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Nego Digests Compiled Section 1 Roman Catholic of Malolos v IAC FACTS: July 7, 1971-A contract over a piece of land

d in San Jose del Monte was executed between the petitioner as vendor and the private respondent as vendee, stipulating for a downpayment of P23,930 and the balance of P100, 000 plus 12% interest per annum to be paid within (4) four years from execution of the contract, that is, on or before July 7, 1975 The contract provides for cancellation, forfeiture of previous payments, and reconveyance of the land in question in case the private respondent fails to complete the payment within the said period July 17, 1975-after the expiration of the stipulated period, private respondent wrote petitioner a formal request that her company be allowed to pay the principal amount of P100,000 in three (3) equal installment of (6) six months each with the first installment and the accrued interest of P24,000 to be paid immediately upon approval of the said request July 29, 1975-petitioner denied said request, but granted the latter a grace period of five (5) days from receipt of denial letter to pay the total balance of P124,000, otherwise, cancellation, forfeiture and reconveyance will be implemented August 4, 1975-the private respondent wrote petitioner requesting for an extension of 30 days from said date to fully settle its account -->such request for an extension was eventually denied through a letter dated August 7, 1975 by petitioner Private respondent wrote a letter dated August 22, 1975 addressed to petitioner, protesting the alleged refusal of the latter to accept tender of payment purportedly made by the former on August 5, 1975 on the last day of the grace period. In the same letter, private respondent demanded the execution of a deed of absolute sale over the land in question and after which it would pay its account in full, otherwise, judicial action would be resorted to (SORRY, MAGULO 'TONG PART NA 'TO. SINABI NIYA NA NAGBAYAD SIYA PERO DI LANG "daw" TINANGGAP YUNG TENDER OF PAYMENT. PERO AFTER, PARANG INAMIN NARIN NIYA NA DI PA SIYA NAGBABAYAD DAHIL ANG GUSTO NIYANG MANGYARI, BIGYAN MUNA SIYA NG DEED OF ABSOLUTE SALE BEFORE NIYA BAYARAN YUNG OBLIGATION IN FULL) August 27, 1975-petitioner wrote a reply stating refusal to execute the deed of absolute sale due to respondent's failure to pay its full obligation. Petitioner denied that the respondent had made tender of payment whatsoever within the grace period

Due to the breach of contract, petitioner cancelled the contract and considered all previous payments forfeited and the land reconveyed

RULING OF THE RTC: In favor of Petitioner Roman Catholic Bishop of Malolos Respondent's claim that she made tender of payment on August 5, considered in relation to the circumstances antecedent and subsequent thereto, is not worthy of credence (If respondent had available funds on August 5, then why did respondent have to ask for an extension for 30 days the day before?) There was failure on the part of the respondent to present the certified personal check allegedly tendered as payment or at least a copy or bank records thereof The RTC found out that the respondent had insufficient funds available to fulfill the obligation (respondent only had a savings account of P64,840, and though the she has a money market placement of P300,000, the same has not yet matured)

RULING OF THE CA: In favor of the Respondent As testified by a representative of the Insular Bank, respondent could withdraw her her money anytime and place it at her disposal, thus proving her financial capability of paying the P124,000 due The CA, in finding that the respondent had sufficient available funds, ipso facto concluded that the latter had tendered payment

ISSUES BEFORE THE SUPREME COURT: A. Is the finding that private respondent had sufficient available funds on or before the grace period for the payment of its obligation proof that it did tender of payment for its said obligation within said period? B. Is it the legal obligation of the petitioner to execute a deed of absolute sale in favor of respondent before the latter has actually paid the complete consideration of the sale where in the contract between the parties, it is stipulated that "upon complete payment of the agreed consideration by herein VENDEE, the VENDOR shall cause the execution of a deed of absolute sale in favor of the VENDEE" C. Is an offer of a check a valid tender of payment considering that the contract stipulates that the consideration of the sale is in Philippine Currency? HELD/RATIO: A. No. Tender of Payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former's obligation and demanding that the latter accept the same. Thus, tender of payment cannot be presumed by a mere interference of surrounding circumstances. Sufficiency of available funds is only affirmative of the capacity of the obligor to fulfill his part of the bargain. But whether or not the obligor avails himself of such funds to settle his obligation remains to

be proven by independent and credible evidence.A proof that an act could have been done is no proof that it was actually done. B. No. In private respondent's testimony during the cross-examination, she admitted into wanting the defendant to execute the Deed of Absolute Sale before she gives the personal certified check as payment for her balance. The subject contract clearly provides that the full payment by the private respondent is a priori condition for the execution of the absolute deed of sale. Such is the condition expressly stipulated in their contract. Art, 1159 of the Civil Code provides that "obligations arising from contracts have the force of law between parties and should be complied with in good faith." And unless the stipulations in said contract are contrary to law, morals, good customs, public order, or public policy, the same are binding as between the parties. Respondent should have paid the petitioner within the grace period and obtained a receipt of payment. Only then could she have demanded petitioner to execute the necessary documents. C. No. Assuming that the respondent did issue a check, the respondent used a certified personal check which is not legal tender nor the currency stipulated. Therefore, it cannot serve as a valid tender of payment. Art. 1249 of the Civil Code provides that "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."Since a negotiable instrument is only a substitute for money, the delivery of such an instrument does not, by itself, operate as payment. 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.

