Digest: Sesbreno vs.

Court of Appeals (GR 9252, 24 May 1993)

Sesbreno vs. CA
GR 89252, 24 May 1993
Third Division, Feliciano (J)

Facts: On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000
with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance
issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note
(2731), the Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said
security was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia
and America for P304,533.33 payable on 13 March 1981. The checks were dishonored for having been
drawn against insufficient funds. Pilipinas Bank never released the note, nor any instrument related thereto,
to Sesbreno; but Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981,
has a face value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was
stamped “non-negotiable” on its face. As Sesbreno was unable to collect his investment and interest
thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.

Issue: Whether non-negotiability of a promissory note prevents its assignment.

Held: Only an instrument qualifying as a negotiable instrument under the relevant statute may be
negotiated either by indorsement thereof coupled with delivery, or by delivery alone if it is in bearer form. A
negotiable instrument, instead of being negotiated, may also be assigned or transferred. The legal
consequences of negotiation and assignment of the instrument are different. A negotiable instrument may
not be negotiated but may be assigned or transferred, absent an express prohibition against assignment or
transfer written in the face of the instrument. herein, there was no prohibition stipulated.

Haystack: Abubakar vs. Auditor General (GR L-1405, 31 July 1948)

Abubakar vs. Auditor General
[G.R. No. L-1405. July 31, 1948.]
First Division, Bengzon (J): 6 concurring

Facts: Treasury Warrant A-2867376 was issued in favor of Placido S. Urbanes on 10 December 1941 for
P1,000, but is now in the hands of Benjamin Abubakar. The Auditor refused to authorize the payment of the
treasury warrant. Hence, the appeal.

The Supreme Court dismissed the petition, with costs.

1. Treasury Warrant issued in favor of a government employee now in custody of a private

individual
There is no doubt as to the authenticity and date of the treasury warrant; and that it was regularly indorsed
by the payee and is now in the custody of Abubakar, a private individual. On the other hand, the warrant
was originally made payable to Urbanes in his capacity as disbursing officer of the Food Administration for
"additional cash advance for Food Production Campaign in La Union," and thus it is a treasury warrant
issued in favor of a public officer or employee and held in possession by a private individual. Such being
the case, the Auditor General can hardly be blamed for not authorizing its redemption out of an
appropriation specifically for "treasury warrants issued . . . in favor of and held in possession by private
individuals." (RA 80, Item F- IV-8.) This warrant was not issued in favor of a private individual. It was issued
in favor of a government employee.
2. Intent of Legislature as to redemption of a class of warrant
Outstanding treasury warrants issued prior to 2 January 1942, amount to more than P4 million. The
appropriation is only for P1,750,000. Obviously Congress wished to provide for redemption of one class of
warrants — those issued to private individuals — as distinguished from those issued in favor of government
officials. Basis for the discrimination is not lacking. Probably the Government is not so sure that those
warrants to officials have all been properly used by the latter during the Japanese occupation or maybe it
wants to conduct further inquiries as to the equities of the present holders thereof.

3. Treasury or government warrants are not negotiable instruments

A treasury warrant is not within the scope of the negotiable instruments law. For one thing, the document
bearing on its face the words "payable from the appropriation for food administration," is actually an order
for payment out of "a particular fund," and is not unconditional, and does not fulfill one of the essential
requirements of a negotiable instrument. (Section 3 last sentence and section 1[b] of the Negotiable
Instruments Law.) In the United States, government warrants for the payment of money are not negotiable
instruments nor commercial paper. Therefore, the holder of a treasury warrant cannot argue that he is a
holder in good faith and for value of a negotiable instrument and is entitled to the rights and privileges of a
holder in due course, free from defenses.

Digest: Abubakar vs. Auditor General (GR L-1405, 31 July 1948)

Abubakar vs. Auditor General
GR L-1405, 31 July 1948
First Division, Bengzon (J)

Facts: Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes on 10 December 1941 for
P1,000, but is now in the hands of Benjamin Abubakar. The Auditor refused to authorize the payment of the
treasury warrant. Abubakar contends he is a holder in good faith and for value and thus, entitled to the
rights and privileges of a holder in due course.

