Case Name Topic Facts Ruling

1. PATRIMONIO vs. Contract, Elements  Petitioner and respondent Gutierrez W/N the petitioner authorized the borrowing
GUTIERREZ entered into a business venture  The contract of loan entered into by Gutierrez in behalf of the petitioner
GR 187769 together. should nullified for being void. Hence, he is not bound by the contract
2014 of loan.
Incomplete but  Patrimonio issued pre-signed  The essential requisites of a valid contract:
delivered instrument checks and entrusted them to 1. Consent of the contracting parties
Gutierrez. Although signed, the 2. Object certain which is the subject matter of the contract; and
checks has no payee’s name, date 3. Cause of the obligation which is established
Holder in Due Course or amount.  In this case, consent is lacking since Gutierrez did not have the
petitioner’s written or verbal consent to enter into a contract of loan.
 Patrimonio had specific instruction
not to fill them out without previous
notification to and approval by him. W/N Gutierrez completely filled out the subject check strictly under the
petitioner’s authority
 Subsequently, without Ptrimonio’s  Sec. 14. Blanks; when may be filled. - Where the instrument is
knowledge and consent, Gutierrez wanting in any material particular, the person in possession
went to Marasigan to secure a loan thereof has a prima facie authority to complete it by filling up the blanks
in the amount of P200,000 on the therein. And a signature on a blank paper delivered by the
excuse that Patrimonio needed the person making the signature in order that the paper may be
money for the construction of his converted into a negotiable instrument operates as a prima facie
house. Marasigan then acceded to authority to fill it up as such for any amount. In order, however,
Gutierrez’s request and gave him that any such instrument when completed may be enforced against any
the money. person who became a party thereto prior to its completion, it must be
filled up strictly in accordance with the authority given and
 Gutierrez simultaneously delivered within a reasonable time. But if any such instrument, after
to Marasigan one of the blank completion, is negotiated to a holder in due course, it is valid and
checks issued by Patrimonio with effectual for all purposes in his hands, and he may enforce it as if it
the blank portions filled out as had been filled up strictly in accordance with the authority given
“cash” and “Two Hundred Thousand and within a reasonable time.
Pesos Only” and the amount of  The above provision applies to an incomplete but delivered instrument.
P200,000.  The Court held that the check was not completed strictly under the
authority given by the petitioner.
 Marasigan then deposited the  Notably, Gutierrez was only authorized to use the check for business
checks but was dishonored. He expenses; thus, he exceeded the authority when he used the check to
sought for Gutierrez but to no avail. pay the loan he supposedly contracted for the construction of
He then sent demand letters to petitioner’s house. This is a clear violation of the petitioner’s instruction
petitioner. to use the checks for the expenses of their business venture (Slam
Dunk). It cannot therefore be validly concluded that the check was
 The petitioner then filed before the completely strictly in accordance with the authority given by the
RTC a complaint for the declaration petitioner.
of the nullity of the loan.
  Considering that Marasigan is not a holder in due course, the petitioner
 Ruling of the RTC: The RTC ruled in can validly set up the personal defense that the blanks were not filled
favor of Marasigan. It found that up in accordance with the authority he gave. Consequently, Marasigan
the petitioner, in issuing the pre- has no right to enforce payment against the petitioner and the latter
signed blank checks, had the cannot be obliged to pay the face value of the check.
intention of issuing a negotiable
instrument even with specific W/N Marasigan is a holder in due course
instructions to Gutierrez not to  Marsigan is not a holder in due course.
negotiate without his approval.  Sec. 52 — A holder in due course is a holder who has taken the
Moreover, the RTC declared instrument under the following conditions:
Marasigan as holder in due course. (a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without
 The petitioner then elevated the notice that it had been previously dishonored, if such was the fact;
case to the CA contending that (c) That he took it in good faith and for value;
Marasigan is not a holder in due (d) That at the time it was negotiated to him he had no notice of any
course. infirmity in the instrument or defect in the title of the person negotiating
it.(emphasis supplied)
 Ruling of the CA: The CA affirmed Section 52(c) of the NIL states that a holder in due course is one who
the RTC ruling, although on takes the instrument "in good faith and for value." It also provides in
different factual findings. Hence, Section 52(d) that in order that one may be a holder in due course, it
the case. 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.
 It is sufficient that the buyer of a note had notice or knowledge that the
note was in some way tainted with fraud. It is not necessary that he
should know the particulars or even the nature of the fraud, since all
that is required is knowledge of such facts that his action in taking the
note amounted bad faith.
 In the present case, Marasigan’s knowledge that the petitioner 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.

2. AGLIBOT vs. SANTIA Accommodation  Santia loaned the amount of Whether Aglibot is liable to Santia as a mere guarantor?
