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  • Fossum V Hermanos-NIL Case Digest

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    Benjie Sales
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    Fossum v. Hermanos involved a promissory note where the consideration failed between the original parties. The appellant procured the overdue instrument from the bank and attempted to collect, despite being party to the original contract where consideration failed. The court ruled that while a non-holder in due course can sometimes recover under the "shelter rule" by deriving title from a holder in due course, this does not apply when the holder participated in the defect of the instrument, as the appellant did here by being party to the failed contract. Therefore, the appellant could not invoke the shelter rule to collect on the promissory note.

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    Fossum v Hermanos-NIL Case Digest

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    Fossum v. Hermanos involved a promissory note where the consideration failed between the original parties. The appellant procured the overdue instrument from the bank and attempted to collect, despite being party to the original contract where consideration failed. The court ruled that while a non-holder in due course can sometimes recover under the "shelter rule" by deriving title from a holder in due course, this does not apply when the holder participated in the defect of the instrument, as the appellant did here by being party to the failed contract. Therefore, the appellant could not invoke the shelter rule to collect on the promissory note.

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    © All Rights Reserved
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    18 views1 page

    Fossum V Hermanos-NIL Case Digest

    Uploaded by

    Benjie Sales
    Fossum v. Hermanos involved a promissory note where the consideration failed between the original parties. The appellant procured the overdue instrument from the bank and attempted to collect, despite being party to the original contract where consideration failed. The court ruled that while a non-holder in due course can sometimes recover under the "shelter rule" by deriving title from a holder in due course, this does not apply when the holder participated in the defect of the instrument, as the appellant did here by being party to the failed contract. Therefore, the appellant could not invoke the shelter rule to collect on the promissory note.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 1

    Fossum v. Hermanos [G.R. No. L-19461.

    March 28, 1923]

    FACTS

    Appellant was himself a party to the contract which supplied the consideration for the draft, albeit he
    there acted in a representative capacity. He procured the instrument to be indorsed by the bank and
    delivered to himself without the payment of value, after it was overdue, and with full notice that, as
    between the original parties, the consideration had completely failed. Petitioner invoked the “shelter
    rule”.

    ISSUE

    Whether or not petitioner may hide under the “shelter rule”.

    RULING

    NO. While it is true that a person who is not himself a holder in due course may yet recover against the
    person primarily liable where it appears that such holder derives his title through a holder in due course,
    there are exceptions. Here, the holder was party to the contract which participated to the defect of the
    instrument. Hence, shelter rule finds no application here.

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