Académique Documents
Professionnel Documents
Culture Documents
Amount (P)
Asian Bank MC
No. 025935
7,550,000.00
Asian Bank MC
No. 025939
10,905,350.0
0
(aggregate
value of
Asian Bank
MCs:
18,455,350.0
0)
Metrobank CC
No. 003380
TOTAL
7,613,000.00
Source of fund
26,068,350.0
0
Chiok then deposited the three checks (Asian Bank MC Nos. 025935
and 025939, and Metrobank CC No. 003380), with an aggregate
value of P26,068,350.00 in Nuguids account with Far East Bank &
Trust Company (FEBTC), the predecessor-in-interest of petitioner
Bank of the Philippine Islands (BPI). Nuguid was supposed to deliver
US$1,022,288.50,4 the dollar equivalent of the three checks as
1
COMMREV - NEGO
On July 25, 1995, the RTC issued an Order directing the issuance of
a writ of preliminary prohibitory injunction:
COMMREV - NEGO
Upon the filing by Chiok of the requisite bond, the Writ was
subsequently issued on July 26, 1995.
Before the RTC, Asian Bank pointed out that SBTC returned and
issued a Stop Payment Order on SBTC MC No. 037364 (payable to
Chiok in the amount of P25,500,000.00) on the basis of an Affidavit
of Loss & Undertaking executed by a certain Helen Tan. Under said
Affidavit of Loss & Undertaking, Tan claims that she purchased
SBTC MC No. 037364 from SBTC, but the managers check got lost
on that day. Asian Bank argued that Chiok would therefore be liable
for the dishonor of the managers check under the terms of the
BPLA, which provides for recourse against the seller (Chiok) of the
check when it is dishonored by the drawee (SBTC) for any reason,
whether valid or not.
On October 18, 1995, FEBTC filed a Complaint-in-Intervention in
Civil Case No. Q-95-24299. On February6, 1996, the RTC initially
denied FEBTCs intervention in the case. On Motion for
Reconsideration, however, the RTC, on April 15, 1996, reversed
itself and allowed the same.
In the Complaint-in-Intervention, FEBTC claimed that it allowed the
immediate withdrawal of the proceeds of Asian Bank MC Nos.
025935 and 025939 on the ground that, as managerschecks, they
were the direct obligations of Asian Bank and were accepted in
advance by Asian Bank by the mere issuance thereof. FEBTC
presented the checks for payment on July 5, 1995 through the
PCHC. Asian Bank, as admitted in its Answer before the RTC,
received the same on that day. Consequently, Asian Bank was
deemed to have confirmed and booked payment of the subject
checks in favor of FEBTC or, at the latest, during the first banking
hour of July 6, 1995, when payment should have been made. FEBTC
On August 29, 2002, the RTC rendered its Decision, the dispositive
portion of which states:
WHEREFORE, judgment is rendered:
1. Declaring as permanent the writ of preliminary injunction
issued under the Order of July 25, 1995;
2. Ordering Global Business Bank, Inc.to pay the plaintiff
[Chiok]:
a.) The
amount
of P34,691,876.71
(less
the
attorneys fees of P255,000.00 which shall remain
with Global Business Bank, Inc.), plus interest at
the legal rate of 12%/p.a. from September 30,
1999 until fully paid;
b.) The amount of P215,000.00, representing the
excess amount debited from the plaintiffs
deposit in his account with Global Business Bank,
Inc. on July 7, 1995, plus interest of 12%/p.a. from
July 7, 1995, until fully paid;
c.) Attorneys fees equivalentof 5% of the total
amount due; and
3. Ordering Metropolitan Bank & Trust Companyto pay the
plaintiff:
COMMREV - NEGO
COMMREV - NEGO
With respect to Global Bank, the RTC ruled that the entire amount
of P34,691,876.71 it recovered from SBTC from the September 15,
1997 PCHC Decision, as reflected in the September 29, 1999
Charge Slip No. 114977, less the sum of P225,000.00 awarded by
the arbitration committees decision as attorneys fees, should be
paidto Chiok, with interest at 12% per annum from September 30,
1999 until full payment. The RTC likewise ordered Global Bank to
pay Chiok the amount of P215,390.00, an amount debited from
Chioks account as payment for outstanding bills purchase.15
With respect to Metrobank, the RTC ruled that it should pay
Chiok P7,613,000.00, the amount paid by Chiok to purchase the CC,
plus interest of 12 percent per annum from July 5,1995 until full
payment. The RTC explained this finding as follows:
The same conclusion is true with respect to Metro Bank, with whom
the funds amounting to P7,613,000.00 for the purchase of CC No.
