METROBANK vs.

CA
G.R. No. 88866
18 February 1991
Petition for review on certiorari
J. Cruz
FACTS:
Eduardo Gomez opened an account with Golden Savings and Loan Association (Golden) and
deposited 38 treasury warrants which total P1,755,228.37 [all were drawn by Philippine
Fish Marketing Authority; 6 were directly payable to Gomez, others were indorsed by their
respective payees].
On various dates (between 25 June to 16 July 1979) all the treasury warrants were
subsequently indorsed by Gloria Castillo, a cashier at Golden, and deposited to the
companys Metrobank account.
They were sent for clearing to the petitioners main office, which forwarded them to the
Bureau of Treasury for special clearing.
After repeated inquiries by their valued client, represented by Castillo, petitioner allowed
the series of withdrawals (9, 13 & 16 July 1979), which totaled P968,000.00.
In turn, Gomez was allowed to withdraw from his account with Golden (a total of
P1,167,500.00)
21 July 1979 petitioner informed Golden that 32 of the treasury warrants were dishonored
by the Bureau of Treasury, and demanded the refund which was rejected.
RTC: rendered judgment in favor of Golden. On motion for reconsideration, complaint was
dismissed.
CA: trial court decision was affirmed.
ISSUE: Whether treasury warrants are negotiable instruments?
HELD: No. CA decision AFFIRMED.
RATIO:
The Court held that the treasury warrants are non-negotiable instruments evident by the
word non-negotiable stamped on its face, and it also indicates that they are payable from
a particular fund, Fund 501.
Sec. 3 of the NIL provides that an order or promise to pay out of a particular fund is not
unconditional. The indication that the source of the payment (Fund 501) makes the order
or promise to pay not unconditional and the warrants themselves non-negotiable.
Petitioner cannot contend that by indorsing the warrants in general, Golden assumed that
they were genuine and in all respects what they purport to be, in accordance with Sec. 66
of NIL. The simple reason is that this law is not applicable to non-negotiable treasury
warrants.
Castillo did not indorse them for the purpose of guaranteeing their genuineness but to
deposit them with petitioner for clearing.

Caltex Philippines Inc v CA and Security Bank and Trust Company

GR No. 97753, 10 August 1992
Petition for review on Certiorari
Regalado, J.
Facts:
On various dates, defendant bank issued 280 certificates of time deposit (CTDs) in favor of
Angel dela cruz who deposited with the former the amount of P1,120,000. Dela Cruz delivered
CTDs to plaintiff in connection with the purchase of fuel products from the latter. Dela Cruz
informed bank branch manger that he lost all CTDs and was advised by the latter to execute and
submit a notarized Affidavit of Loss if he desired replacement of lost CTDs.
Dela Cruz obtained a P875k loan and thereafter executed a notarized Deed of Assignment
of Time Deposit that he surrenders to defendant bank full control of CTDs from and after date of
assignment and to apply time deposits to the payment of whatever amount may be due on the
loan upon maturity.
Credit Manager of Caltex went to bank and presented for verification the CTDs alleging that
the same were delivered as security for purchases made with Caltex Phil Inc by dela Cruz. Bank
rejected the plaintiffs demand and claim for payment of the value of the CTDs.
Caltex filed instant complaint praying that defendant bank be ordered to pay aggregate
value of CTDs. Complaint was dismissed. On appeal, court affirmed lower courts dismissal.
Issue:
1. W/N the certificates of deposit are negotiable instruments
2. W/N the petitioner became a holder in due course of CTDs
3. W/N provisions of Code of Commerce relating to lost instruments payable to bearer shall
be applied.
Held:

