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BPI vs Spouses Royeca G.R. No.

176664, July 21, 2008

Spouses Reynaldo and Victoria Royeca (respondents) executed and delivered to Toyota Shaw,
Inc. a Promissory Note payable in 48 equal monthly installments. The Promissory Note provides
for a penalty of 3% for every month or fraction of a month that an installment remains unpaid.
Respondents executed a Chattel Mortgage in favor of Toyota over a certain motor vehicle.
Toyota, with notice to respondents, executed a Deed of Assignment transferring all its rights,
title, and interest in the Chattel Mortgage to Far East Bank and Trust Company (FEBTC).
Claiming that the respondents failed to pay four (4) monthly, FEBTC sent a formal demand to
respondents, asking for the payment thereof, plus penalty. The respondents refused to pay on
the ground that they had already paid their obligation. FEBTC filed a Complaint for Replevin
and Damages against the respondents with the Metropolitan Trial Court (MeTC) of Manila
praying for the delivery of the vehicle. The complaint was later amended to substitute BPI as
plaintiff when it merged with and absorbed FEBTC.
Respondents alleged that they delivered to the Auto Financing Department of FEBTC eight (8)
postdated checks in different amount. The Acknowledgment Receipt, which they attached to
the Answer, showed that FEBTC received the checks. respondents further averred that they did
not receive any notice from the drawee banks or from FEBTC that these checks were
dishonored. They explained that, considering this and the fact that the checks were issued
three years ago, they believed in good faith that their obligation had already been fully paid.
They alleged that the complaint is frivolous and plainly vexatious.
FEBTC admitted that they had, in fact, received the eight checks from the respondents.
However, two of these were dishonored. He recalled that the remaining two checks were not
deposited anymore due to the previous dishonor of the two checks.
Whether tender of checks constitutes payment.
NO. A check is not legal tender and, therefore, cannot constitute a valid tender of payment.
Since a negotiable instrument is only a substitute for money and not money, the delivery of
such an instrument does not, by itself, operate as payment. The obligation is not
extinguished and remains suspended until the payment by commercial document is
actually realized.
Consolidated Plywood Inc. vs. Ifc Leasing G.R. No. L-72593, April 30, 1987
Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company
issued a sales invoice for the two used tractors. At the same time, the deed of sale with
chattel mortgage with promissory note was issued.

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Simultaneously, the seller assigned the deed of sale with chattel mortgage and promissory note
to respondent. The used tractors were then delivered but barely 14 days after, the tractors
broke down. The seller sent mechanics but the tractors were not repaired accordingly as they
were no longer serviceable.
Petitioner would delay the payments on the promissory notes until the seller completes its
obligation under the warranty. Thereafter, a collection suit was filed against petitioner for the
payment of the promissory note.
Whether the promissory note in question is a negotiable instrument
No, the instrument is not negotiable. A portion of the note is as follows, For value received,
I/We jointly and severally promise to pay to the IPM, the sum of P1,093,789.71 only.
It can be clearly observed that the instrument does not manifest transferability since it does
not contain the so-called words of negotiability which includes to order or to bearer.
Philippine Bank of Commerce vs. Aruego GR L-25836-37, 31 January 1981, 102 scra 530
To facilitate payment of the printing of a periodical called World Current Events., Aruego, its
publisher, obtained a credit accommodation from the Philippine Bank of Commerce. For every
printing of the periodical, the printer collected the cost of printing by drawing a draft against
the bank, said draft being sent later to Aruego for acceptance. As an added security for the
payment of the amounts advanced to the printer, the bank also required Aruego to execute a
trust receipt in favor of the bank wherein Aruego undertook to hold in trust for the bank the
periodicals and to sell the same with the promise to turn over to the bank the proceeds of the
sale to answer for the payment of all obligations arising from the draft. The bank instituted an
action against Aruego to recover the cost of printing of the latters periodical. Aruego however
argues that he signed the supposed bills of exchange only as an agent of the Philippine
Education Foundation Company where he is president.
Whether Aruego can be held liable by the petitioner although he signed the supposed bills of
exchange only as an agent of Philippine Education Foundation Company.
Aruego did not disclose in any of the drafts that he accepted that he was signing as
representative of the Philippine Education Foundation Company. For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted, pursuant to Section 20 of the
NIL which provides that when a person adds to his signature words indicating that he signs for
or on behalf of a principal or in a representative capacity, he is not liable on the instrument if
he was duly authorized; but the mere addition of words describing him as an agent or as filing
a representative character, without disclosing his principal, does not exempt him from personal

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