Ponce vs.

CAGR L-49444, 31 May 1979First Division, Melencio-Herrera (J)Facts: On 3 June 1969, Jesus Afable, together with Feliza Mendoza and Ma. Aurora Dino executed apromissory note in favor of Nelia Ponce in the sum of P814,868.42 payable without interest on or before 31July 1969, subject to an interest of 12% per annum if not paid at maturity, and an additional sum equivalent to10% of total amount due as attorneys fees in case it is necessary to bring suit, and the execution of a firstmortgage on their properties or the Carmen Planas Memorial Inc. in the event of failure to pay theindebtedness in accordance with the terms. Upon failure of the debtors to pay, a complaint was filed againstthem for the recovery of the principal sum, plus interest and damages. The trial court rendered judgment infavor of Ponce. The Court of Appeals affirmed the decision of the trial court. On the second motion forreconsideration, however, the appellate court reversed the judgment and opined that the intent of the partieswas that the note was payable in US dollars which is illegal, with neither party entitled to recover under thein pari delicto rule. Issue: Whether an agreement to pay in dollars defeat a creditors claim for payment. Held: If there is an agreement to pay an obligation in a currency other than Philippine legal tender, the sameis illegal / null and void as contrary to public policy, pursuant to RA 529, and the most that can be demandedis to pay the said obligation in Philippine currency. It cannot defeat a creditors claim for payment, for suchwill allow a person to enrich himself inequitably at anothers expense. What RA 529 prohibits is the paymentof an obligation in dollars. A creditor cannot oblige the debtor to pay in dollars, even if the loan was given insaid currency. In such case, the indemnity is expressed in Philippine currency on the basis of the current rateof exchange at the time of payment.

Philippine Education Co. vs. SorianoGR L-22405, 30 June 1971En 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 the10 money orders without the knowledge of the teller. Upon discovery, message was sent to all postmastersand banks involving the unpaid money orders. One of the money orders was received by the PhilippineEducation Co. as part of its sales receipt. It was deposited by the company with the Bank of America, whichcleared it with the Bureau of Post. The Postmaster, through the Chief of the

Money Order Division of theManila Post Office informed the bank of the irregular issuance of the money order. The bank debited theaccount 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 insaid country is that Postal money orders are not negotiable instruments inasmuch as the establishment of apostal money order is an exercise of governmental power for the publics benefit. Furthermore, some of therestrictions imposed upon money order by postal laws and regulations are inconsistent with the character ofnegotiable instruments. For instance, postal money orders may be withheld under a variety of circumstances,and which are restricted to not more than one indorsement

to warrant the instrument as genuine, valid and subsisting at the time of indorsementpursuant to Section 66 of the Negotiable Instruments Law. The stamp guaranteeing priorindorsement is not an empty rubric; the collecting bank is held accountable for checksdeposited by its customers. However, due to the fact that the Province of Tarlac is equallynegligent in permitting Pangilinan to collect the checks when he was no longer connectedwith the hospital, it shares the burden of loss from the checks bearing a forgedindorsement. Therefore, the Province can only recover 50% of the amount from the draweebank (PNB), and the collecting bank (Associated Bank) is liable to PNB for 50% of the sameamount. Banco De Oro v. Equitable Bank, 1988 Facts: Banco De Oro drew six crossed Manager's check payable to certain member establishments of Visa Card. The Checks were deposited with Equitable Bank to the credit of its depositor, ascertain Aida Trencio. After stamping at the back of the Checks the usual endorsements: 'All prior and/or lack of endorsement guaranteed' the defendant sent the checks for clearing through the Philippine Clearing House Corporation (PCHC) Banco De Oro paid the Checks and its clearing account was debited for the value of the Checks and Equitable Banks clearing account was credited for the same amount. Thereafter, Banco De Oro discovered that the endorsements appearing at the back of the Checks and purporting to be that of the payees were forged and/or unauthorized or otherwise belong to persons other than the payees.