BPI Express Card Corporation v CA Facts: Atty. Marasigan has a credit card membership from BPI since February 1988. His membership was renewed until 1990 increasing his previous credit limit of P3000 to P5000. BPI tolerated his membership even though he often exceeded his credit limit and unusual payment of monthly bills. BPI and Marasigans contractual relationship was smooth until Atty. Marasigans statement of account amounting to P8,987.84 pesos was not paid in due time. According to Marasigan, the non-payment was due to his professional work in Quezon and other commitments. According to his secretary, BPI ordered immediate payment through an issuance of a check amounting to P15,000 which will include his future bills or else. If not acted, BPI threatened to suspend his credit card. Atty.Marasigan. Atty. Marasigan issued a check in the amount of P15,000 postdated to December 15, 1989. It was received on November 23, 1989 by Ms. Lorenzo (BPI). On Nov.28, 1989, BPI mailed Atty. Marasigan that the privileges of the card is temporarily suspended and put his account into the Caution List. There is no showing that Marasigan received such letter before December 8, 1989--- the day where he invited

guests at Caf Adriatico. His card was dishonored and his guest had to pay the bill amounting to P735. A letter dated December 12, 1989 was given to BPI my Atty. Marasigan requesting he be sent a 1) exact billing due him as of December 15 and 2) withhold deposit of his postdated check and said check be returned to him. The letter was due to Banks violation of their agreement that he will issue the check in return of the continued usage of the card. No reply was given by BPI to the letter. Another letter dated March 12, 1990 was sent by Atty. Marasigan to BPI reminding BPI to give him a correct billing and explanation of the December 8 incident. BPI then served its final demand to Atty. Marasigan requiring him to 1) pay in full his overdue account plus fees and charges, 2) replace the cancelled postdated check with CASH within five days of receipt of letter OR FACE COURT ACTION for violation of the Bouncing Checks Law. Atty. Marasigan replied through a letter reiterating the compliance of his PREVIOUS REQUESTS from his letters sent to BPI. Civil case was filed by Atty. Marasigan in the RTC of Makati. The trial court ruled for Atty. Marasigan stating that BPI abused its right in contravention of Article 19 of the CC. Court awarded damages to Atty. Marasigan amounting to P170,000. Atty. Marasigan in turn was ordered to pay P14,439.91 which was his obligation due to BPI. BPI appealed to CA which affirmed the decision with modification on the amount of damages (from P170 k to 85k). Issue/s: Issue 1: Does BPI have the right to suspend Atty. Marasigans credit card? Was there an agreement between the parties which required Atty. Marasigan to issue a check as PAYMENT in return for continued usage of the card? (Relevant to Nego) Issue 2: Was there an abuse of right by BPI? Was the awarding of damage proper? Ruling: Petition is found meritorious. Damages were all cancelled but obligation to pay the balance was sustained. Atty. Marasigan signed the terms and conditions of the credit card membership which states that any card with outstanding balances after 30 days from the issuance of the billing statement shall be suspended. By his admission, there was no payment within 30 days from 27 September 1989 (1st billing statement) and 27 October 1989 (2nd billing statement). If applied, the card should have been automatically suspended on October 27 1989 with the first billing statement as the reference point. Court agrees that there was an agreement between the two parties. However, Atty. Marasigan was not able to comply with his obligation. According to the testimony of Atty. Marasigan, it can be inferred that the agreement was for the IMMEDIATE PAYMENT of the account. The communication involving his secretary and BPI involved a demand for immediate payment of his account balance. There was NO WRITTEN COMMUNICATION requiring Atty. Marasigan to issue a check for payment. (No WRITTEN EVIDENCE presented by Marasigan that BPI suggested the check as payment--- Parol evidence is not favored.) Settled is the doctrine that a check is only a substitute for money and NOT money. Delivery of such instrument does not operate by itself as effective payment. Atty. Marasigan even supported this doctrine through his testimony. Thus, BPI was justified in suspending his credit card. If asked lang on the second issue:

Abuse of right has the ff elements: 1) legal right or duty, 2) exercised in bad faith, 3) for the sole intent of injuring another. Good faith is presumed and the burden of proving BF is on the party alleging it. BPI, as early as October 27, 1989, could have suspended the credit card. Instead, BPI allowed its usage for weeks and made a special accommodation for Atty. Marasigan to make payment. The termination was not capricious and arbitrary. It is true that Atty. Marasigan suffered damages as a result of the cancellation of the credit card. However, there is a difference between INJURY and DAMAGE. Injury is the illegal invasion of a right; damage is the loss hurt or harm which results from the inury form of compensation for the hurt. There can be damages WITHOUT INJURY which in this case is borne by the injured party. It is not a result of a violation of a legal duty. The law affords no remedy for damages resulting from an act which does not amount to legal injury. DAMNUM ABSQUE INJURIA. It was Atty. Marasigans failure to settle his obligation which caused the suspension of his credit card and dishonor at Caf Adriatico.

