G.R. No.

184458, January 14, 2015

RODRIGO RIVERA, Petitioner, v. SPOUSES SALVADOR CHUA AND S. VIOLETA

CHUA, Respondents.

[G.R. NO. 184472]

SPS. SALVADOR CHUA AND VIOLETA S. CHUA, Petitioners, v. RODRIGO RIVERA, Respondent.

Facts:
The parties were friends of long standing having known each other since 1973: Rivera and Salvador
are kumpadres. On 24 February 1995, Rivera obtained a loan from the Spouses Chua. Rivera issued
a promissory note where it is agreed and understood that failure on Riveras part to pay the amount of
(P120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995, he will pay the sum
equivalent to FIVE PERCENT (5%) interest monthly from the date of default until the entire obligation
is fully paid for. And if the note be referred to a lawyer for collection, Rivera will pay the further sum
equivalent to twenty percent (20%) of the total amount due and payable as and for attorneys fees
which in no case shall be less than P5,000.00 and to pay in addition the cost of suit and other
incidental litigation expense.

In October 1998, almost three years from the date of payment stipulated in the promissory note,
Rivera, as partial payment for the loan, issued and delivered to the Spouses Chua, as payee, a check
numbered 012467, dated 30 December 1998, drawn against Riveras current account with the
Philippine Commercial International Bank (PCIB) in the amount of P25,000.00.

On 21 December 1998, the Spouses Chua received another check presumably issued by Rivera,
likewise drawn against Riveras PCIB current account, numbered 013224, duly signed and dated, but
blank as to payee and amount.

Upon presentment for payment, the two checks were dishonored for the reason account closed.
Rivera claimed forgery of the subject Promissory Note and denied his indebtedness thereunder.Upon
order of the MeTC and after a thorough study, examination, and comparison of the signature on the
questioned document (Promissory Note) and the specimen signatures on the documents it was
concluded that the questioned signature appearing in the Promissory Note and the specimen
signatures of [Rivera] appearing on the other documents submitted were written by one and the same
person. After trial, the MeTC ruled in favor of the Spouses Chua On appeal, the Regional Trial Court
affirmed the Decision of the MeTC. Both trial courts found the Promissory Note as authentic and
validly bore the signature of Rivera.

The Court of Appeals affirmed Riveras liability under the Promissory Note

Issue:

WHETHER OR NOT APPLYING THE PROVISIONS OF THE NEGOTIABLE INSTRUMENTS LAW

IS PROPER

Ruling:
Rivera argues that even assuming the validity of the Promissory Note, demand was still necessary in
order to charge him liable thereunder. Rivera argues that it was grave error on the part of the
appellate court to apply Section 70 of the Negotiable Instruments Law
(NIL).22chanRoblesvirtualLawlibrary

The court agrees that the subject promissory note is not a negotiable instrument and the provisions of
the NIL do not apply to this case. Section 1 of the NIL requires the concurrence of the following
elements to be a negotiable instrument:chanrob

(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
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

On the other hand, Section 184 of the NIL defines what negotiable promissory note
is:chanroblesvirtuallawlibrary

SECTION 184. Promissory Note, Defined. A negotiable promissory note within the
meaning of this Act is an unconditional promise in writing made by one person to
another, signed by the maker, engaging to pay on demand, or at a fixed or determinable
future time, a sum certain in money to order or to bearer. Where a note is drawn to the
makers own order, it is not complete until indorsed by him.

The Promissory Note in this case is made out to specific persons, herein respondents, the Spouses
Chua, and not to order or to bearer, or to the order of the Spouses Chua as payees.

However, even if Riveras Promissory Note is not a negotiable instrument and therefore outside the
coverage of Section 70 of the NIL which provides that presentment for payment is not necessary to
charge the person liable on the instrument, Rivera is still liable under the terms of the Promissory
Note that he issued.

G.R. No. 101163 January 11, 1993

STATE INVESTMENT HOUSE, INC., petitioner,

vs.
COURT OF APPEALS and NORA B. MOULIC, respondents.

Facts:

Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on
commission, two (2) post-dated Equitable Banking Corporation checks in the amount of Fifty
Thousand Pesos (P50,000.00) each, one dated 30 August 1979 and the other, 30 September 1979.
Thereafter, the payee negotiated the checks to petitioner State Investment House. Inc. (STATE).
MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the
checks. The checks, however, could no longer be retrieved as they had already been negotiated.
Consequently, before their maturity dates, MOULIC withdrew her funds from the drawee bank.

Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20
December 1979, STATE allegedly notified MOULIC of the dishonor of the checks and requested that
it be paid in cash instead, although MOULIC avers that no such notice was given her.

On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and
expenses of litigation.

In her Answer, MOULIC contends that she incurred no obligation on the checks because the jewelry
was never sold and the checks were negotiated without her knowledge and consent.

On 26 May 1988, the trial court dismissed the Complaint. The appellate court affirmed the trial court
on the ground that the Notice of Dishonor to MOULIC was made beyond the period prescribed by the
Negotiable Instruments Law.

Issue:

Whether or not the checks are negotiable and STATE was a holder in due course

Ruling:

The negotiability of the checks is not in dispute. Indubitably, they were negotiable.

In this regard, Sec. 52 of the Negotiable Instruments Law provides

Sec. 52. What constitutes a holder in due course. A holder in due course is a holder
who has taken the instrument under the following conditions: (a) That it is complete and
regular upon its face; (b) That he became the holder of it before it was overdue, and
without notice that it was previously dishonored, if such was the fact; (c) That he took it
in good faith and for value; (d) That at the time it was negotiated to him he had no notice
of any infirmity in the instrument or defect in the title of the person negotiating it.

Culled from the foregoing, a prima facie presumption exists that the holder of a negotiable instrument
is a holder in due course.

The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular:
(b) petitioner bought these checks from the payee, Corazon Victoriano, before their due dates; 3 (c)
petitioner took these checks in good faith and for value, albeit at a discounted price; and, (d)
petitioner was never informed nor made aware that these checks were merely issued to payee as
security and not for value.

Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free from
any defect of title of prior parties, and from defenses available to prior parties among themselves;
STATE may, therefore, enforce full payment of the checks.

.MOULIC can only invoke this defense against STATE if it was privy to the purpose for which they
were issued and therefore is not a holder in due course.
That the post-dated checks were merely issued as security is not a ground for the discharge of the
instrument as against a holder in due course.

Sec. 119. Instrument; how discharged. A negotiable instrument is discharged: (a) By

payment in due course by or on behalf of the principal debtor; (b) By payment in due
course by the party accommodated, where the instrument is made or accepted for his
accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any
other act which will discharge a simple contract for the payment of money; (e) When the
principal debtor becomes the holder of the instrument at or after maturity in his own
right.

Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of
the instrument. The act of destroying the instrument must also be made by the holder of the
instrument intentionally. Since MOULIC failed to get back possession of the post-dated checks, the
intentional cancellation of the said checks is altogether impossible.

Again, none of the modes outlined therein is applicable in the instant case as Sec. 119 contemplates
of a situation where the holder of the instrument is the creditor while its drawer is the debtor. In the
present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time the
jewelry was returned.

Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the mere
expediency of withdrawing her funds from the drawee bank.

Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. The
need for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable
Instruments Law.

The drawing and negotiation of a check have certain effects aside from the transfer of title or the
incurring of liability in regard to the instrument by the transferor. The holder who takes the negotiated
paper makes a contract with the parties on the face of the instrument. There is an implied
representation that funds or credit are available for the payment of the instrument in the bank upon
which it is drawn. Consequently, the withdrawal of the money from the drawee bank to avoid liability
on the checks cannot prejudice the rights of holders in due course. In the instant case, such
withdrawal renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks.

Under the facts of this case, STATE could not expect payment as MOULIC left no funds with the
drawee bank to meet her obligation on the checks, 11 so that Notice of Dishonor would be futile.

In fine, MOULIC, as drawer, is liable for the value of the checks she issued to the holder in due
course, STATE, without prejudice to any action for recompense she may pursue against the
VICTORIANOs as Third-Party Defendants who had already been declared as in default.

G.R. No. 88866 February 18, 1991

METROPOLITAN BANK & TRUST COMPANY, petitioner,

vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO,
MAGNO CASTILLO and GLORIA CASTILLO, respondents.
Facts:

A certain Eduardo Gomez opened an account with Golden Savings and deposited over a period of
two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the
Philippine Fish Marketing Authority and purportedly signed by its General Manager and
countersigned by its Auditor. Six of these were directly payable to Gomez while the others appeared
to have been indorsed by their respective payees, followed by Gomez as second indorser. 1

All these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and
deposited to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro.

On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored
by the Bureau of Treasury on July 19, 1979, 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 in the Regional Trial Court of
Mindoro. After trial, judgment was rendered in favor of Golden Savings, which, however, filed a
motion for reconsideration even as Metrobank filed its notice of appeal. On November 4, 1986, the
lower court modified its decision. On appeal to the respondent court, the decision was affirmed.

Issue:

Whether or not the NIL is applicable in treasury warrants

Ruling:

The court ruled that the treasury warrants in question are not negotiable instruments. Clearly stamped
on their face is the word "non-negotiable." Moreover, and this is of equal significance, it is indicated
that they are payable from a particular fund.

The following sections of the Negotiable Instruments Law, especially the underscored parts, are
pertinent:

Sec. 1. Form of negotiable instruments. An instrument to be negotiable

must conform to the following requirements:

(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

(e) Where the instrument is addressed to a drawee, he must be named or

otherwise indicated therein with reasonable certainty.

xxx xxx xxx

 Sec. 3. When promise is unconditional. An unqualified order or promise to pay
is unconditional within the meaning of this Act though coupled with

(a) 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

(b) A statement of the transaction which gives rise to the instrument judgment.

But an order or promise to pay out of a 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
unconditional" and the warrants themselves non-negotiable. There should
be no question that the exception on Section 3 of the Negotiable
Instruments Law is applicable in the case at bar.

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 Section 66 of the Negotiable Instruments Law. The simple reason is
that this law is not applicable to the non-negotiable treasury warrants. The indorsement
was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the
warrants but merely to deposit them with Metrobank for clearing. It was in fact
Metrobank that made the guarantee when it stamped on the back of the warrants: "All
prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust
Co., Calapan Branch."

G.R. No. L-40824 February 23, 1989

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,

vs.
COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO, respondents.

Facts:

Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs Flaviano
Lagasca, executed a deed of mortgage in favor of petitioner Government Service Insurance System
(hereinafter referred to as GSIS) and subsequently, another deed of mortgage in connection with two
loans granted by the latter. A parcel of land covered by Transfer Certificate of Title No. 38989 of the
Register of Deed of Quezon City, co-owned by said mortgagor spouses, was given as security under
the aforesaid two deeds. They also executed a 'promissory note". The Lagasca spouses executed an
instrument denominated "Assumption of Mortgage" under which they obligated themselves to assume
the aforesaid obligation to the GSIS and to secure the release of the mortgage covering that portion
of the land belonging to herein private respondents and which was mortgaged to the GSIS. This
undertaking was not fulfilled. 5

Upon failure of the mortgagors to comply with the conditions of the mortgage, GSIS extrajudicially
foreclosed the mortgage and caused the mortgaged property to be sold at public auction.
Private respondents filed a complaint against the petitioner and the Lagasca spouses in the former
Court of First Instance praying that the extrajudicial foreclosure "made on, their property and all other
documents executed in relation thereto in favor of the Government Service Insurance System" be
declared null and void. The trial court rendered judgment on February 25, 1968 dismissing the
complaint for failure to establish a cause of action.

The Court of Appeals held that the foreclosure of the mortgage is void insofar as it affects the share
of the appellants.

Issue:

Whether or not the provisions of Section 29 of Act No. 2031, otherwise known as the Negotiable
Instruments Law is applicable

Ruling:

The provisions of Section 29 of Act No. 2031, otherwise known as the Negotiable Instruments Law,
provides that an accommodation party is one who has signed an instrument as maker, drawer,
acceptor of indorser without receiving value therefor, but is held liable on the instrument to a holder
for value although the latter knew him to be only an accommodation party.

This approach of both parties appears to be misdirected and their reliance misplaced. The promissory
note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not
negotiable instruments. These documents do not comply with the fourth requisite to be considered as
such under Section 1 of Act No. 2031 because they are neither payable to order nor to bearer. The
note is payable to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act
No. 2031 would not apply; governance shall be afforded, instead, by the provisions of the Civil Code
and special laws on mortgages.

G.R. No. 16454 September 29, 1921

GEORGE A. KAUFFMAN, plaintiff-appellee,
vs.
THE PHILIPPINE NATIONAL BANK, defendant-appellant.
Facts:
George A. Kauffman, was the president of a domestic corporation engaged chiefly in the exportation
of hemp from the Philippine Islands and known as the Philippine Fiber and Produce Company, of
which company the plaintiff apparently held in his own right nearly the entire issue of capital stock. On
February 5, 1918, the board of directors of said company, declared a dividend of P100,000 from its
surplus earnings for the year 1917, of which the plaintiff was entitled to the sum of P98,000. This
amount was accordingly placed to his credit on the books of the company, and so remained until in
October of the same year when an unsuccessful effort was made to transmit the whole, or a greater
part thereof, to the plaintiff in New York City.
In this connection it appears that on October 9, 1918, George B. Wicks, treasurer of the Philippine
Fiber and Produce Company, presented himself in the exchange department of the Philippine
National Bank in Manila and requested that a telegraphic transfer of $45,000 should be made to the
plaintiff in New York City, upon account of the Philippine Fiber and Produce Company. He was
informed that the total cost of said transfer, including exchange and cost of message, would be
P90,355.50. Accordingly, Wicks, as treasurer of the Philippine Fiber and Produce Company,
thereupon drew and delivered a check for that amount on the Philippine National Bank; and the same
was accepted by the officer selling the exchange in payment of the transfer in question.
Upon receiving this telegraphic message, the bank's representative in New York sent a cable
message in reply suggesting the advisability of withholding this money from Kauffman, in view of his
reluctance to accept certain bills of the Philippine Fiber and Produce Company. The Philippine
National Bank acquiesced in this and on October 11 dispatched to its New York agency another
message to withhold the Kauffman payment as suggested.
Meanwhile Wicks, the treasurer of the Philippine Fiber and Produce Company, cabled to Kauffman in
New York, advising him that $45,000 had been placed to his credit in the New York agency of the
Philippine National Bank; and in response to this advice Kauffman presented himself at the office of
the Philippine National Bank in New York City on October 15, 1918, and demanded the money. By
this time, however, the message from the Philippine National Bank of October 11, directing the
withholding of payment had been received in New York, and payment was therefore refused.
Kauffman instituted the present action in the Court of First Instance of the to recover said sum and
judgment having been there entered favorably to the plaintiff.
Issue:
Whether or not the provisions of the Negotiable Instruments Law can come into operation
Ruling:
The provisions of the Negotiable Instruments Law 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. There was an order transmitted by the defendant
bank to its New York branch, for the payment of a specified sum of money to George A. Kauffman.
But this order was not made payable "to order or "to bearer," as required in subsection (d) of that Act;
and inasmuch as it never left the possession of the bank, or its representative in New York City, there
was no delivery in the sense intended in section 16 of the same Law. In this connection it is
unnecessary to point out that the official receipt delivered by the bank to the purchaser of the
telegraphic order, and already set out above, cannot itself be viewed in the light of a negotiable
instrument, although it affords complete proof of the obligation actually assumed by the bank.
In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is clear
enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the
plaintiff in New York City is a stipulation in his favor within the meaning of the paragraph above
quoted; and the circumstances under which that promise was given disclose an evident intention on
the part of the contracting parties that the plaintiff should have the money upon demand in New York
City. The recognition of this unqualified right in the plaintiff to receive the money implies the right in
him to maintain an action to recover it; and indeed if the provision in question were not applicable to
the facts it would be difficult to conceive of a case arising under it.

G.R. No. 175851 July 4, 2012

EMILIA LIM, Petitioner - versus - MINDANAO WINES & LIQUOR GALLERIA, a Single
Proprietorship Business Outfit Owned by Evelyn S. Valdevieso, Respondent.

Facts:
Sales Invoice No. 1711dated November 24, 1995, as well as Statement of Accounts No. 076 indicate that
respondent Mindanao Wines and Liquor Galleria (Mindanao Wines) delivered several cases of liquors to H &
E Commercial owned by Emilia, for which the latter issued four Philippine National Bank (PNB) postdated
checks. When two of these checks, particularly PNB Check Nos. 951453 and 95145 bounced for the reasons
ACCOUNT and DRAWN AGAINST INSUFFICIENT FUNDS, Mindanao Wines, thru its proprietress Evelyn
Valdevieso, demanded from H & E Commercial the payment of their value through two separate letters.
When the demands went unheeded, Mindanao Wines filed Municipal Trial Court in Cities (MTCC) against
Emilia for violations of BP 22.

MTCC granted the Demurrer to Evidence. It ruled that while Emilia did issue the checks for value, the
prosecution nevertheless miserably failed to prove one essential element that consummates the crime of BP
22, i.e., the fact of dishonor of the two subject checks. It noted that other than the checks, no bank
representative testified about presentment and dishonor. Hence, the MTCC acquitted Emilia of the criminal
charges. However, the MTCC still found her civilly liable because when she redeemed one of the checks
during the pendency of the criminal cases, the MTCC considered the same as an acknowledgement on her
part of her obligation with Mindanao Wines. The RTC clarified that the MTCC dismissed the criminal cases
based on reasonable doubt and not on insufficiency of evidence. And while the prosecution failed to prove
criminal liability beyond reasonable doubt, Emilias indebtedness was nonetheless proven by preponderance
of evidence, the quantum of evidence required to prove the same. The CA, in turn, emphasized that even if
acquitted, an accused may still be held civilly liable if a) the acquittal was based on reasonable doubt or b) the
court declared that the liability of the accused is only civil. Just like the RTC, the CA ruled that the dismissal of
the criminal cases against Emilia was expressly based on reasonable doubt, hence, she is not free from civil
liability because the same is not automatically extinguished by acquittal based on said ground. The CA further
declared that even granting that her acquittal was for insufficiency of evidence, the same is still akin to a
dismissal based on reasonable doubt.

Issue:

Whether or not, Emilia Lim is civilly liable

Ruling:

The extinction of the penal action does not carry with it the extinction of the civil liability where x x x the
acquittal is based on reasonable doubt as only preponderance of evidence is required in civil cases. As may
be recalled, the MTCC dismissed the criminal cases because one essential element of BP 22 was
missing, i.e., the fact of the banks dishonor. The evidence was insufficient to prove said element of the crime
as no proof of dishonor of the checks was presented by the prosecution. This, however, only means that the
trial court cannot convict Emilia of the crime since the prosecution failed to prove her guilt beyond reasonable
doubt, the quantum of evidence required in criminal cases. Conversely, the lack of such proof of dishonor
does not mean that Emilia has no existing debt with Mindanao Wines, a civil aspect which is proven by
another quantum of evidence, a mere preponderance of evidence. a check may be evidence of
indebtedness. A check, the entries of which are in writing, could prove a loan transaction. While Emilia is
acquitted of violations of BP 22, she should nevertheless pay the debt she owes.

G.R. No. 160855 April 16, 2008

CONCEPCION CHUA GAW, Petitioner, - versus - SUY BEN CHUA and FELISA CHUA,
Respondents.

Facts:
Spouses Chua Chin and Chan Chi were the founders of three business enterprises namely: Hagonoy
Lumber, Capitol Sawmill Corporation, and Columbia Wood Industries. Chua Chin died, leaving his
wife Chan Chi and his seven children as his only surviving heirs. The surviving heirs executed a
Deed of Partition, wherein the heirs settled their interest in Hagonoy Lumber as follows: to Chan
Chi, as her share in the conjugal partnership; and the other half will be divided among Chan Chi and
the seven children in equal pro indiviso shares. In said document, Chan Chi and the six children
likewise agreed to voluntarily renounce and waive their shares over Hagonoy Lumber in favor of their
co-heir, Chua Sioc Huan.
Petitioner Concepcion Chua Gaw and her husband, Antonio Gaw (Spouses Gaw), borrowed
P200,000 from Suy Ben Chua to be used for the construction of their house. Suy Ben Chua issued
a check for the amount. The parties agreed that the loan will be payable in 6 months without interest.
Chua Sioc Huan executed a Deed of Sale over all her rights and interests in Hagonoy Lumber for
P255,000 in favor of respondent Suy Ben Chua.
Spouses Gaw failed to pay the amount they borrowed within the designated period. Suy Ben Chua
filed a Complaint for Sum of Money against the Spouses Gaw.
In their Answer, the Spouses Gaw contend that Concepcion asked Suy Ben Chua for an accounting
and payment of her share in the profits of the 3 business enterprises but Suy Ben Chua persuaded
Concepcion to temporarily forego her demand as it would offend their mother who still wanted to
remain in control of the family businesses. To insure that she will defer her demand, Suy Ben Chua
allegedly gave her P200,000.00 as her share in the profits of Hagonoy Lumber
During trial, Spouses Gaw called Suy Ben Chua to testify as an adverse witness under Rule 132,
Section 10. On cross-examination, Suy Ben Chua explained that he ceased to be a stockholder of
Capitol Sawmill when he sold his shares of stock to the other stockholders. He further testified that
Chua Sioc Huan acquired Hagonoy Lumber by virtue of a Deed of Partition, executed by the heirs of
Chua Chin. He, in turn, became the owner of Hagonoy Lumber when he bought the same from Chua
Sioc Huan through a Deed of Sale.
On re-direct examination, Suy Ben Chua stated that he sold his shares of stock in Capitol Sawmill for
P254,000.00, which payment he received in cash. He also paid the purchase price of P255,000.00 for
Hagonoy Lumber in cash.
RTC ruled in favor of Suy Ben Chua and ordered Concepcion Gaw (her husband Antonio had passed
away) to pay P200,000. RTC held that the P200,000.00 was a loan advanced by the Suy Ben Chua
from his own funds and not remunerations for services rendered to Hagonoy Lumber nor
Concepcions advance share in the profits of their parents businesses.
Concepcion appealed to the CA alleging that the TC erred in considering evidence for Concepcion,
Suy Ben Chuas testimony when he was called to testify as an adverse party.
CA affirmed the decision of the RTC. CA found Concepcions argument that the RTC should not have
included respondents Suy Ben Chua as part of petitioner Concepcions evidence as baseless.

Issue:

Whether or not Concepcion was unduly prejudiced when RTC treated Suy Ben Chuas testimony as
adverse witness during cross-examination by his own counsel as part of Concepcions evidence
Ruling:

The delineation of a piece of evidence as part of the evidence of one party or the other is only
significant in determining whether the party on whose shoulders lies the burden of proof was able to
meet the quantum of evidence needed to discharge the burden. In civil cases, the rule is that the
plaintiff must rely on the strength of his own evidence and not upon the weakness of the defendants
evidence. Preponderance of evidence is determined by considering all the facts and circumstances of
the case, culled from the evidence, regardless of who actually presented it.
That the witness is the adverse party does not necessarily mean that the calling party will not be
bound by the formers testimony. The fact remains that it was at his instance that his adversary was
put on the witness stand. Under a rule permitting the impeachment of an adverse witness, although
the calling party does not vouch for the witness veracity, he is nonetheless bound by his testimony if
it is not contradicted or remains unrebutted.
A party who calls his adversary as a witness is, therefore, not bound by the latters testimony only in
the sense that he may contradict him by introducing other evidence to prove a state of facts contrary
to what the witness testifies on. A rule that provides that the party calling an adverse witness shall not
be bound by his testimony does not mean that such testimony may not be given its proper weight, but
merely that the calling party shall not be precluded from rebutting his testimony or from impeaching
him.
This, Concepcion failed to do as in her own testimony, she failed to discredit the Suy Ben Chuas
testimony on how Hagonoy Lumber became his sole property.
In arriving at a decision, the entirety of the evidence presented will be considered, regardless of the
party who offered them in evidence. The testimony of an adverse witness is evidence in the case and
should be given its proper weight, and such evidence becomes weightier if the other party fails to
impeach the witness or contradict his testimony.
G.R. No. L-63419 December 18, 1986
FLORENTINA A. LOZANO, petitioner,
vs.
THE HONORABLE ANTONIO M. MARTINEZ, in his capacity as Presiding Judge, Regional Trial
Court, National Capital Judicial Region, Branch XX, Manila, and the HONORABLE JOSE B.
FLAMINIANO, in his capacity as City Fiscal of Manila, respondents.
G.R. No. L-66839-42 December 18, 1986
LUZVIMINDA F. LOBATON petitioner,
vs.
HONORABLE GLICERIO L. CRUZ, in his capacity as Presiding Executive Judge, Branch V,
Region IV, Regional Trial Court, sitting at Lemery, Batangas, THE PROVINCIAL FISCAL OF
BATANGAS, and MARIA LUISA TORDECILLA,respondents.
G.R No. 71654 December 18, 1986
ANTONIO DATUIN and SUSAN DATUIN, petitioners,
vs.
HONORABLE JUDGE ERNANI C. PANO, Regional Trial Court, Quezon City, Branch LXXXVIII,
HONORABLE ClTY FISCAL OF QUEZON CITY, respondents.
G.R. No. 74524-25 December 18, 1986
OSCAR VIOLAGO, petitioner,
vs.
HONORABLE JUDGE ERNANI C. PA;O Regional Trial Court, Quezon City, Branch LXXXVIII,
HONORABLE CITY FISCAL OF QUEZON CITY, respondents.
G.R. No. 75122-49 December 18, 1986
ELINOR ABAD, petitioner,
vs.
THE HONORABLE NICOLAS A. GEROCHI, JR., in his capacity as Presiding Judge, Regional
Trial Court, National Capital Judicial Region, Branch 139, Makati and FEDERICO L.
MELOCOTTON JR., in his capacity as Trial Fiscal Regional Trial Court, Branch 139,
Makati, respondents.
G.R No. 75812-13 December 18, 1986
AMABLE R. AGUILUZ VII and SYLVIA V. AGUILUZ, spouses, petitioners,
vs.
HONORABLE PRESIDING JUDGE OF BRANCH 154, now vacant but temporarily presided by
HONORABLE ASAALI S. ISNANI Branch 153, Court of First Instance of Pasig, Metro
Manila, respondent.
G.R No. 75765-67 December 18, 1986
LUIS M. HOJAS, petitioner,
vs.
HON. JUDGE SENEN PENARANDA, Presiding Judge, Regional Trial Court of Cagayan de Oro
City, Branch XX, HONORABLE JUDGE ALFREDO LAGAMON, Presiding Judge, Regional Trial
Court of Cagayan de Oro City, Branch XXII, HONORABLE CITY FISCAL NOLI T. CATHI, City
Fiscal of Cagayan de Oro City, respondents.
G.R. No. 75789 December 18, 1986
THE PEOPLE OF THE PHILIPPINES, petitioner,
vs.
HON. DAVID G. NITAFAN, Presiding Judge, Regional Trial Court, National Capital Judicial
Region, Branch 52, Manila and THELMA SARMIENTO, respondents

Facts:

These petitions arose from cases involving prosecution of offenses under the BP 22. The defendants
in those cases moved seasonably to quash the informations on the ground that the acts charged did
not constitute an offense, the statute being unconstitutional. The motions were denied by the
respondent trial courts, except in one case, which is the subject of G. R. No. 75789, wherein the trial
court declared the law unconstitutional and dismissed the case. The parties adversely affected have
come to us for relief.

Solicitor General in his comment on the petitions, maintained the posture that it was premature for the
accused to elevate to this Court the orders denying their motions to quash, these orders being
interlocutory.
Issue:

Whether or not BP 22 is violative of the constitutional provision on non-imprisonment due to debt

Ruling

The enactment of BP 22 is a valid exercise of the police power and is not repugnant to the
constitutional inhibition against imprisonment for debt. The gravamen of the offense punished by BP
22 is the act of making and issuing a worthless check or a check that is dishonored upon its
presentation for payment. It is not the non-payment of an obligation which the law punishes. The law
is not intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit,
under pain of penal sanctions, the making of worthless checks and putting them in circulation.
Because of its deleterious effects on the public interest, the practice is proscribed by the law. The law
punishes the act not as an offense against property, but an offense against public order.

Unlike a promissory note, a check is not a mere undertaking to pay an amount of money. It is
an order addressed to a bank and partakes of a representation that the drawer has funds on deposit
against which the check is drawn, sufficient to ensure payment upon its presentation to the bank.
There is therefore an element of certainty or assurance that the instrument will be paid upon
presentation. For this reason, checks have become widely accepted as a medium of payment in trade
and commerce. Although not legal tender, checks have come to be perceived as convenient
substitutes for currency in commercial and financial transactions. The basis or foundation of such
perception is confidence. If such confidence is shaken, the usefulness of checks as currency
substitutes would be greatly diminished or may become nil. Any practice therefore tending to destroy
that confidence should be deterred for the proliferation of worthless checks can only create havoc in
trade circles and the banking community.

The effects of the issuance of a worthless check transcends the private interests of the parties directly
involved in the transaction and touches the interests of the community at large. The mischief it
creates is not only a wrong to the payee or holder, but also an injury to the public. The harmful
practice of putting valueless commercial papers in circulation, multiplied a thousand fold, can very
wen pollute the channels of trade and commerce, injure the banking system and eventually hurt the
welfare of society and the public interest.

G.R. No. 100290 June 4, 1993

NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA, petitioners,

vs.
THE HONORABLE COURT OF APPEALS and EDEN TAN, respondents.

Facts:

Case No. 54863 was a suit for collection of a sum of money filed by Eden Tan against the Tibajia
spouses. A writ of attachment was issued by the trial court on 17 August 1987 and on 17 September
1987, the Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses in the
Regional Trial Court of Kalookan City in the amount of Four Hundred Forty Two Thousand Seven
Hundred and Fifty Pesos (P442,750.00) in another case, had been garnished by him. On 10 March
1988, the Regional Trial Court, Branch 151 of Pasig, Metro Manila rendered its decision in Civil Case
No. 54863 in favor of the plaintiff Eden Tan, ordering the Tibajia spouses to pay her an amount in
excess of Three Hundred Thousand Pesos (P300,000.00). On appeal, the Court of Appeals modified
the decision by reducing the award of moral and exemplary damages. The decision having become
final, Eden Tan filed the corresponding motion for execution and thereafter, the garnished funds
which by then were on deposit with the cashier of the Regional Trial Court of Pasig, Metro Manila,
were levied upon.

On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total
money judgment

Private respondent, Eden Tan, refused to accept the payment made by the Tibajia spouses and
instead insisted that the garnished funds deposited with the cashier of the Regional Trial Court of
Pasig, Metro Manila be withdrawn to satisfy the judgment obligation. On 15 January 1991, defendant
spouses (petitioners) filed a motion to lift the writ of execution on the ground that the judgment debt
had already been paid. On 29 January 1991, the motion was denied by the trial court on the ground
that payment in cashier's check is not payment in legal tender and that payment was made by a third
party other than the defendant. A motion for reconsideration was denied on 8 February 1991.
Thereafter, the spouses Tibajia filed a petition for certiorari, prohibition and injunction in the Court of
Appeals. The appellate court dismissed the petition on 24 April 1991 holding that payment by
cashier's check is not payment in legal tender as required by Republic Act No. 529. The motion for
reconsideration was denied on 27 May 1991.

Issue:

Whether or not payment by means of check (even by cashier's check) is considered payment in legal
tender as required by the Civil Code, Republic Act No. 529, and the Central Bank Act

Ruling:

The provisions of law applicable to the case at bar are the following:

a. Article 1249 of the Civil Code which provides:

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and
if it is not possible to deliver such currency, then in the currency which is legal tender in
the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other

mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in
abeyance.;

b. Section 1 of Republic Act No. 529, as amended, which provides:

Sec. 1. Every provision contained in, or made with respect to, any obligation which
purports to give the obligee the right to require payment in gold or in any particular kind
of coin or currency other than Philippine currency or in an amount of money of the
Philippines measured thereby, shall be as it is hereby declared against public policy null
and void, and of no effect, and no such provision shall be contained in, or made with
respect to, any obligation thereafter incurred. Every obligation heretofore and hereafter
incurred, 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.

c. Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides:

Sec. 63. Legal character Checks representing deposit money do not have legal
tender power and their acceptance in the payment of debts, both public and private, is
at the option of the creditor: Provided, however, that a check which has been cleared
and credited to the account of the creditor shall be equivalent to a delivery to the
creditor of cash in an amount equal to the amount credited to his account.

From the aforequoted provisions of law, it is clear that the petition must fail. A check, whether a
manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is
not a valid tender of payment and may be refused receipt by the obligee or creditor.

G.R. No. L-49188 January 30, 1990

PHILIPPINE AIRLINES, INC., petitioner,

vs.
HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of
Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila,
and AMELIA TAN, respondents.

Facts:

Amelia Tan, under the name and style of Able Printing Press commenced a complaint for damages
before the Court of First Instance of Manila. The case was docketed as Civil Case No. 71307,
entitled Amelia Tan, et al. v. Philippine Airlines, Inc. After trial, the Court of First Instance of Manila
rendered judgment on June 29, 1972, in favor of private respondent Amelia Tan and against
petitioner Philippine Airlines, Inc. (PAL)

On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. On February 3, 1977, the
appellate court rendered its decision, that PAL is condemned to pay plaintiff the sum of P25,000.00
as damages and P5,000.00 as attorney's fee. Notice of judgment was sent by the Court of Appeals to
the trial court and on dates subsequent thereto, a motion for reconsideration was filed by respondent
Amelia Tan, duly opposed by petitioner PAL.

On May 23,1977, the Court of Appeals rendered its resolution denying the respondent's motion for
reconsideration for lack of merit. No further appeal having been taken by the parties, the judgment
became final and executory and on May 31, 1977, judgment was correspondingly entered in the
case.

Four months later, on February 11, 1978, respondent Amelia Tan moved for the issuance of an alias
writ of execution stating that the judgment rendered by the lower court, and affirmed with modification
by the Court of Appeals, remained unsatisfied.

On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of an alias writ of
execution stating that it had already fully paid its obligation to plaintiff through the deputy sheriff of the
respondent court, as evidenced by cash vouchers properly signed and receipted. .

Issue:
Whether or not the payment of a check to the sheriff extinguishes the judgment debt

Ruling:

Under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his
name did not operate as a satisfaction of the judgment debt.

In general, a payment, in order to be effective to discharge an obligation, must be made to the proper
person. Article 1240 of the Civil Code provides:

Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive
it. (Emphasis supplied)

The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in
checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding
sheriff.

Article 1249 of the Civil Code provides:

The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the
Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other

mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in
abeyance.

Since a negotiable instrument is only a substitute for money and not money, the delivery of such an
instrument does not, by itself, operate as payment. A check, whether a manager's check or ordinary
cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of
payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not
discharge the obligation under a judgment. The obligation is not extinguished and remains suspended
until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3).

G.R. No. 93397 March 3, 1997

TRADERS ROYAL BANK, petitioner,

vs.
COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL
BANK of the PHILIPPINES, respondents.

Facts:

On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached
Assignment" . . ., whereby Filriters, as registered owner, sold, transferred, assigned and delivered
unto Philippine Underwriters Finance Corporation (Philfinance) all its rights and title to Central Bank
Certificates of Indebtedness The aforesaid Detached Assignment contains an express authorization
executed by the transferor intended to complete the assignment through the registration of the
transfer in the name of PhilFinance.

