Bataan Cigar v.

CA

Facts
Bataan Cigar & Cigarette Factory Inc. (BCCFI) engaged one of its suppliers George King to
deliver 2000 bales of tobacco leaves and subsequently, an additional 2500 bales.

BCCFI issued two crossed post dated checks with the total amount of Php 820,000 and Php 1.1
M.

George King negotiated under a discounting agreements the checks given by BCCFI to private
respondent SIHI.

For failure to deliver the bales, BCCFI issued a stop payment order issued to George King.

After the checks were dishonored, SIHi tried to collect from BCCFI and instituted a suit against
the latter.

RTC ruled in favor of SIHI ruling that it has a valid claim and that it was a holder in due course.
CA affirmed the RTC's decision

Issue: Whether SIHI, as holder of crossed check, is a holder in due course?

Held: No. Petition approved. CA decision reversed.

Reason:

The crossing of the check should put the holder in inquiry to determine the validity of indorser's
title.

A check is crossed specially when the name of a particular banker or a company is written
between the parallel
lines drawn. It is crossed generally when only the wordsand company are written or nothing is
written at all between the parallel lines. It may be issued so that presentment can be made only
by a bank.

In the present case, BCCFIs defense in stopping payment is as good to SIHI as it is to George
King. Because, really, the checks were issued with the intention
that George King would supply BCCFI with the bales of tobacco leaf. There being failure of
consideration, SIHI is
not a holder in due course. Consequently, BCCFI cannot be obliged to pay the checks.