Patrimonio vs. Gutierrez

Patrimonio vs. Gutierrez

(G.R. No. 187769, June 4, 2014)

Doctrines: In order however that one who is not a holder in due course can enforce the instrument against a party prior to the instrument’s completion, two requisites must exist: (1) that the blank must be filled strictly in accordance with the authority given; and (2) it must be filled up within a reasonable time. If it was proven that the instrument had not been filled up strictly in accordance with the authority given and within a reasonable time, the maker can set this up as a personal defense and avoid liability. However, if the holder is a holder in due course, there is a conclusive presumption that authority to fill it up had been given and that the same was not in excess of authority.

Facts: The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business venture under the name of Slam Dunk Corporation (Slum Dunk), a production outfit that produced mini-concerts and shows related to basketball. In the course of their business, the petitioner pre-signed several checks to answer for the expenses of Slam Dunk; however, these checks had no payee’s name, date or amount. The blank checks were entrusted to Gutierrez with the specific instruction not to fill them out without previous notification to and approval by the petitioner. Without the petitioner’s knowledge and consent, Gutierrez went to Marasigan to secure a loan in the amount of ₱200,000.00 and  Gutierrez simultaneously delivered to Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank in the amount of "₱200,000.00. When Marasigan deposited the check, it was dishonored for the reason "ACCOUNT CLOSED" and so Marasigan sought recovery from Gutierrez and petitioner asking for the payment of ₱200,000.00.

Issue: Whether or not Marasigan is a holder in due course thus may hold petitioner liable.

Held: No, Marasigan is not a holder in due course. Section 52(c) & (d) of the NIL states that a holder in due course is one who takes the instrument “in good faith and for value" and that it 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. In the present case, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the authority when he used the check to pay the loan he supposedly contracted for the construction of petitioner's house. 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. Considering that Marasigan is not a holder in due course, the petitioner can validly set up the personal defense that the blanks were not filled up in accordance with the authority he gave; hence, Marasigan has no right to enforce payment against the petitioner and the latter cannot be obliged to pay the face value of the check.