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Eventually, Metrobank informed Golden Savings that 32 of Sec. 3. When promise is unconditional. — An
the warrants had been dishonored by the Bureau of unqualified order or promise to pay is
Treasury and demanded the refund by Golden Savings of unconditional within the meaning of this Act
the amount it had previously withdrawn, to make up the though coupled with —
deficit in its account.
(a) An indication of a particular fund out of which
The demand was rejected. Metrobank then sued Golden reimbursement is to be made or a particular
Savings. account to be debited with the amount; or
To the above petition, the LTA filed a timely answer Estrella O. Querimit worked as internal auditor of the
sustaining the petitioners' stand. The Secretary of Finance, Philippine Savings Bank (PSB) for 19 years, from 1963 to
represented by the Solicitor General, also filed an answer, 1992. She opened a dollar savings account in petitioner's
which argued that he was not a necessary party to the case Harrison Plaza branch,[4] for which she was issued four (4)
as he was not the officer with the duty of collecting taxes. Certificates of Deposit each certificate representing the
amount of $15,000.00, or a total amount of $60,000.00. The
In effect, however, they resolve themselves into the single certificates were to mature in 60 days and were payable to
question of whether or not the said certificates where bearer at 4.5% interest per annum. The certificates bore the
drawn payable on demand as required by Section 9 of word "accrued," which meant that if they were not
Republic Act 1400. presented for encashment or pre-terminated prior to
maturity, the money deposited with accrued interest would
be "rolled over" by the bank and annual interest would
accumulate automatically. The petitioner bank's manager
The trial court rendered judgment for respondent. Court of Respondents-Spouses Erlando and Norma Rodriguez were
Appeals affirmed the decision of the trial court. The appeals clients of petitioner Philippine National Bank (PNB). They
court stated that petitioner FEBTC failed to prove that the maintained savings and demand/checking accounts,
certificates of deposit had been paid out of its funds, since namely, PNBig Demand Deposits (Checking/Current Account
"the evidence by the [respondent] stands unrebutted that No. 810624-6 under the account name Erlando and/or
the subject certificates of deposit until now remain Norma Rodriguez), and PNBig Demand Deposit
unindorsed, undelivered and unwithdrawn by her. (Checking/Current Account No. 810480-4 under the account
name Erlando T. Rodriguez).
ISSUE
The spouses were engaged in the informal lending
business. In line with their business, they had a
Whether the subject certificates of deposit have already discounting3arrangement with the Philnabank Employees
been paid by petitioner. Savings and Loan Association (PEMSLA), an association of
PNB employees. Naturally, PEMSLA was likewise a client of
HELD PNB
NO. Petitioner bank failed to prove that it had already paid PEMSLA regularly granted loans to its members. Spouses
Estrella Querimit, the bearer and lawful holder of the Rodriguez would rediscount the postdated checks issued to
subject certificates of deposit. The finding of the trial court members whenever the association was short of funds. As
on this point, as affirmed by the Court of Appeals, is that was customary, the spouses would replace the postdated
petitioner did not pay either respondent Estrella or her checks with their own checks issued in the name of the
husband the amounts evidenced by the subject certificates members.
of deposit. A certificate of deposit is defined as a written
acknowledgment by a bank or banker of the receipt of a It was PEMSLA’s policy not to approve applications for loans
sum of money on deposit which the bank or banker of members with outstanding debts. To subvert this policy,
promises to pay to the depositor, to the order of the some PEMSLA officers devised a scheme to obtain
depositor, or to some other person or his order, whereby additional loans despite their outstanding loan accounts.
the relation of debtor and creditor between the bank and They took out loans in the names of unknowing members,
the depositor is created. The principles governing other without the knowledge or consent of the latter. The PEMSLA
types of bank deposits are applicable to certificates of checks issued for these loans were then given to the
deposit,[25] as are the rules governing promissory notes spouses for rediscounting. The officers carried this out by
when they contain an unconditional promise to pay a sum forging the indorsement of the named payees in the checks.
certain of money absolutely.[26] The principle that
payment, in order to discharge a debt, must be made
to someone authorized to receive it is applicable to In return, the spouses issued their personal checks
the payment of certificates of deposit. Thus, a bank (Rodriguez checks) in the name of the members and
will be protected in making payment to the holder of a delivered the checks to an officer of PEMSLA. The PEMSLA
certificate indorsed by the payee, unless it has notice of the checks, on the other hand, were deposited by the spouses
invalidity of the indorsement or the holder's want of title. to their account.
