Cely Yang vs. CAG.R. 138074August 15, 2003

Facts:Cely Yang and Chandiramani agreed to exchange checks. Chandiramani was to give Yang a check with the amount 4.2 M while Yang was to issue 2 checks amounting to 2.087M each in the name of Fernando David. An exchange of dollar drafts was also agreed upon.

Messenger Danilo Ranigo was ordered to meet Chandiramani for the exchange. However, Danilo later went back, claiming he lost the checks and dollar draft. The incident was reported to the police and stop payment was requested by Yang.

However, it was not true that the checks were lost. Chandiramani got hold of the checks and dollar drafts. He negotiated the same to David and in turn, David issued him a dollar draft. Chandiramani deposited the dollar drafts to his wifes account.

David verified the genuineness of the check from his bank. His inquiry came earlier than the stop payment request of Yang, so the bank declared the check genuine.

Yand instituted a case for damages against David, Chandiramani and the banks. RTC ruled in favor of David, finding that he was a holder in due course. CA affirmed the same.

Issue:Was david a holder in due course?

Held:Yes. David was a holder in due course. David was not a privy to the transaction of Yang and Chandiramani. He had his own transaction with Chandiramani. He has no knowledge of the fraud by Chandiramani. He even verified the check through his bank. The claim of Yang that David did not get the check for value was not backed up by evidence. The presumption that there was an adequate consideration for the checks was not rebutted.