Caltex (Phils.) Inc. V.

CA And
Security Bank And Trust Co. (1992)
G.R. No. 97753 August 10, 1992
Lessons Applicable: Requisites of negotiability to antedated and postdated instruments
(Negotiable Instrument Law)
FACTS:
Security Bank and Trust Company (Security Bank), a commercial banking institution,
through its Sucat Branch issued 280 certificates of time deposit (CTDs) in favor of
Angel dela Cruz who deposited with Security Bank the total amount of P1,120,000

Angel delivered the CTDs to Caltex for his purchase of fuel products

March 18, 1982: Angel informed Mr. Tiangco, the Sucat Branch Manager that he lost
all CTDs, submitted the required Affidavit of Loss and received the replacement

March 25, 1982: Angel dela Cruz negotiated and obtained a loan from Security Bank
in the amount of P875,000 and executed a notarized Deed of Assignment of Time
Deposit

November, 1982: Mr. Aranas, Credit Manager of Caltex went to the Sucat branch to
verify the CTDs declared lost by Angel

November 26, 1982: Security Bank received a letter from Caltex formally informing
it of its possession of the CTDs in question and of its decision to pre-terminate the
same.

December 8, 1982: Caltex was requested by Security Bank to furnish:

a copy of the document evidencing the guarantee agreement with Mr. Angel dela
Cruz

the details of Mr. Angel's obligation against which Caltex proposed to apply the time
deposits

Security Bank rejected Caltex demand for payment bec. it failed to furnish a copy of
its agreement w/ Angel

April 1983, the loan of Angel dela Cruz with Security Bank matured

August 5, 1983: CTD were set-off w/ the matured loan

Caltex filed a complaint praying the bank to pay 1,120,000 plus 16% interest

CA affirmed RTC to dismiss complaint

ISSUE:
1. W/N the CTDs are negotiable
2. W/N Caltex as holder in due course can rightfully recover on the CTDs

HELD: Petition is Denied and appealed decision is affirmed.

1. YES.
Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates
the requisites for an instrument to become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and -check
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
The documents provide that the amounts deposited shall be repayable to the depositor

depositor = bearer

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" stamped on the space
provided for the name of the depositor in each CTD

negotiability or non-negotiability of an instrument is determined from the writing,

that is, from the face of the instrument itself

2. NO.

although the CTDs are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between it and De la Cruz, as ultimately ascertained, requires
both delivery and indorsement

CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel
products

There was no negotiation in the sense of a transfer of the legal title to the CTDs in
favor of petitioner in which situation, for obvious reasons, mere delivery of the bearer
CTDs would have sufficed.

Where the holder has a lien on the instrument arising from contract, he is deemed a
holder for value to the extent of his lien.

As such holder of collateral security, he would be a pledgee but the requirements

therefor and the effects thereof, not being provided for by the Negotiable Instruments
Law, shall be governed by the Civil Code provisions on pledge of incorporeal rights:

Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be

pledged. The instrument proving the right pledged shall be delivered to the creditor, and
if negotiable, must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the thing
pledged and the date of the pledge do not appear in a public instrument.
Art. 1625. An assignment of credit, right or action shall produce no effect as against third
persons, unless it appears in a public instrument, or the instrument is recorded in the
Registry of Property in case the assignment involves real property.
DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL.
G.R. No. 85419 March 9, 1993
--complete undelivered
FACTS:
Respondent Sima Wei executed and delivered to petitioner Bank a promissory
note engaging to pay the petitioner Bank or order the amount of P1,820,000.00. Sima
Wei subsequently issued two crossed checks payable to petitioner Bank drawn against
China Banking Corporation in full settlement of the drawer's account evidenced by the
promissory note. These two checks however were not delivered to the petitioner-payee or
to any of its authorized representatives but instead came into the possession of respondent
Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement to
the account of respondent Plastic Corporation with Producers Bank. Inspite of the fact
that the checks were crossed and payable to petitioner Bank and bore no indorsement of