[27] A bank acts at its peril when it pays deposits
evidenced by a certificate of deposit, without its The Rodriguez checks were deposited directly by PEMSLA to
production and surrender after proper indorsement. its savings account without any indorsement from the
[28] As a rule, one who pleads payment has the named payees. This was an irregular procedure made
burden of proving it. Even where the plaintiff must possible through the facilitation of Edmundo Palermo, Jr.,
allege non-payment, the general rule is that the treasurer of PEMSLA and bank teller in the PNB Branch.
burden rests on the defendant to prove payment,
Since the tractors were no longer serviceable, on April 7, xxx xxx xxx
1979, petitioner Wee asked the seller-assignor to pull out
the units and have them reconditioned, and thereafter to
When instrument is payable to order.
offer them for sale. The proceeds were to be given to the
respondent and the excess, if any, to be divided between
the seller-assignor and petitioner-corporation which offered SEC. 8. WHEN PAYABLE TO ORDER. — The
to bear one-half (1/2) of the reconditioning instrument is payable to order where it is
drawn payable to the order of a specified
person or to him or his order. . . .
The seller-assignor did nothing with regard to the request,
until the complaint in this case was filed by the respondent
against the petitioners, the corporation, Wee, and Vergara. xxx xxx xxx
The complaint was filed by the respondent against the These are the only two ways by which an
petitioners for the recovery of the principal sum and instrument may be made payable to
accrued interest order. There must always be a specified
person named in the instrument. It means
that the bill or note is to be paid to the
ISSUE:
person designated in the instrument or to
any person to whom he has indorsed and
Whether or not the promissory note in question is a delivered the same. Without the words
negotiable instrument so as to bar completely all the "or order" or"to the order of, "the
available defenses of the petitioner against the respondent- instrument is payable only to the person
assignee. designated therein and is therefore non-
negotiable. Any subsequent purchaser
thereof will not enjoy the advantages of
HELD
being a holder of a negotiable instrument
but will merely "step into the shoes" of
The promissory note is NOT a negotiable instrument. the person designated in the instrument
and will thus be open to all defenses
available against the latter."
It is patent then, that the seller-assignor is liable for its
breach of warranty against the petitioner. This liability as a
general rule, extends to the corporation to whom it Therefore, considering that the subject promissory note is
assigned its rights and interests unless the assignee is a not a negotiable instrument, it follows that the respondent
holder in due course of the promissory note in question, can never be a holder in due course but remains a mere
Negotiable Instruments Law Case Digest Page 14
assignee of the note in question. Thus, the petitioner may The DOJ issued its resolution5 affirming the prosecutor’s
raise against the respondent all defenses available to it as Resolution dismissing the case.
against the seller-assignor Industrial Products Marketing.
Ruling of the Court of Appeals
Secondly, even conceding for purposes of discussion that
the promissory note in question is a negotiable instrument,
The CA found that the postdated checks were issued by
the respondent cannot be a holder in due course for a more
Puzon merely as a security for the payment of his
significant reason:
purchases and that these were not intended to be
encashed. It thus concluded that SMC did not acquire
The respondent had actual knowledge of the fact that the ownership of the checks as it was duty bound to return the
seller-assignor's right to collect the purchase price was not same checks to Puzon after the transactions covering them
unconditional, and that it was subject to the condition that were settled. The CA agreed with the prosecutor that there
the tractors -sold were not defective. The respondent knew was no theft, considering that a person cannot be charged
that when the tractors turned out to be defective, it would with theft for taking personal property that belongs to
be subject to the defense of failure of consideration and himself.
cannot recover the purchase price from the petitioners.
Even assuming for the sake of argument that the
ISSUE
promissory note is negotiable, the respondent, which took
the same with actual knowledge of the foregoing facts so
that its action in taking the instrument amounted to bad Whether the checks issued by Puzon were payments for his
faith, is not a holder in due course. purchases or were intended merely as security to ensure
payment.
SAN MIGUEL CORPORATION vs. BARTOLOME PUZON,
JR. "[T]he essential elements of the crime of theft are the
following: (1) that there be a taking of personal property;
(2) that said property belongs to another; (3) that the taking
FACTS be done with intent to gain; (4) that the taking be done
without the consent of the owner; and (5) that the taking be
Respondent Bartolome V. Puzon, Jr., (Puzon) owner of accomplished without the use of violence or intimidation
Bartenmyk Enterprises, was a dealer of beer products of against persons or force upon things."
petitioner San Miguel Corporation. Puzon purchased SMC
products on credit. To ensure payment and as a business Considering that the second element is that the thing
practice, SMC required him to issue postdated checks taken belongs to another, it is relevant to determine
equivalent to the value of the products purchased on credit whether ownership of the subject check was transferred to
before the same were released to him. Said checks were petitioner. On this point the Negotiable Instruments Law
returned to Puzon when the transactions covered by these provides:
checks were paid or settled in full.