Issue: Whether Abubakar is a holder in due course.

Held: A treasury warrant is not a negotiable instrument; it being an order for payment out of a “particular
fund”, and is not unconditional and does not fulfill one of the essential requirements of a negotiable
instrument. Therefore, a holder of a treasury warrant cannot argue that he is a holder in good faith and for
value of a negotiable instrument and thus entitled to the rights and privileges of a holder in due course, free
from defenses.

Digest: Tibajia vs. Court of Appeals (GR 100290, 4 June 1993)

Tibajia vs. CA
GR 100290, 4 June 1993
Second Division, Padilla (J)

Facts: A suit for collection of sum of money was ruled in favor of Eden Tan and against the spouses
Norberto Jr. and Carmen Tibajia. After the decision was made final, Tan filed a motion for execution and
levied upon the garnished funds which were deposited by the spouses with the cashier of the Regional
Trial Court of Pasig. The spouses, however, delivered to the deputy sheriff the total money judgment in the
form of Cashier’s Check (P262,750) and Cash (P135,733.70). Tan refused the payment and insisted upon
the garnished funds to satisfy the judgment obligation. The spouses filed a motion to lift the writ of
execution on the ground that the judgment debt had already been paid. The motion was denied.

Issue: Whether the spouses have satisfied the judgment obligation after the delivery of the cashier’s check
and cash to the deputy sheriff.

Held: A check, whether a manager’s check or ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor
(Philippine Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs. Intermediate Appellate
Court). The court is not, by decision, sanctioning the use of a check for the payment of obligations over the
objection of the creditor (Fortunado vs. Court of Appeals).

Haystack: Tibajia vs. Court of Appeals (GR 100290, 4 June 1993)

Tibajia vs. CA
[G.R. No. 100290. June 4, 1993.]
Second Division, Padilla (J): 3 concurring

Facts: Case 54863 was a suit for collection of a sum of money filed by Eden Tan against the Tibajia
spouses (Norberto Jr. and Carmen). A writ of attachment was issued by the trial court on 17 August 1987
and on 17 September 1987, the Deputy Sheriff filed a return stating that a deposit made by the Tibajia
spouses in the RTC Kalookan City in the amount of P442,750.00 in another case, had been garnished by
him. On 10 March 1988, the RTC, Branch 151 of Pasig, Metro Manila rendered its decision in Civil Case
54863 in favor of Tan, ordering the Tibajia spouses to pay her an amount in excess of P300,000.00. On
appeal, the Court of Appeals modified the decision by reducing the award of moral and exemplary
damages. The decision having become final, Tan filed the corresponding motion for execution and
thereafter, the garnished funds which by then were on deposit with the cashier of the RTC Pasig, Metro
Manila, were levied upon. On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo
Bolima the total money judgment in the form of Cashier's Check (P262,750.00) and Cash (P135,733.70).
Tan, refused to accept the payment made by the Tibajia spouses and instead insisted that the garnished
funds deposited with the cashier of the RTC Pasig be withdrawn to satisfy the judgment obligation. On 15
January 1991, the spouses filed a motion to lift the writ of execution on the ground that the judgment debt
had already been paid. On 29 January 1991, the motion was denied by the trial court on the ground that
payment in cashier's check is not payment in legal tender and that payment was made by a third party
other than the defendant. A motion for reconsideration was denied on 8 February 1991.

Thereafter, the spouses Tibajia filed a petition for certiorari, prohibition and injunction in the Court of
Appeals (CA GR SP 24164). The appellate court dismissed the petition on 24 April 1991 holding that
payment by cashier's check is not payment in legal tender as required by RA 529. The motion for
reconsideration was denied on 27 May 1991. Hence, the petition for review.