Caltex v CA FACTS: Security Bank and Trust Company issued 280 certificates of time deposit (CTDs) in favor of Angel dela Cruz who deposited an amount of P1,120,000.00 to the said bank. Dela Cruz used these CTDs to guarantee his purchases of fuel products from Caltex (petitioner). Later on, Dela Cruz said that the same CDTs were lost and so the bank issued him new CTDs. Dela Cruz then took an P875 000 loan from the ban. On March 1978, Dela Cruz surrendered his new CTDs to the bank as payment for the P875,000 he loaned, authorizing the bank to pre-terminate, set-off and apply the time deposits to whatever amounts may be due on the loan upon its maturity. Months later, Caltex informed the bank that it was in possession of the lost CDTs. According to them, they were delivered by Dela Cruz. Caltex wanted to pre-terminate them. The bank asked for necessary documents such as the guarantee agreement as well as the details of Dela Cruzs obligation to Caltex. Since Caltex did not submit any of the requested documents, the bank rejected honoring the CTDs in favor of Caltex. Hence this petition. ISSUE: 1. Whether the CTDs are negotiable instruments - YES 2. Whether the petitioner can rightfully recover on the CTDs - NO HELD: 1. The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself. CA ruled that the CDTs were non-negotiable because it is written in the instrument that the bearer has deposited and it is repayable to said depositor meaning it is

payable, only to the depositor which was Dela Cruz. HOWEVER, SC DISAGREED. The CDTs in question are negotiable instruments. The documents provide that the amounts deposited shall be repayable to the depositor. And according to the document, the depositor is the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable specifically to him. If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical terms in the documents, instead of having the word "BEARER." 2. Although the CTDs are bearer instruments, a valid negotiation requires both delivery and indorsement. Caltex Credit Manager admitted that the CTDs were only used to guarantee the purchases of fuel product. Caltex also failed to show the dates of payment of the alleged indebtedness of Dela Cruz or any receipt showing that the CTDs were delivered as form of payment. The CTDs were only delivered to Caltex but not indorsed. Mere delivery of the CTDs did not vest in petitioner any right binding against respondent bank. Moreover, assignment of CTDs made by Dela Cruz in favor of the bank was embodied in a public instrument so it has a better right over the CTDs.

Inciong v CA Facts: Inciong executed a promissory note (Php 50,000) together with Naybe and Pantosas holding them solidarily liable to PB Com. Inciong failed to pay their obligation. PB Com demanded that payment be made and because there was no response from any of the debtors, PB Com filed a complaint for collection against the 3 debtors. Inciong claimed that he was defrauded to enter into the agreement due to the assurances of Compos who claimed to be a friend of Pio Tio (branch manager of PB Com.). He also claimed that he only agreed to be liable for Php 5,000. The lower court ruled against Inciong. CA affirmed. Issue: W/N Inciong is liable to the pay the obligation. Held: Yes, Inciong is liable to pay. There is no merit in Inciongs assertion that parol evidence may overcome the contents of the promissory note as it is only a commercial document. The rule on parol evidence applies to written contracts, regardless of the type. As such, parol evidence cannot overcome the contents of the promissory note. When the terms of agreement have been reduced in writing, it is considered as containing all terms agreed upon, and there can be no evidence of such terms other than the contents of the written agreement. Because the promissory note expressly states that the three signatories

therein are jointly and severally liable, any one, some, or all of them may be proceeded against for the entire obligation. It should also be noted that there is a difference between guarantor and solidary debtor. A guarantor binds himself to the creditor to full the obligation of the principal debtor in case the latter should fail to do so. Whereas, the solidary debtor assumes to pay the debt before the property of the principal debtor has been exhausted. As regards the assertion that there was fraud and misrepresentation as to the amount of liability, the Court finds no jurisdiction as it is a factual issue. Traders Royal Bank v CA FACTS - Filriters, as owner, executed a Detached Assignment wherein it sold, transferred and assigned unto Philfinance all its rights and title to its Central Bank Certificate of Indebtedness (CBCI). The notes amounted to around 3.5 million pesos. Alfredo Banaria, Senior VP of the Treasury of Filriters executed the assignment without any clearance or authorization from the board of directors. Traders Royal Bank (TRB) bought the CBCI from Philfinance. Philfinance agreed to buy it back but defaulted. TRB presented the CBCI to the Central Bank and requested transfer but was denied. ISSUE Was the transfer of CBCI from Filriters to Philfinance and from Philfinance to TRB in accord with existing law so as to entitle TRB to have the CBCI registered in its name with the CB?