the latter, the Branch Manager of Producers Bank authorized the acceptance of the checks
for deposit and credited them to the account of said Plastic Corporation.
ISSUE:
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered
checks.
RULING:
No. A negotiable instrument must be delivered to the payee in order to evidence its
existence as a binding contract. Section 16 of the NIL provides that every contract on a
negotiable instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. Thus, the payee of a negotiable instrument acquires no
interest with respect thereto until its delivery to him. Without the initial delivery of the
instrument from the drawer to the payee, there can be no liability on the
instrument. Petitioner however has a right of action against Sima Wei for the balance due
on the promissory note.
Jimenez v. Bucoy
103 Phil 40 Unconditional Promise To Pay
During the Japanese occupation, Pacita Young issued three promissory notes to Pacifica
Jimenez. The total sum of the notes was P21k. All three promissory notes were couched
in this manner:
Received from Miss Pacifica Jimenez the total amount of ___________ payable six
months after the war, without interest.
When the promissory notes became due, Jimenez presented the notes for payment. Pacita
and her husband died and so the notes were presented to the administrator of the estate of
the spouses (Dr. Jose Bucoy). Bucoy manifested his willingness to pay but he said that
since the loan was contracted during the Japanee occupation the amount should be
deducted and the Ballantyne Schedule should be used, that is peso-for-yen (which would
lower the amount due from P21k). Bucoy also pointed out that nowhere in the not can be
seen an express promise to pay because of the absence of the words I promise to
pay
ISSUE: Whether or not Bucoy is correct.
HELD: No. The Ballantyne schedule may not be used here because the debt is not
payable during the Japanese occupation. It is expressly stated in the notes that the
amounts stated therein are payable six months after the war. Therefore, no reduction
could be effected, and peso-for-peso payment shall be ordered in Philippine currency.
The notes also amounted in effect to a promise to pay the amounts indicated therein. An
acknowledgment may become a promise by the addition of words by which a promise of
payment is naturally implied, such as, payable, payable on a given day, payable on
demand, paid . . . when called for, . . . To constitute a good promissory note, no
precise words of contract are necessary, provided they amount, in legal effect, to a
promise to pay. In other words, if over and above the mere acknowledgment of the debt
there may be collected from the words used a promise to pay it, the instrument may be
regarded as a promissory note.
People v. Nitafan

G.R. No. 75954 October 22, 1992

Facts:
On January 20, 1985, aid accused did then and there wilfully, unlawfully and
feloniously make or draw and issue to Fatima Cortez Sasaki Philippine Trust
Company Check No. 117383 in the amount of P143,000.00
He knew that at the time of issue he did not have sufficient funds in or credit with
the drawee bank.
The check was subsequently dishonored by the drawee bank for insufficiency of
funds, and despite receipt of notice of such dishonor, said accused failed to pay
Sasaki the amount of said check or to make arrangement for full payment of the
same within five banking days after receiving said notice.
Private respondent, Mariano Lim moved to quash the Information of the ground
that the facts charged did not constitute a felony as B.P. 22 was unconstitutional
and that the check he issued was a memorandum check which was in the nature of
a promissory note in thus, is civil in nature.
On 1 September 1986, respondent judge, ruling that B.P. 22 on which the
Information was based was unconstitutional, issued the questioned Order
quashing the Information. Hence, this petition for review on certiorari filed by the
Solicitor General in behalf of the government.
Issues:
W/N B.P. 22 is unconstitutional
W/N a memorandum check issued postdated in partial payment of a pre-existing
obligation is within the coverage of B.P. 22.
Ratio:
The constitutionality of the Bouncing Check Law has already been sustained by
the SC through jurisprudence in Lozano v. Martinez, and the seven other cases
decided jointly with it.
A memorandum check is in the form of an ordinary check, with the word
"memorandum", "memo" or "mem" written across its face, signifying that the
maker or drawer engages to pay the bona fide holder absolutely, without any
condition concerning its presentment.
Such a check is an evidence of debt against the drawer, and although may not be
intended to be presented has the same effect as an ordinary check and if passed to
the third person will be valid in his hands like any other check.
A memorandum check comes within the meaning of Sec. 185 of the Negotiable
Instruments Law which defines a check as "a bill of exchange drawn on a bank
payable on demand."
A memorandum check must therefore fall within the ambit of B.P. 22 which does
not distinguish but merely provides that "any person who makes or draws and
issues any check knowing at the time of issue that he does not have sufficient
funds in or credit with the drawee bank which check is subsequently dishonored
shall be punished by imprisonment"
A memorandum check, upon presentment, is generally accepted by the bank.
Hence it does not matter whether the check issued is in the nature of a
memorandum as evidence of indebtedness or whether it was issued is partial
fulfillment of a pre-existing obligation, for what the law punishes is the issuance

