Facts:
On September 5, 1980, State Investment House (petitioner) sought review of the decision of the Intermediate Appellate Court, now the Court of Appeals, in AC-G.R. CV No. 04523, which reversed the April 30, 1984 judgment of the Regional Trial Court of Manila, Branch XXXVII in Civil Case No. 82-10547 that had ordered spouses Anita Pena Chua and Harris Chua (private respondents) to pay petitioner the amounts corresponding to three dishonored postdated crossed checks, plus interest, attorney’s fees, and costs. The case arose from a loan transaction involving New Sikatuna Wood Industries, Inc., which shortly before September 5, 1980 requested a loan from Harris Chua. Harris Chua agreed to grant the loan subject to the condition that New Sikatuna Wood Industries, Inc. would wait until December 1980 when he would have the money. In connection with that arrangement, Anita Pena Chua issued three crossed checks payable to New Sikatuna Wood Industries, Inc., all postdated to December 22, 1980, with a total value of P299,450.00, and the checks were later dishonored upon deposit by petitioner for reasons of “insufficient funds,” “stop payment,” and “account closed,” respectively. Petitioner alleged that, despite demands on private respondent Anita Pena Chua to make good the checks, she failed to pay, prompting petitioner to file the collection suit against both Anita Pena Chua and her husband. Private respondents filed a third-party complaint against New Sikatuna Wood Industries, Inc. for reimbursement and indemnification in case they were held liable, but the third-party defendant was declared in default for failure to answer after due service of summons. The Regional Trial Court rendered judgment on April 30, 1984 ordering private respondents to pay jointly and severally petitioner P229,450.00 with 12% interest per annum from February 24, 1981 until fully paid, P29,945.00 as attorney’s fees, and the costs of suit, and further ordered New Sikatuna Wood Industries, Inc. to reimburse private respondents for any amounts they might pay to petitioner. On appeal, however, the Intermediate Appellate Court reversed and dismissed petitioner’s complaint, holding that petitioner was not a holder in due course and, consequently, was subject to personal defenses.
Issues:
Whether petitioner, which acquired and discounted the dishonored postdated crossed checks, was a
holder in due course entitled to enforce the checks against private respondents despite the checks’ dishonor.
Ruling:
Ratio:
Doctrine: