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G.R. No. 88866
February 18, 19991
Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants. All
warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to
its Savings account in Metrobank branch in Calapan, Mindoro. They were sent for clearance.
Meanwhile, Gomez is not allowed to withdraw from his account, later, however, exasperated over
Floria repeated inquiries and also as an accommodation for a valued client Metrobank decided to
allow Golden Savings to withdraw from proceeds of the warrants. In turn, Golden Savings subsequently
allowed Gomez to make withdrawals from his own account. Metrobank informed Golden Savings that
32 of the warrants had been dishonored by the Bureau of Treasury and demanded the refund by
Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account. The
demand was rejected. Metrobank then sued Golden Savings.
1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the amount
withdraws to make up with the deficit as a result of the dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable instruments
1. No. Metrobank is negligent in giving Golden Savings the impression that the treasury warrants had
been cleared and that, consequently, it was safe to allow Gomez to withdraw. Without such assurance,
Golden Savings would not have allowed the withdrawals. Indeed, Golden Savings might even have
incurred liability for its refusal to return the money that all appearances belonged to the depositor, who
could therefore withdraw it anytime and for any reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to
its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank
to determine the validity of the warrants through its own services. The proceeds of the warrants were
withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that
they were genuine and in all respects what they purport to be, in accordance with Sec. 66 of NIL. The
simple reason that NIL is not applicable to non negotiable instruments, treasury warrants.
2. No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is the word:
non negotiable. Moreover, and this is equal significance, it is indicated that they are payable from a
particular fund, to wit, Fund 501. 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. The indication of Fund 501 as the source of
the payment to be made on the treasury warrants makes the order or promise to pay not conditional
and the warrants themselves non-negotiable. There should be no question that the exception on
Section 3 of NIL is applicable in the case at bar.
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G.R. No. 16454
September 29, 1921
Plaintiff was entitled to the sum of P98, 000 from the surplus earnings of Philippine Fiber & Produce
Company (PFPC) which was placed to his credit on the companys books. The PFPC treasurer
requested from PNB Manila that a telegraphic transfer of $45, 000 should be made to the plaintiff in NY
upon account of PFPC. The treasurer drew and delivered a check for the amount of P90, 355 on the
PNB which is the total costs o said transfer. As evidence, a document was made out and delivered to
the PFPC treasurer which is referred to by the banks assistant cashier as its official receipt.
On the same day the Philippine National Bank dispatched to its New York agency a cablegram to the
following effect:
Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.)
Upon receipt of the telegraphic message, the banks representative advised the withholding of the
money from Kauffman, in view of his reluctance to accept certain bills of the PFPC. The PNB agreed
and sent to its NY agency another message to withhold the payment as suggested.
Upon advice of the PFPC treasurer that $45, 000 had been placed to his credit, he presented himself
at the PNB NY and demanded the money but was refused due to the direction of the withholding of
Whether or not plaintiff has a right over the money withhold.
No. Provisions of the NIL can come into operation there must be a document in existence of the
character described in section 1 of the Law; and no rights properly speaking arise in respect to said
instrument until it is delivered.
The order transmitted by PNB to its NY branch, for the payment of a specified sum of money to the
plaintiff was not made payable to order or to bearer, as required in subsection (d) of that Act; and
inasmuch as it never left he possession of the bank, or its representative in NY, there was no delivery in
the sense intended in section 16 of the same Law.
In connection, it is unnecessary to point out that the official receipt delivered by the bank to the
purchaser of the telegraphic order cannot itself be viewed in the light of a negotiable instrument,
although it affords complete proof of the obligation actually assumed by the bank

G.R. No. 75908
October 22, 1999
Respondent brought before the CFI of Rizal, an action against Petitioner to compel them to transfer to
his name in the books of F.O.B., Inc., 23,223 shares of stock registered in the name of Federico O.
Borromeo, as evidenced by a Deed of Assignment dated January 16, 1974.
Private respondent averred that all the shares of stock of F.O.B. Inc. registered in the name of Federico
O. Borromeo belong to him, as the said shares were placed in the name of Federico O. Borromeo "only
to give the latter personality and importance in the business world." According to the private
respondent, on January 16, 1974 Federico O. Borromeo executed in his favor a Deed of Assignment
with respect to the said 23,223 shares of stock.
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On the other hand, petitioner Federico O. Borromeo disclaimed any participation in the execution of the
Deed of Assignment, theorizing that his supposed signature thereon was forged.
PC Crime Constabulary upon investigation concluded that the signature affixed was genuine
1. Whether or not the CA erred in appreciating the competency of the questioned document examined
by the PC Crime Laboratory
2. Whether or not the CA erred in holding that the signature affixed in the document is genuine since it
was signed on 1954 but dated in 1974
1. No. Well-settled is the rule that "factual findings of the Court of Appeals are conclusive on the parties
and not reviewable by the Supreme Court and they carry even more weight when the Court of
Appeals affirms the factual findings of the trial court."
2. No. The Deed of Assignment is dated January 16, 1974 while the questioned signature was found to
be circa 1954-1957, and not that of 1974, is of no moment. It does not necessarily mean that the deed
is a forgery. Pertinent records reveal that the subject Deed of Assignment is embodied in a blank form
for the assignment of shares with authority to transfer such shares in the books of the corporation. It
was clearly intended to be signed in blank to facilitate the assignment of shares from one person to
another at any future time. This is similar to Section 14 of the Negotiable Instruments Law where the
blanks may be filled up by the holder, the signing in blank being with the assumed authority to do so.
Indeed, as the shares were registered in the name of Federico O. Borromeo just to give him personality
and standing in the business community, private respondent had to have a counter evidence of
ownership of the shares involved. Thus, the execution of the deed of assignment in blank, to be filled
up whenever needed. The same explains the discrepancy between the date of the deed of assignment
and the date when the signature was affixed thereto.

G.R. No. 89252
May 24, 1993
Petitioner Sesbreo made a money market placement in the amount of P300, 000 with the Philippine
Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to
Sesbreo the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note, the
Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said security
was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and
America for P304, 533.33 payable on March 13, 1981. The checks were dishonored for having been
drawn against insufficient funds. Pilipinas Bank never released the note, nor any instrument related
thereto, to Sesbreo; but Sesbreo learned that the security which was issued on April 10, 1980,
maturing on 6 April 1981, has a face value of P2, 300, 833.33 with PhilFinance as payee and Delta
Motors as maker; and was stamped non-negotiable on its face. As Sesbreo was unable to collect
his investment and interest thereon, he filed an action for damages against Delta Motors and Pilipinas
Bank. Delta Motors contends that said promissory note was not intended to be negotiated or otherwise
transferred by PhilFinance as manifested by the word "non-negotiable" stamped across the face of the
Whether the non-negotiability of a promissory note prevents its assignment.
No. While 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 where the
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negotiable instrument is in bearer form, a negotiable instrument may, however, instead of being
negotiated, also be assigned or transferred. The legal consequences of negotiation as distinguished
from assignment of a negotiable instrument are, of course, different. A non-negotiable instrument may,
obviously, not be negotiated; but it may be assigned or transferred, absent an express prohibition
against assignment or transfer written in the face of the instrument:
The words "not negotiable," stamped on the face of the bill of lading, did not destroy its assignability,
but the sole effect was to exempt the bill from the statutory provisions relative thereto, and a bill,
though not negotiable, may be transferred by assignment; the assignee taking subject to the equities
between the original parties.


G.R. No. L-1405
July 31, 1948
Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes on December 10, 1941 for
1,000, but is now in the hands of the herein petitioner Benjamin Abubakar. The Auditor General refused
to authorized the payment of the treasury warrant, for his refusal he gave two reasons: first, because
the money available for the redemption of treasury warrants issued before January 2, 11942 is
appropriated by RA No.80 and this warrant does not come with the purview of said appropriation and
second, because on the requirements of his office had not been complied with.. Abubakar contends
that he is a holder in good faith and for value and thus, entitled to the rights and privileges of a holder in
due course.
1. Whether or not the treasury warrant issued is a negotiable instrument.
2. Whether or not Abubakar is a holder in due course.
1. NO. The treasury warrant issued is not a negotiable instrument.
This treasury warrant is not within the scope of the negotiable instrument law. For one thing, the
document bearing on its face the words payable from the appropriation for food administration, is
actually an order for payment out of a particular fund, and is not unconditional, and does not fulfill one
of the essential requirements of a negotiable instrument (Section 3 last sentenced and section 1 of the
Negotiable instruments Law).
2. NO. Abubakar is a not holder in due course.
A treasury warrant is not a negotiable instrument. It being an order for payment out of a particular
fund, and is not unconditional and does not fulfill one of the essential requirements of a negotiable
instrument. Therefore, a holder of a treasury warrant cannot argue that he is a holder in good faith and
for value of a negotiable instrument and thus entitled to the rights and privileges of a holder in due
course, free from defenses.



G.R. No. L-10221
February 28, 1958
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During the Japanese occupation, Pacita Young issued three promissory notes to Pacifica Jimenez. The
total sum of the notes was P21k. All three promissory notes were couched in this manner:
Received from Miss Pacifica Jimenez the total amount of (P10, 000) ten thousand pesos payable six
months after the war, without interest.
When the promissory notes became due, Jimenez presented the notes for payment. Pacita and her
husband died and so the notes were presented to the administrator of the estate of the spouses (Dr.
Jose Bucoy). Bucoy manifested his willingness to pay but he said that since the loan was contracted
during the Japanese occupation the amount should be deducted and the Ballantyne Schedule should
be used, that is peso-for-yen (which would lower the amount due from P21k). Bucoy also pointed out
that nowhere in the not can be seen an express promise to pay because of the absence of the words
I promise to pay
Whether or not Bucoy is correct that the amount should be deducted by applying the Ballantyne
No. The Ballantyne schedule may not be used here because the debt is not payable during the
Japanese occupation. It is expressly stated in the notes that the amounts stated therein are payable
six months after the war. Therefore, no reduction could be effected, and peso-for-peso payment shall
be ordered in Philippine currency.
The notes also amounted in effect to a promise to pay the amounts indicated therein. An
acknowledgment may become a promise by the addition of words by which a promise of payment is
naturally implied, such as, payable, payable on a given day, payable on demand, paid . . . when
called for, . . . To constitute a good promissory note, no precise words of contract are necessary,
provided they amount, in legal effect, to a promise to pay. In other words, if over and above the mere
acknowledgment of the debt there may be collected from the words used a promise to pay it, the
instrument may be regarded as a promissory note.
G.R. No. L-22405
June 30, 1971
Enrique Montinola sought to purchase from Manila Post Office ten money orders of 200php each
payable to E. P. Montinola. Montinola offered to pay with the money orders with a private check. Private
check were not generally accepted in payment of money orders, the teller advised him to see the Chief
of the Money Order Division, but instead of doing so, Montinola managed to leave the building without
the knowledge of the teller.
Upon the discovery of the disappearance of the unpaid money order, a message was sent to instruct all
banks that it must not pay for the money order stolen upon presentment. The Bank of America received
a copy of said notice three days later. The Bank of America, then, received of the money orders from
petitioner. Defendant then notified the bank that the money order has been irregularly issued that the
amount was deducted from petitioner's account. After asking the Postmaster General to reconsider the
deduction, which he denied, plaintiff filed an action against defendant.
The lower court decided that the notice be revoked that the plaintiff shall be indemnified.
Whether or not the postal money order in question is a negotiable instrument.
No, the postal money order is a non-negotiable instrument. The SC affirmed the lower court's decision.
Postal money orders are not negotiable instruments. The reason behind this rule being that, in
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establishing and operating a postal money order system, the government is not engaging 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


G.R. NO. 97753
August 10, 1992
In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs) from Security Bank and Trust
Company for the formers deposit with the said bank amounting to P1,120,000.00. The said CTDs are
couched in the following manner:
This is to Certify that B E A R E R has deposited in this Bank the sum of _______ Pesos,
Philippine Currency, repayable to said depositor _____ days. after date, upon presentation and
surrender of this certificate, with interest at the rate of ___ % per cent per annum.
Angel de la Cruz subsequently delivered the CTDs to Caltex in connection with the purchase of fuel
products from Caltex.
In March 1982, Angel de la Cruz advised Security Bank that he lost the CTDs. He executed an affidavit
of loss and submitted it to the bank. The bank then issued another set of CTDs. In the same month,
Angel de la Cruz acquired a loan of P875,000.00 and he used his time deposits as collateral.
In November 1982, a representative from Caltex went to Security Bank to present the CTDs (delivered
by de la Cruz) for verification. Caltex advised Security Bank that de la Cruz delivered Caltex the CTDs
as security for purchases he made with the latter. Security Bank refused to accept the CTDs and
instead required Caltex to present documents proving the agreement made by de la Cruz with Caltex.
Caltex however failed to produce said documents.
In April 1983, de la Cruz loan with Security bank matured and no payment was made by de la Cruz.
Security Bank eventually set-off the time deposit to pay off the loan.
Caltex sued Security Bank to compel the bank to pay off the CTDs. Security Bank argued that the
CTDs are not negotiable instruments even though the word bearer is written on their face because the
word bearer contained therein refer to depositor and only the depositor can encash the CTDs and no
one else.
Whether or not the certificates of time deposit are negotiable.
Yes. The CTDs indicate that they are payable to the bearer; that there is an implication that the
depositor is the bearer but as to who the depositor is, no one knows. It does not say on its face that the
depositor is Angel de la Cruz. If it was really the intention of respondent bank to pay the amount to
Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical terms in
the documents, instead of having the word BEARER stamped on the space provided for the name of
the depositor in each CTD. On the wordings of the documents, therefore, the amounts deposited are
repayable to whoever may be the bearer thereof.


G.R. No. 113236
March 5, 2001
Page 6 of 77

Defendant is a banking corporation. It operates under a certificate of authority issued by the Central
Bank of the Philippines, and among its activities, accepts savings and time deposits. Said defendant
had as one of its client-depositors the Fojas-Arca Enterprises Company ("Fojas-Arca" for brevity).
Fojas-Arca maintaining a special savings account with the defendant, the latter authorized and allowed
withdrawals of funds therefrom through the medium of special withdrawal slips. These are supplied by
the defendant to Fojas-Arca.
In January 1978, plaintiff and Fojas-Arca entered into a "Franchised Dealership Agreement" whereby
Fojas-Arca has the privilege to purchase on credit and sell plaintiff's products.
On January 14, 1978 up to May 15, 1978. Pursuant to the aforesaid Agreement, Fojas-Arca purchased
on credit Firestone products from plaintiff with a total amount of P4, 896,000.00. In payment of these
purchases, Fojas-Arca delivered to plaintiff six (6) special withdrawal slips drawn upon the defendant.
In turn, these were deposited by the plaintiff with its current account with the Citibank. With this, relying
on such confidence and belief Firestone extended to Fojas-Arca other purchase on credit of its
products but several withdrawal slips were dishonored and not paid. As a consequence, Citibank
debited the plaintiffs account representing the aggregate amount of the two dishonored special
withdrawal slips. Fojas-Arca averred that the pecuniary losses it suffered are a caused by and directly
attributes to defendants gross negligence as a result Fojas-Arca filed a complaint.
Whether or not respondent bank should be held liable for damages suffered by petitioner, due to its
allegedly belated notice of non-payment of the subject withdrawal slips.
The withdrawal slips in question were non-negotiable. Hence, the rules governing the giving of
immediate notice of dishonor of negotiable instruments do not apply in this case. Petitioner itself
concedes this point. Thus, respondent bank was under no obligation to give immediate notice that it
would not make payment on the subject withdrawal slips. Citibank should have known that withdrawal
slips were not negotiable instruments. It could not expect these slips to be treated as checks by other
entities. Payment or notice of dishonor from respondent bank could not be expected immediately, in
contrast to the situation involving checks.
In the case at bar, it appears that Citibank, with the knowledge that respondent Luzon Development
Bank, had honored and paid the previous withdrawal slips, automatically credited petitioner's current
account with the amount of the subject withdrawal slips, then merely waited for the same to be honored
and paid by respondent bank. It presumed that the withdrawal slips were "good."
It bears stressing that Citibank could not have missed the non-negotiable nature of the withdrawal slips.
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 in question lacked this
The withdrawal slips deposited with petitioner's current account with Citibank were not checks, as
petitioner admits. Citibank was not bound to accept the withdrawal slips as a valid mode of deposit. But
having erroneously accepted them as such, Citibank and petitioner as account-holder must bear
the risks attendant to the acceptance of these instruments. Petitioner and Citibank could not now shift
the risk and hold private respondent liable for their admitted mistake.
#13 PNB vs Zulueta
101 Phil 1071
On October 26, 1948, Jose Zulueta applied for a commercial letter of credit with PNB, which was
granted in favor of Otis Elevator Co. in New York City, USA for $14,449.15. On May 17, 1949, Otis
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Elevator drew a 90-day sight draft which was duly presented to and accepted by Zulueta. Said
acceptance matured on October 4, 1949.
A debit advise was received from Zuluetas New York agency to the effect that it paid the draft to Otis
Elevator Co., and was charged against PNB. After the maturity date, PNB presented the draft to
Zulueta, but the latter refused to pay.
1. Whether or not the draft is a negotiable instrument.
2. Whether or not the rate of exchange is determined by the rate at the time the bill should have been
1. The document is a negotiable instrument and is governed by the Negotiable Instruments Law. The
draft is a foreign bill of exchange because, although drawn in New York, it is payable in the
Philippines. Although the amount payable is expressed in dollars not current money in the
Philippines it is still negotiable for it may be discharged with pesos of equivalent amount.
2. There are decisions in America to the effect that, the rate of exchange in effect at the time the bill
should have been paid controls.
Such decisions agree with the provisions of the Bills of Exchange Act of England and could be
taken as enunciating the correct principle, inasmuch as our Negotiable Instruments Law copied the
American Uniform Negotiable Instruments Law, which in turn was based largely on the Bills of
Exchange Act of England.
There is one decision applying the rate of exchange at the time the judgment is entered. However,
this view is rejected because it related to a bill expressly made payable in a foreign currency. The
theory would probably produce undesirable effects upon commercial documents, for it would make
the amount uncertain, the parties to the bill unable to foresee the day judgment would be rendered.

G. R. No. 96405
June 26, 1996
Petitioner, Baldomero Inciong, Jr., a Bachelor of Laws graduate and a labor consultant, signed a
promissory note as a co-maker together with Gregorio D. Pantanosas, an MTCC Judge, for a loan
obtained by Rene C. Naybe from private respondent, Philippine Bank of Communications, in the
amount of Php 50,000.00. Said loan was intended for the purchase of a chainsaw which would be used
in the falcata logs operation business.
Under the promissory note, they have bound themselves to be jointly and severally liable to private
respondent for the payment of aforesaid loan. The loan became due but none of the promissors paid
their obligation. Demand letters were sent by private respondent but to no avail. Hence, the latter filed a
case for collection of sum of money against the three obligors.
However, the case against defendant Pantanosas was dismissed as prayed for by private respondent.
With regard to defendant Naybe, the court was not able to serve the summons and consequently, failed
to acquire jurisdiction over his person because he went to Saudi Arabia. Therefore, it was only the
summons addressed to petitioner that was served.
The Regional Trial Court adjudged petitioner as solidarily liable to private respondent for the payment of
the loan in the amount of Php 50,000.00. And the same was affirmed by the Court of Appeals.
Petitioner avers that there was trickery, fraud, and misrepresentation because he had only signed the
promissory note with the understanding that he is only liable for the amount of Php 5,000.00 and not
Php 50,000.00. He attached to his petition the affidavit of defendant Pantanosas reinforcing the claim of
petitioner that they have indeed signed the promissory note on the belief that it was only Php 5,000.00
and that their friend, Rudy Campos, was the one who caused the amount to become Php 50,000.00.
Petitioner posits that parol evidence may be used to overcome the contents of the promissory note, it
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being a mere commercial paper and not a public document with the formalities prescribed by law
present therein.
Also, petitioner contends that the release of defendant Pantanosas should also benefit him as he is
only a guarantor in the making of the promissory note.
1. Whether or not petitioner is a guarantor and not a solidary debtor as evidenced by the promissory
note; and
2. Whether or not parol evidence is admissible to buttress the claim of petitioner regarding the content
and validity of the promissory note.
No, petitioner is not a mere guarantor but rather a solidary debtor and thus, should be held solidarily
liable to pay the total amount of the loan which is Php 50,000.00.
The liability of a guarantor is different from that of a solidary debtor. According to Tolentino, a guarantor
does not become a solidary co-debtor for all intents and purposes. Also, the guarantor only assumes
the obligation in case the principal debtor failed to do so, but still retaining the rights, actions, and
benefits which pertain to him. On the other hand, a solidary debtor is liable for the entire obligation upon
demand of the creditor.
In the case at bar, it was expressly stipulated in the promissory note that the promisors, including
petitioner, agreed to be bound jointly and severally to the loan obtained from private respondent as
evidenced by the words I/We jointly and severally promise to pay to the Philippine Bank of
Communications. Such stipulation operates to make each of the obligors, not only as guarantors but
as solidary debtors with whom the creditor bank, at his election, could proceed to satisfy its claim for
collection of sum of money. In addition, the release of defendant Pantanosas does not operate to
absolve petitioner since in solidary obligations, the creditor is given the option to choose from whom
among the debtors he could enforce the obligation in full.
Meanwhile, petitioners argument that the promissory note is not a public document and thus, parol
evidence could be admitted to prove his defense of fraud and trickery is unavailing.
The law does not require any formality for such a negotiable instrument to be valid. It only mentions of it
being put into writing. If at all, the affidavit of defendant Pantanosas along with petitioners
uncorroborated testimony could not be entertained by the Court for it is not a trier of facts. It should
have been brought to the attention of the lower court.
Moreover, it should be noted that petitioner is a holder of a Bachelor of Laws degree and thus, he
should have exercised caution in his dealings such as this involved in the case at bar.


G.R. No. 93073
December 21, 1992
Shozo Yamaguchi and private respondent Fermin Canlas were President/Chief Operating Officer and
Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board Resolution No.1,
Yamaguchi and private respondent were authorized to apply for credit facilities with the petitioner
Republic Planters Bank in the forms of export advances and letters of credit/trust receipts
accommodations. Petitioner bank issued nine promissory notes, each of which were uniformly worded
with the phrase, I/we, jointly and severaIly promise to pay
On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi and
Fermin Canlas above their printed names with the phrase "and (in) his personal capacity" typewritten
below. These entries were separated from the text of the notes with a bold line which ran horizontally
across the pages.
In three promissory notes, the name Worldwide Garment Manufacturing, Inc. was apparently rubber
stamped above the signatures of defendant and private respondent.
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Petitioner bank then filed a complaint for the recovery of sums of money covered among others, by the
nine promissory notes with interest thereon, plus attorney's fees and penalty charges. The complainant
was originally brought against Worldwide Garment Manufacturing, Inc. inter alia, but it was later
amended to drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing
Corporation(the new name of Worldwide Garment) it its place.
Only private respondent Fermin Canlas filed an Amended Answer wherein he, denied having issued
the promissory notes in question since according to him, he was not an officer of Pinch Manufacturing
Corporation, but instead of Worldwide Garment Manufacturing, Inc., and that when he issued said
promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same were in blank, the
typewritten entries not appearing therein prior to the time he affixed his signature.
1. Whether or not the promissory notes are negotiable instruments
2. Whether or not private respondent is solidarily liable with the other defendants on the nine
promissory notes.
1. YES, the promissory notes are negotiable instruments.
Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes
are makers and are liable as such. By signing the notes, the maker promises to pay to the order of the
payee or any holder according to the tenor thereof. Based on the above provisions of law, there is no
denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As
such, he cannot escape liability arising therefrom.
2. YES, private respondent is solidarily liable with the other defendants on the nine promissory notes.
Where an instrument containing the words "I promise to pay" is signed by two or more persons, they
are deemed to be jointly and severally liable thereon. An instrument which begins" with "I" ,We" , or
"Either of us" promise to, pay, when signed by two or more persons, makes them solidarily liable. The
fact that the singular pronoun is used indicates that the promise is individual as to each other; meaning
that each of the co-signers is deemed to have made an independent singular promise to pay the notes
in full.
In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer and certain,
without reason for ambiguity, by the presence of the phrase "joint and several" as describing the
unconditional promise to pay to the order of Republic Planters Bank. By making a joint and several
promise to pay to the order of Republic Planters Bank, private respondent Fermin Canlas assumed the
solidary liability of a debtor and the payee may choose to enforce the notes against him alone or jointly
with Yamaguchi and Pinch Manufacturing Corporation as solidary debtors.
As to whether the interpolation of the phrase "and (in) his personal capacity" below the signatures of
the makers in the notes will affect the liability of the makers, is immaterial and will not affect to the
liability of private respondent for with or without the presence of said phrase, private respondent is
primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor.
As a general rule, officers or directors under the old corporate name bear no personal liability for acts
done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such
officers acted in their capacity as agent of the old corporation and the change of name meant only the
continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts
of its agents if authorized by the Board.
Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is
acting in a representative capacity or the name of the third party for whom he might have acted as
agent, the agent is personally liable to take holder of the instrument and cannot be permitted to prove
that he was merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid
the agent's personal liability.
On the private respondent's contention that the promissory notes were delivered to him in blank for his
signature, we rule otherwise. A careful examination of the notes in question shows that they are the
stereotype printed form of promissory notes generally used by commercial banking institutions to be
Page 10 of 77

signed by their clients in obtaining loans. Such printed notes are incomplete because there are blank
spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest,
date of issue and the maturity date. The terms and conditions of the loan are printed on the note for the
borrower-debtor 's perusal.
Proof that the notes were signed in blank was only the self-serving testimony of private respondent, as
determined by the trial court, so that the trial court ''doubts the defendant signed in blank the
promissory notes". The Court chose to believe the bank's testimony that the notes were filled up before
they were given to private respondent Fermin Canlas and defendant Shozo Yamaguchi for their
signatures as joint and several promissors. For signing the notes above their typewritten names, they
bound themselves as unconditional makers. The Court take judicial notice of the customary procedure
of commercial banks of requiring their clientele to sign promissory notes prepared by the banks in
printed form with blank spaces already filled up as per agreed terms of the loan, leaving the borrowersdebtors to do nothing but read the terms and conditions therein printed and to sign as makers or comakers.
When the notes were given to private respondent Fermin Canlas for his signature, the notes were
complete in the sense that the spaces for the material particular had been filled up by the bank as per
agreement. The notes were not incomplete instruments; neither were they given to private respondent
Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not


Bian Transportation Company bought two motor vehicles. They signed a promissory note and to
secure payment, they mortgaged the motor vehicles. The promissory notes were negotiated and were
not paid. So Elizalde who was holding the promissory note sued. Bians defense was that the
promissory note was not negotiable because it was mentioned that it was subject to chattel mortgage.
Whether or not the note was negotiable.
Yes. For reference to mortgage to destroy negotiability, the promise to pay must be burdened with the
terms and conditions of the chattel mortgage. Since the reference to the chattel mortgage did not make
the promise to pay burdened with the terms and conditions of the chattel mortgage, the promissory note
was still negotiable.


