STATE INVESTMENT HOUSE V. CA
217 SCRA 32
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
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.