VII. Holder in Due Course Flashcards
What constitutes a holder in due course?
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 has been 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.
What is the effect of absence of one requisite?
The 4 requisites must CONCUR. Absence of one
requisite will prevent the holder from being a holder
in due course.
What are the rights of a holder in due course?
Sec. 57. Rights of holder in due course. - A holder in due
course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.
Sec. 58. When subject to original defense. - In the hands of
any holder other than a holder in due course, a negotiable
instrument is subject to the same defenses as if it were
non-negotiable. But a holder who derives his title through a
holder in due course, and who is not himself a party to any
fraud or illegality affecting the instrument, has all the rights
of such former holder in respect of all parties prior to the
latter.
Doctrine: De Ocampo & Co. v. Gatchalian, G.R. No. L-15126, November 30, 1961
Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a “payee or indorsee of a bill or note who is inpossession of it, or the bearer thereof.”
The case against David does not prosper. While petitioners argue that David failed to acquire the instrument for value, and that he did not inquire whether the indorserer validly indorsed the instrument, the law creates the presumption that: every party to an instrument acquired the same for a consideration or for value (Sec. 24 NIL); and that absent any circumstances to alert the payee or holder of a defect, he acquired it without notice of defect.
Doctrine: Salas v. CA, G.R. No. 76788, January 22, 1990
A holder in due course holds the instrument free fromo any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof.
Doctrine: Stelco Marketing Corporation v. CA, G.R. No. 96160, June 17, 1992
Possession of negotiable instrument after does not make the possessor a holder for value within the meaning of the law. Possessor did not become “the holder of it before it was overdue, and without notice that it had been previously dishonored,” and it did not take the check “in good faith and for value.”
Doctrine: Yang v. CA, G.R. No. 138074, August 15, 2003
Rights of a holder in due course
Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a “payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.”
While it is merely a disputable presumption, anyone who challenges this presumption must show proof that the holder failed to meet the requirements under Section 52 of the Negotiable Instruments Law.
Doctrine: Patrimonio v. Gutierrez III, G.R. No. 187769, June 4, 2014
Rights of a holder not in due course
It does not follow that simply because the possessor of the instrument is not a holder in due course, he is already totally barred from recovery. The NIL does not provide that a holder who is not a holder in due course may not in any case recover on the instrument. The only disadvantage of a holder who is not in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. Among such defenses is the filling up balnk not within the authority.
Doctrine: Atrium Management Corporation v. CA, G.R. No. 109491, February 28, 2001
Rights of a holder not in due course
The disadvantage of the possessor in not being a holder in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. One such defense is absence or failure of consideration.