#18 PONCE v CA
G.R. No. L-49494

May 31, 1979

In 1969, Jesusa Afable and two others procured a loan from Nelia Ponce in the amount of $194,016.29.
In June 1969, Afable and her co-debtors executed a promissory note in favor of Ponce in the peso
equivalent of the loan amount which was P814,868.42. The promissory note went due and was left
unpaid despite demands from Ponce. This prompted Ponce to sue Afable et al. The trial court ruled in
favor of Ponce. The Court of Appeals initially affirmed the trial court but it later reversed its decisions as
Page 11 of 77

it ruled that the promissory note under consideration was payable in US dollars, and, therefore pursuant
to Republic Act 529, the transaction was illegal with neither party entitled to recover under the in pari
delicto rule.
Whether or not Ponce may recover.
Yes. RA 529 provides that an agreement to pay in dollars is null and void and of no effect however
what the law specifically prohibits is payment in currency other than legal tender. It does not defeat a
creditors claim for payment, as it specifically provides that every other domestic obligation whether
or not any such provision as to payment is contained therein or made with respect thereto, shall be
discharged upon payment in any coin or currency which at the time of payment is legal tender for public
and private debts. A contrary rule would allow a person to profit or enrich himself inequitably at
anothers expense.
On the face of the promissory note, it says that it is payable in Philippine currency the equivalent of
the dollar amount loaned to Afable et al. It may likewise be pointed out that the Promissory Note
contains no provision giving the obligee the right to require payment in a particular kind of currency
other than Philippine currency, which is what is specifically prohibited by RA No. 529. If there is any
agreement to pay an obligation in a currency other than Philippine legal tender, the same is null and
void as contrary to public policy, pursuant to Republic Act No. 529, and the most that could be
demanded is to pay said obligation in Philippine currency.


G.R. No. L-27782

July 31, 1970

On November 17, 1959, Octavio Kalalo, an engineer entered into an agreement with Alfredo Luz, an
architect under their firm names where the former was to render engineering design services to the
latter for fees, as stipulated in the agreement. Luz contracted Kalalo to work on ten projects across the
country, one of which was the International Rice Research Institute (IRRI) Research Center in Los
Baos, Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalos work, Luz agreed to
pay him 20% of what IRRI is going to pay or equivalent to $28,000.00. On December 1961, Kalalo sent
a statement account for engineering fees. Luz sent resume of fees to appellant saying they owe less
than what was being asked. Luz sent a check bearing lesser amount than what was asked by Kalalo.
Kalalo accepted the payment but refused to accept it as full payment for services rendered. Kalalo then
filed a complaint against Luz for payment of his services, as well as consequential and moral damages,
actual damages, attorney's fees and expenses of litigation. The trial court ruled in favor of respondent.
Petitioner Luz then appealed the case.
Whether or not Kalalo should be paid in US currency.
No. The agreement was forged years before the passage of Republic Act 529 in 1950. The said law
requires that payment in a particular kind of coin or currency other than the Philippine currency shall be
discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation
was incurred. Nothing in the law however provides which rate of exchange shall be used hence it is but
logical to use the rate of exchange at the time of payment.


Page 12 of 77

G.R. No. L-18103

June 8, 1922

The manager and the treasurer of the Manila Oil Refinining & By-Products Company, Inc., executed
and delivered to the Philippine National Bank (PNB), a written instrument with a confession of judgment
Defendant failed to pay the promissory note on demand. PNB brought action in the Court of First
Instance of Manila, to recover the amount of the note, together with interest and costs. Mr. Elias N.
Rector, an attorney associated with the Philippine National Bank, entered his appearance in
representation of the defendant, and filed a motion confessing judgment. The defendant, however, in a
sworn declaration, objected strongly to the unsolicited representation of attorney Recto. Later, attorney
Antonio Gonzalez appeared for the defendant and filed a demurrer, and when this was overruled,
presented an answer. The trial judge rendered judgment on the motion of attorney Recto in the terms of
the complaint.
Whether or not a promissory note with a confess of judgment proviso is valid in this jurisdiction.
No. Neither the Code of Civil Procedure nor any other remedial statute expressly or tacitly recognizes a
confession of judgment commonly called a judgment note. At least one provision of the substantive
law, namely, that the validity and fulfillment of contracts cannot be left to the will of one of the
contracting parties (Civil Code, art. 1356), constitutes another indication of fundamental legal purposes.
Judgments by confession as appeared at common law were considered an amicable, easy, and cheap
way to settle and secure debts. In one sense, instruments of this character may be considered as
special agreements, with power to enter up judgments on them, binding the parties to the result as they
themselves viewed it.
On the other hand, are disadvantages to the commercial world which outweigh the considerations just
mentioned. Such warrants of attorney are void as against public policy, because they enlarge the field
for fraud, because under these instruments the promissor bargains away his right to a day in court, and
because the effect of the instrument is to strike down the right of appeal accorded by statute. It can
readily be seen that judgment notes, instead of resulting to the advantage of commercial life in the
Philippines might be the source of abuse and oppression, and make the courts involuntary parties
We are of the opinion that warrants of attorney to confess judgment are not authorized nor
contemplated by our law. We are further of the opinion that provisions in notes authorizing attorneys to
appear and confess judgments against makers should not be recognized in this jurisdiction by
implication and should only be considered as valid when given express legislative sanction.


G.R. No. 166260
February 18, 2009
A certain check dated January 13, 1997, payable to cash, was drawn against the account of Bienvenido
C. Tan with petitioner Metropolitan Bank & Trust Company (Metrobank) and was deposited with
respondent United Overseas Bank (UOB). The check was forwarded for clearing on January 14, 1997,
and was cleared by Metrobank on the same date. Metrobank thereafter informed UOB that it was
returning the check on account of material alteration the date was changed from January 23, 1997 to
January 13, 1997, and the amount was altered from P1, 000.00 to P91, 000.00.
UOB refused to accept the return and to reimburse Metrobank the amount it paid, on which instance,
Metrobank was prompted to file a complaint before the PCHC Arbitration Committee. It was the
contention of Metrobank that UOB had the duty to examine the deposited check for any material
Page 13 of 77

alteration, but since UOB failed to exercise due diligence therefore, UOB should bear the loss. UOB, in
its Answer with Counterclaim, interposed that it exercised due diligence, and that Metrobank failed to
comply with the 24-hour clearing house rule, and, with gross negligence, cleared the check.
Whether or not the drawee-bank, Metrobank, can claim for reimbursement from UOB?
No. Under prevailing jurisprudence, it shall be the drawee-bank that should bear the loss if it had
mistakenly cleared a forged or an altered check. Metrobank, being the drawee-bank, should have
exercised due diligence in examining the checks specifically its material particulars before clearing the
same. Metrobank cleared the check on the same date it was forwarded through Philippine Clearing
House Corporation. Metrobank failed to comply with the 24-hour clearing house rule when it only
informed UOB, in its January 27, 1997 Letter, that it was returning the check on account of material
alteration. Thus, Metrobanks claim for reimbursement could not be sustained.



G.R. No. 179952
December 4, 2009
Lamberto Bitanga (Bitanga) obtained from respondent BA Finance Corporation (BA Finance) a loan to
secure which, he mortgaged his car to respondent BA Finance. Bitanga thus had the mortgaged car
insured by respondent Malayan Insurance Co., Inc. (Malayan Insurance). The car was stolen. On
Bitangas claim, Malayan Insurance issued a check payable to the order of B.A. Finance Corporation
and Lamberto Bitanga for P224,500, drawn against China Banking Corporation (China Bank). The
check was crossed with the notation For Deposit Payees Account Only.
Without the indorsement or authority of his co-payee BA Finance, Bitanga deposited the check to his
account with the Asianbank Corporation (Asianbank), now merged with petitioner Metropolitan Bank
and Trust Company (Metrobank). Bitanga subsequently withdrew the entire proceeds of the check.
In the meantime, Bitangas loan became past due, but despite demands, he failed to settle it. BA
Finance thereupon demanded the payment of the value of the check from Asianbank but to no avail,
prompting it to file a complaint for sum of money and damages against Asianbank and Bitanga alleging
that, inter alia, it is entitled to the entire proceeds of the check.
On the issue of whether or not BA Finance has a cause of action, Metrobank contends that Bitanga is
authorized to indorse the check as the drawer names him as one of the payees. Moreover, his
signature is not a forgery nor has he or anyone forged the signature of the representative of BA
Finance Corporation. No unauthorized indorsement appears on the check. Absent the indispensable
fact of forgery or unauthorized indorsement, the payee may not recover from the collecting bank.
1. Whether or not BA Finance has a cause of action against Metrobank even if the subject check had
not been delivered to BA Finance by the issuer itself.
2. Whether or not Metrobank is liable to BA Finance for the full value of the check, under the
Negotiable Instruments Law.
1. YES. Section 41 of the Negotiable Instruments Law provides:
Page 14 of 77

Where an instrument is payable to the order of two or more payees or indorsees who are not
partners, all must indorse unless the one indorsing has authority to indorse for the others.
Bitanga alone endorsed the crossed check, and petitioner allowed the deposit and release of the
proceeds thereof, despite the absence of authority of Bitangas co-payee BA Finance to endorse it
on its behalf. Petitioners argument that since there was neither forgery, nor unauthorized
indorsement because Bitanga was a co-payee in the subject check, the dictum in Associated Bank
v. CA does not apply in the present case fails. The payment of an instrument over a missing
indorsement is the equivalent of payment on a forged indorsement or an unauthorized indorsement
in itself in the case of joint payees.
Accordingly, one who credits the proceeds of a check to the account of the indorsing payee is liable
in conversion to the non-indorsing payee for the entire amount of the check.
2. YES. Section 68 of the Negotiable Instruments Law instructs that joint payees who indorse are
deemed to indorse jointly and severally. When the maker dishonors the instrument, the holder
thereof can turn to those secondarily liable the indorser for recovery.
A collecting bank, Asianbank in this case, where a check is deposited and which indorses the check
upon presentment with the drawee bank, is an indorser. This is because in indorsing a check to the
drawee bank, a collecting bank stamps the back of the check with the phrase all prior
endorsements and/or lack of endorsement guaranteed and, for all intents and purposes, treats the
check as a negotiable instrument, hence, assumes the warranty of an indorser.
Petitioner, as the collecting bank or last indorser, 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 prior indorsements.