003380 has remained. According to Chiok, Metro Bank used such
funds in its operations.
In the hearing on May 17, 2001, Lita Salonga Tan was offered as a
witness for Metro Bank, but in lieu ofher testimony, the parties
agreed to stipulate on the following as her testimony, to wit:
It also seems that Metro Bank paid the CC without first checking
whether, in fact, any actual payment of the 3 checks had been
made on July 5, 1995 to the payee when the checks were deposited
in payees account with FEBTC on July 5, 1995. The records show no
such payment was ever made to render the TRO of July 6, 1995 or
the writ of preliminary injunction applied for moot and academic.
Jessy A. Degaos adopted by Metro Bank as its own witness in
injunction hearing of July 24, 1995 stated that the payment of the
3 checks consisted of the accounting entry made at the PCHC
during the presenting process by debiting the respective accounts
of the drawees and crediting the account of collecting bank FEBTC.
Yet, as already found hereinabove, such process was reversed due
to the return by the drawees of the checks which they dishonored
on account of the TRO.
Also, Degaos, testifying on January 17, 2002 for intervenor BPI,
was asked in what form was the withdrawal of the amounts of the
checks made by Nuguid on July 5, 1995, that is, whether:- 1) cash
5
COMMREV - NEGO
COMMREV - NEGO
COMMREV - NEGO
COMMREV - NEGO
I.
II.
III.
Whether or not the Court of Appeals detracted from wellsettled concepts and principles in commercial law
regarding the nature, causes, and effects of a managers
check and cashiers checkin ruling that [the] power of
the court can be invoked by the purchaser [Chiok] in a
proper action, which the Court su[b]stantially construed
as a rescissory action or the power to rescind obligations
under Article 1191 of the Civil Code.
Whether or not the Honorable Court of Appeals erred in
ruling that where a purchaser invokes rescission due to
an alleged breach of the payees contractual obligation,
it is deemed as "peculiar circumstance" which justifies a
stop payment order issued by the purchaser or a
temporary restraining order/injunction from a Court to
prevent payment of a Managers Check or a Cashiers
Check.
Whether or not the Honorable Court of Appeals erred in
ruling that judicial admissions in the pleadings of Nuguid,
BPI, Asian Bank, Metrobank and even Chiok himself that
Nuguid had withdrawn the proceeds of the checks will
not defeat Chioks "substantial right" to restrain the
drawee bank from paying BPI, the collecting bank or
presenting bank in this case who paid the value of the
Cashiers/Managers Checks to the payee.27
Finally, Global Bank rely upon the following grounds in its petition
with this Court:
A. THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
PETITIONER GLOBAL BANK HAD NO JUSTIFICATION FOR ITS RIGHT
OF RECOURSE AGAINST RESPONDENT CHIOK NOTWITHSTANDING
THE CLEAR AND UNMISTAKABLE PROVISIONS OF THE BILLS
PURCHASE AGREEMENT.
B. THE COURT OF APPEALS GRAVELY ERRED IN MAKING PETITIONER
GLOBAL BANK LIABLE FOR INTEREST OF 4% PER ANNUM DESPITE
THE FACT THAT:
1) RESPONDENT DID NOT ASK FOR SUCH RELIEF IN HIS
COMPLAINT;
9
COMMREV - NEGO
COMMREV - NEGO
COMMREV - NEGO
COMMREV - NEGO
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,
with rights and duties of one in such situation. Where a check is
certified by the bank on which it is drawn, the certification is
equivalent to acceptance. 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, and that they shall be so
applied whenever the check is presented for payment. It is an
understanding that the check is good then, and shall continue
good, and this agreement is as binding on the bank as its notes in
circulation, a certificate of deposit payable to the order of the
depositor, or any other obligation it can assume. The object of
certifying a check, as regards 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." Hence, the exception to the rule enunciated
under Section 63 of the Central Bank Act to the effect "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" shall apply in
this case. x x x. (Emphases supplied, citations omitted.)
Even more telling is the Courts pronouncement in Tan v. Court of
Appeals,36 which unequivocally settled the unconditional nature of
the credit created by the issuance of managers or cashiers
checks:
A cashiers check is a primary obligation of the issuing bank and
accepted in advanceby its mere issuance. By its very nature, a
cashiers check is the banks order to pay drawn upon itself,
committing in effect its total resources, integrity and honor behind
the check. A cashiers check by its peculiar character and general
use in the commercial world is regarded substantially to be as good
asthe money which it represents. In this case, therefore, PCIB by
issuing the check created an unconditional creditin favor of any
collecting bank. (Emphases supplied, citations omitted.)
