FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES V.

CA
[G.R. No. 113236. March 5, 2001]
DOCTRINE:
The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to
be a substitute for money.
FACTS:
Fojas-Arca and Firestone Tire entered into a franchising agreement wherein the former had the privilege to purchase on
credit the latters products. In paying for these products, the former could pay through special withdrawal slips. In turn,
Firestone would deposit these slips with Citibank. Citibank would then honor and pay the slips. Citibank
automatically credits the account of Firestone then merely waited for the same to be honored and paid by
Luzon Development Bank. As this was the circumstances,
Firestone believed in the sufficient funding of the slips until there was a time that Citibank informed it that one
of the slips was dishonored. It wrote then a demand letter to Fojas -Arca for the payment and damages but the
latter refused to pay, prompting Firestone to file an action against it.
ISSUE:
Whether or not the withdrawal slips were negotiable instruments?
To whom notice of dishonor must be given?
HELD:
The withdrawal slips, at the outset, are non-negotiable. Hence, the rule on immediate notice of dishonor is non-applicable
to the case at hand. Thus, the bank was under no obligation to give immediate notice that it wouldn't make payment on
the subject withdrawal slips. Citibank should have known that withdrawal slips are not negotiable instruments.
It couldn't expect then the slips be treated like checks by other entities. Payment or notice of dishonor from respondent
bank couldn't be expected immediately in contrast to the situation involving checks. In the case at bar, Citibank relied on
the fact that LDB honored and paid the withdrawal slips which made it automatically credit the account of Firestone
with the amount of the subject withdrawal slips then merely waited for LDB to honor and pay the same. It bears
stressing though that Citibank couldn't have missed the non-negotiable character of the slips. The essence of
negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to be a substitute
for money. The withdrawal slips in question lacked this character. In the ordinary and usual course of banking
operations, current account deposits are accepted by the bank on the basis of deposit slips prepared and signed by the
depositor, or the latters agent or representative, who indicates therein the current account number to which the deposit is
to be credited, the name of the depositor or current account holder, the date of the deposit, and the amount of the deposit
either in cash or in check. The withdrawal slips deposited were not checks as Firestone admits and Citibank
generally was not bound to accept the withdrawal slips as a valid mode of deposit. Nonetheless, Citibank erroneously
accepted the same as such and thus, must bear the risks attendant to the acceptance of the instruments.
Firestone and Citibank could not now shift the risk to LDB for their committed mistake.
PNB V. CONCEPTION MINING
G.R. No. L-16968
DOCTRINE:
SEC. 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous
or there are omissions therein, the following rules of construction apply:
(g) Where an instrument containing the word I promise to pay is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.
FACTS:
A promissory note dated march 12, 1954 was executed by Vicente Legarda, president of Concepcion Mining Company,
and Jose Sarte. On the face of the promissory note partially reads:
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .
The promissory note matured and without payment from the makers. PNB sued Concepcion Mining and Sarte.
Upon the filing of the complaint the defendants presented their answer in which they allege that the co-maker the
promissory note Don Vicente L. Legarda died on February 24, 1946 and his estate is in the process of judicial
determination in Special Proceedings No. 29060 of the Court of First Instance of Manila. On the basis of this allegation it
is prayed, as a special defense, that the estate of said deceased Vicente L. Legarda be included as party-defendant. The
court in its decision ruled that the inclusion of said defendant is unnecessary and immaterial
ISSUE:
Whether or not the estate of Legarda should be included in the suit.
HELD:
No. There is no need for pursuant to Section 17 (g) of the Negotiable Instruments Law:

SEC. 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous
or there are omissions therein, the following rules of construction apply:
(g) Where an instrument containing the word I promise to pay is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.
And Article 1216 of the Civil Code of the Philippines also provides as follows:
ART. 1216. The creditor may proceed against any one of the solidary debtors or some of them simultaneously. The
demand made against one of them shall not be an obstacle to those which may subsequently be directed against the
others so long as the debt has not been fully collected.
In view of the above quoted provisions, and as the promissory note was executed jointly and severally by the same
parties, namely, Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S. Sarte, the payee of the
promissory note had the right to hold any one or any two of the signers of the promissory note responsible for the
payment of the amount of the note. This judgment of the lower court should be affirmed.