Cely Yang v.

CA
No. 138074. 15 August 2003
Facts:
-

Cely Yang entered into an agreement with respondent Prem

Chandiramani where the latter was to give Yang a PCIB managers
check (P4.2million) in exchange of 2 Yangs managers checks (each
P2.087million), both payable to the order of respondent Fernando
David. They also agreed that Yang would secure from FEBTC a dollar
draft in $200,000, payable to PCIB FCDU which Prem would
exchange for another dollar draft in the same amount to be issued
by Hang Seng Bank Ltd. of Hong Kong.
Yang gave the checks and dollar drafts to her business associate
Albert Liong to be delivered to Chandi by Liongs messenger, Danilo
Ranigo. Now Prem did not go to the rendezvous and Ranigo
allegedly lost the 2 cashiers checks and dollar draft, thus reporting
it to Yang and the police.
It turns out that Prem already had the instruments. 2 hrs after
meeting Ranigo, Prem delivered the instruments to David. Prem got
$360,000 in return, and deposited the dollar draft drawn upon the
Chemical Bank, New York for $200,000.
Meanwhile, Yang, requested FEBTC and Equitable to stop payment
on the instruments she thought were lost. Both banks complied, but
upon representation of PCIB, FEBTC lifted the stop payment order on
a dollar draft, thus enabling the holder of such account to receive
the amount of $200,000. [They lifted it because FEBTC realized the
checks were not actually lost but reached David].
Yang filed complaint for injunction and damages against Equitable,
Prem and David for TRO. RTC: in favor of David. CA: affirmed

Issue: WON David may be considered a holder in due course

Held: Yes. Petition denied.
Ruling:
1) Every holder of a negotiable instrument is deemed prima facie a holder
in due course. However, this presumption arises only in favor of one
who is a payee/indorser of a bill or note, who is in possession of it, or
the bearer thereof. [Section 191 of NIL]. Its true that David was the
payee of the checks. The weight of authority sustains the view that a
payee may be a holder in due course, hence he is a holder.
2) [Section 52 of NIL]: What constitutes a holder in due course. A holder
in due course is a holder who has taken the instrument under the
following conditions: (1) That it is complete and regular upon its face;
(2) 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; (3)

That he took it in good faith and for value; (4) That at the time it was
negotiated to him, he had no notice of any infirmity in the instrument
or defect of the title of the person negotiating it.
- Yang contends that (3) and (4) are missing because there was
lack of proof to show that David tendered any valuable
consideration for the checks; and Davids lack of action to
inquire how Prem got the instruments show intentional
ignorance tantamount to bad faith. But Yang was wrong.
[Sec. 24 NIL]: Presumption of consideration. Every
negotiable instrument is deemed prima facie to have
been issued for valuable consideration; and every
person whose signature appears thereon to have
become a party thereto, for value. Hence, David is
presumed to have given valuable consideration for the
checks since he did not receive the checks for free,
paying Prem $360,000.
Yang also failed to show why David needed to know why
or how Prem got the checks. David was not privy to the
the transaction between Yang and Prem, since Prem and
David had a separate dealing where Prem had the duty
to deliver the checks to David. Prem performed that
task.
In other words, Yang should have filed against Prem and
not David. Lol.