18. Philippine Commercial International Bank vs.

Court
of Appeals
FACTS: Ford Philippines drew and issued its citibank
checks in favor of Commissioner of Internal Revenue as
payment for taxes. The checks were depositedto IBAA and
was sunsequently cleared at central bank and later paid to
ibaa as collecting bank. However proceeds of said checks
were never received by the commisioner and as a
consequence, ford was compelled to make a second
payment. It was discovered by ford that check were
encashed by unauthorized persons.
According to investigatiin cinducted by the NBI,
one of the checks issued by petitioner was withdrawn from
PCIB for alleged mistake in the amount to be paid. This
was replaced with managers check by PCIB, which were
said to be
stolenby the syndicate and deposited in their own account.
The trial court decided in favor of Ford.
ISSUE: Has Ford the right to recover the value of the
checks intended as payment to CIR?
HELD: The checks were drawn against the drawee bank but
the title of the person negotiating
thesamewas allegedly defective because the instrument w

as obtained by fraud and unlawful means, and theproceeds

of the checks were not remitted to the payee. The mere fac
t that the forgery wascommitted by a drawer- Payors
confidential employee or agent, who by virtue of his
position had
Unusual facilities for perpetrating the fraud and imposing
the forged paper upon the bank, doesnt
Entitle the bank to shift the loss to the drawer-payor, in the
absence of some circumstance raising estoppel against the
drawer.
19. Ramon Ilusorio vs. Court of Appeals

FACTS:
Petitioner was a prominent businessmrunning 20
corporations and was going out of country a number of
times. He then entrusted to his then secretary the handling
of his credit cards and checkbooks. For a material Period of
time, the secretary was able to encash and deposit in
her personal account moneyfrom the account of
petitioner. Upon knowledge of her acts, she was
fired immediately
andcriminal actions were filed against her. Thereafter, petit
ioner requested the bank to restore itsmoney but the bank
refused to do so
.Issue: Whether or not the bank is liable for the forged
checks.

HELD: The petitioner doesnt have a course of action

against the bank. To be entitled to damages,
Petitioner has the burden of proving negligence on the part
of the bank for failure to detect thediscrepancy in the
signatures on the checks. It is incumbent upon petitioner to
establish the fact of forgery. It was petitioner who was
negligent in this case. He failed to examine
his bank statements andthis was the proximate cause of
his own damage. Because of this negligence, he is
precluded fromsetting up the defense of forgery with
regard the checks.
20. Samsung Construction Company Phils., Inc vs FEBTC
Facts: Petitioner maintains a current account with the
respondent bank and authorized Jong to sign checks in
behalf of the company. The checks are in the custody of an
accountant Kyu. On one occasion, a certain Gonzaga
presented a check to FEBTC purportedly drawn by the
Company in the amount of P999,500. The check was
payable to cash and appeared to be signed by Jong. FEBTC
upon ascertaining that there are sufficient fund to cover
the check and finding the signature of Jong appears to be
genuine paid Gonzaga. Later, the forgery was discovered.
Samsung demanded that the amount paid to Gonzaga be
credited back to its account because they have not
authorized the encashment of the check. On the other
hand, the respondent bank claimed negligence on the part
of the petitioner in protecting its check.
Issue: Whether or not FEBTC should bear the loss.

Held: The SC held that the FEBTC should bear the loss.
Under Sec. 62 of NIL, among the warranties to be assumed
by the acceptor is it admits the existence of the drawer,
the genuineness of his signature, and his capacity and
authority to draw the instrument. It is incumbent upon the
drawee bank to ascertain the genuineness of the signature
of its depositor. The respondent bank in this case did not
exercise the degree of diligence required to enable it to
detect the forgery.
MALTERIAL ALTERATION
21. Philippine National Bank vs. Court of Appeals
FACTS: DECS issued a check in favor of Abante Marketing c
ontaining
a specific serial number,drawn against PNB. The check was
deposited by Abante in its account with Capitol and the latt
erconsequently deposited the same with its account with
PBCOM which later deposited it with petitioner for
clearing. The check was thereafter cleared. However, on a
relevant date, petitioner pnb
returned the check on account that there had been a mater
ial alteration on it. Subsequent debitswere made but
Capitol cannot debit the account of Abante any longer for
the latter had withdrawn all the money already from the
account. This prompted Capitol to seek reclarification from
pbcomand demanded the recrediting of its account.
Issue: Whether or not PBCOM should bear the loss for the
check materially altered.

HELD: An alteration is said to be material if it alters the

effect of the instrument. It means
anunauthorized change in the instrument that purports to
modify in any respect the obligation of aparty or an unauth
orized addition of words or numbers or other change to
an incomplete instrument relating to the obligation of the
party. In other words, a material alteration
is one which changesthe items which are required to be
stated under Section 1 of the NIL. In this case, the alleged
material alteration was the alteration of the serial
number of the check in issue
Which is not an essential element of a negotiable instrum
ent under Section 1. Therefore,there being no material
alteration in the check committed, PNB could not return
the check to PBCOM. Itshould pay the same.
22. Montinola vs. Philippine National Bank
Facts: Ramos, a disbursing officer of USAFE made cash
advancements with the provincial Treasurer of Lanao. The
latter gave him a P500,000 check. Thereafter, Ramos
presented the check to laya forencashment. Laya in his
capacity as Provincial Treasurer issued a check to Ramos in
the sum of P100,000. Ramos was assigned only P30000 of
the value of the document to Montinola and to deposit The
balance to Ramoss credit. This writing however,
mysteriously obliterated and in its place, a Supposed
indorsement appearing on the back of the check was made
for the whole amount of the check Agent, Phil. National
Bank under the signature of Laya purportedly showing
that Laya issued the check As agent of the PNB.

