1.ALVIN PATRIMONIO, petitioner, vs.

NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III,

respondents.
PONENTE: BRION, J.: June 4, 2014
TRIGGER: Patrimonio pinahawak yung blank checks kay Gutierrez, now si G inutangan si Marasigan
ng 200k gamit yung cheke ni Patrimonio na di nya consented & closed account na pala since may 1993.

DOCTRINE: Incomplete But Delivered Instruments; In order that one who is not a holder in due course
can enforce the instrument against a party prior to the instrument’s completion, two requisites must
exist: (1) that the blank must be filled strictly in accordance with the authority given; and (2) it must be
filled up within a reasonable time.—This provision applies to an incomplete but delivered instrument.

ISSUE:
1. Whether Marasigan is a holder in due course. NO.
2. Whether the petitioner can be made liable under the check he signed. NO.

FACTS: RULING:

● Patrimonio and Gutierrez entered into ● Sec. 14. Blanks; when may be filled.—Where

a business venture under the name of
Slum Dunk Corporation. During the
course of their business, Patrimonio pre-
signed several checks, which were
entrusted to Gutierrez, for the expenses
of Slam Dunk.
● Petitioner had specific instruction that
the respondent does not fill it out without
the former's prior approval.
● In the middle of 1993, Gutierrez went to
Marasigan (co-respondent), without
consent of the petitioner, to obtain a loan
of P200,000 with a promise of interest
rate of 5% per month from March to May
1994.
● Sometime in February 1994, Gutierrez
sent to Marasigan pre-signed checks
of Patrimonio. It was then filled out with
an amount of P200,000 and date of "May ●
23, 1994 but the petitioner said such was
not written by Gutierrez.
● When Marasigan tried to encash it, it
was dishonored for the reason of
"ACCOUNT CLOSED." It was found
that it had been closed since May 28,
1993.
● Consequently, he repeatedly demanded
Patrimonio for payment but to no avail.
Hence, Marasigan filed a complaint
against the petitioner for violation of BP ●
22.
the instrument is wanting in any material particular,
the person in possession thereof has a prima facie
authority to complete it by filling up the blanks
therein. And a signature on a blank paper delivered
by the person making the signature in order that the
paper may be converted into a negotiable
instrument operates as a prima facie authority to fill
it up as such for any amount. In order, however, that
any such instrument when completed may be
enforced against any person who became a party
thereto prior to its completion, it must be filled up
strictly in accordance with the authority given and
within a reasonable time. But if any such instrument,
after completion, is negotiated to a holder in due
course, it is valid and effectual for all purposes in his
hands, and he may enforce it as if it had been filled
up strictly in accordance with the authority given and
within a reasonable time.
This provision applies to an incomplete but
delivered instrument. Under this rule, if the maker
or drawer delivers a pre-signed blank paper to
another person for the purpose of converting it into
a negotiable instrument, that person is deemed to
have prima facie authority to fill it up. It merely
requires that the instrument be in the possession of
a person other than the drawer or maker and from
such possession, together with the fact that the
instrument is wanting in a material particular, the
law presumes agency to fill up the blanks.
In order however that one who is not a holder in due
course can enforce the instrument against a party
● Patrimonio filed for Nullity of Loan
arguing he was not privy of the
transaction between Marasigan and
Gutierrez.
● RTC: ruled in favor of Marasigan. It
found that the petitioner, in issuing the
pre-signed blank checks, had the
intention of issuing a negotiable
instrument, albeit with specific
instructions to Gutierrez not to negotiate
or issue the check without his approval.
While under Section 14 of the Nego Law,
Gutierrez had the prima facie authority to
complete the checks by filling up the
blanks therein, the RTC ruled that he
deliberately violated petitioner’s specific
instructions and took advantage of the
trust reposed in him by the latter.
● RTC declared Marasigan as a holder
in due course and accordingly
dismissed the petitioner’s complaint for
declaration of nullity of the loan.
● Petitioner(Patri) Argue to CA: insisting
that Marasigan is not a holder in due
course. He contended that when
Marasigan received the check, he knew
that the same was without a date, and
hence, incomplete. He also alleged that
the loan was actually between
Marasigan and Gutierrez with his check
being used only as a security.
● CA: affirmed the RTC ruling, although
premised on different factual findings.
CA agreed with the petitioner that
Marasigan is not a holder in due course
as he did not receive the check in good
faith.
● The Petition argues that: (1) there was
no loan between him and Marasigan
since he never authorized the borrowing
of money nor the check’s negotiation to
the latter; (4) the check had not been
completely and strictly filled out in
accordance with his authority since the
condition that the subject check can only
be used provided there is prior approval
from him, was not complied with;
prior to the instrument’s completion, two requisites
must exist:
a. that the blank must be filled strictly in
accordance with the authority given; and
b. it must be filled up within a reasonable time. If it
was proven that the instrument had not been
filled up strictly in accordance with the authority
given and within a reasonable time, the maker
can set this up as a personal defense and avoid
liability.
● However, if the holder is a holder in due course,
there is a conclusive presumption that authority to
fill it up had been given and that the same was not
in excess of authority.
● In the present case, the petitioner contends that
there is no legal basis to hold him liable both under
the contract and loan and under the check because:
first, the subject check was not completely filled out
strictly under the authority he has given and second,
Marasigan was not a holder in due course.
● Section 52 provides that a person is only a
holder in due course if: a) the instrument is
complete and regular on its face, b) he became the
holder of it before it's due, and without notice that it
had been previously dishonored, c) that he took it in
good faith and for value, and d) that at the time it
was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the
person negotiating it.
● In this case, Marasigan was not in good faith
since he had knowledge that the petitioner is not a
party or a privy to the contract of loan, and
correspondingly had no obligation or liability to him,
renders him dishonest. It was heard in trial that
Marasigan said he knew Alvin was not the borrower
but only the check owner and that he originally
demanded from Napoleon. Hence, since he knew
that the underlying obligation was Gutierrez's, the
prima facie presumption that the possessor is the
holder in due course is inapplicable.
● Considering that Marasigan is not a holder in
due course, the petitioner can validly set up the
personal defense that the blanks were not filled up
in accordance with the authority he gave.
Consequently, Marasigan has no right to enforce
payment against the petitioner and the latter cannot
be obliged to pay the face value of the check.
EXTRA NOTES

WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the petitioner Alvin
Patrimonio’s petition for review on certiorari. The appealed Decision dated September 24, 2008 and the
Resolution dated April 30, 2009 of the Court of Appeals are consequently ANNULLED AND SET
ASIDE. Costs against the respondents.

Owing to the consumable nature of the thing loaned, the resulting duty of the borrower in a contract of
loan is to pay, not to return, to the creditor or lender the very thing loaned, and this explains why the
ownership of the thing loaned is transferred to the debtor upon perfection of the contract; Evidently, the
resulting relationship between a creditor and debtor in a contract of loan cannot be characterized as
fiduciary; Absent any special facts and circumstances proving a higher degree of responsibility, any
dealings between a lender and borrower are not fiduciary in nature. (Republic vs. Sandiganbayan [First
Division], 648 SCRA 47 [2011])

A crossed check is one where two parallel lines are drawn across its face or across its corner; The
crossing of a check has the following effects: (a) the check may not be encashed but only deposited in
the bank; (b) the check may be negotiated only once — to the one who has an account with the bank;
and (c) the act of crossing the check serves as a warning to the holder that the check has been issued
for a definite purpose and he must inquire if he received the check pursuant to this purpose; otherwise,
he is not a holder in due course. (Philippine Commercial International Bank vs. Balmaceda, 658 SCRA
33 [2011])

Section 52
Acquisition in good faith means taking without knowledge or notice of equities of any sort which could be
set up against a prior holder of the instrument. It means that he does not have any knowledge of fact
which would render it dishonest for him to take a negotiable paper. The absence of the defense, when the
instrument was taken, is the essential element of good faith.

As held in De Ocampo v. Gatchalian:

In order to show that the defendant had “knowledge of such facts that his action in taking the instrument
amounted to bad faith,” it is not necessary to prove that the defendant knew the exact fraud that was
practiced upon the plaintiff by the defendant’s assignor, it being sufficient to show that the defendant had
notice that there was something wrong about his assignor’s acquisition of title, although he did not have
notice of the particular wrong that was committed.

It is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted with
fraud. It is not necessary that he should know the particulars or even the nature of the fraud, since all that
is required is knowledge of such facts that his action in taking the note amounted to bad faith.