G.R. No. 116320
November 29, 1999
Petitioner is the President of A. Francisco Realty & Development Corporation (AFRDC) and private
respondent, Jaime Ong is the President and General Manager of Herby Commercial Construction
Corporation (HCCC). On 1977, the parties entered into a Land Development and Construction Contract
where HCCC undertake the construction of 35 housing units and development of 35 hectares of land
financed under the Government Service Insurance System (GSIS). To facilitate payment, AFRDC
executed a Deed of Assignment in favor of HCCC to enable to collect payments from GSIS. An
Executive Committee Account was put up with the Insular Bank Asia & America (IBAA) from which
checks would be issued and co-signed by petitioner and GSIS.
On 1978, HCCC filed a complaint against petitioner and GSIS for the collection of unpaid balance. But
the parties reached an amicable settlement, thus, the case was dismissed. Sometime in 1979, Ong
discovered that petitioner and GSIS had executed and signed 7 checks drawn against IBAA in favor of
HCCC for completed and delivered work. Ong however claims that these were not delivered to him.
Ong learned that the custody of these checks were given to petitioner and the latter promised to deliver
it to the former. Petitioner forged the signature of Ong at the dorsal portion of the said checks to make it
appear that HCCC had indorsed the checks. Petitioner then indorsed the checks for a second time by
signing her name at the back of the checks and deposited the checks in her IBAA savings account.
Page 15 of 77

Ong filed for Estafa thru falsification of commercial documents. Petitioner denied having forged the
signature and claimed that Ong himself indorsed the checks and deliver it to petitioner. The court
dismissed the complaint.
Private respondents filed against petitioner and IBAA for recovery of money representing the total value
of the 7 checks and the RTC ruled in favor of the former. The NBI affirmed that petitioner indeed forged
the signature of Ong. IBAA was held liable for having honored the checks despite such obvious
irregularities as the lack of initials to validate the alterations made on the check, the absence of the
signature of a co-signatory and the deposit of the checks on a second indorsement. The CA affirmed
the lower courts decision. Hence, this petition.
Whether or not petitioner committed forgery.
Yes, the act of forgery was sufficiently established by the findings of the NBI. Petitioners claim that she
is authorized to sign Ong's name on the checks by virtue of the Certification executed by Ong giving
her the authority to collect all the receivables of HCCC from the GSIS, including the questioned checks
is untenable. The Negotiable Instruments Law provides that where any 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 in behalf of the principal and must
disclose the name of his principal; otherwise he shall be held personally liable. Thus, the said
certification cannot be used to validate her act of forgery.


66 SCRA 29
Petitioner deposited 10 checks in its current account with BPI. The checks which were acquired by
petitioner from Ramirez, a sales agent of the Inter-Island Gas were all payable to Inter-Island Gas
Service, Inc. or order. After the checks had been submitted to Inter-bank clearing, Inter-Island Gas
discovered that all the indorsements made on the checks purportedly by its cashiers were
forgeries. BPI thus debited the value of the checks against petitioner's current account and forwarded
to the latter the checks containing the forged indorsements which petitioner refused to accept.
Whether BPI had the right to debit from petitioner's current account the value of the checks with the
forged indorsements.
BPI acted within legal bounds when it debited the petitioner's account. Having indorsed the checks to
respondent bank, petitioner is deemed to have given the warranty prescribed in Section 66 of the NIL
that every single one of those checks "is genuine and in all respects what it purports to
be." Respondent which relied upon the petitioner's warranty should not be held liable for the resulting
#28 MWSS vs CA and PNB
G.R. No. L-62943
July 14, 1986
Metropolitan Waterworks and Sewerage System(MWSS is a GOCC created under RA No. 6234 as the
successor-in- interest of the defunct NWSA while the Philippine National Bank (PNB )is the depository
Page 16 of 77

bank of MWSS and its predecessor-in-interest NWSA. Among the several accounts of NWSA with PNB
is NWSA Account No. 6 with (treasurer)Jose Sanchez, Pedro Aguilar (auditor) and acting General
Manager Victor L. Recio authorized signatories after having been submitted to with the PNB. By special
arrangement with the PNB, the MWSS used personalized checks in drawing from this account. These
checks were printed for MWSS by F. Mesina Enterprises.
23 checks were prepared, processed, issued and
released by NWSA, all of which were paid and
cleared by PNB and debited by PNB against NWSA
Account No. 6
1. 59546 8-21-69 Deogracias P 3,187.79 4-2-6
2. 59548 3-31-69 Natividad 2,848.86 4-23-69
3. 59547 3-31-69 Pangilinan 195.00 Unreleased
4. 59549 3-31-69 Natividad 3,239.88 4-23-69
5. 59552 4-1-69 Villarama 987.59 5-6-69 & Sons
6. 59554 4-1-69 Gascom 6,057.60 4-16 69
7. 59558 4-2-69 The Evening 112.00 Unreleased
8. 59544 3-27-69 Progressive 18,391.20 4-18 69
9. 59564 4-2-69 Ind. Insp. 594.06 4-18 69 Int. Inc.
10. 59568 4-7-69 Roberto 800.00 4-22-69 Marsan
11. 59570 4-7-69 Paz Andres 200.00 4-22-69
12. 59574 4-8-69 Florentino 100,000.00 4-11-69
13. 59578 4-8-69 Mla. Daily 95.00 Unreleased
14. 59580 4-8-69 Phil. Herald 100.00 5-9-69
15. 59582 4-8-69 Galauran 7,729.09 5-6-69 & Pilar
16. 59581 4-8-69 Manila 110.00 5-12 69 Chronicle
17. 59588 4-8-69 Treago 21,583.00 4-11 69 Tunnel
18. 59587 4-8-69 Delfin 120,000.00 4-11-69
19. 59589 4-10-69 Deogracias 1,257.49 4-16 69
20. 59594 4-14-69 Philam Accident Inc. - 33.03 4-29
21. 59577 4-8-69 Esla 9,429.78 4-29 69

NWSA checks were likewise paid and

cleared by PNB and debited against
NWSA Account No. 6,
59546 3-6-69 Raul Dizon P 84,401.00 3-1669
59548 3-11-69 Raul Dizon 104,790.00 4-169
59547 3-14-69 Arturo Sison 56,903.00 4-1169
59549 3-20-69 Arturo Sison 48,903.00 4-1569
59552 3-24-69 Arturo Sison 63,845.00 4-1669
59544 3-26-69 Arturo Sison 98,450.00 4-1769
59558 3-28-69 Arturo Sison 114,840.00 421-69
59544 3-16-69 Antonio 38,490.00 4-22-69
59564 3-31-69 Arturo Sison 180,900.00 423-69
59568 4-2-69 Arturo Sison 134,940.00 4- 569
59570 4-1-69 Arturo Sison 64,550.00 4-2869
59574 4-2-69 Arturo Sison 148,610.00 4-2969
59578 4-10-69 Antonio 93,950.00 4-2969Mendoza
59580 4-8-69 Arturo Sison 160,000.00 5-269
59582 4-10-69 Arturo Sison 155,400.00 5-569
59581 4-8-69 Antonio 176,580.00 5-6-69
59588 4-16-69 Arturo Sison 176,000.00 5-869
59587 4-16-69 Arturo Sison 300,000.00 512-69
59589 4-18-69 Arturo Sison 122,000.00 514-69
59594 4-18-69 Arturo Sison 280,000.00 515-69
59577 4-14-69 Antonio 260,000.00 5-16-69
59601 4-18-69 Arturo Sison 400,000.00 519-69
Page 17 of 77

23. 59595 4-14-69 Neris Phil. Inc. 4,274.00 5-20-69

P 320,636.26

59595 4-28-69 Arturo Sison 190,800.00 521-69


The foregoing checks were deposited by the payees Dizon, Sison and Mendoza in their respective
current accounts with the PCIB and PBC on same months and the checks were presented for payment
by PBC and PCIB to the defendant PNB, and paid, also in the same months. At the time of their
presentation to PNB these checks bear the standard indorsement which reads all prior indorsement
and/or lack of endorsement guaranteed
However, upon NBI investigation,it showed that these three were all fictitious persons but with
respective balances with the PBC and/or PCIB account, to with stood as follows:
A. Raul Dizon P3,455.00 as of April 30, 1969;
B. Antonio Mendoza P18,182.00 as of May 23, 1969; and
C. Arturo Sison Pl,398.92 as of June 30, 1969.
NWSA addressed a letter to PNB requesting the immediate restoration to its account no. 6 of the total
sum of P345,7903.00 corresponding to the total amount of the 23 checks claimed by NWSA to be
forged and/or spurious check. But PNB refused to credit back the amount, MWSS filed a complaint
before the CFI of Manila.
PNB answered that the checks were regular on its face in all aspects including the genuineness of the
signatures of the authorized NWSA signing officers and there is nothing on its face that could have
aroused any suspicion as to such and that NWSA was guilty of negligence which was the proximate
cause of the loss. PNB also filed a third party complaint against the negotiating PCIB and PCB on the
ground that they failed to ascertain the identity of the payees and their title to the checks which were
deposited in the respective new accounts of the payees with them.
CFI rendered judgment in favor of MWSS and dismissed the third party complaint against PCIB and
PCB for lack of evidence.CA reversed the decision of CFI and rendered judgment in favor of PNB.
1. Whether or not the signatures on the checks were forged, the drawee bank was liable for the loss
under section 23 of the NIL
2. Whether or not court failed to consider the proximate negligence of pnb in accepting the spurious
checks despite the obvious irregularity of two sets of checks bearing identical number being
encashed within days of each other
1. No. There is no forgery that took place in this case. Forgery cannot be presumed. It must be
established by clear, positive and convincing evidence. There is no express and categorical finding
that the 23 questioned checks were indeed signed by the person other than the authorized MWSS
signatories. There must be conclusive findings that there is a variance in the inherent characteristics of
the signatures and that they were written by 2 or more different persons.
2. No. Negligence was the proximate cause of the failure to discover fraud. MWSS was in a better
position to detect and prevent the fraudulent encashment of its checks. Thus, it is attributed to MWSS
and not on the part of PNB on the following reasons:
a. At the time the 23 checks were prepared, negotiated and encashed, MWSS was using its own
personalized checks instead of the official PNB commercial checks
b. there was gross negligence in the printing of its personalized checks as MWSS failed to:
- give its printer, Mesina Enterprises, specific instructions relative to the safekeeping and disposition
of excess forms, check vouchers, and safety papers;
- retrieve from its printer all spoiled check forms
- provide any control regarding the paper used in the printing of said checks;
- furnish PNB with samples of typewriting, cheek writing, and print used by its printer in the printing
of its checks and of the inks and pens used in signing the same
- send a representative to the printing office during the printing of said checks
Page 18 of 77

c. there was failure on the part of MWSS to reconcile the bank statements with its own records. The
fraudulent encashment of the first checks should have been discovered and further prevented fraud if
only MWSS had reconciled its bank statements with its own records.
d. MWSS failed to provide appropriate security measures over its own records thereby laying
confidential records open to unauthorized persons.

G.R. No. 92244
February 9, 1993
Natividad Gempesaw is a businesswoman who entrusted to her bookkeeper, Alicia Galang, the
preparation of checks about to be issued in the course of her business transactions. From 1984 to
1986, 82 checks amounting to P1, 208,606.89 were prepared and were supposed to be delivered to
Gempesaws clients as payees named thereon. However, through Galang, these checks were never
delivered to the supposed payees. Instead, the checks were fraudulently indorsed to Alfredo Romero
and Benito Lam.
Whether or not the bank should refund the money lost by reason of the forged indorsements.
No. Gempesaw cannot set up the defense of forgery by reason of her negligence. As a rule, a drawee
bank (in this case the Philippine Bank of Communications) who has paid a check on which an
indorsement has been forged cannot charge the drawers (Gempesaws) account for the amount of said
check. An exception to this rule is where the drawer is guilty of such negligence which causes the bank
to honor such a check or checks. If a check is stolen from the payee, it is quite obvious that the drawer
cannot possibly discover the forged indorsement by mere examination of his cancelled check. A
different situation arises where the indorsement was forged by an employee or agent of the drawer, or
done with the active participation of the latter.
The negligence of a depositor which will prevent recovery of an unauthorized payment is based on
failure of the depositor to act as a prudent businessman would under the circumstances. In the case at
bar, Gempesaw relied implicitly upon the honesty and loyalty of Galang, and did not even verify the
accuracy of amounts of the checks she signed against the invoices attached thereto. Furthermore,
although she regularly received her bank statements, she apparently did not carefully examine the
same nor the check stubs and the returned checks, and did not compare them with the same invoices.
Otherwise, she could have easily discovered the discrepancies between the checks and the documents
serving as bases for the checks. With such discovery, the subsequent forgeries would not have been
accomplished. It was not until two years after Galang commenced her fraudulent scheme that
Gempesaw discovered that eighty-two (82) checks were wrongfully charged to her account, at which
she notified the Philippine Bank of Communications.