Furthermore, under the principle of ejusdem generis, where a
statute describes things of a particular class or kind accompanied
by words of a generic character, the generic word willusually be
COMMREV - NEGO
the subject checks with the end in view of the return of the
proceeds to Chiok.40
Thus, as it was construed by the Court of Appeals, the Amended
Complaint of Chiok was in reality an action for rescission of the
contract to buy foreign currency between Chiok and Nuguid. The
Court of Appeals then proceeded to cancel the managers and
cashiers checks as a consequence of the granting of the action for
rescission, explaining that "the subject checks would not have been
issued were it not for the contract between Chiok and Nuguid.
Therefore, they cannot be disassociated from the contract and
given a distinct and exclusive signification, as the purchase thereof
is part and parcel of the series of transactions necessary to
consummate the contract."41
We disagree with the above ruling.
The right to rescind invoked by the Court of Appeals is provided by
Article 1191 of the Civil Code, which reads:
Art. 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.
The cause of action supplied by the above article, however, is
clearly predicated upon the reciprocity of the obligations of the
injured party and the guilty party. Reciprocal obligations are those
which arise from the same cause, and in which each party is a
debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be
performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfillment of the other. 42 When
Nuguid failed to deliver the agreed amount to Chiok, the latter had
a cause of action against Nuguid to ask for the rescission of their
contract. On the other hand, Chiok did not have a cause of action
against Metrobank and Global Bank that would allow him to rescind
the contracts of sale of the managers or cashiers checks, which
would have resulted in the crediting of the amounts thereof back to
his accounts.
Otherwise stated, the right of rescission43 under Article 1191 of the
Civil Code can only be exercised in accordance with the principle of
relativity of contracts under Article 1131 of the same code, which
provides:
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law. x x x.
In several cases, this Court has ruled that under the civil law
principle of relativity of contracts under Article 1131, contracts can
only bind the parties who entered into it, and it cannot favor or
prejudice a third person, even if he is aware of such contract and
has acted with knowledge thereof. 44 Metrobank and Global Bank are
not parties to the contract to buy foreign currency between Chiok
and Nuguid. Therefore, they are not bound by such contract and
cannot be prejudiced by the failure of Nuguid to comply with the
terms thereof.
Neither could Chiok be validly granted a writ of injunction against
Metrobank and Global Bank to enjoin said banks from honoring the
subject managers and cashiers checks. It is elementary that "(a)n
injunction should never issue when an action for damages would
adequately compensate the injuries caused. The very foundation of
the jurisdiction to issue the writ of injunction rests in the fact that
the damages caused are irreparable and that damages would not
adequately compensate."45 Chiok could have and should have
proceeded directly against Nuguid to claim damages for breach of
14
COMMREV - NEGO
15
COMMREV - NEGO
COMMREV - NEGO
COMMREV - NEGO
As in SBTC, BPI in the case at bar relied on the integrity and honor
of the managers and cashiers checks asthey are regarded in
commercial transactions when it immediately credited their
amounts to Nuguids account.
Nuguid has admitted that FEBTC (now BPI) has paid him the value
of the subject checks.57 This statement by Nuguid is certainly
against his own interest as he can be held liable for said amounts.
Unfortunately, Nuguid allowed his appeal with the Court of Appeals
to lapse, without taking steps to have it reinstated. This course of
action, which is highly unlikely if Nuguid had not withdrawn the
value of the managers and cashiers checks deposited into his
account, likewise prevents us from ordering Nuguid to deliver the
amounts of the checks to Chiok. Parties who did not appeal will not
be affected by the decision of an appellate court rendered to
appealing parties.58
We agree with the finding of the Court of Appeals that BPI is not a
holder in due course with respect to managers checks. Said checks
were never indorsed by Nuguid to FEBTC, the predecessor-ininterest of BPI, for the reason that they were deposited by Chiok