HELD - The CBCI is not a negotiable instrument. It is not payable to the bearer, as it was registered in Filriters name. Thus, it was payable ONLY to them. o It lacked the words of negotiability which should have served as an expression of the consent that the instrument may be transferred by negotiation. o The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. o Negotiability or non-negotiability of an instrument is determined from the writingFrom the face of the instrument itself. - Philfinances title over CBCI is defective since it acquired the instrument from Filriters fictitiously. There was no consideration involved. Philfinance merely borrowed the CBCI from its sister company, Filriters, to guarantee its financing

operations. When Philffinance transferred it to TRB, it was still registered to Filriters. This makes the transfer void. The transfer was a personal act, not a corporate act o Banaria did not have authority to perform the act. Thus, there was no valid transfer. o Transfer should be authorized in writing by the Board of Directors This is contained in the Rules and Regulations Governing Central Bank Certificates of Indebtedness (CB Circular 769). Being a commercial bank, TRB cannot feign ignorance of it and its requirements. Philfinance had no title over the subject certificate to convey to Traders Royal Bank.

Sesbreno v CA FACTS Raul Sesbreo made a money market placement in the amount of P300,000 with Philfinance which will mature after 32 days. Sesbreo received from Philfinance a Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note (DMC PN No. 2731 this was stamped as non-negotiable), the Certificate of Securities Delivery Receipt (DCR) indicating the sale of DMC PN No. 2731 with the notation that the said security was in custodianship of Pilipinas Bank, and postdated checks payable on 13 March 1981 with petitioner as payee, Philfinance as drawer, and Insular Bank of Asia and America as drawee. When the petitioner sought to encash the PDCs, the checks were dishonored for having been drawn against insufficient funds. Petitioner then sent demand letters to Pilipinas Bank demanding the physical delivery of the original of the DMC promissory note. Pilipinas however, failed to release the same. Because of his failure to receive the money that was due to him, petitioner filed an action for damages seeking to collect the amount from Delta and Pilipinas Bank. ISSUE W/N the non-negotiability of DMC PN No. 2731 prevented its assignment to petitioner Sesbreo. (This will determine the liability of Delta) HELD Negotiable instruments, aside from being negotiated, may also be assigned or transferred. The legal consequences of negotiation and assignment of the instrument are different. This means that while the DMC PN No. 2731 is marked as non-negotiable, the same does not prevent it from being properly assigned. SC noted that since there was no

express prohibition against assignment or transfer, the assignment of the DMC PN No. 2731 to petitioner was valid. But because petitioner only informed Delta of the assignment after compensation has already taken effect by operation of law (Art 1279), Delta was no longer bound to account for the DMC PN No. 2731 because it already offset a previous liability of Philfinance to Delta. Had petitioner informed Delta before the compensation took effect, Delta would have been liable. While Delta was no longer liable for damges against the petitioner, SC held that Pilipinas Bank, by refusing to deliver DCR to petitioner upon its maturity, was liable to petitioner for damages. (This part of the decision doesnt seem to be related to negotiable instrument. It was mainly about the responsibility of Pilipinas Bank to deliver the DCR to petitioner. Refer to the original for a more thorough discussion. )

Serrano v CA Facts: Petitioner Serrano instructed her private secretary Rocco to pawn some jewelry she bought from a certain Niceta Ribaya. o Rocco went to the respondent, Long Life Pawnshop Inc. and pledged the jewelry for P22,000 with the owner of the pawnshop Yu An Kiong. o Thereafter, Rocco ABSCONDED with the amount and the pawn ticket. o The pawnshop ticket was redeemable by presentation by the bearer The petitioner, after being notified that her missing jewelry was being put up for sale by the respondent pawnshop, requested Yu An Kiong to not permit anyone to redeem the jewelry because she was the lawful owner. o Petitioner also went to the Manila Police Department to report the loss and file a complaint of estafa against Rocco. Detective Mateo went to the respondent pawnshop and left a note asking to hold the jewelry and to notify the police should anyone try to redeem the jewelry. o However, Yu An Kiong allowed a certain Tomasa de Leon to redeem the subject jewelry despite such requests from the petitioner and Detective Mateo. According to the pawnshop, such ticket was a Nego Instrument. Substantive Issues: 1. W/N the private respondent, Long Life Pawnshop Inc. was duty bound to hold the allegedly embezzled pledged jewelry and to give notice to the petitioner and the police when there was any effort to redeem such jewelry. Held/Ratio: 1. YES, Art. 21 of the Civil Code impose such duty on the respondent. The respondent cannot raise as a defense that the pawn ticket are redeemable by the bearer because such pawn tickets are neither a negotiable instrument under

the Negotiable Instruments Law or a negotiable document of title under Article 1507 of the Civil Code. a. The court held that the respondent pawnbroker acted in reckless disregard of the duty imposed upon him and must bear the consequences, without prejudice to recover damages from Rocco.