Page 19 of 77


430 SCRA 261
On November 8, 1982, plaintiff CASA Montessori International opened Current Account No. 02910081-01 with defendant BPI[,] with CASAs President Ms. Ma. Carina C. Lebron as one of its authorized
"In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its checks had been
encashed by a certain Sonny D. Santos since 1990 in the total amount of P782,000.00,
"It turned out that Sonny D. Santos with account at BPIs Greenbelt Branch [was] a fictitious name
used by third party defendant Leonardo T. Yabut who worked as external auditor of CASA. Third party
defendant voluntarily admitted that he forged the signature of Ms. Lebron and encashed the checks.
"The PNP Crime Laboratory conducted an examination of the nine (9) checks and concluded that the
handwritings thereon compared to the standard signature of Ms. Lebron were not written by the latter.
"On March 4, 1991, plaintiff filed the herein Complaint for Collection with Damages against defendant
bank praying that the latter be ordered to reinstate the amount of P782,500.007 in the current and
savings accounts of the plaintiff with interest at 6% per annum.
1. Whether or not there is forgery under the Negotiable Instruments Law (NIL).
2. Whether or not any of the parties is negligent and therefore precluded from setting up forgery as a
3. Whether or not moral and exemplary damages, attorneys fees, and interest will be awarded.
1. YES. "Section 23. Forged signature; effect of. -- When a signature is forged or made without the
authority of the person whose signature it purports to be, it is wholly inoperative, and no right x x x to
enforce payment thereof against any party thereto, can be acquired through or under such signature,
unless the party against whom it is sought to enforce such right is precluded from setting up the forgery
or want of authority."
A forged signature is a real or absolute defense, and a person whose signature on a negotiable
instrument is forged is deemed to have never become a party thereto and to have never consented to
the contract that allegedly gave rise to it. The counterfeiting of any writing, consisting in the signing of
anothers name with intent to defraud, is forgery.
First, both the CA and the RTC found that Respondent Yabut himself had voluntarily admitted, through
an Affidavit, that he had forged the drawers signature and encashed the checks. He never refuted
these findings.That he had been coerced into admission was not corroborated by any evidence on
Second, the appellate and the trial courts also ruled that the PNP Crime Laboratory, after its
examination of the said checks, had concluded that the handwritings thereon -- compared to the
standard signature of the drawer -- were not hers. This conclusion was the same as that in the
Report that the PNP Crime Laboratory had earlier issued to BPI -- the drawee bank -- upon the latters
2. NO. Negligence Attributable to BPI Alone Having established the forgery of the drawers signature,
BPI -- the drawee -- erred in making payments by virtue thereof. The forged signatures are wholly
inoperative, and CASA -- the drawer whose authorized signatures do not appear on the negotiable
instruments -- cannot be held liable thereon. Neither is the latter precluded from setting up forgery as a
real defense.
3. NO. We deny CASAs claim for moral damages. In the absence of a wrongful act or omission, or of
fraud or bad faith, moral damages cannot be awarded. The adverse result of an action does not per se
make the action wrongful, or the party liable for it. One may err, but error alone is not a ground for
granting such damages. We also deny CASAs claim for exemplary damages. Imposed by way of for
the public good, exemplary damages cannot be recovered as a matter of right. Attorneys fees granted.
Page 20 of 77

Although it is a sound policy not to set a premium on the right to litigate, we find that CASA is entitled to
reasonable attorneys fees based on "factual, legal, and equitable justification."

G.R. No. 129015
August 13, 2004
Samsung Construction held an account with Far East Bank. One day a check worth 900,000, payable
to cash, was presented by one Roberto Gonzaga in the Makati Branch of Far East Bank. The check
was certified to be true by Jose Sempio, the assistant accountant of Samsung, who was also present
during the time the check was cashed. Later however it was discovered that no such check was ever
approved by the Samsungs head accountant, the president of the company also never signed any
such check.
Whether or not Far East Bank is liable to reimburse Samsung for cashing out the forged check, which
was drawn from the account of Samsung.
Far East Bank is liable for reimbursement. Sec. 23 of the Negotiable Instrument Law states that a
forged signature makes the instrument wholly inoperative. If payment is made the drawee (Far East)
cannot charge it to the drawers account (Samsung). The fact that the forgery is clever is immaterial.
The forged signature may so closely resemble the genuine as to defy detection by the depositor
himself. And yet, if the bank pays the check, it is paying out with its own money and not of the
depositors. This rule of liability can be stated briefly in these words: A bank is bound to know its
depositors signature. The accusation of negligence on the part of Samsung was not clearly proven.
Absence of proof to the contrary, the presumption is that the ordinary course of business was followed.
GR. No. L-2861
February 26, 1951
The insertion of the words Agent, Phil. National Bank which converts the bank from a mere drawee to
a drawer and therefore changes its liability, constitute a material alteration of the instrument without the
consent of the parties liable thereon and so discharges the instrument.
Ramos, a disbursing officer of the USAFE made cash advancements with the provincial treasurer of
lanao (Encarnacion). The latter gave him a P500,000 check. Thereafter Ramos presented the check to
Laya for encashment. Ubaldo Laya, as provincial treasurer of Misamis Oriental issued a P100,000.00
Philippine National Bank (PNB) check to Mariano Ramos. The said check was to be used by Ramos,
as disbursing officer of the US forces at that time, for military purposes. Before Ramos can encash the
check, he was made a prisoner of war by the invading Japanese forces until 1943.
Enrique Montinola alleges that in 1944, Ramos needed some money for foodstuffs for himself and so
he went to him and made arrangements to sell him the check. However According to Ramos the
agreement between himself and Montinola regarding the transfer of the check was that he was selling
only P30,000. And not the whole amount of P100,000. In consideration thereof, Montinola promised to
pay 850,000.00 in Japanese notes (that time peso notes are valued higher). However, he was only able
to pay 450,000.00 in Japanese notes to Ramos. Later, Montinola sought to have the check encashed
but PNB dishonored the check. It appears that there was an insertion made. Under the signature of
Laya, the words Agent, Philippine National Bank was inserted, thus making it appear that laya
Page 21 of 77

disbursed the check as an agent of PNB and not as provincial treasurer of Misamis Oriental. Montinola
then filed a suit to recover the sum of P100,000 of the check issued in 1942.
1. Whether or not there was a valid negotiation of the instrument.
2. Whether or not the material alteration discharges the instrument.
1. NO. The instrument was not legally negotiated. It was not negotiated according to the Negotiable
Instruments Law (NIL) hence it is not a negotiable instrument. There was only a partial indorsement
and not a negotiation contemplated under the NIL. Only P30,000.00 of the P100,000.00 amount of the
check was indorsed. This makes Montinola a mere assigneeand this is the clear intent of Ramos.
Ramos was merely assigning P30,000.00 to Montinola. Montinola may therefore not be regarded as an
indorsee and PNB has all the right to dishonor the check. As mere assignee, he is subject to all
defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos.
2. YES. The material alteration discharges the instrument. The insertion of the words Agent, Phil.
National Bank which converts the bank from a mere drawee to a drawer and therefore changes its
liability, constitute a material alteration of the instrument without the consent of the parties liable
thereon and so discharges the instrument. The apparent purpose of which is to make the drawee (PNB)
the drawer against which Montinola can recover from directly. Such material alteration which was done
by Montinola without the consent of the parties liable thereon discharges the instrument, pursuant to
Section 124 of the NIL.

#35 PNB vs CA
G.R. No. 108052

July 24, 1996

A check with a specific serial number was issued by the DECS in favor of Abante Marketing, drawn
against PNB. The check was deposited by Abante in its account with Capitol and the latter
consequently deposited the same with its account with PBCOM which later deposited it with
petitioner for clearing. Thereafter, the check was cleared. Petitioner PNB however, contends that there
was a material alteration on check so it was returned. Subsequent debits were 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 PBCOM and demanded the
recrediting of its account. PBCOM followed suit by doing the same against PNB. Demands
unheeded, it filed an action against PBCOM and the latter filed a third-party complaint against
Whether or not there is a material alteration in the instrument.
An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized
change in the 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 the party. In other words, a material alteration is one which changes the 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
issuewhich is not an essential element of a negotiable instrument under Section 1. PNB alleges
that the alteration was material since it is an accepted concept that a TCAA check by its very
nature is the medium of exchange of governments, instrumentalities and agencies. As a safety
measure, every government office or agency is assigned checks bearing different serial numbers.
Page 22 of 77

But this contention has to fail. The checks serial number is not the sole indicia of its origin. The name
of the government agency issuing the check is clearly stated therein. Thus, the checks drawer is
sufficiently identified, rendering redundant the referral to its serial number.
Therefore, there being no material alteration in the check committed, PNB could not return the check to
PBCOM. It should pay the same.




19 SCRA 924
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. Sadaya and Sevilla both signed as co-makers to
accommodate Varona. Thereafter, the bank collected from Sadaya. Varona failed to reimburse.
Consequently, Sevilla died and intestate estate proceedings were established. Sadaya filed a creditors
claim on his estate for the payment he made on the note. The administrator resisted the claim on the
ground that Sevilla didn't receive any proceeds of the loan. The trial court admitted the claim of Sadaya
though this was reversed by the CA.
Whether or not Sadaya can claim against the estate of Sevilla as co-accommodation party when
Varona as principal debtor is not yet insolvent.
No. Sadaya could have sought reimbursement from Varona, which is right and just as the latter was
the only one who received value for the note executed. There is an implied contract of indemnity
between Sadaya and Varona upon the formers payment of the obligation to the bank.
Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be joint and several. For
indeed, had payment been made by Varona, Varona couldn't had reason to seek reimbursement from
either Sadaya or Sevilla. After all, the proceeds of the loan went to Varona alone.
On principle, a solidary accommodation maker who made payment has the right to contribution,
from his co-accommodation 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 that may ensue from their having consented to stamp their signatures on the promissory note.
The following are the rules:
1. A joint and several accommodation maker of a negotiable promissory note may demand
from the principal debtor reimbursement for the amount that he paid to the payee
2. A joint and several accommodation maker who pays on the said promissory note may
directly demand reimbursement from his co-accommodation maker without first directing his action
against the principal debtor provided that:
a. He made the payment by virtue of a judicial demand
b. A principal debtor is insolvent.
Page 23 of 77

It was never shown that there was a judicial demand on Sadaya to pay the obligation and also, it was
never proven that Varona was insolvent. Thus, Sadaya cannot proceed against Sevilla for


19 SCRA 924
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. Sadaya and Sevilla both signed as comakers to accommodate Varona. Thereafter, the bank collected from Sadaya. Varona failed to
Consequently, Sevilla died and intestate estate proceedings were established. Sadaya filed a
creditors claim on his estate for the payment he made on the note. The administrator resisted the
claim on the ground that Sevilla didn't receive any proceeds of the loan. The trial court admitted the
claim of Sadaya though this was reversed by the CA.
Whether or not Sadaya can claim against the estate of Sevilla as co-accommodation party when
Verona as principal debtor is not yet insolvent
Sadaya could have sought reimbursement from Varona, which is right and just as the latter was the
only one who received value for the note executed. There is an implied contract of indemnity
between Sadaya and Varona upon the formers payment of the obligation to the bank.
Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be joint and several. For
indeed, had payment been made by Varona, Varona couldn't had reason to seek reimbursement from
either Sadaya or Sevilla. After all, the proceeds of the loan went to Varona alone.
On principle, a solidary accommodation maker who made payment has the right to contribution,
from his co-accommodation 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 that may ensue from their having consented to stamp their signatures on the promissory note.
The following are the rules:
1. A joint and several accommodation maker of a negotiable promissory note may demand
from the principal debtor reimbursement for the amount that he paid to the payee
2. A joint and several accommodation maker who pays on the said promissory note may
directly demand reimbursement from his co-accommodation maker without first directing his action
against the principal debtor provided that:
a. He made the payment by virtue of a judicial demand
b. A principal debtor is insolvent.
It was never shown that there was a judicial demand on Sadaya to pay the obligation and also, it was
never proven that Varona was insolvent. Thus, Sadaya cannot proceed against Sevilla for
G.R. No. L-34539
July 14, 1986
Appellants spouses Eulalio and Elisa Prudencio were the registered owners of a parcel of land located
in Sampaloc, Manila. On October 7, 1954, they mortgaged the property to PNB as a guaranty for a
loan. After persuasions from appellants relative, Jose Toribio, the appellants signed an Amendment of
Page 24 of 77