On February 4, 1981, petitioner entered into a Repurchase Agreement with PhilFinance whereby,
PhilFinance sold, transferred and delivered to petitioner CBCI 4-year, 8th series, Serial No. D891 with
a face value of P500,000.00 . . ., which CBCI was among those previously acquired by PhilFinance
from Filriters. Philfinance agreed to repurchase CBCI Serial No. D891 at the stipulated price on April
27, 198. PhilFinance failed to repurchase the CBCI on the agreed date of maturity, April 27, 1981,
when the checks it issued in favor of petitioner were dishonored for insufficient funds

Owing to the default of PhilFinance, it executed a Detached Assignment in favor of the Petitioner to
enable the latter to have its title completed and registered in the books of the respondent. And by
means of said Detachment, Philfinance transferred and assigned all, its rights and title in the said
CBCI to petitioner and, furthermore, it did thereby "irrevocably authorize the said issuer (respondent
herein) to transfer the said bond/certificate on the books of its fiscal agent.

Petitioner presented the CBCI, together with the two (2) aforementioned Detached Assignments to
the Securities Servicing Department of the respondent, and requested the latter to effect the transfer
of the CBCI on its books and to issue a new certificate in the name of petitioner as absolute owner
thereof. Respondent failed and refused to register the transfer as requested, and continues to do so
notwithstanding petitioner's valid and just title over the same and despite repeated demands in
writing, and made an integral part hereof;

Issue:

Whether the Cer5ificate of Indebtedness is a negotiable instrument

Ruling:

Properly understood, a certificate of indebtedness pertains to certificates for the creation and
maintenance of a permanent improvement revolving fund, is similar to a "bond," (82 Minn. 202).
Being equivalent to a bond, it is properly understood as acknowledgment of an obligation to pay a
fixed sum of money. It is usually used for the purpose of long term loans.

The language of negotiability which characterize a negotiable paper as a credit instrument is its
freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchtone
relating to the protection of holders in due course, and the freedom of negotiability is the foundation
for the protection which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This
freedom in negotiability is totally absent in a certificate indebtedness as it merely to pay a sum of
money to a specified person or entity for a period of time.

The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the
writing, that is, from the face of the instrument itself. In the construction of a bill or note, the intention
of the parties is to control, if it can be legally ascertained. While the writing may be read in the light of
surrounding circumstance in order to more perfectly understand the intent and meaning of the parties,
yet as they have constituted the writing to be the only outward and visible expression of their
meaning, no other words are to be added to it or substituted in its stead. The duty of the court in such
case is to ascertain, not what the parties may have secretly intended as contradistinguished from
what their words express, but what is the meaning of the words they have used. What the parties
meant must be determined by what they said.
Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is not
governed by the negotiable instruments law.

G.R. No. 166018 June 4, 2014

THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE
BRANCHES, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent;
x-----------------------x
G.R. No. 167728
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE
BRANCHES, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

Facts:

HSBCs investor-clients maintain Philippine peso and/or foreign currency accounts, which are
managed by HSBC through instructions given through electronic messages. The said instructions are
standard forms known in the banking industry as SWIFT, or "Society for Worldwide Interbank
Financial Telecommunication." In purchasing shares of stock and other investment in securities, the
investor-clients would send electronic messages from abroad instructing HSBC to debit their local or
foreign currency accounts and to pay the purchase price therefor upon receipt of the securities.
Pursuant to the electronic messages of its investor-clients, HSBC purchased and paid Documentary
Stamp Tax (DST). the Bureau of Internal Revenue (BIR), issued BIR Ruling No. 132-99 to the effect
that instructions or advises from abroad on the management of funds located in the Philippines which
do not involve transfer of funds from abroad are not subject to DST.

HSBC subsequently brought the matter to the CTA. Respondent Commissioner of Internal Revenue
was ordered to refund or issue a tax credit certificate in favor of HSBC. The CTA ruled that HSBC is
entitled to a tax refund or tax credit because Sections 180 and 181 of the 1997 Tax Code do not
apply to electronic message instructions transmitted by HSBCs non-resident investor-clients. The
instruction made through an electronic message by a nonresident investor-client, which is to debit his
local or foreign currency account in the Philippines and pay a certain named recipient also residing in
the Philippines is not the transaction contemplated in Section 181 of the Code.
the Court of Appeals ruled that the electronic messages of HSBCs investor-clients are subject to
DST.
Issue:
Whether or not the electronic messages transactions are considered negotiable instruments
Ruling:
A bill of exchange is one of two general forms of negotiable instruments under the Negotiable
Instruments Law. the electronic messages of HSBCs investor-clients containing instructions to debit
their respective local or foreign currency accounts in the Philippines and pay a certain named
recipient also residing in the Philippines is not the transaction contemplated under Section 181 of the
Tax Code as such instructions are "parallel to an automatic bank transfer of local funds from a
savings account to a checking account maintained by a depositor in one bank." the electronic
messages "cannot be considered negotiable instruments as they lack the feature of negotiability,
which, is the ability to be transferred" and that the said electronic messages are "mere memoranda"
of the transaction consisting of the "actual debiting of the [investor-client-payors] local or foreign
currency account in the Philippines" and "entered as such in the books of account of the local bank,"
HSBC.
More fundamentally, the instructions given through electronic messages that are subjected to DST in
these cases are not negotiable instruments as they do not comply with the requisites of negotiability
under Section 1 of the Negotiable Instruments Law, which provides:
Sec. 1. Form of negotiable instruments. An instrument to be negotiable must conform to the
following requirements:
(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
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.
The electronic messages are not signed by the investor-clients as supposed drawers of a bill of
exchange; they do not contain an unconditional order to pay a sum certain in money as the payment
is supposed to come from a specific fund or account of the investor-clients; and, they are not payable
to order or bearer but to a specifically designated third party. Thus, the electronic messages are not
bills of exchange. As there was no bill of exchange or order for the payment drawn abroad and made
payable here in the Philippines, there could have been no acceptance or payment that will trigger the
imposition of the DST under Section 181 of the Tax Code.
G.R. No. 156132 October 16, 2006
CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS FINANCE
CORPORATION, doing business under the name and style of FNCB Finance, Petitioners, -
versus- MODESTA R. SABENIANO, Respondent.
Facts:
Respondent Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance.
Regrettably, the business relations among the parties subsequently went awry. respondent filed a
Complain against petitioners. Respondent claimed to have substantial deposits and money market
placements with the petitioners, as well as money market placements with the Ayala Investment and
Development Corporation (AIDC), the proceeds of which were supposedly deposited automatically
and directly to respondents accounts with petitioner Citibank. Respondent alleged that petitioners
refused to return her deposits and the proceeds of her money market placements despite her
repeated demands, thus, compelling respondent to file Civil Case No. 11336 against petitioners for
Accounting, Sum of Money and Damages. Respondent eventually filed an Amended Complaint on 9
October 1985 to include additional claims to deposits and money market placements inadvertently left
out from her original Complaint. Petitioners admitted that respondent had deposits and money market
placements with them, including dollar accounts in the Citibank branch in Geneva, Switzerland
(Citibank-Geneva). Petitioners further alleged that the respondent later obtained several loans from
petitioner Citibank, for which she executed Promissory Notes (PNs), and secured by (a) a Declaration
of Pledge of her dollar accounts in Citibank-Geneva, and (b) Deeds of Assignment of her money
market placements with petitioner FNCB Finance. When respondent failed to pay her loans despite
repeated demands by petitioner Citibank, the latter exercised its right to off-set or compensate
respondents outstanding loans with her deposits and money market placements, pursuant to the
Declaration of Pledge and the Deeds of Assignment executed by respondent in its favor.
Issue:
Whether or not the delivery of checks would discharge the obligation to pay
Ruling:
By the admission of the genuineness and due execution of an instrument, as provided,is meant that
the party whose signature it bears admits that he signed it or that it was signed by another for him
with his authority; that at the time it was signed it was in words and figures exactly as set out in the
pleading of the party relying upon it; that the document was delivered; and that any formal requisites
required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by
him. The effect of the admission is such that in the case of a promissory note a prima facie case is
made for the plaintiff which dispenses with the necessity of evidence on his part and entitles him to a
judgment on the pleadings unless a special defense of new matter, such as payment, is interposed by
the defendant. Petitioner Citibank did admit that respondent was able to pay for some of these PNs,
and what it identified as the first and second sets of PNs were only those which remained unpaid. It
thus became incumbent upon respondent to prove that the checks received were actually applied to
the PNs in either the first or second set; a fact that, unfortunately, cannot be determined from the
provisional receipts submitted by respondent since they only generally stated that the checks
received were payment for respondents loans.
A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or
creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation
is not extinguished and remains suspended until the payment by commercial document is actually
realized. In the case at bar, the issuance of an official receipt by petitioner Citibank would have been
dependent on whether the checks delivered by respondent were actually cleared and paid for by the
drawee banks.

[G.R. No. 148582. January 16, 2002]

FAR EAST BANK AND TRUST COMPANY, petitioner, vs. ESTRELLA O. QUERIMIT,
respondent.

Facts:
Respondent Estrella O. Querimit worked as internal auditor of the Philippine Savings Bank (PSB) for
19 years, she opened a dollar savings account in petitioners for which she was issued four (4)
Certificates of Deposit. The certificates bore the word accrued, which meant that if they were not
presented for encashment or pre-terminated prior to maturity, the money deposited with accrued
interest would be rolled over by the bank and annual interest would accumulate automatically.
Respondent went to petitioner FEBTC to withdraw her deposit but, to her dismay, she was told that
her husband had withdrawn the money in deposit. She sent a demand letter to petitioner FEBTC. In
another letter, respondent reiterated her request for updating and payment of the certificates of
deposit, including interest earned. Petitioner FEBTC alleged that it had given respondents late
husband Dominador an accommodation to allow him to withdraw Estrellas deposit. The trial court
rendered judgment for respondent. The Court of Appeals which, on March 6, 2001, affirmed through
its Fourteenth Division the decision of the trial court, with the modification that FEBTC was declared
solely liable for the amounts adjudged in the decision of the trial court. The appeals court stated that
petitioner FEBTC failed to prove that the certificates of deposit had been paid out of its funds, since
the evidence by the respondent stands unrebutted that the subject certificates of deposit until now
remain unindorsed, undelivered and unwithdrawn by her.

Issue:

Whether or not petitioner is liable to respondent

Ruling:

Petitioner bank failed to prove that it had already paid Estrella Querimit, the bearer and lawful holder
of the subject certificates of deposit. The finding of the trial court on this point, as affirmed by the
Court of Appeals, is that petitioner did not pay either respondent Estrella or her husband the amounts
evidenced by the subject certificates of deposit.

A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a

sum of money on deposit which the bank or banker promises to pay to the depositor, to the order of
the depositor, or to some other person or his order, whereby the relation of debtor and creditor
between the bank and the depositor is created. The principles governing other types of bank deposits
are applicable to certificates of deposit, as are the rules governing promissory notes when they
contain an unconditional promise to pay a sum certain of money absolutely. The principle that
payment, in order to discharge a debt, must be made to someone authorized to receive it is
applicable to the payment of certificates of deposit.

In this case, the certificates of deposit were clearly marked payable to bearer, which means, to [t]he
person in possession of an instrument, document of title or security payable to bearer or indorsed in
blank. Petitioner should not have paid respondents husband or any third party without requiring the
surrender of the certificates of deposit.

G.R. No. 89252 May 24, 1993

RAUL SESBREO, petitioner,
vs.
HON. COURT OF APPEALS, DELTA MOTORS CORPORATION AND PILIPINAS
BANK, respondents.

Facts:
Raul Sesbreo made a money market placement with the Philippine Underwriters Finance
Corporation ("Philfinance"). Philfinance, also on 9 February 1981, issued the following documents to
petitioner:
(a) the Certificate of Confirmation of Sale
(b) the Certificate of securities Delivery Receipt
(c) post-dated checks
On 13 March 1981, petitioner sought to encash the postdated checks issued by Philfinance.
However, the checks were dishonored for having been drawn against insufficient funds.
On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, Makati
Branch, and handed her a demand letter informing the bank that his placement with Philfinance in the
amount reflected in the DCR No. 10805 had remained unpaid and outstanding, and that he in effect
was asking for the physical delivery of the underlying promissory note. Petitioner then examined the
original of the DMC PN No. 2731 and found: that the security had been issued on 10 April 1980; that
it would mature on 6 April 1981; that it had a face value of P2,300,833.33, with the Philfinance as
"payee" and private respondent Delta Motors Corporation ("Delta") as "maker;" and that on face of the
promissory note was stamped "NON NEGOTIABLE." Pilipinas did not deliver the Note, nor any
certificate of participation in respect thereof, to petitioner.
The trial court, in a decision dated 5 August 1987, dismissed the complaint and counterclaims for lack
of merit and for lack of cause of action, with costs against petitioner. Petitioner appealed to
respondent Court of Appeals which denied the appeal.
Issue:
Whether or not the subject instrument is a negotiable instrument
Ruling:
Firstly, it is important to bear in mind that the negotiation of a negotiable instrument must be
distinguished from the assignment or transfer of an instrument whether that be negotiable or non-
negotiable. 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
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.
DMC PN No. 2731, 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, in whole or in part, that Note.
Philfinance and Delta were doing by their exchange of their promissory notes was this: Delta
invested, by making a money market placement with Philfinance.
What is involved here is a money market transaction. As defined by Lawrence Smith "the money
market is a market dealing in standardized short-term credit instruments (involving large amounts)
where lenders and borrowers do not deal directly with each other but through a middle manor a
dealer in the open market." It involves "commercial papers" which are instruments "evidencing
indebtness of any person or entity. . ., which are issued, endorsed, sold or transferred or in any
manner conveyed to another person or entity, with or without recourse". The fundamental function of
the money market device in its operation is to match and bring together in a most impersonal manner
both the "fund users" and the "fund suppliers." The money market is an "impersonal market", free
from personal considerations. "The market mechanism is intended to provide quick mobility of money
and securities."
The impersonal character of the money market device overlooks the individuals or entities
concerned.The issuer of a commercial paper in the money market necessarily knows in advance that
it would be expenditiously transacted and transferred to any investor/lender without need of notice to
said issuer. In practice, no notification is given to the borrower or issuer of commercial paper of the
sale or transfer to the investor.
There is need to individuate a money market transaction, a relatively novel institution in the Philippine
commercial scene. It has been intended to facilitate the flow and acquisition of capital on an
impersonal basis. And as specifically required by Presidential Decree No. 678, the investing public
must be given adequate and effective protection in availing of the credit of a borrower in the
commercial paper market.
G.R. No. L-22405 June 30, 1971
PHILIPPINE EDUCATION CO., INC., plaintiff-appellant,
vs.
MAURICIO A. SORIANO, ET AL., defendant-appellees.
Facts:
Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders of P200.00
each payable to E.P. Montinola. After the postal teller had made out money ordersnumbered 124685,
124687-124695, Montinola offered to pay for them with a private checks were not generally accepted
in payment of money orders. Montinola managed to leave building with his own check and the ten(10)
money orders without the knowledge of the teller.
upon discovery of the disappearance of the unpaid money orders, an urgent message was sent to all
postmasters, and the following day notice was likewise served upon all banks, instructing them not to
pay anyone of the money orders aforesaid if presented for payment. The Bank of America received a
copy of said notice three days later.
On April 23, 1958 one of the above-mentioned money orders numbered 124688 was received by
appellant as part of its sales receipts. The following day it deposited the same with the Bank of
America, and one day thereafter the latter cleared it with the Bureau of Posts and received from the
latter its face value of P200.00.
On September 27, 1961, appellee Mauricio A. Soriano, Chief of the Money Order Division of the
Manila Post Office, acting for and in behalf of his co-appellee, Postmaster Enrico Palomar, notified
the Bank of America that money order No. 124688 attached to his letter had been found to have been
irregularly issued and that, in view thereof, the amount it represented had been deducted from the
bank's clearing account. For its part, on August 2 of the same year, the Bank of America debited
appellant's account with the same amount and gave it advice thereof by means of a debit memo.
On October 12, 1961 appellant requested the Postmaster General to reconsider the action taken by
his office deducting the sum of P200.00 from the clearing account of the Bank of America, but his
request was denied.
Issue:
Whether or not the negotiable instrument law is applicable in postal money orders
Ruling:
It is to be noted in this connection that 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 (49 C.J. 1153).
Of particular application to the postal money order in question are the conditions laid down in the
letter of the Director of Posts of October 26, 1948 to the Bank of America for the redemption of postal
money orders received by it from its depositors. Among others, the condition is imposed that "in
cases of adverse claim, the money order or money orders involved will be returned to you (the bank)
and the, corresponding amount will have to be refunded to the Postmaster, Manila, who reserves the
right to deduct the value thereof from any amount due you if such step is deemed necessary." The
conditions thus imposed in order to enable the bank to continue enjoying the facilities theretofore
enjoyed by its depositors, were accepted by the Bank of America. The latter is therefore bound by
them. That it is so is clearly referred from the fact that, upon receiving advice that the amount
represented by the money order in question had been deducted from its clearing account with the
Manila Post Office, it did not file any protest against such action.

[G.R. No. 113236. March 5, 2001]

FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, petitioner, vs., COURT OF
APPEALS and LUZON DEVELOPMENT BANK, respondents.

DECISION
Facts:

Defendant has one of its client-depositors the Fojas-Arca Enterprises Company (Fojas-Arca for
brevity), 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 plaintiffs products.
Fojas-Arca purchased Firestone products on credit and delivered to plaintiff the corresponding
special withdrawal slips in payment thereof drawn upon the defendant.

Out of these four (4) withdrawal slips only withdrawal slip No. 42130 in the amount of was honored
and paid by the defendant in October 1978. Because of the absence for a long period coupled with
the fact that defendant honored and paid withdrawal slips, plaintiffs belief was all the more
strengthened that the other withdrawal slips were likewise sufficiently funded, and that it had received
full value and payment of Fojas-Arcas credit purchased then outstanding at the time. On this basis,
plaintiff was induced to continue extending to Fojas-Arca further purchase on credit of its products as
per agreement.

However, on December 14, 1978, plaintiff was informed by Citibank that special withdrawal slips
were dishonored and not paid for the reason NO ARRANGEMENT. As a consequence, the Citibank
debited plaintiffs representing the aggregate amount of the above-two special withdrawal slips. Under
such situation, plaintiff averred that the pecuniary losses it suffered is caused by and directly
attributable to defendants gross negligence.

Issue:
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.
Ruling:
The Court notes that petitioner admits that 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.
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
character.
A bank is under obligation to treat the accounts of its depositors with meticulous care, whether
such account consists only of a few hundred pesos or of millions of pesos. The fact that the other
withdrawal slips were honored and paid by respondent bank was no license for Citibank to presume
that subsequent slips would be honored and paid immediately. By doing so, it failed in its fiduciary
duty to treat the accounts of its clients with the highest degree of care.
G.R. No. 170325 September 26, 2008
PHILIPPINE NATIONAL BANK, Petitioner, - versus - ERLANDO T. RODRIGUEZ and NORMA
RODRIGUEZ Respondents. September 26, 2008
Facts:
FACTS:

Spouses Erlando and Norma Rodriguez were engaged in the informal lending business and
had a discounting arrangement with the Philnabank Employees Savings and Loan Association
(PEMSLA), an association of PNB employees. The association maintained current and savings
accounts with Philippine National Bank (PNB). PEMSLA regularly granted loans to its
members. Spouses Rodriguez would rediscount the postdated checks issued to members
whenever the association was short of funds.

As was customary, the spouses would replace the postdated checks with their own checks
issued in the name of the members. It was PEMSLAs policy not to approve applications for loans
of members with outstanding debts. To subvert this policy, some PEMSLA officers devised a scheme
to obtain additional loans despite their outstanding loan accounts. They took out loans in the names
of unknowing members, without the knowledge or consent of the latter.

The officers carried this out by forging the indorsement of the named payees in the checks.
Rodriguez checks were deposited directly by PEMSLA to its savings account without any
indorsement from the named payees.

This was an irregular procedure made possible through the facilitation of Edmundo Palermo,
Jr., treasurer of PEMSLA and bank teller in the PNB Branch. This became the usual practice
for the parties.

November 1998-February 1999: spouses issued 69 checks totalling to P2,345,804. These were
payable to 47 individual payees who were all members of PEMSLA. PNB eventually found out
about these fraudulent acts. To put a stop to this scheme, PNB closed the current account of
PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or
dishonored for the reason Account Closed.

The amounts were duly debited from the Rodriguez account

Spouses filed a civil complaint for damages against PEMSLA, the Multi-Purpose Cooperative
of Philnabankers (MCP), and PNB.

Issue:

Whether or not the 69 checks are payable to order for not being issued to fictitious persons
thereby dismissing PNB from liability

Ruling:

The general rule is that when the payee is fictitious or not intended to be the true recipient of
the proceeds, the check is considered as a bearer instrument (Sections 8 and 9 of the NIL). An
exception to the rule is when there is a commercial bad faith exception to the fictitious-payee
rule. A showing of commercial bad faith on the part of the drawee bank, or any transferee of
the check for that matter, will work to strip it of this defense. The exception will cause it to
bear the loss.

The distinction between bearer and order instruments lies in their manner of negotiation. The order
instrument requires an indorsement from the payee or holder before it may be validly negotiated while
a bearer instrument, mere delivery would suffice

In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the
loss. When faced with a check payable to a fictitious payee, it is treated as a bearer instrument that
can be negotiated by delivery. The underlying theory is that one cannot expect a fictitious payee to
negotiate the check by placing his indorsement thereon. Lack of knowledge on the part of the payees,
however, was not tantamount to a lack of intention on the part of respondents-spouses that the
payees would not receive the checks proceeds. PNB did not obey the instructions of the drawers
when it accepted absent indorsement, forged or otherwise. It was negligent in the selection
and supervision of its employees
G.R. No. 180390 July 27, 2011

PRUDENTIAL BANK, Petitioner - versus - COMMISSIONER OF INTERNAL REVENUE,

Respondent.

Facts:

Petitioner Prudential Bank is a banking corporation organized and existing under Philippine law. On July 23,
1999, petitioner received from the respondent Commissioner of Internal Revenue (CIR) a Final Assessment
Notice No. ST-DST-95-0042-99 and a Demand Letter for deficiency Documentary Stamp Tax (DST) for the
taxable year 1995 on its Repurchase Agreement with the Bangko Sentral ng Pilipinas [BSP], Purchase of
Treasury Bills from the BSP, and on its Savings Account Plus [SAP] product, in the amount
of P18,982,734.38. Petitioner protested the assessment on the ground that the documents subject matter of
the assessment are not subject to DST.

CTA affirmed the assessment for deficiency DST insofar as the SAP is concerned, but cancelled and set
aside the assessment on petitioners repurchase agreement and purchase of treasury bills with the BSP. the
CTA En Banc denied the appeal for lack of merit. It affirmed the ruling of its First Division that petitioners SAP
is a certificate of deposit bearing interest subject to DST under Section 180 of the old National Internal
Revenue Code (NIRC), as amended by Republic Act (RA) No. 7660.

Petitioner contends that its SAP is not subject to DST because it is not included in the list of documents under
Section 180 of the old NIRC, as amended. Petitioner insists that unlike a time deposit, its SAP is evidenced by
a passbook and not by a deposit certificate. In addition, its SAP is payable on demand and not on a fixed
determinable future To support its position, petitioner relies on the legislative intent of the law prior to Republic
Act (RA) No. 9243 and the historical background of the taxability of certificates of deposit.

Issue:

Whether or not Petitioners Savings Account Plus is subject to Documentary Stamp Tax

Ruling:

DST is imposed on certificates of deposit bearing interest pursuant to Section 180 of the old NIRC, as
amended, to wit:

Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of exchange, drafts, instruments
and securities issued by the government or any of its instrumentalities, certificates of deposit bearing
interest and others not payable on sight or demand. On all loan agreements signed abroad wherein the
object of the contract is located or used in the Philippines; bills of exchange (between points within the
Philippines), drafts, instruments and securities issued by the Government or any of its instrumentalities
or certificates of deposits drawing interest, or orders for the payment of any sum of money otherwise than
at the sight or on demand, or on all promissory notes, whether negotiable or non-negotiable, except bank
notes issued for circulation, and on each renewal of any such note, there shall be collected a documentary
stamp tax of Thirty centavos (P0.30) on each Two hundred pesos, or fractional part thereof, of the face value
of any such agreement, bill of exchange, draft, certificate of deposit, or note: Provided, That only one
documentary stamp tax shall be imposed on either loan agreement, or promissory note issued to secure such
loan, whichever will yield a higher tax: provided, however, that loan agreements or promissory notes the
aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000.00) executed by an
individual for his purchase on installment for his personal use or that of his family and not for business, resale,
barter or hire of a house, lot, motor vehicle, appliance or furniture shall be exempt from the payment of the
documentary stamp tax provided under this section.
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a sum of
money on deposit which the bank or banker promises to pay to the depositor, to the order of the depositor, or
to some other person or his order, whereby the relation of debtor and creditor between the bank and the
depositor is created.
The fact that the SAP is evidenced by a passbook likewise cannot remove its coverage from Section 180 of
the old NIRC, as amended. A document to be considered a certificate of deposit need not be in a specific
form. Thus, a passbook issued by a bank qualifies as a certificate of deposit drawing interest because it is
considered a written acknowledgement by a bank that it has accepted a deposit of a sum of money from a
depositor.
[G.R. No. 154127. December 8, 2003]
ROMEO C. GARCIA, petitioner, vs. DIONISIO V. LLAMAS, respondent.
Facts:
This case started out as a complaint for sum of money and damages by Respondent Dionisio Llamas
against Petitioner Romeo Garcia and Eduardo de Jesus. The complaint alleged that on 23 December
1996, petitioner and de Jesus borrowed P400,000.00 from respondent; that, on the same day, they
executed a promissory note wherein they bound themselves jointly and severally to pay the loan on
or before 23 January 1997 with a 5% interest per month; that the loan has long been overdue and,
despite repeated demands, petitioner and de Jesus have failed and refused to pay it.
Resisting the complaint, Petitioner Garcia, in his Answer, averred that he assumed no liability under
the promissory note because he signed it merely as an accommodation party for de Jesus; and,
alternatively, that he is relieved from any liability arising from the note inasmuch as the loan had been
paid by de Jesus by means of a check dated 17 April 1997; and that, in any event, the issuance of the
check and respondents acceptance thereof novated or superseded the note.
Respondent tendered a reply to Petitioners answer, thereunder asserting that the loan remained
unpaid for the reason that the check issued by de Jesus bounced.
Regional Trial Court (RTC) ruled in favor of the respondent and against petitioner and de Jesus who
are ordered to pay, jointly and severally the respondent. The appellate court ruled that no novation --
express or implied -- had taken place when respondent accepted the check from De Jesus. According
to the CA, the check was issued precisely to pay for the loan that was covered by the promissory note
jointly and severally undertaken by petitioner and De Jesus. Respondents acceptance of the check
did not serve to make De Jesus the sole debtor because, first, the obligation incurred by him and
petitioner was joint and several; and, second, the check -- which had been intended to extinguish the
obligation -- bounced upon its presentment.
Issues:
Whether or not petitioner is merely an accommodation party
Ruling:
Petitioner avers that he signed the promissory note merely as an accommodation party; and that, as
such, he was released as obligor when respondent agreed to extend the term of the obligation.
This reasoning is misplaced, because the note herein is not a negotiable instrument.
By its terms, the note was made payable to a specific person rather than to bearer or to order -- a
requisite for negotiability under Act 2031, the Negotiable Instruments Law (NIL). Hence, petitioner
cannot avail himself of the NILs provisions on the liabilities and defenses of an accommodation
party. Besides, a non-negotiable note is merely a simple contract in writing and is evidence of such
intangible rights as may have been created by the assent of the parties. The promissory note is thus
covered by the general provisions of the Civil Code, not by the NIL.
Even granting arguendo that the NIL was applicable, still, petitioner would be liable for the
promissory note. Under Article 29 of Act 2031, an accommodation party is liable for the instrument to
a holder for value even if, at the time of its taking, the latter knew the former to be only an
accommodation party. The relation between an accommodation party and the party accommodated
is, in effect, one of principal and surety -- the accommodation party being the surety. It is a settled
rule that a surety is bound equally and absolutely with the principal and is deemed an
original promissor and debtor from the beginning. The liability is immediate and direct.
G.R. No. 97753 August 10, 1992
CALTEX (PHILIPPINES), INC., petitioner, vs. COURT OF APPEALS and SECURITY BANK AND
TRUST COMPANY, respondents.
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.
Angel informed Mr. Tiangco, the Sucat Branch Manager that he lost all CTDs, submitted the
required Affidavit of Loss and received the replacement. 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
Mr. Aranas, Credit Manager of Caltex went to the Sucat branch to verify the CTDs declared lost
by Angel. 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.
Security Bank rejected Caltex demand for payment because it failed to furnish a copy of its
agreement with Angel.
The loan of Angel dela Cruz with Security Bank matured. The CTD were set-off w/ the matured
loan
ISSUE:

Whether or not the CTDs are negotiable

Ruling:
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. The
depositor is the earer
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. The negotiability or non-negotiability of an instrument is determined from the writing,
that is, from the face of the instrument itself

G.R. No. 74917 January 20, 1988

BANCO DE ORO SAVINGS AND MORTGAGE BANK, petitioner,
vs.
EQUITABLE BANKING CORPORATION, PHILIPPINE CLEARING HOUSE CORPORATION, AND
REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH XCII (92), respondents.

FACTS:
Plaintiff through its Visa Card Department, drew six crossed Manager's check payable to certain
member establishments of Visa Card. Subsequently, the Checks were deposited with the defendant
to the credit of its depositor, a certain Aida Trencio. the defendant sent the checks for clearing
through the Philippine Clearing House Corporation (PCHC). Accordingly, plaintiff paid the Checks; its
clearing account was debited for the value of the Checks and defendant's clearing account was
credited for the same amount,
Thereafter, plaintiff discovered that the endorsements appearing at the back of the Checks and
purporting to be that of the payees were forged and/or unauthorized or otherwise belong to persons
other than the payees. Pursuant to the PCHC Clearing Rules and Regulations, plaintiff presented the
Checks directly to the defendant for the purpose of claiming reimbursement from the latter. However,
defendant refused to accept such direct presentation and to reimburse the plaintiff for the value of the
Checks.
Issue:
Whether or not the subject checks were under the jurisdiction of the PCHC
Ruling:
BDO having stamped its guarantee of all prior endorsements and/or lack of endorsements is now
estopped from claiming that the checks under consideration are not negotiable instruments. The
checks were accepted for deposit by the petitioner stamping thereon its guarantee, in order that it can
clear the said checks with the respondent bank. By such deliberate and positive attitude of the
petitioner it has for all legal intents and purposes treated the said checks as negotiable instruments
and accordingly assumed the warranty of the endorser when it stamped its guarantee of prior
endorsements at the back of the checks. It led the said respondent to believe that it was acting as
endorser of the checks and on the strength of this guarantee said respondent cleared the checks in
question and credited the account of the petitioner. Petitioner is now barred from taking an opposite
posture by claiming that the disputed checks are not negotiable instrument.
A commercial bank cannot escape the liability of an endorser of a check and which may turn out to be
a forged endorsement. Whenever any bank treats the signature at the back of the checks as
endorsements and thus logically guarantees the same as such there can be no doubt said bank has
considered the checks as negotiable.The collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all prior endorsements 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 the endorsements.
PCHCs jurisdiction is not limited to negotiable checks only. The term check as used in the said
Articles of Incorporation of PCHC can only connote checks in general use in commercial and
business activities. Thus, no distinction. Ubi lex non distinguit, nec nos distinguere debemus. Checks
are used between banks and bankers and their customers, and are designed to facilitate banking
operations. It is of the essence to be payable on demand, because the contract between the banker
and the customer is that the money is needed on demand.

G.R. Nos. L-25836-37 January 31, 1981

THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee, vs. JOSE M. ARUEGO, defendant-
appellant.
Facts:

Philippine Bank of Commerce (PBC) instituted against Jose M. Aruego for the recovery of the total
sum of about P 35,000 with interest from November 17, 1959 and commission of 3/8% for every thirty
30 days plus attorney's fees of 10% of the total amount due and costs.

To facilitate the payment of the printing, Aruego obtained a credit accommodation from the PBC. The
printer, Encal Press and Photo Engraving, collected the cost of every printing by drawing a draft
against the PBC, which PBC later accepts
As an added security for the payment of the amounts advanced to Encal Press and Photo-Engraving,
PBC required Aruego to execute a trust receipt PBC hold in trust for Aruego the periodicals and to
sell the same with the promise to turn over to the Aruego the proceeds for the payment of all
obligations arising from the draft.

The bank instituted an action against Aruego to recover the cost of printing of the latters
periodical. Aruego however argues that he signed the supposed bills of exchange only as an agent
of the Philippine Education Foundation Company where he is president.

Issue:

Whether Aruego is liable by the petitioner although he signed the supposed bills of exchange only as
an agent of Philippine Education Foundation Company

Ruling:

Aruego did not disclose in any of the drafts that he accepted that he was signing as representative of
the Philippine Education Foundation Company. For failure to disclose his principal, Aruego is
personally liable for the drafts he accepted, pursuant to Section 20 of the NIL which provides that
when a person adds to his signature words indicating that he signs for or on behalf of a principal or in
a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere
addition of words describing him as an agent or as filing a representative character, without disclosing
his principal, does not exempt him from personal liability.
The defendant also contends that the drafts signed by him were not really bills of exchange but mere
pieces of evidence of indebtedness because payments were made before acceptance. This is also
without merit. Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in
writting addressed by one person to another, signed by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in
money to order or to bearer. As long as a commercial paper conforms with the definition of a bill of
exchange, that paper is considered a bill of exchange. The nature of acceptance is important only in
the determination of the kind of liabilities of the parties involved, but not in the determination of
whether a commercial paper is a bill of exchange or not.
It is evident then that the defendant's appeal can not prosper. To grant the defendant's prayer will
result in a new trial which will serve no purpose and will just waste the time of the courts as well as of
the parties because the defense is nil or ineffective.

G.R. No. 74451 May 25, 1988

EQUITABLE BANKING CORPORATION, petitioner,

vs.

THE HONORABLE INTERMEDIATE APPELLATE COURT and THE EDWARD J. NELL CO.,
respondents.

Facts:
Liberato Casals went to Edward J. Nell Company and told its senior sales engineer, Amado
Claustro that he was interested in buying one of the plaintiff's garrett skidders. Casals represented
himself as a major stockholder of Casville Enterprises, Inc., Thereafter the agreement to
purchase, Casals mode of payment to Edward J Nell Co is in the form of domestic letter of credit.
Casals delivered to the plaintiff a check in the amount of P300,000.00 which was followed by
another check of same date. Plaintiff considered these checks either as partial payment for the
skidder that was already delivered to Cagayan de Oro or as reimbursement for the marginal
deposit that plaintiff was supposed to pay. Defendants Casville informed the plaintiff that their
application for a letter of credit had been approved by the Equitable Banking Corporation.
However, the defendants said that they would need the sum of P300,000.00 to stand as collateral
or marginal deposit in favor of Equitable Banking Corporation and an additional amount of
P100,000.00. Along the process of the opening of the Letter of Credit, respondents answered all
the expenses (i.e marginal expenses) Thereafter, plaintiff issued a check for P427,300.00,
payable to the "order of EQUITABLE BANKING CORPORATION A/C CASVILLE ENTERPRISES,
INC." and drawn against the first National City Bank. Casals was the one who withdraw the said
money after respondent entrusted the checks to the former. Upon sometime, respondent inquired
about the payment and had known about that Casals withdraw all the money.