Section 2 Bachrach v. Golingco Facts: Plaintiff sold his truck to defendant for 8k. Defendant issued a promissory note for the said amount, which also included a stipulation that in the event that it becomes necessary to employ counsel to enforce its collection, the maker (defendant) shall pay an additional 25% for attorneys fees. Defendant defaulted and now contends that the stipulation is void for being usurious and grossly excessive. Issue: 1. W/N THE STIPULATION FOR THE PAYMENT OF AN ADDITIONAL 25% FOR ATTORNEYS FEES IS VA coLID? Yes 2. W/N THIS IS BINDING ON THE COURTS? No

Held: 1. The stipulation is lawful. The lawful purpose of such stipulation is to permit the creditor to receive the whole amount due him without the deduction of the expenses caused by the delinquency of the debtor. The NIL expressly recognizes this in Sec. 2 which provides that: Sec. 2. What constitutes certainty as to sum. - The sum payable is a sum certain within the meaning of this Act, although it is to be paid: (a) with interest; or (b) by stated installments; or (c) by stated installments, with a provision that, upon default in payment of any installment or of interest, the whole shall become due; or (d) with exchange, whether at a fixed rate or at the current rate; or (e) with costs of collection or an attorney's fee, in case payment shall not be made at maturity.

2. Such stipulation, however, is not binding upon the courts. Sec. 29 of the Code of Civil Procedure provides that an atty. is not entitled, in the absence of an express contract, to recover more than a reasonable compensation for his services; and even where there is an express contract, the court can ignore it and limit the recovery to reasonable compensation if the amount stipulated is found to be unreasonable.

Section 3 Abubakar v Auditor General Facts: A treasury warrant was issued in favor of Placido Urbanes on December 10, 1941, in his capacity as disbursing officer of the Food Administration for additional cash advance for Food Production Campaign in La Union. This warrant is now in the hands of petitioner Benjamin Abubakar. The Auditor General refused to authorize payment of said warrant. He argues that the money available for redemption of warrants issued before January 2, 1942, is appropriated by R.A. No. 80 (Item F-IV-8) and this warrant does not come within the purview of said appropriation. Petitioner Abubakar, on the other hand, argues 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. Issue: W/N the petitioner is a holder in good faith and of value of a negotiable instrument Held:No. The said 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 of payment out of a particular fund, and is not an unconditional order, and does not fulfill one of the essential requirements of a negotiable instrument. Moreover, Item F-IV-8 of R.A. No. 80 refers to treasury warrants issuedin favor of and held in possession by private individuals. The subject treasury warrant, as stated in the facts, was issued in favor of a government employee. Metropolitan Bank v CA Facts: Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.371. All these warrants
1

They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General Manager and countersigned by its Auditor. Six of these were directly payable to Gomez while the others appeared to have been indorsed by their respective payees, followed by Gomez as second indorser.

were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing. More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner says it finally decided to allow Golden Savings to withdraw from the proceeds of the warrants [EVEN WITHOUT CLEARANCE YET]2. In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. Days later, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account.The demand was rejected. Metrobank then sued Golden Savings. The RTC and Court of Appeals favoured Golden savings, hence this petition. Issues: 1. W/N Golden Savings is liable to bear the loss as a result of the dishonoured warrants 2. [Nego] W/N the subject treasury warrants are negotiable instruments Held: 1. The amount withdrawn must be charged not to Golden Savings but to Metrobank3 because the bank was negligent in giving the impression that the treasury warrants had been cleared and that consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account, for without such assurance, Golden Savings would not have allowed the withdrawals. Golden Savings exercised due diligence and cannot be faulted for the withdrawals it allowed Gomez to make. After all, the treasury warrants were subject to clearing, pending which the depositor could not withdraw its proceeds. Also, there was no question of Gomez identity or of the genuineness of his signature since the warrants were dishonoured allegedly because of the forgery of the signatures of the drawers, and not of Gomez as payee or indorser4. In contrast, it is Metrobank that exhibited extraordinary carelessness. Considering that the amount involved more than one and a half million pesos, there is no reason why it should not have waited for clearance. It allowed Golden Savings to withdraw THRICE5 only because it was exasperated and to accommodate a valued client. It presumed that the warrants had been cleared simply because of the lapse of one week.
2

The total withdrawal was P968.000.00.

But the balance must be debited to Golden Savings since Gomez can no longer be permitted to withdraw this amount from his deposit due to the dishonour of the warrants. This is also to avoid unjust enrichment of GS at the expense of Metrobank.
4

The forgery was not established Even if Metrobank argues that it gave no express clearance, allowing GS to withdraw three times from its account can be an implied clearance
5

2. The treasury warrants in question are not negotiable instruments.Clearly stamped on their face is the word "non-negotiable." Moreover, it is indicated that they are payable from a particular fund, to wit, Fund 501. Pertinent provisions of NIL are as follows:

Sec. 1. An instrument to be negotiable must conform to the following requirements: (b) Must contain an unconditional promise or order to pay a sum certain in money; Sec. 3But an order or promise to pay out of a particular fund is not unconditional. Metrobank cannot contended that by indorsing the warrants in general, Golden Savings assumed that they were genuine and in all respects what they purport to be, in accordance with Section 66 of NIL for the reason that this law is not applicable to the non-negotiable treasury warrants. Even jurisprudence raised by Metrobank cannot be considered as these refer to negotiable instruments.

