RPB V.

CA & CANLAS
GR No. 93073 | December 21,
1992
FACTS
Private respondent Fermin Canlas
was the Treasurer of the Worldwide
Garment Manufacturing, Inc. By
virtue of a Board resolution Canlas
together with Shozo Yamaguchi, were
authorized to apply for credit facilities
with the petitioner Republic Planters
Bank. Petitioner bank issued nine
promissory notes and on its right
bottom
margin
appeared
the
signatures of Shozo Yamaguchi and
Fermin Canlas above their printed
names with the phrase and in his
personal capacity typewritten below.
Petitioner bank filed a complaint for
the recovery of sums of money
covered among others, by the nine
promissory notes. Fermin Canlas, in
his answer, alleged that he issued said
promissory
notes
in
behalf
of
Worldwide Garment Manufacturing,
Inc., and the promissory notes were in
blank, the typewritten entries did not
appear therein prior to the time he
affixed his signature.
ISSUE
Whether Fermin Canlas is solidarily
liable with the other defendants on
each of the promissory notes.
RULING
Private respondent Fermin Canlas is
solidarily liable on each of the
promissory
notes
bearing
his
signature.
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.
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. 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. A
joint and several note is one in which
the makers bind themselves both
jointly and individually to the payee so
that all may be sued together for its
enforcement, or the creditor may
select one or more as the object of the
suit
Private respondent's contention that
the promissory notes were delivered
to him in blank for his signature
because it is incomplete, is not
tenable.
Proof that the notes were signed in
blank was only the self-serving
testimony of private respondent
Fermin Canlas. It is a 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
borrowers-debtors 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 Negotiable
Instruments Law is not applicable.
.
PINEDA V. DELA RAMA
GR No. L-31831 | April 28, 1983

in good faith. Corollary to and in

furtherance of this principle, Section
24 of the Negotiable Instruments Law
(Act No. 2031) explicitly provides that
every
negotiable
instrument
is
deemed prima facie to have been
issued for a valuable consideration,
and every person whose signature
appears thereon to have become a
party thereto for value."

FACTS

RULING

Dela Rama is a practicing lawyer

whose services were retained by
Pineda for the purpose of making
representations with the chairman
and general manager of the National
Rice
and
Corn
Administration
(NARIC) to stop or delay the
institution of criminal charges against
Pineda.

No. Pineda is not liable. The Court of

Appeals' reliance on the above
provision
is
misplaced.
The
presumption
that
a
negotiable
instrument is issued for a valuable
consideration is only prima facie. It
can be rebutted by proof to the
contrary.

According to Dela Rama, Pineda had

used up all his funds to buy a big
hacienda in Mindoro and, therefore,
borrowed the P9,300.00 subject of his
complaint for collection.
The CFI ruled in favor of Pineda
believing that the evidence of Pineda
that he signed the promissory note for
P9,300.00 only because Dela Rama
had told him that this amount had
already been advanced to grease the
palms of the Chairman and General
Manager of NARIC in order to save
Pineda from criminal prosecution.
The CA reversed the lower courts
ruling declaring that obligations
arising from contracts have the force
of law between the contracting
parties and should be complied with

ISSUE
Whether Pineda is liable on the
promissory note amounting to
P9,300.00

The terms of the note sustain the

version of Pineda that he signed the
P9,300.00 promissory note because
he believed Dela Rama's story that
these amounts had already been
advanced by Dela Rama and given as
gifts for NARIC officials.
Considering the foregoing, we agree
with the trial court that the
promissory note was executed for an
illegal consideration.
Whether or not the supposed cash
advances reached their destination is
of no moment. The consideration for
the promissory noteto influence
public officers in the performance of
their dutiesis contrary to law and
public policy. The promissory note is
void ab initio and no cause of action

for the collection cases can arise from

it.
Banco Atlantico v. Auditor General
GR No. L-33549 | January 31, 1978
FACTS: Banco Atlantico is doing
business in Madrid Spain. Virginia
Boncan, Finance Officer in the
Philippine
Embassy
in
Madrid,
negotiated with Banco Atlantico a
Philippine embassy check signed by
Luis M. Gonzales, its ambassador and
by said Virginia Boncan in the sum of
US10,109.10 payable to Azucena Pace
and drawn against the Philippine
National Bank branch in New York
USA. The check was endorsed by
Azucena Pace and Virginia Boncan.
Banco Atlantio paid the full amount
without
clearing
the
check.
Subsequently, two other checks was
negotiated to Banco Atlantico, it paid
the
corresponding
amounts
of
US35,000.75 and US90,000.00 to
Virginia Boncan without clearing the
check with the drawee bank.
Upon presentment of Banco Atlantico,
the drawee bank dishonored the
checks by non-acceptance on the
ground that the drawer had ordered
payments to be stopped. Upon receipt
of the notice of dishonor, the
collecting bank of the petitioner sent
a notice of protest with respect to the
checks in question. Thus, they filed a
money claim with the Auditor
General.
The
claimant
Banco
Atlantico
contended that it has every right to
recover from the Embassy as drawer
of the checks because it is a holder in
due course.
ISSUE: Whether Banco Atlantico can
recover from the Philippine Embassy
the corresponding amount of the
checks in question.