directly to Nuguids account with FEBTC. However, inview of our
ruling that Nuguid has withdrawn the value of the checks from his
account, BPI has the rights of an equitable assignee for value under
Section 49 of the Negotiable Instruments Law, which provides:
18
COMMREV - NEGO
COMMREV - NEGO
COMMREV - NEGO
The Facts
The facts of the case are as follows:
Petitioner filed two separate cases before the Regional Trial Court
(RTC) of Cebu. Civil Case No. CEB-9713 was filed by petitioner
against Ma. Teresa Chua (Chua) and Glyndah Tabaag (Tabaag) for
a sum of money with preliminary attachment. Civil Case No. CEB9866 was filed by petitioner for a sum of money with damages
against herein respondent Metropolitan Bank and Trust Company
(Metrobank) and Chua.3
In both cases, petitioner alleged that he was doing business under
the name "Hope Pharmacy" which sells medicine and other
pharmaceutical products in the City of Cebu. Petitioner had in his
employ Chua as his pharmacist and trustee or caretaker of the
business; Tabaag, on the other hand, took care of the receipts and
invoices and assisted Chua in making deposits for petitioners
accounts in the business operations of Hope Pharmacy. 4
In CEB-9713, petitioner claimed that there were unauthorized
deposits and encashments made by Chua and Tabaag in the total
amount of One Hundred Nine Thousand Four Hundred Thirty-three
Pesos and Thirty Centavos (P109,433.30). He questioned
particularly the following:
(1) FEBTC Check No. 251111 dated April 29, 1990 in the
amount of P22,635.00 which was issued by plaintiffs
[petitioners] customer Loy Libron in payment of the stocks
purchased was deposited under Metrobank Savings Account
No. 420-920-6 belonging to the defendant Ma. Teresa Chua;
(2) RCBC Checks Nos. 330958 and 294515, which were in
blank but pre-signed by him (plaintiff [petitioner] Vicente
Go) for convenience and intended for payment to plaintiffs
DATE
AMOUNT
FEBTC 251166
5-23-90
P 65,214.88
FEBTC 239399
5-08-90
24,917.75
FEBTC 251350
7-24-90
212,326.56
PBC 279887
6-27-90
2,000.00
PBC 162387
1-24-90
6,300.00
PBC 162317
12-22-89
3,300.00
PBC 279881
6-23-90
7,650.00
PBC 009005
7-21-89
3,584.00
PBC 279771
5-14-90
3,600.00
PBC 279726
4-25-90
2,000.00
21
COMMREV - NEGO
PBC 168004
3-22-90
2,800.00
PBC 167963
3-07-90
1,700.00
FEBTC 267793
8-20-90
80,085.66
FEBTC 267761
7-21-90
45,304.63
FEBTC 251252
6-03-90
64,000.00
FEBTC 267798
8-15-90
40,078.67
PBC 367292
8-06-90
2,100.00
PBC 376445
9-26-90
1,125.00
PBC 009056
8-07-89
2,500.00
PBC 376402
9-12-90
12,105.40
BPI 197074
7-17-90
5,240.00
BPI 197051
7-06-90
1,350.00
BPI 204358
9-19-90
5,402.60
BPI 204252
7-31-90
6,715.60
FEBTC 251171
6-27-90
83,175.54
FEBTC 251165
6-28-90
231,936.10
FEBTC 251251
6-30-90
47,087.25
FEBTC 251163
6-21-90
170,600.85
FEBTC 251170
5-23-90
16,440.00
FEBTC 251112
5-31-90
211,592.69
FEBTC 239400
6-15-90
47,664.03
FEBTC 251162
6-22-90
82,697.85
P1,492,595.067
Petitioner claimed that the said checks were crossed checks
payable to Hope Pharmacy only; and that without the participation
and connivance of respondent bank, the checks could not have
been accepted for deposit to any other account, except petitioners
account.8
Thus, in CEB-9866, petitioner prayed that Chua and respondent
bank be ordered, jointly and severally, to pay the principal amount
of P1,492,595.06, plus interest at 12% from the dates of the
checks, until the obligation shall have been fully paid; moral
damages of Five Hundred Thousand Pesos (P500,000.00);
exemplary damages ofP500,000.00; and attorneys fees and costs
in the amount of P500,000.00.9
On February 23, 1995, the RTC rendered a Joint Decision, 10 the
dispositive portion of which reads:
WHEREFORE, premises considered, the Court hereby renders
judgment dismissing plaintiff Vicente Gos complaint against the
defendant Ma. Teresa Chua and Glyndah Tabaag in Civil Case No.
CEB-9713, as well as plaintiffs complaint against the same
defendant Ma. Teresa Chua in Civil Case No. CEB-9866.
Plaintiff Vicente Go is moreover sentenced to pay P50,000.00 in
attorneys fees and litigation expenses to the defendants Ma.
Teresa Chua and Glyndah Tabaag in Civil Case No. CEB-9713.
Defendant Metrobank in Civil Case No. CEB-9866 is hereby
condemned to pay unto plaintiff Vicente Go/Hope Pharmacy the
amount of P50,000.00 as moral damages, and attorneys fees and
litigation expenses in the aggregate sum of P25,000.00.
The defendant Metrobanks crossclaim against its co-defendant Ma.
Teresa Chua in Civil Case No. CEB-9866 is dismissed for lack of
merit.
