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Name of Student: Yasie T.


Subject: Negotiable Instruments

Topic: Holders



Yang and Chandimari entered into an agreement that the latter would issue to the former a manager’s
check in exchange for two checks that Yang has payable to the order of David. The difference in amount
would be the profit of the two of them. It was further agreed upon that Yang would secure a dollar
draft, which Chandimari would exchange with another dollar draft to be secured from a Hong Kong bank.
At the agreed time of rendezvous, it was reported by Yang’s messenger that Chandimari didn't
show up and the drafts and checks were allegedly stolen. This wasn't true however. Chandimari was able
to get hold of the drafts and checks. He was even able to deliver to David the two checks and was
able to get money in return. Consequently, Yang asked for the stoppage of payment of the checks she
believe to be lost, relying on the report of her messenger. The stoppage order was eventually lifted
by the banks and the drafts and checks were able to be encashed. Yang then filed an action for injunction
and damages against the banks, Chandimari and David. The trial court and CA held in favor of David as a
holder in due course.


WON David is a holder in due course?


Every holder of a negotiable instrument is presumed to be a holder in due course. This is especially true
if one is a holder because he is the payee or indorsee of the instrument.

In the case at bar, it is evident that David was the payee of the checks. The prima facie presumption of
him being a holder in due course is in his favor. Nonetheless, this presumption is disputable. On whether
he took the check under the conditions set forth in Section 52 must be proven. Petitioner relies on two
arguments on why David isn’t a holder in due course—first, because he took the checks without
valuable consideration; and second, he failed to inquire on Chandimari’s title to the checks given to

The law gives rise to the presumption of valuable consideration. Petitioner has the burden of debunking
such presumption, which it failed to do so. Her allegation that David received the checks without
consideration is unsupported and devoid of any evidence.

Furthermore, petitioner wasn't able to show any circumstance which should have placed David in inquiry
as to why and wherefore of the possession of the checks by Chandimari. David wasn't a privy to the
transactions between Yang and Chandimari. Instead, Chandimari and David had the agreement between
themselves of the delivery of the checks. David even inquired with the banks on the genuineness of the
checks in issue. At that time, he wasn't aware of any request for the stoppage of payment. Under these
circumstances, David had no obligation to ascertain from Chandimari what the nature of the latter’s title
to the checks was, if any, or the nature of his possession.