Yang v CA (2003)

Petitioner: Cely Yang

Respondents: PCI Bank, Far East Bank & Trust Co., Equitable Bank, Prem Chandiramani, Fernando David
Quisimbing
Yang had an agreement with Chandiramani that she will deliver 2 checks (with David as payee) to Chandiramani in
exchange for him giving to her a Managers check. Chandiramani did not fulfil his side of the agreement, but was able
to get the 2 checks from Yang. Chandiramani gave the checks to David. Yang is now suing David, saying he isnt a
holder in due course because of lack of proof of consideration, and because David did not check how Chandiramani
got the checks.
SC: presumption of holder in due course applies to David. Yang failed to rebut this.

Petitioner Cely Yang and respondent Prem Chandiramani entered into an agreement
Chandiramani was to give Yang a PCIB Managers check in the amount of P4.2 M
In exchange, Yang will give 2 checks (Equitable cashiers check and FEBTC cashiers check) worth
P2.087M each. Both checks are payable to respondent Fernando David.
They agreed that they will split the difference of P26k between them
They also agreed that:
Yang will secure from FEBTC a dollar draft in the amount of $200k payable to a PCIB FCDU Account
Chandiramani will exchange this for another dollar draft in the same amount to be issued by Hang Seng
Bank of Hong Kong
So, Yang procured the ff:
a. Equitable Cashiers check P2,087,000 payable to Fernando David
b. FEBTC Cashiers check P2,087,000 payable to Fernando David
c. FEBTC dollar draft, drawn on Chemical Bank, NY payable to PCIB FCDU Account No. 4195-01165

Whate happened during the exchange:

Yang gave the cashiers checks and dollar drafts to her business associate. The messenger of that business
associate was supposed to deliver it to Chandiramani. They were supposed to meet at Philippine Trust Bank
along Ayala Ave. Chandiramani was supposed to deliver a PCIB Managers check in the sum of P4.2 M and a
Hang Seng Bank dollar draft for $200,000
Chandiramani did not appear at the rendezvous, and the messenger allegedly lost the 2 cashiers checks and
dollar drafts.
It turned out, however, that Chandiramani was able to get hold of the 2 checks and dollar drafts without delivering
the exchange consideration consisting of the PCIB Managers check and the Hang Seng Bank dollar draft.

And so Chandiramani delivered to Fernando David the 2 cashiers check worth P2.087 M each.
In exchange, he got $360k from David which he deposited in the account of his wife and mother in the UCPB.
He also deposited the Dollar Draft in the PCIB FCDU account.

MEANWHILE: Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be
lost.

Both banks complied with her request, but upon the presentation of PCIB, FEBTC subsequently lifted the stop
payment order on the Dollar Draft, thus enabling the holder of the PCIB FCDU to receive the amount of
$200,000.

Yang filed 2 COMPLAINTS for injunction and damages

1st complaint: against Equitable, Chandiramani, David for P2.087M
2nd complaint: against FEBTC, PCIB, Chandiramani, David for 2.087M

RTC decided in favour of David he was a holder in due course, the checks were complete on their face when
they were negotiated to him
Ordered Yang to pay David moral damages and attorneys fees worth P100k each
Dismissed the complaints against the banks

CA affirmed.
Added an award of P25k attorneys fees to PCIB because it was compelled to litigate

Yang says:

David was not a holder in due course because even if he was the payee of the checks, he failed to inquire from
Chandiramani how he acquired possession of the checks.
Because of this, he cannot be said to be unaware of any infirmity or defect in the title of Chandiramani to the
checks.
Also, inasmuch as the checks were crossed, David should have been put on guard that the checks were issued
for a definite purpose and accordingly, made inquiries to determine if he received the checks pursuant to that
purpose. (Yang relied on Bataan Cigar v CA)

Note: crossed check - Any check that is crossed with two parallel lines, either across the whole check or through the
top left hand corner of the check. This symbol means that the check can only be deposited directly into a bank
account and cannot be immediately cashed by a bank or any other credit institution
ISSUES:
1.
2.

W/N David was a holder in due course YES

W/N the award of attorneys fees to David and PCIB was valid YES

RATIO:
ISSUE 1: David was a holder in due course
Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption
arises only in favor of a person who is a holder as defined in NIL 191 ,meaning a "payee or indorsee of a bill or
note, who is in possession of it, or the bearer thereof."
In this case, David is the payee so the presumption applies
Yangs challenge to Davids status as a holder in due course hinges on 2 arguments:
1. Lack of proof that he gave consideration for the checks
2. His failure to inquire from Chandiramani as to how he acquired the checks
So the last 2 requisites under NIL 52 (good faith and for value; no notice of any defect in the title of the
person negotiating)
Re lack of consideration NIL 24 creates a presumption that every party to an instrument acquired the same
for a consideration or for value. Yang failed to discharge her burden of proof. Her allegations are devoid of any
concrete proof.
The TC and CA also found that David gave Chandiramani $360,000 as consideration for the instruments
Re failure of David to inquire as to how Chandiramani got the checks David was not privy to the
transaction between Chandiramani and Yang. He only had a separate dealing with Chandiramani in which
Chandiramani will deliver the checks to him. Chandiramani performed his task.
Yang also admits that David inquired with the manager of his bank to verify from FEBTC and Equitable as to
the genuineness of the checks. At that time, he was not aware of any stop payment order
Thus, the Court cannto hold him guilty of any gross neglect amounting to legal absence of good faith.
Re: Crossed Checks
Yang relied on Bataan Cigar v CA, saying that David should have at least inquired as to whether he was
acquiring the checks for the purpose for which they were issued.
SC: the facts here are not in all fours with Bataan Cigar.
In that case, the crossed checks were negotiated and sold at a discount by the payee
In this case, the payee did not negotiate further the checks but promptly deposited them in his account

The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce1
makes reference to such instruments
Nonetheless, this Court has taken judicial cognizance of the practice that a check with two parallel lines in the
upper left hand corner means that it could only be deposited and not converted into cash.
The effects of crossing a check, thus, relates to the mode of payment, meaning that the drawer had intended the
check for deposit only by the rightful person, i.e., the payee named therein.
In Bataan Cigar, the rediscounting of the check by the payee knowingly violated the avowed intention of crossing
the check. Thus, in accepting the cross checks and paying cash for them, despite the warning of the crossing,
the subsequent holder could not be considered in good faith and thus, not a holder in due course.
ISSUE 2: Damages and Attorneys fees
David is entitled to the award of moral damages because he was needlessly and unceremoniously dragged into
this case which should have been brought only between Yang and Chandiramani.
PCIB was also dragged in the case on unfounded and baseless grounds.
Both were compelled to litigate, so the award of Attorneys Fees is proper.
Petition denied.

1 ART. 541. The maker or any legal holder of a check shall be entitled to indicate therein that it be paid to a certain banker or
institution, which he shall do by writing across the face the name of said banker or institution, or only the words "and company."