The Supreme Court denied the petition, and affirmed the appealed decision, with costs against the
spouses.

1. Article 1249 of the Civil Code

Article 1249 of the Civil Code provides “The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the
Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or when through the
fault of the creditor they have been impaired. In the meantime, the action derived from the original
obligation shall be held in abeyance."

2. Section 1 of RA 529, as amended

Section 1 of RA 529, as amended, provides “Every provision contained in, or made with respect to, any
obligation which purports to give the obligee the right to require payment in gold or in any particular kind of
coin or currency other than Philippine currency or in an amount of money of the Philippines measured
thereby, shall be as it is hereby declared against public policy, null and void, and of no effect, and no such
provision shall be contained in, or made with respect to, any obligation thereafter incurred. Every obligation
heretofore and hereafter incurred, whether or not any such provision as to payment is contained therein or
made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of
payment is legal tender for public and private debts."

3. Section 63 of RA 265 (Central Bank Act), as amended

Section 63 (Legal character) of RA 265, as amended (Central Bank Act) provides “Checks representing
deposit money do not have legal tender power and their acceptance in the payment of debts, both public
and private, is at the option of the creditor: Provided, however, that a check which has been cleared and
credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount
equal to the amount credited to his account."

4. PAL vs. CA and Roman Catholic Bishop of Malolos vs. IAC; Check not a legal tender
In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals and Roman Catholic Bishop of Malolos,
Inc. vs. Intermediate Appellate Court, the Court held that "A check, whether a manager's check or ordinary
check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and
may be refused receipt by the obligee or creditor." The ruling in these cases merely applies the statutory
provisions which lay down the rule that a check is not legal tender and that a creditor may validly refuse
payment by check, whether it be a manager's, cashier's or personal check.

5. Reliance to a dissenting opinion in the PAL case erroneous; Circumstances in PAL case different
The spouses erroneously relied on one of the dissenting opinions in the Philippine Airlines case to support
their cause. The dissenting opinion does not in any way support the contention that a check is legal tender
but, on the contrary, states that "If the PAL checks in question had not been encashed by Sheriff Reyes,
there would be no payment by PAL and, consequently, no discharge or satisfaction of its judgment
obligation." Moreover, the circumstances in the Philippine Airlines case are quite different from those in the
present case for in that case the checks issued by the judgment debtor were made payable to the sheriff,
Emilio Z. Reyes, who encashed the checks but failed to deliver the proceeds of said encashment to the
judgment creditor.

6. Fortunado vs. CA; Check as payment cannot be sanctioned over objection of the creditor
In the more recent case of Fortunado vs. Court of Appeals, the Court stressed that the Court is not, by the
decision “sanctioning the use of a check for the payment of obligations over the objection of the creditor."

Haystack: Vda. De Eduque vs. Ocampo (GR L-222, 26 April 1950)

Vda. De Eduque vs. Ocampo
[G.R. No. L-222. April 26, 1950.]
Second Division, Moran (CJ): 5 concurring
Facts: On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon, Doña
Escolastica de los Reyes and Don Jose M. Ocampo, the first in the amount of P40,000 and the second in
the sum of P15,000, both payable within the period of 20 years, with interest at the rate of 5% per annum.
Payment of these two loans was guaranteed by mortgage on real property. In the mortgage contract it is
stipulated that any of the mortgage creditors may receive payment and execute deeds of cancellation of the
mortgage debts. On 6 December 1943, Salvacion F. Vda. De Eduque, as administratrix of the estate of the
deceased Dr. Jose Eduque, tendered payment, by means of a cashier's check, of the total amount of the
two loans, P55,000, to Jose M. Ocampo, one of the creditors, who refused to accept payment.