Banco De Oro presented the Checks directly to Equitable Bank for the purpose of claiming reimbursement from the latter. However, defendant refused to accept such direct presentation and to reimburse Banco De Oro for the value of the Checks Hence, this case. Issue: Whether Banco De Oro could collect reimbursement from Equitable Bank. Ruling: Yes. The petitioner having stamped its guarantee of "all prior endorsements and/or lack of endorsements" is now estopped from claiming that the checks under consideration are not negotiable instruments. It led the said respondent to believe that it was acting as endorser of the checks and on the strength of this guarantee said respondent cleared the checks in question and credited the account of the petitioner. Petitioner is now barred from taking an opposite posture by claiming that the disputed checks are not negotiable instrument. A commercial bank cannot escape the liability of an endorser of a check and which may turn out to be a forged endorsement. Whenever any bank treats the signature at the back of the checks as endorsements and thus logically guarantees the same as such there can be no doubt said bank has considered the checks as negotiable.The collecting bank or last endorser generally suffers the loss because it has the duty toascertain the genuineness of all prior endorsements considering that the act of presenting

the check for payment to the drawee is an assertion that the party making the presentmenthas done its duty to ascertain the genuineness of the endorsements.While the drawer generally owes no duty of diligence to the collecting bank, the law imposesa duty of diligence on the collecting bank to scrutinize checks deposited with it for thepurpose of determining their genuineness and regularity. The collecting bank being primarilyengaged in banking holds itself out to the public as the expert and the law holds it to a highstandard of conduct.

136 Philippine Airlines Inc. vs CA RegaladoGR No. 120262 July 17, 1997| FACTS On October 23, 1988, private respondent Pantejo, then City Fiscal of Surigao City, boarded a PAL plane in Manila and disembarked in Cebu City where he was supposed to take his connecting flight to Surigao City However, due to typhoon Osang, the connecting flight to Surigao City was cancelled. To accommodate the needs of its stranded passengers, PAL initially gave out cash assistance of P100.00 and, the next day, P200.00, for their expected stay of two days in Cebu. Respondent Pantejo requested instead that he be billeted in a hotel at PALs expensebecause he did not have cash with him at that time, but PAL refused. Thus, respondent Pantejo was forced

to seek and accept the generosity of a co-passenger, an engineer named Andoni Dumlao, and he shared a room with the latterat Sky View Hotel with the promise to pay his share of the expenses upon reaching Surigao. On October 25, 1988 when the flight for Surigao was resumed, respondent Pantejocame to know that the hotel expenses of his co-passengers, one SuperintendentErnesto Gonzales and a certain Mrs. Gloria Rocha, an auditor of the PhilippineNational Bank, were reimbursed by PAL. At this point, respondent Pantejo informed Oscar Jereza, PALs Manager forDeparture Services at Mactan Airport and who was in charge of cancelled flights,that he was going to sue the airline for discriminating against him. It was only thenthat Jereza offered to pay respondent Pantejo P300.00 which, due to the ordeal andanguish he had undergone, the latter decline. ISSUES & ARGUMENTS W/N PAL can establish the defense of force majeure.

HOLDING & RATIO DECIDENDI Yes. PAL can establish the defense of force majeure but it is still liable for damages. Petitioner theorizes that the hotel accommodations or cash assistance given in case aflight is cancelled is in the nature of an amenity and is merely a privilege that may beextended at its own discretion, but never a right that may be demanded by itspassengers. Thus, when respondent Pantejo was offered cash assistance and herefused it, petitioner cannot be held liable for whatever befell respondent Pantejo onthat fateful day, because it was merely exercising its discretion when it opted to justgive cash assistance to its passengers. Assuming arguendo that the airline passengers have no vested right to these amenitiesin case a flight is cancelled due to force majeure, what makes petitioner liable fordamages in this particular case and under the facts obtaining herein is its blatantrefusal to accord the so-called amenities equally to all its stranded passengers who were bound for Surigao City. No compelling or justifying reason was advanced forsuch discriminatory and prejudicial conduct.. More importantly, it has been sufficiently established that it is petitioner's standardcompany policy, whenever a flight has been cancelled, to extend to its haplesspassengers cash assistance or to provide them accommodations in hotels with whichit has existing tieups. In fact, petitioner's Mactan Airport Manager for departureservices, Oscar Jereza, admitted that PAL has an existing arrangement with hotels toaccommodate stranded passengers, and that the hotel bills of Ernesto Gonzales were reimbursed obviously pursuant to that policy