The trial court rendered judgment in favor of respondent Edward Nell. CA affirmed the decision.

Issue:

Whether or not the bank is liable to the respondent when it encashed the money to Casals.

Ruling:

No. The check according to the Court is patently ambiguous in its wordings as seen "order of
EQUITABLE BANKING CORPORATION A/C CASVILLE ENTERPRISES, INC." In this instance,
the payee ceased to be indicated with reasonable certainty in contravention of Section 8 of the
Negotiable Instruments Law. It would seem that the Casville Enterprise was the one who is the
beneficiary of the check by inserting the word A/C. Under the Negotiable Instruments Law The
interpretation of obscure words or stipulations in a contract shall not favor the party who caused
the obscurity. Thus, Nells own act or omission in connection with the drawing of the check was
the caused why the money has been withdrawn by Casals. It was NELL's own acts, which put it
into the power of Casals and Casville Enterprises to perpetuate the fraud against it and,
consequently, it must bear the loss.

G.R. Nos. L-25836-37 January 31, 1981

THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee,

vs.

JOSE M. ARUEGO, defendant-appellant.

Facts:

The case arose when Philippine Bank of Commerce and Aruego has twenty-two (22) transactions
entered to by them. The purpose of which is to accommodate the cost of the printing of "World
Current Events," a periodical published by the defendant. In order to facilitate the payment of the
printing the defendant obtained a credit accommodation from the plaintiff bank. In every printing of
the "World Current Events," the printer, Encal Press and Photo Engraving, collected the cost of
printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for
acceptance. As an added security the plaintiff bank also required defendant Aruego to execute a
trust receipt in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the
periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the
sale of said publication to answer for the payment of all obligations arising from the draft.

The Bank claims now to Aruego the sum of money, but Aruego argued that he cannot be held
liable as he was only an accommodation party.

Issue:

Whether or not Aruego may be held liable for the unpaid amount to plaintiff bank.

Ruling:

Yes. The Court ruled that Aruego may be held liable because his claim that he is only an
accommodation party to the parties his liability is of a principal one, that even though he
contended that he was acting as an agent the Court found out in the instrument that he did not
indicate his principal and that he was signing as an agent only. As seen in the face of the
instrument he merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO.
The Courts said that he failed to disclose his principal, Aruego is personally liable for the drafts he
accepted. Section 20 of the Negotiable Instruments Law provides that "Where the instrument
contains or a person adds to his signature words indicating that he signs for or on behalf of a
principal or in a representative capacity, he is not liable on the instrument if he was duly
authorized; but the mere addition of words describing him as an agent or as filing a representative
character, without disclosing his principal, does not exempt him from personal liability."

That even though he contended that he is an accommodation party the NIL is clear that he will
still be liable. The Court stated in its decision that, in lending his name to the accommodated
party, the accommodation party is in effect a surety for the latter. He lends his name to enable the
accommodated party to obtain credit or to raise money. He receives no part of the consideration
for the instrument but assumes liability to the other parties thereto because he wants to
accommodate another.

G.R. No. 74917 January 20, 1988

BANCO DE ORO SAVINGS AND MORTGAGE BANK, petitioner,

vs.
EQUITABLE BANKING CORPORATION, PHILIPPINE CLEARING HOUSE CORPORATION,
AND REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH XCII (92), respondents.

Facts:

Plaintiff through its Visa Card Department, drew six crossed Manager's having an aggregate
amount of P45, 982.23 and payable to certain member establishments of Visa Card. After
stamping at the back of the checks all prior and/or lack of endorsement guaranteed the
defendant sent the checks for clearing through the Philippine Clearing House Corporation
(PCHC). Thereafter plaintiff discovered that the signatures of the checks were forged. Defendant
refuses to reimburse the checks to plaintiff. The Arbiter rendered a decision in favor of the plaintiff.
The Board of PCHC affirmed in toto the decision of the Arbiter. Petition for review was filed with
the Regional Trial Court and affirmed the decision of the Board. Hence, the petition.

Issue:

Whether or not the petitioner is estopped in claiming that the checks were non-negotiable.

Ruling:

Yes, the petitioner is estopped in claiming that the checks were not negotiable. Petitioner after
stamping at the back of the check all prior indorsements guaranteed it has shown deliberate and
positive attitude that it has for all legal intents and purposes treated the said checks as negotiable
instruments and accordingly assumed the warranty of the endorser when it stamped its guarantee
of prior endorsements at the back of the checks. It led the said respondent to believe that it was
acting as endorser of the checks and on the strength of this guarantee said respondent cleared
the checks in question and credited the account of the petitioner.

G.R. Nos. L-25836-37 January 31, 1981

THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee,

vs.

JOSE M. ARUEGO, defendant-appellant.

Facts:
The case arose when Philippine Bank of Commerce and Aruego has twenty-two (22) transactions
entered to by them. The purpose of which is to accommodate the cost of the printing of "World
Current Events," a periodical published by the defendant. In order to facilitate the payment of the
printing the defendant obtained a credit accommodation from the plaintiff bank. In every printing of
the "World Current Events," the printer, Encal Press and Photo Engraving, collected the cost of
printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for
acceptance. As an added security the plaintiff bank also required defendant Aruego to execute a
trust receipt in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the
periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the
sale of said publication to answer for the payment of all obligations arising from the draft.

The Bank claims now to Aruego the sum of money, but Aruego argued that he cannot be held
liable as he was only an accommodation party.

Issue:

Whether or not Aruego is estopped in claiming that he is not liable for the drafts.

Ruling:

Yes, because Aruego did not even discloses that he is a mere representative of Philippine
Education Foundation Company. It is a mere requirement of the law that in asserting that a person
acted in his capacity as representative it should have discloses his principals name. As the
wording of Section 20 of Negotiable Instruments Law where the instrument contains or a person
adds to his signature words indicating that he signs for or on behalf of a principal or in a
representative capacity, he is not liable on the instrument if he was duly authorized; but the mere
addition of words describing him as an agent or as filing a representative character, without
disclosing his principal, does not exempt him from personal liability." Thus, the liability of Aruego is
as that of a principal.

G.R. No. 88866 February 18, 1991

METROPOLITAN BANK & TRUST COMPANY, petitioner,

vs.

COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO,
MAGNO CASTILLO and GLORIA CASTILLO, respondents.

Facts:
 Eduardo Gomez opened an account with Golden Savings and deposited over a period of two
months 38 treasury warrants. They were all drawn by the Philippine Fish Marketing Authority and
purportedly signed by its General Manager and countersigned by its Auditor. This were indorsed
by Gloria Castillo as cashier of the Golden Savings Loan. The warrants were sent to the clearing
of Metrobanks and was thereafter sent to Treasury office for special clearing. Thereafter, Gloria
came back to metrobank and ask whether the checks were now okay for clearing and withdraw
the same. Metrobank finally decided to allow Golden Savings to withdraw from the proceeds of
the

warrants. As Metrobank allowed the withdrawal of money, it suddenly informed Golden Savings
Loan that the warrants were dishonored by the Treasury and demanded the refund of said money
to Golden Savings Loan.

The RTC rendered its decision in favor of Golden Savings. CA affirmed the decision of RTC.

Issue:

Whether or not the warrants contain an unconditional promise to pay a sum certain in money.

Ruling:

No. The fund is payable to a particular fund (FUND 501). Sec. 3. When promise is
unconditional. An unqualified order or promise to pay is unconditional within the meaning of this
Act though coupled with (a) 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 (b) A statement of the transaction
which gives rise to the instrument judgment. But an order or promise to pay out of a 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 unconditional" and the warrants
themselves non-negotiable.

G.R. No. L-10221 February 28, 1958

Intestate of Luther Young and Pacita Young, spouses. PACIFICA JIMENEZ, petitioner-appellee,

vs.

DR. JOSE BUCOY, administrator-appellant.

Facts:
 Pacifica presented for payment four promissory notes signed by Pacita in different amounts
with a total value of 21, 000 pesos. The administrator has asserted his willingness to pay provided
that it is in line of Ballantyne schedule, since Pacitta receive such during Japanese occupation.
However, Pacifica objected and said that the full amount must be paid for by the administrator.

The judge then at that time ruled in favor of Pacita and that the notes should be paid in the
currency prevailing after the war, and that consequently plaintiff was entitled to recover P21,000
plus attorneys fees for the sum of P2,000. Bucoy the administrator said that the payment should
be in the said schedule and that there should be no attorneys fees to be paid for.

Issue:

Whether or not Ballantyne schedule of payment should be applied to the notes.

Ruling:

No. The Court said that the notes were payable after the war. The Court also said that the
notes were unambiguous as they were couched in words that can be completely understood as
payable after war. Quoting the note Received from Miss Pacifica Jimenez the total amount of
P10,000) ten thousand pesos payable six months after the war, without interest. The
administrator said that the notes contains no express promise to pay a specified amount. The
Court said that it is to be without merit. The notes contain an acknowledgment promise to pay as
quoted "a promise to pay ten thousand pesos six months after the war, without interest." As said
by the Court "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-18103 June 8, 1922

PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.

MANILA OIL REFINING & BY-PRODUCTS COMPANY, INC., defendant-appellant.

Facts:
 The manager and the treasurer of the Manila Oil Refining & By-Products Company, Inc.,
executed and delivered to the Philippine National Bank, a written instrument. Written in that
instrument is a confession of judgment clause wherein if the respondent failed to pay the amount
the lawyer of the petitioner, confess judgment for the above sum with interest, cost of suit and
attorney's fees of ten (10) per cent for collection. Respondent failed to pay the said amount thus
Atty. Rector, an attorney associated with the Philippine National Bank, entered his appearance in
representation of the defendant, and filed a motion confessing judgment. The respondent objected
with the appearance of Atty. Rector. The trial judge rendered judgment on the motion of attorney
Recto in the terms of the complaint.

Issue:

Whether or not the note is negotiable even if it contains confession of judgment clause.

Ruling:

Yes. The Court said in their decision 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. However, even if the law said that confession of judgment is void for being
contrary to public policy, morals, the Negotiable Instruments Law provides that The negotiable
character of an instrument otherwise negotiable is not affected by a provision which " (b)
Authorizes a confession of judgment if the instrument be not paid at maturity. Therefore the
negotiability of an instrument is not affected even if confession of judgment clause exist.

G.R. No. L-29900 June 28, 1974

IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGE

PAY, petitioner-appellant,

vs.

SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.

Facts:
 George Pay is a creditor of the Late Justo Palanca who already died. The late Justo Palanca
and Rosa Gonzales Vda. de Carlos Palanca promised to pay George Pay the amount of
P26,900.00, with interest thereon at the rate of 12% per annum. The petitioner claims that the
property of Justo Palanca which was appointed to Segundina Chua vda. de Palanca, as
administratrix can file his claim against the administratrix. Respondent said that the petition could
not prosper as there was a refusal on the part of Segundina Chua Vda. de Palanca to be
appointed as administratrix and that the property sought to be administered no longer belonged to
the debtor, the late Justo Palanca; and that the rights of petitioner-creditor had already prescribed.

Issue:

Whether or not the action of Pay already prescribed barring him to claim for his money.

Ruling:

The Court affirmed the decision of the lower courts. the manner in which the promissory note
was executed, it would appear that petitioner was hopeful that the satisfaction of his credit could
he realized either through the debtor sued receiving cash payment from the estate of the late
Carlos Palanca presumptively as one of the heirs, or, as expressed therein, "upon demand." It
was 15 years after the execution of the promissory note the case was only filed before the court. It
is also provided for by the Court that the prescriptive period of a written contract is 10 years.

G.R. No. 170325 September 26, 2008

PHILIPPINE NATIONAL BANK, Petitioner,

vs.

ERLANDO T. RODRIGUEZ and NORMA RODRIGUEZ, Respondents.

Facts:

Respondents-Spouses Erlando and Norma Rodriguez were clients of petitioner Philippine

National Bank. They maintained savings and demand/checking accounts, namely, under the
account name Erlando and/or Norma Rodriguez, and under the account name Erlando T.
Rodriguez. Respondent is in the business of discounting checks and one of their clients is the
PEMSLA. The latter on the other hand grants loans to its members, spouses Rodriguez would
rediscount the postdated checks issued to members whenever the association was short of funds.
PEMSLAs policy not to approve applications for loans of members with outstanding debts.
However, the practice of PEMSLA is that it will took out loans in the names of unknowing
members, without even the knowledge and consent of the members. Rodriguez checks were
deposited directly by PEMSLA to its savings account without any indorsement from the named
payees. This was an irregular procedure made possible through the facilitation of Edmundo
Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch. Upon the investigation of
the bank and found out about this illegal transaction the checks of PEMSLA was given back to
Sps. Rodriguez. However, the checks of the Sps. Rodriguez were deposited to PEMSLAs
account.

RTC rendered a decision in favor of the Sps. Rodriguez. A reversed and set aside the RTC
disposition. Upon motion for reconsideration of the sps. CA reversed itself via an Amended
Decision.

Issue:

Whether the subject checks are payable to order or to bearer and who bears the loss?

Ruling:

The Court ruled that the bank should bear the loss. The general rule is that when the payee is
fictitious or not intended to be the true recipient of the proceeds, the check is considered as a
bearer instrument. In this situation the drawee bank is absolved from liability and the drawer bears
the loss. Thus, when faced with a check payable to a fictitious payee, it is treated as a bearer
instrument that can be negotiated by delivery. The theory under this is that one cannot expect a
fictitious payee to negotiate the check by placing his indorsement thereon. And since the maker
knew this limitation, he must have intended for the instrument to be negotiated by mere delivery.
Thus, in case of controversy, the drawer of the check will bear the loss. However the Court laid
down an exception which is commercial bad faith, stating that a showing of commercial bad faith
on the part of the drawee bank, or any transferee of the check for that matter, will work to strip it of
this defense. The exception will cause it to bear the loss. Commercial bad faith is present if the
transferee of the check acts dishonestly, and is a party to the fraudulent scheme.

However in the case also, the Court ruled that the checks were order instruments and that the
PNB failed to present sufficient evidence to defeat the claim of respondents-spouses that the
named payees were the intended recipients of the checks proceeds. Because of a failure to show
that the payees were "fictitious" in its broader sense, the fictitious-payee rule does not apply. Also
because of the illegality acts of the Banks employee it perpetrated fraud. As said, the banking
business must exercise extra ordinary diligence in their acts. Thus, the Court said that a bank
that has been remiss in its duty must suffer the consequences of its negligence.
G.R. No. 157943 September 4, 2013

PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE,

vs.

GILBERT REYES WAGAS, ACCUSED-APPELLANT.

Facts:

Wagas placed an order for 200 bags of rice over the telephone. Ligaray released the goods to
Wagas and at the same time received Bank of the Philippine Islands (BPI) Check No. 0011003 for
P200,000.00 payable to cash and postdated May 8, 1997. He later deposited the check with Solid
Bank, his depository bank, but the check was dishonored due to insufficiency of funds. Despite
demand of Ligaray the Wagas did not pay. Ligaray admitted that he did not personally meet
Wagas it was Robert Caada, the brother-in-law of Wagas, who signed the delivery receipt upon
receiving the rice. Wagas on the other hand said that the checks he issued was for his brother in
law Canada.

RTC convicted Wagas of estafa.

Issue:

Whether or not the conviction of Wagas in the crime of estafa is proper.

Ruling:

No. There is doubt as to the conviction of Wagas because according to the Court the check
delivered to Ligaray was made payable to cash. Under the Negotiable Instruments Law, this type
of check was payable to the bearer and could be negotiated by mere delivery without the need of
an indorsement. This rendered it highly probable that Wagas had issued the check not to Ligaray,
but to somebody else like Caada, his brother-in-law, who then negotiated it to Ligaray.1wphi1
Relevantly, Ligaray confirmed that he did not himself see or meet Wagas at the time of the
transaction and thereafter, and expressly stated that the person who signed for and received the
stocks of rice was Caada.

The instrument check here according to the Court is a bearer instrument as defined by Section
30 of the Negotiale Instruments Law an instrument is negotiated when it is transferred from one
person to another in such manner as to constitute the transferee the holder thereof. If payable to
bearer, it is negotiated by delivery.

G.R. No. 170325 September 26, 2008

PHILIPPINE NATIONAL BANK, Petitioner,

vs.

ERLANDO T. RODRIGUEZ and NORMA RODRIGUEZ, Respondents.

Facts:

Respondents-Spouses Erlando and Norma Rodriguez were clients of petitioner Philippine

National Bank. They maintained savings and demand/checking accounts, namely, under the
account name Erlando and/or Norma Rodriguez, and under the account name Erlando T.
Rodriguez. Respondent is in the business of discounting checks and one of their clients is the
PEMSLA. The latter on the other hand grants loans to its members, spouses Rodriguez would
rediscount the postdated checks issued to members whenever the association was short of funds.
PEMSLAs policy not to approve applications for loans of members with outstanding debts.
However, the practice of PEMSLA is that it will took out loans in the names of unknowing
members, without even the knowledge and consent of the members. Rodriguez checks were
deposited directly by PEMSLA to its savings account without any indorsement from the named
payees. This was an irregular procedure made possible through the facilitation of Edmundo
Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch. Upon the investigation of
the bank and found out about this illegal transaction the checks of PEMSLA was given back to
Sps. Rodriguez. However, the checks of the Sps. Rodriguez were deposited to PEMSLAs
account.

RTC rendered a decision in favor of the Sps. Rodriguez. A reversed and set aside the RTC
disposition. Upon motion for reconsideration of the sps. CA reversed itself via an Amended
Decision.

Issue:

Whether or not the instruments were bearer instruments.

Ruling:

No. The checks were order instruments. In the case the Court did not consider the checks as
bearer instruments because the petitioner bank failed to prove that the payees were fictitious. As
the Court stated check that is payable to a specified payee is an order instrument. However,
under Section 9(c) of the NIL, a check payable to a specified payee may nevertheless be
considered as a bearer instrument if it is payable to the order of a fictitious or non-existing person,
and such fact is known to the person making it so payable. Thus, checks issued to "Prinsipe
Abante" or "Si Malakas at si Maganda," who are well-known characters in Philippine mythology,
are bearer instruments because the named payees are fictitious and non-existent. However, in the
case, the petitioner bank failed to present sufficient evidence to defeat the claim of respondents-
spouses that the named payees were the intended recipients of the checks proceeds.

G.R. No. 97753 August 10, 1992

CALTEX (PHILIPPINES), INC., petitioner,

vs.

COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.

Facts:

Security Bank issued 280 certificates of time deposit (CTDs) in favor of one Angel dela Cruz
who deposited with herein defendant the aggregate amount of P1,120,000.00. Angel dela Cruz on
the other hand delivered the same to petitioner for purchased of fuel products. Angel dela Cruz
informed the bank that the CTDs were lost. Thus the bank said that she should file an affidavit of
loss. She filed the same the bank replaced the said CTDs. Angel dela Cruz negotiated and
obtained a loan from defendant bank in the amount of P875,000.00. Caltex now claims before the
bank the validity of CTDs and that the same were delivered to it. The plaintiff ordered that the
bank should pay the amount to it.
 RTC dismissed the decision. CA affirmed the lower court.

Issue:

Whether or not the CTDs were negotiable instruments.

Ruling:

Yes. The documents provide that the amounts deposited shall be repayable to the depositor.
The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited
are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of presentment. Stamped
in the document that the same were payable to the Bearer and that bearer is the holder of the
instrument. Thus, petitioner's aforesaid witness merely declared that Angel de la Cruz is the
depositor "insofar as the bank is concerned," but obviously other parties not privy to the
transaction between them would not be in a position to know that the depositor is not the bearer
stated in the CTDs.

G.R. No. 76788 January 22, 1990

JUANITA SALAS, petitioner,

vs.

HON. COURT OF APPEALS and FIRST FINANCE & LEASING CORPORATION, respondents.

Facts:

Juanita Salas bought a motor vehicle from the Violago Motor Sales Corporation evidenced by a
promissory note. The note was subsequently endorsed to Filinvest Finance & Leasing Corporation
to financed purchase. Petitioner defaulted in its payment because of alleged discrepancy in the
engine and chassis numbers of the vehicle delivered to her. Thus upon failure of the petitioner to
pay the respondent he filed before the RTC complaint for collection of sum of money.
RTC ruled that Salas should pay the corporation. CA affirmed the RTCs decision. Hence this
petition.

Issue:

Whether or not the promissory note in question is a negotiable instrument which will bar
completely all the available defenses of the petitioner against private respondent.

Ruling:

Yes. It appears to be no question that Filinvest is a holder in due course, having taken the
instrument under the following conditions: a. it is complete and regular upon its face; b. it became
the holder thereof before it was overdue, and without notice that it had previously been
dishonored; c. it took the same in good faith and for value; and d. when it was negotiated to
Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS
Corporation. Respondent Corporation holds the instrument free from any defect of title of prior
parties, and free from defenses available to prior parties among themselves, and may enforce
payment of the instrument for the full amount thereof. This being so, petitioner cannot set up
against respondent the defense of nullity of the contract of sale between her and VMS.

G.R. No. 72593 April 30, 1987

CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T. VERGARA,

petitioners,

vs.

IFC LEASING AND ACCEPTANCE CORPORATION, respondent.

Facts:

Industrial Products Marketing (the "seller-assignor"), a corporation dealing in tractors and other
heavy equipment business, offered to sell to petitioner-corporation two "Used" Allis Crawler
Tractors, one (1) an HDD-21-B and the other an HDD-16-B. Petitioner-corporation requested the
seller-assignor to inspect the job site. After conducting said inspection, the seller-assignor assured
petitioner-corporation that the "Used" Allis Crawler Tractors which were being offered were fit for
the job, and gave the corresponding warranty of ninety (90) days performance of the machines
and availability of parts. The seller-assignor issued the sales invoice for the two 2) units of tractors
at the same time, the deed of sale with chattel mortgage with promissory note was executed
Simultaneously with the execution of the deed of sale with chattel mortgage with promissory note,
the seller-assignor, by means of a deed of assignment assigned its rights and interest in the
chattel mortgage in favor of the respondent. Thereafter the tractors were found to be defective.
Upon non-payment of petitioner because of the defective tractors the complaint was filed by the
respondent against the petitioners for the recovery of sum of money.

Issue:

Whether or not the promissory note in question is a negotiable instrument so as to bar

completely all the available defenses of the petitioner against the respondent-assignee.

Ruling:

The promissory note were not negotiable instrument as they are not payable to order or to
bearer but payable specifically to Industrial Products Industry. The instrument in order to be
considered negotiability-i.e. must contain the so-called 'words of negotiable, must be payable to
'order' or 'bearer'. These words serve as an expression of consent that the instrument may be
transferred. Thus, since the instrument are not negotiable the respondent then is not a holder in
due course and cannot claim for the money.

G.R. No. L-2516 September 25, 1950

ANG TEK LIAN, petitioner,

vs.

THE COURT OF APPEALS, respondent.

Facts:

Ang Tek Lian drew upon the China Banking Corporation for the sum of P4,000, payable to the
order of "cash". He delivered it to Lee Hua Hong in exchange for money which the latter handed in
act. The check was presented by Lee Hua Hong to the drawee bank for payment, but it was
dishonored for insufficiency of funds. The latter testified that Ang Tek Lian went to him to encash
the money because the banks were already closed at that time and since Ang Tek Lain promises
to pay he lends him the money which he believed that Ang tek lian needed it.

Issue:

Whether or not the check is an order or bearer instrument when it is indicated payable to cash.

Ruling:
 The Court ruled that the instrument is a bearer instrument. Under the Negotiable Instruments,
a check drawn payable to the order of "cash" is a check payable to bearer, and the bank may pay
it to the person presenting it for payment without the drawer's indorsement. A check payable to
the order of cash is a bearer instrument. Where a check is made payable to the order of "cash",
the word cash "does not purport to be the name of any person", and hence the instrument is
payable to bearer. The drawee bank need not obtain any indorsement of the check, but may pay it
to the person presenting it without any indorsement. If the bank is not sure of the bearer's identity
or financial solvency, it has the right to demand identification and /or assurance against possible
complications, for instance, (a) forgery of drawer's signature, (b) loss of the check by the rightful
owner, (c) raising of the amount payable, etc. The bank may therefore require, for its protection,
that the indorsement of the drawer or of some other person known to it be obtained. But where the
Bank is satisfied of the identity and /or the economic standing of the bearer who tenders the check
for collection, it will pay the instrument without further question; and it would incur no liability to the
drawer in thus acting.

G.R. No. 161756 December 16, 2005

VICTORIA J. ILANO represented by her Attorney-in-fact, MILO ANTONIO C. ILANO, Petitioners,

vs.

HON. DOLORES L. ESPAOL, in her capacity as Executive Judge, RTC of Imus, Cavite, Br. 90,
and, AMELIA ALONZO, EDITH CALILAP, DANILO CAMACLANG, ESTELA CAMACLANG,
ALLAN CAMACLANG, LENIZA REYES, EDWIN REYES, JANE BACAREL, CHERRY
CAMACLANG, FLORA CABRERA, ESTELITA LEGASPI, CARMENCITA GONZALES, NEMIA
CASTRO, GLORIA DOMINGUEZ, ANNILYN C. SABALE and several JOHN DOES,
Respondents.

Facts:

Amelia Alonzo is a trusted employee of the petitioner. The petitioner entrusted with Alonzo
Metrobank Check Book containing either signed or unsigned blank checks, especially in those
times when [petitioner] left for the United States for medical check-up. It is alleged that Alonzo by
means of deceit and abuse of confidence succeeded in procuring Promissory Notes and signed
blank checks from petitioner who was then recuperating from illness. Defendant Alonzo also
succeeded in inducing the petitioner certain promissory notes. Aside from that it is alleged that the
defendant Alonzo conspired with her co-defendants about the said acts and took advantage of the
signature of [petitioner] in said blank checks which were later on completed by them indicated
opposite their respective names and the respective amount.

The defendants alleged that the case should be dismissed for lack of cause of action. RTC
decided that the case be dismissed. The CAs decision affirming the dismissal order of the trial
court.

Issue:

Whether or not omissions on the subject checks may affect its negotiability.

Ruling:

The Court partly granted the petition. Firstly the checks that were gathered by defendants and
upon presentment to the bank were d ishonored on January 12, 2000 due to account closed.
When petitioner then filed her complaint on March 28, 2000, all the checks subject hereof which
were drawn against the same closed account were already rendered valueless or non-negotiable,
hence, petitioner had, with respect to them, no cause of action. Secondly, on the checks drawn
against another account of petitioner, albeit the date of issue bears only the year 1999, its validity
and negotiable character at the time the complaint was filed on March 28, 2000 was not affected.
Under Section 6 of the NIL Omission; seal; particular money. The validity and negotiable
character of an instrument are not affected by the fact that (a) It is not dated.

G.R. No. L-24571 December 18, 1970

JOSE L. PONCE DE LEON, plaintiff-appellant,

vs.

REHABILITATION FINANCE CORPORATION, defendant-appellant and third-party defendant-

appellant, ROSALINA SORIANO, TEOFILA SORIANO and REV. FR. EUGENIO R. SORIANO,
third-party plaintiffs-appellants.

Facts:

Jose L. Ponce de Leon and Francisco Soriano, obtained a loan for P10, 000.00 from the
Philippine National Bank (PNB), Manila, mortgaging a parcel of land. Ponce de Leon gave
P2,000.00 to Soriano from the proceeds of the loan. The loan was subsequently increased to
P17,500.00 and an amendment to the real estate mortgage. Jose L. Ponce de Leon filed with the
Rehabilitation Finance Corporation for an industrial loan, for putting up as sawmill. The application
was approved for P495,000.00 and the mortgage contract, the same parties signed a promissory
note (Exhibit "A") for P495,000.00, with interest at 6% per annum, payable on installments every
month for P28,831.64 in connection with the mortgage deed. Upon non-payment of petitioner the
RFC foreclosed the said mortgage and thus was sold to public auction. The RTC ruled in favor of
the RFC.

Issue:

Whether or not the defendant is allowed to fix the date of the maturity when the note does not
provide so.

Ruling:

Yes. The Court authorized the RFC to fix the date of maturity of the installments therein stipulated,
which is allowed by the Negotiable Instruments Law and when a promissory note expresses no
time for payment, it is deemed payable on demand. Thus, part of the sum of P495,000 had been
delivered by the RFC to the creditors of the plaintiff and Francisco Soriano, as agreed upon by
them, in payment of their outstanding obligations, and the balance of said sum of P495,000 was
turned over to the plaintiff, with the written authorization and conformity of Francisco Soriano. The
petitioner impliedly admitted that the first installment was due in October 1952 or, more
specifically, on October 24, 1952, this being the date given therefor in the letter-demands of the
RFC, the accuracy of which were not questioned by the plaintiff so that the last release made by
the RFC to complete the sum of P495,000 must have taken place on July 24, 1952.

G.R. No. L-14883 July 31, 1963

NARCISA BUENCAMINO, AMADA DE LEON-ERAA, ENCARNACION DE LEON and

BIENVENIDO B. ERAA,petitioners-appellants,

vs.

C. HERNANDEZ, as City Treasurer of Quezon City,

JAIME HERNANDEZ, as Secretary of Finance and

LAND TENURE ADMINISTRATION, respondents-appellees.

Facts:

Land Tenure Administration purchased from the petitioners Narcisa Buencamino et al, their
hacienda. A Memorandum Agreement was executed on the said date which expressly declared
that the LTA was purchasing the hacienda upon petition of the tenants thereof in accordance with
Republic Act No. 1400. The parties agreed to pay partly in cash and partly in negotiable land
certificates. The condition in the certificate regarding its encashment only after the lapse of five
years from the date of execution of the Deed of Sale of Hacienda de Leon was adopted or taken
from the Memorandum Agreement of May 11, 1957. Petitioners presented two of them to the
respondent City Treasurer in payment of certain 1957 realty tax obligations to Quezon City but
was denied by the City Treasurer. Thereafter, petitioners tendered once more the same
certificates in payment of their 1958 realty taxes and the respondent Treasurer similarly rejected
the tender. Petitioners filed the instant mandamus proceedings.

Issue:

Whether or not the denial of Treasury to accept the same for tax obligations is valid.

Ruling:

Yes because the date specified in the negotiable land certificates should be followed and that
is payable after five years. Under Section 9 of NIL the land certificates "shall be payable to bearer
on demand." The one issued, however, were payable to bearer only after the lapse of five years
from a given period. Obviously then, the requirement that they should be payable on demand was
not met since an instrument payable on demand is one which under section 7 of NIL, (a) is
expressed to be payable on demand, or at sight, or on presentation; or (b) expresses no time. The
5-year period within which the certificates could not be encashed was an expression of the time
for payment contrary to paragraph (b) of the last law cited.

G.R. No. 126670 December 2, 1999

ERNESTO T. PACHECO and VIRGINIA O. PACHECO, petitioners,

vs.

HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

Facts:

Petitioners obtained a loan of P10,000.00 from Mrs. Vicencio. Instead of merely requiring a note
of indebtedness, however, her husband Mr. Vicencio required petitioners to issue an undated
check as evidence of the loan which allegedly will not be presented to the bank. Thus acceding to
the request of Mr. Vicencio it issued a check and required petitioner Ernesto Pacheco, to sign the
check on the same understanding that the check is not to be encashed but merely intended as an
evidence of indebtedness which cannot be negotiated. Another loan was obtained for by the
petitioner and again was required to do the same but the checks were never returned to the
petitioner. All the checks were undated at the time petitioners handed them to Mrs. Vicencio.
Petitioners were able to settle and pay in cash P60,000.00. Petitioners never had any transaction
nor ever dealt with Mrs. Vicencio's husband, the complainant herein. When the remaining balance
was not paid for by petitioner the Vivencios tried to encashed the said checks but the same were
dishonored for insufficiency of funds. Thus, the Vivencios filed before the court violation of BP 22.

Issue:

Whether or not the checks are evidence of debt.

Ruling:

Yes. The Sps. Vicencio has known that the account of Pacheco has no fund. The petitioner
openly discloses to the Vicencio that their account is has no fund and thus cannot used such to
payments of debt. The checks were merely issued as security and evidence of debt. Also, the
Court noted that Vicencio need not ask the petitioners to place a date on the check, because as
holder of the check, he could have inserted the date pursuant to Section 13 of the Negotiable
Instruments Law (NIL). Moreover, as stated in Section 14 thereof, complainant, as the person in
possession of the check, has prima facie authority to complete it by filling up the blanks therein.
Besides, pursuant to Section 12 of the same law, a negotiable instrument is not rendered invalid
by reason only that it is antedated or postdated. Thus, the allegation of Mrs. Vicencio that the date
to be placed by Virginia was necessary so as to make the check evidence of indebtedness is
nothing but a ploy. Petitioners openly disclosed and never hid the fact that they no longer have
funds in the bank as their bank account was already closed. Knowledge by the complainant that
the drawer does not have sufficient funds in the bank at the time it was issued to him does not
give rise to a case for estafa through bouncing

G.R. No. 123567 June 5, 1998

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.

ROBERTO TONGKO, accused-appellant.

Facts:

Accused Tongko opened savings and current account with Amanah Bank. In the morning Marites
Bo-ot brought the accused to the office of Carmelita V. Santos at Room 504 Pacific Place, Pearl
Drive, Ortigas Center to borrow money. The accused asked for P50,000.00 to be paid not later
than December 1993. He assured Santos that his receivables would come in by November 1993.
He persuaded Santos to give the loan by issuing five (5) check, each in the sum of P10,000.00,
postdated December 20, 1993 and by signing a promissory note. In the afternoon of the same
date, the accused returned to Santos and borrowed an additional P50,000.00. Again, he issued
five (5) checks, each worth P10,000.00 postdated December 20, 1993. Amanah Bank closed
accused's current account for lack of funds. Upon presentment of Santos to the bank the checks
were dishonored as accused's accounts had been closed. The trial court convicted the said
accused for Estafa.

Issue:

Whether or not the accused is guilty of Estafa.

Ruling:

Yes. Under Article 315, paragraph 2(d) of the Revised Penal Code, as amended by Republic
Act. No. 4885, has the following elements: (1) postdating or issuance of a check in payment of an
obligation contracted at the time the check was issued; (2) lack of sufficiency of funds to cover the
check; and (3) damage to the payee thereof. In this case all the elements were satisfied. Focusing
on the post-dating of checks. The Court said the postdated checks were issued a day or two after
the loans. Appellant however offers to the Court that since the checks were postdated December
1993, ergo, they were issued in payment of the P100, 000.00 he got from Santos on August 20,
1993. The postdating of the checks to December 1993 simply means that on said date the checks
would be properly funded. It does not mean that the checks should be deemed as issued only on
December 1993.