ADDED (not so much related to Nego but may be asked): -Metrobank stressed that it was acting only as a collecting agent for Golden Savings, seemingly suggesting that as a mere agent it cannot be liable to the principal. But Art 1909 of the Civil Code clearly provides that an agent is responsible for negligence. -Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any reason is not acceptable. Any reason does not mean no reason at all. Otherwise, there would have been no need at all for Golden Savings to deposit the treasury warrants with it for clearance. There would have been no need for it to wait until the warrants had been cleared before paying the proceeds thereof to Gomez. Such a condition, if interpreted in the way the petitioner suggests, is not binding for being arbitrary and unconscionable. And it becomes more so in the case at bar when it is considered that the supposed dishonor of the warrants was not communicated to Golden Savings before it made its own payment to Gomez. -The belated notification aggravated the petitioner's earlier negligence in giving express or at least implied clearance to the treasury warrants and allowing payments therefrom to Golden Savings. But that is not all. On top of this, the supposed reason for the dishonor, to wit, the forgery of the signatures of the general manager and the auditor of the drawer corporation, has not been established.

Section 5 Philippine National Bank v Manila Oil Refining FACTS: The manager and treasurer of Manila Oil Refining & By-Products Co. executed and delivered to PNB a promissory notewith a warrant of attorney authorizing any attorney to enter a motion confessing judgment on behalf of Manila Oil for the principal amount, w/ interest, costs, and attorneys fees, and waiving all errors, rights to appeal and any property exemptions in case the note be not paid on maturity. Manila Oil failed to pay upon demand a confession of judgment was entered by Atty. Recto, a lawyer associated w/ PNB. Manila Oil strongly objected. ISSUE: w/n warrants of attorney to confess judgment are authorized in the Philippines HELD: It is true that there is a provision in the Negotiable Instruments Law authorizing confessions of judgment in case the instruments are not paid at maturity. The Court pointed out that this provision that such clauses will not affect the negotiable character of the instrument. Besides, there is a clause in the said law w/c states that nothing in this

section shall validate any stipulation or provision otherwise illegal. The Court ruled that judgment notes are void for being contrary to public policy. Such a provision gives the creditor absolute power over the debtor and opens the door for fraud. It violates the right of the debtor to due process to have his day in court and the right to be heard. It also violates his statutory right to appeal. Such stipulations can only attain validity if granted express legislative sanction. Section 8 Salas v CA FACTS: Assailed in this petition for review on certiorari is the decision of the CA entitled Filinvest Finance & Leasing Corporation v. Salas, which modified the decision of the RTC of San Fernando, Pampanga in a civil case (Civil Case # 5915) involving a collection suit between the same parties. On February 6, 1980, Juanita Salas (petitioner) bought a motor vehicle from Violago Motor Sales Corporation (VMS) for p58,138.20 as evidenced by a promissory note. The note was subsequently endorsed to Filinvest Finance & Leasing Corporation (respondent) which financed the purchase. Salas defaulted in her installments beginning May 21, 1980 allegedly due to discrepancies in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which she discovered only when the vehicle figured in an accident on May 9,1980. This failure to pay prompted respondent to initiate the aforementioned Civil Case mentioned above. The RTC, in September 10, 1982 held: WHEREFORE, and in view of all the foregoing judgement is hereby rendered ordering the defendant to pay the plaintiff the sum of 28,414,40 with interest thereon at the rate of 14% from Oct 2, 1980 until the said sum is fully paid; and 1000 as attorneys fees. Both petitioner and respondent appealed the decision to the CA. Filinvest imputed fraud, bad faith and misrepresentation against VMS for allegedly having delivered a different vehicle to Salas, who in turn prayed for a reversal of the trial courts decision so that she may be absolved from the obligation under the contract. On Oct. 27, 1986 the CA rendered its assailed decision, stating that: the allegations, statements, or admissions in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contradictory of, or inconsistent with his pleadings. Admissions made by the parties in the pleadings or during tiral or

other proceedings do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistake... a persual of the evidence shows that the amount of P58,138.20 stated in the promissory note is the amount assumed by the plaintiff in financing the purchase of defendants motor vehicle from VMS with monthly amortizations of 1614.95 for 36 months....considering the defendant was able to pay twice (becoming delinquent only on May, with a total sum of 3229.90, she is therefore liable to pay the remaining balance with 14% per annum from Oct. 2 1980 until full payment) Petitioners motion for reconsideration was denied, hence the present recourse. In the present petition, Salas assigned 12 errors, focusing on the alleged fraud, bad faith and misrepresentation of VMS in the conduct of its business which supposedly released petitioner from nay liability to private respondent who should instead proceed against VMS. Salas states that the provision of the law on sales by description (art. 1481) should be applicable here and that no contract ever existed between her and VMS and therefore none had been assigned in favor of private respondent. Salas also states that its not necessary to implead VMS as a party because she already sued them in another civil case, where the court ordered VMS to return to petitioner the initial downpayment she made of 17,855.70. (Do note that during this time, the decision in the civil case was still pending consideration in the CA after VMS appealed it.) Private respondent prays for the dismissal of the petition stating that the issues raised are a mere rehash of those already presented and passed upon and that the judgement in the breach of contract suit cannot be invoked as an authority as the same is still pending determinantion in an appelate court. ISSUE: Whether the promissory note in question is a negotiable instrument which will bar completely all the available defenses of the petitioner against respondent HELD: Petitioners liability on the promissory note, the due execution and genuineness of which she never denied under oath is inevitable as it is clearly established. The records reveal that involved herein is not a simple case of assignment of credit as petitioner would have it appear. In Consolidated Plywood Industrics Inc v. IFC Leasing and Acceptance Corp. this Court had the occasion to distinguish between a negotiable and non-negotiable instrument. To be considered negotiable, an instrument must contain the so-called words of negotiability.. i.e payable to order or bearer. Section of Negotiable Instruments Law provides that there are only 2 ways by which an instrument may be made payable to order.