NATIONAL MARKETING vs. FEDERATION OF UNITED NAMARCO DISTRIBUTORS G.R. No. L-22578 January 31, 1973 Facts: NAMARCO and the FEDERATION entered into a Contract of Sale. NAMARCO was authorized to import the following items with the corresponding dollar value totalling $2,001,031.00. Among the goods covered by the Contract of Sale were 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, 500 cartons of Adams Chicklets, 168 cartons of Blue Denims, and 138 bales of Khaki Twill. To insure the payment of those goods by the FEDERATION, the NAMARCO accepted three domestic letters of credit. FEDERATION received from the NAMARCO the 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets, all with a total value of P277,357.91, under the condition that the cost thereof would be paid in cash through PNB Domestic L/C No. 600570; and on February 20, 1960, the FEDERATION received from the NAMARCO the 168 cartons of Blue Denims and 183 bales of Khaki Twill, with a total value of P135,891.82 and P197,804.12, respectively, under the condition that the cost thereof would be paid in cash through PNB Domestic L/C Nos. 600606 and 600586, respectively. FEDERATION filed a complaint against the NAMARCO for specific performance and damages, alleging that after the NAMARCO had delivered a great portion of the goods listed in the Contract of Sale, it refused to deliver the other goods mentioned in the said contract. NAMARCO has refused and declined to accept the cash payments by the FEDERATION. According to NAMARCO, the Contract of Sale was not validly entered into by the NAMARCO and, therefore, it is not bound by the provisions thereof. PNB informed NAMARCO that it could not negotiate and effect payment on the sight drafts drawn under PNB Domestic L/Cs as the requirements of the covering letters of credit had not been complied with. The common condition of the three letters of credit is that the sight drafts drawn on them must be duly accepted by the FEDERATION before they will be honored by the Philippine National Bank. But the said drafts were not presented to the FEDERATION for acceptance. NAMARCO demanded from the FEDERATION the payment of the total amount of P611,053.35, but the latter failed and refused to pay the said amount. CFI Manila promulgated its decision ordering the NAMARCO to specifically perform its obligation in the Contract of Sale, by delivering to the FEDERATION the undelivered goods. Issue: WON the mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO operate to discharge the debt of the FEDERATION? Held: No. Mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO did not operate to discharge the debt of the FEDERATION. As shown by the appealed

judgment NAMARCO accepted the three letters of credit to insure the payment of those goods by the FEDERATION. It was given therefore as a mere guarantee for the payment of the merchandise. The delivery of promissory notes payable to order, or bills of exchange or drafts or other mercantile document shall produce the effect of payment (1) only when realized, or (2) when by the fault of the creditor, the privileges inherent in their negotiable character have been impaired. (Art. 1249 New Civil Code.) The clause of Article 1249 relative to the impairment of the negotiable character of the commercial paper by the fault of the creditor, is applicable only to instruments executed by third persons and delivered by the debtor to the creditor, and does not apply to instruments executed by the debtor himself and delivered to the creditor. In the case at bar it is not even pretended that the negotiable character of the sight drafts was impaired as a result of the fault of NAMARCO. The fact that NAMARCO attempted to collect from the Philippine National Bank on the sight drafts on March 10, 1960, is of no material significance. As heretofore stated they were never taken, in the first instance as payment. There was no agreement that they should be accepted as payment. The mere fact that NAMARCO proceeded in good faith to try to collect payments thereon, did not amount to an appropriation by it of the amounts mentioned in the sight drafts so as to release its claims against the FEDERATION. A mere attempt to collect or enforce a bill or note from which no payment results is not such an appropriation of it as to discharge the debt.

