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taken the instrument complete and regular on its face, he took it

before it was overdue and it was not previously dishonored; he


took it in good faith and for value and he had no notice of any
infirmity in the instrument or a defect of the title of a prior party.
Rolando, intending to buy a car, saw an old friend, Roger, who is an
agent to sell the car belonging to Delgado Clinic. After negotiation,
Rolando decided to buy said car. He drew upon request of Roger, a
crossed check for P600.00, payable to Delgado Clinic as evidence of
his good faith, but which was merely meant to be shown to Delgado
Clinic by Roger who received said check. The check would then be
returned when Roger brings the car and its registration certificate
for Rolando's inspection. For failure of Roger to bring the car and its
certificate of registration, and to return the check, Rolando issued
a "stop payment order" to the drawee bank. In the meantime,
Roger paid the check to the Delgado Clinic for the hospital bill of
his wife and was given P158.25 as change. May Delgado Clinic
be considered a holder in due course, hence entitled to recover?
Decide with reasons.
Delgado Clinic may not be considered a holder in due course,
hence not entitled to recover. Although Delgado Clinic was not in
fact aware of the circumstances with respect to the delivery of the
check to Roger, there are circumstances that should have put him
on inquiry. Thus, it should have noted that Rolando had no relation
with it; that the amount of the check did not correspond exactly
with the obligation of Roger to the clinic; and that the check is a
crossed check, which means that the check could only be deposited
but may not be converted into cash, and should have put the clinic
to inquiry as to the possession of the check by Roger, and why he
used it to pay his accounts (1962 and 1977 Bar).
Po Press issued in favor of Jose a postdated crossed check, in pay-
ment of newsprint which Jose promised to deliver. Jose sold and
negotiated the check to Excel Inc. at a discount. Excel did not ask
Jose the purpose of crossing the check. Since Jose failed to deliver
the newsprint, Po ordered the drawee bank to stop payment on
the check. Efforts of Excel to collect from Po failed. Excel wants
to know from you as counsel: 1) Is Excel a holder in due course?
defense?
2) Can Po Press raise absence or failure of consideration as a
1)
Excel is not a holder in due course. The instrument involved
is a crossed check and was supposed to be deposited
only. Excel is therefore obligated to inquire regarding the
circumstances involving the issuance of the check. Failure on
his part, as in this case, will prevent him from becoming &
faith.
holder in due course; such failure or refusal

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