RULING: The record shows that the

check was issued for the sum of
US109.10 for the payment of said
payees salary and the other check in
the
amount
of
US75.00
in
reimbursement of Virginia Boncans
living quarters allowance. There is
also a showing that the US90,000.00
check was payable on demand but
Boncan asked that the same be not
presented for collection until a later
date, Banco Atlantico should have
been put on guard that there was
something wrong with the check. The
fact that the amount involved was
quite big and the payees request that
it be paid on a later date was proof of
a glaring infirmity or defect in the
instrument.
Therefore,
Banco
Atlantico was not a holder in due
course because it had knowledge of
the infirmity or defect of the check
The petitioner paid the amounts of the
three checks in question to Boncan
without previously clearing the said
checks with the drawee bank. This is
contrary to normal or ordinary
banking practice specially so where
the drawee bank is a foreign bank and
the amounts involved were large. The
drawer of the aforementioned checks
was not even the client of Banco
Atlantico. There is a showing that
Boncan has a special relationship with
the employees and chiefs of the
petitioner that it disregarded the
elementary principles that should
attend banking transactions.
The Philippine embassy in Madrid, as
drawer, cannot be held liable. It is
apparent that the said checks were
altered
fraudulently
by
Virginia
Boncan as to their amounts and,
therefore, wholly inoperative. No
right of payment thereof against any
party thereto could have been
acquired by the petitioner.

GONZALES V. PCIB
GR No. 180257 | February 23,
2011
FACTS
Gonzales was a client of PCIB for 15
years, for this reason PCIB granted a
credit line to Gonzales through the
execution of Credit-On-Hand Loan
Agreement (COHLA), in which the
aggregate amount of the accounts of
Gonzales with PCIB served as
collateral for and his availment limit
under the credit line. He also had a
Foreign Currency Deposit (FCD) with
PCIB.
Subsequently, Gonzales & his wife
obtained a loan, and another loan was
obtained by spouses Panlilio and
Gonzales from PCIB. These were
covered by three promissory notes.
Notably,
the
promissory
notes
specified, among others, the solidary
liability of Gonzales and the spouses
Panlilio for the payment of the loans.
However, it was the spouses Panlilio
who received the loan proceeds. Sps.
Panlilio were the ones paying the
interest dues of the loan through
automatic debiting, however, started
to be in default of such obligations.
In the meantime, Gonzales issued a
check in favor of Rene Unson.
However, upon presentment for
payment by Unson of said check, it
was dishonored by PCIB due to the
termination by PCIB of the credit line
under COHLA for the unpaid periodic
interest dues from the loans of
Gonzales and the spouses Panlilio.
PCIB likewise froze the FCD account
of Gonzales.
As a result of the damages cause to
Gonzales, he filed a case against PCIB
with the RTC, on account of the

alleged unjust dishonor of the check

issued in favor of Unson.
ISSUE
I. Whether Gonzales is liable for the
three promissory notes he made with
the sps. Panlilio.
II. Whether PCIB properly dishonored
the check of Gonzales dawn against
the COHLA he had with the bank.
RULING
Clearly, Gonzales is liable for the
loans
covered
by
the
above
promissory notes. Gonzales admitted
that he is an accommodation party. In
his testimony, Gonzales admitted that
he merely accommodated the spouses
Panlilio. As an accommodation party,
Gonzales is solidarily liable with the
spouses Panlilio for the loans.
An
accommodation
party
under
Section
29
of
the
Negotiable
Instruments Law, is a person "who
has signed the instrument as maker,
drawer, acceptor, or indorser, without
receiving value therefor, and for the
purpose of lending his name to some
other person.
Thus being an accommodation party
does not exonerate Gonzales from
liability on the three promissory
notes.

WESTMONT BANK V. EUGENE

ONG
GR No. 132560 | January 30, 2002
FACTS

Respondent Eugene Ong has a

current
account
with
petitioner
Westmont Bank. Ong sold shares of
stocks through Island Securities
Corporation,
as
payment
Island
Securities purchased two Pacific
Banking Corps managers checks,
both were issued in the name of
Eugene Ong as payee. Before Ong
could get hold of the checks, his
friend Paciano Tanlimco got hold of
them, forged Ongs signature and
deposited these with petitioner, where
Tanlimco was also a depositor. Even
though Ongs specimen signature was
on file, petitioner accepted and
credited both checks to the account of
Tanlimco,
without
verifying
the
signature indorsements appearing at
the back thereof. Tanlimco then
immediately withdrew the money and
absconded.
Ong demanded in his complaint that
petitioner pay the value of the two
checks from the bank on whose gross
negligence he imputed his loss.
Petitioner argues, respondent cannot
sue petitioner because under Section
51 of the Negotiable Instruments Law
it is only when a person becomes a
holder of a negotiable instrument can
he sue in his own name. Conversely,
prior to his becoming a holder, he had
no right or cause of action under such
negotiable instrument.
ISSUE
Whether respondent Ong has a cause
of action against petitioner Westmont
Bank
RULING

The essential elements of a cause of

action are: (a) a legal right or rights
of the plaintiff, (b) a correlative
obligation of the defendant, and (c) an
act or omission of the defendant in
violation
of
said
legal
right.
The complaint filed before the trial
court expressly alleged respondents
right as payee of the managers
checks to receive the amount
involved, petitioners correlative duty
as collecting bank to ensure that the
amount gets to the rightful payee or
his order, and a breach of that duty
because of a blatant act of negligence
on the part of petitioner which
violated respondents rights.
Since the signature of the payee, in
the case at bar, was forged to make it
appear that he had made an
indorsement in favor of the forger,
such signature should be deemed as
inoperative
and
ineffectual.
Petitioner, as the collecting bank,
grossly erred in making payment by
virtue of said forged signature. The
payee, herein respondent, should
therefore be allowed to recover from
the
collecting
bank.
The collecting bank is liable to the
payee and must bear the loss because
it is its legal duty to ascertain that the
payees endorsement was genuine
before cashing the check. As a
general rule, a bank or corporation
who has obtained possession of a
check upon an unauthorized or forged
indorsement of the payees signature
and who collects the amount of the
check from the drawee, is liable for
the proceeds thereof to the payee or
other owner, notwithstanding that the
amount has been paid to the person
from whom the check was obtained.