Is a corporation to which four crossed checks were indorsed by the payee corporation a holder in due course and hence entitled to recover the amount of the checks when the same had been dishonored for the reason of “payment stopped”?


The checks were crossed checks and specifically indorsed for deposit to payee’s account only. From the beginning, the corporation was aware of the fact that the checks were all for deposit only to payee’s account. Clearly then, it could not be considered a holder in due course. However, it does not follow as a legal proposition that simply because it was not a holder in due course for having taken the instruments in question, with notice that the same was for deposit only, that it was altogether precluded from recovering on the instrument. The disadvantage in not being a holder in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. (Atrium Management Corp. v. CA, G.R. No. 109491, Feb. 28, 2001)