Real Estate Mortgage, which mortgaged their property to guaranty a loan of P10,000.00 extended to
the Concepcion & Tamayo Construction Company.
A promissory note covering the loan of P10,000.00 dated December 29, 1955 was signed by Toribio,
as they Companys attorney-in-fact. The appellants also signed the portion of the promissory note,
indicating that they are requesting PNB to issue the check covering the loan to the Company.
The Company was to use the loan for the construction of a municipal building in Puerto Princessa,
Palawan, by virtue of a contract with the Bureau of Public Works. However, the Company abandoned
the work, which caused the Bureau to rescind the contract.
On November 14, 1958, the appellants wrote the PNB for the cancellation of their real estate mortgage.
However, it was denied. This prompted them to file a complaint against the Company, Jose Toribio, and
the District Engineer of Puerto Princesa, Palawan, but it was denied by the trial court. The Court of
Appeals affirmed the decision of the trial court, and stated that, as accommodation makers, the
petitioners liability is that of solidary co-makers. Appellants contend that as accommodation makers,
the nature of their liability is only that of mere sureties.
Whether or not accommodation parties are solidary co-debtors.
Yes. Section 29 of the Negotiable Instrument Law provides:
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.
In the case of Philippine Bank of Commerce v. Aruego (102 SCRA 530, 539), the Court held that "... in
lending his name to the accommodated party, the accommodation party is in effect a surety." However,
unlike in a contract of suretyship, the liability of the accommodation party remains not only primary but
also unconditional to a holder for value such that even if the accommodated party receives an
extension of the period for payment without the consent of the accommodation party, the latter is still
liable for the whole obligation and such extension does not release him because as far as a holder for
value is concerned, he is a solidary co- debtor.
There is, therefore, no question that as accommodation makers, petitioners would be primarily and
unconditionally liable on the promissory note to a holder for value, regardless of whether they stand as
sureties or solidary co-debtors since such distinction would be entirely immaterial and inconsequential
as far as a holder for value is concerned.
***note: However, PNB was not a holder in due course. (I only discussed the issue in accordance with
the topic the case is listed under. )


G. R. No. L-56169
June 26, 1992
Private respondent, Arturo S. Miranda, procured tickets from petitioner, Travel-On, Inc. (Travel-On), on
behalf of airline passengers and derived commissions therefrom. From August 5, 1969 to January 16,
1970, he bought various airline tickets from petitioner wherein he issued six (6) postdated checks
amounting to Php115,000.00. But those were all dishonored by the drawee banks. Thereafter, he
tendered payment of Php10,000.00 thereby reducing his indebtedness to Php105,000.00.
Travel-On filed a suit to collect on the six (6) checks. However, Arturo S. Miranda avers paying and
even overpaying his obligations and further claims that he only issued the checks for accommodation in
order that its General Manager, Elita Montilla, could show to Travel-Ons Board of Directors that the
Page 25 of 77

accounts receivable of the company were still good. He added that when the cheks were dishonored,
these were all returned to him since the accommodation purpose had already been accomplished.
1. Whether or not the six (6) postdated checks were issued for accommodation; and
2. Whether or not Arturo S. Miranda should be held liable to pay Travel-On in the six (6) checks that he
had issued.
No, the checks were not issued for accommodation. Therefore, private respondent, Arturo S. Miranda,
should be held liable therefrom.
According to the Negotiable Instruments Law, in accommodation transactions, the accommodating
party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a
payee or indorsee as a holder in due course, who gave full value therefore to the accommodated party.
The accommodated party, thus, receives or realizes full value which he/it must repay to the
accommodating party. On the other hand, the accommodating party is liable on the check to the holder
in due course who is a third party and not the accommodated party.
In the instant case, Travel-On, being the payee of the six (6) checks, was not an accommodated party.
It did not realize any value on the checks that had bounced. It was, therefore, to be presumed as a
holder in due course and being a holder in due course, private respondent should be held liable to
petitioner on the amount of the checks.
Furthermore, a 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. Mere issuance of the check entitles the plaintiff for recovery.
In the case at bar, private respondent failed to prove that there was no sufficient consideration when he
issued the checks. It bears stressing, however, that the checks were issued immediately after petitioner
demanded payment from private respondent. And when the checks were presented for payment, the
same were presumed to be intended for encashment. Hence, the checks are nothing but evidence of
private respondents indebtedness to petitioner. However, since the liability was reduced by
Php10,000.00, private respondent is to be held liable only for the remaining balance of Php105,000.00.
Wherefore, judgment is hereby rendered requiring private respondent, Arturo S. Miranda, to pay
petitioner, Travel-On, the amount of Php105,000.00 with legal interest from June 14, 1972, plus ten
percent (10%) of the total amount due as attorneys fees. Costs against private respondent.





Page 26 of 77


G.R. No. L-33549
January 31, 1978
Boncan was the Finance Officer of the Philippine Embassy in Madrid who on many occasions
negotiated with Banco Atlantico checks, allegedly endorsed to her by the embassy. On these
occasions, the bank made the payment of the checks, notwithstanding the fact that the drawee
bank has not yet cleared the checks for collection. This was premised on the finding that Boncan had
special relations with the employees of the bank. And that upon presentment to the drawee bank, the
checks were dishonored due to non-acceptance allegedly on the ground that the drawer has ordered
the stoppage of payment. This prompted Banco Atlantico to collect from the Philippine Embassy for the
funds released to Boncan but the latter refused. This eventually led to filing of money claim of the bank
with the Auditor General.
Whether or not Banco Atlantico was a holder in due course.
No. All four conditions enumerated under Sec. 52 of the NIL must concur before a holder can be
considered as a holder in due course. The absence or failure to comply with any of the conditions set
forth under this section will make one's title to the instrument defective. The check for US$90,000.00
was a demand note. When Miss Boncan, the payee, negotiated the same by depositing it in
her account, at the same time informing the bank in writing that it be not presented for collection until a
later date. Banco Atlantico through its agent teller or cashier should have been put on guard that there
was something wrong with the check. The fact that the amount involved was quite big and it was the
payee herself who made the request that the same not be presented for collection until a fixed date in
the future was proof of a glaring infirmity or defect in the instrument. It loudly proclaims, "Take me at
your risk." The interest of the payee was the immediate punishment of the check of which she was the
beneficiary and not the deferment of the presentment for collection of the same to the drawee bank.
This being the case, Banco Atlantico was not a holder in due course because it was obvious that it had
knowledge of the infirmity or defect of the check. The fact that the check was honored by claimant bank
was proof not only of their gross negligence but a further manifestation of the special treatment they
were according Miss Boncan.


G.R. No. 70145
November 13, 1986
Respondent Jose Go, purchased a Cashier's Check from Associated Bank which he unfortunately left
on the top of the desk of the bank manager. Said check was entrusted for safekeeping to a bank
official, a certain Albert Uy, who had then a visitor in the person of Alexander Lim. When respondent
inquired for his cashier's check from Albert Uy, the check was not in his folder and nowhere to be
found. Respondent advised the bank to accomplish a "STOP PAYMENT" order and also executed an
affidavit of loss. Albert Uy went to the police to report the loss of the check, pointing to the person of
Alexander Lim as the one who could shed light on it.
The lost check was presented by Prudential Bank for clearing and twice dishonored by Associated
Bank. Respondent Associated Bank received a letter from a certain Atty. Lorenzo Navarro demanding
payment on the cashier's check in question, but refused to reveal the name of his client, and threatened
to sue if payment is not made. Respondent bank replied saying the check belonged to Jose Go who
lost it in the bank and is laying claim to it.
Page 27 of 77

Associated Bank filed an action for Interpleader naming as respondent, Jose Go and one John Doe,
Atty. Navarro's then unnamed client. On even date, respondent bank received summons and copy of
the complaint for damages of a certain Marcelo A. Mesina from the Regional Trial Court (RTC) of
Caloocan City. Respondent bank moved to amend its complaint, and substituted Marcelo A. Mesina for
John Doe.
The trial court, in the interpleader case, issued an order denying the motion to dismiss by petitioner
Mesina and ruling that respondent bank's complaint sufficiently pleaded a cause of action for
interpleader. Petitioner's motion for reconsideration was also denied. Upon motion by respondent Jose
Go, respondent judge issued an order declaring petitioner in default since his period to answer has
already expired and set the ex-parte presentation of respondent bank's evidence. Petitioner Mesina
filed a petition for certioari with preliminary injunction with IAC which the court dismissed.
Whether or not the IAC erred in ruling that a cashier's check can be countermanded even in the hands
of a holder in due course.
Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or value
as shown by the established facts of the case.
Admittedly, petitioner became the holder of the cashier's check as endorsed by Alexander Lim who
stole the check. He refused to say how and why it was passed to him. He had therefore notice of the
defect of his title over the check from the start. The holder of a cashier's check who is not a holder in
due course cannot enforce such check against the issuing bank which dishonors the same.
The check was Jose Go's property when it was misplaced or stolen. At the outset, respondent bank
knew it was Jose Go's check. When payment on it was therefore stopped, respondent bank was not the
one who did it but Jose Go, the owner of the check. Respondent bank could not be drawer and drawee
for clearly, Jose Go owns the money it represents and he is therefore the drawer and the drawee in the
same manner as if he has a current account and he issued a check against it; and from the moment
said cashier's check was lost and/or stolen no one outside of Jose Go can be termed a holder in due
course because Jose Go had not indorsed it in due course. The check in question suffers from the
infirmity of not having been properly negotiated and for value.





Page 28 of 77



G.R. No. L-24224
November 3, 1925
Respondents executed a total of 5 promissory notes of Php10,000.00 each and were not taken up at
maturity, which accumulated interests. Herein petitioner filed an action to recover the amount with back
interest. Respondents interposed that the promissory notes were sent in blank to them by Enrique
Echaus so that he may negotiate them with the PNB in case of need. They also alleged that they did
not negotiated the promissory notes with the bank, nor have they received it value, or delivered them to
the bank in payment of any preexisting debt; and that it was Echaus who negotiated the notes with the
bank and thus, the real party in interest liable for the payment of the notes. The trial judge denied the
motion and ruled in favor of petitioner.
Whether or not respondents are liable
Yes, the respondents are regarded as accommodation parties. The respondents having signed the
instruments without receiving value therefor and for the purpose of lending their names to some other
person are still liable on the instruments. The law now is that the accommodation party can claim no
benefit as such, but he is liable according to the face of his undertaking, the same as if he were himself
financially interested in the transaction.
The respondents also attested to the genuineness and due execution of the instruments sued on, so,
as makers and principals they must fulfill their obligations. Their liability on the instruments is primary
and unconditional.
14 SCRA 498
On June 16, 1961, Antonio M. Perez executed a promissory note wherein he agreed to pay J. Antonio
Araneta, or order, the sum of P3,700.00 119 days from said date, or on October 13, 1961, and if it is
not paid on the date of maturity, to pay interest at 9% per on the amount of the loan, and P370.00 as
attorney's fees in addition to costs and other disbursements taxable under the Rules of Court.
The note having become due and Antonio M. Perez having failed to pay it despite demand made upon
him to do so, Araneta filed on October 31, 1961 a complaint in the Municipal Court of Manila to collect
its import under the terms therein stipulated. Perez alleged tht the proceeds of the note was applied by
him to the payment of the medical treatment of his minor daughter Angela, who is the beneficiary of the
trust then administered by Araneta as trustee.
WON, the maker of the note bound himself to pay personally the promissory note?

Page 29 of 77

Yes. Under Sec. 60 of the NIL, the maker of the promissory note cannot escape liability by alleging that
he spent the money for the medical treatment of his daughter, the beneficiary of the trustee who is the
payee of the note, since it is not the payees concern to know how said proceeds should be spent, in as
much as that is the sole concern of the maker, and the payees interest is merely to see that the note
be paid according to its terms.



G.R. No. L-39641 Feb 28, 1983
Sambok Motors Company negotiated and indorsed the note in favor of plaintiff Metropol Financing &
Investment Corporation with the following indorsement:
Pay to the order of Metropol Bacolod Financing & Investment Corporation with recourse. Notice of
Demand; Dishonor; Protest; and Presentment are hereby waived. SAMBOK MOTORS CO.
(BACOLOD) By: RODOLFO G. NONILLO Asst. General Manager
The maker, Dr. Villaruel defaulted in the payment. Plaintiff notified Sambok as indorsee of said note of
the fact that the same has been dishonored and demanded payment. Sambok failed to pay. Trial court
rendered its decision in favour of Plaintiff. Appellant Sambok argues that by adding the words with
recourse in the indorsement of the note, it becomes a qualified indorser; that being a qualified indorser,
it does not warrant that if said note is dishonored by the maker on presentment, it will pay the amount to
the holder.
Whether or not Sambok is a qualified indorser.
Appellant, 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 Dr. Villaruel fails to
pay the note, plaintiff-appellee can go after said appellant. The effect of such indorsement is that the
note was indorsed without qualification. A person who indorses without qualification engages that on
due presentment, the note shall be accepted or paid, or both as the case may be, and that if it be
dishonored, he will pay the amount thereof to the holder. Appellant Samboks intention of indorsing the
note without qualification is made even more apparent by the fact that the notice of demand, dishonor,
protest and presentment were all waived. The words added by said appellant do not limit his liability,
but rather confirm his obligations as a general indorser.