22
COMMREV - NEGO
The Issue
SO ORDERED.15
Hence, this petition.
COMMREV - NEGO
where two parallel lines are drawn across its face or across the
corner thereof. It may be crossed generally or specially.18
A check is crossed specially when the name of a particular banker
or a company is written between the parallel lines drawn. It is
crossed generally when only the words "and company" are written
or nothing is written at all between the parallel lines, as in this
case. It may be issued so that presentment can be made only by a
bank.19
In order to preserve the credit worthiness of checks, jurisprudence
has pronounced that crossing of a check has the following effects:
(a) the check may not be encashed but only deposited in the bank;
(b) the check may be
negotiated only once to one who has an account with a bank;
and (c) the act of crossing the check serves as 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 that
purpose, otherwise, he is not a holder in due course.20
The Court has taken judicial cognizance of the practice that a check
with two parallel lines in the upper left hand corner means that it
could only be deposited and not converted into cash. The effect of
crossing a check,
thus, relates to the mode of payment, meaning that the drawer had
intended the check for deposit only by the rightful person, i.e., the
payee named therein.21 The crossing of a check is a warning that
the check should be deposited only in the account of the payee.
Thus, it is the duty of the collecting bank to ascertain that the
check be deposited to the payees account only.22
In the instant case, there is no dispute that the subject 32 checks
with the total amount of P1,492,595.06 were crossed checks with
petitioner as the named payee. It is the submission of petitioner
that respondent bank should be held accountable for the entire
amount of the checks because it accepted the checks for deposit
under Chuas account despite the fact that the checks were crossed
and that the payee named therein was not Chua.
COMMREV - NEGO
[Chua] told him that those checks belonged to her as payment for
the advances she extended to Mr. Go/Hope Pharmacy. x x x
Davis stressed that Metrobank granted the privilege to Ma. Teresa
Chua that for every check she deposited with Metrobank, the same
would be credited outright to her account, meaning that she could
immediately make use of the amount credited; this arrangement
went on for about three years, without any complaint from Mr.
Go/Hope Pharmacy, and Ma. Teresa Chua made warranty that she
would reimburse Metrobank if Mr. Go complained. He did not
however call or inform Mr. Go about this arrangement, because
their bank being a Chinese bank, transactions are based on trust
and confidence, and for him to inform Mr. Vicente Go about it, was
tantamount to questioning the integrity of their client, Ma. Teresa
Chua. Besides, this special privilege or arrangement would not
bring any monetary gain to the bank.24
Negligence was committed by respondent bank in accepting for
deposit the crossed checks without indorsement and in not
verifying the authenticity of the negotiation of the checks. The law
imposes a duty of extraordinary diligence on the collecting bank to
scrutinize checks deposited with it, for the purpose of determining
their genuineness and regularity.25 As a business affected with
public interest and because of the nature of its functions, the banks
are under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of the
relationship.26 The fact that this arrangement had been practiced
for three years without Mr. Go/Hope Pharmacy raising any objection
does not detract from the duty of the bank to exercise
extraordinary diligence. Thus, the Decision of the RTC, as affirmed
by the CA, holding respondent bank liable for moral damages is
sufficient to remind it of its responsibility to exercise extraordinary
diligence in the course of its business which is imbued with public
interest.
WHEREFORE, the Decision dated May 27, 2005 and the Resolution
dated August 31, 2005 of the Court of Appeals in CA-G.R. CV No.
63469 are hereby AFFIRMED.
SO ORDERED.
25
COMMREV - NEGO
COMMREV - NEGO
COMMREV - NEGO
FERNAN, C.J.:
Petitioner State Investment House seeks a review of the decision of
respondent Intermediate Appellate Court (now Court of Appeals) in
AC-G.R. CV No. 04523 reversing the decision of the Regional Trial
Court of Manila, Branch XXXVII dated April 30, 1984 and dismissing
the complaint for collection filed by petitioner against private
respondents Spouses Anita Pena Chua and Harris Chua.
It appears that shortly before September 5, 1980, New Sikatuna
Wood Industries, Inc. requested for a loan from private respondent
Harris Chua. The latter agreed to grant the same subject to the
condition that the former should wait until December 1980 when he
would have the money. In view of this agreement, private
respondent-wife, Anita Pena Chua issued three (3) crossed checks
payable to New Sikatuna Wood Industries, Inc. all postdated
December 22, 1980 as follows:
DRAWEE BANK
CHECK NO.
DATE
AMOUNT
28
COMMREV - NEGO
1. China Banking
Corporation
2. International
Corporate Bank
3.