(There must be a specified person named in the instrument and the bill/note is to be paid to the person desginated in the instrument or to any person whom he has indorsed and delivered the same, without the words to the order of or or order, the instrument is payable only to the designated person, and is therefore non-negotiable. Any subsequent purchaser will not enjoy the advantages of being a holder of a negotiable instrument but merely step into the shoes of the designated person in the instrument and will thus be open to all defenses available against the latter. Private respondent is not a holder in due course but a mere assignee against whom all defenses available to the asignor may be raised. In the case at bar however, the situation is different. The basis of private respondents claim against petitioner is a promissory note which bears all the earmarks of negotiability. A careful study of the questioned promissory note shows that it is a negotiable instrument, having complied with the requisites under the law as follows: - it is in writing and signed by the maker (salas) - it contains an uncondiational promise to pay (58,138.20) - it is payable at a fixed or determinable future time (1,614.95 monthly for 36 months, due and payable on the 21st of each month starting March 21,1980 thru Feb. 21, 1983) - it is payable to VMS, OR ORDER, and as such - drawee is named/indicated with certainty - it was negotiated by indorsement in writing on the instrument itself payatble to the order of Filinvest and it is indorsement of the entire instrument. Under the circumstances, there is no question that Filinvest is a holder in due course, having taken the instrument under the ff conditions: - it is complete and regular upon its face - it became the holder before it was overdue, and without notice that it had previously been dishonored - it took the same in good faith and for value - when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument /defect in title of VMS corp. -> Respondent can enforce payment of the instrument for the full amount and petitioner cannot set up against respondent the defense of nullity of contract of sale between her and VMS. *even if Salas allegations that VMS deceived her, this matter cannot be passed in the case before the court since VMS was never impleaded as a party. It has to be resolved in

the breach of contract case. (Kelangan rin nila sundin due process e, sorry na lang kay Salas... kahit technically dapat wala siyang sala...s.. joke.) Consolidated Plywood v IFC Leasing FACTS: Consolidated Plywood Industries (CPI), engaged in the logging business, purchased 2 tractors from Industrial Products Marketing which assured them that the said 2 tractors were capable of handling their logging activities. A 90-day warranty was agreed upon. A Deed of Sale & Chattel Mortgage w/ Promissory Note was executed between CPI and Industrial Products. The note reads: "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 and every 15th of the month thereafter until fully paid. . . . ." That same day, by means of a deed of assignment, Industrial Products assigned its rights and interest in the chattel mortgage in favor of respondent IFC Leasing. Barely a few days into operation, both tractors broke down. They were diagnosed as being no longer serviceable. CPI then said that it will postpone payment of the remaining installments until the seller-assignor completely fulfills its obligation under its warranty. No response was made by Industrial Products. IFC Leasing now sues CPI to recover the principal sum manifested in the note; CPI interposed that the IFC was a mere assignee and thus open to the defense of breach of warranty the note being non-negotiable. ISSUE: Whether the promissory note in question is a negotiable instrument so as to bar completely all the available defenses of the petitioner against the respondent-assignee. RULING: No. The promissory note contained the words promise to pay to the Industrial Products Marketing the sum of It did not contain words of negotiability. 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." Even conceding for purposes of discussion that the promissory note in question is a negotiable instrument, the respondent cannot be a holder in due course because the respondent had actual knowledge of the fact that the seller-assignor's right to collect the