Page 30 of 77


G.R. No. 74886
December 8, 1992
Philippine Rayon Mills, Inc.(PRMI) entered into a contract with Nissho Co., Ltd. of Japan for the
importation of textile machineries under a 5-year deferred payment plan. To effect the payment, PRMI
applied for a commercial letter of credit with the Prudential Bank and Trust Company in favor of Nissho.
Prudential Bank opened Letter of Credit No. DPP-63762 for $128,548.78 Against this letter of credit,
drafts were drawn and issued by Nissho, which were all paid by the Prudential Bank through its
correspondent in Japan, the Bank of Tokyo, Ltd. Two of the original drafts were accepted by PRMI
through its president, Anacleto R. Chi, while the others were not. Upon the arrival of the machineries,
the Prudential Bank indorsed the shipping documents to the PRMI which accepted delivery of the
same. To enable PRMI to take delivery of the machineries, it executed, by prior arrangement with the
Prudential Bank, a trust receipt which was signed by Anacleto R. Chi in his capacity as President of
PRMI company.
At the back of the trust receipt was printed a form to be accomplished by 2 sureties who, by the very
terms and conditions thereof, were to be jointly and severally liable to the Prudential Bank should the
PRMI fail to pay the total amount or any portion of the drafts issued by Nissho and paid for by
Prudential Bank. . PRMI was able to take delivery of the textile machineries and installed the same at
its factory site. Chi argued that presentment for acceptance was necessary to make PRMI liable.
The trial court ruled that that presentment for acceptance was an indispensable requisite for Philippine
Rayons liability on the drafts to attach.
Whether or not presentment for acceptance was needed in order for PRMI to be liable under the draft.
Presentment for acceptance is defined as the production of a bill of exchange to a drawee for
acceptance. Acceptance, however, was not even necessary in the first place because the drafts which
were eventually issued were sight drafts. Even if these were not sight drafts, thereby necessitating
acceptance, it would be the Bank (Bank of America) and not Philippine Rayon which had to
accept the same for the latter was not the drawee.
The trial court and the public respondent, therefore, erred in ruling that presentment for acceptance was
an indispensable requisite for Philippine Rayons liability on the drafts to attach. Contrary to both courts
pronouncements, Philippine Rayon immediately became liable upon Bank of Americas payment on the
letter of credit. Such is the essence of the letter of credit issued by the petitioner. A different conclusion
would violate the principle upon which commercial letters of credit are founded because in such a case,
both the beneficiary and the issuer, Nissho Company Ltd. and the petitioner, respectively, would be
placed at the mercy of Philippine Rayon even if the latter had already received the imported machinery
and the petitioner had fully paid for it.
#60 WONG vs CA
G.R. No. 117857 Feb 2 2001
Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of calendars. However, petitioner had
a history of unremitted collections. Hence, petitioners customers were required to issue postdated
checks before LPI would accept their purchase orders.
In early December 1985, Wong issued 6 postdated checks totaling P18, 025, all dated December 30,
1985 and drawn payable to the order of LPI. The checks were drawn against Allied Banking
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The checks were initially intended to guarantee the calendar orders of customers who failed to issue
post-dated checks. However, following company policy, LPI refused to accept the checks as
guarantees. Instead, the parties agreed to apply the checks to the payment of petitioners unremitted
collections for 1984 amounting to P18,077.07. LPI waived the P52.07 difference.
Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and promised
to replace them within 30 days. However, petitioner reneged on his promise. Hence, on June 5, 1986,
LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks were
returned for the reason account closed.
On June 20, 1986, complainant notified the petitioner of the dishonor. However, petitioner failed to
make arrangements for payment within 5 banking days.
On November 6, 1987, petitioner was charged with 3 counts of violation of B.P. Blg. 22 under 3
separate Informations for the 3 checks amounting to P5,500.00, P3,375.00, and P6,410.00.
Petitioner was similarly charged in Criminal Case No. 12057 for ABC Check No. 660143463 in the
amount of P3,375.00, and in Criminal Case No. 12058 for ABC Check No. 660143464 for P6,410.00.
Both cases were raffled to the same trial court.
The version of the defense is that petitioner issued the 6 checks to guarantee the 1985 calendar
bookings of his customers, not as payment for any obligation. In fact, the face value of the 6 postdated
checks tallied with the total amount of the calendar orders of the 6 customers of the accused. Although
these customers had already paid their respective orders, petitioner claimed LPI did not return the said
checks to him.
On August 30, 1990, the trial court found petitioner guilty beyond reasonable doubt with 3 counts of
Violations of Sec.1 of B.P. Blg. 22.
Petitioner appealed his conviction to the CA. However, it affirmed the trial courts decision in toto on
October 28, 1994.
1. Whether the checks were issued merely as guarantee or for payment of petitioners unremitted
2. WON the prosecution was able to establish beyond reasonable doubt all the elements of the offense
penalized under B.P. Blg. 22.
3. WON petitioners penalty may be modified to only payment of fine.
1. This is a factual issue involving as it does the credibility of witnesses. Said factual issue has been
settled by the trial court and CA. Its findings of fact are generally conclusive, and there is no cogent
reason to depart from such. In cases elevated from the CA, the SCs review is confined to alleged
errors of law. Absent any showing that the findings by the respondent court are entirely devoid of any
substantiation on record, the same must stand. The lack of accounting between the parties is not the
issue in this case. As repeatedly held, the SC is not a trier of facts.
2. There are 2 ways of violating B.P. Blg. 22:
(a) by making or drawing and issuing a check to apply on account or for value knowing at the time of
issue that the check is not sufficiently funded; and
(b) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep
sufficient funds therein, or credit with, said bank to cover the full amount of the check when presented
to the drawee bank within a period of 90 days.
The elements of B.P. Blg. 22 under the 1st situation, pertinent to the present case, are:
(a) The making, drawing & issuance of any check to apply for account or for value;
(b) The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient
funds in or credit with the drawee bank for the payment of such check in full upon its presentment; and
(c) The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or
dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop
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As to the 1st element, the RTC & CA have both ruled that the checks were in payment for unremitted
collections, and not as guarantee. What B.P. Blg. 22 punishes is the issuance of a bouncing check, and
not the purpose for which it was issued nor the terms and conditions relating to its issuance.
As to the 2nd element, B.P. Blg. 22 creates a presumption juris tantum that the 2nd element prima facie
exists when the 1st & 3rd elements of the offense are present. Thus, the makers knowledge is
presumed from the dishonor of the check for insufficiency of funds.
An essential element of the offense is knowledge on the part of the maker/drawer of the check of the
insufficiency of his funds in, or credit with, the bank to cover the check upon its presentment. Since this
involves a state of mind difficult to establish, the statute itself creates a prima facie presumption of such
knowledge where payment of the check is refused by the drawee because of insufficient funds in, or
credit with, such bank when presented within 90 days from the date of the check. The statute provides
that such presumption shall not arise if within 5 banking days from receipt of the notice of dishonor, the
maker/drawer makes arrangements for payment of the check by the bank or pays the holder the
amount of the check.
Nowhere in the said provision does the law require a maker to maintain funds in his bank account for
only 90 days. Rather, the clear import of the law is to establish a prima facie presumption of knowledge
of such insufficiency of funds under the following conditions: (1) presentment within 90 days from date
of the check, and (2) the dishonor of the check & failure of the maker to make arrangements for
payment in full within 5 banking days after notice thereof. That the check must be deposited within 90
days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to
arise. It is not an element of the offense. Neither does it discharge petitioner from his duty to maintain
sufficient funds in the account within a reasonable time thereof. Under Sec. 186 of the Negotiable
Instruments Law, 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 6 months (180 days).
Private respondent herein deposited the checks 157 days after the date of the check. Hence said
checks cannot be considered stale. Only the presumption of knowledge of insufficiency of funds was
lost, but such knowledge could still be proven by direct or circumstantial evidence. As found by the
RTC, private respondent did not deposit the checks because of the reassurance of petitioner that he
would issue new checks. Upon his failure to do so, LPI was constrained to deposit the said checks.
After the checks were dishonored, petitioner was duly notified of such fact but failed to make
arrangements for full payment within 5 banking days thereof. There is, on record, sufficient evidence
that petitioner had knowledge of the insufficiency of his funds in or credit with the drawee bank at the
time of issuance of the checks. And despite petitioners insistent plea of innocence, the respondent
court is not in error for affirming his conviction by the trial court for violations of the Bouncing Checks
3. Pursuant to the policy guidelines in Administrative Circular No. 12-2000, which took effect on
November 21, 2000, the penalty imposed on petitioner should now be modified to a fine of not less than
but not more than double the amount of the checks that were dishonored. The penalty imposed on him
is modified so that the sentence of imprisonment is deleted.
GR. No. 141968
February 12, 2001
While it is true that failure to present for payment within a reasonable time will result in the discharge of
the drawer to the extent of the loss caused by the delay, failure to present on time does not totally wipe
out all liability. The original obligation to pay certainly has not been erased.
In order to purchase a car (Nissan Sentra), spouses Gueco obtained a loan from international
Corporate Bank (now Union Bank). They issued a promissory note, payable in monthly installments,
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and chattel mortgage as security for the loan. The spouses defaulted in their payment of installments.
Thus, Bank filed a civil action with replevin in MTC. The bank demanded P184, 000.00. But after some
negotiations, a compromise was reached and the amount was lowered to P150, 000.00. Gueco
delivered a managers check amounting to P150,000.00 but the car was not released due to his refusal
to sign the joint Motion to Dismiss. The bank alleges that among the conditions of the compromise was
the Joint Motion to Dismiss. The spouses filed an action for damages against the Bank and by the time
the case was instituted, the check had become stale in the hands of the bank. MTC dismissed the
case filed by the spouses Gueco. RTC reversed and favored Gueco. CA Affirmed in favor of the
Guecos. Hence this case.
Whether or not there is timely presentment for payment.
NO. There is no timely presentment for payment.
It appeared that the check has not been encashed. The delivery of the managers check did not
constitute payment. The original obligation to pay still exists. Indeed, the circumstances that cause the
non-presentment of the check should be considered to determine who should bear the loss. In this
case, ICB held on the check and refused to encash the same because of the controversy surrounding
the signing of the joint motion to dismiss. There is no bad faith or negligence on the part of ICB.
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. A check should be presented for payment within a
reasonable time after its issue. Here, what is involved is a managers check, which is essentially a
banks own check and may be treated as a promissory note with the bank as a maker.
Even assuming the presentment is needed, Section 186 of the Negotiable instruments Law provides
that failure to present within a reasonable time will result discharge ONLY to the extent of LOSS
caused by delay. The Guecos has not proven that they have suffered damage or loss due to the
delay of presentment. The Bank is justified in delaying presentment due to a legal controversy. Still,
such failure to present on time does not wipe out liability. The Spouses Gueco is ordered to pay
P150,000.00 as agreed upon and international Corporate Bank is ordered to release the car.





G.R. No. 101163
January 11, 1993
Two post dated checks amounting to fifty thousand pesos (P50, 000) each was issued by Nora Moulic
to Corazon Victoriano, as a security for pieces of jewellery to be sold on commission. Thereafter,
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Victoriano negotiated he said checks to State Investment House, Inc. The jewellery was return to
Victoriano, when Moulic failed to sell it before the maturity of the checks. However, the checks cannot
be retrieved as they have been negotiated. Before the maturity date Moulic withdrew her funds from the
bank contesting that she incurred no obligation on the checks because the jewellery was never sold
and the checks are negotiated without her knowledge and consent. Upon presentment of for payment,
the checks were dishonored for insufficiency of funds.
Whether or not Moulic can set up against the petitioner the defense that there was failure or absence of
No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for which
they were issued and therefore is not a holder in due course.
Section 119 of NEGOTIOBLE INSTRUMENT LAW provides how an instruments be discharged. Moulic
can only invoke paragraphs c and d as possible grounds for the discharge of the instruments. Since
Moulic failed to get back the possession of the checks as provided by paragraph c, intentional
cancellation of instrument is impossible. As provided by paragraph d, the acts which will discharge a
simple contract of payment of money will discharge the instrument. Correlating Article 1231 of the Civil
Code which enumerates the modes of extinguishing obligation, none of those modes outlined therein is
applicable in the instant case. Thus, Moulic may not unilaterally discharge herself from her liability by
mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal
basis to excuse herself from liability on her check to a holder in due course. Moreover, the fact that the
petitioner failed to give notice of dishonor is of no moment. The need for such notice is not absolute;
there are exceptions provided by Sec 114 of NEGOTIOBLE INSTRUMENT LAW.