Issue: Whether the words, Agent, Phil. National Bank

were added after
Laya had issued the check andthus constitutes a material
alteration which discharges the instrument.
Held: The insertion of the words Agent, Phil. National
Bank, which converts the bank from a mere
Drawer and therefore changes its liability, constitutes a
material alteration of the instrument withoutthe consent of
the parties liable thereon, and so discharges the
instrument.
VII. ACCOMODATION PARTY
23. Sadaya vs. Sevilla
FACTS: Sadaya, Sevilla and Varona signed solidarily a
promissory note in favor of the bank. Varona was
the only one who received the proceeds of the note. Saday
a and Sevilla both signed as co-makers toaccommodate Va
rona. Thereafter, the bank collected from Sadaya. Varona
failed
to reimburse.Consequently, Sevilla died and intestate estat
e proceedings were established. Sadaya filed a creditors
claim on his
Estate for the payment he made on the note. The
administrator resisted theclaim on the ground that Sevilla
didn't receive any proceeds of the loan.
Issue: Whether or not Sadaya had the right to demand
payment.
HELD: A solidary accommodation makerWho made
payment

Has the right to contribution, from his co-accomodation

maker, in the absence of agreement to the contrary
between them, subject to conditions imposed by law. This
right springs from an implied promise to share equally the
burdens thay may ensue from their having consented to st
amp their signatures on the promissory note
25. Stelco Marketing vs. Court of Appeals
FACTS: Petitioner was engaged in the distribution and sale
of structural steel bars. RYL bought on several occasion
large quantities of steel bars but the same were never paid
for despite several demands by petitioner. On a relevant
date, RYL gave to Armstrong Industries a check in payment
of its obligations. That check was a company check of
another corporation, Steelweld Corporation of the
philippines, signed by its President, Peter Rafael Limson,
and VP. The check was issued by Limson at the behest of
his friend, Romeo Y. Lim, President of RYL. Romeo Lim had
asked Limson, for financial assistance, and the latter had
agreed to give Lim a check only by way of accommodation,
"only as
guaranty but not to pay for anything. Stelco filed a complai
nt against RYL and Steelweld for therecovery of sum of
money in payment of the steel bars ordered on the ground
that the said check has been given for payment of steel
bars
Issue: Whether or not petitioner as a holder for value may
recover from the accommodation party.
HELD: No. An accommodation party is liable to a holder for
value. However, Stelco cannot be considered as a holder

for value for there is no evidence whatsoever that the

check was ever given to it, or indorsed to it in any manner
or form in payment of an obligation or as security for an
obligation, or for any other purpose before it was
presented for payment. STELCO never became a holder for
value and that nowhere in the check itself does the name
of Stelco Marketing appear as payee, indorsee or depositor
thereof

26. Travel vs ca
Facts: Travel-On filed suit to collect on 6 checks issued by
private respondent with a total face amount of P115 ,000
as payment of various airline tickets sold to respondent.
Private respondent claimed that hehad already fully paid
the obligations. He argued that he had issued postdated
checks for purposes of accommodation, as he had in past
accorded similar favors to petitioner.
Issue: Whether or not said checks were for accommodation
and that private respondent is still liable considering that
petitioner is a holder for value.
Held: Travel-on is not an accommodated party; it realize no
value on the checks bounced. It presented these checks for
payment at the drawee bank but the checks bounced. Thus
private responded must beheld liable on the six checks
here involved. Those checks in themselves constituted
evidence of indebtedness of private respondent
27. BPI vs. Court of Appeals

Facts: Private respondent Benjamin Napiza deposited in his

foreign current deposit with BPI a dollar check owned by
Henry Chan in which he affixed his signature at the dorsal
side thereof. For this purpose, Napiza gave Chan a signed
blank withdrawal slip. However, Gayon Jr. Got hold of the
withdrawal slip and used it to withdraw the proceeds of the
dollar check, even before the check was cleared and
without the presentation of the bank passbook.
Issues: Whether or not petitioner can hold private
respondent liable for the proceeds of the check for having
affixed his signature at the dorsal side as indorser.
Held: A person 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. As such, she is under the law liable on the
instrument to
A holder for value, notwithstanding such holder at the time
of
Taking the instrument knew * * (her) to be only an
accommodation party, although she has the right, after
paying the holder, to obtain reimbursement from the party
accommodated, since the re
Lation between them is in effect that of principal and
surety, the accommodation party being the surety. "It is
thus clear that ordinarily private respondent may be held
liable as an indorser of the check or even as an
accommodation party. However, to hold private respondent
liable for the amount of the check he deposited by the
strict application of the law and without considering the
attending circumstances in the case would result in an