itself of a bouncing check 15 and not the purpose for which it was issuance.
The mere act of issuing a worthless check, whether as a deposit, as a guarantee, or
even as an evidence of a pre-existing debt, is malum prohibitum.
Dispositive Portion:
WHEREFORE, the petition is GRANTED and the Order of respondent Judge of 1
September 1986 is SET ASIDE. Consequently, respondent Judge, or whoever presides
over the Regional Trial Court of Manila, Branch 52, is hereby directed forthwith to
proceed with the hearing of the case until terminated.
SO ORDERED.
Lozano v. Martinez
This case is a consolidation of 8 cases regarding violations of the Bouncing Checks Law
or Batas Pambansa Blg. 22 (enacted April 3, 1979). In one of the eight cases, Judge
David Nitafan of RTC Manila declared the law unconstitutional. Among the arguments
against the constitutionality of the law are a.) it is violative of the constitutional provision
on non-imprisonment due to debt, and b.) it impairs freedom of contract.
ISSUE: Whether or not BP 22 is constitutional.
HELD: Yes, BP 22 is constitutional.
The Supreme Court first discussed the history of the law. The SC explained how the law
on estafa was not sufficient to cover all acts involving the issuance of worthless checks;
that in estafa, it only punishes the fraudulent issuance of worthless checks to cover prior
or simultaneous obligations but not pre-existing obligations.
BP 22 is aimed at putting a stop to or curbing the practice of issuing checks that are
worthless, i.e. checks that end up being rejected or dishonored for payment. The practice
is proscribed by the state because of the injury it causes to public interests.
BP 22 is not violative of the constitutional prohibition against imprisonment for debt. The
debt contemplated by the constitution are those arising from contracts (ex contractu).
No one is going to prison for non-payment of contractual debts.
However, non-payment of debts arising from crimes (ex delicto) is punishable. This is
precisely why the mala prohibita crime of issuing worthless checks as defined in BP 22
was enacted by Congress. It is a valid exercise of police power.
Due to the insufficiency of the Revised Penal Code, BP 22 was enacted to punish the
following acts:
any person who, having sufficient funds in or credit with the drawee bank when he
makes or draws and issues a check, shall fail to keep sufficient funds or to maintain a
credit to cover the full amount of the check if presented within a period of ninety (90)
days from the date appearing thereon, for which reason it is dishonored by the drawee
bank.
And
any person who makes or draws and issues any check on account or for value, knowing
at the time of issue that he does not have sufficient funds in or credit with the drawee
bank for the payment of said check in full upon presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or would have been
dishonored for the same reason had not the drawer, without any valid reason, ordered the
bank to stop payment.
Congress was able to determine at that time that the issuance of worthless checks was a
huge problem. The enactment of BP 22 is a declaration by the legislature that, as a matter

of public policy, the making and issuance of a worthless check is deemed public nuisance
to be abated by the imposition of penal sanctions.
Checks are widely used due to the convenience it brings in commercial transactions and
confidence is the primary basis why merchants rely on it for their various commercial
undertakings. If such confidence is shaken, the usefulness of checks as currency
substitutes would be greatly diminished or may become nil. Any practice therefore
tending to destroy that confidence should be deterred for the proliferation of worthless
checks can only create havoc in trade circles and the banking community. Thus, the
Congress, through their exercise of police power, declared that the making and issuance
of a worthless check is deemed a public nuisance which can be abated by the imposition
of penal sanctions.
The Supreme Court however also explained that (regardless of their previous explanation
on ex delicto debts) the non-payment of a debt is not the gravamen of the violations of BP
22. The gravamen of the offense punished by BP 22 is the act of making and issuing a
worthless check or a check that is dishonored upon its presentation for payment. It is not
the non-payment of an obligation which the law punishes. The law is not intended or
designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain
of penal sanctions, the making of worthless checks and putting them in circulation.
Because of its deleterious effects on the public interest, the practice is proscribed by the
law. The law punishes the act not as an offense against property, but an offense against
public order.

TRAVEL ON V. CA
210 SCRA 351
FACTS:
Petitioner was a travel agency involved in ticket sales on a commission basis for
and on behalf of different airline companies. Miranda has a revolving credit line
with the company. He procured tickets on behalf of others and derived
commissions from it.
Petitioner filed a collection suit against Miranda for the unpaid amount of six
checks. Petitioner alleged that Miranda procured tickets from them which he paid
with cash and checks but the checks were dishonored upon presentment to the bank.
This was being refuted by Miranda by saying
that he actually paid for his obligations, even in the excess. He argued that the
checks were for accommodation purposes only. The company needed to show to its
Board of Directors that its accounts receivable was in good standing. The RTC and CA
held Miranda not to be liable.

HELD:

Reliance by the lower and appellate court on the companys financial statements
were wrong, to see if Miranda was liable or not. This financial statements were actually
not updated to show that there was indebtedness on the part of Miranda. The best
evidence that the courts should have looked at were the checks itself. There is a prima
facie presumption that a check was issued for valuable consideration and the
provision puts the burden upon the drawer to disprove this presumption. Miranda was
unable to relieve himself of this burden.
Only clear and convincing evidence and not mere self-serving evidence of drawer can
rebut this presumption. The company was entitled to the benefit conferred by the
statutory provision. Miranda failed to show that the checks werent issued for any
valuable consideration. The checks were
clear by stating that the company was the payee and not a mere accommodated
party. And also, notice was given to the fact that the checks were issued after a
written demand by the company regarding Mirandas unpaid liabilities.
PNB V. National City Bank New York (1936)
G.R. No. L-43596 October 31, 1936
Lessons Applicable: Forgery (Negotiable Instruments)
FACTS:
April 7 & 9, 1933: unknown person or persons purchased tires and paid Motor
Service Company, Inc.(MSCI) checks purporting to have been issued by the
"Pangasinan Transportation Co., Inc. (Pantranco) by J. L. Klar, Manager and
Treasurer" against PNB and in favor of International Auto Repair Shop.
MSCI indorsed for deposit at the National City Bank of New York and MSCI was
accordingly credited with the amounts thereof, or P144.50 and P215.75
April 8 & 10, 1933: Checks were cleared and PNB credited the National City Bank
PNB found out that the signatures of J. L. Klar, Manager and Treasurer were forged
and demanded from MSCI and National City Bank New York
PNB filed the case in the municipal court of Manila against National City Bank and
MSCI.
Pantranco objected to have the proceeds of said check deducted from their deposit.
RTC: Favored PNB
MSCI appealed
ISSUES:
1. W/N acceptance = payment
2. W/N law or business practice prevents the presentation of checks for acceptance before
they are paid.
3. W/N MSCI was negligent and therefore PNB should recover

