State Investment House vs.ca digest

State Investment House vs. CA GR 101163 11 January 1993 First Division, Beosio !J" Facts: Nora B. Moulic issued to Corazon Victoriano checks, as security for pieces of jewelry sold sold on commis commissi sion. on. Victo Victoria riano no neoti neotiate ated d the the check checks s to the !tate !tate "n#est "n#estmen mentt $ouse "nc. %!"$"&. Moulic failed to sell the pieces of jewelry, so he returned them to the payee 'efore the maturity of the checks. (he checks, howe#er, could not 'e retrie#ed as they had already 'een neotiated. Before the check)s maturity dates, Moulic withdrew her funds from the drawee 'ank. *pon presentment of the checks for payment, they were dishonored for insu+ciency of funds. !"$" sued to reco#er the #alue of the checks. "ssue: hether the personal defense of failure or a'sence of consideration is a#aila'le, or con#ersely, whether !"$" is a holder in due course. $eld: -n their faces, the postdated checks were complete and reular/ !"$" 'ouht the checks from the payee %Victoriano& 'efore their due dates/ !"$" took the checks in ood faith and for #alue, al'eit at a discounted price/ and !"$" was ne#er informed not made aware that the checks were merely issued to payee as security and not for #alue. Complyin with the re0uisites re0uisites of !ection 12 of the Neotia'le "nstruments 3aw, !"$" is a holder in due course. 4s such, it holds the instruments free from any defect of title of prior parties, and from defenses a#aila'le to prior parties amon themsel#es. !"$" may enforce full payment of the checks. (he defense of failure or a'sence of consideration is not a#aila'le as !"$" was not pri#y to the purpose for which the checks were issued. (hat the postdated checks were merely issued as security is not a round for the dischare of the instrument as aainst a holder in due cours urse. "t is not not one of the the ro rounds unds outli tlined in !ec !ectio tion 55 556 6 of the the Neotia'le"nstrument 3aw, for the instrument to 'e dischared. "t must 'e noted that the drawin and neotiation of a check ha#e certain e7ects aside from the trans transfer fer of title title or the the incur incurrin rin  of lia'il lia'ility ity in rear reard d to the instru instrumen mentt 'y the the transferor. (he holder who takes the neotiated paper makes a contract with the parties on the face of the instrument. (here is an implied representation that funds or credit are a#aila'le for the payment of the instrument in the 'ank upon which it is drawn. Conse0uently, the withdrawal of the money from the drawee 'ank to a#oid lia'ility on the checks cannot prejudice the rihts of holders in due course.  (he drawer, Moulic, is lia'le lia'le to the holder holder in due course, course, !"$".