injustice and in the erosion of the public trust in the

banking system. The interest of justice thus demands
looking into the events that led to the encashment of the
check.
28. Agro Conglomerates, Inc. Vs. Court of Appeals
FACTS: Petitioner sold to Wonderland Food Industries
two parcels
of land. They stipulated under amemorandum of Agreemen
t that the terms of payment would be P1,000,000 in cash, P
2,000,000 inshares of stock, and the balance would be
payable in monthly installments. Petitioner Soriano signed
as maker the promissory notes payable to the bank.
However, the petitioners failed to pay
the obligations as they were due. During that
time, the bank was in financial distress and this
Prompted it to endorse the promissory notes for
collection. The bank gave ample time to petitioners then to
satisfy their obligations.
Issue: Whether or not Agro Conglomerates is liable as
accommodation parties
.HELD: Petitioners became liable as accommodation parties
. They have the right after paying theinstrument to seek rei
mbursement from the party accommodated, since the relat
ion between themhas in effect became one of principal and
surety.Furthermore, as it turned out, the contract of surety
between Woodland and petitioner wasextinguished by the
rescission of the contract of sale of the farmland. With the
rescission, there was
confusion in the persons of the principal debtor and surety.

X. CHECKS
31. Metropol vs. Sambok
L-39641
February 28, 1983
De Castro, J.:
Facts:
Dr. Javier Villaruel executed a promissory note in
favor of Ng Sambok Sons Motors Co., Ltd. Payable in 12
equal monthly installments with interest. It is further
provided that in case on non-payment of any of the
installments, the total principal sum then remaining unpaid
shall become due and payable with an additional interest.
Sambok Motors co., a sister company of Ng Sambok Sons
negotiated and indorsed the note in favor of Metropol
Financing & investment Corporation. Villaruel defaulted in
the payment, upon presentment of the promissory note he
failed to pay the promissory note as demanded, hence Ng
Sambok Sons Motors Co., Ltd. Notified Sambok as indorsee
that the promissory note has been dishonored and
demanded payment. Sambok failed to pay. Ng Sambok
Sons filed a complaint for the collection of sum of money.
During the pendency of the case Villaruel died. Sambok
argues that by adding the words with recourse in the
indorsement of the note, it becomes a qualified indorser,
thus, it does not warrant that in case that the maker failed

to pay upon presentment it will pay the amount to the

holder.
Issue:
Whether or not Sambok Motors Co is a qualified
indorser, thus it is not liable upon the failure of payment of
the maker.
Held:
No. A qualified indorserment constitutes the
indorser a mere assignor of the title to the instrument. It
may be made by adding to the indorsers signature the
words without recourse or any words of similar import.
Such indorsement relieves the indorser of the general
obligation to pay if the instrument is dishonored but not of
the liability arising from warranties on the instrument as
provided by section 65 of NIL. However, Sambok indorsed
the note with recourse and even waived the notice of
demand, dishonor, protest and presentment.
Recourse means resort to a person who is secondarily
liable after the default of the person who is primarily liable.
Sambok by indorsing the note with recourse does not
make itself a qualified indorser but a general indorser who
is secondarily liable, because by such indorsement, it
agreed that if Villaruel fails to pay the not the holder can
go after it. The effect of such indorsement is that the note
was indorsed witout qualification. A person who indorses
without qualification engages that on due presentment, the
note shall be accepted or paid, or both as the case maybe,
and that if it be dishonored, he will pay the amount thereof

to the holder. The words added by Sambok do not limit his

liability, but rather confirm his obligation as general
indorser.

36. STATE INVESTMENT HOUSE, INC vs COURT OF APPEALS

and NORA MOULIC

Post-dated checks issued as security is not a ground for

the discharge of the instrument as against a holder in due
course.
FACTS
Nora Moulic, issued to Corazon Victoriano as security for
pieces of jewelry, to be sold on commission, two postdated Equitable Banking Corporation checks; One dated
August 30, 1979 and the other September 30, 1979.
Thereafter, the payee negotiated the checks to petitioner
State Investment House (STATE). Moulic failed to sell the
pieces of jewelry, so she returned the check to the payee
before its maturity. The check however could no longer be
retrieved as they had already been negotiated. Before the
maturity date, MOULIC withdrew her funds from the
drawee bank. Upon presentment for payment, checks were
dishonored for insufficiency of funds. STATE allegedly
notified MOULIC of the dishonor of the checks and
requested that it be paid in cash. MOULIC contends that
she incurred no obligation on the checks because the

jewelry was never sold and checks were negotiated without

her knowledge and consent. RTC dismissed the complaint
affirmed by the Court of Appeals on the ground that the
Notice of Dishonor to MOULIC was beyond the period
prescribed by the Negotiable Instruments Law and that
even if STATE did serve such notice on MOULIC within the
reglementary period it would be no consequence as the
chcks should never have been presented for payment. The
sale of jewelry was never effected and therefore the checks
ceased to serve their purpose as security for the jewelry.
ISSUE
WON State Investment House is a holder in due course.
HELD
YES. Evidence clearly showed that STATE was a holder in
due course in accordance to Section 52 of Negotiable
Instruments Law and as such, STATE may enforce full
payment of the checks. MOULIC cannot state up against
STATE the defense that there was failure or absence of
consideration for the latter is a holder in due course.
MOULIC can only invoke this defense against STATE if it
was privy to the purpose for which they were issued.
Moreover, post-dated checks issued as security is not a
ground for the discharge of the instrument as against a
holder in due course for the only grounds are those
outlined in Sec. 119 of the Negotiable Instruments Law.
Consequently, the withdrawal of the money from the

drawee bank to avoid liability on the checks cannot

prejudice the rights of holders in due course. In this case,
such withdrawal renders the drawer, Nora Moulic, liable to
STATE, a holder in due course for the value of the checks
she issued without prejudice to any action for recompense
she may pursue against Victoriano.

40. Citytrust banking Corp., vs. Intermediate Appellate

Court
GR No. 84281 May 27, 1994
Vitug, J:
Facts:
Emme Herrero, businesswoman, made regular
deposits with Citytrust Banking Corp. At its Burgoa branch
in Calamba, Laguna. She deposited the amount of P31, 500
in order to amply cover 6 postdated checks she issued. All
checks were dishonored due to insufficiency of funds upon
the presentment for encashment. Citytrust banking Corp.
Asserted that it was due to Herreros fault that her checks
were dishonored, for he inaccurately wrote his account
number in the deposit slip. RTC dismissed the complaint for
lack of merit. CA reversed the decision of RTC.
Issue:

Whether or not Citytrust banking Corp. Has the

duty to honor checks issued by Emme Herrero despite the
failure to accurately stating the account number resulting
to insufficiency of funds for the check.
Held:
Yes, even it is true that there was error on the
account number stated in the deposit slip, its is, however,
indicated the name of Emme Herrero. This is controlling
in determining in whose account the deposit is made or
should be posted. This is so because it is not likely to
commit an error in ones name than merely relying on
numbers which are difficult to remember. Numbers are for
the convenience of the bank but was never intended to
disregard the real name of its depositors. The bank is
engaged in business impressed with public trust, and it is
its duty to protect in return its clients and depositors who
transact business with it. It should not be a matter of the
bank alone receiving deposits, lending out money and
collecting interests. It is also its obligation to see to it that
all funds invested with it are properly accounted for and
duly posted in its ledgers.

Petitioner Allied Bank (ALLIED), purchased an Export Bill

amounting to US $20,085.00 from respondent G.G.
Sportswear Mfg. Corporation (GGS). The bill, drawn under a
letter of credit, was issued by Chekiang First Bank Ltd.
Purchasing the same, ALLIED credited GGS the peso
equivalent of the aforementioned bill amounting

to P151,474.52 and the receipt of which was acknowledged

by the latter. Nari Gidwani and Alcron International Ltd.
(Alcron) executed their respective Letters of Guaranty,
holding themselves liable on the export bill if it should be
dishonored or retired by the drawee for any reason.
Spouses Leon and Leticia de Villa and Nari Gidwani also
executed a Continuing Guaranty/Comprehensive Surety
guaranteeing payment of any and all such credit
accommodations which ALLIED may extend to GGS. When
ALLIED negotiated the export bill to Chekiang, payment
was refused due to some material discrepancies in the
documents submitted by GGS relative to the exportation
covered by the letter of credit. Consequently, ALLIED
demanded payment from all the respondents based on the
Letters of Guaranty and Surety executed in favor of
ALLIED. However, respondents refused to pay, prompting
ALLIED to file an action for a sum of money. GGS and Nari
Gidwani claimed to have signed blank forms of the Letters
of Guaranty and Surety and the blanks were only filled up
by ALLIED after they affixed their signatures. On the other
hand, spouses de Villa, claimed that they were not aware
of the existence of the export bill; they signed blank forms
of the surety; and averred that the guaranty was not
meant to secure the export bill. Alcron, for its part, alleged
that as a foreign corporation which merely a liaison office
confined to the specific duties and responsibilities, neither
its liaison office in the Philippines nor its then
representative, Hans-Joachim Schloer, had the authority to
issue Letters of Guaranty for and in behalf of local entities
and persons.

Trial Court denied the motion but CA rendered its decision

against GGS ordering the latter to reimburse ALLIED the
peso equivalent of the export bill but it exonerated the
guarantors from their liabilities under the Letters of
Guaranty.
ISSUE Can the herein guarantors and surety be held liable
jointly and severally liable?
HELD
Our review of the records shows that what transpired in
this case is a discounting arrangement of the subject
export bill, between petitioner ALLIED and respondent GGS.
Previously, we ruled that in a letter of credit transaction,
once the credit is established, the seller ships the goods to
the buyer and in the process secures the required shipping
documents of title. To get paid, the seller executes a draft
and presents it together with the required documents to
the issuing bank. The issuing bank redeems the draft and
pays cash to the seller if it finds that the documents
submitted by the seller conform with what the letter of
credit requires. The bank then obtains possession of the
documents upon paying the seller. The transaction is
completed when the buyer reimburses the issuing bank
and acquires the documents entitling him to the goods.
[6] However, in most cases, instead of going to the issuing
bank to claim payment, the buyer (or the beneficiary of the
draft) may approach another bank, termed the negotiating
bank, to have the draft discounted.[7] While the
negotiating bank owes no contractual duty toward the

beneficiary of the draft to discount or purchase it, it may

still do so. Nothing can prevent the negotiating bank from
requiring additional requirements, like contracts of
guaranty and surety, in consideration of the discounting
arrangement.
In this case, respondent GGS, as the beneficiary of the
export bill, instead of going to Chekiang First Bank Ltd.
(issuing bank), went to petitioner ALLIED, to have the
export bill purchased or discounted. Before ALLIED agreed
to purchase the subject export bill, it required respondents
Nari Gidwani and Alcron to execute Letters of Guaranty,
holding them liable on demand, in case the subject export
bill was dishonored or retired for any reason.[8]
Likewise, respondents Nari Gidwani and spouses Leon and
Leticia de Villa executed Continuing
Guaranty/Comprehensive Surety, holding themselves
jointly and severally liable on any and all credit
accommodations, instruments, loans, advances, credits
and/or other obligation that may be granted by the
petitioner ALLIED to respondent GGS.[9] The surety also
contained a clause whereby said sureties waive protest and
notice of dishonor of any and all such instruments, loans,
advances, credits and/or obligations.[10] These letters of
guaranty and surety are now the basis of the petitioners
action.
At this juncture, we must stress that obligations arising
from contracts have the force of law between the parties
and should be complied with in good faith.[11] Nothing can

stop the parties from establishing stipulations, clauses,

terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good
customs, public order, or public policy.[12]
Here, Art. 2047 of the New Civil Code is pertinent. Art.
2047 states,
Art. 2047. By guaranty a person, called the guarantor,
binds himself to the creditor to fulfill the obligation of the
principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal
debtor, the provisions of Section 4, Chapter 3, Title I of this
Book shall be observed. In such case the contract is called
a suretyship.
In this case, the Letters of Guaranty and Surety clearly
show that respondents undertook and bound themselves
as guarantors and surety to pay the full amount of the
export bill.
Respondents claim that the petitioner did not
protest[13] upon dishonor of the export bill
by Chekiang First Bank, Ltd. According to respondents,
since there was no protest made upon dishonor of the
export bill, all of them, as indorsers were discharged under
Section 152 of the Negotiable Instruments Law.
Section 152 of the Negotiable Instruments Law pertaining
to indorsers, relied on by respondents, is not pertinent to
this case. There are well-defined distinctions between the
contract of an indorser and that of a guarantor/surety of a
commercial paper, which is what is involved in this

case. The contract of indorsement is primarily that of

transfer, while the contract of guaranty is that of personal
security.[14] The liability of a guarantor/surety is broader
than that of an indorser. Unless the bill is promptly
presented for payment at maturity and due notice of
dishonor given to the indorser within a reasonable time, he
will be discharged from liability thereon.[15] On the other
hand, except where required by the provisions of the
contract of suretyship, a demand or notice of default is not
required to fix the suretys liability.[16] He cannot complain
that the creditor has not notified him in the absence of a
special agreement to that effect in the contract of
suretyship.[17] Therefore, no protest on the export bill is
necessary to charge all the respondents jointly and
severally liable with G.G. Sportswear since the respondents
held themselves liable upon demand in case the
instrument was dishonored and on the surety, they even
waived notice of dishonor as stipulated in their Letters of
Guarantee.
As to respondent Alcron, it is bound by the Letter of
Guaranty executed by its representative Hans-Joachim
Schloer. As to the other respondents, not to be overlooked
is the fact that, the Suretyship Agreement they executed,
expressly contemplated a solidary obligation, providing as
it did that the sureties hereby guarantee jointly and
severally the punctual payment of any and all such credit
accommodations, instruments, loans, which is/are now or
may hereafter become due or owing by the borrower.[18] It
is a cardinal rule that if the terms of a contract are clear
and leave no doubt as to the intention of the contracting

parties, the literal meaning of its stipulation shall control.

[19] In the present case, there can be no mistaking about
respondents intent, as sureties, to be jointly and severally
obligated with respondent G.G. Sportswear.
Respondents also aver that, (1) they only signed said
documents in blank; (2) they were never made aware that
said documents will cover the payment of the export bill;
and (3) laches have set in.
Respondents stance lacks merit. Under Section 3 (d), Rule
131 of the Rules of Court, it is presumed that a person
takes ordinary care of his concerns. Hence, the natural
presumption is that one does not sign a document without
first informing himself of its contents and
consequences. Said presumption acquires greater force in
the case at bar where not only one document but several
documents were executed at different times and at
different places by the herein respondent guarantors and
sureties.[20]
In this case, having affixed their consenting signatures in
several documents executed at different times, it is safe to
presume that they had full knowledge of its terms and
conditions, hence, they are precluded from asserting
ignorance of the legal effects of the undertaking they
assumed thereunder. It is also presumed that private
transactions have been fair and regular[21] and that he
who alleges has the burden of proving his allegation with

the requisite quantum of evidence.[22] But here the

records of this case do not support their claims.
Last, we find the defense of laches unavailing. The
question of laches is addressed to the sound discretion of
the court and since laches is an equitable doctrine, its
application is controlled by equitable considerations.
[23] Respondents, however, failed to show that the
collection suit against them as sureties was inequitable.
Remedies in equity address only situations tainted with
inequity, not those expressly governed by statutes.[24]
After considering the facts of this case vis--vis the pertinent
laws, we are constrained to rule for the petitioner.
WHEREFORE, the instant petition is GRANTED. The assailed
Decision of the Court of Appeals is hereby MODIFIED, and
we hold that respondent Alcron International Ltd.
Is subsidiarily liable, while respondents Nari Gidwani, and
Spouses Leon and Leticia de Villa are jointly and severally
liable together with G.G. Sportswear, to pay petitioner
Bank the sum of P151,474.52 with interest at the legal rate
from the filing of the complaint, and the costs.
SO ORDERED.

DOCTRINES
Philippine Education Co. Vs. Soriano

The Weight of authority in the United States is that postal

money orders are not negotiable instruments, the reason
being that in establishing and operating a postal money
order system, the government is not engaged in
commercial transactions but merely exercises a
governmental power for the public benefit. Moreover, some
of the restrictions imposed upon money 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 withheld
under a variety of circumstances.
Caltex Phil. Vs. Court of Appeals
A negotiable instrument that is payable to bearer may be
negotiated by mere delivery. No further act other than
delivery is necessary in order to negotiate the instrument
and to make the transferee a holder.
Metrobank vs. Court of Appeals
An instrument to be negotiable instrument must contain an
unconditional promise or orders to pay a sum certain in
money. As provided by Sec 3 of NIL an unqualified order or
promise to pay is unconditional though coupled with: 1st,
an indication of a particular fund out of which
reimbursement is to be made or a particular account to be
debited with the amount; or 2nd, a statement of the
transaction which give rise to the instrument. But an order
to promise to pay out of particular fund is not
unconditional.

Sesbreno vs. Court of Appeals

Only an instrument qualifying as a negotiable instrument
under the relevant statute may be negotiated either by
indorsement thereof coupled with delivery, or by delivery
alone if it is in bearer form. 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 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.
Firestone Tire & rubber Co. Vs. Court of Appeals
Withdrawal slips are non negotiable instruments. The
essence of negotiability which characterizes a negotiable
paper as a credit instrument lies in its freedom to circulate
freely as a substitute for money. The withdrawal slips
lacked this character.
Ang Tek Lian vs. Court of Appeals
A check drawn payable to the order of cash is a check
payable to bearer and the bank may pay it to the person
presenting it for payment without the drawers
indorsement. However, if the bank is not sure of the
bearers identity or financial solvency, it has the right to
demand identification or assurance against possible
complication. But where the bank is satisfied of the identity
or economic standing of the bearer who tenders the check

for collection, it will pay the instrument without further

question; and it would incur no liability to the drawer in
thus acting.
Development Bank of the Phils. Vs. Sima Wei
The payee of a negotiable instrument acquires no interest
with respect thereto until its delivery to him. Delivery of an
instrument means transfer of possession, actual or
constructive, from one person to another. Without the
initial delivery of the instrument from the drawer to the
payee, there can be no liability on the instrument.
Moreover, such delivery must be intended to give effect to
the instrument.
Philippine Bank of Commerce vs. Aruego
There is a difference between a qualified indorser and a
person negotiating by mere delivery. While a qualified
indorser warrants to all subsequent holders, the warranties
of the person negotiating by mere delivery extends only in
favor of his immediate transferee.
Francisco vs. Court of Appeals
The negotiable Instruments Law provides that when a
person is under obligation to indorse in a representative
capacity, he may indorse in such terms as to negative
personal liability. An agent, when so signing, should
indicate that he is merely signing as an agent in behalf of
the principal and must disclose the name of his
principal. Otherwise, he will be held liable personally

Jail-Alai vs. Bank of the Philippine Islands

Holders of checks may obtain payment from the drawee
bank by presenting it for payment directly with the bank or
by depositing it in his account in another bank known as
the collecting bank or depositary bank. When the holder
deposits his check with the collecting bank, the nature of
the relationship created at that stage is one of agency, that
is the bank is to collect from the drawee of the check the
corresponding proceeds.
Republic Bank vs. Ebreda
Where the signature on a negotiable instrument is forged,
the negotiation of the check is without force or effect.
However, where a check has several indorsersment on it, it
is only the negotiation based on the forged or unauthorized
signature is inoperative. It will not render void all the other
negotiations of the check with respect to other parties
whose signatures are genuine.
MWSS vs. Court of Appeals
It is basic that whoever alleges forgery must prove such
fact. Forgery cannot be presumed, it must be duly
established.
Banco de Oro vs. Equitable Banking Corporation
If the instrument involved is a check, the drawee cannot
charge the account of the drawer if the payees or
indorsers signature is forged. The drawee, in turn has the
right of recourse against the collecting bank.

The drawer generally owes no duty of diligence to the

collecting bak, the law imposes a duty of diligence on the
collecting bank to scrutinize checks deposited with it for
the purpose of determining their genuineness and
regularity. The collecting bank being primarily engaged in
banking holds itself out to the public as the expert and the
law holds it to high standard of conduct.
It is the collecting bank that generally suffers the loss
with regard to forged indorsements because it had the
duty to ascertain the genuineness of all prior
indorsements considering that the act of presenting the
check for payment to the drawee is an assertion that the
party making the presentment has done its duty to
ascertain the genuineness of the indorsements.
Gempesaw vs. Court of Appeals
A forged signature is wholly inoperative, no one can gain
title to the instrument through such forged insdorsement.
Such indorsement prevents any subsequent partyfrom
acquiring any right as against parties prior to the forgery.
Although rights may exist between and among parties
subsequent to the forged instrument, not one of the can
acquire rights agasint parties prior to the forgery. Such
forged instrument cuts-off the rights of all subsequent
parties as against parties prior to the forgery. However, the
law makes an exception to these rules where party is
precluded from setting up forgery as a defense.
Associated Bank vs. Court of Appeals

When a check is deposited with the collecting bank, it

takes a risk on its depositor. It is only logical that this bank
be held accountable for checks deposited by its customers.
It is important to mention that Payee whose signature was
forged may directly proceed against the collecting bank.
However, the drawer cannot opt to recover from the
collecting bank. There is no privity of contract between the
drawer and the collecting bank.
Metrobank vs. First National City Bank
When the indorsement itself is very clear when it begins
with the words For clearance, clearing office such
indorsement must be read together with the 24-hour rule
regulation of the House operations of the Central Bank.
Once that 24-hour period is over, the liability on such
indorsement has ceased. Failure of drawee bank to call the
attention of collecting bank to the alteration of the check in
question until after the lapse of 24 hours negates whatever
right it might have against the collecting bank. Its remedy
lies not against collecting bank but against the party
responsible for the changing of the name of the payee and
the amount on the face of the check.
Republic Bank vs. Court of Appeals
The 24-hour clearing house rule is valid rule applicable to
commercial banks. As general rule, the collecting bank or
last endorser bears the loss when the indorsement was
forged. But the unqualified endorsement of the collecting
bank on the check should be read together with the 24hour regulation on the clearing house operation. Thus,

when the drawee bank fails to return a forged or altered

check to the collecting bank is absolved from liability.
Unless an alteration is attributable to the fault or
negligence of the drawer himself, the remedy of the
drawee bank that negligently clears a forged and/or honor
altered check for payment is against the party responsible
for the forgery or alteration, otherwise, it bears the loss.
Philippine Commercial International Bank vs. Court of
Appeals
A bank (in this case PCIB) which cashes a check drawn
upon another bank (in this case Citibank), without requiring
proof as to the identity of persons presenting it, or making
inquiries with regard to them, cannot hold the proceeds
against the drawee when the proceeds of the checks were
afterwards diverted to the hands of a third party.
Ramon Illusorio vs. Court of Appeals
The collecting bank or last endorser generally suffers the
loss because it has the duty to ascertain the genuineness
of all prior indorsements considering that the act of
presenting the check for payment to the drawee is an
assertion that the party making the presentment has done
its duty to ascertain the genuineness of the indorsements.
As between the drawer and the drawee bank, the drawee
bank should bear the loss. The drawee bank shall have
recourse against the collecting bank because such
collecting bank guarantees that all prior endorsements are
genuine. The collecting bank then can go against the
forger. In cases involving a forged check, where the

drawers is forged, drawer can recover from the drawee

bank. No drawee bank has a right to pay a forged check. If
it does, it shall have to recredit the amount of check to the
account of the drawer. The liability chain ends with drawee
bank whose responsibility it is to know the drawers
signature since the latter is its customer.

Samsung Construction Co. Phils, Inc vs. FEBTC and CA

Under Sec. 62 of NIL, among the warranties to be assumed
by the acceptor is it admits the existence of the drawer,
the genuineness of his signature, and his capacity and
authority to draw the instrument. It is incumbent upon the
drawee bank to ascertain the genuineness of the signature
of its depositor. The respondent bank in this case did not
exercise the degree of diligence required to enable it to
detect the forgery. Aside from the warranties as an
indorser, the collecting bank is made liable because it is
privy to the depositor who negotiated the check because it
knows him, his address and history for being a client
thereof. Thus, it is in a better position to detect forgery or
irregularity in the indorsement aka Doctrine of
Comparative Negligence
Philippine National Bank vs. Court of Appeals
An alteration is said to be material if it alters the effect of
the instrument. It means an unauthorized change in an
instrument that purports to modify in any respect the
obligation of a party or an unauthorized addition of words
or numbers or other change to an incomplete instrument

relating to the obligation of a party. In other words,

material alteration is one which changes the items which is
required to be stated under Sec 1 of NIL.
Sadaya vs. Sevilla
On principle, a solidary accommodation makerwho
made paymenthas the right to contribution, from his coaccomodation maker, in the absence of agreement to the
contrary between them, subject to conditions imposed by
law. This right springs from an implied promise to
share equally the burdens thay may ensue from their
having consented to stamp their signatures on the
promissory note.
Crisologo-Jose vs. Court of Appeals
The provision of NIL which holds an accommodation party
liable on the instrument to holder for value, although such
holder at the time of taking the instrument knew him to be
only an accommodation party, does not include nor apply
to corporations which are accommodation parties. This is
because the issue or indorsement of negotiable paper by a
corporation without consideration and for accommodation
of another is ultra vires. Hence, one who has taken the
instrument with knowledge of the accommodation nature
thereof cannot recover against a corporation where it is
only a accommodation party.
Stelco Marketing vs. Court of Appeals
A person cannot be holder of the check for value if it does
not meet the essential requisites prescribed by the law. He

must become the holder of it before it was overdue, and

without notice that it had previously dishonored, and he
took the check in good faith and for value before he can be
considered as a holder of the check for value.
Travel-On BPI vs. Court of Appeals
Check which is regular on its face is deemed prima facie to
have been issued for a valuable consideration and every
person whose signature appears thereon is deemed to
have become a party thereto for value. Further the rule is
quite settled that a negotiable instrument is presumed to
have been given or indorsed for a sufficient consideration
unless otherwise contradicted and overcome by another
evidence.
In the accommodation transactions recognized by
the NIL, an accommodating party lends his credit to the
accommodated party, by issuing or indorsing a check
which is held by the payee or indorsee as a holder in due
course, who gave full value which the accommodated party
must repay the accommodating party, unless of course the
accommodating party intended to make a donation to the
accommodated party. But the accommodating party is
bound on the check to the holder in due course who is
necessarily a third party and is not the accommodated
party. Having issued or indorsed the check, the
accommodating party has warranted to the holder in due
course that he will pay the same according to its tenor.
De Ocampo vs. Gatchalian

Good faith on the part of the holder is presumed, such

presumption is destroyed if the payee or indorsee acquired
possession of the instrument under circumstances that
should have put it to inquiry as to the title of the holder
who negotiated the instrument. The burden is now on the
part of the holder to show that notwithstanding the
suspicious circumstances, it acquired in the actual good
faith.
Mesina vs. IAC
The holder of a cashiers check who is not a holder
in due course cannot enforce payment against the
issuing bank which dishonors the same. If a payee of a
cashiers check obtained it from the issuing bank by fraud,
or if there is some other reason why the payee is
not entitled to collect the check, the bank would of
course have the right to refuse payment of the check
when presented by payee.
Metropol vs. Sambok
A qualified indorserment constitutes the indorser a mere
assignor of the title to the instrument. It may be made by
adding to the indorsers signature the words without
recourse or any words of similar import. Such indorsement
relieves the indorser of the general obligation to pay if the
instrument is dishonored but not of the liability arising from
warranties on the instrument as provided by section 65 of
NIL.

Recourse means resort to a person who is secondarily

liable after the default of the person who is primarily liable.
A person who indorses without qualification engages that
on due presentment, the note shall be accepted or paid, or
both as the case maybe, and that if it be dishonored, he
will pay the amount thereof to the holder.
Sepiera vs. Court of Appeals
Every indorser who indorses without qualification, warrants
to all subsequent holders in due course that, on due
presentment, it shall be accepted or paid or both,
according to its tenor, and that if it be dishonored and the
necessary proceedings on dishonor be duly taken, he will
pay the amount thereof to the holder or to any subsequent
indorser who may be compelled to pay it.
Prudencial Bank vs. IAC
Acceptance is presumed to be unqualified or absolute. If
the drawee intends toqualify his acceptance, he must do so
distinctly and unmistakably or else the acceptance will be
taken as absolute.
Wong vs. Court of Appeals
A check must be presented for payment within a
reasonable time after its issue or the drawer will be
discharged from liability thereon to the extent of the loss
caused by the delay. By current banking practice, a check
becomes stale after more than six (6) months, or 180 days.

The International Corporate Bank vs. Francis S. Gueco and

Ma. Luz E Gueco
A stale check is one which has not been presented for
payment within a reasonable time after its issue. It is
valueless and, therefore, should not be paid. Under the
negotiable instruments law, an instrument not payable on
demand must be presented for payment on the day it falls
due. When the instrument is payable on demand,
presentment must be made within a reasonable time after
its issue. In the case of a bill of exchange, presentment is
sufficient if made within a reasonable time after the last
negotiation thereof. A check must be presented for
payment within a reasonable time after its issue, and in
determining what is a "reasonable time," regard is to be
had to the nature of the instrument, the usage of trade or
business with respect to such instruments, and the facts of
the particular case. The test is whether the payee
employed suchdiligence as a prudent man exercises in his
own affairs. This is because the nature and theory behind
the useof a check points to its immediate use and
payability.
State Investment House Inc. Vs. CA
The withdrawal of the money from the drawee bank to
avoid liability on the checks cannot prejudice the rights of
holders in due course. For the reason that the holder who
takes the negotiated paper makes a contract with the
parties on the face of the instrument; there is an implied
representation that funds or credit are available for the

payment of the instrument in the bank upon which it is

withdrawn.
Bataan Cigar and Cigarette Factory, Inc. Vs. CA
In order to preserve the credit worthiness of checks,
jurisprudence has pronounced that crossing a check should
have the following effects: (1) check may not be encashed
but only deposited in the bank; (2) the check may be
negotiated only once, to one who has an account with a
bank; (3) and 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.
Citytrust banking Corp., vs. Intermediate Appellate Court
Even there was error on the account number the
controlling in determining in whose account the deposit is
name of the account owner. This is so because it is not
likely to commit an error in ones name than merely relying
on numbers which are difficult to remember. Numbers are
for the convenience of the bank but was never intended to
disregard the real name of its depositors. The bank is
engaged in business impressed with public trust, and it is
its duty to protect in return its clients and depositors who
transact business with it.
Tan vs. Court of Appeals
A cashiers check is a primary obligation of the issuing
bank and accepted in advance by its mere issuance, and

by its peculiar character and general use in the commercial

world is regarded substantially to be as good as the money
which it represents.
Papa vs. A.U. Valencia
After more than 10 years from the payment in part by cash
and in part by check, the presumption is that the check
had been encashed. Failure of the payee to encash a check
for more than 10 years undoubtedly resulted in the
impairment of the check through his unreasonable and
unexplained delay.
Bank of the Philippine Islands vs. Court of Appeals
Every negotiable instrument is deemed prima facie to have
been issued for a valuable consideration; every person
whose signature appears thereon to have become a party
thereto for value. Therefore, it is up to the party who
alleges that there was absence of consideration to prove
such fact.
The presumption will operate only if there was negotiation.
Consideration is not presumed if there was transfer without
indorsement.