Metropolitan
Bank & Trust Co.
589053
04045549
036512
P98,750.0
0
102,313.0
0
98,387.00
COMMREV - NEGO
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 that purpose,
otherwise he is not a holder in due course. Further, the appellate
court said:
It results therefore that when appellee rediscounted the
check knowing that it was a crossed check he was knowingly
violating the avowed intention of crossing the check.
Furthermore, his failure to inquire from the holder, party
defendant New Sikatuna Wood Industries, Inc., the purpose
for which the three checks were cross despite the warning of
the crossing, prevents him from being considered in good
faith and thus he is not a holder in due course. Being not a
holder in due course, plaintiff is subject to personal
defenses, such as lack of consideration between appellants
and New Sikatuna Wood Industries. Note that under the
facts the checks were postdated and issued only as a loan to
New Sikatuna Wood Industries, Inc. if and when deposits
were made to back up the checks. Such deposits were not
made, hence no loan was made, hence the three checks are
without consideration (Sec. 28, Negotiable Instruments
Law).
Likewise New Sikatuna Wood Industries negotiated the three
checks in breach of faith in violation of Article (sic) 55,
Negotiable Instruments Law, which is a personal defense
available to the drawer of the check. 6
In addition, such instruments are mentioned in Section 541 of the
Negotiable Instruments Law as follows:
Sec. 541. The maker or any legal holder of a check shall be
entitled to indicate therein that it be paid to a certain banker
or institution, which he shall do by writing across the face
the name of said banker or institution, or only the words
"and company."
30
COMMREV - NEGO
The three subject checks in the case at bar had been crossed
generally and issued payable to New Sikatuna Wood Industries, Inc.
which could only mean that the drawer had intended the same for
deposit only by the rightful person, i.e., the payee named therein.
Apparently, it was not the payee who presented the same for
payment and therefore, there was no proper presentment, and the
liability did not attach to the drawer.
Thus, in the absence of due presentment, the drawer did not
become liable. 7 Consequently, no right of recourse is available to
petitioner against the drawer of the subject checks, private
respondent wife, considering that petitioner is not the proper party
authorized to make presentment of the checks in question.
Yet it does not follow as a legal proposition that simply because
petitioner was not a holder in due course as found by the appellate
court for having taken the instruments in question with notice that
the same is for deposit only to the account of payee named in the
subject checks, petitioner could not recover on the checks. The
31
COMMREV - NEGO
32
COMMREV - NEGO
COMMREV - NEGO
The foregoing does not mean, however, that respondent could not
recover from the checks. The only disadvantage of a holder who is
not a holder in due course is that the instrument is subject to
defenses
as
if
it
were
non-negotiable. 14 Hence, respondent can collect from the
immediate indorser, in this case, George King.
WHEREFORE, finding that the court a quo erred in the application of
law, the instant petition is hereby GRANTED. The decision of the
Regional Trial Court as affirmed by the Court of Appeals is hereby
REVERSED. Cost against private respondent. SO ORDERED.
G.R. No. L-15126
34
COMMREV - NEGO
Plaintiff
and
defendants
through
their
respective
undersigned attorney's respectfully submit the following
Agreed Stipulation of Facts;
First. That on or about 8 September 1953, in the evening,
defendant Anita C. Gatchalian who was then interested in
looking for a car for the use of her husband and the family,
was shown and offered a car by Manuel Gonzales who was
accompanied by Emil Fajardo, the latter being personally
known to defendant Anita C. Gatchalian;
Second. That Manuel Gonzales represented to defend
Anita C. Gatchalian that he was duly authorized by the
owner of the car, Ocampo Clinic, to look for a buyer of said
car and to negotiate for and accomplish said sale, but which
facts were not known to plaintiff;
Third. That defendant Anita C. Gatchalian, finding the
price of the car quoted by Manuel Gonzales to her
satisfaction, requested Manuel Gonzales to bring the car the
day following together with the certificate of registration of
the car, so that her husband would be able to see same;
that on this request of defendant Anita C. Gatchalian,
Manuel Gonzales advised her that the owner of the car will
not be willing to give the certificate of registration unless
there is a showing that the party interested in the purchase
of said car is ready and willing to make such purchase and
that for this purpose Manuel Gonzales requested defendant
Anita C. Gatchalian to give him (Manuel Gonzales) a check
which will be shown to the owner as evidence of buyer's
good faith in the intention to purchase the said car, the said
check to be for safekeeping only of Manuel Gonzales and to
be returned to defendant Anita C. Gatchalian the following
day when Manuel Gonzales brings the car and the certificate
of registration, but which facts were not known to plaintiff;
Fourth. That relying on these representations of Manuel
Gonzales and with his assurance that said check will be only
for safekeeping and which will be returned to said defendant
the following day when the car and its certificate of
registration will be brought by Manuel Gonzales to
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The check could not have been intended to pay the hospital
fees which amounted only to P441.75. The check is in the
amount of P600.00, which is in excess of the amount due
plaintiff. (Par. 10, Stipulation of Facts).