By reason of such refusal, an action was brought and a cashier's check for the total amount of P55,000
was deposited in court. After trial, judgment was rendered against Ocampo compelling him to accept the
P55,000 deposited in court, to issue deeds for cancellation of the mortgage debts, and to pay the expenses
of consignation and costs. Ocampo accepted the judgment with respect to the second loan of P15,000
upon the ground that, according to him, in the deed of mortgage corresponding to that loan it clearly
appeared that the loan was payable "durante el término de 20 años," and that the only question remaining
between the parties is the interpretation of the first deed of mortgage regarding the first loan of P40,000.
And he asked the court to order "que de la cantidad de P55,000 consignada en este Juzgado, se entregue
al demandado la suma de P15,000, después de descontar proporcionalmente cualesquiera cantidades por
depósito y otros conceptos según los términos de la decición promulgada." The order was issued
accordingly and the sum P15,000 out of the P55,000 deposited in court was delivered to Ocampo.

The present appeal concerns the decision of the lower court regarding the first loan of P40,000, and the
principal error assigned by Vda. de Eduque is that tender of payment by means of a cashier's check
representing Japanese war notes is not valid.

The Supreme Court affirmed the judgment, with costs against Ocampo.

1. Japanese military notes were legal tender during Japanese occupation; Cashier’s check a
sufficient tender where no objection is made
Japanese military notes were legal tender during the Japanese occupation. Further, Ocampo accepted
impliedly the consignation of the cashier's check when he himself asked the court that out of the money
thus consigned he be paid the amount of the second loan of P15,000. It is a rule that "a cashier's check
may constitute a sufficient tender where no objection is made on this ground." (62 C. J., p. 670; see also 40
Amer. Jur., p. 764.)

Vda. de Eduque vs. Ocampo

GR L-222, 26 April 1950
Second Division, Moran (CJ)

Facts: On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon,
Dona Escolastica delos Reyes and Don Jose M. Ocampo, with amount s of P40,000 and P15,000,
both payable within 20 years with interest of 5% per annum. Payment of the loans was
guaranteed by mortgage on real property. On 6 December 1943, Salvacion F. Vda de Eduque, as
administratrix of the estate of Dr. Jose Eduque, tendered payment by means of a cashier’s check
representing Japanese War notes to Jose M. Ocampo, who refused payment. By reason of such
refusal, an action was brought and the cashier’s check was deposited in court. After trial, judgment
was rendered against Ocampo compelling him to accept the amount, to pay the expenses of
consignation, etc. Ocampo accepted the judgment as to the second loan but appealed as to the
first loan.
Issue: Whether there is a tender of payment by means of a cashier’s check representing war
notes.

Held: Japanese military notes were legal tender during the Japanese occupation; and Ocampo
impliedly accepted the consignation of the cashier’s check when he asked the court that he be paid
the amount of the second loan (P15,000). It is a rule that a cashier’s check may constitute a
sufficient tender where no objection is made on this ground.

Philippine Education Co. vs. Soriano

GR L-22405, 30 June 1971
En Banc, Dizon (J)

Facts: Enrique Montinola sought to purchase from the Manila Post Office 10 money orders (P200
each), offering to pay for them with a private check. Montinola was able to leave the building with
his check and the 10 money orders without the knowledge of the teller. Upon discovery, message
was sent to all postmasters and banks involving the unpaid money orders. One of the money
orders was received by the Philippine Education Co. as part of its sales receipt. It was deposited by
the company with the Bank of America, which cleared it with the Bureau of Post. The Postmaster,
through the Chief of the Money Order Division of the Manila Post Office informed the bank of the
irregular issuance of the money order. The bank debited the account of the company. The
company moved for reconsideration.

Issue: Whether postal money orders are negotiable instruments.

Held: Philippine postal statutes are patterned from those of the United States, and the weight of
authority in said country is that Postal money orders are not negotiable instruments inasmuch as
the establishment of a postal money order is an exercise of governmental power for the public’s
benefit. Furthermore, some of the restrictions imposed upon money order by postal laws and
regulations are inconsistent with the character of negotiable instruments. For instance, postal
money orders may be withheld under a variety of circumstances, and which are restricted to not
more than one indorsement.