4. W/N the drawee bank should be allowed recovery, as MSCI's position would not become
worse than if the drawee had refused the payment of these checks upon their presentation.
HELD: Affirmed
1. NO.
A check is a bill of exchange payable on demand and only the rules governing bills of
exchange payable on demand are applicable to it, according to section 185 of the
Negotiable Instruments Law
Acceptance is a step unnecessary for bills of exchange payable on demand (sec. 143)
Acceptance implies, subsequent negotiation of the instrument
From the moment a check is paid it is withdrawn from circulation.
That the payment of a check does not include or imply its acceptance in the sense that
this word is used in section 62 of the Negotiable Instruments Law
Payment (in checks) - final act which extinguishes a bill.
Acceptance (in certified checks) - a promise to pay in the future and continues the life
of the bill.
2. NO

section 187, which provides that "where a check is certified by the bank on which it
is drawn, the certification is equivalent to an acceptance", and it is then that the
warranty under section 62 exists
That if a drawee bank pays a forged check which was previously accepted or certified
by the said bank it cannot recover from a holder who did not participate in the forgery
and did not have actual notice thereof
3. YES.
Circumstances:
check number 637023-D was dated April 6, 1933, whereas check number 637020-D
and is dated April 7, 1933. (later check had prior number)
accepted the 2 checks from unknown persons
check 637023-D was indorsed by a subagent of the agent of the payee, International
Auto Repair Shop and cross generally
Section 23 of the Negotiable Instruments Act provides that "when a signature is
forged or made without the authority of the person whose signature it purports to be,
it is wholly inoperative, and no right to retain the instrument, or to give a discharge
therefor, or to enforce payment thereof against any party thereto, can be acquired
through or under such signature, unless the party against whom it is sought to enforce
such right is precluded from setting up the forgery or want of authority.
PNB did not warrant to MCSI the genuineness of the checks in question, by its
acceptance thereof, nor did it perform any act which would have induced MSCI to
believe in the genuineness
PNB is NOT precluded from setting up the forgery

4. NO.
A drawee of a check, who is deceived by a forgery of the drawer's signature may
recover the payment back, unless his mistake has placed an innocent holder of the
paper in a worse position than he would have been in if the discover of the forgery
had been made on presentation.
MSCI has lost nothing by anything which the drawee has done. It had in its hands
some forged worthless papers. It did not purchase or acquire these papers because of
any representation made to it by the drawee
Court concluded:
1. That where a check is accepted or certified by the bank on which it is drawn, the bank
is estopped to deny the genuineness of the drawer's signature and his capacity to issue the
instrument;
2. That if a drawee bank pays a forged check which was previously accepted or certified
by the said bank it cannot recover from a holder who did not participate in the forgery
and did not have actual notice thereof;
3. That the payment of a check does not include or imply its acceptance in the sense that
this word is used in section 62 of the Negotiable Instruments Law;
4. That in the case of the payment of a forged check, even without former acceptance, the
drawee can not recover from a holder in due course not chargeable with any act of
negligence or disregard of duty;
5. That to entitle the holder of a forged check to retain the money obtained thereon, there
must be a showing that the duty to ascertain the genuineness of the signature rested
entirely upon the drawee, and that the constructive negligence of such drawee in failing to
detect the forgery was not affected by any disregard of duty on the part of the holder, or
by failure of any precaution which, from his implied assertion in presenting the check as
a sufficient voucher, the drawee had the right to believe he had taken;
6. That in the absence of actual fault on the part of the drawee, his constructive fault in
not knowing the signature of the drawer and detecting the forgery will nor preclude his
recovery from one who took the check under circumstances of suspicion and without
proper precaution, or whose conduct has been such as to mislead the drawee or induce
him to pay the check without the usual scrutiny or other precautions against mistake or
fraud;
7. That on who purchases a check or draft is bound to satisfy himself that the paper is
genuine, and that by indorsing it or presenting it for payment or putting it into circulation
before presentation he impliedly asserts that he performed his duty;
8. That while the foregoing rule, chosen from a welter of decisions on the issue as the
correct one, will not hinder the circulation of two recognized mediums of exchange by
which the great bulk of business is carried on, namely, drafts and checks, on the other