It was necessary for plaintiff to give Manuel Gonzales
change in the sum P158.25 (Par. 10, Stipulation of Facts).
Since Manuel Gonzales is the party obliged to pay, plaintiff
should have been more cautious and wary in accepting a
piece of paper and disbursing cold cash.
The check is payable to bearer. Hence, any person who
holds it should have been subjected to inquiries. EVEN IN A
BANK, CHECKS ARE NOT CASHED WITHOUT INQUIRY FROM
THE BEARER. The same inquiries should have been made by
plaintiff. (Defendants-appellants' brief, pp. 52-53)
Answering the first contention of appellant, counsel for plaintiffappellee argues that in accordance with the best authority on the
Negotiable Instruments Law, plaintiff-appellee may be considered
as a holder in due course, citing Brannan's Negotiable Instruments
Law, 6th edition, page 252. On this issue Brannan holds that a
payee may be a holder in due course and says that to this effect is
the greater weight of authority, thus:
Whether the payee may be a holder in due course under the
N. I. L., as he was at common law, is a question upon which
the courts are in serious conflict. There can be no doubt that
a proper interpretation of the act read as a whole leads to
the conclusion that a payee may be a holder in due course
under any circumstance in which he meets the requirements
of Sec. 52.
The argument of Professor Brannan in an earlier edition of
this work has never been successfully answered and is here
repeated.
Section 191 defines "holder" as the payee or indorsee of a
bill or note, who is in possession of it, or the bearer thereof.
Sec. 52 defendants defines a holder in due course as "a
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Rep. 739, 181 N.Y. Supp. 913, affd. in memo., 191 App. Div.
947, 181 N.Y. Supp. 945." (pp. 640-642, Brannan's
Negotiable Instruments Law, 6th ed.).
The above considerations would seem sufficient to justify our ruling
that plaintiff-appellee should not be allowed to recover the value of
the check. Let us now examine the express provisions of the
Negotiable Instruments Law pertinent to the matter to find if our
ruling conforms thereto. Section 52 (c) provides that a holder in due
course is one who takes the instrument "in good faith and for
value;" Section 59, "that every holder is deemed prima facie to be a
holder in due course;" and Section 52 (d), that in order that one
may be a holder in due course it is necessary that "at the time the
instrument was negotiated to him "he had no notice of any . . .
defect in the title of the person negotiating it;" and lastly Section
59, that every holder is deemed prima facieto be a holder in due
course.
In the case at bar the rule that a possessor of the instrument
is prima faciea holder in due course does not apply because there
was a defect in the title of the holder (Manuel Gonzales), because
the instrument is not payable to him or to bearer. On the other
hand, the stipulation of facts indicated by the appellants in their
brief, like the fact that the drawer had no account with the payee;
that the holder did not show or tell the payee why he had the check
in his possession and why he was using it for the payment of his
own personal account show that holder's title was defective or
suspicious, to say the least. As holder's title was defective or
suspicious, it cannot be stated that the payee acquired the check
without knowledge of said defect in holder's title, and for this
reason the presumption that it is a holder in due course or that it
acquired the instrument in good faith does not exist. And having
presented no evidence that it acquired the check in good faith, it
(payee) cannot be considered as a holder in due course. In other
words, under the circumstances of the case, instead of the
presumption that payee was a holder in good faith, the fact is that
it acquired possession of the instrument under circumstances that
should have put it to inquiry as to the title of the holder who
negotiated the check to it. The burden was, therefore, placed upon
it to show that notwithstanding the suspicious circumstances, it
acquired the check in actual good faith.
The rule applicable to the case at bar is that described in the case
of Howard National Bank v. Wilson, et al., 96 Vt. 438, 120 At. 889,
894, where the Supreme Court of Vermont made the following
disquisition:
Prior to the Negotiable Instruments Act, two distinct lines of
cases had developed in this country. The first had its origin
in Gill v. Cubitt, 3 B. & C. 466, 10 E. L. 215, where the rule
was distinctly laid down by the court of King's Bench that
the purchaser of negotiable paper must exercise reasonable
prudence and caution, and that, if the circumstances were
such as ought to have excited the suspicion of a prudent
and careful man, and he made no inquiry, he did not stand
in the legal position of a bona fide holder. The rule was
adopted by the courts of this country generally and seem to
have become a fixed rule in the law of negotiable paper.