Ponce vs. CA
GR L-49444, 31 May 1979
First Division, Melencio-Herrera (J)

Facts: On 3 June 1969, Jesus Afable, together with Feliza Mendoza and Ma. Aurora Dino executed
a promissory note in favor of Nelia Ponce in the sum of P814,868.42 payable without interest on or
before 31 July 1969, subject to an interest of 12% per annum if not paid at maturity, and an
additional sum equivalent to 10% of total amount due as attorney’s fees in case it is necessary to
bring suit, and the execution of a first mortgage on their properties or the Carmen Planas Memorial
Inc. in the event of failure to pay the indebtedness in accordance with the terms. Upon failure of
the debtors to pay, a complaint was filed against them for the recovery of the principal sum, plus
interest and damages. The trial court rendered judgment in favor of Ponce. The Court of Appeals
affirmed the decision of the trial court. On the second motion for reconsideration, however, the
appellate court reversed the judgment and opined that the intent of the parties was that the note
was payable in US dollars which is illegal, with neither party entitled to recover under the “in pari
delicto” rule.

Issue: Whether an agreement to pay in dollars defeat a creditor’s claim for payment.
Held: If there is an agreement to pay an obligation in a currency other than Philippine legal
tender, the same is illegal / null and void as contrary to public policy, pursuant to RA 529, and the
most that can be demanded is to pay the said obligation in Philippine currency. It cannot defeat a
creditor’s claim for payment, for such will allow a person to enrich himself inequitably at another’s
expense. What RA 529 prohibits is the payment of an obligation in dollars. A creditor cannot oblige
the debtor to pay in dollars, even if the loan was given in said currency. In such case, the
indemnity is expressed in Philippine currency on the basis of the current rate of exchange at the
time of payment

Arrieta vs. National Rice & Corn Corporation (NARIC)

GR L-15645, 31 January 1964
En Banc, Regala (J)

Facts: On 19 May 1952, Paz and Vitaliado Arrieta participated in the public bidding called by
NARIC for the supply of 20,000 metric tons of Burmese rice. Ad her bid of $203  per metric ton
was the lowest, she was awarded the contract for the same. As a result of the delay in the opening
of the letter of credit by NARIC, the allocation of Arrieta’s supplier in Rangoon was cancelled and
the 5% deposit amounting to an equivalent of P200,000 was forfeited. Arrieta endeavored but
failed to restore the cancelled Burmese rice allocation, and thus offered Thailand rice instead. Such
offer was rejected by NARIC. Subsequently, Arrieta sent a letter to NARIC, demanding
compensation for the damages caused her in the sum of US$286,000 representing unrealized
profit. The demand having been rejected, she instituted the case.

Issue: Whether the rate of exchange to be applied in the conversion is that prevailing at the time
of breach, or at the time the obligation was incurred, or on the promulgation of the decision.

Held: As pronounced in Eastboard Navigation vs. Ismael, if there is any agreement to pay an
obligation in the currency other than Philippine legal tender, the same is null and void as contrary
to public policy (RA 529), and the most that could be demanded is to pay said obligation in
Philippine currency to be measured in the prevailing rate of exchange at the time the obligation
was incurred. Herein, the rate of exchange to be applied is that of 1 July 1952, when the contract
was executed.

Kalalo vs. Luz

GR L-27782, 31 July 1970
En Banc, Zaldivar (J)

Facts: On 17 November 1959, Octavio Kalalo entered into an agreement with Alfredo Luz where
he was to render engineering design services for a fee. On 11 December 1961, Kalalo sent Luz a
statement of account where the balance due for services rendered was P59,505. On 18 May 1962,
Luz sent Kalalo a resume of fees due to the latter, and a check for P10,861.08. Kalalo refused to
accept the check as full payment of the balance of the fees due him. On 10 August 1962, Kalalo
filed a complaint containing 4 causes of action, i.e. $28,000 (representing 20% of the amount paid
to Luz in the International Research Institute project) and the balance of P30,881.25 as fees;
P17,0000 as consequential and moral damages; P55,000 as moral damages, attorney’s fees and
litigation expenses; and P25,000 as actual damages, attorney’s fees and litigation expenses). The
trial court ruled in favor of Kalalo. Luz filed an appeal directly with the Supreme  Court raising only
questions of law.

