishonored for insufficiency of funds
- October 6, 1983: State sued to recover the value of the checks plus attorney's fees and expenses of litigation
- CA affirmed RTC: dismissed
ISSUE: W/N State has a right to recourse as holder in due course regardless if the sale did not push through against MOULIC
HELD: YES. Petition is Granted.
Sec. 52. What constitutes a holder in due course. — 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 was 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.
- a prima facie presumption exists that the holder of a negotiable instrument is a holder in due course
- burden of proving that STATE is not a holder in due course lies in MOULIC - failed
- As holder in due course, it holds the instruments free from any defect of title of prior parties, and from defenses available to prior parties among themselves
- State may, therefore, enforce full payment of the checks
- MOULIC cannot set up against STATE the defense that there was failure or absence of consideration
- That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as against a holder in due course.
- For the only grounds are those outlined in Sec. 119 of the Negotiable Instruments Law:
Sec. 119. Instrument; how discharged. — A negotiable instrument is discharged: (a) By payment in due course by or on behalf of the principal debtor; (b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple contract for the payment of money; (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right.
- Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument.
- But, the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up, burning it, or writing the word "cancelled" on the instrument.
- The act of destroying the instrument must also be made by the holder of the instrument intentionally.
- Since MOULIC failed to get back possession of the post-dated checks, the intentional cancellation of the said checks is altogether impossible.
- acts which will discharge a simple contract for the payment of money under paragraph (d) are determined by other existing legislations since Sec. 119 does not specify what these acts are, e.g., Art. 1231 of the Civil Code which enumerates the modes of extinguishing obligations.
- Again, none of the modes outlined therein is applicable in the instant case as Sec. 119 contemplates of a situation where the holder of the instrument is the creditor while its drawer is the debtor. In the present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time the jewelry was returned.
- State failed to give Notice of Dishonor to MOULIC is of no moment. The need for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable Instruments Law:
Sec. 114. When notice need not be given to drawer. — Notice of dishonor is not required to be given to the drawer in the following cases:
(a) Where the drawer and the drawee are the same person;
(b) When the drawee is a fictitious person or a person not having capacity to contract;
(c) When the drawer is the person to whom the instrument is presented for payment:
(d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument;
(e) Where the drawer had countermanded payment.
- she was responsible for the dishonor of her checks, hence, there was no need to serve her Notice of Dishonor, which is simply bringing to the knowledge of the drawer or indorser of the instrument, either verbally or by writing, the fact that a specified instrument, upon proper proceedings taken, has not been accepted or has not been paid, and that the party notified is expected to pay it
- No unjust enrichment -absence of a similar provision in Act No. 3135, as amended, it cannot be concluded that the creditor loses his right recognized by the Rules of Court to take action for the recovery of any unpaid balance on the principal obligation simply because he has chosen to extrajudicially foreclose the real estate mortgage pursuant to a Special Power of Attorney given him by the mortgagor in the contract of mortgage.