hand, it will encourage and demand prudent business methods on the part of those
receiving such mediums of exchange;
9. That it being a matter of record in the present case, that the appellee bank in no more
chargeable with the knowledge of the drawer's signature than the appellant is, as the
drawer was as much the customer of the appellant as of the appellee, the presumption that
a drawee bank is bound to know more than any indorser the signature of its depositor
does not hold;
10. That according to the undisputed facts of the case the appellant in purchasing the
papers in question from unknown persons without making any inquiry as to the identity
and authority of the said persons negotiating and indorsing them, acted negligently and
contributed to the appellee's constructive negligence in failing to detect the forgery;
11. That under the circumstances of the case, if the appellee bank is allowed to recover,
there will be no change of position as to the injury or prejudice of the appellant.
Abubakar vs. Auditor General
GR L-1405, 31 July 1948
First Division, Bengzon (J)
Facts: Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes on 10
December 1941 for
P1,000, but is now in the hands of Benjamin Abubakar. The Auditor refused to authorize
the payment of the
treasury warrant. Abubakar contends he is a holder in good faith and for value and thus,
entitled to the rights
and privileges of a holder in due course.
Issue: Whether Abubakar is a holder in due course.
Held: A treasury warrant is not a negotiable instrument; it being an order for payment out
of a particular
fund, and is not unconditional and does not fulfill one of the essential requirements of a
negotiable
instrument. Therefore, a holder of a treasury warrant cannot argue that he is a holder in
good faith and for
value of a negotiable instrument and thus entitled to the rights and privileges of a holder
in due course, free
from defenses.
Philippine Education Co. Inc. vs. Soriano [GR L-22405, 30 June 1971]Facts:
On 18 April 1958 Enrique Montinola sought to purchase from the Manila Post Office 10
money orders of P200.00each payable to E. P. Montinola with address at Lucena,
Quezon. After the postal teller had made out money ordersnumbered 124685, 124687-

124695, Montinola offered to pay for them with a private check. As private checks were
notgenerally accepted in payment of money orders, the teller advised him to see the Chief
of the Money Order Division, butinstead of doing so, Montinola managed to leave the
building with his own check and the 10 money orders without theknowledge of the teller.
On the same date, 18 April 1958, upon discovery of the disappearance of the unpaid
moneyorders, 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 Blank of Americareceived a copy of said
notice 3 days later. On 23 April 1958 one of the above mentioned money orders
numbered124688 was received by Philippine Education Co. as part of its sales receipts.
The following day it deposited the samewith 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. On 27 September 1961, Mauricio A. Soriano, Chief of the Money Order
Division of the ManilaPost Office, acting for and in behalf of Post-master Enrico
Palomar, notified the Bank of America that money order 124688attached to his letter had
been found to have been irregularly issued and that, in view thereof, the amount it
representedhad been deducted from the bank's clearing account. For its part, on August 2
of the same year, the Bank of Americadebited Philippine Education Co.'s account with
the same amount and gave it advice thereof by means of a debit memo.On 12 October
1961 Philippine Education Co. requested the Postmaster General to reconsider the action
taken by hisoffice deducting the sum of P200.00 from the clearing account of the Bank of
America, but his request was denied. Sowas Philippine Education Co.'s subsequent
request that the matter be referred to the Secretary of Justice for advice.Thereafter,
Philippine Education Co. elevated the matter to the Secretary of Public Works and
Communications, but thelatter sustained the actions taken by the postal officers. In
connection with the events set forth above, Montinola wascharged with theft in the Court
of First Instance of Manila (Criminal Case 43866) but after trial he was acquitted on
theground of reasonable doubt. On 8 January 1962 Philippine Education Co. filed an
action against Soriano, et al. in theMunicipal Court of Manila. On 17 November 1962,
after the parties had submitted the stipulation of facts, the municipalcourt rendered
judgment, ordering Soriano, et al. to countermand the notice given to the Bank of
America on 27September 1961, deducting from said Bank's clearing account the sum of
P200.00 representing the amount of postalmoney order 124688, or in the alternative, to
indemnify Philippine Education Co. in the said sum of P200.00 with interestthereon at the
rate of 8-1/2% per annum from 27 September 1961 until fully paid; without any
pronouncement as to costsand attorney's fees." The case was appealed to the Court of
First Instance of Manila where, after the parties hadresubmitted the same stipulation of
facts, the appealed decision dismissing the complaints with costs, was
rendered.Philippine Education Co. appealed.
Issue:
Whether the postal money order is a negotiable instrument.
Held:
Philippine postal statutes were patterned after similar statutes in force in the United
States. For this reason,Philippine postal statutes are generally construed in accordance
with the construction given in the United States to their own postal statutes, in the
absence of any special reason justifying a departure from this policy or practice. The

weight of authority in the United Status is that postal money orders are not negotiable
instruments, the reason behind this rule beingthat, in establishing and operating a postal
money order system, the government is not engaging in commercialtransactions but
merely exercises a governmental power for the public benefit. Some of the restrictions
imposed uponmoney orders by postal laws and regulations are inconsistent with the
character of negotiable instruments. For instance,such laws and regulations usually
provide for not more than one endorsement; payment of money orders may be
withheldunder a variety of circumstances.

SESBRENO V. CA
222 SCRA 466
FACTS:
Petitioner made a placement with Philfinance. The latter delivered to him documents,
some of which was a promissory note from Delta Motors and a post-dated check. The
post-dated checks were dishonored. This prompted petitioner to ask for the promissory
note from DMC and it was discovered that the note issued by DMC was marked as nonnegotiable. As Sesbreno failed to recover his money, he filed case against DMC and
Philfinance.