Issue: Whether the rate of exchange of dollar to peso are those at the time of the payment of the
judgment or at the time when the research institute project became due and demandable.
Held: Luz’ obligation to pay Kalalo the sum of US$28,000 accrued on 25 August 1961, or after the
enactment of RA 529 (16 June 1950). Thus, the provision of the statute which requires payment at
the prevailing rate of exchange when the obligation was incurred cannot be applied. RA 529 does
not provide for the rate of exchange for the payment of obligation incurred after the enactment of
the Act, and thus the rate of exchange should be that prevailing at the time of payment. The view
finds support in the ruling of the Court in Engel vs. Velasco & Co. The trial court did not err in
holding the rate of exchange is that at the time of payment.

Philippine Bank of Commerce vs. Aruego

GR L-25836-37, 31 January 1981
First Division, Fernandez (J)

Facts: Jose Aruego publishes a periodical called “World Current Events.” To facilitate payment of
the printing, Aruego obtained a credit accommodation from the Philippine Bank of Commerce. For
every printing of the periodical, the printer (Encal Press and Photo-Engraving) collected the cost of
printing by drawing a draft against the bank, said draft being sent later to Aruego for acceptance.
As an added security for the payment of the amounts advanced to the printer, the bank also
required Aruego to execute a trust receipt in favor of the bank wherein Aruego undertook to hold
in trust for the bank the periodicals and to sell the same with the promise to turn over to the bank
the proceeds of the sale to answer for the payment of all obligations arising from the draft. The
bank instituted an action against Aruego to recover the cost of printing of the latter’s periodical for
the period of 28 August 1950 to 14 March 1951.

Issue [1]: Whether the drafts were bills of exchange or mere pieces of evidence of indebtedness.

Held [1]: Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in
writing addressed by one person to another, signed by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in
money to order or to bearer. As long as a commercial paper conforms with the definition of a bill of
exchange, that paper is considered a bill of exchange. The nature of acceptance is important only
in the determination of the kind of liabilities of the parties involved, but not in the determination of
whether a commercial paper is a bill of exchange or not.

Issue [2]: Whether Aruego is an agent of Philippine Education Foundation Company when he
signed the supposed bills of exchange.

Held [2]: Nowhere in the drafts accepted by Aruego that he disclosed that he was signing as
representative of the Philippine Education Foundation Company. For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted, pursuant to Section 20 of the
Negotiable Instruments Law.

Issue [3]: Whether Aruego is primarily liable.

Held [3]: An accommodation party is one who has signed the instrument as maker, drawer,
acceptor, indorser, without receiving value therefor and for the purpose of lending his name to
some other person. Herein, Aruego signed as a drawee / acceptor. Under the Negotiable
Instruments Law, a drawee is primarily liable. If Aruego intended to be secondarily liable only, he
should not have signed as an acceptor / drawee. In doing so, he became primarily and personally
liable for the drafts.
Philippine Bank of Commerce vs. Aruego
GR L-25836-37, 31 January 1981
First Division, Fernandez (J)

Facts: Jose Aruego publishes a periodical called “World Current Events.” To facilitate payment of
the printing, Aruego obtained a credit accommodation from the Philippine Bank of Commerce. For
every printing of the periodical, the printer (Encal Press and Photo-Engraving) collected the cost of
printing by drawing a draft against the bank, said draft being sent later to Aruego for acceptance.
As an added security for the payment of the amounts advanced to the printer, the bank also
required Aruego to execute a trust receipt in favor of the bank wherein Aruego undertook to hold
in trust for the bank the periodicals and to sell the same with the promise to turn over to the bank
the proceeds of the sale to answer for the payment of all obligations arising from the draft. The
bank instituted an action against Aruego to recover the cost of printing of the latter’s periodical for
the period of 28 August 1950 to 14 March 1951.