Later in Goodman v. Harvey, 4 A. & E. 870, 31 E. C. L. 381,
the English court abandoned its former position and adopted
the rule that nothing short of actual bad faith or fraud in the
purchaser would deprive him of the character of a bona fide
purchaser and let in defenses existing between prior parties,
that no circumstances of suspicion merely, or want of proper
caution in the purchaser, would have this effect, and that
even gross negligence would have no effect, except as
evidence tending to establish bad faith or fraud. Some of the
American courts adhered to the earlier rule, while others
followed the change inaugurated in Goodman v. Harvey. The
question was before this court in Roth v. Colvin, 32 Vt. 125,
and, on full consideration of the question, a rule was
adopted in harmony with that announced in Gill v. Cubitt,
which has been adhered to in subsequent cases, including
those cited above. Stated briefly, one line of cases including
our own had adopted the test of the reasonably prudent
man and the other that of actual good faith. It would seem
that it was the intent of the Negotiable Instruments Act to
harmonize this disagreement by adopting the latter test.
That such is the view generally accepted by the courts
appears from a recent review of the cases concerning what
constitutes notice of defect. Brannan on Neg. Ins. Law, 187201. To effectuate the general purpose of the act to make
uniform the Negotiable Instruments Law of those states
39
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It comes to this then: When the case has taken such shape
that the plaintiff is called upon to prove himself a holder in
due course to be entitled to recover, he is required to
establish the conditions entitling him to standing as such,
including good faith in taking the instrument. It devolves
upon him to disclose the facts and circumstances attending
the transfer, from which good or bad faith in the transaction
may be inferred.
ERNESTINA
CRISOLOGO-JOSE, petitioner, vs.
COURT
OF
APPEALS and RICARDO S. SANTOS, JR. in his own behalf and
as Vice-President for Sales of Mover Enterprises,
Inc., respondents.
REGALADO, J.:
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After trial, the court a quo, holding that it was "not persuaded to
believe that consignation referred to in Article 1256 of the Civil
Code is applicable to this case," rendered judgment dismissing
plaintiff s complaint and defendant's counterclaim. 4
As earlier stated, respondent court reversed and set aside said
judgment of dismissal and revived the complaint for consignation,
directing the trial court to give due course thereto.
Hence, the instant petition, the assignment of errors wherein are
prefatorily stated and discussed seriatim.
1. Petitioner contends that respondent Court of Appeals
erred in holding that private respondent, one of the
signatories of the check issued under the account of Mover
Enterprises, Inc., is an accommodation party under the
Negotiable Instruments Law and a debtor of petitioner to the
extent of the amount of said check.
Petitioner avers that the accommodation party in this case is Mover
Enterprises, Inc. and not private respondent who merely signed the
check in question in a representative capacity, that is, as vicepresident of said corporation, hence he is not liable thereon under
the Negotiable Instruments Law.
The pertinent provision of said law referred to provides:
Sec.
29.
Liability
of
accommodation
party
an
accommodation party is one who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to
some other person. Such a person is liable on the
instrument to a holder for value, notwithstanding such
holder, at the time of taking the instrument, knew him to be
only an accommodation party.
Consequently, to be considered an accommodation party, a person
must (1) be a party to the instrument, signing as maker, drawer,
acceptor, or indorser, (2) not receive value therefor, and (3) sign for
41
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the purpose of lending his name for the credit of some other
person.
Based on the foregoing requisites, it is not a valid defense that the
accommodation party did not receive any valuable consideration
when he executed the instrument. From the standpoint of contract
law, he differs from the ordinary concept of a debtor therein in the
sense that he has not received any valuable consideration for the
instrument he signs. Nevertheless, he is liable to a holder for value
as if the contract was not for accommodation 5 in whatever
capacity such accommodation party signed the instrument,
whether primarily or secondarily. Thus, it has been held that in
lending his name to the accommodated party, the accommodation
party is in effect a surety for the latter. 6
The instant case falls squarely within the purview of the aforesaid
decisional rules. If we indulge petitioner in her aforesaid
postulation, then she is effectively barred from recovering from
Mover Enterprises, Inc. the value of the check. Be that as it may,
petitioner is not without recourse.
The fact that for lack of capacity the corporation is not bound by an
accommodation paper does not thereby absolve, but should render
personally liable, the signatories of said instrument where the facts
show that the accommodation involved was for their personal
account, undertaking or purpose and the creditor was aware
thereof.
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