HELD:
The non-negotiability of the instrument doesnt mean that it is non-assignable or
transferable. It may still be assigned or transferred in whole or in part, even without the
consent of the promissory note, since consent is not necessary for the validity of the
assignment.
In assignment, the assignee is merely placed in the position of the
assignors and acquires the instrument subject to all the defenses that
might have been set up against the original payee.
-Sesbreno vs. Court of Appeals
GR 89252, 24 May 1993
FACTS:
Petitioner Sesbreno made a money market placement in the amount of P300,000 with the
Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32
days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta
Motor Corporation Promissory Note, the Certificate of Securities Delivery Receipt
indicating the sale of the note with notation that said security was in the custody of
Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and America

for P304,533.33 payable on March 13, 1981. The checks were dishonored for having
been drawn against insufficient funds. Pilipinas Bank never released the note, nor any
instrument related thereto, to Sesbreno; but Sesbreno learned that the security which was
issued on April 10, 1980, maturing on 6 April 1981, has a face value of P2,300,833.33
with PhilFinance as payee and Delta Motors as maker; and was stamped nonnegotiable on its face. As Sesbreno was unable to collect his investment and interest
thereon, he filed an action for damages against Delta Motors and Pilipinas Bank. Delta
Motors contents that said promissory note was not intended to be negotiated or otherwise
transferred by Philfinance as manifested by the word "non-negotiable" stamped across the
face of the Note.
ISSUE:
Whether the non-negotiability of a promissory note prevents its assignment.
RULING:
A negotiable instrument, instead of being negotiated, may also be assigned or transferred.
The legal consequences of negotiation and assignment of the instrument are different. A
non-negotiable instrument may not be negotiated but may be assigned or transferred,
absent an express prohibition against assignment or transfer written in the face of the
instrument. The subject promissory note, while marked "non-negotiable," was not at the
same time stamped "non-transferable" or "non-assignable." It contained no stipulation
which prohibited Philfinance from assigning or transferring such note, in whole or in part.
**A non-negotiable instrument may not be negotiated but may be assigned or
transferred, absent an express prohibition against assignment or transfer written on the
face of the instrument.

New Pacific Timber & Supply Co,

Inc vs Seneris, 101 SCRA 686;
GR No. L-41764, December 19,
1980, digested
Posted by Pius Morados on December 1, 2011
(Credit Transactions; Negotiable Instruments Check; Remedial Law Judgments)
Doctrine:
1. Cashiers check deemed as cash.
2. Certification of check by drawee bank equivalent to acceptance.

Facts: In a complaint for a collection of sum of money, petitioner failed to comply with
his judgment obligation in an amicable settlement with the respondent. Hence, a writ of
execution was issued for the amount of P63, 140.00 pursuant to which, petitioners
properties were levied and was set for an auction sale. Prior to the set date for the auction
sale, petitioner deposited with the Clerk of Court, CFI, in his capacity as Ex-Officio
Sheriff, the sum of P63, 130.00 for payment of the judgment obligation, consisting of
P50, 000.00 Cashiers Check and P13,130.00 in cash.
Private respondent refused to accept the check as well as the cash deposit and requested
the scheduled auction sale. Respondent judge uphold private respondents claim that he
has the right to refuse payment by means of a check and cited Section 63 of the Central
Bank Act:
Sec 63. Legal Character Checks representing deposit money do not
have legal tender power and their acceptance in payment of debts, both
public and private, is at the option of the creditor. Provided, however,
that a check which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor in cash in an
amount equal to the amount credited to his account.
And Article 1249 of the New Civil Code which provides for payment of debts in money
shall be made in the currency stipulated or the currency that is legal tender in the
Philippines.
Likewise, respondent judge sustained the contention of the private respondent that he has
a right to refuse payment of the amount of P13, 130 in cash because the said amount is
less than the judgment obligation, which is a partial payment as provided in Article 1248
of the New Civil Code.
Petitioner filed an ex-parte motion for issuance of certificate of satisfaction of judgment
after his levied properties were all sold during the auction sale. Petitioner question the
order of the judge for denial of the said motion alleging that said judge capriciously and
whimsically abused his discretion on the ground that there was already a full satisfaction
of the judgment before the auction sale was conducted.
Issue: WON there was a valid refusal to accept the payment of the judgment obligation
made by the petitioner consisting of P50, 000.00 in Cashiers Check and P13, 130.00 in
cash.
Held: No. A cashiers check of the Equitable Bank Corporation is not an ordinary check.
It is a well-known and accepted practice in the business sector that a Cashiers Check is
deemed as cash.
Where a check is certified by the bank on which it is drawn, the certification is equivalent
to acceptance. By the certification of drawee bank, the funds represented by the check are
transferred from the credit of the maker to that of the payee or holder, and for all intents
and purposes, the latter becomes the depositor of the drawee bank. Said certification