1. Yes

2. No

3. No

4. Ruling:
1. CTDs in question are negotiable instruments for they undoubtedly meet the
requirements of the law for negotiability under Sec 1 of Act No. 2031 1.
5. The documents provide that the amounts deposited shall be repayable to the
depositor. It is the bearer. The documents do not say that the depositor is dela
Cruz and that the amounts deposited are repayable specifically to him. The
amounts are to be repayable to the bearer of the documents, or for that matter,
whosoever may be the bearer at the time of presentment. On this score, the
accepted rule is that the negotiability or non-negotiability of an instrument is
determined from the writing, from the face of the instrument itself. In the
construction of a bill or note, the intention of the parties is to control, if it can be
legally ascertained. No other words are to be added to it or substituted in its
stead. What the parties meant must be determined by what they said.
2. Although the CTDs are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between petitioner and dela Cruz requires both delivery
and indorsement. Dela Cruz delivered the CTDs to petiioner without informing
respondent bank thereof at anytime. The CTDs were in reality delivered as a
security for purchase of fuel products, as stated by petitioners own
representative.
6.
Under Negotiable instruments law, an instrument is negotiated when it
is transferred from one person to another in such a manner as to constitute the
transferee the holder thereof, and a holder may be the payee or indorsee of a bill
or note, who is in possession of it or the bearer thereof.
7.
In the case, there was no negotiation in the sense of a transfer of the
legal title to the CTDs in favor of petitioner in which situation, mere delivery of
the bearer CTDs would have sufficed. The delivery only was for security of the
purchases could at most constitute petitioner only as a holder for value by reason
of his lien.
8.
Where holder has lien on the instrument arising from contract, he is
deemed a holder for value to the extent of his lien. Such holder of collateral
security, he would be a pledgee but the requirement and effects thereof shall be
governed by CC on pledge of incorporeal rights 2.
3. A close scrutiny of the provisions of the Code of Commerce laying down the rules
to be followed in case of lost instruments payable or bearer will reveal that said
provisions even assuming their applicability to the CTDs in the case at bar are
merely permissive and not mandatory. Where the provision reads may this word
shows that it is not mandatory but discretional.
9. The rights provided by Arts 548-558 merely established a right of recourse in
favor of dispossessed owner or holder of a bearer instrument so that he may
obtain a duplicate, an option in favor of party liable for some valid ground, may
elect to refuse to issue replacement of instrument. Such neither prohibit or
restricts issuance of replacement instrument.
10.
11.
12.

1 That it must be in writing and signed by the maker or drawer; must contain unconditional
promise or order to pay a sum certain in money; must be payable on demand or at a fixed or
determinable future time; must be payable to order or to bearer; and where the instrument
is addressed to a drawee, he must be named or otherwise indicated therein with reasonable
certainty.

2 Art 2095 Incorporeal rights, evidenced by negotiable instruments may also be pledged.
The instrument proving the right pledged shall be delivered to the creditor, and if
negotiable, must be indorsed.

13.
14.
15.
16.
17.
18.
19.
20.ANG TEK LIAN vs. CA
21.No. L-2516. 25 September 1950
22.
23. Facts:
24. For issuing a rubber check, Ang Tek Lian was convicted of estafa. CA affirmed the
verdict. Ang Tek Lian drew the check upon the China Banking Corporation for the
sum of P4,000 payable to order of cash. He delivered it to Lee Hua Hong in
exchange of money, who presented it to the drawee bank for payment, but was
dishonored for insufficiency of funds, the balance being P335 only. Appellant could
not be located anywhere until he was summoned in the City Fiscals Office in view
of the complaint for estafa and for not paying yet the amount of the check.
25.
26. Issue:
27.
Whether or not Ang Tek Lian was guilty, considering that the check had been
made payable to cash and had not been endorsed by him.
28.
29. Held:
30.
Yes. Petition denied.
31.
32. Ruling:
33.
Under the Negotiable Instruments Law (sec. 9 [d]), 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 drawer's indorsement.
34.
Of course, if the bank is not sure of the bearer's identity or financial solvency,
it has the right to demand identification and/or assurance against possible
complications, for instance, (a) forgery of drawer's signature, (b) loss of the check
by the rightful owner, (c) raising of the amount payable, etc. The bank may
therefore require, for its protection, that the indorsement of the drawer or of
some other person known to it be obtained. But where the Bank is satisfied of the
identity and/or the 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.
35.
"A check payable to bearer is authority for payment to the holder. Where a
check is in the ordinary form, and is payable to bearer, so that no indorsement is
required, a bank, to which it is presented for payment, need not have the holder
identified, and is not negligent in failing to do so. " (Michie on Banks and Banking,
Permanent Edition, Vol. 5, p. 343.)
36.
The Court of Appeals declared that it was returned unsatisfied
because the drawer had insufficient funds, not because the drawer's
indorsement was lacking.
37.
38.
39.
40.
41.
42.
43.
44.

45.
46.
47.
48.
49.
50.
51.
52.
53.
54.

