FACTS:

Moulic issued checks as security to Victoriano, for pieces of jewelry to be sold  on  commission.    Moulic  failed  to  sell  the  pieces  of  jewelry,  so  she returned them to Victoriano.  The checks however could not be recovered by  Moulic  as  these  have  been  discounted  already  in  favor  of  petitioner.  Consequently, before the maturity dates,  Moulic withdrew  her funds from her account.  Thereafter, petitioner presented the checks for payment but these were dishonored.  This prompted the petitioner to initiate an action
against Moulic.  
 

HELD:

A prima facie presumption exists that a holder of a negotiable instrument is a holder in due course.  The burden of proving that State is not a holder in due course is upon Moulic.  In this regard, she failed to do so.
 
The  evidence  shows  that  the  dated  checks  were  complete  and  regular; petitioner bought the checks from Victoriano before their due dates; it took the checks in good faith and for value; and it was never informed nor made aware that these checks were merely issued to payee as security.
 
Consequently,  State  is  a  holder  in  due  course.    Moulic  cannot  set  up  the defense that there was failure or want of consideration.  It can only invoke the defense if State was a privy to the purpose for which they were issued and therefore is not a holder in due course.  
 
Furthermore, the mere fact that the checks were issued as security is not sufficient  ground  to  discharge  the  instrument  as  against  a  holder  in  due course.  
 
And  also,  Moulic  was  responsible  for  the  dishonor  of  her  checks.    She withdrew  her  funds  from  her  account  and  could  not  have  expected  her checks to be honored by then.