GR 170912; (April, 2010) (Digest)
G.R. No. 170912; April 19, 2010
ROBERT DINO, Petitioner, vs. MARIA LUISA JUDAL-LOOT, joined by her husband VICENTE LOOT, Respondents.
FACTS
Petitioner Robert Dino was induced by a syndicate to issue three checks totaling ₱3,000,000.00 for a loan secured by a supposed real estate mortgage. One check, payable to “Vivencia Ompok Consing and/or Fe Lobitana,” was postdated. Upon discovering the mortgage documents pertained to government land and the transaction was fraudulent, Dino instructed Metrobank to stop payment. Payment was stopped only on this specific check. Meanwhile, payee Fe Lobitana negotiated and endorsed the check to respondents Maria Luisa Judal-Loot and Vicente Loot in exchange for ₱948,000.00. Before accepting it, respondents verified with Metrobank that the check was sufficiently funded. Upon presentment, however, the check was dishonored with the notation “PAYMENT STOPPED.”
ISSUE
Whether the respondents are holders in due course of the check, thereby precluding the petitioner from raising the defense of absence of consideration against them.
RULING
No. The Supreme Court reversed the Court of Appeals and held that respondents were not holders in due course. A holder in due course is one who takes the instrument under specific conditions, including that it is complete and regular upon its face, and that they have no notice of any infirmity in the instrument or defect in the title of the person negotiating it. The Court found the check was not “complete and regular” because it was crossed with the notation “C-A,” indicating it was for clearing or account purposes only. This crossing imposed a limitation that the check could only be deposited to the account of the payee. By accepting a crossed check endorsed to them by a third party (Lobitana), respondents were deemed to have taken the instrument with notice of a potential defect or infirmity. Consequently, they did not acquire the status of holders in due course.
As respondents are not holders in due course, the petitioner is not precluded from raising personal defenses against them, such as the total absence of consideration. The Court found that the check was issued based on a fraudulent loan transaction with a syndicate; thus, there was indeed a failure or absence of consideration for its issuance. Therefore, petitioner Dino cannot be held liable to respondents on the check. The respondents’ recourse is against the immediate indorser, Fe Lobitana, against whom the trial court’s judgment for solidary liability had already become final and executory.