#67 SYCIP JR. vs CA

G.R. No. 125059
March 17, 2000
Francisco Sycip agreed to buy a townhouse unit from Francel Realty Corporation (FRC) on an
installment basis. Upon execution of the contract to sell, Sycip issued 48 postdated checks, each on the
amount of P9,304.00 covering 48 monthly installments.
However, upon moving in to his unit, Sycip complained to FRC regarding defects and incomplete
features of the townhouse project. FRC ignored the complaint, and as a result of which Sycip served 2
notarial notices to FRC stating that he was suspending his installment payments on the unit pending
compliance with the project plans and specifications, as approved by the Housing and Land Use
Regulatory Board (HLURB).
Notwithstanding the notarial notices, FRC continued to present the postdated checks for encashment.
Sycip subsequently sent stop payment orders to the bank, and the bank advised Sycip to close his
checking account to avoid paying bank charges every time he made a stop payment order.
Due to the closure of petitioners checking account, the drawee bank dishonored six postdated checks.
FRC filed a complaint against petitioner for violations of BP Blg 22. Both the trial court and the CA
found petitioner guilty of violating Sec 1 of BP Blg 22 in each of the six cases.
Whether or not the petitioner is guilty of violating the Bouncing Checks Law.
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The petitioner is not guilty. Petitioners exercise of a right of the buyer under Article 23 of PD 957 is a
valid defense to the charges against him.
Under the provisions of BP Blg 22, an offense is committed when the following elements are present:
(1) the making, drawing and issuance of any check to apply for account or for value; (2) the knowledge
of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit
with the drawee bank for the payment of such check in full upon its presentment; and (3) the
subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for
the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.
Although the first element of the offense exists, the other elements have not been established beyond
reasonable doubt. The second element involves knowledge on the part of the issuer at the time of the
checks issuance that he did not have enough funds or credit in the bank for payment thereof upon its
presentment. BP Blg 22 creates a presumption juris tantum that the second element prima facie exists
when the first and third elements of the offense are present. But such evidence may be rebutted.
The Court finds from the records no showing that at the time said checks were issued, petitioner had
knowledge that his deposit or credit in the bank would be insufficient to cover them when presented for
Finally, petitioner had a valid cause to order his bank to stop payment. Hence, the third element was
not duly established by the prosecution.
G.R. No. 120639
September 25, 1998

Private respondent, Atty. Ricardo J. Marasigan, was a cardholder of a credit card from petitioner, BPI
Express Card Corporation. He failed to pay his statement of account for October, 1989 amounting to
Php8,987.84. Thereafter, petitioner demanded payment requiring the issuance of a check for
Php15,000.00 which would include his future bills and threatening to suspend respondents credit card.
He issued a check with an amount of Php15,000.00 postdated December 15, 1989. An employee of
petitioner, Tess Lorenzo, received it on November 23, 1989. On November 28, 1989, petitioner sent a
letter to respondent notifying him of the temporary suspension of his credit card and telling him to
refrain from further use of such card to avoid any inconvenience or embarrassment.
There was no evidence that respondent receive the letter before December 8, 1989, the date when his
credit card was dishonored by Caf Adriatico upon presenting the same for payment. Private
respondent then filed a complaint for damages.
1. Whether or not a check operates as payment.
2. Whether or not petitioner had the right to suspend the credit card of private respondent.
3. Whether or not petitioner abused its right under the terms and conditions of the credit card in
canceling the credit card of private respondent thereby justifying the award for damages to the latter.
1. No, a check does not operate as payment.
Well-settled is the rule that a check is not a legal tender. It only acts as a substitute for money but not
money in itself. Thus, the delivery of such an instrument does not by itself operate as payment. The
same is true with postdated checks as in the case at bar. Hence, even if Atty. Marasigan did issue the
required payment of Php15,000.00 in the form of a check, the check is not considered to be a valid
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2. Yes, petitioner had the right to suspend the credit card of private respondent.
Under the terms and conditions of the credit card which was signed by private respondent, any card
with outstanding balances after thirty (30) days from original billing/statement shall automatically be
suspended. Private respondent did not make any payment within thirty (30) days both from his original
billing on September 27, 1989 and October 27, 1989. Hence, as early as October 28, 1989, thirty (30)
days from the non-payment of his billing dated September 27, 1989, petitioner could automatically
suspend his credit card. Nowhere was it indicated in the terms and conditions of the credit card that
there should first be notice send to the cardholder before suspension could be effected.
Anent respondents contention that he did not receive the mail sent by petitioner, the court cannot
entertain the same because under the disputable presumption in evidence, letters duly mailed were
received on the regular course of mail. Private respondent failed to offer evidence to rebut the
presumption and he even admitted receiving the letter during the cross-examination.
3. No, petitioner did not abuse its right in canceling the credit card of respondent thus, the award of
damages is unjustifiable.
As early as October 28, 1989, petitioner could have suspended the credit card of respondent but it did
not do so and even allowed private respondent to use his credit card for several weeks. It further
notified the latter of the impending suspension of the credit card providing special accommodations for
him to settle his obligations. If there was indeed damage to respondent due to the humiliating
experience he had after his credit card was dishonored, it was nevertheless attributable to his own
negligence for failure to settle his accounts in due time. Therefore, the award of damages is clearly
Wherefore, the decision of the Court of Appeals ordering petitioner to pay private respondent
Php100,000.00 as moral damages, Php50,000.00 as exemplary damages and Php20,000.00 as
attorneys fees is set aside. Private respondent is directed to pay his outstanding obligation with
petitioner in the amount of Php14,439.41.





G.R. No. 105188
January 23, 1998
Myron Papa, acting as attorney-in-fact of Angela Butte, allegedly sold a parcel of land in La Loma,
Quezon City to Felix Penarroyo. However, prior to the alleged sale, the land was mortgaged by Butte to
Associated Banking Corporation along with other properties and after the alleged sale but prior to the
propertys release by delivery, Butte died. The Bank refused to release the property despite
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Penarroyos unless and until the other mortgaged properties by Butte have been redeemed and
because of this Penarroyo settled to having the title of the property annotated.
It was later discovered that the mortgage rights of the Bank were transferred to one Tomas Parpana,
administrator of the estate of Ramon Papa Jr. and his since then been collecting rents. Despite
repeated demands of Penarroyo and Valencia, Papa refused to deliver the property which led to a suit
for specific performance. The trial court ruled in favor of Penarroyo and Valencia.
On appeal, Papa averred that the sale of the property was not consummated since the
PCIB check issued by Penarroyo for payment worth Php 40,000.00 was not encashed by him.
However, the CA saw the contrary and that Papa in fact encashed the check by means of a receipt.
On appeal to the SC, Papa cited that according to Art 1249 of the Civil Code, payment of checks only
produce effect once they have been encashed and he insists that he never encashed the check. He
further alleged that if check was encashed, it should have been stamped as such or at least a microfilm
copy. It must be noted that the check was in possession of Papa for ten (10) years from the time
payment was made to him.
Whether or not the check was encashed and can be considered effective as payment
Yes. After more than ten (10) years from the payment in part by cash and in part by check, the
presumption is that the check had been encashed. Granting that Papa had never encashed the check,
his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay. While it is true that the delivery of a check produces
the effect of payment only when it is cashed, pursuant to Article 1249 of the Civil Code, the rule is
otherwise if the debtor (Pearroyo) is prejudiced by the creditors (Papas) unreasonable delay in
presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to
operate as actual payment of the debt or obligation for which it was given.



G.R. No. 141001
May 21, 2009
BA-Finance Corporation (BA-Finance) granted a credit line facility to Miller Offset Press, Inc. (Miller).
Miller discounted and assigned several trade receivables to BA-Finance by executing Deeds of
Assignment in favor of the latter. In consideration of the assignment, BA-Finance issued four checks
payable to the "Order of Miller Offset Press, Inc." with the notation "For Payees Account Only." These
checks were drawn against Bank of America and were deposited by Ching Uy Seng (a.k.a. Robert
Ching), then the corporate secretary of Miller, in a joint bank account under the names of Ching Uy
Seng and Uy Chung Guan Seng, in Associated Citizens Bank (Associated Bank). Associated Bank
stamped the checks with the notation "all prior endorsements and/or lack of endorsements
guaranteed," and sent them through clearing. Bank of America, honored the checks and paid the
proceeds to Associated Bank as the collecting bank.
Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables. Consequently,
BA-Finance filed a Complaint against Miller for collection of the amount which BA-Finance allegedly
paid in consideration of the assignment, plus interest at the rate of 16% per annum and penalty
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charges. Likewise impleaded as party defendants in the collection case were Uy Kiat Chung, Ching Uy
Seng, and Uy Chung Guan Seng.
Miller, Uy Kiat Chung, and Uy Chung Guan Seng filed a Joint Answer with Cross-Claim against Ching
Uy Seng, wherein they denied that (1) they received the amount covered by the four Bank of America
checks, and (2) they authorized their co-defendant Ching Uy Seng to transact business with BAFinance on behalf of Miller. In view thereof, BA-Finance filed an Amended Complaint impleading Bank
of America as additional defendant for allegedly allowing encashment and collection of the checks by
person or persons other than the payee named thereon. Ching Uy Seng, on the other hand, did not file
his Answer to the complaint.
The RTC rendered a Decision against defendant Bank of America to pay plaintiff BA Finance
Corporation the value of the four (4) checks subject matter of this case, with legal interest thereon from
the time of the filing of this complaint until payment is made and attorneys fees corresponding to 15%
of the amount due and to pay the costs of the suit. The CA affirmed the RTC decision but removed
payment of attorney's fees.
Whether or not Bank of America is liable to pay BA-Finance the amount of the four checks.
Yes. The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on
the contract between the bank and its customer (drawer), to pay the check only to the payee or the
payees order.
Among the different types of checks issued by a drawer is the crossed check. The Negotiable
Instruments Law is silent with respect to crossed checks, although the Code of Commerce makes
reference to such instruments. In Bataan Cigar v. Court of Appeals, we enumerated the effects of
crossing a check as follows: (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 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.
In this case, the four checks were drawn by BA-Finance and made payable to the "Order of Miller
Offset Press, Inc." The checks were also crossed and issued "For Payees Account Only." Clearly, the
drawer intended the check for deposit only by Miller Offset Press, Inc. in the latters bank account.
Thus, when a person other than Miller, i.e., Ching Uy Seng, a.k.a. Robert Ching, presented and
deposited the checks in his own personal account (Ching Uy Sengs joint account with Uy Chung Guan
Seng), and the drawee bank, Bank of America, paid the value of the checks and charged BA-Finances
account therefor, the drawee Bank of America is deemed to have violated the instructions of the
drawer, and therefore, is liable for the amount charged to the drawers account.


536 SCRA 615
Best Emporium (in Pagadian City) and its president, Wee Sion Ben, petitioners, purchased fruit juices
from SEMEXCO/ZEST-O Marketing Corporation, respondent, for the period from January to August
1995. Respondent issued petitioners a Charge Invoice in the amount of P104,277.80 which bearing a
condition that all checks shall be payable to SEMEXCO Marketing Corporation only.
Petitioners then issued a check in the sum of P104,277.80 payable to cash. Maloney Sorolla,
respondent corporations sales representative, received the check. Sorolla encashed the check but did
not remit the money to herein respondent.
Upon learning of the delivery of the check to Sorolla, the district sales manager of respondent
corporation, inquired from petitioner Wee Sion Ben why he issued a "pay to cash" check when the
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Charge Invoice states that all payments must be made payable to the order of respondent corporation.
Thereupon, petitioner issued another check to replace the "pay to cash" check. However, when
presented for payment, respondent was informed by the drawee bank that petitioner directed it to "stop
payment" or not to pay the new check.
Consequently, respondent made demands upon petitioners to pay, but to no avail.
Respondent thus filed with the RTC a complaint for sum of money wherein the latter ruled that
petitioners obligation had been extinguished when they delivered the "pay to cash" check to which, the
CA affirmed with modification.
Petitioners motion for reconsideration was also denied.
Whether or not petitioners issuance of the check payable to cash delivered and received by Sorolla
constitutes a valid payment of petitioners obligation to respondent.
Petitioners contention that the Charge Invoice is a contract of adhesion, is unmeritorious. Such
contracts are as binding as ordinary contracts since those who adhere to the contract are in reality free
to reject it entirely and if they adhere, they give their consent.
The Charge Invoice issued by respondent to petitioners clearly states that they shall "make all checks
payable to SEMEXCO Marketing Corporation only." Evidently, both parties in their business transaction
are bound by this term or condition. Clearly then, petitioners issuance of the "pay to cash" check is a
clear violation on their part of the term or condition stipulated in the Charge Invoice.
Records show that it was Sorolla himself who requested them to issue the check payable to cash. This
should have warned them of the possible risk that the check may not reach respondent.
At any rate, when petitioners realized they made a serious mistake in issuing the "pay to cash" check to
Sorolla, they readily issued a second check payable to respondent corporation. Obviously, they
admitted that they violated the condition in the Charge Invoice. Hence, pursuant to Article 1595(1) of
the Civil Code, their obligation to pay the fruit juices delivered to them is not extinguished.

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