Dino v. Judal-Loot
REITERATIONFacts
The Antecedents: Sometime in December 1992, petitioner Robert Dino was approached by a syndicate offering a P3,000,000.00 loan secured by a real estate mortgage. One syndicate member, posing as Vivencia Ompok Consing, offered a Deed of Absolute Sale instead of a mortgage. Petitioner issued three Metrobank checks totaling P3,000,000.00, including a P1,000,000.00 check postdated February 13, 1993, payable to Vivencia Ompok Consing and/or Fe Lobitana. Upon discovering the properties were government properties, petitioner ordered a stop payment on his checks. However, only the P1,000,000.00 check was stopped; the others were encashed. Fe Lobitana subsequently negotiated the stopped check to respondents for P948,000.00. Respondents, after confirming with Metrobank that the check was sufficiently funded, deposited it, but it was dishonored due to the stop payment order. Procedural History: Respondents filed a collection suit against petitioner and Fe Lobitana. The Regional Trial Court ruled in favor of respondents, declaring them holders in due course and ordering petitioner and Lobitana to solidarily pay the face value of the check, plus interest, moral damages, attorney's fees, and litigation expenses. Only petitioner appealed to the Court of Appeals. The Court of Appeals affirmed the trial court's finding that respondents were holders in due course but modified the decision by deleting the awards for interest, moral damages, attorney's fees, and litigation expenses, reasoning that petitioner acted in good faith in stopping payment. Petitioner's motion for reconsideration was denied, with the Court of Appeals noting that the argument regarding the check being a crossed check was raised for the first time on appeal. The Petition: Petitioner Robert Dino filed this petition for review under Rule 45 of the Rules of Court, assailing the Court of Appeals' decision. He argues that the Court of Appeals erred in holding respondents to be holders in due course, asserting that the fact that Metrobank Check No. 142119406 is a crossed check served as a warning requiring respondents to exercise extraordinary diligence to ascertain the indorser's title. Petitioner also contends that the Court of Appeals erred in denying his motion for reconsideration, arguing that equity should have allowed the consideration of the crossed check defense to prevent manifest injustice, as he consistently maintained that respondents were not holders in due course.
Issue(s)
Whether the Court of Appeals erred in holding that the respondents were holders in due course, considering that Metrobank Check No. 142119406 is a crossed check. Whether the Court of Appeals erred in denying the petitioner's motion for reconsideration for raising arguments for the first time on appeal.
Ruling
The Supreme Court GRANTED the petition, SET ASIDE the Decision and Resolution of the Court of Appeals, and declared that respondents are not holders in due course. Consequently, petitioner is not liable to pay the face value of the check to the respondents.
Ratio Decidendi
On the issue of whether respondents were holders in due course: The Court held that respondents were not holders in due course. While petitioner did not explicitly state in his Answer that the check was crossed, he consistently argued that respondents were not holders in due course. The Court noted that the act of crossing a check serves as a warning that it was issued for a definite purpose, requiring the holder to inquire if the check was received pursuant to that purpose; otherwise, the holder is not in due course. Respondents' verification of the check's funding with Metrobank did not amount to determining the indorser's (Lobitana's) title to the check. Failing to do so constituted gross negligence amounting to legal absence of good faith. The Court applied the principles governing crossed checks, stating they may not be encashed but only deposited, negotiated only once to a person with a bank account, and warn the holder of a definite purpose. The Court cited State Investment House v. Intermediate Appellate Court to emphasize that a generally crossed check issued to a specific payee means it was intended for deposit only by the rightful person, and a different party presenting it for payment does not constitute proper presentment, thus not attaching liability to the drawer (petitioner). Since respondents were not the payee and did not perform proper presentment, no right of recourse was available to them against the drawer (petitioner). On the issue of raising new arguments on appeal: The Court ruled that it has the authority to entertain issues not raised in lower courts in the interest of substantial justice, citing Casa Filipina Realty v. Office of the President. The Court found that petitioner consistently argued that respondents were not holders in due course, which is a possible effect of a crossed check, and thus did not change his theory of the case. Furthermore, the subject check was admitted as evidence, and its nature as a crossed check was undeniable. Therefore, the Court entertained the defense of the check being crossed, as it was crucial for the equitable resolution of the parties' rights and obligations.
Main Doctrine
A holder of a generally crossed check, who fails to inquire into the title of the indorser or the nature of the possession of the check, is not a holder in due course and cannot recover from the drawer, as the check is subject to defenses as if it were non-negotiable, including absence or failure of consideration.