G.R. No. 167398 August 9, 2011

AUGUSTUS GONZALES and spouses NESTOR victor and MA. LOURDES RODRIGUEZ,
Petitioners,

vs.

QUIRICO PE, Respondent.

Facts:

Quirico Pe had been transacting business with petitioner Spouses Nestor Victor Rodriguez and
Ma. Lourdes Rodriguez. DPWH awarded two contracts in favor of petitioner Nestor Rodriguez.
Nestor Rodriguez availed of the DPWHs pre-payment program for cement requirement regarding
the Lanot-Banga Road, Kalibo Highway project wherein the DPWH would give an advance
payment even before project completion upon his presentment, among others, of an official
receipt for the amount advanced. Petitioner Nestor Rodriguez gave LBP Check No. 6563066 to
respondent, which was signed by co-petitioners, but leaving the amount and date in blank. Said
check were delivered to the respondent to guarantee the payment of 15,698 bags of Portland
cement valued at P1,507,008.00. However, respondent fill out the blank in excess to the amount
said by the petitioners it contended that that is the amount delivered to the petitioners equivalent
to the cement delivered. The trial court rendered judgment in favor of petitioners. CA set aside
the decision.

Petitioners allege that since respondent failed to pay the docket and other legal fees at the
time he filed the Notice of Appeal, his appeal was deemed not perfected in contemplation of the
law. Thus, petitioners pray that the CA decision be set aside and a new one be rendered
dismissing the respondents appeal and ordering the execution of the RTC Decision dated June
28, 2002.

Issue:

Whether or not the CA gravely erred in reversing the decision of the trial court.

Ruling:

Yes. Respondents appeal was not perfected within the 15-day reglementary period, it was as
if no appeal was actually taken. Therefore, the RTC retains jurisdiction to rule on pending
incidents lodged before it, such as the petitioners Motion for Reconsideration, to Dismiss Appeal,
and for Issuance of Writ of Execution. The prudent thing that the CA should have done was to
dismiss the respondents appeal for failure to pay the appeal fees, and declare that the RTC
Decision dated June 28, 2002 has now become final and executory.

G.R. No. 75908 October 22, 1999

FEDERICO O. BORROMEO, LOURDES O. BORROMEO and FEDERICO O. BORROMEO,

INC., petitioners,

vs.

AMANCIO SUN and the COURT OF APPEALS, respondents.

Facts:

Amancio Sun filed an action against Lourdes O. Borromeo, Federico O. Borromeo and
Federico O. Borromeo (F.O.B.), Inc., to compel the 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. The respondent contended 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. Borromeo denied any participation in the execution of the Deed of Assignment,
saying that his supposed signature thereon was forged.

The RTC ruled that the signature of Borromeo was genuine. The CA reversed the decision.
Upon filing of the motion for reconsideration the CA reversed its own decision and sustained the
RTCs decision.

Issue:

Whether or not the CA erred in reversing its judgment.

Ruling:

No. The Court said that the Deed of Assignment is 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. 126568 April 30, 2003

QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO GONZALES and EUFEMIA

GONZALES,petitioners,

vs.
THE COURT OF APPEALS (CA) and REPUBLIC PLANTERS BANK, respondents.

Facts:

Petitioner Quirino Gonzales Logging Concessionaire through its proprietor, general manager
co-petitioner Quirino Gonzales, applied for credit accommodations with respondent Republic
Bank (the Bank), later known as Republic Planters Bank. Bank approved QGLC's application on
granting it a credit line of P900,000.00 broken into an overdraft line of P500,000.00 which was
later reduced to P450,000.00 and a Letter of Credit (LC) line of P400,000.00. The Bank and
petitioners QGLC and the spouses Quirino and Eufemia Gonzales executed ten documents.
Petitioners' obligations under the credit line were secured by a real estate mortgage on four
parcels of land. Petitioners also executed promissory notes in favor of bank. After defaulting in the
payment, the Bank foreclosed the mortgage and filed a complaint for collection of sum of money.
The parties presented 10 causes of action in the case. Petitioners seek to evade liability under the
Banks causes of action by claiming that they Gonzales signed the promissory notes in blank and
that they had not received the value of said notes.

Issue:

Whether or not the petitioners were liable on the said promissory notes as they alleged that
they had not received the value of said notes.

Ruling:

Yes. The genuineness and due execution of the notes had, however, been deemed admitted
by petitioners, they having failed to deny the same under oath. Their claim that they signed the
notes in blank does not thus lie. Petitioners' admission of the genuineness and due execution of
the promissory notes notwithstanding, they raise want of consideration thereof. The promissory
notes, however, appear to be negotiable as they meet the requirements of Section 1 of the
Negotiable Instruments Law. Such being the case, the notes are prima facie deemed to have
been issued for consideration. It bears noting that no sufficient evidence was adduced by
petitioners to show otherwise. In any case, it is no defense that the promissory notes were signed
in blank as Section 1448 of the Negotiable Instruments Law concedes the prima facie authority of
the person in possession of negotiable instruments, such as the notes herein, to fill in the blanks.

G.R. No. 85419 March 9, 1993

DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,

vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL
PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES, defendants-
respondents.

Facts:

A loan extended by petitioner Bank to respondent Sima Wei, the latter executed and delivered
to the former a promissory note. Sima Wei made partial payments on the note. Sima Wei issued
two crossed checks payable to petitioner Bank drawn against China Banking Corporation. The
said checks were allegedly issued in full settlement of the drawer's account evidenced by the
promissory note. These two checks were not delivered to the petitioner-payee or to any of its
authorized representatives. These checks were in the hands of Lee Kian Huat for unknown
reasons, the latter deposited the checks without the petitioner-payee's indorsement to the account
of respondent Plastic Corporation that the transaction was legal and regular, instructed the
cashier of Producers Bank to accept the checks for deposit and to credit them to the account of
said Plastic Corporation, inspite of the fact that the checks were crossed and payable to petitioner
Bank and bore no indorsement of the latter.

Issue:

Whether petitioner Bank has a cause of action against any or all of the defendants.

Ruling:

No. The Court said that the payee of a negotiable instrument acquires no interest with respect
thereto until its delivery to him. Delivery of an instrument means transfer of possession, actual or
constructive, from one person to another. Without the initial delivery of the instrument from the
drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must be
intended to give effect to the instrument. Without the delivery of said checks to petitioner-payee,
the former did not acquire any right or interest therein and cannot therefore assert any cause of
action, founded on said checks, whether against the drawer Sima Wei or against the Producers
Bank or any of the other respondents. Unless respondent Sima Wei proves that she has been
relieved from liability on the promissory note by some other cause, petitioner Bank has a right of
action against her for the balance due thereon. However, insofar as the other respondents are
concerned, petitioner Bank has no privity with them.

G.R. No. 85419 March 9, 1993

DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,

vs.

SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL
PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES, defendants-
respondents.

Facts:

A loan extended by petitioner Bank to respondent Sima Wei, the latter executed and delivered
to the former a promissory note. Sima Wei made partial payments on the note. Sima Wei issued
two crossed checks payable to petitioner Bank drawn against China Banking Corporation. The
said checks were allegedly issued in full settlement of the drawer's account evidenced by the
promissory note. These two checks were not delivered to the petitioner-payee or to any of its
authorized representatives. These checks were in the hands of Lee Kian Huat for unknown
reasons, the latter deposited the checks without the petitioner-payee's indorsement to the account
of respondent Plastic Corporation that the transaction was legal and regular, instructed the
cashier of Producers Bank to accept the checks for deposit and to credit them to the account of
said Plastic Corporation, inspite of the fact that the checks were crossed and payable to petitioner
Bank and bore no indorsement of the latter.

Issue:

Whether petitioner Bank has a cause of action against any or all of the defendants.

Ruling:

No. The Court said that the payee of a negotiable instrument acquires no interest with respect
thereto until its delivery to him. Delivery of an instrument means transfer of possession, actual or
constructive, from one person to another. Without the initial delivery of the instrument from the
drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must be
intended to give effect to the instrument. Without the delivery of said checks to petitioner-payee,
the former did not acquire any right or interest therein and cannot therefore assert any cause of
action, founded on said checks, whether against the drawer Sima Wei or against the Producers
Bank or any of the other respondents. Unless respondent Sima Wei proves that she has been
relieved from liability on the promissory note by some other cause, petitioner Bank has a right of
action against her for the balance due thereon. However, insofar as the other respondents are
concerned, petitioner Bank has no privity with them.

GR NO 175350

JUNE 13, 2012

Equitable Banking Corporation vs. Special Steel Products, Inc. and Augusto Pardo

Facts:
Respondent Special Steel Products, Inc. is a private domestic with co-respondent Augusto L.
Pardo as its President and majority stockholder. Interco is its regular customer. SSPI sold welding
electrodes to Interco as evidenced by 3 sales invoices which the latter issued 3 checks payable
to the order of SSI. Each check was crossed with the notation account payee only and was drawn
against Equitable. The records do not identify the signatory for these three checks, or explain how
Uy, Intercos purchasing officer, came into possession of these checks. Uy presented each
crossed check to Equitable and Equitable accepted the checks for deposit and stamped ALL
PRIOR ENDORSEMENT AND/OR LACK OF ENDORSEMENT GUARANTEED on their dorsal
portion. Uy promptly withdrew the proceeds of the checks.

SSPI demanded payment from Interco to pay its outstanding balance but the later stated it had
already issued three checks payable to SSPI and drawn against Equitable.SSPI denied receipt of
these checks. It was determined that Uy, not SSPI, received the proceeds of the three checks.
Interco finally paid the value of the three checks to SSPI, plus a portion of the accrued interests.
Interco refused to pay the entire accrued interest of P767,345.64 on the ground that it was not
responsible for the delay.

SSPI and its president, Pardo, filed a complaint for damages with application for a writ of
preliminary attachment against Uy and Equitable Bank. The complaint alleged that the three
crossed checks, all payable to the order of SSPI and with the notation account payee only, could
be deposited and encashed by SSPI only. However, due to Uys fraudulent representations, and
Equitables indispensable connivance or gross negligence, the restrictive nature of the checks
was ignored and the checks were deposited in Uys account. Had the defendants not diverted the
three checks in July 1991, the plaintiffs could have used them in their business and earned money
from them.

Uy answered that the checks were negotiated to him; that he is a holder for value of the checks
and that he has a good title thereto. He did not, however, explain how he obtained the checks,
from whom he obtained his title, and the value for which he received them.During trial, Uy did not
present any evidence but adopted Equitables evidence as his own.

Issue:

Whether or not SSPI may assert a right against the bank for undelivered checks

Held:

YES. The fact that a person, other than the named payee of the crossed check, was presenting it
for deposit should have put the bank on guard. It should have verified if the payee (SSPI)
authorized the holder (Uy) to present the same in its behalf, or indorsed it to him. Considering
however, that the named payee does not have an account with Equitable (hence, the latter has no
specimen signature of SSPI by which to judge the genuineness of its indorsement to Uy), the
bank knowingly assumed the risk of relying solely on Uys word that he had a good title to the
three checks. Such misplaced reliance on empty words is tantamount to gross negligence, which
is the absence of or failure to exercise even slight care or diligence, or the entire absence of care,
evincing a thoughtless disregard of consequences without exerting any effort to avoid them.

These are crossed checks, whose manner of discharge, in banking practice, is restrictive and
specific. Uys name does not appear anywhere on the crossed checks. Equitable, not knowing the
named payee on the check, had no way of verifying for itself the alleged genuineness of the
indorsement to Uy. The checks bear nothing on their face that supports the belief that the drawer
gave the checks to Uy. Uys relationship to Intercos majority stockholder will not justify
disregarding what is clearly ordered on the checks.

G.R. No. 111190

June 27, 1995

LORETO D. DE LA VICTORIA, vs. HON. JOSE P. BURGOS

Facts:

RAUL H. SESBREO filed a complaint for damages against Assistant City Fiscals Bienvenido N.
Mabanto, Jr., and Dario D. Rama, Jr. After trial judgment was rendered ordering the defendants to
pay P11,000.00 to private respondent herein. The decision became final and executory. This
order was questioned by the defendants before the Court of Appeals. However, on 15 January
1992 a writ of execution was issued. A notice of garnishment was served on petitioner Loreto D.
de la Victoria as City Fiscal of Mandaue City where defendant Mabanto, Jr., was then detailed.
Petitioner moved to quash the notice of garnishment claiming that he was not in possession of
any money, funds, credit, property or anything of value belonging to Mabanto, Jr., except his
salary and RATA checks, but that said checks were not yet properties of Mabanto, Jr., until
delivered to him. He further claimed that, as such, they were still public funds which could not be
subject to garnishment.

Issue:

whether a check still in the hands of the maker or its duly authorized representative is owned by
the payee before physical delivery to the latter

Held:

As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He receives his
compensation in the form of checks from the Department of Justice through petitioner as City
Fiscal of Mandaue City and head of office. Under Sec. 16 of the Negotiable Instruments Law,
every contract on a negotiable instrument is incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means the
transfer of the possession of the instrument by the maker or drawer with intent to transfer title to
the payee and recognize him as the holder thereof.

Inasmuch as said checks had not yet been delivered to Mabanto, Jr., they did not belong to him
and still had the character of public funds. In Tiro v. Hontanosas 8 we ruled that

The salary check of a government officer or employee such as a teacher does not belong to him
before it is physically delivered to him. Until that time the check belongs to the government.
Accordingly, before there is actual delivery of the check, the payee has no power over it; he
cannot assign it without the consent of the Government.

GR No 167567

September 22, 2010

San Miguel Corporation vs. Bartolome Puzon, Jr.

Facts:

Puzon was a dealer of beer products of petitioner San Miguel Corporation. Puzon purchased SMC
products on credit. To ensure payment and as a business practice, SMC required him to issue
postdated checks equivalent to the value of the products purchased on credit before the same
were released to him. Said checks were returned to Puzon when the transactions covered by
these checks were paid or settled in full.

Puzon purchased products on credit amounting to P11,820,327 for which he issued, and gave to
SMC, 2 BPI checks to cover the said transaction. On January 2001, Puzon visited the SMC Sales
Office to reconcile his account with SMC when he allegedly left, taking the 2 BPI checks from the
office.

Issue:

Whether SMC is the owner of the checks

Held:

No. Once there is delivery, the person to whom the instrument is delivered gets the title to the
instrument completely and irrevocably.

If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of
giving effect to the instrument is evident thus title to or ownership of the check was transferred
upon delivery. However, if the check was not given as payment, there being no intent to give
effect to the instrument, then ownership of the check was not transferred to SMC.

The evidence of SMC failed to establish that the check was given in payment of the obligation of
Puzon. There was no provisional receipt or official receipt issued for the amount of the check.
What was issued was a receipt for the document, a POSTDATED CHECK SLIP.

It becomes clear that both parties did not intend for the check to pay for the beer products. The
evidence proves that the check was accepted, not as payment, but in accordance with the long-
standing policy of SMC to require its dealers to issue postdated checks to cover its receivables.
The check was only meant to cover the transaction and in the meantime Puzon was to pay for the
transaction by some other means other than the check. This being so, title to the check did not
transfer to SMC; it remained with Puzon.

G.R. No. 198660

October 23, 2013

TING TING PUA vs. SPOUSES BENITO LO BUN TIONG and CAROLINE SIOK CHING TENG

Facts:

Petitioner asserts that respondents owed her a sum of money way back in 1988 for which the
latter gave her several checks. These checks, however, had all been dishonored and petitioner
has not been paid the amount of the loan plus the agreed interest. In 1996, respondents
approached her to get the computation of their liability including the 2% compounded interest.
After bargaining to lower the amount of their liability, respondents supposedly gave her a
postdated check bearing the discounted amount of the money they owed to petitioner. Like the
1988 checks, the drawee bank likewise dishonored this check. To prove her allegations, petitioner
submitted the original copies of the 17 checks issued by respondent Caroline in 1988 and the
check issued in 1996, Asiatrust Check No. BND057750. In ruling in her favor, the RTC sustained
the version of the facts presented by petitioner.

Respondents, on the other hand, completely deny the existence of the debt asserting that they
had never approached petitioner to borrow money in 1988 or in 1996. They hypothesize, instead,
that petitioner Pua is simply acting at the instance of her sister, Lilian, to file a false charge against
them using a check left to fund a gambling business previously operated by Lilian and respondent
Caroline.

Issue:

Whether there was delivery of the checks

Held:

Yes. The 17 original checks, completed and delivered to petitioner, are sufficient by themselves
to prove the existence of the loan obligation of the respondents to petitioner. Note that respondent
Caroline had not denied the genuineness of these checks. Instead, respondents argue that they
were given to various other persons and petitioner had simply collected all these 17 checks from
them in order to damage respondents reputation. This account is not only incredible; it runs
counter to human experience, as enshrined in Sec. 16 of the NIL which provides that when an
instrument is no longer in the possession of the person who signed it and it is complete in its
terms "a valid and intentional delivery by him is presumed until the contrary is proved."

G.R. No. 136729

September 23 ,2003

ASTRO ELECTRONICS CORP. and PETER ROXAS, petitioner, vs. PHILIPPINE EXPORT AND
FOREIGN LOAN GUARANTEE CORPORATION, respondent.

Facts:

Astro was granted several loans by the Philippine Trust Company amounting to P3,000,000.00
with interest and secured by three promissory notes. In each of these promissory notes, it appears
that petitioner Roxas signed twice, as President of Astro and in his personal capacity. Roxas also
signed a Continuing Surety ship Agreement in favor of Philtrust Bank, as President of Astro and
as surety. Philguarantee, guaranteed in favor of Philtrust the payment of 70% of Astros loan,
subject to the condition that upon payment by Philguanrantee of said amount, it shall be
proportionally subrogated to the rights of Philtrust against Astro.

As a result of Astros failure to pay its loan obligations, despite demands, Philguarantee paid 70%
of the guaranteed loan to Philtrust. Subsequently, Philguarantee filed against Astro and Roxas a
complaint for sum of money with the RTC of Makati.

Roxas disclaims any liability on the instruments, alleging, inter alia, that he merely signed the
same in blank and the phrases in his personal capacity and in his official capacity were
fraudulently inserted without his knowledge.

Issue:

Whether or not Roxas should be jointly and severally liable (solidary) with Astro

Held:

Yes. Astros loan with Philtrust Bank is secured by three promissory notes. These promissory
notes are valid and binding against Astro and Roxas. As it appears on the notes, Roxas signed
twice: first, as president of Astro and second, in his personal capacity. In signing his name aside
from being the President of Asro, Roxas became a co-maker of the promissory notes and cannot
escape any liability arising from it. Under the Negotiable Instruments Law, persons who write their
names on the face of promissory notes are makers,[10] promising that they will pay to the order of
the payee or any holder according to its tenor.[11]Thus, even without the phrase personal
capacity, Roxas will still be primarily liable as a joint and several debtor under the notes
considering that his intention to be liable as such is manifested by the fact that he affixed his
signature on each of the promissory notes twice which necessarily would imply that he is
undertaking the obligation in two different capacities, official and personal.

G.R. No. 101163

January 11, 1993

STATE INVESTMENT HOUSE, INC., petitioner, vs. COURT OF APPEALS and NORA B.
MOULIC, respondents.

Facts:

Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on
commission, two (2) post-dated Equitable Banking Corporation checks. the payee negotiated the
checks to petitioner State Investment House. Inc.. MOULIC failed to sell the pieces of jewelry, so
she returned them to the payee before maturity of the checks. The checks, however, could no
longer be retrieved as they had already been negotiated. Consequently, before their maturity
dates, MOULIC withdrew her funds from the drawee bank.

Upon presentment for payment, the checks were dishonored for insufficiency of funds.

Issue:

Whether the issuance of the checks as security is a ground for the discharge of the instrument

Held:

No. The evidence clearly shows that: (a) on their faces the post-dated checks were complete and
regular: (b) petitioner bought these checks from the payee, Corazon Victoriano, before their due
dates; (c) petitioner took these checks in good faith and for value, albeit at a discounted price;
and, (d) petitioner was never informed nor made aware that these checks were merely issued to
payee as security and not for value.

Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free
from any defect of title of prior parties, and from defenses available to prior parties among
themselves; STATE may, therefore, enforce full payment of the checks.
MOULIC cannot set up against STATE the defense that there was failure or absence of
consideration. MOULIC can only invoke this defense against STATE if it was privy to the purpose
for which they were issued and therefore is not a holder in due course.

That the post-dated checks were merely issued as security is not a ground for the discharge of the
instrument as against a holder in due course.

G.R. No. 93073

December 21, 1992

REPUBLIC PLANTERS BANK, petitioner, vs. COURT OF APPEALS and FERMIN CANLAS,
respondents

Facts:

Defendant 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 defendant Shozo Yamaguchi and private respondent Fermin Canlas
were authorized to apply for credit facilities with the petitioner Republic Planters Bank. Petitioner
bank issued nine promissory notes.

Petitioner bank filed a complaint for the recovery of sums of money covered among others, by the
nine promissory notes. Fermin Canlas 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.

Issue:

Whether private respondent Fermin Canlas is solidarily liable with the other defendants

Held:

We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes
bearing his signature for the following reasons:

The promissory notes are negotiable instruments and must be governed by the Negotiable
Instruments Law.
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.

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. 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. A joint and several obligation in common law corresponds to a civil law solidary
obligation; that is, one of several debtors bound in such wise that each is liable for the entire
amount, and not merely for his proportionate share. 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.

G.R. No. 74451

May 25, 1988

EQUITABLE BANKING CORPORATION, petitioner, vs. THE HONORABLE INTERMEDIATE

APPELLATE COURT and THE EDWARD J. NELL CO., respondents.

Facts:

Defendant Liberato Casals was interested in buying one of the plaintiff's garrett skidders.
Defendant Casals represented himself as the majority stockholder, president and general
manager of Casville Enterprises, Inc..

He was referred to plaintiffs executive vice-president, Apolonio Javier, for negotiation in

connection with the manner of payment. When Javier asked for cash payment for the skidders,
defendant Casals informed him that his corporation, defendant Casville Enterprises, Inc., had a
credit line with defendant Equitable Banking Corporation. Javier agreed to have the skidders paid
by way of a domestic letter of credit which defendant Casals promised to open in plaintiffs favor, in
lieu of cash payment.
On August 16, 1976, plaintiff issued a check, payable to the "order of EQUITABLE BANKING
CORPORATION A/C CASVILLE ENTERPRISES, INC." and drawn against the first National City
Bank. A cover letter was included stating a/c of Casville Enterprises Inc. for Marginal deposit and
payment of balance on Estrada Property to be used as security for trust receipt for opening L/C of
Garrett Skidders in favor of the Edward J. Nell Co.".<re||an1w> Both the check and the
covering letter were sent to defendant bank through defendant Casals. Plaintiff entrusted the
delivery of the check and the latter to defendant Casals because it believed that no one, including
defendant Casals, could encash the same as it was made payable to the defendant bank alone.

Meanwhile, upon their presentation for encashment, plaintiff discovered that the three checks in
the total amount of P427,300.00, that were issued by defendant Casville as collateral were all
dishonored for having been drawn against a closed account.

Issue:

Whether or not petitioner Equitable Banking Corporation (briefly, the Bank) is liable to private
respondent Edward J. Nell Co. (NELL, for short) for the value of the second check issued by
NELL which was made payable to the order of EQUITABLE Ashville BANIUNG CORPORATION
A/C OF CASVILLE ENTERPRISES INC.

Held:

No. The subject check was equivocal and patently ambiguous. By making the check read:

Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF CASVILLE ENTERPRISES,

INC.

the payee ceased to be indicated with reasonable certainty in contravention of Section 8 of the
Negotiable Instruments Law. As worded, it could be accepted as deposit to the account of the
party named after the symbols "A/C," or payable to the Bank as trustee, or as an agent, for
Casville Enterprises, Inc., with the latter being the ultimate beneficiary. That ambiguity is to be
taken contra proferentem that is, construed against NELL who caused the ambiguity and could
have also avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code,
provides:

Art. 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity.

G.R. No. L-16968

July 31, 1962

PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. CONCEPCION MINING COMPANY, INC.,
ET AL., defendants-appellants.

Facts:

The present action was instituted by the plaintiff to recover from the defendants the face of a
promissory note which was signed by Vicente Legarda twice. Upon the filing of the complaint the
defendants presented their answer in which they allege that the co-maker the promissory note
Don Vicente L. Legarda died on February 24, 1946 and his estate is in the process of judicial
determination. It is prayed that the estate of said deceased Vicente L. Legarda be included as
party-defendant.

Issue:

Whether or not Legarda should be included as party-defendant

Held:

Section 17 (g) of the Negotiable Instruments Law provides as follows:

SEC. 17. Construction where instrument is ambiguous. Where the language of the instrument
is ambiguous or there are omissions therein, the following rules of construction apply:

xxx xxx xxx

(g) Where an instrument containing the word "I promise to pay" is signed by two or more persons,
they are deemed to be jointly and severally liable thereon.

And Article 1216 of the Civil Code of the Philippines also provides as follows:

ART. 1216. The creditor may proceed against any one of the solidary debtors or some of them
simultaneously. The demand made against one of them shall not be an obstacle to those which
may subsequently be directed against the others so long as the debt has not been fully collected.

In view of the above quoted provisions, and as the promissory note was executed jointly and
severally by the same parties, namely, Concepcion Mining Company, Inc. and Vicente L. Legarda
and Jose S. Sarte, the payee of the promissory note had the right to hold any one or any two of
the signers of the promissory note responsible for the payment of the amount of the note.

G.R. No. 148864.

August 21, 2003

SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA, petitioners, vs.

MERCATOR FINANCE CORP., LYDIA P. SALAZAR, LAMECS** REALTY AND DEVELOPMENT
CORP. and the REGISTER OF DEEDS OF BULACAN, respondents.
Facts:

Petitioners were the registered owners of 5 parcels of land contained in a Real Estate Mortgage
with Embassy Farms, Inc. They alleged that they executed the Real Estate Mortgage in favor of
Mercator only as officers of Embassy Farms. They did not receive the proceeds of the loan
evidenced by a promissory note, as all of it went to Embassy Farms. Thus, they contended that
the mortgage was without any consideration as to them since they did not personally obtain any
loan or credit accommodations.

Mercator contends that since petitioners and Embassy Farms signed the promissory note as co-
makers, aside from the Continuing Suretyship Agreement subsequently executed to guarantee
the indebtedness of Embassy Farms, and the succeeding promissory notes restructuring the loan,
then petitioners are jointly and severally liable with Embassy Farms.

Issue:

Whether petitioners may be held solidarily liable with Embassy Farms

Held:

The agreement was signed by petitioners on February 16, 1982. The promissory notes
subsequently executed by petitioners and Embassy Farms, restructuring their loan, likewise prove
that petitioners are solidarily liable with Embassy Farms.

Petitioners further allege that there is an ambiguity in the wording of the promissory note and
claim that since it was Mercator who provided the form, then the ambiguity should be resolved
against it.

Courts can interpret a contract only if there is doubt in its letter. But, an examination of the
promissory note shows no such ambiguity. Besides, assuming arguendo that there is an
ambiguity, Section 17 of the Negotiable Instruments Law states, viz:

SECTION 17. Construction where instrument is ambiguous. Where the language of the instrument
is ambiguous or there are omissions therein, the following rules of construction apply:

xxxxxxxxx

(g) Where an instrument containing the word I promise to pay is signed by two or more persons,
they are deemed to be jointly and severally liable thereon.

G. R. No. 116320.

November 29, 1999

ADALIA FRANCISCO, petitioner, vs. COURT OF APPEALS , HERBY COMMERCIAL &
CONSTRUCTION CORPORATION AND JAIME C. ONG, respondents.

Facts:

A Land Development and Construction Contract was entered into by A. Francisco Realty &
Development Corporation (AFRDC), of which petitioner Francisco is the president, and private
respondent Herby Commercial & Construction Corporation (HCCC), represented by its President
and General Manager private respondent Ong, pursuant to a housing project of AFRDC financed
by the Government Service Insurance System (GSIS). Under the contract, HCCC agreed to
undertake the construction of 35 housing units and the development of 35 hectares of land. The
payment of HCCC for its services was on a turn-key basis. To facilitate payment, AFRDC
executed a Deed of Assignment in favor of HCCC to enable the latter to collect payments directly
from the GSIS. Furthermore, the GSIS and AFRDC put up an Executive Committee Account with
the Insular Bank of Asia & America (IBAA) in the amount of P4,000,000.00 from which checks
would be issued and co-signed by petitioner Francisco and the GSIS Vice-President Armando
Diaz.

HCCC filed a complaint against Francisco, AFRDC and the GSIS for the collection of the unpaid
balance under the Land Development and Construction Contract but the parties eventually arrived
at an amicable settlement.

Sometime in 1979, Ong discovered that Diaz and Francisco had executed and signed seven
checks, drawn against the IBAA and payable to HCCC for completed and delivered work under
the contract. Ong, however, claims that these checks were never delivered to HCCC. Upon
inquiry with Diaz, Ong learned that the GSIS gave Francisco custody of the checks since she
promised that she would deliver the same to HCCC. Instead, Francisco forged the signature of
Ong, without his knowledge or consent, at the dorsal portion of the said checks to make it appear
that HCCC had indorsed the checks; Francisco 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. IBAA credited Franciscos account with the amount of the checks and the latter withdrew
the amount so credited.

Issue:

Whether or not Francisco forged the signature of Ong on the seven checks

Held:

Yes, the court concurs with the lower courts finding that Francisco forged the signature of Ong on
the checks to make it appear as if Ong had indorsed said checks and that, after indorsing the
checks for a second time by signing her name at the back of the checks, Francisco deposited said
checks in her savings account with IBAA. The forgery was satisfactorily established.
Petitioner claims that she was, in any event, authorized to sign Ongs name on the checks by
virtue of the Certification executed by Ong in her favor giving her the authority to collect all the
receivables of HCCC from the GSIS, including the questioned checks. Petitioners alternative
defense must similarly fail. 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. Even assuming that Francisco was authorized by HCCC to sign Ongs name,
still, Francisco did not indorse the instrument in accordance with law. Instead of signing Ongs
name, Francisco should have signed her own name and expressly indicated that she was signing
as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate her act of
forgery.

G.R. Nos. L-25836-37

January 31, 1981

THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee, vs. JOSE M. ARUEGO, defendant-

appellant.

Facts:

The complaint filed by the Philippine Bank of Commerce contains twenty-two (22) causes of
action referring to twenty-two (22) transactions entered into by the said Bank and Aruego on
different dates. The sum sought to be recovered represents the cost of the printing of "World
Current Events," a periodical published by the defendant. To facilitate the payment of the printing
the defendant obtained a credit accommodation from the plaintiff. Thus, for every printing of the
"World Current Events," the printer, Encal Press and Photo Engraving, collected the cost of
printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for
acceptance. As an added security for the payment of the amounts advanced to Encal Press and
Photo-Engraving, the plaintiff bank also required defendant Aruego to execute a trust receipt in
favor of said bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and
to sell the same with the promise to turn over to the plaintiff the proceeds of the sale of said
publication to answer for the payment of all obligations arising from the draft.

Issue:

Whether Aruego should be held liable

Held:

Yes. Section 20 of the Negotiable Instruments Law provides that "Where the instrument contains
or a person adds to his signature words indicating that he signs for or on behalf of a principal or in
a representative capacity, he is not liable on the instrument if he was duly authorized; but the
mere addition of words describing him as an agent or as filing a representative character, without
disclosing his principal, does not exempt him from personal liability."

An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that
he was signing as a representative of the Philippine Education Foundation Company. He merely
signed as follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted.

G.R. No. 89802

May 7, 1992

ASSOCIATED BANK and CONRADO CRUZ, petitioners, vs. HON. COURT OF APPEALS, and
MERLE V. REYES, doing business under the name and style "Melissa's RTW," respondents.

Facts:

Private respondent deals with, among other customers, Robinson's Department Store, Payless
Department Store, Rempson Department Store, and the Corona Bazaar. These companies issued
in payment of their respective accounts crossed checks payable to Melissa's RTW.

When she went to these companies to collect on what she thought were still unpaid accounts, she
was informed of the issuance of the crossed checks and had been deposited with the Associated
Bank and subsequently paid by it to one Rafael Sayson, one of its "trusted depositors," in the
words of its branch manager and co-petitioner, Conrado Cruz, Sayson had not been authorized by
the private respondent to deposit and encash the said checks.

Issue:

Whether or not the private respondent has a cause of action against the petitioners for their
encashment and payment to another person of certain crossed checks issued in her favor

Held:

The subject checks were accepted for deposit by the Bank for the account of Rafael Sayson
although they were crossed checks and the payee was not Sayson but Melissa's RTW. The Bank
stamped thereon its guarantee that "all prior endorsements and/or lack of endorsements (were)
guaranteed." By such deliberate and positive act, the Bank had for all legal intents and purposes
treated the said checks as negotiable instruments and, accordingly, assumed the warranty of the
endorser.
The weight of authority is to the effect that "the possession of check on a forged or unauthorized
indorsement is wrongful, and when the money is collected on the check, the bank can be held 'for
moneys had and received." 6The proceeds are held for the rightful owner of the payment and may
be recovered by him. The position of the bank taking the check on the forged or unauthorized
indorsement is the same as if it had taken the check and collected without indorsement at all. The
act of the bank amounts to conversion of the check.

The petitioners were negligent when they permitted the encashment of the checks by Sayson.
The Bank should have first verified his right to endorse the crossed checks, of which he was not
the payee, and to deposit the proceeds of the checks to his own account. The Bank was by
reason of the nature of the checks put upon notice that they were issued for deposit only to the
private respondent's account. Its failure to inquire into Sayson's authority was a breach of a duty it
owed to the private respondent.

G.R. No. 149454

May 28, 2004

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA MONTESSORI INTERNATIONALE

and LEONARDO T. YABUT, respondents.

G.R. No. 149507

May 28, 2004

CASA MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE PHILIPPINE ISLANDS,

respondent.

Facts:

Plaintiff CASA Montessori International opened Current Account with defendant BPI, with CASAs
President Ms. Ma. Carina C. Lebron as one of its authorized signatories. 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.

Issue:

(1) Whether there was forgery under the Negotiable Instruments Law
(2) Whether forgery may be set up as a defense

Held:

(1) Section 23 of the NIL provides:

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.

Under this provision, 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.

In the present case, we hold that there was forgery of the drawers signature on the check.

(2) 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.

For allowing payment on the checks to a wrongful and fictitious payee, BPI -- the drawee bank --
becomes liable to its depositor-drawer. Since the encashing bank is one of its branches, BPI can
easily go after it and hold it liable for reimbursement. It may not debit the drawers account and is
not entitled to indemnification from the drawer. In both law and equity, when one of two innocent
persons must suffer by the wrongful act of a third person, the loss must be borne by the one
whose negligence was the proximate cause of the loss or who put it into the power of the third
person to perpetrate the wrong.

G.R. No. 74917

January 20, 1988

BANCO DE ORO SAVINGS AND MORTGAGE BANK, petitioner, vs. EQUITABLE BANKING
CORPORATION, PHILIPPINE CLEARING HOUSE CORPORATION, AND REGIONAL TRIAL
COURT OF QUEZON CITY, BRANCH XCII (92), respondents.