implies that the check is drawn upon sufficient funds in the hands of the drawee that they
have been set apart for its satisfaction, that they shall be so applied whenever the check is
presented for payment. The object of certifying a check, as regards to both parties, is to
enable the holder to use it as money. When the holder procures the check to be certified,
the check operates as an assignment of a part of the funds to the creditors. Certification of
a check is an exception to the rule enunciated under Sec 63 of the CB Act.
Considering that the whole amount deposited by the petitioner consisting of Cashiers
Check of P50, 000.00 and P13, 130.00 in cash covers the judgment obligation of
P63,000.00 as mentioned in the writ of execution, then, we see no valid reason for the
private respondent to have refused acceptance of the payment of the obligation in his
favor.
Crystal vs. CA
GR L-35767, 18 June 1976
Resolution of the Second Division, Barredo (J)
Facts:
The Supreme Court, in its decision of 25 February 1975, affirmed the decision of the
Court of Appeals, holding that Raymundo Crystals redemption of the property acquired
by Pelagia Ocang, Pacita, Teodulo,
Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de Garcia, was invalid as
the check which
Crystal used in paying the redemption price has been either dishonored or had become
stale (Ergo, the value
of the check was never realized). Crystal filed a motion for reconsideration.
Issue:
Whether the conflicting circumstances of the check being dishonored and becoming stale
affect the
validity of the redemption sale.
Held:
For a check to be dishonored upon presentment and to be stale for not being presented at
all in time are
incompatible developments that have variant legal consequences. If indeed the questioned
check was
dishonored, the redemption was null and void. If it had only become state, it becomes
imperative that the
circumstances that caused its non-presentment be determined, for if it was not due to the
fault of the drawer, it
would be unfair to deprive him of the rights he had acquired as redemptioner. Herein, it
appears that there is a
strong showing that the check was not dishonored, although it became stale, and that
Pelagia Ocang had
actually been paid the full value thereof. The Supreme Court, thus, reconsidered its
decision and remanded
the case to the trial court for further proceedings.

April 26, 1950

G.R. No. L-222
SALVACION F. VDA. DE EDUQUE, ETC., plaintiff-appellee,
vs.
JOSE M. OCAMPO, defendant-appellant.
Alfredo B. Cacnio and Padilla, Carlos and Fernando for appellant.
Jose Feria for appellee.
Delfin L. Gonzalez for plaintiff-intervenor.
MORAN, C.J.:
This is an action to compel acceptance of payment of a mortgage debt.
On February 16, 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de
Leon, Doa Escolastica de los Reyes and Don Jose M. Ocampo, the first in the amount of
P40,000 and the second in the sum of P15,000, both payable within the period of twenty
years, with interest at the rate of 5 per cent per annum. Payment of these two loans was
guaranteed by mortgage on real property. In the mortgage contract it is stipulated that any
of the mortgage creditors may receive payment and execute deeds of cancellation of the
mortgage debts.
On December 6, 1943, plaintiff and appellee, as administratrix of the estate of the
deceased Dr. Jose Eduque, tendered payment, by means of cashier's check, of the total
amount of the two loans, P55,000, to defendant-appellant Jose M. Ocampo, one of the
creditors, who refused to accept payment. By reason of such refusal, an action was
brought and a cashier's check for the total amount of P55,000 deposited in court. After
trial, judgment was rendered against defendant compelling him to accept the P55,000
deposited in court, to issue deeds for cancellation of the mortgage debts, and to pay the
expenses of consignation and costs.
Defendant accepted the judgment with respect to the second loan of P15,000 upon the
ground that, according to him, in the deed of mortgage corresponding to that loan it
clearly appeared that the loan was payable "durante el termino de 20 aos," and that the
only question remaining between the parties is the interpretation of the first deed of
mortgage regarding the first loan of P40,000. and he asked the court to order "que de la
cantidad de P55,000 consignada en este Juzgado, se entregue al demandado la suma de
P15,000, despues de descontar proporcionalmente cualesquiera cantidades por deposito y
otros conceptos segun los terminos de la decision promulgada." The order was issued
accordingly and the sum of P15,000 out of the P55,000 deposited in court was delivered
to the defendant.
The present appeal concerns the decision of the lower court regarding the first loan of
P40,000, and the principal error assigned by the appellant is that tender of payment by
means of a cashier's check representing Japanese war notes is not valid.

We have already help that Japanese military notes were legal tender during the Japanese
occupation. But appellant argues, further, that the consignation of a cashier's check,
which is not legal tender, is not binding upon him. This question, however, has never
been raised in the lower court. Upon the contrary, defendant accepted impliedly the
consignation of the cashier's check when he himself asked the court that out of the money
thus consigned he be paid the amount of the second loan of P15,000. It is a rule that " a
cashier's check may constitute a sufficient tender where no objection is made on this
ground." (62 C. J., p. 670; see also 40 Amer. Jur., p. 764.)
For all the foregoing, judgment is affirmed with cost against appellant.
Ozaeta, Pablo, Bengzon, Montemayor, and Reyes, JJ., concur.
Separate Opinions
TUASON, J., dissenting:
I am constrained to dissent from the majority decision on the ground on which I rested
my dissent in various cases involving the validity of payments in Japanese military notes.
I maintain that Japanese war notes were not legal tender and could not be made so by
military orders. Accordingly, payment in that currency of pre-war obligation over the
protest of the creditor did not operate to discharge the debt except to the extent he was or
could have been benefited by the payment.

