■ Effects of crossing a check.

■ Crossing a check relates to the mode of making payment, the drawer intending the
check to be deposited only by the rightful person, i.e., the payee named therein. In order
to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing
of a check should have the following effects:
■ (1) The check may not be encashed but only deposited in the bank;
■ (2) The check may be negotiated only once—to one who has an account with a bank;
and
■ (3) The act of crossing the check serves as warning to the holder that the check has
been issued for a definite purpose so

■ that he must inquire if he has received the check pursuant to that purpose; otherwise, he
is not a holder in due course.1 (Bataan Cigar and Cigarette Factory, Inc. vs. Court of
Appeals, 230 SCRA 643 [1994]; Bank of America, NT & SA vs. Associated Citizens
Bank, 588 SCRA 51 [2009].)
■ A holder, therefore, cannot claim it acted in good faith when it accepted and discounted
post-dated crossed checks from tha payee, when it was all too aware that the subject
checks were crossed and bore restrictions that they were for deposit to payee's account
only; hence, could not be further negotiated to it. (Hi- Cement Corp. vs. Insular Bank of
Asia and America, 534 SCRA 269 [2007].)
■ Note that the law does not absolutely bar a holder who is not a holder in due course from
recovering on the checks. The holder may recover from the party who
indorsed/encashed the checks "if the latter has no valid excuse for refusing payment."
(Ibid.)

Sec. 28. Effect of want of consideration. - Absence or

failure of consideration is a matter of defense as against
any person not a holder in due course; and partial failure
of consideration is a defense pro tanto, whether the failure
is an ascertained and liquidated amount or otherwise.
Sec. 52. What constitutes a holder in due course. - A holder in due
course is a holder who has taken the instrument under the following
conditions: chanroblesvirtuallawlibrary

(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.

However, it does not follow as a legal proposition that simply because

petitioner Atrium was not a holder in due course for having taken the
instruments in question with notice that the same was for deposit only
to the account of payee E.T. Henry that it was altogether precluded
from recovering on the instrument. The Negotiable Instruments Law
does not provide that a holder not in due course cannot recover on
the instrument. The disadvantage of Atrium in not being a holder in
due course is that the negotiable instrument is subject to defenses as
if it were non-negotiable. One such defense is absence or failure of
consideration.
This implies that the cheque is payable to the bearer and the property of
the cheque can be transferred by mere delivery. 

Payee money to be paid

Payor

Underlying meaning Lourdes is liable even if he is treasure of hi-cement is

because his act is not ultra vires

In the case at bar, Lourdes M. de Leon and Antonio de las Alas as treasurer and Chairman of
Hi-Cement were authorized to issue the checks. However, Ms. de Leon was negligent when she
signed the confirmation letter requested by Mr. Yap of Atrium and Mr. Henry of E.T. Henry for
the rediscounting of the crossed checks issued in favor of E.T. Henry. She was aware that the
checks were strictly endorsed for deposit only to the payee’s account and not to be further
negotiated. What is more, the confirmation letter contained a clause that was not true, that is,
“that the checks issued to E.T. Henry were in payment of Hydro oil bought by Hi-Cement from
E.T. Henry”. Her negligence resulted in damage to the corporation. Hence, Ms. de Leon may be
held personally liable therefor.