Banco De Oro v. Equitable Bank, 1988

FACTS: BDO drew checks payable to member establishments. Subsequently, the checks were deposited in Trencios account with Equitable. The checks were sent for clearing and was thereafter cleared. Afterwards, BDO discovered that the indorsements in the back of the checks were forged. It then demanded that Equitable credit its account but the latter refused to do so. This prompted BDO to file a complaint against Equitable and PCHC. The trial court and RTC held in favor of the Equitable and PCHC. HELD: First, PCHC has jurisdiction over the case in question. The articles of incorporation of PHHC extended its operation to clearing checks and other clearing items. No doubt transactions on non-negotiable checks are within the ambit of its jurisdiction. Further, the participation of the two banks in the clearing operations is submission to the jurisdiction of the PCHC. Petitioner is likewise estopped from raising the non-negotiability of the checks in issue. It stamped its guarantee at the back of the checks and subsequently presented it for clearing and it was in the basis of these endorsements by the petitioner that the proceeds were credited in its clearing account. The petitioner cannot now deny its liability as it assumed the liability of an indorser by stamping its guarantee at the back of the checks. Furthermore, the bank cannot escape liability of an indorser of a check and which may turn out to be a forged indorsement. Whenever a bank treats the signature at the back of the checks as indorsements and thus logically guarantees the same as such there can be no doubt that said bank had considered the checks as negotiable. A long line of cases also held that in the matter of forgery in endorsements, it is the collecting bank that generally suffers the loss because it had the dutyh to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the indorsements.

Consolidated Plywood Industries Inc. vs. IFC Leasing and Acceptance Corp. [GR 72593, 30 April 1987] Second Division, Gutierrez Jr. (J): 5 concur Facts: Consolidated Plywood Industries Inc. (CPII) is a corporation engaged in the logging business. It had for its program of logging activities for the year 1978 the opening of additional roads, and simultaneous logging operations along the route of said roads, in its logging concession area at Baganga, Manay, and Commercial Law Negotiable Instruments Law, 2006 ( 12 )Narratives (Berne Guerrero) Caraga, Davao Oriental. For this purpose, it needed 2 additional units of tractors. Cognizant of CPII's needn and purpose, Atlantic Gulf & Pacific Company of Manila, through its sister company and marketing arm, Industrial Products Marketing (IPM), a corporation dealing in tractors and other heavy equipment business, offered to sell to CPII 2 "Used" Allis Crawler Tractors, 1 an HD-21-B and the other an HD-16-B. In order to ascertain the extent of work to which the tractors were to be exposed, and to determine the capability of the "Used" tractors being offered, CPII requested the seller-assignor to inspect the jobsite. After conducting said inspection, IPM assured CPII that the "Used" Allis Crawler Tractors which were being offered were fit for the job, and gave the corresponding warranty of 90 days performance of the machines and availability of parts. With said assurance and warranty, and relying on the IPM's skill and judgment, CPII through Henry Wee and Rodolfo T. Vergara, president and vice-president, respectively, agreed to purchase on installment said 2 units of "Used" Allis Crawler Tractors. It also paid the down payment of P210,000.00. On 5 April 1978, IPM issued the sales invoice for the 2 units of tractors. At the same time, the deed of sale with chattel mortgage with promissory note was executed. Simultaneously with the execution of the deed of sale with chattel mortgage with promissory note, IPM, by means of a deed of assignment, assigned its rights and interest in the chattel mortgage in favor of IFC Leasing and Acceptance Corporation. Immediately thereafter, IPM delivered said 2 units of "Used" tractors to CPII's jobsite and as agreed, IPM stationed its own mechanics to supervise the operations of the machines. Barely 14 days had elapsed after their delivery when one of the tractors broke down and after another 9 days, the other tractor likewise broke down. On 25 April 1978, Vergara formally advised IPM of the fact that the tractors broke down and requested for IPM's usual prompt attention under the warranty. In response to the formal advice by Vergara, IPM sent to the jobsite its mechanics to conduct the necessary repairs, but the tractors did not come out to be what they should be after the repairs were undertaken because the units were no longer serviceable. Because of the breaking down of the tractors, the road building and simultaneous

