NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 93 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010

V. S. Wolff. The signature is O. K. Macondray & Co.

The liability of an indorser of a bill of exchange, after due protest and
notice of nonpayment and dishonor, is the same as that of the original
obligors on such a contract, and any material alteration in the terms of this
contract by the holder of the same, without the consent of the obligor, will
relieve such obligor from all liability thereon.

The original indrosement then of the company was for the purpose only of
assuring the American Bank that the signature of Wolff was genuinethat
is to say, that the person whom he represented himself to be. It was an
indorsement for identification of the person only and not for the purpose of
incurring liability to the payment of such bill of exchange.

125 VELASCO V. TAN LIVAN
43 PHIL 196

FACTS:
Defendant issued to Soo 4 promissory notes. Later, Soo drew a bill of
exchange in favor of PNB. The latter refused at first to encash the bill,
which made Velasco indorse it so that it would be encashed. When it was
encashed, Velasco didn't receive a single penny and it was claimed that the
proceeds was received instead by Tan Liuan. In the ordinary course of
business, the draft was dishonored when presented, and later Velasco was
required to make a promissory note in favor of PNB.

HELD:

126 ASSOCIATED BANK V. CA
208 SCRA 465

FACTS:
Reyes was engaged in the RTW business and held transactions with
different department stores. She was about to collect payments from the
department stores when she was informed that the payments had already
been made, through crossed checks issued in her business name and the
same were deposited with the bank. The bank consequently allowed its
transfer to Sayson who later encashed the checks. This prompted Reyes to
sue the bank and its manager for the return of the money. The trial and
appellate court ruled in her favor.

HELD:
There is no doubt that the checks were crossed checks and for payees
account only. Reyes was able to show that she has never authorized
Sayson to deposit the checks nor to encash the same; that the bank had
allowed all checks to be deposited, cleared and paid to one Sayson in
violation of the instructions in the said crossed checks that the same were
for payees account only; and that Reyes maintained a savings account
with the bank which never cleared the said checks.

Under accepted banking practice, crossing a check is done by writing two
parallel lines diagonally on the top left portion of the checks. The crossing
is special where the name of a bank or a business institution is written
between the two parallel lines, which means that the drawee should pay
only with the intervention of the company. The crossing is general where
the words written in between are And Co. and for payees account only,
as in the case at bar. This means that the drawee bank should not encash
the check but merely accept it for deposit.

The effects of crossing a check are as follows:
1. That the check may not be encashed but only deposited in the
bank
2. That the check may be negotiated only onceto one who has an
account with a bank
3. That the act of crossing the check serves as a warning to the
holder that the check has been issued for a definite purpose so
that he must inquire if he has received the check pursuant to the
purpose

The subject checks were accepted for deposit by the bank for the account
of Sayson although they were crossed checks and the payee wasn't Sayson
but Reyes. The bank stamped thereon its guarantee that all prior
endorsements and/or lack of endorsements guaranteed. By such
deliberate and positive act, the bank had for all legal intents and purposes
treated the said checks as negotiable instruments and accordingly assumed
the warranty of the endorser.

When the bank paid the checks so endorsed notwithstanding that title has
not passed to the endorser, it did so at its peril and became liable to the
payee for the value of the checks.

127 GULLAS V. PNB
62 PHIL 519

FACTS: