FIRESTONE TIRE Vs. CA , [G.R. No. 113236.

March 5, 2001]

FACTS:
Firestone Tire and Fojas-Arca entered into a franchising agreement wherein the former
had the privilege to purchase on credit the latters products. In paying for these
products, the former could pay through special withdrawal slips. In turn, Firestone
would
deposit
these
slips
with
Citibank.
Citibank
would
then honor and pay the slips. Citibank automatically credits the
account of Firestone
then merely waited for the same to be honored and paid by LDB. Having the same
setup
every
transaction,
Firestone assumed in
the
sufficient funding of the slips until there was a time that Citibank informed it that one
of
the
slips
was
dishonored.
It wrote then a demand letter to Fojas Arca for the payment and damages but the latter refused to pay, prompting Firestone
then to file an action for damages. .
ISSUE:
Whether or not the withdrawal slips were negotiable or non negotibale instruments?
HELD:
From the very start, the withdrawal slips are non-negotiable. Hence, the rule on
immediate notice of dishonor is not appropriate to the case at hand. Accordingly, the
bank was under no obligation to give immediate notice that it wouldn't
make payment on the subject withdrawal slips.
Citibank should have
known that withdrawal slips are not negotiable instruments. It couldn't expect then the
slips be treated like checks by other entities. Payment or notice of dishonor from
respondent bank couldn't be expected immediately in contrast to the situation involving
checks.
In the case at bar, Citibank relied on the fact that LDB honored and paid
the withdrawal slips which made it automatically credit the account of
Firestone with the amount of the subject withdrawal slips then merely waited for LDB to
honor and pay the same. It bears stressing though that Citibank
couldn't have missed the non-negotiable character of the slips.
The essence of negotiability which characterizes a negotiable paper as a
credit instrument lies in its freedom to be a substitute for money. The withdrawal
slips in question lacked this character. In the ordinary and usual course of banking
operations, current account deposits are accepted by the bank on the basis of deposit
slips prepared and signed by the depositor, or the latters agent or representative, who

indicates therein the current account number to which the deposit is to be credited, the
name of the depositor or current account holder, the date of the deposit, and the amount
of the deposit either in cash or in check. The withdrawal slips deposited
were not checks as Firestone admits and Citibank generally was not bound to accept
the withdrawal slips as a valid mode of deposit. Nonetheless, Citibank invalidly
accepted
the
same
as
such and thus, must bear the risks attendant to the acceptance of the
instruments.
Firestone and Citibank could not now shift the risk to LDB for their committed
inaccuracy.
.