TRADERS ROYAL BANK V CA

Filriters Guaranty Assurance Corporation (FGAC) is the owner of several Central Bank
Certificates of Indebtedness (CBCI). These certificates are actually proof that FGAC has
the required reserve investment with the Central Bank to operate as an insurer and to
protect third persons from whatever liabilities FGAC may incur. In 1979, FGAC agreed
to assign said CBCI to Philippine Underwriters Finance Corporation (PUFC). Later,
PUFC sold said CBCI to Traders Royal Bank (TRB). Said sale with TRB comes with a
right to repurchase on a date certain. However, when the day to repurchase arrived, PUFC
failed to repurchase said CBCI hence TRB requested the Central Bank to have said CBCI
be registered in TRBs name. Central Bank refused as it alleged that the CBCI are not
negotiable; that as such, the transfer from FGAC to PUFC is not valid; that since it was
invalid, PUFC acquired no valid title over the CBCI; that the subsequent transfer from
PUFC to TRB is likewise invalid.
TRB then filed a petition for mandamus to compel the Central Bank to register said CBCI
in TRBs name. TRB averred that PUFC is the alter ego of FGAC; that PUFC owns 90%
of FGAC; that the two corporations have identical sets of directors; that payment of said
CBCI to PUFC is like a payment to FGAC hence the sale between PUFC and TRB is
valid. In short, TRB avers that that the veil of corporate fiction, between PUFC and

FGAC, should be pierced because the two corporations allegedly used their separate
identity to defraud TRD into buying said CBCI.
ISSUE: Whether or not Traders Royal Bank is correct.
HELD: No. Traders Royal Bank failed to show that the corporate fiction is used by the
two corporations to defeat public convenience, justify wrong, protect fraud or defend
crime or where a corporation is a mere alter ego or business conduit of a person. TRB
merely showed that PUFC owns 90% of FGAC and that their directors are the same. The
identity of PUFC cant be maintained as that of FGAC because of this mere fact; there is
nothing else which could lead the court under the circumstance to disregard their
corporate personalities. Further, TRB cant argue that it was defrauded into buying those
certificates. In the first place, TRB as a banking institution is not ignorant about these
types of transactions. It should know for a fact that a certificate of indebtedness is not
negotiable because the payee therein is inscribed specifically and that the Central Bank is
obliged to pay the named payee only and no one else.

REPUBLIC PLANTERS BANK v CA

n 1979, World Garment Manufacturing, through its board authorized Shozo Yamaguchi
(president) and Fermin Canlas (treasurer) to obtain credit facilities from Republic
Planters Bank (RPB). For this, 9 promissory notes were executed. Each promissory note
was uniformly written in the following manner:

___________, after date, for value received, I/we, jointly and severally
promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office
in Manila, Philippines, the sum of ___________ PESOS(.) Philippine
Currency
Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP.

Sgd. Shozo Yamaguchi

Sgd. Fermin Canlas

The note became due and no payment was made. RPB eventually sued Yamaguchi and
Canlas. Canlas, in his defense, averred that he should not be held personally liable for
such authorized corporate acts that he performed inasmuch as he signed the promissory
notes in his capacity as officer of the defunct Worldwide Garment Manufacturing.

ISSUE: Whether or not Canlas should be held liable for the promissory notes.
HELD: Yes. The solidary liability of private respondent Fermin Canlas is made clearer
and certain, without reason for ambiguity, by the presence of the phrase joint and
several as describing the unconditional promise to pay to the order of Republic Planters
Bank. Where an instrument containing the words I promise to pay is signed by two or
more persons, they are deemed to be jointly and severally liable thereon.
Canlas is solidarily liable on each of the promissory notes bearing his signature for the
following reasons:
The promissory notes are negotiable instruments and must be governed by the Negotiable
Instruments Law.
Under the Negotiable lnstruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. By signing the notes, the maker
promises to pay to the order of the payee or any holder according to the tenor thereof.

REPUBLIC PLANTERS BANK V. COURT

OF APPEALS
216 SCRA 738
FACTS:
Yamaguchi and Canlas are officers of the Worldwide Garment Manufacturing,
which later changed its name to Pinch Manufacturing. They were authorized to apply for
credit facilities with the petitioner bank. The two officers signed the promissory notes
issued to secure the payment of the obligations. Later, the bank instituted an action
for collection of money, impleading also the two officers. The trial court held
the two officers personally liable also.

HELD:
Canlass is solidarily liable on each of the promissory notes to which his signature
appears. The promissory notes in question are negotiable instruments and thus,
governed by the Negotiable Instruments Law.
Under the Negotiable Instruments Law, persons who write their names in the
instrument are makers are liable as such. By signing the note, the maker promises to pay
to the order of the payee or any holder the tenor of the obligation. Based on the above

provisions of the law, there is no denying that Canlass is one of the co-makers of the
promissory note.