Philippine Education Co. vs.

Soriano
L-22405 June 30, 1971
Dizon, J.:

Facts:
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 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. However, The Bank of America received the money order and
deposited it to the appellants account upon clearance. Mauricio Soriano, Chief of the Money Order
Division notified the Bank of America that the money order deposited had been found to have been
irregularly issued and that, the amount it represented had been deducted from the banks clearing
account. The Bank of America debited appellants account with the same account and give notice by
mean of debit memo.

Issue:
Whether or not the postal money order in question is a negotiable instrument

Held:
No. It is not disputed that the Philippine postal statutes were patterned after similar statutes in force
in United States. The Weight of authority in the United States is that postal money orders are not
negotiable instruments, the reason being that in establishing and operating a postal money order
system, the government is not engaged in commercial transactions but merely exercises a governmental
power for the public benefit. Moreover, some of the restrictions imposed upon money orders by postal
laws and regulations are inconsistent with the character of negotiable instruments. For instance, such
laws and regulations usually provide for not more than one endorsement; payment of money orders may
be withheld under a variety of circumstances.
Caltext Philippines Inc vs CA

FACTS:
Security Bank and Trust Company (Security Bank), a commercial banking institution, through its
Sucat Branch issued 280 certificates of time deposit (CTDs) in favor of Angel dela Cruz who deposited
with Security Bank the total amount of P1,120,000
Angel delivered the CTDs to Caltex for his purchase of fuel products
March 18, 1982: Angel informed Mr. Tiangco, the Sucat Branch Manager that he lost all CTDs,
submitted the required Affidavit of Loss and received the replacement
March 25, 1982: Angel dela Cruz negotiated and obtained a loan from Security Bank in the
amount of P875,000 and executed a notarized Deed of Assignment of Time Deposit
November, 1982: Mr. Aranas, Credit Manager of Caltex went to the Sucat branch to verify the
CTDs declared lost by Angel
November 26, 1982: Security Bank received a letter from Caltex formally informing it of its
possession of the CTDs in question and of its decision to pre-terminate the same.
December 8, 1982: Caltex was requested by Security Bank to furnish:
a copy of the document evidencing the guarantee agreement with Mr. Angel dela Cruz
the details of Mr. Angel's obligation against which Caltex proposed to apply the time
deposits
Security Bank rejected Caltex demand for payment bec. it failed to furnish a copy of its
agreement w/ Angel
April 1983, the loan of Angel dela Cruz with Security Bank matured
August 5, 1983: CTD were set-off w/ the matured loan
Caltex filed a complaint praying the bank to pay 1,120,000 plus 16% interest
CA affirmed RTC to dismiss complaint

ISSUE:
1. W/N the CTDs are negotiable
2. W/N Caltex as holder in due course can rightfully recover on the CTDs
HELD:
Petition is Denied and appealed decision is affirmed.
1. YES.
Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites
for an instrument to become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and -check
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein
with reasonable certainty.
The documents provide that the amounts deposited shall be repayable to the depositor
depositor = bearer
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
negotiability or non-negotiability of an instrument is determined from the writing, that is, from
the face of the instrument itself
2. NO.
although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and
agreement between it and De la Cruz, as ultimately ascertained, requires both delivery and
indorsement
CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel
products
There was no negotiation in the sense of a transfer of the legal title to the CTDs in favor
of petitioner in which situation, for obvious reasons, mere delivery of the bearer CTDs would have
sufficed.
Where the holder has a lien on the instrument arising from contract, he is deemed a holder for
value to the extent of his lien.
As such holder of collateral security, he would be a pledgee but the requirements
therefor and the effects thereof, not being provided for by the Negotiable Instruments Law, shall be
governed by the Civil Code provisions on pledge of incorporeal rights:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged. The
instrument proving the right pledged shall be delivered to the creditor, and if negotiable, must be
indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the thing pledged and
the date of the pledge do not appear in a public instrument.
Art. 1625. An assignment of credit, right or action shall produce no effect as against third persons, unless
it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the
assignment involves real property.

Metropolitan Bank & Trust Company vs. Court of Appeals

G.R. No. 88866 February, 18, 1991

Cruz, J.:

Facts:

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.

Issue:

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

 Held:

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 deposit.

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.

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: 1 st, 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.

Sesbreno vs. Court of Appeals

GR 89252, 24 May 1993

FACTS:
Petitioner Sesbreno 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 Sesbreno
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
Sesbreno; but Sesbreno 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 Sesbreno was unable to collect his investment and
interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank. Delta Motors
contents 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 Note.

ISSUE:
Whether the non-negotiability of a promissory note prevents its assignment.

RULING:
A negotiable instrument, instead of being negotiated, may also be assigned or transferred. The legal
consequences of negotiation and assignment of the instrument are different. A non-negotiable
instrument may not be negotiated but may be assigned or transferred, absent an express prohibition
against assignment or transfer written in the face of the instrument. The subject promissory note, while
marked "non-negotiable," was not at the same time stamped "non-transferable" or "non-assignable." It
contained no stipulation which prohibited Philfinance from assigning or transferring such note, in whole
or in part.

**A non-negotiable instrument may not be negotiated but may be assigned or transferred, absent an
express prohibition against assignment or transfer written on the face of the instrument.

Firestone Tire & rubber Co. vs. Court of Appeals

GR No. 113236 March 5, 2001

Quisumbing, J.:

Facts:

Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon Development
Bank, the latter authorized and allowed withdrawals of funds though the medium of special withdrawal
slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit with FirestoneTire & Rubber
Company, in payment Fojas-Arca delivered a 6 special withdrawal slips. In turn, these were deposited by
the Firsestone to its bank account in 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.

Issue:

Whether or not the acceptance and payment of the special withdrawal slips without the
presentation of the depositors passbook thereby giving the impression that it is a negotiable instrument
like a check.

Held:

No. Withdrawal slips in question were non negotiable instrument. Hence, the rules governing the
giving immediate notice of dishonor of negotiable instrument do not apply. 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 character.
Ang Tek Lian vs. Court of Appeals

L-2516 September, 1950

Bengzon, J.:

Facts:

Ang Tek Lian knowing that he had no funds therefor, drew a check upon China Banking
Corporation payable to the order of cash. He delivered it toLee Hua Hong in exchange for money. The
check was presented by Lee Hua hong to the drawee bank for payment, but it w3as dishonored for
insufficiency of funds. With this, Ang Tek Lian was convicted of estafa.

Issue:

Whether or not the check issued by Ang Tek Lian that is payable to the order to cash and not
have been indorsed by Ang Tek Lian, making him not guilty for the crime of estafa.

Held:

No.Under Sec. 9 of NIL a check drawn payable to the order of cash is a check payable to bearer
and the bank may pay it to the person presenting it for payment without the drawers indorsement.
However, if the bank is not sure of the bearers identity or financial solvency, it has the right to demand
identification or assurance against possible complication, such as forgery of drawers signature, loss of
the check by the rightful owner, raising of the amount payable, etc. But where the bank is satisfied of the
identity or economic standing of the bearer who tenders the check for collection, it will pay the
instrument without further question; and it would incur no liability to the drawer in thus acting.