Sonya is a businesswoman apparently engaged in buy and sell of U.S. Dollars. She usually transacts business with Mr. Raj, an Indian businessman. In one of their transactions, Sonya agreed to give Raj two manager’s checks of P2.087 million each both payable to the order of Art with whom Raj had an arrangement regarding the sale of dollars. Raj in turn will give Sonya a manager’s check for P4.2 million to cover the two manager’s checks given by Sonya. They agreed to split the difference of P26,000 in the exchange of Art’s dollars with pesos.
Sonya and Raj further agreed that Sonya would secure a dollar demand draft in the amount of $200,000 drawn on a local bank which Raj would exchange for another dollar draft of the same amount drawn on a Hongkong bank.
As agreed, Sonya obtained two manager’s checks of P2.087 million each from PCIB and FEBTC, as well as a FEBTC dollar draft of $200,000 drawn on Chemical Bank New York. Then she asked her business associate to deliver them to Raj. The business associate in turn asked his driver Nilo to deliver the checks and the dollar draft to Raj. Somehow, along the way Nilo said that he lost the items for delivery. He reported the loss to his boss at about 4:30 p.m. of the same day. When Sonya learned of the loss, she reported it to the police. She also requested the banks to stop payment of the instruments she believed to be lost.
It turned out however that Raj was able to get hold of the instruments and had earlier met with Art at about 3 p.m. in San Fernando, Pampanga where he delivered the two manager’s checks of P2.087 million each payable to Art in exchange for which Art gave him US $ 360,000 after due verification of the instruments with his bank. Raj then deposited the $ 360,000 in his wife and mother’s FCDU savings account. Raj also deposited the FEBTC dollar draft of $200,000 drawn on Chemical Bank in PCIB FCDU account.
While PCIB and FEBTC complied with Sonya’s stopped payment orders, the dollar draft of $200,000 was however subsequently honored upon representation of PCIB where it was deposited, to FEBTC which issued it.
About a week later Sonya filed actions against PCIB, FEBTC, Raj and Art for injunction and damages. She asked PCIB to return to her the P2.087 million with interest. She likewise asked FEBTC to return to her the other P2.087 and the value of the dollar draft for $200,000 also with interest. According to Sonya, the banks should not honor their manager’s checks payable to Art because Art is not a holder in due course. Sonya said that while Art is the payee of the manager’s checks, he did not tender valuable consideration for the checks, and he failed to inquire from Raj about how the latter acquired possession of said checks. Given such failure, it cannot be said that Art was unaware of any defect or infirmity in the title of Raj to the checks at the time of their negotiation.
Was Sonya correct?
No.
Every payee or indorsee of a bill (check) or note who is in possession of it, or the bearer thereof is presumed to be a holder in due course. Art is therefore presumed to be a holder in due course. This presumption is however rebuttable by proof that he did not take it in good faith and for value; 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 as Sonya tried to do in this case.
As to lack of consideration, the law itself again creates a presumption that Art gave valuable consideration for the checks in question. The burden is on Sonya to prove that there was none. Sonya failed to discharge this burden of proof. On the contrary Art indeed gave Raj $360,000 as consideration for said instruments.
Sonya also failed to point to any circumstance which should have put Art on inquiry as to the why and wherefore of the possession of the checks by Raj. Art was not privy to the transaction between Sonya and Raj. Instead, Raj and Art had a separate dealing in which it was precisely Raj’s duty to deliver the checks to Art as payee. Raj performed that task to the letter. And Art even took steps of asking his bank to verify the genuineness of the checks and only accepted them after being assured that there was nothing wrong with said checks. At that time, Art was not aware of any stop payment order. Under these circumstances, Art thus had no obligation to ascertain from Raj, the nature of the latter’s title or possession. Art is therefore not guilty of gross neglect amounting to legal absence of good faith.
So Sonya has no cause of action against the two banks for the return of the amounts of the two checks of P2.087 million each. Her cause of action is against Raj for reimbursements of the amount received by the latter (Yang vs. Court of Appeals et. al. G.R. 138074, August 15, 2003).
Note: the decisions here both of the lower and appellate courts are silent as to whether FEBTC and PCIB are solidarily liable to Sonya for having allowed the encashment of the dollar draft in the sum of $200,000 plus interest despite the stop-payment order of Sonya.