Facts:
Plaintiff through its Visa Card Department, drew six crossed Manager's check payable to certain
member establishments of Visa Card. Subsequently, the Checks were deposited with the
defendant to the credit of its depositor, a certain Aida Trencio. The checks were paid by plaintiff.
Plaintiff discovered that the endorsements appearing at the back of the Checks and purporting to
be that of the payees were forged and/or unauthorized or otherwise belong to persons other than
the payees.

Pursuant to the PCHC Clearing Rules and Regulations, plaintiff presented the Checks directly to
the defendant for the purpose of claiming reimbursement from the latter. However, defendant
refused to accept such direct presentation and to reimburse the plaintiff for the value of the
Checks; hence, this case.

Issue:

Whether the drawee bank was negligent in failing to discover the alteration or the forgery

Held:

Very akin to the case at bar is one which involves a suit filed by the drawer of checks against the
collecting bank and this came about in Farmers State Bank 10 where it was held:

A cause of action against the (collecting bank) in favor of the appellee (the drawer) accrued as a
result of the bank breaching its implied warranty of the genuineness of the endorsements of the
name of the payee by bringing about the presentation of the checks (to the drawee bank) and
collecting the amounts thereof, the right to enforce that cause of action was not destroyed by the
circumstance that another cause of action for the recovery of the amounts paid on the checks
would have accrued in favor of the appellee against another or to others than the bank if when the
checks were paid they have been indorsed by the payee. (United States vs. National Exchange
Bank, 214 US, 302, 29 S CT665, 53 L. Ed 1006, 16 Am. Cas. 11 84; Onondaga County Savings
Bank vs. United States (E.C.A.) 64 F 703)

Section 66 of the Negotiable Instruments ordains that:

Every endorser who endorsee without qualification, warrants to all subsequent holders in due
course' (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has
good title to it; (c) that all prior parties have capacity to contract; and (d) that the instrument is at
the time of his indorsement valid and subsisting.

Thus We hold that while the drawer generally owes no duty of diligence to the collecting bank, the
law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it for the
purpose of determining their genuineness and regularity. The collecting bank being primarily
engaged in banking holds itself out to the public as the expert and the law holds it to a high
standard of conduct.

And although the subject checks are non-negotiable the responsibility of petitioner as indorser
thereof remains.
To countenance a repudiation by the petitioner of its obligation would be contrary to equity and
would deal a negative blow to the whole banking system of this country.

G.R. No. 156132

October 16, 2006

CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS FINANCE CORPORATION,
doing business under the name and style of FNCB Finance, Petitioners, - versus- MODESTA R.
SABENIANO, Respondent.

Facts:

Petitioner Investors Finance Corporation was an affiliate company of petitioner Citibank,

specifically handling money market placements for its clients. It is now, by virtue of a merger,
doing business as part of its successor-in-interest, BPI Card Finance Corporation. Respondent
Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance. The business
relations among the parties subsequently went awry.

Respondent claimed to have substantial deposits and money market placements with the
petitioners, as well as money market placements, the proceeds of which were supposedly
deposited automatically and directly to respondents accounts with petitioner Citibank.
Respondent alleged that petitioners refused to return her deposits and the proceeds of her money
market placements despite her repeated demands.

Petitioners admitted that respondent had deposits and money market placements with them,
including dollar accounts in the Citibank branch in Geneva, Switzerland (Citibank-Geneva).
Petitioners further alleged that the respondent later obtained several loans from petitioner
Citibank, for which she executed Promissory Notes, and secured, by a Declaration of Pledge of
her dollar accounts in Citibank-Geneva, and Deeds of Assignment of her money market
placements with petitioner FNCB Finance. When respondent failed to pay her loans despite
repeated demands by petitioner Citibank, the latter exercised its right to off-set or compensate
respondents outstanding loans with her deposits and money market placements, pursuant to the
Declaration of Pledge and the Deeds of Assignment executed by respondent in its favor.
Petitioner Citibank supposedly informed respondent Sabeniano of the foregoing compensation
through letters.

Issue:

Whether set-off may be used as far as respondents account with Citibank

Held:
Savings Account with petitioner Citibank

There is little controversy when it comes to the right of petitioner Citibank to compensate
respondents outstanding loans with her deposit account. As already found by this Court, petitioner
Citibank was the creditor of respondent for her outstanding loans. At the same time, respondent
was the creditor of petitioner Citibank, as far as her deposit account was concerned, since bank
deposits, whether fixed, savings, or current, should be considered as simple loan or mutuum by
the depositor to the banking institution.[122] Both debts consist in sums of money. By June 1979,
all of respondents PNs in the second set had matured and became demandable, while
respondents savings account was demandable anytime. Neither was there any retention or
controversy over the PNs and the deposit account commenced by a third person and
communicated in due time to the debtor concerned. Compensation takes place by operation of
law,[123] therefore, even in the absence of an expressed authority from respondent, petitioner
Citibank had the right to effect, on 25 June 1979, the partial compensation or off-set of
respondents outstanding loans with her deposit account, amounting to P31,079.14.

Money market placements with FNCB Finance

As to these money market placements, respondent was the creditor and petitioner FNCB Finance
the debtor; while, as to the outstanding loans, petitioner Citibank was the creditor and respondent
the debtor. Consequently, legal compensation, under Article 1278 of the Civil Code, would not
apply since the first requirement for a valid compensation, that each one of the obligors be bound
principally, and that he be at the same time a principal creditor of the other, was not met.

What petitioner Citibank actually did was to exercise its rights to the proceeds of respondents
money market placements with petitioner FNCB Finance by virtue of the Deeds of Assignment
executed by respondent in its favor.

Petitioner Citibank was only acting upon the authority granted to it under the foregoing Deeds
when it finally used the proceeds of PNs No. 20138 and 20139, paid by petitioner FNCB Finance,
to partly pay for respondents outstanding loans. Strictly speaking, it did not effect a legal
compensation or off-set under Article 1278 of the Civil Code, but rather, it partly extinguished
respondents obligations through the application of the security given by the respondent for her
loans. Although the pertinent documents were entitled Deeds of Assignment, they were, in reality,
more of a pledge by respondent to petitioner Citibank of her credit due from petitioner FNCB
Finance by virtue of her money market placements with the latter. According to Article 2118 of the
Civil Code
ART. 2118. If a credit has been pledged becomes due before it is redeemed, the pledgee may
collect and receive the amount due. He shall apply the same to the payment of his claim, and
deliver the surplus, should there be any, to the pledgor.

Dollar accounts with Citibank-Geneva

Respondent denied that it was her signature on the Declaration of Pledge. She claimed that the
signature was a forgery. When a document is assailed on the basis of forgery, the best evidence
rule applies

Basic is the rule of evidence that when the subject of inquiry is the contents of a document, no
evidence is admissible other than the original document itself except in the instances mentioned in
Section 3, Rule 130 of the Revised Rules of Court. Mere photocopies of documents are
inadmissible pursuant to the best evidence rule. This is especially true when the issue is that of
forgery.

As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing
evidence and the burden of proof lies on the party alleging forgery. The best evidence of a forged
signature in an instrument is the instrument itself reflecting the alleged forged signature. The fact
of forgery can only be established by a comparison between the alleged forged signature and the
authentic and genuine signature of the person whose signature is theorized upon to have been
forged. Without the original document containing the alleged forged signature, one cannot make a
definitive comparison which would establish forgery. A comparison based on a mere xerox copy
or reproduction of the document under controversy cannot produce reliable results.

Petitioner Citibank failed to comply with the production of the original Declaration of Pledge. It is
admitted that Citibank-Geneva had possession of the original copy of the pledge. While petitioner
Citibank in Manila and its branch in Geneva may be separate and distinct entities, they are still
incontestably related, and between petitioner Citibank and respondent, the former had more
influence and resources to convince Citibank-Geneva to return, albeit temporarily, the original
Declaration of Pledge. Petitioner Citibank did not present any evidence to convince this Court that
it had exerted diligent efforts to secure the original copy of the pledge, nor did it proffer the reason
why Citibank-Geneva obstinately refused to give it back, when such document would have been
very vital to the case of petitioner Citibank. There is thus no justification to allow the presentation
of a mere photocopy of the Declaration of Pledge in lieu of the original, and the photocopy of the
pledge presented by petitioner Citibank has nil probative value. In addition, even if this Court
cannot make a categorical finding that respondents signature on the original copy of the pledge
was forged, it is persuaded that petitioner Citibank willfully suppressed the presentation of the
original document, and takes into consideration the presumption that the evidence willfully
suppressed would be adverse to petitioner Citibank if produced
Without the Declaration of Pledge, petitioner Citibank had no authority to demand the remittance
of respondents dollar accounts with Citibank-Geneva and to apply them to her outstanding loans.
It cannot effect legal compensation under Article 1278 of the Civil Code since, petitioner Citibank
itself admitted that Citibank-Geneva is a distinct and separate entity. As for the dollar accounts,
respondent was the creditor and Citibank-Geneva is the debtor; and as for the outstanding loans,
petitioner Citibank was the creditor and respondent was the debtor. The parties in these
transactions were evidently not the principal creditor of each other.

Therefore, this Court declares that the remittance of respondents dollar accounts from Citibank-
Geneva and the application thereof to her outstanding loans with petitioner Citibank was illegal,
and null and void. Resultantly, petitioner Citibank is obligated to return to respondent the amount
of US$149,632,99 from her Citibank-Geneva accounts, or its present equivalent value in
Philippine currency; and, at the same time, respondent continues to be obligated to petitioner
Citibank for the balance of her outstanding loans which, as of 5 September 1979, amounted to
P1,069,847.40.

G.R. No. 92244

February 9, 1993

NATIVIDAD GEMPESAW, petitioner, vs. THE HONORABLE COURT OF APPEALS and

PHILIPPINE BANK OF COMMUNICATIONS, respondents.

Facts:

Petitioner Gempesaw owns and operates four grocery stores. Petitioner maintains a checking
account with drawee Bank. To facilitate payment of debts to her suppliers, petitioner draws checks
against her checking account with the respondent bank as drawee. Her customary practice of
issuing checks in payment of her suppliers was as follows: the checks were prepared and filled up
as to all material particulars by her trusted bookkeeper, Alicia Galang, an employee for more than
eight (8) years. After the bookkeeper prepared the checks, the completed checks were submitted
to the petitioner for her signature, together with the corresponding invoice receipts which indicate
the correct obligations due and payable to her suppliers. Petitioner signed each and every check
without bothering to verify the accuracy of the checks against the corresponding invoices because
she reposed full and implicit trust and confidence on her bookkeeper. The issuance and delivery
of the checks to the payees named therein were left to the bookkeeper. Petitioner admitted that
she did not make any verification as to whether or not the checks were delivered to their
respective payees. Although the respondent drawee Bank notified her of all checks presented to
and paid by the bank, petitioner did not verify the correctness of the returned checks, much less
check if the payees actually received the checks in payment for the supplies she received. In the
course of her business operations covering a period of two years, petitioner issued, following her
usual practice stated above, a total of eighty-two (82) checks in favor of several suppliers. These
checks were all presented by the indorsees as holders thereof to, and honored by, the respondent
drawee Bank. Respondent drawee Bank correspondingly debited the amounts thereof against
petitioner's checking account. Most of the aforementioned checks were for amounts in excess of
her actual obligations to the various payees as shown in their corresponding invoices.

Practically, all the checks issued and honored by the respondent drawee bank were crossed
checks. 3 Aside from the daily notice given to the petitioner by the respondent drawee Bank, the
latter also furnished her with a monthly statement of her transactions, attaching thereto all the
cancelled checks she had issued and which were debited against her current account. It was only
after the lapse of more two (2) years that petitioner found out about the fraudulent manipulations
of her bookkeeper.

Petitioner made a written demand on respondent drawee Bank to credit her account with the
money value of the eighty-two (82) checks totalling P1,208,606.89 for having been wrongfully
charged against her account. Respondent drawee Bank refused to grant petitioner's demand.

Issue:

Whether the account of petitioner should be credited

Held:

forgery is a real or absolute defense by the party whose signature is forged. A party whose
signature to an instrument was forged was never a party and never gave his consent to the
contract which gave rise to the instrument. Since his signature does not appear in the instrument,
he cannot be held liable thereon by anyone, not even by a holder in due course. Thus, if a
person's signature is forged as a maker of a promissory note, he cannot be made to pay because
he never made the promise to pay. Or where a person's signature as a drawer of a check is
forged, the drawee bank cannot charge the amount thereof against the drawer's account because
he never gave the bank the order to pay. And said section does not refer only to the forged
signature of the maker of a promissory note and of the drawer of a check. It covers also a forged
indorsement, i.e., the forged signature of the payee or indorsee of a note or check. Since under
said provision a forged signature is "wholly inoperative", no one can gain title to the instrument
through such forged indorsement. Such an indorsement prevents any subsequent party from
acquiring any right as against any party whose name appears prior to the forgery. Although rights
may exist between and among parties subsequent to the forged indorsement, not one of them can
acquire rights against parties prior to the forgery. Such forged indorsement cuts off the rights of all
subsequent parties as against parties prior to the forgery. However, the law makes an exception
to these rules where a party is precluded from setting up forgery as a defense.

As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot
charge the drawer's 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. This accounts for the rule that
although a depositor owes a duty to his drawee bank to examine his cancelled checks for forgery
of his own signature, he has no similar duty as to forged indorsements. 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. Most of the cases involving forgery by an agent or employee deal with
the payee's indorsement. The drawer and the payee often time shave business relations of long
standing. The continued occurrence of business transactions of the same nature provides the
opportunity for the agent/employee to commit the fraud after having developed familiarity with the
signatures of the parties. However, sooner or later, some leak will show on the drawer's books. It
will then be just a question of time until the fraud is discovered. This is specially true when the
agent perpetrates a series of forgeries as in the case at bar.

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, the petitioner relied implicitly upon the honesty and loyalty of her bookkeeper, 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 the
bookkeeper commenced her fraudulent scheme that petitioner discovered that eighty-two (82)
checks were wrongfully charged to her account, at which she notified the respondent drawee
bank.

G.R. No. 29432

1975

JAI-ALAI CORPORATION OF THE PHILIPPINES, Petitioner, v. BANK OF THE PHILIPPINE

ISLAND, Respondent.

Facts:

Ten checks with a total face value of P8,030.58, which were later found to be forged checks, were
deposited by the petitioner in its current account with the respondent bank. All the foregoing
checks were, upon deposit, temporarily credited to the petitioner's account.

The drawers of the checks demanded reimbursement to their respective accounts from the
drawee-banks, which in turn demanded from the respondent, as collecting bank, the return of the
amounts they had paid on account. When the drawee-banks returned the checks to the
respondent, the latter paid their value which the former in turn paid to the Inter-Island Gas. The
respondent, for its part, debited the petitioner's current account and forwarded to the latter the
checks containing the forged indorsements, which the petitioner, however, refused to accept.

When petitioner drew another check, it was dishonored by respondent because the account had
insufficient funds due to the removal of the amount of the forged checks.

Issue:

Whether the respondent had the right to debit the petitioner's current account in the amount
corresponding to the total value of the checks

Held:

Yes. the respondent acted within legal bounds when it debited the petitioner's account. When the
petitioner deposited the checks with the respondent, the nature of the relationship created at that
stage was one of agency, that is, the bank was to collect from the drawees of the checks the
corresponding proceeds.

It is true that the respondent had already collected the proceeds of the checks when it debited the
petitioner's account, so that following the rule in Gullas vs. Philippine National Bank it might be
argued that the relationship between the parties had become that of creditor and debtor as to
preclude the respondent from using the petitioner's funds to make payments not authorized by the
latter. It is our view nonetheless that no creditor-debtor relationship was created between the
parties.

Section 23 of the Negotiable Instruments Law (Act 2031) states that

"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 to retain the instrument, or to give a discharge
therefor, or 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."

Since under the foregoing provision, a forged signature in a negotiable instrument is wholly
inoperative and no right to discharge it or enforce its payment can be acquired through or under
the forged signature except against a party who cannot invoke the forgery, it stands to reason,
upon the facts of record, that the respondent, as a collecting bank which indorsed the checks to
the drawee-banks for clearing, should be liable to the latter for reimbursement, for, as found by
the court a quo and by the appellate court, the indorsements on the checks had been forged prior
to their delivery to the petitioner. In legal contemplation, therefore, the payments made by the
drawee-banks to the respondent on account of the said checks were ineffective; and, such being
the case, the relationship of creditor and debtor between the petitioner and the respondent had
not been validly effected, the checks not having been properly and legitimately converted into
cash.

G.R. No. L-55079

November 19, 1982

METROPOLITAN BANK and TRUST COMPANY, petitioner, vs. THE FIRST NATIONAL CITY
BANK and THE COURT OF APPEALS, respondents.

Facts:

A check, payable to cash, was drawn by Joaquin Cunanan & Compnay on FNCB was deposited
to Metrobank by Salvador Sales, who had an account with the latter. Metrobank sent the cash
ceck for clearing stamping All prior endorsements and/or Lack of endorsements Guaranteed.
The check was cleared on the same day. FNCB paid Metrobank the amount of P 50,000 and the
account of Sales was credited. Sales eventually withdraw the entire proceed of the check and the
balance of his account and later closed his account.

It was later found that the actual amount of the check was P50.00 and was payable to Manila Polo
Club. FNCB notified Metrobank of the alteration. FNCB demanded reimbursement from
Metrobank for P50,000 which the latter refused.

Issue:

Which bank is liable for the payment of the altered check, the drawee bank (FNCB) or the
collecting bank (Metro Bank)

Held:

In this case, the check was not returned to Metro Bank in accordance with the 24-hour clearing
house period, but was cleared by FNCB. Failure of FNCB, therefore, to call the attention of Metro
Bank to the alteration of the check in question until after the lapse of nine days, negates whatever
right it might have had against Metro Bank in the light of the said Central Bank Circular. Its
remedy lies not against Metro Bank, but against the party responsible for the changing the name
of the payee 5 and the amount on the face of the check.

G.R. No. L-62943

July 14, 1986

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, vs. COURT OF
APPEALS (Now INTERMEDIATE APPELLATE COURT) and THE PHILIPPINE NATIONAL
BANK, respondents.

Facts:

PNB is the depository bank of MWSS and its predecessor-in-interest NWSA. The authorized
signature for one of its accounts is MWSS treasurer Jose Sanchez, auditor Pedro Aguilar, and
General Manager Victor Recio. 23 checks were issued by NWSA which were paid and cleared by
PNB and debited against the NWSA account. However, during the same time 23 checks bearing
the same numbers as the previous 23 checks were likewise paid and cleared by PNB. At the time
of their presentation, the checks bear the standard indorsement which reads all prior indorsement
and/or lack of endorsement guaranteed.'

NWSA requested from PNB the immediate restoration to its account the sum of P 3,457,903.00
which was refused by the latter.

Issue:

Whether PNB should bear the loss for the forged checks

Held:

It is clear that these three (3) NBI Reports relied upon by the petitioner are inadequate to sustain
its allegations of forgery. These reports did not touch on the inherent qualities of the signatures
which are indispensable in the determination of the existence of forgery. There must be
conclusive findings that there is a variance in the inherent characteristics of the signatures and
that they were written by two or more different persons.

Forgery cannot be presumed (Siasat, et al. v. Intermediate Appellate Court, et al, 139 SCRA 238).
It must be established by clear, positive, and convincing evidence. This was not done in the
present case.

Considering the absence of sufficient security in the printing of the checks coupled with the very
close similarities between the genuine signatures and the alleged forgeries, the twenty-three (23)
checks in question could have been presented to the petitioner's signatories without their knowing
that they were bogus checks. Indeed, the cashier of the petitioner whose signatures were
allegedly forged was unable to ten the difference between the allegedly forged signature and his
own genuine signature. On the other hand, the MWSS officials admitted that these checks could
easily be passed on as genuine.

Moreover, the petitioner is barred from setting up the defense of forgery under Section 23 of the
Negotiable Instruments Law which provides that:
SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is forged or made without
authority of the person whose signature it purports to be, it is wholly inoperative, and no right to
retain the instrument, or to give a discharge therefor, or 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.

Because it was guilty of negligence not only before the questioned checks were negotiated but
even after the same had already been negotiated. (See Republic v. Equitable Banking
Corporation, 10 SCRA 8) The records show that at the time the twenty-three (23) checks were
prepared, negotiated, and encashed, the petitioner was using its own personalized checks,
instead of the official PNB Commercial blank checks. In the exercise of this special privilege,
however, the petitioner failed to provide the needed security measures. That there was gross
negligence in the printing of its personalized checks.

G.R. No. 121413

January 29, 2001

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND

AMERICA), petitioner, vs.COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK,
N.A., respondents.

G.R. No. 121479

January 29, 2001

FORD PHILIPPINES, INC., petitioner-plaintiff, vs. COURT OF APPEALS and CITIBANK, N.A.
and PHILIPPINE COMMERCIAL INTERNATIONAL BANK, respondents.

G.R. No. 128604

January 29, 2001

FORD PHILIPPINES, INC., petitioner, vs. CITIBANK, N.A., PHILIPPINE COMMERCIAL

INTERNATIONAL BANK and COURT OF APPEALS, respondents.

Facts:

Ford drew and issued a Citibank check for P4,746,114 payable to the Commissioner of Internal
Revenue (COIR). It was deposited in IBAA and was subsequently cleared at the Central Bank.
Upon presentment with the defendant Citibank, the proceeds of the check was paid to IBAA as
collecting or depository bank however the COIR never received the proceeds of the check. As a
consequence, the plaintiff was compelled to make a second payment to the Bureau of Internal
Revenue in the amount of P4,746,114.41 which was duly received by the Bureau of Internal
Revenue.

Citibank on the other states that the Citibank Check which was drawn and issued by the plaintiff
in favor of the Commissioner of Internal Revenue was a crossed check in that, on its face were
two parallel lines and written in between said lines was the phrase "Payee's Account Only"; and
that defendant Citibank paid the full face value of the check in the amount of P4,746,114.41 to the
defendant IBAA.

The first check was deposited with IBAA, which it accepted and sent for clearing with the
indorsement at the back "all prior indorsements and/or lack of indorsements guaranteed."

This happened again two more times where the same syndicate apparently embezzled the
proceeds of the checks intended to settle Fords taxes.

Issue:

Whether Ford has the right to recover from the collecting bank (PCIBank) and the drawee bank
(Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue

Held:

Note that in these cases, the checks were drawn against the drawee bank, but the title of the
person negotiating the same was allegedly defective because the instrument was obtained by
fraud and unlawful means, and the proceeds of the checks were not remitted to the payee. It was
established that instead of paying the checks to the CIR, for the settlement of the appropriate
quarterly percentage taxes of Ford, the checks were diverted and encashed for the eventual
distribution among the members of the syndicate. As to the unlawful negotiation of the check the
applicable law is Section 55 of the Negotiable Instruments Law (NIL), which provides:

"When title defective -- The title of a person who negotiates an instrument is defective within the
meaning of this Act when he obtained the instrument, or any signature thereto, by fraud, duress,
or fore and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it
in breach of faith or under such circumstances as amount to a fraud."

Pursuant to this provision, it is vital to show that the negotiation is made by the perpetrators in
breach of faith amounting to fraud. The person negotiating the checks must have gone beyond the
authority given by his principal. If the principal could prove that there was no negligence in the
performance of his duties, he may set up the personal defense to escape liability and recover from
other parties who. Though their own negligence, allowed the commission of the crime.

In this case, we note that the direct perpetrators of the offense, namely the embezzlers belonging
to a syndicate, are now fugitives from justice. They have, even if temporarily, escaped liability for
the embezzlement of millions of pesos. We are thus left only with the task of determining who of
the present parties before us must bear the burden of loss of these millions. It all boils down to the
question of liability based on the degree of negligence among the parties concerned.

It appears that although the employees of Ford initiated the transactions attributable to an
organized syndicate, in our view, their actions were not the proximate cause of encashing the
checks payable to the CIR. The degree of Ford's negligence, if any, could not be characterized as
the proximate cause of the injury to the parties.

The crossing of the check with the phrase "Payee's Account Only," is a warning that the check
should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank
PCIBank to ascertain that the check be deposited in payee's account only. Therefore, it is the
collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors
before it could make the clearing indorsement "all prior indorsements and/or lack of indorsement
guaranteed".

banking business requires that the one who first cashes and negotiates the check must take some
percautions to learn whether or not it is genuine. And if the one cashing the check through
indifference or othe circumstance assists the forger in committing the fraud, he should not be
permitted to retain the proceeds of the check from the drawee whose sole fault was that it did not
discover the forgery or the defect in the title of the person negotiating the instrument before paying
the check. For this reason, a bank which cashes a check drawn upon another bank, without
requiring proof as to the identity of persons presenting it, or making inquiries with regard to them,
cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards
diverted to the hands of a third party. In such cases the drawee bank has a right to believe that
the cashing bank (or the collecting bank) had, by the usual proper investigation, satisfied itself of
the authenticity of the negotiation of the checks. Thus, one who encashed a check which had
been forged or diverted and in turn received payment thereon from the drawee, is guilty of
negligence which proximately contributed to the success of the fraud practiced on the drawee
bank. The latter may recover from the holder the money paid on the check.

Having established that the collecting bank's negligence is the proximate cause of the loss, we
conclude that PCIBank is liable in the amount corresponding to the proceeds of Citibank Check
No. SN-04867.

G.R. No. 158143

September 21, 2011

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, - versus - ANTONIO B.

BALMACEDA and ROLANDO N. RAMOS, Respondents.

Facts:

PCIB alleged that between 1991 and 1993, Balmaceda, by taking advantage of his position as
branch manager, fraudulently obtained and encashed 31 Managers checks in the total amount of
P10,782,150.00. PCIB moved to be allowed to file an amended complaint to implead Rolando
Ramos as one of the recipients of a portion of the proceeds from Balmacedas alleged fraud.
PCIB also increased the number of fraudulently obtained and encashed Managers checks to 34,
in the total amount of P11,937,150.00.

Issue:

Whether Ramos, who received a portion of the money that Balmaceda took from PCIB, should
also be held liable for the return of this money to the Bank

Held:

On its face, all that PCIBs evidence proves is that Balmaceda used Ramos name as a payee
when he filled up the application forms for the Managers checks. But, as the CA correctly
observed, the mere fact that Balmaceda made Ramos the payee on some of the Managers
checks is not enough basis to conclude that Ramos was complicit in Balmacedas fraud; a number
of other people were made payees on the other Managers checks yet PCIB never alleged them to
be liable, nor did the Bank adduce any other evidence pointing to Ramos participation that would
justify his separate treatment from the others. Also, while Ramos is Balmacedas brother-in-law,
their relationship is not sufficient, by itself, to render Ramos liable, absent concrete proof of his
actual participation in the fraudulent scheme.

Moreover, the evidence on record clearly shows that Balmaceda acted on his own when he
applied for the Managers checks against the bank account of one of PCIBs clients, as well as
when he encashed the fraudulently acquired Managers checks.

In considering this case, one point that cannot be disregarded is the significant role that PCIB
played which contributed to the perpetration of the fraud. We cannot ignore that Balmaceda
managed to carry out his fraudulent scheme primarily because other PCIB employees failed to
carry out their assigned tasks flaws imputable to PCIB itself as the employer.

G.R. No. 173259

July 25, 2011

PHILIPPINE NATIONAL BANK, Petitioner, - versus - F.F. CRUZ and CO., INC. Respondent.

Facts:

FFCCI had a current/savings account and a dollar savings account with PNB. Its President
Felipe Cruz and Secretary-Treasurer Angelita A. Cruz were the named signatories for the said
accounts. The said signatories on separate but coeval dates left for and returned from the USA,
Felipe on March 18, 1995 until June 10, 1995 while Angelita followed him on March 29, 1995 and
returned ahead on May 9, 1995.
While they were thus out of the country, applications for cashiers and managers checks bearing
Felipes signature were presented to and both approved by the PNB totaling P13,210,500. When
Angelita returned she discovered the unauthorized and fraudulently made checks. FFCCI
requested PNB to credit back and restore its account to the value of the checks. PNB refused.

Issue:

Whether PNB is guilty of negligence

Held:

Yes. PNB is guilty of negligence.

The court finds no reversible error in the findings of the appellate court that PNB was negligent in
the handling of FFCCIs combo account, specifically, with respect to PNBs failure to detect the
forgeries in the subject applications for managers check which could have prevented the loss. As
we have often ruled, the banking business is impressed with public trust. A higher degree of
diligence is imposed on banks relative to the handling of their affairs than that of an ordinary
business enterprise. Thus, the degree of responsibility, care and trustworthiness expected of their
officials and employees is far greater than those of ordinary officers and employees in other
enterprises. In the case at bar, PNB failed to meet the high standard of diligence required by the
circumstances to prevent the fraud. In Philippine Bank of Commerce v. Court of Appeals and The
Consolidated Bank & Trust Corporation v. Court of Appeals, where the banks negligence is the
proximate cause of the loss and the depositor is guilty of contributory negligence, we allocated the
damages between the bank and the depositor on a 60-40 ratio.

G.R. No. 139130

November 27, 2002

RAMON K. ILUSORIO, petitioner, vs. HON. COURT OF APPEALS, and THE MANILA BANKING
CORPORATION, respondents.

Facts:

Petitioner was a depositor in good standing of respondent bank. As he was then running about 20
corporations, and was going out of the country a number of times, petitioner entrusted to his
secretary, Katherine E. Eugenio, his credit cards and his checkbook with blank checks. It was also
Eugenio who verified and reconciled the statements of said checking account. Eugenio was able
to encash and deposit to her personal account about seventeen (17) checks drawn against the
account of the petitioner at the respondent bank, with an aggregate amount of P119,634.34.
Petitioner did not bother to check his statement of account until a business partner apprised him
that he saw Eugenio use his credit cards.

Private respondent, through an affidavit executed by its employee, Mr. Dante Razon, also lodged
a complaint for estafa thru falsification of commercial documents against Eugenio on the basis of
petitioners statement that his signatures in the checks were forged.

Petitioner then requested the respondent bank to credit back and restore to its account the value
of the checks which were wrongfully encashed but respondent bank refused.

Issue:

Whether or not petitioner has a cause of action against private respondent

Held:

None. To be entitled to damages, petitioner has the burden of proving negligence on the part of
the bank for failure to detect the discrepancy in the signatures on the checks. It is incumbent upon
petitioner to establish the fact of forgery, i.e., by submitting his specimen signatures and
comparing them with those on the questioned checks. Curiously though, petitioner failed to submit
additional specimen signatures as requested by the National Bureau of Investigation from which
to draw a conclusive finding regarding forgery. The Court of Appeals found that petitioner, by his
own inaction, was precluded from setting up forgery.

As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the
omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would do. In the present case, it appears that petitioner accorded his
secretary unusual degree of trust and unrestricted access to his credit cards, passbooks, check
books, bank statements, including custody and possession of cancelled checks and reconciliation
of accounts.

GR No. 42725

April 22, 1991

Republic Bank vs. CA

Republic Bank vs. Court of Appeals

Grino Aquino, J.:

Facts:

J. Roberto Delgado, is a stock holder San Miguel Corporation. San Miguel Corporation
drew a dividend check worth P240 on its account in First National City Bank in favor of Delgado.
On its face, the stated amount was fraudulent and without authority of the drawer, and was altered
by increasing the amount from P240 to P9, 240. Delgado then indorsed and deposited the check
to his account with Republic bank. After the check was endorsed to FNCB and presented for
payment by Republic Bank it was then sent through the Central Bank Clearing House. FNCB
then paid P9, 240 to Republic Bank through the Central Bank Clearing House. San Miguel
Corporation notified FNCB of the material alteration of the check in question. FNCB informed
Republic with regard to the alteration and the forgery of Delgados endorsement. By then, the
amount in the forged check was already withdrawn by Delgado from his account in the republic.
FNCB then demanded Republic Bank to refund the P9, 240 withdrawn by Delgado. The trial court
rendered judgment in favor of FNCB and it was affirmed by the Court of Appeals.

Issue:

Whether Republic, as the collecting bank, is protected, by 24-hour clearing house rule,
found in CB circular No. 9, as amended, from liability to refund the amount paid by FNCB, as
drawee of the SMC dividend check.

Held:

No.According to the Supreme Court the 24-hour clearing house rule is valid rule applicable
to commercial banks. It is true that when an indorsement is forged, the collecting bank or last
endorser, as general rule, bears the loss. But the unqualified endorsement of the collecting bank
on the check should be read together with the 24-hour regulation on the clearing house operation.
Thus, when the drawee bank fails to return a forged or altered check to the collecting bank is
absolved from liability. Unless an alteration is attributable to the fault or negligence of the drawer
himself, such as when he leaves spaces on the check which would allow the fraudulent insertion
of additional numerals in the amount appearing thereon, the remedy of the drawee bank that
negligently clears a forged and/or honor altered check for payment is against the party
responsible for the forgery or alteration, otherwise, it bears the loss. It may not charge the amount
so paid to the account of the drawer, if the latter was free from blame, nor recover it from the
collecting bank is the latter made payment after proper clearance from the drawee.

GR L-40796

July, 31 1975
Republic Bank vs. Ebrada

FACTS:

A back pay check dated January 15, 1963 at Republic Bank was encashed by respondent
Ebrada. The Bureau of Treasury, which issued the check then advised the bank that the alleged
indorsement of the check by one Martin Lorenzo was a forgery as the latter has been dead since
14 July 1952 and requested that it be refunded the sum deducted from its account. The bank
refunded the amount to the Bureau of Treasury and demanded upon Ebrada the amount that was
in question. However Ebrada refused to give in.

ISSUES:

Whether the bank can recover from Ebrada who was the last indorser of the check with the forged
indorsement.

RULING:

The Supreme Court ruled that Republic Bank should suffer the loss when it paid the amount of the
check in question to Ebrada. Republic Bank has the remedy to recover from the latter the amount
it paid to her. The reason is because as last indorser of the check, she has warranted that she has
good title to it even if in fact she did not really have because the payee of the check was already
dead 11 years before the check was issued.

G.R. No. 129015.

August 15, 2004

Samsung Construction v. Far East Bank

Facts:Petitioner, Samsung Construction held an account with respondent, Far East Bank. One
day a check worth P900,000, payable to cash, was presented by one Roberto Gonzaga in the
Makati Branch of Far East Bank. Jose Sempio certified the check was to be true. Jose Sempio
was the 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, and that the president of the company also never signed any such
check.
Issue: 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.

Held: The Supreme court held that 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 which is Far East bank in this case, cannot charge it
to the drawers account which was Samsung Construction. The fact that the forgery is clever is
immaterial in this case. 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.

Still, even if the bank performed with utmost diligence, the drawer whose signature was forged
may still recover from the bank as long as he or she is not precluded from setting up the defense
of forgery. After all, Section 23 of the Negotiable Instruments Law plainly states that no right to
enforce the payment of a check can arise out of a forged signature. Since the drawer, Samsung
Construction, is not precluded by negligence from setting up the forgery, the general rule should
apply. Consequently, if a bank pays a forged check, it must be considered as paying out of its
funds and cannot charge the amount so paid to the account of the depositor. A bank is liable,
irrespective of its good faith, in paying a forged check.

G.R. No. 132560.

