ALVIN PATRIMONIO

vs
NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III
G.R. No. 187769, June 4, 2014

Patrimonio and Gutierrez entered into a business venture under the name of Slam Dunk
Corporation, a production outfit that produced mini-concerts and shows related to basketball. In
the course of their business, Patrimonio pre-signed several checks to answer for the expenses
of the Corporation. However, the checks are blank and has 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 Patrimonio.

Thereafter, without the knowledge and consent of Patrimonio, Gutierrez went to Marasigan to
secure a loan in the amount of ₱200,000.00 on the pretext that Patrimonio needed the money
for the construction of his house. Marasigan acceded to Gutierrez’ request and gave him
₱200,000.00. In return, Gutierrez simultaneously delivered to Marasigan one of the pre-signed
checks, with the blank portions filled out with the words "Cash" "Two Hundred Thousand Pesos
Only", the amount of "₱200,000.00", and the date of "May 23, 1994". When Marasigan
deposited the check, it was dishonored for the reason "ACCOUNT CLOSED." Marasigan then
sought recovery from Gutierrez and Patrimonio asking for the payment of ₱200,000.00.
Patrimonio then argued that he should not be liable therefor because the check was not
completely and strictly filled out in accordance with his authority and that Marasigan is not a
holder in due course and thus not entitled to claim the check’s value.
a. Is Marasigan a holder in due course?
b. May Patrimonio validly set up the defense of the check was not completely and
strictly filled out in accordance with his authority?

ANSWERS:
A. No, Marasigan is not a holder in due course.

According to Section 52 of the Negotiable Instruments Law, A holder in due course is

a holder who has taken the instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it
has been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) 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 case at bar, the requirements that a holder in due course should have took the
instrument in good faith and 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 are lacking. Gutierrez has no special authority to act in behalf of Patrimonio and it
is Gutierrez who contracted the loan with Marasigan. Hence, Marasigan’s knowledge
that Patrimonio is not a party or a privy to the contract of loan, and correspondingly
had no obligation or liability to him, renders him dishonest and in bad faith.
 Therefore, Marasigan failed to comply with all of the requirements to be a holder in
due course and thus, he cannot be considered as a holder in due course.

B. Yes, Patrimonio can validly set up the defense that the check was not completely
and strictly filled out in accordance with his authority.
According to Section 14 of the Negotiable Instruments Law, where the instrument is
wanting in any material particular, the person in possession thereof has a prima facie
authority to complete it by filling up the blanks therein. And a signature on a blank
paper delivered by the person making the signature in order that the paper may be
converted into a negotiable instrument operates as a prima facie authority to fill it up
as such for any amount. In order, however, that any such instrument when
completed may be enforced against any person who became a party thereto prior to
its completion, it must be filled up strictly in accordance with the authority given and
within a reasonable time. But if any such instrument, after completion, is negotiated
to a holder in due course, it is valid and effectual for all purposes in his hands, and
he may enforce it as if it had been filled up strictly in accordance with the authority
given and within a reasonable time.
In the case at bar, Patrimonio gave Gutierrez pre-signed checks to be used in their
business provided that he could only use them upon his approval. His instruction is
clear that Gutierrez’ authority is limited only to the use of the checks for the operation
of their business, and on the condition that Patrimonio’s prior approval be first
secured. Thus, when Gutierrez used the check to pay the loan not related to the
operation of their business, he exceeded the authority given to him by Patrimonio. As
Marasigan is not a holder in due course, and as it was proven that the instrument
had not been filled up strictly in accordance with the authority given and within a
reasonable time, Patrimonio can set this up as a personal defense and avoid liability.
Therefore, Patrimonio can validly set up the personal defense that the blanks were
not filled up in accordance with the authority he gave.