purchase price was not unconditional, and that it was subject to the condition that the tractors sold were not defective. GSIS v CA Facts: Spouses Racho and Spouses Lagasca were co-owners of a particular piece of property, which became the subject of a two (2) deeds of mortgage to the Government Service Insurance System (GSIS). In addition to that, they also executed a promissory note which stated (quote) ". . . for value received, we the undersigned . . . JOINTLY, SEVERALLY and SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded monthly payable in . . .(120) equal monthly installments of . . . (P127.65) each." After this, the Lagasca spouses executed an Assumption of Mortgage wherein they stated that they were assuming the obligation in order to release that portion of the property which belonged to the co-owners, the Rachos. It appears that the mortgage and loan itself were intended entirely for the benefit of the Lagascas, and that the Rachos merely signed on as well as a form of accommodation and because the GSIS required it as well. (In short, the Lagasca were really the ones loaning, they just needed Rachos to agree. They intended to release the Rachos share after the mortgage was executed. Unfortunately, they ended up failing to pay so the whole property including the Rachos aliquot share was foreclosed). Upon the failure of the parties to meet their obligations, the property was extra judicially foreclosed. Two years after, the Rachos moved to have the mortgage declared null and void. Issue: 1) Whether the fact that the mortgage was only for the benefit of the Lagascas and not Rachos, notwithstanding both signed as assuming the obligation jointly and severally, affected the validity of the mortgage. Negotiable Instruments Issue: <-The Only Important Thing in this whole case. 2) Was the Promissory note a negotiable instrument? Ruling: 1) No. The mortgage is still valid because the Civil Code (Art 2085) allows a third party to a principal obligation to secure the later by pledging his or her own property. The important thing is that valid consent was given. Hence, the extrajudicial foreclosure was not reversed. 2) The Promissory note is clearly not a negotiable instrument. It lacks the fourth (4th) requisite under Section 1 of the NIL to be a negotiable instrument, in that it is made neither to order nor to bearer. Instead, it is issued to a specific party

(the GSIS). Hence, it is not governed by the Negotiable Instruments Law, but by the relevant provision in the Civil Code and Special Laws on Mortages. (In short, a negotiable note must ALWAYS be made either pay to order, or to bearer).

PECO v Soriano FACTS: Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders of P200.00, offering to pay for them with a private check. Private checks were not generally accepted in payment of money orders, so the teller advised him to see the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave building with his own check and the ten unpaid (10) money orders. Upon discovery, an urgent message was sent to all postmasters, and the following day notice was likewise served upon all banks, instructing them not to pay anyone of the money orders aforesaid if presented for payment. The Bank of America received a copy of said notice three days later. One of the above-mentioned money orders numbered 124688 was received by PECO as part of its sales receipts. It deposited the same with the Bank of America, and one day thereafter the latter cleared it with the Bureau of Posts and received from the latter its face value of P200.00. Appellee Soriano, Chief of the Money Order Division of the Manila Post Office, acting for and in behalf of his co-appellee, Postmaster Palomar, notified the Bank of America that money order No. 124688 attached to his letter had been found to have been irregularly issued and that, in view thereof, the amount it represented had been deducted from the bank's clearing account. For its part, on August 2 of the same year, the Bank of America debited appellant's account with the same amount and gave it advice thereof by means of a debit memo. PECO requested the Postmaster General to reconsider the action taken by his office deducting the sum of P200.00 from the clearing account of the Bank of America, but his request was denied. It then filed an action against appellees in the Municipal Court of Manila. The Municipal Court rendered judgment, ordering Soriano et al. to countermand the notice given to the Bank of America on September 27, 1961, deducting from said Bank's clearing account the sum of P200.00 representing the amount of postal money order No. 124688, or in the alternative, to indemnify the plaintiff in the said sum of P200.00 with interest thereon at the rate of 8-% per annum from September 27, 1961 until fully paid; without any pronouncement as to cost and attorney's fees. PECO appealed. ISSUE: WON 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 publics 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 endorsement. Equitable Banking v IAC Facts In 1975, Casals/Casville enterprises went to J. Nell Company (NELL) and told its senior sales engineer that it wished to purchase garret skidders. When Casals told the executive vice-president of NELL that he had a credit line with Equitable, the VP was impressed and immediately sold the skidders. Casals and NELL agreed that payment will be via a domestic letter of credit (LOC). Casals informed NELL that it had opened an LOC with Equitable and that he needed 300,000 as collateral in favor of Equitable and 100,000 to clear the title of the Estrada estate which had been a security for the trust receipts issued by Equitable. NELL agreed to advance the amount requested and gave a 400,000 peso check that had an attachment saying that it was for the marginal deposit and payment of balance on Estrada property. Then, Casals was informed by Equitable that it needed a check with a value of 427,000 payable to the order of EQUITABLE BANKING CORP for the account of Cassville Ent.. NELL drew new three checks which were intended to replace he previous one. The new check said: order of Equitable Banking Corp. a/c Casville Ent.Check was encashed by Casals. NELL filed an action when it discovered that no LOC was opened and that Casals had withdrawn the 427,000. Trial court ordered Casals and Equitable to pay NELL the 427,000. Issue: w/n Equitable is liable to NELL for the second check. Held: The check was equivocal and patrently ambiguous. By making a check read: Pay to Equitable Banking Corp. order of A/C of Casville ENT. The payee ceased to be indicated with reasonable certainty. NELLs own acts and omissions with the drawing, issuance and delivery of the check were the proximate cause of its own defraudation. Ex: the writing on the check (Pay to Equitable Banking Corp. order of A/C of Casville ENT.) eliminated the purpose for which the checks were drawn as seen in the attachment to the checks,

It is abnormal for the seller of goods to advance the marginal deposit for the LOC Therefore, NELL must bear the loss.