GR 185945 party. P2,500,000.00 to PLCC, through its
2012 Manager, Aglibot. No. She is what the NIL calls an accommodation party. The relation
 The loan was evidenced by a between an accommodation party and the party accommodated is, in
Promissory Note issued by Aglibot in effect, one of principal and surety—The accommodation party being the
behalf of PLCC, payable in 1 year surety. It is a settled rule that a surety is bound equally and absolutely with
subject to interest at 24% per the principal and is deemed an original promisor and debtor from the
annum. beginning. The liability is immediate and direct. Moreover in PBC v Aruego,
 As guarantee or security for the that unlike in a contract of suretyship, the liability of the accommodation
payment of note, Aglibot issued and party remains not only primary but also unconditional to a holder for value.
 delivered 11 post-dated personal The mere fact that Aglibot issued her own checks to Santia made her
checks drawn from her own demand personally liable to the latter on her checks without the need for Santia to
account in Metrobank. first go after PLCC for the payment of its loan.
 Checks were dishonored by the
bank for having been drawn against NIL Sec 29
insufficient funds or closed account. Liability of an accommodation party-
 Santia demanded payment but An accommodation party is one who has signed the instrument as maker,
neither Aglibot and PLCC heeded his drawer, acceptor, or indorser, without receiving value therefor, and for the
demand purpose of lending his name to some other person. Such a person is liable
 11 informations for violation of BP on the instrument to a holder for value notwithstanding such holder at the
Blg. 22 were filed against Aglibot. time of taking the instrument knew him to be only an accommodation
 Aglibot claimed that she issued her party.
own 11 post-dated checks to Santia
in behalf of her employer, PLCC, the
true borrower and beneficiary of the
loan.
 Her liability should only be as a
mere guarantor and as such could
not be compelled to pay Santia
unless the latter has exhausted all
the property of PLCC

3. DINO vs. LOOT Holder in Due Course Sometime in December 1992, a Whether or not the spouses Loot where holders in due course.
GR 170912 member of a syndicate approached
2010
Dino and induced him to lend the NO, respondents where NOT holders in due course. The act of crossing a
group 3M pesos to be secured by a real check serves as a warning to the holder that the check has been issued for a
estate mortgage on the properties of definite purpose so that the holder thereof must inquire if he has received
the said member. Petitioner issued the check pursuant to that purpose; otherwise, he is not a holder in due
three Metrobank checks totaling course.
P3,000,000.00, one of which is Check Section 52 of the Negotiable Instruments Law defines a holder in due course,
No. C-MA-142119406-CA postdated 13 thus:
February 1993 in the amount of A holder in due course is a holder who has taken the instrument under the
P1,000,000.00 payable to Vivencia following conditions:
Ompok Consing and/or Fe Lobitana. (a) That it is complete and regular upon its face;
Petitioner discovered that the (b) That he became the holder of it before it was overdue, and without
documents covered rights over notice that it has been previously dishonored, if such was the fact;
government properties. Realizing he (c) That he took it in good faith and for value;
had been deceived, petitioner advised
 Metrobank to stop payment of his (d) That at the time it was negotiated to him, he had no notice of any
checks. However, only one check was infirmity in the instrument or defect in the title of the person negotiating it.
stopped. Meanwhile, Lobitana In the case of a crossed check, as in this case, the following principles must
negotiated and indorsed Check No. C- additionally be considered: A crossed check (a) may not be encashed but
MA- 142119406-CA to respondents in only deposited in the bank; (b) may be negotiated only once to one who has
exchange for cash in the sum of an account with a bank; and (c) warns the holder that it has been issued for
P948,000.00, which respondents a definite purpose so that the holder thereof must inquire if he has received
borrowed from Metrobank and the check pursuant to that purpose; otherwise, he is not a holder in due
charged against their credit line.When course.
respondents where to deposit the Based on the foregoing, respondents had the duty to ascertain the indorsers,
check, it was dishonored due to the in this case Lobitanas, title to the check or the nature of her possession. This
reason of payment stopped. respondents failed to do. Respondents verification from Metrobank on the
Respondents filed a collection of suit funding of the check does not amount to determination of Lobitanas title to
against Dino and Lobitana. the check. Failing in this respect, respondents are guilty of gross negligence
Respondents alleged, among other amounting to legal absence of good faith, contrary to Section 52(c) of the
things, that they are holders in due Negotiable Instruments Law. Hence, respondents are not deemed holders in
course. due course of the subject check
The trial court ruled in favor of Petitioner cannot be obliged to pay the face value of the check. Respondents
respondents and declared them due can collect from the immediate indorser, Lobitana.
course holders of the subject check
Only petitioner filed an appeal.