January 30, 2002

WESTMONT BANK (formerly ASSOCIATED BANKING CORP.), petitioner, vs. EUGENE ONG,
respondent.

FACTS:

This case originated when respondent Ong by maintaining a current account with petitioner
Westmont Bank, sold certain shares of stocks through Island Securities Corporation, and in order
to pay respondent, Island Securities Corporation issued two managers checks in favor of
respondent Ong. However, respondent Ong was not able to get hold of the checks because his
friend Tanlimco got hold of them and then forged his signature. Tanlimco then deposited it with
petitioner, Westmont Bank. Even though respondents signature specimens were kept by
petitioner bank, they never checked it and simply accepted and credited both checks to the
account of the forger Tanlimco. After seeking help from the help of the family of the forger and the
Central bank , five months after the discovery of the fraud which proved futile, respondent Ong
sought to claim from petitioner the value of the 2 checks. Both the lower and appellate courts
rendered their decision in favor of the respondent ordering petitioner bank to pay the sum of
P1,754,787.50 plus moral and exemplary damages and attorneys fees.

Issues: Whether or not the petitioner Westmont Bank can be held liable.

Ruling: Yes, the Supreme court held petitioner Westmont Bank liable. The Supreme Court
declared that under sec 23 of the Negotiable Instruments Law, 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 to retain the instrument, or to give a discharge therefore, or 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. Hence, a forged signature is inoperative and ineffectual. 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 is genuine before chasing the check. In this case, petitioner Westmont Bank as the
collecting bank failed to do so. Hence it should bear the loss and is liable to Ong.

G.R. No. 179952,

Dec. 4, 2009

METROPOLITAN BANK AND TRUST COMPANY (formerly ASIANBANK CORPORATION) V.

BA FINANCE CORPORATION and MALAYAN INSURANCE CO. INC.

FACTS:

Lamberto Bitanga obtained from respondent BA Finance Corporation a loan to secure

which,he mortgaged his car to respondent BA Finance. Bitanga had the mortgaged car insured by
respondent Malayan Insurance Co., Inc... The car was then stolen. Based on the claim of Bitanga,
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 The check was crossed
with the notation For Deposit Payees Account Only.

Bitanga deposited the check to his account with the Asian bank Corporation, without the
indorsement or authority of his co-payee BA Finance. Asian bank Corporation now merged with
petitioner Metropolitan Bank and Trust Company 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 Asian bank but to
no avail, prompting it to file a complaint for sum of money and damages against Asian bank and
Bitanga alleging that, inter alia, it is entitled to the entire proceeds of the check.

Metro bank 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.

ISSUE:

Whether BA Finance has a cause of action against Metrobank?

HELD:

The Supreme Court Held in the affirmative. Section 41 of the Negotiable Instruments Law
provides 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.

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.

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.

G.R. No. 148211.

July 25, 2006.

SINCERE Z. VILLANUEVA v. MARLYN P. NITE.

FACTS:

Respondent allegedly took out a loan of P409,000 from petitioner. To secure the loan, respondent
issued petitioner an Asian Bank Corporation (ABC) check (Check No. AYA 020195) in the amount
of P325,500 dated February 8, 1994. The date was later changed to June 8, 1994 with the
consent and concurrence of petitioner.

The check was, however, dishonored due to a material alteration when petitioner deposited the
check on due date. On August 24, 1994, respondent, through her representative Emily P.
Abojada, remitted P235,000 to petitioner as partial payment of the loan. The balance of P174, 000
was due on or before December 8, 1994.

On August 24, 1994, however, petitioner filed an action for a sum of money and damages (Civil
Case No. Q-94-21495) against ABC for the full amount of the dishonored check. And in a decision
dated May 23, 1997, the RTC of Quezon City, Branch 101 ruled in his favor.2 When respondent
went to ABC Salcedo Village Branch on June 30, 1997 to withdraw money from her account, she
was unable to do so because the trial court had ordered ABC to pay petitioner the value of
respondents ABC check.

On August 25, 1997, ABC remitted to the sheriff a managers check amounting to P325,500
drawn on respondents account. The check was duly received by petitioner on the same date.

ABC then remitted to the sheriff the check which Villanueva received. Nite filed a petition to seek
to annul the RTC's decision. The CA held in favor Nite and was ordered to pay Nite a sum of
money for extrinsic fraud.

ISSUE: Whether the receipt of the check was legal.

RULING:

The SC ruled in favor of Nite and that Villanueva was fraudulent. The SC pointed out Villanueva's
action of having to file his complaint against the bank days after he received the P235,000
payment. By filing a complaint against the bank and Nite not impleaded within, it show his intent to
prevent her from opposing his action.

Still, the RTC decision was to be annulled because as the NIL provides, the drawee cannot be
held liable unless he accepts the check. There was no privity between ABC and Villanueva.

The contract of loan was between petitioner and respondent. No collection suit could prosper
without respondent who was an indispensable party. Rule 3, Sec. 7 of the Rules of Court states:
Sec. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants. (emphasis
ours)

An indispensable party is one whose interest in the controversy is such that a final decree will
necessarily affect his rights. The court cannot proceed without his presence.11 If an indispensable
party is not impleaded, any judgment is ineffective.12 On this, Aracelona v. Court of Appeals13
declared:

Rule 3, Section 7 of the Rules of Court defines indispensable parties as parties-in-interest without
whom there can be no final determination of an action. As such, they must be joined either as
plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action
requires, of course, the joinder of all necessary parties where possible, and the joinder of all
indispensable parties under any and all conditions, their presence being sine qua non for the
exercise of judicial power. It is precisely "when an indispensable party is not before the court (that)
the action should be dismissed." The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties but
even as to those present.

G.R. No. 132403

G.R. No. 132419

September 28, 2007

Hi-Cement Corp. V. Insular Bank

FACTS:

Enrique Tan and Lilia Tan were the controlling stockholders of E.T. Henry & Co., Inc. a company
engaged in the business of processing and distributing bunker fuel. E.T. Henry's customers were
Hi-Cement Corporation (Hi-Cement), Riverside Mills Corporation (Riverside) and Kanebo
Cosmetics Philippines, Inc. (Kanebo) who issued postdated checks for their purchases. Sometime
in 1979: Insular Bank of Asia and America (turned PCIB then Equitable PCI-Bank) granted E.T.
Henry a credit facility known as Purchase of Short Term Receivables. (re-discounting
arrangement). Through this, E.T. Henry was able to encash, with pre-deducted interest, the
postdated checks of its clients. For every transaction, E.T. Henry had to execute a promissory
note and a deed of assignment. 1979-1981: E.T. Henry was able to re-discount its clients' checks
. February 1981: 20 checks of Hi-Cement (which were crossed and which bore the restriction
deposit to payees account only) were dishonored. So were the checks of Riverside and Kanebo.
Bank filed a complaint for sum of money in CFI against E.T. Henry, the spouses Tan, Hi-Cement
(including its general manager and its treasurer as signatories of the postdated crossed checks),
Riverside and Kanebo. CA Affirmed RTC: Ordering E.T. Henry, spouses Tan, Hi-Cement,
Riverside and Kanebo, jointly and severally, to pay bank damages represented by the face value
of the postdated checks plus interests, services, charges and penalties until fully paid.

ISSUE: Whether or not Hi-Cement can still be made liable for the checks.

HELD:The Supreme Court affirmed the Court of Appeals decision with modification and
remanded it to the Regional Trial Court for recomputation. The drawer of the postdated crossed
checks was not liable to the holder who was deemed not a holder in due course. The holder in
due course may recover from the party who indorsed or encashed the checks if the latter has no
valid excuse for refusing payment. E.T. Henry had no justification to refuse payment, it should
pay. Furthermore, in the absence of any irregularity in the foreclosure proceeding or proof that it
was carried out without strict observance of the procedure, we will continue to assume its
regularity and strike down any attempt to vitiate it. In this case, E.T. Henry and the spouses Tan
made no mention of any anomaly to support the nullification of the foreclosure sale but merely
alleged a disparity in the bid price and the propertys fair market value.

G.R. No. 125851

July 11, 2006

Allied Banking Corp. V. Court of Appeals

FACTS: On January 6, 1981, petitioner Allied Bank, Manila (ALLIED) purchased Export Bill No.
BDO-81-002 in the amount of US $20,085.00 from respondent G.G. Sportswear Mfg. Corporation
(GGS). The bill, drawn under a letter of credit No. BB640549 covered Mens Valvoline Training
Suit that was in transit to West Germany (Uniger viaRotterdam) under Cont. #73/S0299. The
export bill was issued by Chekiang First Bank Ltd., Hongkong. With the purchase of the bill,
ALLIED credited GGS the peso equivalent of the aforementioned bill amounting to P151,474.52
and the receipt of which was acknowledged by the latter in its letter dated June 22, 1981.

On the same date, respondents Nari Gidwani and Alcron International Ltd. executed their
respective Letters of Guaranty, holding themselves liable on the export bill if it should be
dishonored or retired by the drawee for any reason.

Subsequently, the spouses Leon and Leticia de Villa and Nari Gidwani also executed a
Continuing Guaranty/Comprehensive Surety (surety, for brevity), guaranteeing payment of any
and all such credit accommodations which ALLIED may extend to GGS. When ALLIED negotiated
the export bill to Chekiang, payment was refused due to some material discrepancies in the
documents submitted by GGS relative to the exportation covered by the letter of credit.
Consequently, ALLIED demanded payment from all the respondents based on the Letters of
Guaranty and Surety executed in favor of ALLIED. However, respondents refused to pay,
prompting ALLIED to file an action for a sum of money.
In their joint answer, respondents GGS and Nari Gidwani admitted the due execution of the export
bill and the Letters of Guaranty in favor of ALLIED, but claimed that they signed blank forms of the
Letters of Guaranty and the Surety, and the blanks were only filled up by ALLIED after they had
affixed their signatures. They also added that the documents did not cover the transaction
involving the subject export bill.

On the other hand, the respondents, spouses de Villa, claimed that they were not aware of the
existence of the export bill; they signed blank forms of the surety; and averred that the guaranty
was not meant to secure the export bill.

Respondent Alcron, for its part, alleged that as a foreign corporation doing business in the
Philippines, its branch in the Philippines is merely a liaison office confined to the following duties
and responsibilities, to wit: acting as a message center between its office in Hongkong and its
clients in the Philippines; conducting credit investigations on Filipino clients; and providing its
office in Hongkong with shipping arrangements and other details in connection with its office in
Hongkong. Respondent Alcron further alleged that neither its liaison office in the Philippines nor
its then representative, Hans-Joachim Schloer, had the authority to issue Letters of Guaranty for
and in behalf of local entities and persons. It also invoked laches against petitioner ALLIED.

GGS and Nari Gidwani filed a Motion for Summary Judgment on the ground that since the plaintiff
admitted not having protested the dishonor of the export bill, it thereby discharged GGS from
liability. But the trial court denied the motion. After the presentation of evidence by the petitioner,
only the spouses de Villa presented their evidence. The other respondents did not. The trial court
dismissed the complaint.

On appeal, the Court of Appeals modified the ruling of the trial court holding respondent GGS
liable to reimburse petitioner ALLIED the peso equivalent of the export bill, but it exonerated the
guarantors from their liabilities under the Letters of Guaranty.

ISSUE: Whether or not Gidwani, Alcron and Spouses Villa can be held jointly and severally liable
becuase of their capacity as guarantors and surety in the absence of protest on the bill in
accordance with Section 152 of the Negotiable Instruments Law?

Ruling: The supreme court held in the affirmative. In this case, the Letters of Guaranty and
Surety clearly show that respondents undertook and bound themselves as guarantors and surety
to pay the full amount of the export bill.

Respondents claim that the petitioner did not protest upon dishonor of the export bill by Chekiang
First Bank, Ltd. According to respondents, since there was no protest made upon dishonor of the
export bill, all of them, as indorsers were discharged under Section 152 of the Negotiable
Instruments Law.

Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by respondents,
is not pertinent to this case. There are well-defined distinctions between the contract of an
indorser and that of a guarantor/surety of a commercial paper, which is what is involved in this
case. The contract of indorsement is primarily that of transfer, while the contract of guaranty is
that of personal security. The liability of a guarantor/surety is broader than that of an indorser.
Unless the bill is promptly presented for payment at maturity and due notice of dishonor given to
the indorser within a reasonable time, he will be discharged from liability thereon. On the other
hand, except where required by the provisions of the contract of suretyship, a demand or notice of
default is not required to fix the suretys liability. He cannot complain that the creditor has not
notified him in the absence of a special agreement to that effect in the contract of suretyship.
Therefore, no protest on the export bill is necessary to charge all the respondents jointly and
severally liable with G.G. Sportswear since the respondents held themselves liable upon demand
in case the instrument was dishonored and on the surety, they even waived notice of dishonor as
stipulated in their Letters of Guarantee.

G.R. No. L-56169

June 26, 1992

Travel-On, Inc. vs Court of Appeals

FACTS:

Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on behalf
of airline passengers and derived commissions therefrom. Miranda was sued by petitioner to
collect on the six postdated checks he issued which were all dishonored by the drawee banks.
Miranda, however, claimed that he had already fully paid and even overpaid his obligations and
that refunds were in fact due to him. He argued that he had issued the postdated checks not for
the purpose of encashment to pay his indebtedness but for purposes of accommodation, as he
had in the past accorded similar favors to petitioner. Petitioner however urges that the postdated
checks are per se evidence of liability on the part of private respondent and further argues that
even assuming that the checks were for accommodation, private respondent is still liable
thereunder considering that petitioner is a holder for value.

ISSUE:
Whether Miranda is liable on the postdated checks he issued even assuming that said checks
were issued for accommodation only.

RULING:

There was no accommodation transaction in the case at bar. In accommodation transactions

recognized by the Negotiable Instruments Law, an 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 therefor to the accommodated party. The latter, in other
words, receives or realizes full value which the accommodated party then must repay to the
accommodating party. But the accommodating party is bound on the check to the holder in due
course who is necessarily a third party and is not the accommodated party. In the case at bar,
Travel-On was payee of all six (6) checks, it presented these checks for payment at the drawee
bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized no
value on the checks which bounced. Miranda must be held liable on the checks involved as
petitioner is entitled to the benefit of the statutory presumption that it was a holder in due course
and that the checks were supported by valuable consideration.

G.R. No. 110782.

September 25, 1998

IRMA IDOS, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES,
respondents.
Facts: The petitioner herein, Irma L. Idos, is a businesswoman engaged in leather tanning. Her
accuser for violation of B.P. 22 is her erstwhile supplier and business partner, the complainant
below, Eddie Alarilla. As narrated by the Court of Appeals, the background of this case is as
follows:

The complainant Eddie Alarilla supplied chemicals and rawhide to the accused-appellant Irma L.
Idos for use in the latters business of manufacturing leather. In 1985, he joined the accused-
appellants business and formed with her a partnership under the style Tagumpay Manufacturing,
with offices in Bulacan and Cebu City.

However, the partnership was short lived. In January, 1986 the parties agreed to terminate their
partnership. Upon liquidation of the business the partnership had as of May 1986 receivables and
stocks worth P1,800,000.00. The complainants share of the assets was P900,000.00 to pay for
which the accused-appellant issued the following postdated checks, all drawn against Metrobank
Branch in Mandaue, Cebu.

The complainant was able to encash the first, second, and fourth checks, but the third check (Exh.
A) which is the subject of this case, was dishonored on October 14, 1986 for insufficiency of
funds.The complainant demanded payment from the accused-appellant but the latter failed to pay.
Accordingly, on December 18, 1986, through counsel, he made a formal demand for payment.
(Exh. B) In a letter dated January 2, 1987, the accused-appellant denied liability. She claimed that
the check had been given upon demand of complainant in May 1986 only as assurance of his
share in the assets of the partnership and that it was not supposed to be deposited until the
stocks had been sold.

Complainant then filed his complaint in the Office of the Provincial Fiscal of Bulacan which on
August 22, 1988 filed an information for violation of BP Blg. 22 against accused-appellant.

Complainant denied that the checks issued to him by accused-appellant were subject to the
disposition of the stocks and the collection of receivables of the business. But the accused-
appellant insisted that the complainant had known that the checks were to be funded from the
proceeds of the sale of the stocks and the collection of receivables. She claimed that the
complainant himself asked for the checks because he did not want to continue in the tannery
business and had no use for a share of the stocks.

On February 15, 1992, the trial court rendered judgment finding the accused-appellant guilty of
the crime charged. The accused-appellants motion for annulment of the decision and for
reconsideration was denied by the trial court in its order dated April 12, 1991.

Herein respondent court thereafter affirmed on appeal the decision of the trial court. Petitioner
timely moved for a reconsideration, but this was subsequently denied by respondent court in its
Resolutiondated June 11, 1993. Petitioner has now appealed to us by way of a petition for
certiorari under Rule 45 of the Rules of Court.

Issue: Whether or not Irma is guilty of violating BP. 22.

Ruling: The Supreme Court Ruled that under the circumstances obtaining in this case, we find the
petitioner to have issued the check in good faith, with every intention of abiding by her
commitment to return, as soon as able, the investments of complainant in the partnership.
Evidently, petitioner issued the check with benign considerations in mind, and not for the purpose
of committing fraud, deceit, or violating public policy

To recapitulate, we find the petition impressed with merit. Petitioner may not be held liable for
violation of B.P. 22 for the following reasons: (1) the subject check was not made, drawn and
issued by petitioner in exchange for value received as to qualify it as a check on account or for
value; (2) there is no sufficient basis to conclude that petitioner, at the time of issue of the check,
had actual knowledge of the insufficiency of funds; and (3) there was no notice of dishonor of said
check actually served on petitioner, thereby depriving her of the opportunity to pay or make
arrangements for the payment of the check, to avoid criminal prosecution.

Having resolved the foregoing principal issues, and finding the petition meritorious, we no longer
need to pass upon the validity and legality or necessity of the purported compromise agreement
on civil liability between the petitioner and the complainant.
G.R. No. 102967

February 10, 2000

Baas Jr. v. Court of Appeals

FACTS:

On February 20, 1976, petitioner, Bibiano V. Baas Jr. sold to Ayala Investment Corporation
(AYALA), 128,265 square meters of land located at Bayanan, Muntinlupa, for two million, three
hundred eight thousand, seven hundred seventy (P2,308,770.00) pesos. The Deed of Sale
provided that upon the signing of the contract AYALA shall pay four hundred sixty-one thousand,
seven hundred fifty-four (P461,754.00) pesos. The balance of one million, eight hundred forty-
seven thousand and sixteen (P1,847,016.00) pesos was to be paid in four equal consecutive
annual installments, with twelve (12%) percent interest per annum on the outstanding balance.
AYALA issued one promissory note covering four equal annual installments. Each periodic
payment of P461,754.00 pesos shall be payable starting on February 20, 1977, and every year
thereafter, or until February 20, 1980.

The same day, petitioner discounted the promissory note with AYALA, for its face value of
P1,847,016.00, evidenced by a Deed of Assignment signed by the petitioner and AYALA. AYALA
issued nine (9) checks to petitioner, all dated February 20, 1976, drawn against Bank of the
Philippine Islands with the uniform amount of two hundred five thousand, two hundred twenty-four
(P205,224.00) pesos.

In his 1976 Income Tax Return, petitioner reported the P461,754 initial payment as income from
disposition of capital asset.
n the succeeding years, until 1979, petitioner reported a uniform income of two hundred thirty
thousand, eight hundred seventy-seven (P230,877.00) pesos4 as gain from sale of capital asset.
In his 1980 income tax amnesty return, petitioner also reported the same amount of P230,877.00
as the realized gain on disposition of capital asset for the year.

On April 11, 1978, then Revenue Director Mauro Calaguio authorized tax examiners, Rodolfo
Tuazon and Procopio Talon to examine the books and records of petitioner for the year 1976.
They discovered that petitioner had no outstanding receivable from the 1976 land sale to AYALA
and concluded that the sale was cash and the entire profit should have been taxable in 1976 since
the income was wholly derived in 1976.

Tuazon and Talon filed their audit report and declared a discrepancy of two million, ninety-five
thousand, nine hundred fifteen (P2,095,915.00) pesos in petitioner's 1976 net income. They
recommended deficiency tax assessment for two million, four hundred seventy-three thousand,
six hundred seventy-three (P2,473,673.00) pesos.

Meantime, Aquilino Larin succeeded Calaguio as Regional Director of Manila Region IV-A. After
reviewing the examiners' report, Larin directed the revision of the audit report, with instruction to
consider the land as capital asset. The tax due was only fifty (50%) percent of the total gain from
sale of the property held by the taxpayer beyond twelve months pursuant to Section 345 of the
1977 National Internal Revenue Code (NIRC). The deficiency tax assessment was reduced to
nine hundred thirty six thousand, five hundred ninety-eight pesos and fifty centavos
(P936,598.50), inclusive of surcharges and penalties for the year 1976.

On June 27, 1980, respondent Larin sent a letter to petitioner informing of the income tax
deficiency that must be settled him immediately.

On September 26, 1980, petitioner acknowledged receipt of the letter but insisted that the sale of
his land to AYALA was on installment.

On June 8, 1981, the matter was endorsed to the Acting Chief of the Legal Branch of the National
Office of the BIR. The Chief of the Tax Fraud Unit recommended the prosecution of a criminal
case for conspiring to file false and fraudulent returns, in violation of Section 51 of the Tax Code
against petitioner and his accountants, Andres P. Alejandre and Conrado Baas.

On June 17, 1981, Larin filed a criminal complaint for tax evasion against the petitioner.

ISSUE:

Whether or not the promissory note should be declared cash transaction for purposes of taxation.

RULING:
The Supreme Court ruled in the affirmative. A negotiable instrument is deemed a substitute for
money and for value. According to Sec. 25 of NIL: value is any consideration sufficient to support
a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such
whether the instrument is payable on demand or at a future time. Although the proceed of a
discounted promissory note is not considered part of the initial payment, it is still taxable income
for the year it was converted into cash.

G.R. No. 84220 March 25, 1992

BENJAMIN RODRIGUEZ, petitioner,

vs.

COURT OF APPEALS, and HADJI ESMAYATEN LUCMAN, respondents.

Facts:

Petitioner Rodriguez alias Uy Tian Kiu is a businessman from Cebu City whose business, includes
the importation of various commodities from Hongkong which he occasionally ordered from Allied
Overseas Commercial Co., Ltd., a Hongkong corporation. The Managing Director of Allied
Overseas Commercial Co., Ltd. is Lin Ping Huang, a close friend of private respondent Lucman.

Petitioner Rodriguez, as a result of business transactions with the Hongkong Corporation,

accumulated an indebtedness owed to Allied Overseas in the amount of HK $418,729.60 which
had at that time in 1968 an exchange value of P540,553.00.

Upon demand for payment by the Hongkong Corporation, the petitioner issued a pay-to-cash
check dated September 11, 1970 covering the indebtedness. The check was, however,
dishonored for lack of funds, the account having been closed two months earlier.

Subsequently, the Allied Overseas Commercial Co., Ltd., through its Managing Director, Lin Ping
Huang, assigned its credit to the private respondent. The contract was evidenced by a Deed of
Assignment (Exhs. "B-2" and "B-3") duly executed before Philippine Consular officials in
Hongkong.

The assignee filed an action to collect the indebtedness. On March 4, 1985, the trial court
rendered a decision in favor of the private respondent. Benjamin Rodriguez appealed the decision
to the Court of Appeals and assigned the following as errors committed by the trial court:

1 Plaintiff is not the real party-in-interest and is therefore, without legal capacity to sue;

2 The obligation does not exist or has not been sufficiently proven to exist;

3 Venue is improperly laid.

After carefully evaluating the evidence presented by the parties, the Court of Appeals rendered
the questioned decision dismissing the appeal for lack of merit. Benjamin Rodriguez filed a motion
for reconsideration which was denied by the appellate court which stated that the arguments
submitted in support of the motion were a mere rehash of the arguments in the Appellant's Brief.

Issue: Whether or not there was subrogation.

Ruling:

The basis of the complaint is not a deed of subrogation but an assignment of credit whereby the
private respondent became the owner, not the subrogee of the credit since the assignment was
supported by HK$ 1.00 and other valuable considerations.

The case is one of the assignment of credit and not subrogation. In subrogation, the third party
pays the obligation of the debtor to the creditor with the latter's consent. As a consequence, the
paying third party steps into the shoes of the original creditor as subrogee of the latter.

An assignment of credit, on the other hand, is the process of transferring the right of the assignor
to the assignee who would then have the right to proceed against the debtor. The assignment
may be done either gratuitously or onerously, in which case, the assignment has an effect similar
to that of a sale (p. 235, Civil Code of the Philippines, Annotated, Vol. V, Paras, 1982 ed.; Nyco
Sales Corp. vs. BA Finance Corp., G.R. No. 71694, August 16, 1991).

The petitioner further contends that the consent of the debtor is essential to the subrogation.
Since there was no consent on his part, then he allegedly is not bound.

Again, we find for the respondent. The questioned deed of assignment is neither one of the
subrogation nor a power of attorney as the petitioner alleges. The deed of assignment clearly
states that the private respondent became an assignee and, therefore, he became the only party
entitled to collect the indebtedness. As a result of the Deed of Assignment, the plaintiff acquired
all rights of the assignor including the right to sue in his own name as the legal assignee.
Moreover, in assignment, the debtor's consent is not essential for the validity of the assignment
(Art. 1624 in relation to Art. 1475, Civil Code), his knowledge thereof affecting only the validity of
the payment he might make (Article 1626, Civil Code).

Article 1626 also shows that payment of an obligation which is already existing does not depend
on the consent of the debtor. It, in effect, mandates that such payment of the existing obligation
shall already be made to the new creditor from the time the debtor acquires knowledge of the
assignment of the obligation.

The law is clear that the debtor had the obligation to pay and should have paid from the date of
notice whether or not he consented.

G.R. No. L-31831 April 28, 1983

JESUS PINEDA, petitioner,

vs.

JOSE V. DELA RAMA and COURT OF APPEALS, respondents.

Facts: Dela Rama is a practising 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 who
allegedly misappropriated 11,000 cavans of palay deposited at his ricemill in Concepcion, Tarlac.
The NARIC general manager was allegedly an intimate friend of Dela Rama.

According to Dela Rama, petitioner Pineda has 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. In addition
to filling the suit to collect the loan evidenced by the matured promissory note, Dela Rama also
sued to collect P5,000.00 attorney's fees for legal services rendered as Pineda's counsel in the
case being investigated by NARIC.

The Court of First Instance of Manila decided Civil Case No. 45762 in favor of petitioner Pineda.
The court believed 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.

Issue: Whether or not the CFI erred in believing Pineda.

Ruling: The Supreme Court agreed with the trial court which believed Pineda. It is indeed unusual
for a lawyer to lend money to his client whom he had known for only three months, with no
security for the loan and on interest. Dela Rama testified that he did not even know what Pineda
was going to do with the money he borrowed from him. The petitioner had just purchased a
hacienda in Mindoro for P210,000.00, owned sugar and rice lands in Tarlac of around 800
hectares, and had P60,000.00 deposits in three banks when he executed the note. It is more
logical to believe that Pineda would not borrow P5,000.00 and P4,300.00 five days apart from a
man whom he calls a "fixer" and whom he had known for only three months.

There is no dispute that an air-conditioning unit valued at P1,250.00 was purchased by Pineda's
son and given to Dela Rama although the latter claims he paid P1,250.00 for the unit when he
received it. Pineda, however, alleged that he gave the air-conditioning unit because Dela Rama
told him that Dr. Rodriguez was asking for one air-conditioning machine of 1.5 horsepower for the
latter's NARIC office. Pineda further testified that six cavans of first class rice also intended for the
NARIC Chairman and General Manager, together with the airconditioning unit, never reached Dr.
Rodriguez but were kept by the lawyer.

BATAAN CIGAR AND CIGARETTE FACTORY, INC. v. THE COURT OF APPEALS. G.R. No.
93048. March 3, 1994.

FACTS:

Bataan Cigar & Cigarette Factory, Inc. (BCCFI), engaged with King Tim Pua George, to deliver
2,000 bales of tobacco leaf. BCCFI issued post dated crossed checks in exchange. Trusting
King's words, BCCFI issued another post-dated cross check for another purchase of tobacco
leaves.
During these time, King was dealing with State Investment House Inc.. On two separate
occasions King sold the post-dated cross checks to SIHI, that was drawn by BCCFI in favor of
King.

Because King failed to deliver the leaves, BCFI issued a stop payment to all the checks, including
those sold to SIHI.

The RTC held that SIHI had a valid claim of being a holder in due course and to collect the

checks issued by BCCFI.

ISSUE: Whether SIHI is a holder in due course.

RULING:

The SC held that SIHI is not a holder in due course thus granting the petition of BCCFI. The
purpose of cross checks is to avoid those bouncing or encashing of forged checks. Cross checks
have the following effects: it cannot be encashed but only deposited in a bank; it can only be
negotiated on its respective bank once; it serves as a warning to the hiolder that it has been
issued for a defienite purpose thus making SIHI not a holder in due course.

Still, SIHI can collect from the immediate indorser, in this case, George King.

Caltex (Philippines) Inc. vs. CA

GR 97753, 10 August 1992

-negotiability

FACTS:

Security Bank and Trust Co. issued 280 certificates of time deposit (CTD) in favor of one Mr.
Angel dela Cruz who deposited with the bank P1.12 million. Dela Cruz delivered the CTDs to
Caltex in connection with his purchase of fuel products from the latter. Subsequently, dela Cruz
informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the
issuance of the replacement CTDs. When Caltex presented said CTDs for verification with the
bank and formally informed the bank of its decision to preterminate the same, the bank rejected
Caltex claim and demand as Caltex failed to furnish copies of certain requested documents. In
1983, dela Cruz loan matured and the bank set-off and applied the time deposits as payment for
the loan. Caltex filed a complaint which was dismissed on the ground that the subject certificates
of deposit are non-negotiable.

ISSUE:

Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.

RULING:

The CTDs in question are negotiable instruments as they meet the requirements of the law for
negotiability as provided for in Section 1 of the Negotiable Instruments Law. The documents
provide that the amounts deposited shall be repayable to the depositor. And according to the
document, the depositor is the "bearer." The documents do not say that the depositor is Angel de
la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are
to be repayable to the bearer of the documents or, for that matter, whosoever may be the bearer
at the time of presentment. However, petitioner cannot recover on the CTDs. Although the CTDs
are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it
and dela Cruz, as ultimately ascertained, requires both delivery and indorsement. In this case,
there was no indorsement as the CTDs were delivered not as payment but only as a security for
dela Cruz' fuel purchases.

G.R. No. 172954 October 5, 2011

Engr. Jose E. Cayanan vs North Star International Travel, Inc.

Facts: North Star International Travel Incorporated (North Star) is a corporation engaged in the
travel agency business while petitioner is the owner/general manager of JEAC International
Management and Contractor Services, a recruitment agency. Virginia Balagtas, the General
Manager of North Star, in accommodation and upon the instruction of its client, petitioner herein,
sent the amount of US$60,000 to View Sea Ventures Ltd., in Nigeria from her personal account in
Citibank Makati. On March 29, 1994, Virginia again sent US$40,000 to View Sea Ventures by
telegraphic [4] transfer, with US$15,000 coming from petitioner. Likewise, on various dates, North
Star extended credit to petitioner for the airplane tickets of his clients, with the total amount of
such indebtedness under the credit extensions eventually reaching P510,035.47. To cover
payment of the obligations, petitioner issued five checks to North Star. When presented for
payment, the checks in the amount of P1,500,000 and P35,000 were dishonored for insufficiency
of funds while the other three checks were dishonored because of a stop payment order from
petitioner. North Star, through its counsel, wrote petitioner informing him that the checks he issued
had been dishonored. North Star demanded payment, but petitioner failed to settle his obligations.
Hence, North Star instituted Criminal Case Nos. 166549-53 charging petitioner with violation of
Batas Pambansa Blg. 22, or the Bouncing Checks Law, before the Metropolitan Trial Court
(MeTC) of Makati City. After trial, the MeTC found petitioner guilty beyond reasonable doubt of
violation of B.P. 22. On appeal, the Regional Trial Court (RTC) acquitted petitioner of the criminal
charges. The RTC also held that there is no basis for the imposition of the civil liability on
petitioner. The Court of Appeals reversed the ruling of the RTC and held petitioner civilly liable for
the value of the subject checks.

Issue: Whether or not the petitioner should be civilly liable to North Star for the value of the
checks

Held: The Supreme court ruled in the affirmative. Petitioner argues that the CA erred in holding
him civilly liable to North Star for the value of the checks since North Star did not give any
valuable consideration for the checks. He insists that the US$85,000 sent to View Sea Ventures
was not sent for the account of North Star but for the account of Virginia as her investment. He
points out that said amount was taken from Virginia s personal dollar account in Citibank and not
from North Star s corporate account. Respondent North Star, for its part, counters that petitioner is
liable for the value of the five subject checks as they were issued for value. Respondent insists
that petitioner owes North Star plus interest. Upon issuance of a check, in the absence of
evidence to the contrary, it is presumed that the same was issued for valuable consideration
which may consist either in some right, interest, profit or benefit accruing to the party who makes
the contract, or some forbearance, detriment, loss or some responsibility, to act, or labor, or
service given, suffered or undertaken by the other side. Under the Negotiable Instruments Law, it
is presumed that every party to an instrument acquires the same for a consideration or for value.
As petitioner alleged that there was no consideration for the issuance of the subject checks, it
devolved upon him to present convincing evidence to overthrow the presumption and prove that
the checks were in fact issued without valuable consideration. Sadly, however, petitioner has not
presented any credible evidence to rebut the presumption, as well as North Star s assertion, that
the checks were issued as payment for the US$85,000 petitioner owed. Petitioner claims that
North Star did not give any valuable consideration for the checks since the money was taken from
the personal dollar account of Virginia and not the corporate funds of North Star. The contention,
however, deserves scant consideration. The subject checks, bearing petitioner s signature, speak
for themselves. The fact that petitioner himself specifically named North Star as the payee of the
checks is an admission of his liability to North Star and not to Virginia Balagtas, who as manager
merely facilitated the transfer of funds. Indeed, it is highly inconceivable that an experienced
businessman like petitioner would issue various checks in sizeable amounts to a payee if these
are without consideration.

G.R. No. 126568. April 30, 2003.

QUIRINO GONZALES LOGGING CONCESSIONAIRE v. THE COURT OF APPEALS.

FACTS:
Petitioner Quirino Gonzales Logging Concessionaire applied for credit accommodation which the
Bank approved. Parcels of land were used as a security for their obligation of. Quirino Gonzales
Logging Concessionaire executed a promissory note in which they defaulted. The Bank
foreclosed the property and was subsequently owned by the Bank. The Bank then filed a
complaint for a sum of money in regards to the unpaid notes.

The notes were payable 30 days after date and provided for the solidary liability in their non-
payment at maturity. Petitioners deny having received the value of the promissory notes.

The RTC sided with petitioner but the CA reversed the decision.

ISSUE: Whether the promissory notes were valid.

RULING: The SC remanded the issue concerning the notes to the court of origin.The Supreme
court Noted Petitioner claims that they signed the notes in blank but did not receive the value of
the notes. They also admit the genuineness and due execution of the notes. The promissory
notes were negotiable as they met the requirements of Sec. 1 of the NIL. The notes are prima
facie deemed to have issued for consideration.