Issue [1]: Whether the drafts were bills of exchange or mere pieces of evidence of indebtedness.

Held [1]: Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in
writing addressed by one person to another, signed by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in
money to order or to bearer. As long as a commercial paper conforms with the definition of a bill of
exchange, that paper is considered a bill of exchange. The nature of acceptance is important only
in the determination of the kind of liabilities of the parties involved, but not in the determination of
whether a commercial paper is a bill of exchange or not.

Issue [2]: Whether Aruego is an agent of Philippine Education Foundation Company when he
signed the supposed bills of exchange.

Held [2]: Nowhere in the drafts accepted by Aruego that he disclosed that he was signing as
representative of the Philippine Education Foundation Company. For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted, pursuant to Section 20 of the
Negotiable Instruments Law.

Issue [3]: Whether Aruego is primarily liable.

Held [3]: An accommodation party is one who has signed the instrument as maker, drawer,
acceptor, indorser, without receiving value therefor and for the purpose of lending his name to
some other person. Herein, Aruego signed as a drawee / acceptor. Under the Negotiable
Instruments Law, a drawee is primarily liable. If Aruego intended to be secondarily liable only, he
should not have signed as an acceptor / drawee. In doing so, he became primarily and personally
liable for the drafts.

Jimenez vs. Bucoy

GR L-10221, 28 February 1958
En Banc, Bengzon (J)

Facts: In the proceedings in the intestate of Luther Young and Pacita Young who died in 1954 and
1952, respectively, Pacifica Jimenez presented for payment 4 promissory notes signed by Pacita
for different amounts totalling P21,000. Acknowledging receipt by Pacita during the Japanese
occupation, in the currency then prevailing, the Administrator manifested willingness to pay
provided adjustment of the sums be made in line with the Ballantyne schedule. The claimant
objected to the adjustment insisting on full payment in accordance with the notes. The court held
that the notes should be paid in the currency prevailing after the war, and thus entitling Jimemez
to recover P21,000 plus P2,000 as attorney’s fees. Hence, the appeal.

Issue: Whether the amounts should be paid, peso for peso; or whether a reduction should be
made in accordance with the Ballantyne schedule.

Held: If the loan was expressly agreed to be payable only after the war, or after liberation, or
became payable after those dates, no reduction could be effected, and peso-for-peso payment
shall be ordered in Philippine currency. The Ballantyne Conversion Table does not apply where the
monetary obligation, under the contract, was not payable during the  Japanese occupation.
Herein,  the debtor undertook to pay “six months after the war,” peso for peso payment is
indicated.

Dela Victoria vs. Burgos

GR 111190, 27 June 1995
First Division, Bellosillo (J)

Facts: Raul Sesbreno filed a complaint for damages against Assistant City Fiscal Bienvenido
Mabanto before the RTC of Cebu City. After trial, judgment was rendered ordering Mabanto to pay
Sesbreno P11,000. The decision having become final and executory, the trial court ordered its
execution upon Sesbreno’s motion. The writ of execution was issued despite Mabanto’s objection.
A notice of garnishment was served upon Loreto de la Victoria as City Fiscal of Mandaue City
where Mabanto was then detailed. De la Victoria moved to quash the notice of garnishment
claiming that he was not in possession of any money, funds, etc. belonging to Mabanto until
delivered to him, and as such are still public funds which could not be subject of garnishment..

Issue: Whether the checks subject of garnishment belong to Mabanto or whether they still belong
to the government.

