Chan Wan v.

Tan Kim and Chen So

G.R. No. L-15380 | Sept. 30, 1960
En Banc | Bengzon, J.

Digest Author: Noel Francis T. Galinato

Topic: Presentment and Protest

Case Summary: This case is a collection suit for 11 checks totaling P4,290.00. The checks were drawn by
defendant Tan Kim upon drawee bank Equitable with payees Pinong and Muy. The checks were crossed-
checks with the words “non-negotiable-China Banking Corporation” written in between the parallel lines. The
checks however, came into possession of plaintiff Chan Wan.

Chan Wan tried to collect upon the checks but was unable to do so (dishonored). Hence, he filed this case. Tan
Kim’s defense was that the checks were issued as receipts for Pinong’s promise to make shoes for the former
but that the latter failed to make them.

On trial, the Court found that despite being crossed checks, it is seen on the back of the checks, endorsements
which apparently show that they had been deposited with the China Banking Corp., and were subsequently
presented to the Drawee Bank (Equitable) for collection. Notations were also found that China Banking
Corporation endorsed the checks “[f]or deposit to the credit of our account. Viuda e Hijos de Chua Chiong Pio.
People’s Shoe Company.” Some of the checks also bore the stamp “account closed.”

Whether plaintiff Chan Wan has the right to collect on the 11 commercial documents.—IT DEPENDS
(case is remanded to lower court). The drawer in drawing the check engaged that “on due presentment, the
check would be paid, and that if it be dishonored […] he will pay the amount thereof to the holder.” Wherefore,
in the absence of due presentment, the drawer did not become liable. The check specifically instructed that
China Banking Corp. should be the one to present the checks, and not Chan Wan. Thus, in as much as Chan
Wan presented them, defendant Tan Kim cannot be held liable.

However, because of the endorsements on the back of the checks which showed that they were indeed presented
by China Banking Corp. to Equitable, and that the checks were endorsed for deposit to People Shoe Company’s
account (Pinong’s), but dishonored, the Court ruled that Chan Wan might be able to claim. However, Chan Wan
cannot be considered a holder in due course because he acquired the checks with the stamps “account closed.”
But the only difference between a holder who is not an HDC and an HDC is that the latter cannot be subject to
personal defenses. Since the personal defenses of Tan Kim were not adequately proven in the lower court, the
Supreme Court remands the case for reception of further evidence. Should Tan Kim’s personal defense 1 be
meritorious, then Chan Wan cannot claim. Should it be unmeritorious, then Chan Wan may claim.

Doctrines/Laws Involved:
The drawer in drawing the check engaged that “on due presentment, the check would be paid, and that if it be
dishonored […] he will pay the amount thereof to the holder.” Wherefore, in the absence of due presentment,
the drawer did not become liable.

FACTS:

1
The Court found that it was implied from the transcripts of cross examination that her personal defense is that Pinong failed to
make the shoes. However, this has to be first proven true. Hence, the remand.
 1. This case is a collection suit for 11 checks totaling P4,290.00. The checks were issued under the
following circumstnaces:
o Drawer: defendant Tan Kim (other defendant is her husband)
o Drawee: Equitable Banking Corporation
o Payee: Two persons named Pinong and Muy
o Checks were crossed.
 Eight of the checks bear across their face two parallel transverse lines between which the
words “non-negotiable-China Banking Corporation” are written.
2. According to Tan Kim, the checks were issued for some shoes which Pinong had promised to make, and
that the checks “were intended as mere receipts.”
3. However, plaintiff Chan Wan, for some reason, acquired possession of the checks.
4. Despite being crossed checks, the Court found, on the backs of the checks, endorsements which
apparently show that they had been deposited with the China Banking Corp., and were subsequently
presented to the Drawee Bank (Equitable) for collection. Notations were also found that China Banking
Corporation endorsed the checks “[f]or deposit to the credit of our account. Viuda e Hijos de Chua
Chiong Pio. People’s Shoe Company.” Some of the checks also bore the stamp “account closed.”
5. Unable to collect the funds, plaintiff Chan Wan filed this collection suit against defendants Tan Kim and
Chen So.

ISSUES + HELD:
1. Whether plaintiff Chan Wan has the right to collect on the 11 commercial documents.—IT
DEPENDS (case is remanded to lower court).
o The drawer in drawing the check engaged that “on due presentment, the check would be paid,
and that if it be dishonored […] he will pay the amount thereof to the holder.” Wherefore, in the
absence of due presentment, the drawer did not become liable.
o Eight of the checks in this case were crossed with the words “on-negotiable-China Banking
Corporation” written between the parallel lines. The checks have, therefore, been crossed
specially to China Banking Corporation, and should have been presented for payment by China
Banking, and not Chan Wan.
o However, inasmuch as Chan Wan presented the checks for payment himself, it is ruled that there
was no proper presentment, and the liability did not attach to the drawer Tan Kim.
o Nevertheless, the Court finds evidence that the checks were indeed presented by China Banking
to Equitable.
 On the back of the checks, there were endorsements which show that they had indeed
been deposited with China Banking Corporation.
 From the endorsements and the writings on the back of the checks, it is also evident that
they were presented by China Banking Corporation to the Drawee Bank Equitable
Corporation.
 The Court also found that the checks, after having been presented by China Bank to
Drawee Equitable, they were subsequently endorsed for deposit to the People’s Shoe
Company.
o But since Drawee had no funds,2 they were unpaid and returned, some of them stamped “account
closed.” Because of this, the Court found that plaintiff only acquired the checks after they were
dishonored. Chan Wan presented them to the Court with the stamps “account closed.” Thus,
Chan Wan could not be considered as a holder in due course.3
2
I think this meant that Tan Kim’s account in Equitable had no funds.
3
Because Chan Wan had notice of defects – i.e. he acquired the checks after they were dishonored (there were stamps saying
“account closed.”)
 However, it does not follow that just because a holder is not a holder in due course, he could no
o
longer recover on the checks. The only disadvantage of a holder who is not a holder in due
course is that the negotiable instrument is subject to defenses as if it were non-negotiable.4
o But the Supreme Court decides to remand the case to the lower court because defendant Tan Kim
was not able to prove any personal defenses. In Tan Kim’s cross-examination, the Court found
that Tan Kim implied that the checks were issued for shoes which Pinong would make but the
latter failed to make them. Should that be true, then it would be sufficient to serve as Tan Kim’s
defense against the holder plaintiff Chan Wan. Thus, the Supreme Court ruled that it should be
remanded.
RULING: Considering the deficiency of important details on which a fair adjudication of the parties’ rights
depends, we think the record should be and is hereby returned, in the interest of justice, to the court below for
additional evidence, and such further proceedings as are not inconsistent with this opinion.

DISSENT (if required):

NOTES:


4
Holder can be subject to personal defenses.