GR 42081; (June, 1937) (Digest)
G.R. No. 42081 ; June 26, 1937
ISIDRO S. SANTOS, plaintiff-appellant, vs. ARTURO P. REYES and AURELIO P. REYES, defendants-appellees.
FACTS
Plaintiff Isidro S. Santos filed a complaint to recover on two promissory notes executed by defendants Arturo P. Reyes and Aurelio P. Reyes in favor of Hermogenes Mendoza. Santos acquired the notes by assignment from Mendoza. The defendants alleged the notes were fictitious and without consideration. The evidence showed the notes (for P300 and P1,145) were executed as part of a scheme between Mendoza and the defendants to make Mendoza’s mortgaged land appear more valuable to facilitate a sale at a higher price, with the profit to be shared. The deed of sale of the land from Mendoza to the defendants was never registered, and Mendoza continued dealing with the mortgagee. Santos purchased the notes after their maturity dates, without endorsement, and without inquiring into the solvency of the makers.
ISSUE
Whether the plaintiff is a holder in due course of the promissory notes, thereby taking them free from the defense of lack of consideration.
RULING
No. The Supreme Court affirmed the trial court’s dismissal of the complaint. The plaintiff is not a holder in due course under Section 52 of the Negotiable Instruments Law. He purchased the notes after maturity, without the necessary endorsement, and without inquiring into the solvency of the makers. Consequently, the defendants could properly assert against him the defense that the notes were executed without valuable consideration and were fictitious, a defense which would also be available against the original payee, Hermogenes Mendoza.
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