Held: Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the purpose of giving
effect thereto. As ordinarily understood, delivery means the transfer of the possession of the
instrument by the maker or drawer with the intent to transfer title to the payee and recognize him
as the holder thereof. Herein, the salary check of a government officer or employee does not
belong to him before it is physically delivered to him. Inasmuch as said checks had not yet been
delivered to Mabanto, they did not belong to him and still had the character of public funds. As a
necessary consequence of being public fund, the checks may not be garnished to satisfy the
judgment.

Caltex (Philippines) Inc. vs. CA

GR 97753, 10 August 1992
Second Division, Regalado (J)

Facts: On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued
280 certificates of time deposit (CTD) in favor of one Angel dela Cruz who deposited with the bank
the aggregate amount of P1.12 million. Anger de la Cruz delivered the CTDs to Caltex in
connection with his purchase of fuel products from the latter. Subsequently, dela Cruz informed
the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance
of the replacement CTDs. De la Cruz was able to obtain a loan of P875,000 from the bank, and in
turn, he executed a notarized Deed of Assignment of Time Deposit in favor of the bank.
Thereafter, Caltex presented for verification the CTDs (which were declared lost by de la Cruz)
with the bank. Caltex formally informed the bank of its possession of the CTDs and its decision to
preterminate the same. The bank rejected Caltex’ claim and demand, after Caltex failed to furnish
copy of the requested documents evidencing the guarantee agreement, etc. In 1983, de la Cruz’
loan matured and the bank set-off and applied the time deposits as payment for the loan. Caltex
filed the complaint, but which was dismissed.

Issue [1]: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.

Held [1]: The CTDs in question meet the requirements of the law for negotiability. Contrary to the
lower court’s findings, the CTDs are negotiable instruments (Section 1). Negotiability or non-
negotiability of an instrument is determined from the writing, i.e. from the face of the instrument
itself. The documents provided that the amounts deposited shall be repayable to the depositor.
The amounts are to be repayable to the bearer of the documents, i.e. whosoever may be the
bearer at the time of presentment.

Issue [2]: Whether the CTDs’ negotiation require delivery only.

Held [2]: Although the CTDs are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between it (Caltex) and de la Cruz requires both delivery and
indorsement; as the CTDs were delivered to it as security for dela Cruz’ purchases of its fuel
products, and not for payment. Herein, there was no negotiation in the sense of a transfer of title,
or legal title, to the CTDs in which situation mere delivery of the bearer CTDs would have sufficed.
The delivery thereof as security for the fuel purchases at most constitutes Caltex as a holder for
value by reason of his lien. Accordingly, a negotiation for such purpose cannot be effected by mere
delivery of the instrument since the terms thereof and the subsequent disposition of such security,
in the event of non-payment of the principal obligation, must be contractually provided for.

Republic Planters Bank vs. CA

GR 93073, 21 December 1992
Second Division, Campos Jr. (J)

Facts: Republic Planters Bank  issued 9 promissory notes signed by Shozo Yamaguchi (President)
and Fermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc. Yamaguchi and Canlas
were authorized by the corporation to apply for credit facilities with the bank in form of export
advances and letters of credit  or trust receipts accommodations. Three years after, the bank filed
an action to recover the sums of money covered by the promissory notes. Worldwide Garment
Manufacturing changed its name to Pinch Manufacturing Corp. Canlas alleged he was not liable
personally for the corporate acts that he performed, and that the notes were still blank when he
signed them.

Issue: Whether the corporate treasurer is liable for the amounts in the promissory notes.

Held: Canlas is a co-maker of the promissory notes, under the law, and cannot escape liability
arising therefrom. Inasmuch as the instrument contained the words “I promise to pay” and is
signed by two or more persons, said persons are deemed to be jointly and severally liable thereon.
As the promissory notes are stereotype ones issued by the bank in printed form with blank spaces
filled up as per agreed terms of the loan, following customary procedures, leaving the debtors to
do nothing but read the terms and conditions therein and to sign as makers or co-makers. Section
14 of the Negotiable Instruments Law, therefore, does not apply. Canlas is solidarily liable with the
corporation for the amount of the 9 promissory notes.