55.
56.
57.Philippine National Bank v. Rodriguez
58.G.R. No. 170325 26 September 2008
59.
60. Facts:
61.
Spouses Erlando and Norma Rodriguez, who were clients of petitioner PNB, were
engaged in the informal lending business.
The private respondents entered into a discounting 3 agreement with Philnabank
Employees Savings and Loan Association (PEMSLA) which is also a client of PNB.
PEMSLA regularly granted loans to its members and Spouses Rodriguez would
rediscount the postdated checks issued to members whenever the association was
short of funds. The Spouses would replace the postdated checks with their own
checks issued to members.
Some PEMSLA officers devised a scheme to obtain additional loans despite
outstanding loans by taking out loans in the name of unknowing members. The
PEMSLA checks issues for these loans were given to the spouses for rediscounting.
The checks from the Spouses were deposited directly by PEMSLA to its savings
account without indorsement from named payees, which was an irregular procedure
made through the facilitation of PEMSLA member and PNB Employee Endundo
Palermo Jr.
PNB found out about the fraudulent scheme and closed the PEMSLA account. As a
result, the checks deposited by the Spouses were dishonored.
The Spouses filed a suit for damages against PEMSLA and PNB seeking to recover the
value of checks deposited to PEMSLA amounting to Php 2,345,804. The Spouses
argued that PNB credited the checks to the PEMSLA account even without
indorsement. Hence, it should bear the loss. PNB argued that payees were fictitious
payees under the NIL. Hence, checks were negotiable by mere delivery.
The RTC ruled in favor of the Spouses. Upon appeal, the CA reversed the RTCs
decision arguing that the checks were bearer instruments which did not requirement
indorsement for negotiation. Upon a motion for reconsideration, the CA reversed
itself and ruled that the checks were payable to order.
62.
63. Issue: Whether the checks were bearer instruments?
64.
65. Held: No. Petition denied.
66.
67. Ruling:
68.

3 A financing scheme where a post-dated check is exchanged for a current check with a
discounted face value

As a rule, when the payee is fictitious or not intended to be the true recipients of the
proceeds, the check is considered a bearer instrument.
Ac actual, existing, and living payee may be deemed fictitious if the maker of the
check did not intend the payee to receive the proceeds of the checks.
For the fictitious payer to be used as a defense, PNB must show that the makers did
not intend for the named payees to be part of the transaction involving the check.
PNB failed to show evidence supporting this claim.
69.
70.
71.
72.
73.
74.
75.
76.
77.Philippine National Bank v Manila Oil Refining & By-Products Company
78.43 Phil 445, 08 June 1922
79.
80. Nature: Appeal from a judgment of the CFI of Manila
81. Ponente: DIAZ, J.
82.
83. Facts:
84.
85. On May 8, 1920, the manager and the treasurer of the Manila Oil Refining & ByProducts Company, Inc., executed and delivered to the Philippine National Bank, a
promissory note containing a provision that in the case the same is not paid at
maturity, the maker authorizes any attorney to appear and confess judgment
thereon for the principal amount, with interest, costs, and attorneys fees, and
waives all errors, right to inquisition, and appeal, and all property exemptions.
86.
87. The Manila Oil Refining Company failed to pay the promissory note on demand
and hence PNB brought action in the CFI to recover the whole amount. The CFI
denied the motions of PNB and forwarded the complaint to the SC, hence this
appeal.
88.
89. Issue: Whether a confession of judgment or commonly called a judgment note is
a negotiable instrument and is therefore valid in Philippine jurisdiction.
90.
91. Held: No, judgment note is not a negotiable instrument and is thus not valid in
Philippine jurisdiction.
92.
93. Ruling:
94.
95. The appellee argues that Section 5 of the NIL provides that the negotiable
character of an instrument otherwise negotiable is not affected by a provision
which x x x (b) authorizes a confession of judgment if the instrument be not paid
at maturity.
96.
97.
However, the Court says that this provision of the law cannot be taken to
sanction judgments by confession because it a portion of a uniform law which
merely provides that, in jurisdictions where judgment notes are recognized, such
clauses shall not affect the negotiable character of the instrument. Further, the
NIL concludes with these words: But nothing in this section shall validate any
provision or stipulation otherwise illegal.
98.

99.

While common law dictates that these judgment notes may be accepted in
some jurisdictions, the SC is of the opinion that such is not authorized nor
contemplated by our law and should only be considered as valid when given
express legislative sanction. Judgment notes are deemed to be against public
policy because they enlarge the field for fraud, and might be the source of abuse
and oppression and make the courts an involuntary party thereto. Thus the
judgment is set aside and the case is remanded to the lower court for further
proceeding in accordance with this decision.
100.
101.

102.