Vicente de Ocampo vs Anita GatchalianG.R. L-15126November 30, 1961

Facts:

Anita Gatchalian was looking for a car to buy when Manuel Gonzales represented himself to be an authorized agent of Mr. Ocampo, who is selling his car. They agreed that Manuel will show her the car along with its certificate of registration. In turn, Anita will issue a check amounting to P600 to show that she was interested in purchasing the car. Manuel did not stay true to the negotiation. Upon receiving the check, he used the same to pay the hospital bills of his wife at Ocampo Clinic. Anita ordered stop payment of the checks. The lower court ordered Anita to pay de Ocampo the amount of the check with interest.Anita appealed the judgement claiming that de Ocampo is not a holder in due course and the check was not negotiable.Issue:IS de Ocampo a holder in due course so as to merit payment of the instrument?Held:No, de Ocampo is not a holder in due course. Yes, de Ocampo was not aware of the circumstances under which Manuel got the instrument, however, de Ocampo should have made inquiries since there are suspicious circumstances when Manuel negotiated the instrument. The amount of the check did not correspond to the account of Manuel’s wife; the check contained two parallel lines which meant that the check may only be deposited and not converted to cash; Anita did not have an obligation to Ocampo Clinic. Failure of Mr. Ocampo to inquire on this circumstances is negligence tantamount to bad faith.

Bad Faith does not necessarily mean having ill motives. Bad Faith does not also mean that the holder have exact knowledge of the fraud committed. It is sufficient that the holder had notice that something is wrong about the title of the holder and the same was not verified.