PROBLEM:

1.
A induced B by fraud to make a promissory note payable on
demand to the order of A in the sum of P5,000,000.00. (a) Can A file
an action successfully against the maker B for the amount of the
note? Reasons. (b) Going further, A transfers the note to C who pays
P5.000.000.00 therefor and acquires the note under circumstances
that make him (C) a holder in due course. Can C file an action
successfully against B, the maker of the note, for the amount of the
note? Explain (1978 Bar).
A:
a)
No. B may raise the defense of fraud in inducement against
A who is not a holder in due course. This is specially true in
this case where A was the one who fraudulently induced B to
issue the note.
b)
Yes. C can file an action successfully against B. C is presumed
to be a holder in due course. Hence, in the absence of proof
that he is not, he is a holder in due course who is free from
personal defenses including fraud in inducement.
13.07. FAILURE, ABSENCE OF, OR ILLICIT CONSIDER-
ATION
These are only personal defenses. However, with
respect to illegality, the exceptional case when it is a
real defense is if the statute declares the instrument
void for any purpose. Examples: (1) where the note
was given to the sister as a gift (2012 Bar); (2) the bill
of exchange drawn by the husband with the wife as
drawee payable to the husband's paramour (2009 Bar);
(3) When the drawer issued the check as payment for a
ring that she already returned or when the seller failed
to deliver the goods purchased to the drawer (1986 and
1996 Bar).
PROBLEMS:
1.
NM issued two postdated checks to CV, as security for pieces
of jewelry to be sold. Each check has a face value of P50,000.00.
Thereafter, CV negotiated the check to SIH, Inc. without the
knowledge of NM. NM returned the jewelries to CV and tried to
retrieve the checks. Having failed to do so, NM withdrew her funds
from the drawee bank and the checks were consequently dishonored
when presented for payment. SIH sued NM who interposed the
defense that the checks do not have any consideration. However,
NM did not present proof that SIH is not a holder in due course.
Will the defense of absence of consideration prosper against SIH?