logging operations of CPII were delayed and Vergara advised IPM that the payments of the installments as listed in the promissory note would likewise be delayed until IPM completely fulfills its obligation under its warranty. Since the tractors were no longer serviceable, on 7 April 1979, Wee asked IPM to pull out the units and have them reconditioned, and thereafter to offer them for sale. The proceeds were to be given to IFC Leasing and the excess, if any, to be divided between IPM and CPII which offered to bear 1/2 of the reconditioning cost. No response to this letter was received by CPII and despite several follow-up calls, IPM did nothing with regard to the request, until the complaint in the case was filed by IFC Leasing against CPII, Wee, and Vergara. The complaint was filed by IFC Leasing against CPII, et al. for the recovery of the principal sum of P1,093,789.71, accrued interest of P151,618.86 as of 15 August 1979, accruing interest there after at the rate of 12% per annum, attorney's fees of P249,081.71 and costs of suit. CPII, et al. filed their amended answer praying for the dismissal of the complaint and asking the trial court to order IFC leasing to pay them damages in an amount at the sound discretion of the court, P20,000.00 as and for attorney's fees, and P5,000.00 for expenses of litigation, among others. In a decision dated 20 April 1981, the trial court rendered judgment, ordering CPII, et al. to pay jointly and severally in their official and personal capacities the principal sum of P1,093,798.71 with accrued interest of P151,618.86 as of 15 August 1979 and accruing interest thereafter at the rate of 12% per annum; and attorney's fees equivalent to 10% of the principal and to pay the costs of the suit. On 8 June 1981, the trial court issued an order denying the motion for reconsideration filed by CPII, et al. CPII, et al.appealed to the Intermediate Appellate Court. On 17 July 1985, the Intermediate Appellate Court issued the decision affirming in toto the decision of the trial court. CPII et al.'s motion for reconsideration was denied by the Intermediate Appellate Court in its resolution dated 17 October 1985, a copy of which was received by CPII, et al. on 21 October 1985. CPII, et al. filed the petition for certiorari under rule 45 of the Rules of Court. Issue: Whether the promissory note in question is a negotiable instrument. Held: The pertinent portion of the note provides that ""FOR VALUE RECEIVED, I/we jointly and severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING, the sum of ONE MILLION NINETY THREE THOUSAND SEVEN HUNDRED EIGHTY NINE PESOS & 71/100 only (P1,093,789.71), Philippine Currency, the said principal sum, to be payable in 24 monthly installments starting July 15, 1978 Commercial Law Negotiable Instruments Law, 2006 ( 13 )Narratives (Berne Guerrero) and every 15th of the month thereafter until fully paid." Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires that a promissory note "must be payable to order or bearer," it cannot be denied that the promissory note in question is not a negotiable instrument. The instrument in order to be considered negotiable must contain the so called "words of negotiability" i.e., must be payable to "order" or "bearer." These

words serve as an expression of consent that the instrument may be transferred. This consent is indispensable since a maker assumes greater risk under a negotiable instrument than under a nonnegotiable one. Without the words "or order" or "to the order of," the instrument is payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available against the latter. Therefore, considering that the subject promissory note is not a negotiable instrument, it follows that IFC Leasing can never be a holder in due course but remains a mere assignee of the note in question. Thus, CPII may raise against IFC Leasing all defenses available to it as against IPM. This being so, there was no need for CPII to implead IPM when it was sued by IFC Leasing because CPII's defenses apply to both or either of them.