In any case, it is no defense that the promissory notes were signed in blank as Section 14 of the
Negotiable Instruments Law concedes the prima facie authority of the person in possession of
negotiable instruments, such as the notes herein, to fill in the blanks.

[G.R. NO. 117913. February 1, 2002]

CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD VELASCO and
ALFONSO CO, petitioners, vs. COURT OF APPEALS and PHILIPPINE BANK OF
COMMUNICATIONS, respondents.

Facts:

On March 2, 1979, Charles Lee, as President of MICO wrote private respondent Philippine Bank
of Communications (PBCom) requesting for a grant of a discounting loan/credit line in the sum of
Three Million Pesos (P3,000,000.00) for the purpose of carrying out MICOs line of business as
well as to maintain its volume of business.

On the same day, Charles Lee requested for another discounting loan/credit line of Three Million
Pesos (P3,000,000.00) from PBCom for the purpose of opening letters of credit and trust receipts.

As per agreement, the proceeds of all the loan availments were credited to MICOs current
checking account with PBCom. To induce the PBCom to increase the credit line of MICO,
petitioners executed another surety agreement in favor of PBCom on July 28, 1980, whereby they
jointly and severally guaranteed the prompt payment on due dates or at maturity of overdrafts,
promissory notes, discounts, drafts, letters of credit, bills of exchange, trust receipts and all other
obligations of any kind and nature for which MICO may be held accountable by PBCom

Upon maturity of all credit availments obtained by MICO from PBCom, the latter made a demand
for payment. Private respondent PBCom extrajudicially foreclosed MICOs real estate mortgage
upon repeated demands & emerged as the highest bidder. For the unpaid balance, PBCom then
demanded the settlement of the aforesaid obligations from herein petitioners-sureties who,
however, refused to acknowledge their obligations to PBCom under the surety agreements.
Hence, PBCom filed a complaint with prayer for writ of preliminary attachment before the Regional
Trial Court of Manila.

Petitioners (MICO and herein petitioners-sureties) denied all the allegations of the complaint filed
by respondent PBCom, and alleged that: a) MICO was not granted the alleged loans and neither
did it receive the proceeds of the aforesaid loans; b) Chua Siok Suy was never granted any valid
Board Resolution to sign for and in behalf of MICO; c) PBCom acted in bad faith in granting the
alleged loans and in releasing the proceeds thereof; d) petitioners were never advised of the
alleged grant of loans and the subsequent releases therefor, if any; e) since no loan was ever
released to or received by MICO, the corresponding real estate mortgage and the surety
agreements signed concededly by the petitioners-sureties are null and void.

Issue: WON the proceeds of the loans or the goods under the trust receipts were ever delivered to
and received by MICO.

Held: It is clear that letters of credit, being usually bank to bank transactions, involve more than
just one bank. Consequently, there is nothing unusual in the fact that the drafts presented in
evidence by respondent bank were not made payable to PBCom.

A trust receipt is considered as a security transaction intended to aid in financing importers and
retail dealers who do not have sufficient funds or resources to finance the importation or purchase
of merchandise, and who may not be able to acquire credit except through utilization, as collateral
of the merchandise imported or purchased.

A trust receipt, therefor, is a document of security pursuant to which a bank acquires a security
interest in the goods under trust receipt. Under a letter of credit-trust receipt arrangement, a bank
extends a loan covered by a letter of credit, with the trust receipt as a security for the loan. The
transaction involves a loan feature represented by a letter of credit, and a security feature which is
in the covering trust receipt which secures an indebtedness.
G.R. No. 139006.

November 27, 2000

REMIGIO S. ONG, petitioner, vs. PEOPLE OF THE PHILIPPINES and COURT OF APPEALS
(EIGHTH DIVISION), respondents.

Facts: That on December 17, 1992, Remigio Ong approached Marcial de Jesus in his place of
work in Pasay City and requested to be accommodated a loan of P130,000.00 which he needed
to pay the 13th month pay of his employees at the Master Metal Craft. Complainant De Jesus
obliged by issuing Ong Producers Bank check No. 489427 payable to Ong's Master Metal Craft.
In order to insure the repayment, complainant required Mr. Ong to issue a post-dated check for
the same amount to become due on January 16, 1993. Mr. Ong therefore issued FEBTC Check
No. 381937, dated January 16, 1993 .Exh. "A-4" show(s) that Remigio Ong negotiated the
Producers Bank Check issued to him by De Jesus on the same day, December 17, 1992,
although this is at variance with which show(s) that the check was deposited in Ong's account
only on May 26, 1993 and debited for the said amount of P130,000.00. At any rate, whatever the
date the loan check was encashed by Remigio Ong, what is certain was that the check was
encashed for value and debited to Ong's account.

In the meanwhile, Ong's FEBTC check dated January 16, 1993 was deposited by Marcial De
Jesus in his account at Producers Bank on May 26, 1993 which was promptly returned the
following day by FEBTC for reason that it was drawn against insufficient funds (DAIF), meaning,
the check was dishonored by FEBTC for lack of sufficient funds. That thereafter, De Jesus
verbally notified Remigio Ong of his bounced check several times but unacted until made a written
formal demand on September 10, 1993. For failure of Ong to make arrangement for the payment
or replacement of the bounced check, De Jesus filed this case

Issue: Whether or not the Check issued for a consideration has a consequence in this case.

Ruling: Petitioner's argument that the subject check was issued without consideration is
inconsequential. The law invariably declares the mere act of issuing a worthless check as malum
prohibitum. We quote with approval the appellate court's findings on this matter:

In actions based upon a negotiable instrument, it is unnecessary to aver or prove consideration,

for consideration is imported and presumed from the fact that it is a negotiable instrument. The
presumption exists whether the words "value received" appear on the instrument or not
(Agbayani, A.F., Commentaries and Jurisprudence on the Commercial Laws of the Philippines,
1989 Ed., Vol. 1, p. 227, emphasis supplied). Furthermore, such contention is also
inconsequential in Batas Pambansa Blg. 22.

Rizal Commercial Banking Corporation vs Hi-Tri Development Corporation

G.R. No. 192413 June 13, 2012

Facts: Luz Bakunawa and her husband Manuel, now deceased (Spouses Bakunawa) are
registered owners of six (6) parcels of land covered by TCT Nos. 324985 and 324986 of the
Quezon City Register of Deeds, and TCT Nos. 103724, 98827, 98828 and 98829 of the Marikina
Register of Deeds. These lots were sequestered by the Presidential Commission on Good
Government [(PCGG)]. Sometime in 1990, a certain Teresita Millan (Millan), through her
representative, Jerry Montemayor, offered to buy said lots for 6,724,085.71, with the promise
that she will take care of clearing whatever preliminary obstacles there may be to effect a
completion of the sale. The Spouses Bakunawa gave to Millan the Owners Copies of said TCTs
and in turn, Millan made a downpayment of 1,019,514.29 for the intended purchase. However,
for one reason or another, Millan was not able to clear said obstacles. As a result, the Spouses
Bakunawa rescinded the sale and offered to return to Millan her downpayment of 1,019,514.29.
However, Millan refused to accept back the 1,019,514.29 down[]payment. Consequently, the
Spouses Bakunawa, through their company, the Hi-Tri Development Corporation (Hi-Tri) took out
on October 28, 1991, a Managers Check from RCBC-Ermita in the amount of 1,019,514.29,
payable to Millans company Rosmil Realty and Development Corporation (Rosmil) c/o Teresita
Millan and used this as one of their basis for a complaint against Millan and Montemayor which
they filed with the Regional Trial Court of Quezon City, Branch 99. On January 31, 2003, during
the pendency of the above mentioned case and without the knowledge of [Hi-Tri and Spouses
Bakunawa], RCBC reported the 1,019,514.29-credit existing in favor of Rosmil to the Bureau of
Treasury as among its unclaimed balances as of January 31, 2003. Allegedly, a copy of the
Sworn Statement executed by Florentino N. Mendoza, Manager and Head of RCBCs Asset
Management, Disbursement & Sundry Department (AMDSD) was posted within the premises of
RCBC-Ermita.

Issue: Whether or not the escheat of the account in RCBC is proper.

Held: No. An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank
(drawee), requesting the latter to pay a person named therein (payee) or to the order of the payee
or to the bearer, a named sum of money. The issuance of the check does not of itself operate as
an assignment of any part of the funds in the bank to the credit of the drawer. Here, the bank
becomes liable only after it accepts or certifies the check. After the check is accepted for payment,
the bank would then debit the amount to be paid to the holder of the check from the account of the
depositor-drawer.

There are checks of a special type called managers or cashiers checks. These are bills of
exchange drawn by the banks manager or cashier, in the name of the bank, against the bank
itself. Typically, a managers or a cashiers check is procured from the bank by allocating a
particular amount of funds to be debited from the depositors account or by directly paying or
depositing to the bank the value of the check to be drawn. Since the bank issues the check in its
name, with itself as the drawee, the check is deemed accepted in advance. Ordinarily, the check
becomes the primary obligation of the issuing bank and constitutes its written promise to pay upon
demand.

G.R. No. 107898 December 19, 1995

MANUEL LIM and ROSITA LIM, petitioners,

vs.

COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

Facts:

Manuel Lim and Rosita Lim are the officers of the Rigi Bilt Industries, Inc. (RIGI). RIGI had been
transacting business with Linton Commercial Company, Inc. The Lims ordered 100 pieces of mild
steel plates from Linton and were delivered to the Lims place of business which was in Caloocan.
To pay Linton, the Lims issued a postdated check for P51,800.00. On a different date, the Lims
also ordered another 65 pcs of mild steel plates and were delivered in the place of business. They
again issued another postdated check. On that same day, they also ordered purlins worth
P241,800 which were delivered to them on various dates. The Lims issued 7 checks for this.
When the 7 checks were presented to the drawee bank (Solidbank), it was dishonored because
payment for the checks had been stopped and/or insufficiency of funds. So the Lims were
charged with 7 counts of violation of Bouncing Checks Law. The Malabon trial court held that the
Lims were guilty of estafa and violation of BP 22. They went to CA on appeal. The CA acquitted
the Lims of estafa, on the ground that the checks were not made in payment of an obligation
contracted at the time of their issuance. However, the CA affirmed the finding that they were guilty
of violation for BP 22. Motion for Reconsideration to SC.

Issue: Whether or not the issue was within the jurisdiction of the Malabon Trial Court

Held:

It is settled that venue in criminal cases is a vital ingredient of jurisdiction. It shall be where the
crime or offense was committed or any one of the essential ingredients thereof took place.
In determining the proper venue for these cases, the following are material factsthe checks
were issued at the place of business of Linton; they were delivered to Linton at the same place;
they were dishonored in Kalookan City; petitioners had knowledge of the insufficiency of funds in
their account.

Under Section 191 of the Negotiable Instruments Law, issue means the first delivery of the

instrument complete in its form to a person who takes it as holder. The term holder on the
other hand refers to the payee or indorsee of a bill or note who is in possession of it or the bearer
thereof. The important place to consider in the consummation of a negotiable instrument is the
place of delivery. Delivery is the final act essential to its consummation as an obligation.

G.R. No. 111190 June 27, 1995

LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his personal capacity as
garnishee,petitioner,
vs.

HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, Cebu City, and RAUL H. SESBREO,
respondents.

Facts:

Raul Sebreo filed a complaint for damages against Fiscal Bienvenido Mabanto Jr. of Cebu City.
Sebreo won and he was awarded the payment of damages. Judge Burgos ordered De La
Victoria, custodian of the paychecks of Mabanto, to hold the checks and convey them to Sebreo
instead. De La Victoria assailed the order as he said that the paychecks and the amount thereon
are not yet the property of Mabanto because they are not yet delivered to him; that since there is
no delivery of the checks to Mabanto, the checks are still part of the public funds; and the checks
due to the foregoing cannot be the proper subject of garnishment.

ISSUE: Whether or not De La Victoria is correct.

HELD: Yes. Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the purpose of giving
effect thereto. As ordinarily understood, delivery means the transfer of the possession of the
instrument by the maker or drawer with intent to transfer title to the payee and recognize him as
the holder thereof.

G.R. No. 112392.

February 29, 2000

BPI vs. Court of Appeals and Napiza

FACTS:

A certain Henry Chan owned a Continental Bank Managers Check payable to "cash" in the
amount of Two Thousand Five Hundred Dollars ($2,500.00). Chan went to the office of Benjamin
Napiza and requested him to deposit the check in his dollar account by way of accommodation
and for the purpose of clearing the same. Private respondent acceded, and agreed to deliver to
Chan a signed blank withdrawal slip, with the understanding that as soon as the check is cleared,
both of them would go to the bank to withdraw the amount of the check upon private respondents
presentation to the bank of his passbook. Napiza thus endorsed the check and deposited it in a
Foreign Currency Deposit Unit (FCDU) Savings Account he maintained with BPI. Using the blank
withdrawal slip given by private respondent to Chan, one Ruben Gayon, Jr. was able to withdraw
the amount of $2,541.67 from Napiza's FCDU account. It turned out that said check deposited by
private respondent was a counterfeit check.

When BPI demanded the return of $2,500.00, private respondent claimed that he deposited the
check "for clearing purposes" only to accommodate Chan.
Petitioner claims that private respondent, having affixed his signature at the dorsal side of the
check, should be liable for the amount stated therein in accordance with the provision of the
Negotiable Instruments Law on the liability of a general indorser (Sec. 66).

ISSUE:

Whether private respondent is obliged to return the money paid out by BPI on a counterfeit check
even if he deposited the check "for clearing purposes" only to accommodate Chan.

RULING:

Ordinarily private respondent may be held liable as an indorser of the check or even as an
accommodation party. However, petitioner BPI, in allowing the withdrawal of private respondents
deposit, failed to exercise the diligence of a good father of a family. BPI violated its own rules by
allowing the withdrawal of an amount that is definitely over and above the aggregate amount of
private respondents dollar deposits that had yet to be cleared. The proximate cause of the
eventual loss of the amount of $2,500.00 on BPI's part was its personnels negligence in allowing
such withdrawal in disregard of its own rules and the clearing requirement in the banking system.
In so doing, BPI assumed the risk of incurring a loss on account of a forged or counterfeit foreign
check and hence, it should suffer the resulting damage.

GR No. 101163 January 11, 1993

State Investment House Inc. vs. CA

Bellosillo, J.:

Facts:

Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on
commission, two postdated checks in the amount of fifty thousand each. Thereafter, Victoriano
negotiated the checks to State Investment House, Inc. When Moulic failed to sell the jewellry, she
returned it to Victoriano 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 dishonoured for insufficiency of funds.

Issues:

Whether or not State Investment House inc. was a holder of the check in due course
Held: Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence
shows that: on the faces of the post dated checks were complete and regular; that State
Investment House Inc. bought the checks from Victoriano before the due dates; that it was taken
in good faith and for value; and there was no knowledge with regard that the checks were issued
as security and not for value. A prima facie presumption exists that a holder of a negotiable
instrument is a holder in due course. Moulic failed to prove the contrary.

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.

G. R. No. 115410

February 27, 1998

JUAN CASABUENA, petitioner, vs. HON. COURT OF APPEALS and SPOUSES CIRIACO
URDANETA AND OFELIA IPIL-URDANETA, respondents.

FACTS:

The private respondent is one of the grantees in the parcel of land by the City of Manila through
its land reform program. Being in debt to Arsenia Benin, he ceded his rights over the land through
a deed of assignment to secure the debt.

The parties verbally agreed that Urdaneta can redeem the property upon payment of the loan
within three years from the date of assignment and that the failure to pay would transfer the
physical possession of the lot to Benin for a period of 15 years, without actual transfer of title and
ownership to the latter.

The administration of the property was further assigned to Candido and Juan Casabuena , to
whom Benin had transferred her right, title and interest. From 1972 to 1976, Juan Casabuena was
benins rental collector. However, their relationship soured which compelled the latter to name as
administrator Angel Tanjuakio, who filed a complaint for ejectment against the petitioner.

ISSUE:

Whether or not a deed of assignment transfer ownership of property to assignee.

HELD:

No. The act of assignment could not have operated to efface liens or restrictions burdening the
right assigned, because an assignee cannot acquire a greater right than that pertaining to the
assignor. At most, an assignee can only acquire rights duplicating those which his assignor is
entitled by law to exercise. In the case at bar, the Casabuenas merely stepped into Benins shoes,
who was not so much an owner as a mere assignee of the rights of her debtors. Since they did
not acquire any right over the land in question, it follows that Benin conveyed nothing to
defendants with respect to the property.

While it is true that the duplex is owned by Benin, the Casabuenas mistakenly believed that the
deed included cession of rights of ownership over the land as well. The encumbrance of the
property may be deemed as an exercise of their right of ownership over the property considering
that, under the law, only owners of certain properties may mortgage the same. By mortgaging a
piece of property, a debtor merely subjects it to a lien but ownership thereof is not parted with. As
a result, notwithstanding the encumbrance of the Bulacan lot through a deed of assignment in
favor of Benin, the spouses Urdaneta remain its owners, to the exclusion of petitioner.

G. R. No. 72593

April 30, 1987

CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T. VERGARA,

petitioners,

vs.

IFC LEASING AND ACCEPTANCE CORPORATION, respondent.

FACTS:

The petitioner is a corporation engaged in the logging business. It had for its program of logging
activities for the year 1978 the opening of additional roads, and simultaneous logging operations
along the route of said roads, in its logging concession area at Baganga, Manay, and Caraga,
Davao Oriental. For this purpose, it needed two (2) additional units of tractors. Petitioner bought
from Atlantic Gulf and Pacific Company, through its sister company, Industrial Products Marketing,
two used tractors. The petitioner was issued a sales invoice for the two used tractors and at the
same time, the deed of sale with chattel mortgage with promissory note was issued. The seller
assigned the deed of sale with chattel mortgage and the promissory note to the respondent. After
the completion of the assignment, the two used tractors were delivered. But, merely 14 days after,
the two tractors broke down. Although the seller acquired the services of mechanics, the two
tractors were not repaired because according to them, they were no longer serviceable. The
petitioner now would delay the payments on the promissory notes until the seller completes its
obligation under the warranty.

Thereafter, a collection suit was filed against petitioner for the payment of the promissory note
where IFC filed against Consolidated for the recovery of the principal sum P1,093,789.71, interest
and attorney's fees. The RTC ruled in favor of IFC which decision was affirmed by the Court of
Appeals whn it was brought on appeal by saying that, a breach of warranty if any, is not a defense
available to Consolidated either to withdraw from the contract and/or demand a proportionate
reduction of the price with damages in either case.

ISSUE:

Whether or not a non-negotiable promissory note may also be assigned.

HELD:

YES. The subject promissory note may be assigned. It follows then that the respondent can never
be a holder in due course but remains a mere assignee of the note in question. Thus, the
petitioner may raise against the respondent all defenses available to it as against the seller-
assignor.

This liability as a general rule extends to the corporation to whom it assigned its rights and
interests unless the assignee is a holder in due course of the promissory note in question,
assuming the note is negotiable, in which case, the latters rights are based on a
negotiable instrument and assuming further that the petitioners defense may not prevail
against it.

The promissory note in question is not a negotiable instrument. The promissory note in
question lacks the so-called words of negotiability. And as such, it follows that the respondent can
never be a holder in due course but remains merely an assignee of the note in question.
Thus, the petitioner may raise against the respondents all defenses available to it against
the seller.

G. R. No. 89252

May 24, 1993

SESBRENO, petitioner, v. COURT OF APPEALS, respondent.

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 the 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.
However, 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. It was stamped as
non-negotiable on its face. Since 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 or not the promissory note is negotiable or not.

HELD:
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.

The decision of the Court of Appeals is modified and set aside where the complaint is dismissed
against Pilipinas Bank. But the Pilipinas Bank is ordered to indemnify the petitioner for damages
with legal interest. And as modified, the decision of the Court of Appeals is affirmed.

G. R. No. 93397

March 3, 1997

TRADERS ROYAL BANK, petitioner, v. COURT OF APPEALS, respondent.

FACTS:

Filriters Guaranty Assurance Corporation (FGAC) is the owner of several Central Bank
Certificates of Indebtedness (CBCI). These certificates are actually proof that FGAC has the
required reserve investment with the Central Bank to operate as an insurer and to protect third
persons from whatever liabilities FGAC may incur. In 1979, FGAC agreed to assign said CBCI to
Philippine Underwriters Finance Corporation (PUFC). Later, PUFC sold said CBCI to Traders
Royal Bank (TRB). Said sale with TRB comes with a right to repurchase on a date certain.
However, when the day to repurchase arrived, PUFC failed to repurchase said CBCI. This
resulted to TRB requesting the Central Bank to have the CBCI be registered in TRBs name.
However, the Central Bank refused because it alleged that the CBCI are not negotiable. Further,
the transfer from FGAC to PUFC is not valid. Since it was invalid, PUFC acquired no valid title
over the CBCI because the subsequent transfer from PUFC to TRB is likewise invalid.
TRB then filed a petition for mandamus to compel the Central Bank to register said CBCI in TRBs
name. TRB averred that PUFC is the alter ego of FGAC that, PUFC owns 90% of FGAC. Further,
the two corporations have identical sets of directors that payment of said CBCI to PUFC is like a
payment to FGAC hence the sale between PUFC and TRB is valid. In short, TRB avers that that
the veil of corporate fiction, between PUFC and FGAC, should be pierced because the two
corporations allegedly used their separate identity to defraud TRD into buying said CBCI.

ISSUE:

Whether or not Traders Royal Bank is correct.

HELD:

No. Traders Royal Bank failed to show that the corporate fiction is used by the two corporations to
defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a
mere alter ego or business conduit of a person. TRB merely showed that PUFC owns 90% of
FGAC and that their directors are the same. The identity of PUFC cant be maintained as that of
FGAC because of this mere fact; there is nothing else which could lead the court under the
circumstance to disregard their corporate personalities. Further, TRB cant argue that it was
defrauded into buying those certificates. In the first place, TRB as a banking institution is not
ignorant about these types of transactions. It should know for a fact that a certificate of
indebtedness is not negotiable because the payee therein is inscribed specifically and that the
Central Bank is obliged to pay the named payee only and no one else.

G. R. No. 72593

April 30, 1987

CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T. VERGARA,

petitioners,

vs.

IFC LEASING AND ACCEPTANCE CORPORATION, respondent.

FACTS:

The petitioner is a corporation engaged in the logging business. It had for its program of logging
activities for the year 1978 the opening of additional roads, and simultaneous logging operations
along the route of said roads, in its logging concession area at Baganga, Manay, and Caraga,
Davao Oriental. For this purpose, it needed two (2) additional units of tractors. Petitioner bought
from Atlantic Gulf and Pacific Company, through its sister company, Industrial Products Marketing,
two used tractors. The petitioner was issued a sales invoice for the two used tractors and at the
same time, the deed of sale with chattel mortgage with promissory note was issued. The seller
assigned the deed of sale with chattel mortgage and the promissory note to the respondent. After
the completion of the assignment, the two used tractors were delivered. But, merely 14 days after,
the two tractors broke down. Although the seller acquired the services of mechanics, the two
tractors were not repaired because according to them, they were no longer serviceable. The
petitioner now would delay the payments on the promissory notes until the seller completes its
obligation under the warranty.

Thereafter, a collection suit was filed against petitioner for the payment of the promissory note
where IFC filed against Consolidated for the recovery of the principal sum P1,093,789.71, interest
and attorney's fees. The RTC ruled in favor of IFC which decision was affirmed by the Court of
Appeals whn it was brought on appeal by saying that, a breach of warranty if any, is not a defense
available to Consolidated either to withdraw from the contract and/or demand a proportionate
reduction of the price with damages in either case.

ISSUE:

Whether or not IFC is a holder in due course of the negotiable promissory note so as to bar
completely all the available defenses of the Consolidated against IPM

HELD:

This liability as a general rule extends to the corporation to whom it assigned its rights and
interests unless the assignee is a holder in due course of the promissory note in question,
assuming the note is negotiable, in which case, the latters rights are based on a
negotiable instrument and assuming further that the petitioners defense may not prevail
against it.

The promissory note in question is not a negotiable instrument. The promissory note in
question lacks the so-called words of negotiability. And as such, it follows that the respondent can
never be a holder in due course but remains merely an assignee of the note in question.
Thus, the petitioner may raise against the respondents all defenses available to it against
the seller.
G. R. No. 89252

May 24, 1993

SESBRENO, petitioner, v. COURT OF APPEALS, respondent.

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 the 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.
However, 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. It was stamped as
non-negotiable on its face. Since 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 or not the non-negotiability of a promissory note prevents its assignment.

HELD:

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.
G. R. No. 93397

March 3, 1997

TRADERS ROYAL BANK, petitioner, v. COURT OF APPEALS, respondent.

FACTS:

Filriters Guaranty Assurance Corporation (FGAC) is the owner of several Central Bank
Certificates of Indebtedness (CBCI). These certificates are actually proof that FGAC has the
required reserve investment with the Central Bank to operate as an insurer and to protect third
persons from whatever liabilities FGAC may incur. In 1979, FGAC agreed to assign said CBCI to
Philippine Underwriters Finance Corporation (PUFC). Later, PUFC sold said CBCI to Traders
Royal Bank (TRB). Said sale with TRB comes with a right to repurchase on a date certain.
However, when the day to repurchase arrived, PUFC failed to repurchase said CBCI. This
resulted to TRB requesting the Central Bank to have the CBCI be registered in TRBs name.
However, the Central Bank refused because it alleged that the CBCI are not negotiable. Further,
the transfer from FGAC to PUFC is not valid. Since it was invalid, PUFC acquired no valid title
over the CBCI because the subsequent transfer from PUFC to TRB is likewise invalid.

TRB then filed a petition for mandamus to compel the Central Bank to register said CBCI in TRBs
name. TRB averred that PUFC is the alter ego of FGAC that, PUFC owns 90% of FGAC. Further,
the two corporations have identical sets of directors that payment of said CBCI to PUFC is like a
payment to FGAC hence the sale between PUFC and TRB is valid. In short, TRB avers that that
the veil of corporate fiction, between PUFC and FGAC, should be pierced because the two
corporations allegedly used their separate identity to defraud TRD into buying said CBCI.

ISSUE:

Whether or not TRBs allegations

HELD:

No. Traders Royal Bank failed to show that the corporate fiction is used by the two corporations to
defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a
mere alter ego or business conduit of a person. The CBCI is not a negotiable instrument in the
absence of words of negotiability under the Negotiable Instruments Law. TRB merely showed that
PUFC owns 90% of FGAC and that their directors are the same. The identity of PUFC cant be
maintained as that of FGAC because of this mere fact; there is nothing else which could lead the
court under the circumstance to disregard their corporate personalities. Further, TRB cant argue
that it was defrauded into buying those certificates. In the first place, TRB as a banking institution
is not ignorant about these types of transactions. It should know for a fact that a certificate of
indebtedness is not negotiable because the payee therein is inscribed specifically and that the
Central Bank is obliged to pay the named payee only and no one else.

The petition is dismissed. The appealed decision is affirmed.

G. R. No. 85419

March 9, 1993

DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,

v.

SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL
PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES, defendants-
respondents

FACTS:

Respondent Sima Wei executed and delivered to petitioner Bank a promissory note engaging to
pay the petitioner Bank or order the amount of P1,820,000.00. Then Sima Wei subsequently
issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation
in full settlement of the drawer's account evidenced by the promissory note. These two checks
however were not delivered to the petitioner-payee or to any of its authorized representatives but
instead came into the possession of respondent Lee Kian Huat, who deposited the checks without
the petitioner-payee's indorsement to the account of respondent Plastic Corporation with
Producers Bank. Although the checks were crossed and payable to petitioner Bank and bore no
indorsement of the latter, the Branch Manager of Producers Bank authorized the acceptance of
the checks for deposit and credited them to the account of said Plastic Corporation.

ISSUE:

Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks.

HELD:

No. A negotiable instrument must be delivered to the payee in order to evidence its existence as
a binding contract. Section 16 of the NIL provides that every contract on a negotiable instrument
is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto.
Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its
delivery to him. Without the initial delivery of the instrument from the drawer to the payee, there
can be no liability on the instrument. Petitioner however has a right of action against Sima Wei for
the balance due on the promissory note.
G. R. No. 111190

June 27, 1995

LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his personal capacity as
garnishee, petitioner,

vs.

HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, Cebu City, and RAUL H. SESBREO,
respondents.

FACTS:

Raul Sebreo filed a complaint for damages against Fiscal Bienvenido Mabanto Jr. of Cebu City.
Sebreo won and he was awarded the payment of damages. Judge Burgos ordered De La
Victoria, custodian of the paychecks of Mabanto, to hold the checks and convey them to Sebreo
instead. De La Victoria assailed the order as he said that the paychecks and the amount thereon
are not yet the property of Mabanto because they are not yet delivered to him; that since there is
no delivery of the checks to Mabanto, the checks are still part of the public funds; and the checks
due to the foregoing cannot be the proper subject of garnishment.

ISSUE:

Whether or not De La Victoria is correct.

HELD:

Yes. Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the purpose of giving
effect thereto. As ordinarily understood, delivery means the transfer of the possession of the
instrument by the maker or drawer with intent to transfer title to the payee and recognize him as
the holder thereof.

G. R. No. 107898

December 19, 1995

MANUEL LIM and ROSITA LIM, petitioners,

vs.

COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

FACTS:

Manuel Lim and Rosita Lim are the officers of the Rigi Bilt Industries, Inc. (RIGI). RIGI had been
transacting business with Linton Commercial Company, Inc. The Lims ordered 100 pieces of mild
steel plates from Linton and were delivered to the Lims place of business which was in Caloocan.
In order to pay Linton, the Lims issued a postdated check for P51,800.00. Again on a different
date, the Lims also ordered another 65 pcs of mild steel plates and were delivered in the place of
business. They again issued another postdated check. On that same day, they also ordered
purlins worth P241,800 which were delivered to them on various dates. The Lims issued 7 checks
for this.

When the 7 checks were presented to the drawee bank (Solidbank), it was dishonored because
payment for the checks had been stopped and/or insufficiency of funds. So the Lims were
charged with 7 counts of violation of Bouncing Checks Law.

The Malabon trial court held that the Lims were guilty of estafa and violation of BP 22. On appeal
to the Court of Appeals, the CA acquitted the Lims of estafa, on the ground that the checks were
not made in payment of an obligation contracted at the time of their issuance. However, the CA
affirmed the finding that they were guilty of violation for BP 22. Thus, this petition.

ISSUE:

Whether or not the case falls under the jurisdiction of the RTC of Malabon.

HELD:

Yes. The venue of jurisdiction lies either in the RTC Caloocan or Malabon Trial Court.

BP 22 is a continuing crime. A person charged with a transitory crime may be validly tried in any
municipality or territory where the offense was partly committed. In determining the proper venue,
the court enumerated the following, 1) 7 checks were issued to Linton in its place of business in
Navotas. 2) The checks were delivered Linton in the same place. 3) The checks were dishonored
in Caloocan 4) The Lims had knowledge of their insufficiency of funds.

The place where the bills were written, signed or dated does not necessarily fix or determine the
place where they were executed. It is the delivery that is important. It is the final act essential to its
consummation of an obligation. An undelivered bill is unoperative. The issuance and delivery of
the check must be to a person who takes it as a holder.

Although Linton sent a collector who received the checks fr. The Lims at their place of business,
the checks were actually issued and delivered to Linton in Navotas. The collector is not a holder
or an agent, he was just an employee.
G. R. No. 125851

July 11, 2006

ALLIED BANKING CORPORATION, Petitioner v. COURT OF APPEALS, G.G. SPORTSWEAR

MANUFACTURING CORPORATION, NARI GIDWANI, SPOUSES LETICIA AND LEON DE
VILLA AND ALCRON INTERNATIONAL LTD., Respondents.

FACTS:

On January 6, 1981, petitioner Allied Bank, Manila (ALLIED) purchased Export Bill No. BDO-81-
002 in the amount of US $20,085.00 from respondent G.G. Sportswear Mfg. Corporation (GGS).
The bill, drawn under a letter of credit No. BB640549 covered Mens Valvoline Training Suit that
was in transit to West Germany (Uniger via Rotterdam) under Cont. #73/S0299. The export bill
was issued by Chekiang First Bank Ltd., Hongkong. With the purchase of the bill, ALLIED credited
GGS the peso equivalent of the aforementioned bill amounting to P acknowledged by the latter in
its letter dated June 22, 1981. 151,474.52 and the receipt of which was On the same date,
respondents Nari Gidwani and Alcron International Ltd. (Alcron) executed their respective Letters
of Guaranty, holding themselves liable on the export bill if it should be dishonored or retired by the
drawee for any reason. Subsequently, the spouses Leon and Leticia de Villa and Nari Gidwani
also executed a Continuing Guaranty/Comprehensive Surety (surety, for brevity), guaranteeing
payment of any and all such credit accommodations which ALLIED may extend to GGS. When
ALLIED negotiated the export bill to Chekiang, payment was refused due to some material
discrepancies in the documents submitted by GGS relative to the exportation covered by the letter
of credit. Consequently, ALLIED demanded payment from all the respondents based on the
Letters of Guaranty and Surety executed in favor of ALLIED. However, respondents refused to
pay, prompting ALLIED to file an action for a sum of money.

ISSUE:

Whether or not private respondents are liable for the obligation since there was no protest made
after dishonor.

HELD:

Yes. Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by
respondents is not pertinent to this case. There are well-defined distinctions between the contract
of an indorser and that of a guarantor/surety of a commercial paper, which is what is involved in
this case. The contract of indorsement is primarily that of transfer, while the contract of guaranty is
that of personal security. The liability of a guarantor/surety is broader than that of an indorser
unless, the bill is promptly presented for payment at maturity and due notice of dishonor given to
the indorser within a reasonable time, he will be discharged from liability thereon. On the other
hand, except where required by the provisions of the contract of suretyship, a demand or notice of
default is not required to fix the suretys liability. He cannot complain that the creditor has not
notified him in the absence of a special agreement to that effect in the contract of suretyship.
Therefore, no protest on the export bill is necessary to charge all the respondents jointly and
severally liable with G.G. Sportswear since the respondents held themselves liable upon demand
in case the instrument was dishonored and on the surety, they even waived notice of dishonor as
stipulated in their Letters of Guarantee.

As to respondent Alcron, it is bound by the Letter of Guaranty executed by its representative

Hans-Joachim Schloer. As to the other respondents, not to be overlooked is the fact that, the
Suretyship Agreement they executed, is an expressly a solidary obligation, providing as it did
that the sureties hereby guarantee jointly and severally the punctual payment of any and all
such credit accommodations, instruments, loans, which is/are now or may hereafter become
due or owing by the borrower. It is a cardinal rule that if the terms of a contract are clear and
leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulation
shall control. In the present case, there can be no mistaking about respondents intent, as
sureties, to be jointly and severally obligated with respondent G.G. Sportswear.
G. R. No. L-2516

September 25, 1950

ANG TEK LIAN v. THE COURT OF APPEALS

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. it is because under Sec. 9 of the Negotiable Instruments Law, 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.
G. R. No. L-2861

February 26, 1951

ENRIQUE P. MONTINOLA, petitioner

v. THE PHILIPPINE NATIONAL BANK, ET. AL., respondents

FACTS:

Ramos, as a disbursing officer of an army division of the USAFE, made cash advancements w/
the Provincial Treasurer of Lanao. In exchange, the Provinciall Treasurer of Lanao gave him
a P500,000 check. Then, Ramos presented the check to Laya for encashment. Laya, in his
capacity as the Provincial Treasurer of Misamis Oriental as drawer, issued a check to Ramos in
the sum P100,000, on the Philippine National Bank as drawee. The P400,000 value of the check
was being by way of military notes. Ramos was not able to encash the check because he was
captured by the Japanese. But after his release, he sold the P30000 amount of the check to
Montinola for P90000 Japanese Military notes, of which only P45000 was paid by the latter.