The Court of Appeals modified the trial
courts decision. The Court of Appeals
ruled that petitioner acted in good
faith in ordering the stoppage of
payment of the subject check and thus,
he must not be made liable for those
amounts. The Court of Appeals noted
that petitioner raised the defense that
the check is a crossed check for the first
time on appeal.

4. VIOLAGO vs. BA Holder in Due Course 1983: Avelino Violago, President of Whether or not BA FINANCE is a holder in due course.
FINANCE Violago Motor Sales Corporation
GR 158262
2008 (VMSC), offered to sell a Toyota BA FINANCE is a holder in due course.
Cressida Model 1983 to increase the Section 52. What constitutes a holder in due course.––A holder in due course
sales quota to his cousin, Pedro F. is a holder who has taken the instrument under the following conditions:
Violago and his wife, Florencia.
Spouses would just have to pay a down (a) That it is complete and regular upon its face;
payment of PhP 60.5K while the (b) That he became the holder of it before it was overdue, and without
balance would be financed by BA notice that it had been previously dishonored, if such was the fact;
Finance. The spouses would pay the (c) That he took it in good faith and for value;
monthly installments to BA Finance (d) That at the time it was negotiated to him he had no notice of any
while Avelino would take care of the infirmity in the instrument or defect in the title of the person negotiating it.
documentation and approval of
financing of the car. (a) the “Promissory Note”, Exhibit “A”, is complete and regular; (b) the
August 4, 1983: the spouses and “Promissory Note” was endorsed by the VMSC in favor of the Appellee; (c)
Avelino signed a promissory note the Appellee, when it accepted the Note, acted in good faith and for value;
under which they bound themselves to (d) the Appellee was never informed, before and at the time the “Promissory
pay jointly and severally to the order of Note” was endorsed to the Appellee, that the vehicle sold to the
VMSC the amount of PhP 209,601 in 36 Defendants-Appellants was not delivered to the latter and that VMSC had
monthly installments of PhP 5,822.25 a already previously sold the vehicle to Esmeraldo Violago. Although Jose
month, the first installment to be due Olvido mortgaged the vehicle to Generoso Lopez, who assigned his rights to
and payable on September 16, 1983. the BA Finance Corporation (Cebu Branch), the same occurred only on May
Avelino prepared a Disclosure 8, 1987, much later than August 4, 1983, when VMSC assigned its rights over
Statement of Loan/Credit the “Chattel Mortgage” by the Defendants-Appellants to the Appellee.
Transportation which showed the net Hence, Appellee was a holder in due course.
purchase price of the vehicle, down Since BA Finance is a holder in due course, petitioners cannot raise the
payment, balance, and finance defense of non-delivery of the object and nullity of the sale against the
charges. VMSC then issued a sales corporation.
invoice in favor of the spouses with a The NIL considers every negotiable instrument prima facie to have been
detailed description of the Toyota issued for a valuable consideration. In Salas, we held that a party holding an
Cressida car. In turn, the spouses instrument may enforce payment of the instrument for the full amount
executed a chattel mortgage over the thereof. As such, the maker cannot set up the defense of nullity of the
car in favor of VMSC as security for the contract of sale. Thus, petitioners are liable to respondent corporation for
amount of PhP 209,601. the payment of the amount stated in the instrument.
VMSC, through Avelino, endorsed the
promissory note to BA Finance without
recourse. After receiving the amount VMSC is a family-owned corporation of which Avelino was president.
of PhP 209,601, Avelino committed fraud in selling the vehicle to petitioners, a vehicle that
VMSC executed a Deed of Assignment was previously sold to Avelino’s other cousin, Esmeraldo
of its rights and interests under the Avelino clearly defrauded petitioners. His actions were the proximate cause
promissory note and chattel mortgage of petitioners’ loss. He cannot now hide behind the separate corporate
in favor of BA Finance. Meanwhile, the personality of VMSC to escape from liability for the amount adjudged by the
spouses remitted the amount of PhP trial court in favor of petitioners.
60,500 to VMSC through Avelino Obligation was incurred in the name of the corporation, the petitioner would
spouses were unaware that the same still be personally liable therefor because for all legal intents and purposes,
car had already been sold in 1982 to he and the corporation are one and the same.
Esmeraldo Violago, another cousin of
Avelino
Since VMSC failed to deliver the car,
Pedro did not pay any monthly
amortization to BA Finance.
March 1, 1984: BA Finance filed with
the RTC a complaint for Replevin with
Damages against the spouses
RTC: favored BA finance , however,
declared that they are entitled to be
indemnified by Avelino
CA: affirmed - promissory note was a
negotiable instrument and that BA
Finance was a holder in due course