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Fossum v. Hermanos [G.R. No. L-19461. March 28, 1923]

30 Jul

FACTS

Appellant was himself a party to the contract which supplied the consideration for the draft, albeit he there acted in a representative capacity. He procured the instrument to be indorsed by the bank and delivered to himself without the payment of value, after it was overdue, and with full notice that, as between the original parties, the consideration had completely failed. Petitioner invoked the “shelter rule”.

 

ISSUE

Whether or not petitioner may hide under the “shelter rule”.

 

RULING

NO. While it is true that a person who is not himself a holder in due course may yet recover against the person primarily liable where it appears that such holder derives his title through a holder in due course, there are exceptions. Here, the holder was party to the contract which participated to the defect of the instrument. Hence, shelter rule finds no application here.

 

 

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