BATAAN CIGAR AND CIGARETTE FACTORY, INC. v.

THE
COURT OF APPEALS. G.R. No. 93048. March 3, 1994.
FACTS:

Bataan Cigar & Cigarette Factory, Inc. (BCCFI), engaged with King Tim Pua George, to deliver
2,000 bales of tobacco leaf. BCCFI issued post dated crossed checks in exchange. Trusting King's
words, BCCFI issued another post-dated cross check for another purchase of tobacco leaves.

During these time, King was dealing with State Investment House Inc.. On two separate occasions
King sold the post-dated cross checks to SIHI, that was drawn by BCCFI in favor of King.

Because King failed to deliver the leaves, BCFI issued a stop payment to all the checks, including
those sold to SIHI.

The RTC held that SIHI had a valid claim of being a holder in due course and to collect the
checks issued by BCCFI.

ISSUE: Whether SIHI is a holder in due course.

RULING:

The SC held that SIHI is not a holder in due course thus granting the petition of BCCFI. The
purpose of cross checks is to avoid those bouncing or encashing of forged checks. Cross checks
have the following effects: it cannot be encashed but only deposited in a bank; it can only be
negotiated on its respective bank once; it serves as a warning to the hiolder that it has been issued
for a defienite purpose thus making SIHI not a holder in due course.

Still, SIHI can collect from the immediate indorser, in this case, George King.