The writing made by Ramos at the back of the check was to the effect that he was
assigning only P30000 of the value of the document with an instruction to the bank to pay P30000
to Montinola and to deposit the balance to Ramoss credit. But, the writing was mysteriously
obliterated and in its place, a supposed indorsement appearing on the back of the check was
made for the whole amount of the check. When the check was transferred to Montinola, the check
was long overdue by for more than 2 years. Thereafter, Montinola filed an action against PNB and
the Provincial Treasurer of Misamis Oriental to collect the sum of P100,000 which is the amount of
the check. Further, it appears that on the face of the check, the words, Agent, Phil. National
Bank under the signature of Laya only shows that Laya issued the check as an agent of PNB.

ISSUE:

Whether or not the check is a negotiable instrument.

HELD:

The words, Agent, Phil. National Bank that appears on the face of the check were added or
placed in the instrument after it was issued by the Provincial Treasurer Laya to Ramos. The check
was issued by only the Provincial Treasurer, and as an official of the Government, which was
under the obligation to provide the USAFE with advance funds, and not as agent of the bank,
which had no obligation. The court is also convinced that the addition of those words was made
after the check had been transferred by Ramos to Montinola. The insertion of those words
converted the bank from a mere drawee into a drawer. It also follows that there is a change in the
liability to be imposed. The insertion therefore is a material alteration of the instrument without the
consent of the parties liable and discharges the instrument.
G. R. No. 105774

April 25, 2002

GREAT ASIAN SALES CENTER CORPORATION and TAN CHONG LIN, petitioners,

v. COURT OF APPEALS and BANCASIA FINANCEand INVESTMENT CORPORATION,

respondents.

FACTS:

On March 17, 1981, Great Asian BOD approved a resolution authorizing its Treasurer and
General Manager, Arsenio Lim Piat, Jr. (Arsenio) to secure a loan, not exceeding 1M, from
Bancasia. Then on February 10, 1982, Great Asian BOD approved a resolution authorizing Great
Asian to secure a discounting line with Bancasia in an amount not exceeding P2M. It also
designated Arsenio as the authorized signatory to sign all instruments, documents and checks
necessary to secure the discounting line. Tan Chong Lin signed 2 surety agreements in favor of
Bancasia. Then the Great Asian, through its Treasurer and General Manager Arsenio, signed 4
Deeds of Assignment of Receivables (Deeds of Assignment), assigning to Bancasia 15 postdated
checks. The 9 checks were payable to Great Asian, 3 were payable to New Asian Emp., 3 were
payable to cash. It must be noted that the various customers of Great Asian issued these
postdated checks in payment for appliances and other merchandise. The Deed of Assignments of
assignment are the following: 1) January 12, 1982, 4 post-dated checks of P244,225.82 maturing
March 17, 1982, 2 were dishonoured, 2) January 12, 1982: 4 post-dated checks of P312,819
maturing April 1, 1982, all 4 were dishonoured, 3) February 11, 1982: 8 postdated checks of
P344,475 maturing April 30, 1982, all 8 checks were dishonoured, 4) March 5, 1982: 1 postdated
checks of P200K maturing March 18, 1982 also dishonoured.

Great Asian assigned the postdated checks to Bancasia at a discount rate of less than 24% of the
face value of the checks. Then Arsenio endorsed all the 15 dishonored checks by signing his
name at the back of the checks. The avoured ed checks bore the endorsement of Arsenio below
the stamped name of Great Asian Sales Center. The drawee banks avoured ed the 15 checks
on maturity when deposited for collection by Bancasia, with any of the following as reason for the
dishonor: account closed, payment stopped,account under garnishment,insufficiency of
funds. On March 18, 1982, Bancasias lawyer, Atty. Eladia Reyes, sent thru a registered mail to
Tan Chong Lin a letter notifying him of the dishonor and demanding payment from him. Then on
June 16, 1982, Bancasia sent by personal delivery a letter to Tan Chong Lin. On May 21, 1982
Great Asian filed a case before the CFI for insolvency listing Bancasia as one of the creditors of
Great Asian in the amount of P1,243,632.00. Also, on June 23, 1982, Bancasia filed a complaint
for collection of a sum of money against Great Asian and Tan Chong Lin.

The Court of First Instance ruled in favor of Bancasia ordering Great Asian and Tan Chong Lin to
pay jointly and severally. On appeal, the Court of Appeals decided to favor labor but it deleted the

ISSUE:

Whether or not Bancasia and Tang Chon Lin should be held liable under the Civil Code because it
was a separate and distinct deed of assignment.

HELD: Yes. Affirmed with Modification

The two board resolutions clearly authorize Great Asian to secure a loan or discounting line from
Bancasia.

Clearly, the discounting arrangements entered into by Arsenio under the Deeds of Assignment
were the very transactions envisioned in the two board resolutions of Great Asian to raise funds
for its business.

There is nothing in the Negotiable Instruments Law or in the Financing Company Act (old or new),
that prohibits Great Asian and Bancasia parties from adopting the with recourse stipulation
uniformly found in the Deeds of Assignment. Instead of being negotiated, a negotiable instrument
may be assigned.

The endorsement does not operate to make the finance company a holder in due course. For its
own protection, the finance company usually requires the assignor, in a separate and distinct
contract, to pay the finance company in the event of dishonor of the notes or checks for the
purpose of security. Otherwise, consumers who will purchase appliances on instalment can just
give their promissory notes or checks to the seller, and the seller will have no defense against the
finance company should the appliances later turn out to be defective.

As endorsee of Great Asian, Bancasia had the option to proceed against Great Asian under the
Negotiable Instruments Law. If it proceded, the Negotiable Instruments Law would have governed
Bancasias cause of action. Bancasia, however, did not choose this route. Instead, Bancasia
decided to sue Great Asian for breach of contract under the Civil Code, a right that Bancasia had
under the express with recourse stipulation in the Deeds of Assignment. Great Asian, after paying
Bancasia, is subrogated back as creditor of the receivables. Great Asian can then proceed
against the drawers who issued the checks. Even if Bancasia failed to give timely notice of
dishonor, still there would be no prejudice whatever to Great Asian.
Under the Negotiable Instruments Law, notice of dishonor is not required if the drawer has no right
to expect or require the bank to honor the check, or if the drawer has countermanded payment

In the case, all the checks were avoured ed for any of the following reasons: account closed,
account under garnishment, and insufficiency of funds. The drawers had no right to expect or
require the bank to honor the checks. Also when payment had stopped and when the drawers
had countermanded payment, are included as one of the reasons for the dishonor of a check.

Moreover, under common law, delay in notice of dishonor, where such notice is required,
discharges the drawer only to the extent of the loss caused by the delay. The obligation of Great
Asian is separate and distinct from its warranties as indorser under the Negotiable Instruments
Law. The Civil Code is the one applicable and not the Negotiable Instruments Law.

Moreover, the stipulations in the Surety Agreements are sufficiently broad, expressly
encompassing because, all the notes, drafts, bills of exchange, overdraft and other obligations of
every kind which the Principal may now or may hereafter owe the Creditor.

The appealed decision is affirmed with modification.

G. R. No. L 39641

February 28, 1983

METROPOL (BACOLOD)FINANCING and INVESTMENT CORPORATION, plaintiff-appellee,

v. SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD., defendants-
appellants.

FACTS:

Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co.,
Ltd. Payable in 12 equal monthly avoured ed with interest. Further, it provided that in case on
non-payment of any of the avoured ed, the total principal sum then remaining unpaid shall
become due and payable with an additional interest.

Sambok Motors co., a sister company of Ng Sambok Sons negotiated and indorsed the note in
favor of Metropol Financing & investment Corporation. Villaruel defaulted in the payment, upon
presentment of the promissory note, he still failed to pay the promissory note as demanded.
Therefore, Ng Sambok Sons Motors Co., Ltd. Notified Sambok as indorsee that the promissory
note has been avoured ed and demanded payment. Sambok still failed to pay. Ng Sambok Sons
filed a complaint for the collection of sum of money but during the pendency of the case, Villaruel
died. Sambok now argues that by adding the words with recourse in the indorsement of the note,
it becomes a qualified indorser, thus, it does not warrant that in case that the maker failed to pay
upon presentment it will pay the amount to the holder.

ISSUE:

Whether or not Sambok Motors Co is a qualified indorser, thus it is not liable upon the failure of
payment of the maker.

HELD:

No. A qualified indorserment constitutes the indorser a mere assignor of the title to the instrument.
It may be made by adding to the indorsers signature the words without recourse or any words of
similar import. Such indorsement relieves the indorser of the general obligation to pay if the
instrument is avoured ed but not of the liability arising from warranties on the instrument as
provided by section 65 of NIL. However, Sambok indorsed the note with recourse and even
waived the notice of demand, dishonor, protest and presentment.

Recourse means resort to a person who is secondarily liable after the default of the person who is
primarily liable. Sambok 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 Villaruel fails to pay the not the holder can go after it. The effect of such indorsement is that
the note was indorsed witout qualification. A person who indorses without qualification engages
that on due presentment, the note shall be accepted or paid, or both as the case maybe, and that
if it be avoured ed, he will pay the amount thereof to the holder. The words added by Sambok do
not limit his liability, but rather confirm his obligation as general indorser.
G. R. No. 92244

February 9, 1993

NATIVIDAD GEMPESAW, petitioner,

v. THE HONORABLE COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS,

respondents.

FACTS:

Gempesaw is the owner and operator of four grocery stores. In order to pay the debts of her
supplies, she draws checks against her account where she sign each and every crossed check
without bothering to verify the accuracy of the checks against the corresponding invoices because
she reposed full and implicit trust and confidence on her bookkeeper. Although the Bank notified
her of all checks presented to and paid by the bank, petitioner did not verify the correctness of the
returned checks, much less check if the payees actually received the checks in payment for the
supplies she received. It was only after the lapse of more 2 years that petitioner found out about
the fraudulent manipulations of her bookkeeper. And on November 7, 1984, Gempesaw made a
written demand on the respondent drawee Bank to credit her account with the money value of the
82 checks totalling P1,208.606.89 for having been wrongfully charged against her account. On
January 23, 1985, Gempesaw filed against Philippine Bank of Communications (drawee Bank) for
recovery of the money value of 82 checks charged against the Gempesaws account on the
ground that the payees indorsements were all forged. But the RTC dismissed the complaint. On
appeal to the Court of Appeals, the CA affirmed the RTCs decision because it ruled that
Gempesaw was grossly negligent in her actions which makes her actions as the proximate cases
for her financial losses.

ISSUE: Whether or not Gempesaw has a right to recover the amount attributable to forgeries.

HELD: No. Forgery is a real defense by the party whose signature was forged. A party whose
signature was forged was never a party and never gave his consent to the instrument. Since his
signature does not appear on the face of the instrument, it cannot be enforced against him even
by a holder in due course. The drawee bank as the courst said, cannot charge the account of the
drawer whose signature was forged because of the reason that, he never gave the bank his
consent the order to pay.

In the case, the checks were filled up by petitioners employee, Galang, and were later given to
her for signature. Her signing of the checks made the negotiable instruments complete. Petitioner
completed the checks by signing the, and after that, authorized Galang to deliver the forged
checks to their payees.

It is a rule that a drawee bank who has paid a check on which an indorsement has been forged,
cannot debt the account of a drawer for the amount of the check. But an exception to this rule is
when the drawer is guilty of negligence which causes the bank to honor the checks where if
applied in this case, the petitioner merely relied solely on the honesty and loyalty of her
bookkeeper and then never bothered to verify also the accuracy of the amounts of the checks she
signed the invoices attached to it. That even after receiving her bank statements, the court found
that she did not even carefulle examined the checks to make sure her payments. Therefore, the
court is convinced that the petitioner in ths case did not exercise reasonable diligence which
eventually led to the schemes of her bookkeeper.

The case is remanded to the trial court.

G. R. No. 116320

November 29, 1999

ADALIA FRANCISCO, petitioner, v. COURT OF APPEALS, HERBY COMMERCIAL and

CONSTRUCTION CORPORATION and JAIME C. ONG, respondents.

FACTS:

On June 23, 1977, Adalia Francisco (Francisco) president of A. Francisco Realty & Development
Corporation (AFRDC) and Jaime C. Ong (Ong) President and General Manager of Herby
Commercial & Construction Corporation (HCCC), entered into a contract where HCCC agreed to
undertake the construction of 35 housing units and the development of 35 hectares of land. In
their contract, HCCC was to be paid on turn-key basis (basis of the completed houses and
developed lands delivered to and accepted by AFRDC and the GSIS). To facilitate the payment,
AFRDC executed a Deed of Assignment in favor of HCCC to enable it to collect payments directly
from the GSIS. Further, the GSIS and AFRDC put up an Executive Committee Account with the
Insular Bank of Asia & America (IBAA) of P4M from which checks would be issued and co-signed
by petitioner Francisco and the GSIS Vice-President Armando Diaz (Diaz). On February 10, 1978,
HCCC filed a complaint w/ the RTC against Francisco, AFRDC and the GSIS for the collection of
the unpaid balance under the Land Development and Construction Contract in the amount of
P515,493.89 for completed and delivered housing units and land development. Ong discovered
that Diaz and Francisco had executed and signed 7 checks drawn against the IBAA and payable
to HCCC but were never delivered to HCCC. GSIS gave Francisco custody of the checks since
she promised that she would deliver the same to HCCC. But, Francisco forged the signature of
Ong, without his knowledge or consent, at the dorsal portion of the said checks to make it appear
that HCCC had indorsed the checks. Francisco also 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. On June 7, 1979, Ong filed complaints charging Francisco with estafa thru falsification of
commercial documents. According to Francisco, she agreed to grant HCCC the loans in the total
amount of P585K and covered by 18 promissory notes in order to obviate the risk of the non-
completion of the project. As a means of repayment, Ong allegedly issued a Certification
authorizing Francisco to collect HCCCs receivables from the GSIS. The RTC avoured Ong and
against IBAA and Francisco. On November 21, 1989, IBAA and HCCC entered into a
Compromise Agreement which was approved by the trial court, wherein HCCC acknowledged
receipt of the amount of P370,475.00 in full satisfaction of its claims against IBAA, without
prejudice to the right of IBAA to pursue its claims against Francisco. But on appeals, the Court of
Appeals affirmed the decision of the RTC. Francisco claims that she was, in any event, authorized
to sign Ongs name on the checks by virtue of the Certification executed by Ong in her favor giving
her the authority to collect all the receivables of HCCC from the GSIS, including the questioned
checks.

ISSUE: Whether or not Francisco can sign Ongs name on the checks.

HELD: No. The court found that the signature of Ong was forged by Francisco. The contention of
Francisco n saying that he was authorized to sign Ongs name in her favor which gives her an
authority to collect all the receivables of HCCC from GSIS has no merit.

Under the Negotiable Instruments Law, it provides that when a person is under obligation to
indorse in a representative capacity, he may indorse in such terms as to negative personal
liability. An agent, when signing, should indicate that he is merely signing as an agent in behalf of
the principal and must disclose the name of his principal. It is because he will be held
personally liable. Franciscos contentions cannot support the fact that she is guilty of forgery.

G. R. No. 172652

November 26, 2014

METROPOLITAN BANK AND TRUST COMPANY, Petitioner,

vs.
WILFRED N. CHIOK, Respondent.

x-----------------------x

G.R. No. 175302

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

vs.

WILFRED N. CHIOK, Respondent.

x-----------------------x

G.R. No. 175394

GLOBAL BUSINESS BANK, INC., Petitioner,

vs.

WILFRED N. CHIOK, Respondent.

FACTS:

This cases are three consolidated petitions that involves a managers check.

Respondent Wilfred N. Chiok (Chiok) had been engaged in dollar trading for several years. He
usually buys dollars from Gonzalo B. Nuguid (Nuguid) at the exchange rate prevailing on the date
of the sale. Chiok pays Nuguid either in cash or managers check, to be picked up by the latter or
deposited in the latters bank account. Nuguid delivers the dollars either on the same day or on a
later date as may be agreed upon between them, up to a week later. Chiok and Nuguid had been
dealing in this manner for about six to eight years, with their transactions running into millions of
pesos. For this purpose, Chiok maintained accounts with petitioners Metropolitan Bank and Trust
Company (Metrobank) and Global Business Bank, Inc. (Global Bank), the latter being then
referred to as the Asian Banking Corporation (Asian Bank). Chiok likewise entered into a Bills
Purchase Line Agreement (BPLA) with Asian Bank. Under the BPLA, checks drawn in favor of, or
negotiated to, Chiok may be purchased by Asian Bank. Upon such purchase, Chiok receives a
discounted cash equivalent of the amount of the check earlier than the normal clearing period.

On July 5, 1995, pursuant to the BPLA, Asian Bank "bills purchased" Security Bank & Trust
Company (SBTC) Managers Check (MC) No. 037364 in the amount of P25,500,000.00 issued in
the name of Chiok, and credited the same amount to the latters Savings Account No. 2-007-03-
00201-3.

Asian Bank refused to honor the checks based on the TRO. Then the collecting bank instituted a
complaint against Asian Bank before the Clearing House Corporation Arbitration Committtee for
the collection of the checks which FEBTC had allegedly allowed Nuguid to withdraw on the same
day when the checks were deposited. With regard to the violation of the TRO, the RTC ruled in
favor of Chiok. It also ordered Metopolitan Bank and Trust Company to pay the plaintiff.
ISSUE:

Whether or not the checks in issue can be transferred without prior indorsement.

HELD:

The Courts applied Section 49 of the Negotiable Instruments Law in this case that, where the
holder of an instrument payable to his order transfers it for value without indorsing it, the transfer
vests in the transferee suchtitle as the transferor had therein, and the transferee acquires in
addition, the right to have the indorsement of the transferor. But for the purpose of determining
whether the transferee is a holder in due course, the negotiation takes effect as of the time when
the indorsement is actually made. BPI is not a holder in due course with respect to managers
checks. Said checks were never indorsed by Nuguid to FEBTC, the predecessor-in-interest of
BPI, for the reason that they were deposited by Chiok directly to Nuguids account with FEBTC.
However, inview of our ruling that Nuguid has withdrawn the value of the checks from his account,
BPI has the rights of an equitable assignee for value .
G. R. No. 109491
February 28, 2001

ATRIUM MANAGEMENT CORPORATION, petitioner, vs. COURT OF APPEALS, E.T. HENRY

AND CO., LOURDES VICTORIA M. DE LEON, RAFAEL DE LEON, JR., AND HI-CEMENT
CORPORATION, respondents.

[G.R. No. 121794. February 28, 2001]

LOURDES M. DE LEON, petitioner, vs. COURT OF APPEALS, ATRIUM MANAGEMENT

CORPORATION, AND HI-CEMENT CORPORATION, respondents.

FACTS:

In 1981, Hi-Cement Corporation through its treasurer Lourdes P. De Leon and the Chairman,
Antonio De

Las Alas, now deceased, issued four post-dated checks to E.T. Henry and Co amounting to a total
of 2million pesos. The checks are crossed checks and are only made payable specifically to E.T.
Henrys account. But, E.T. Henry and Co. still indorsed the checks to Atrium Management
Corporation (AMC). In order to make sure the validity of the checks, AMC requested E.T. Henry
and Co. to get some confirmation. De Leon confirmed the checks and advised that the checks
presented were valid and to be rediscounted by AMC even though they are crossed checks that
are payable to no other accounts other than E.T. Henry and Co. only. When AMC presented the
checks, they were dishonoured because of the reason that Hi-Cement had stopped its payment.
AMC demanded for the payment of the check but it was not heeded. Thus, AMC filed complaint to
the RTC which ruled in its favor. On appeal, modified the decision of the RTC. Thus this petition.

ISSUE:

Whether or not AMC is a holder in due course.

HELD:

No. From the beginning, AMC is aware that the checks were all for deposit only to payees
account, meaning E.T. Henry and Co. which makes AMC not a holder in due course. The court
also made use of Section 52 of the Negotiable Instruments Law that, a holder in due course is a
holder who has take the instrument under the following conditions: a) That it is complete and
regular upon its face, b) that he became the holder of it before it was overdue, and without notice
to that it been previously dishonored, if such was the fact, c) that he too it in good faith and for
value, d) that at the time it was negotiated to him he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.

AMC failed to prove that it was a holder in due course because it failed in the conditions (c) and
(d) of Section 52 of the Negotiable Instruments Law.
G. R. No. 93048

March 3, 1994

BATAAN CIGAR AND CIGARETTE FACTORY, INC., petitioner,

vs.

THE COURT OF APPEALS and STATE INVESTMENT HOUSE, INC., respondents.

FACTS:

Bataan Cigar & Cigarette Factory, Inc. (BCCFI), is a corporation involved in the manufacturing of
cigarettes, purchased from King Tim Pua George (George King) 2,000 bales of tobacco leaf to be
delivered starting October 1978. On July 13, 1978, it issued crossed checks post-dated sometime
in March 1979 in the total amount of P820,000. George represented that he would complete
delivery within 3 months from December 5, 1978 so BCCFI agreed to purchase additional 2,500
bales of tobacco leaves, despite the previous failure in delivery. It issued post-dated crossed
checks in the total amount of P1.1M payable sometime in September 1979. George sold to SIHI
at a discount check amounting to P164K, post-dated March 31, 1979, drawn by BCCFI w/ George
as payee. Also on two occasions, George sold 2 checks both in the amount of P100K, post-dated
September 15 & 30, 1979 respectively, which were drawn by BCCFI with George as payee. Upon
failure to deliver, BCCFI issued on March 30, 1979 and September 14 & 28, 1979 a stop payment
order for all checks. When SIHI failed to claim from BCCFI, filed a claim against BCCFI.
The RTC ruled in favor of SIHI by saying that SIHI is holder in due course. The decision was
affirmed by the Court of Appeals when it was brought on appeal.

ISSUE:

Whether or not SIHI is a holder in due course.

HELD:

No. The Court ruled that the purpose of crossed checks is to avoid those bouncing or encashing
of forged checks.

Crossed check is one where two parallel lines were drawn across its face or across a corner
thereof where it may be crossed generally or specially. A crossed check has the following effects,
that it cannot be encahsed but it can only be deposited in a bank, that it can only be negotiated on
its respective bank once, and that it serves as a warning to the holder that it has been issued for a
definite purpose which makes SIHI not a holder n de course. Since SIHI is not a holder in due
course, it cannot oblige BCCFI to pay to it but it can collect from the immediate indorser, George.

G. R. No. 157833

October 15, 2007

BANK OF THE PHILIPPINE ISLANDS, petitioner, v. GREGORIO C. ROXAS, respondent.

FACTS:

Roxas is a trader. He delivered stocks of e=vegetable oil to Spouses Cawili and as payment,
spouses Cawili issued a personal check. Upon presentment to the drawee bank, the check was
dishonored. The Spouses Cawili then replaced the personal check into a cashiers check from BPI
drawn against the account of Mrs. Cawili. The check was gain dishonored for the reason that Mrs.
Cawilis account is already closed.Roxas then filed a complaint to the RTC for collection of the
amount of the dishonored check plus damages and cost of suit against BPI. BPI argued that the
check was dishonored for lack of consideration or value. But the RTC still ruled in favor of Roxas.
On appeal, the Court of Appeals affirmed the decision of the RTC.

ISSUE:

Whether or not Roxas is a holder in due course despite BPIs allegations that it lacks
consideration or value.

HELD:

Yes. The court applied Section 52 and Section 25 of the Negotiable Instruments Law in this case.
That as a general rule, a holder is always presumed a prima facie to be a holder in due course.
Under Section 25 of the Negotiable Instruments Law, a value is any consideration sufficient to
support a simple contract. An antecedent or pre-existing debt constitutes value, and is deemed as
such whether the instrument is payable on demand or at a future time.

Also, since the check is a cashiers check, it is really the banks own check and may be treated as
a promissory note with the bank as the maker. The check becomes the primary obligation of the
bank which issues it and constitutes a written promise to pay upon demand. BPI became liable
from the moment it issued a cashiers check.
G. R. No. 97753

August 10, 1992

CALTEX (PHILIPPINES), INC., petitioner,

vs.

COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.

FACTS:

Security bank issued Certificates of Time Deposits to Angel dela Cruz. The same were given by
Dela Cruz to petitioner in connection to his purchase of fuel products of the latter. On a later date,
Dela Cruz approached the bank manager, communicated the loss of the certificates and
requested for a reissuance. Upon compliance with some formal requirements, he was issued
replacements. Then, he secured a loan from the bank where he assigned the certificates as
security.

The petitioner, averred that the certificates were not actually lost but were given as security
for payment for fuel purchases. The bank demanded some proof of the agreement but the
petitioner failed to comply.

The loan matured and the time deposits were terminated and then applied to the payment of the
loan.

When the petitioner demanded the payment of the certificates, it was not heeded.

ISSUE:

Whether or not the Certificates of Time Deposits are negotaible.

HELD:

Yes. The CTDs are negotiable instruments.

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. The amounts deposited are payable to whoever may be the bearer.
The petitioners witness erely declared that Angle de la Cruz is the depositor as far as the bank is
concerned but other parties that are not privy to the transaction between them would not be in a
position to know that the depositor is not the bearer stated in CTDs. Thus, in this situation, it
would require that any party dealing with the CTDs to go behind the plain import of what is written
to unravel the agreement of the parties through the facts aliunde. Caltex may not encash the
CTDs because it still require delivery and indorsement. The court ruled that based from the
evidence presented, the CTDs were presented to Caltex by De la Cruz merely for guarantee or
security and not as a form of payment.

G. R. No. 138074

August 15, 2003

CELY YANG, petitioner, vs. HON. COURT OF APPEALS, PHILIPPINE COMMERCIAL

INTERNATIONAL BANK, FAR EAST BANK & TRUST CO., EQUITABLE BANKING
CORPORATION, PREM CHANDIRAMANI and FERNANDO DAVID, respondents.
FACTS:

Cely Yang agreed with private respondent Prem Chandiramani to procure from Equitable Banking
Corp. and Far East Bank and Trust Company (FEBTC) two cashiers checks in the amount of
P2.087 million each, payable to Fernando David and FEBTC dollar draft in the amount of
US$200,000.00 payable to PCIB FCDU account No. 4195-01165-2. Yang gave the checks and
the draft to Danilo Ranigo to be delivered to Chandiramani.

Ranigo was to meet Chandiramani to turn over the checks and the dollar draft, and the latter
would in turn deliver to the former Phil. Commercial International Bank (PCIB) managers check in
the sum of P4.2 million and the dollar draft in the same amount to be issued by Hang Seng Bank
Ltd. of HongKong. But Chandiramani did not appear at the rendezvous and Ranigo allegedly lost
the two cashiers checks and the dollar draft. The loss was then reported to the police. It
transpired, however that the checks and the dollar draft were never lost, for Chandiramani was
able to get hold of them without delivering the exchange consideration consisting of PCIB
Managers checks. Two hours after Chandiramani was able to meet Ranigo, the former delivered
to David the two cashiers checks of Yang and, in exchange, got US $360,000 from David, who in
turn deposited them. Chandiramani also deposited the dollar draft in

PCIG FCDU No. 4194-0165-2.

Then Yang requested FEBTC and Equitable to stop payment on the instruments she believed to
be lost. Both Banks complied then with her request, but upon the representation of PCIB, FEBTC
subsequently lifted the stop payment order on FEBTC Dollar Draft No. 4771, thus, enabling the
holder PCIB FCDU Account No. 4194-0165-2 to received the amount of US $ 200, 000

ISSUE:

(1) Whether or not David may be considered a holder in due course

(2) Whether or not the presumption that every party to an instrument acquired the same for a
consideration is applicable in this case.

HELD:

(1) Every holder of a negotiable instrument is deemed prima facie a holder in due course.
However, this presumption arises only in favor of a person who is a holder as defined in Section
191 of the Negotiable Instruments Law, meaning a payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof.
In this case, it is not disputed that David was the payee of the checks in question. The weight of
authority sustains the view that a payee may be a holder in due course. Hence, the presumption
that he is a prima facie holder in due course applies in his favor.

(2) The presumption is that every party to an instrument acquired the same for a consideration.
However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is
whether David took possession of the checks under the conditions provided for in Section 52 of
the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in
Davids case, otherwise he cannot be deemed a holder in due course.

The Court applied Section 24 of the Negotiable Instruments Law because under this provision, it
creates a presumption that every party to an instrument acquired the same for a consideration or
for value. Thus, the law itself creates a presumption in Davids favor that he gave valuable
consideration for the checks in question. In alleging otherwise, the petitioner has the onus to
prove that David got hold of the checks absent said consideration. However, petitioner failed to
discharge her burden of proof. The petitioners averment that David did not give valuable
consideration when he took possession of the checks is unsupported, devoid of any concrete
proof to sustain it. Note that both the trial court and the appellate court found that David did not
receive the checks gratis, but instead gave Chandiramani US$ 360,000 as consideration for the
said instruments.
G. R. No. L-15380

September 30, 1960

CHAN WAN, plaintiff-appellant,

vs.

TAN KIM and CHEN SO, defendants-appellees.

FACTS:

Tan Kim and her husband (Chen So) issued 11 checks payable to cash or bearer to be drawn
against their account with the Equitable Banking Corporation. The checks were negotiated to the
White House Shoe Supply (company). White House then deposited the checks to their China
Bank account. China Bank then presented the checks to Equitable Bank but the checks were
returned because Equitable Bank then had no funds to cover the checks. China Bank then
stamped the checks with Account Closed and Non negotiable China Bank Corporation.
But somehow, Chan Wan got hold of these checks (Chan Wan was not able to explain in court
how he got hold of the checks). Chan Wan now wants to encash the checks but Equitable Bank
refused accept the said checks.

ISSUE:

Whether or not Chan Wan is a holder in due course.

HELD:

No. The court said that as a general rule, a dishonored check/instrument may still be negotiated
either by indorsement or delivery and the holder may be a holder in due course provided that he
received no notice regarding the dishonor of the instrument. In this case, the checks were already
crossed on their face which gives us the idea that Chan Wan was properly notified of the dishonor
of the checks at the time of his acquisition.

The Negotiable Instruments Law does not provide that a holder who is not a holder in due course,
may not in any case, recover on the instrument. The holder may recover directly from the drawee,
in this case Tan Kim and Chen So, unless the drawees have a valid excuse in refusing payment.
The only disadvantage of a holder who is not a holder in due course is that the negotiable
instrument is subject to defense as if it were non- negotiable. The case was remanded to the
lower court for a proper determination as to how Chan Wan acquired the checks and to determine
if he is indeed entitled to payment based on some other transactions involving those checks.

G.R. No. L-19461

March 28, 1923

CHARLES A. FOSSUM vs FERNANDEZ HERMANOS et al

In 1919, the Fernandez Hermanos (FH) contracted with the American Iron Products Company,
Inc. (AIP), for the latter to build a shaft for one of the ships managed by FH. In consideration
thereof, a time draft with the Philippine National Bank (PNB), a negotiable instrument, was
executed by FH in the amount of $2,250.00 payable in 60 days. But later, FH dishonored the draft
because AIP was not able to comply with the specifications of the shaft ordered by FH.

Nevertheless, Charles Fossum, the agent of AIP here in the Philippines and the person with
whom FH was transacting with, was able to obtain the draft from the bank without consideration
(for free). Fossum then instituted an action against FH to recover the amount covered by the draft.
Fossum maintains that he is a holder in due course; that he inherited that status from the previous
holder (PNB, named payee in the draft); that as such, he is entitled to payment.

ISSUE: Whether or not Fossum is a holder in due course.

HELD: No. In the first place, Fossum, as an agent of AIP, is well aware that the draft is
unenforceable because it has no consideration, the shaft being substandard. AIP did not comply
with its obligation thus the draft was dishonored and Fossum was well aware of this as part of
the original party.

Under Sec. 59 of the Negotiable Instruments Law, there is indeed a presumption that every holder
is a holder in due course, this covers a payee or an indorsee (for bearer instruments, the bearer).
This presumption does not apply to Fossum because he was not a payee nor an indorsee. Hes
not an indorsee because the bank merely delivered the draft to him and the delivery was even
without consideration.

But if the presumption previously applied to PNB, wasnt that acquired by Fossum?

No. The presumption only covers the present holder, and not the previous holder. When a holder
delivers/indorses the instrument, he loses that presumption. It will then become incumbent upon
the person who received the instrument to prove that the previous holder is a holder in due course
especially in this case when the current holder, Fossum, cannot be granted the presumption in
Sec. 59, which is merely prima facie by the way, because of the fact that he was an original party
fully notified of the failure of the consideration.

At any rate, PNB itself is not a holder in due course due to the timely dishonor of the draft by FH.

Further even assuming PNB is a holder in due course, there is a well-known rule of law that if the
original payee of a note unenforceable for lack of consideration repurchases (in this case, the
draft was not even repurchased, it was merely delivered back) the instrument after transferring it
to a holder in due course, the paper again becomes subject in the payees hands to the same
defenses to which it would have been subject if the paper had never passed through the hands of
a holder in due course. The same is true where the instrument is re-transferred to an agent of the
payee.

G.R. No. L-15126

November 30, 1961

VICENTE R. DE OCAMPO & CO. vs. ANITA GATCHALIAN, ET AL.,

FACTS: Matilde Gonzales was a patient of the De Ocampo Clinic owned by Vicente De Ocampo.
She incurred a debt amounting to P441.75. Her husband, Manuel Gonzales designed a scheme in
order to pay off this debt: In 1953, Manuel went to a certain Anita Gatchalian. Manuel purported
himself to be selling the car of Vicente De Ocampo. Gatchalian was interested in buying said car
but Manuel told her that De Ocampo will only sell the car if Gatchalian shows her willingness to
pay for it. Manuel advised Gatchalian to draw a check of P600.00 payable to De Ocampo so that
Manuel may show it to De Ocampo and that Manuel in the meantime will hold it for safekeeping.
Gatchalian agreed and gave Manuel the check. After that, Manuel never showed himself to
Gatchalian.

Meanwhile, Manuel gave the check to his wife who in turn gave the check to De Ocampo as
payment of her bills with the clinic. De Ocampo received the check and even gave Matilde her
change (sukli). On the other hand, since Gatchalian never saw Manuel again, she placed a stop-
payment on the P600.00 check so De Ocampo was not able to cash on the check. Eventually, the
issue reached the courts and the trial court ordered Gatchalian to pay De Ocampo the amount of
the check.

Gatchalian argued that De Ocampo is not entitled to payment because there was no valid
indorsement. De Ocampo argued tha he is a holder in due course because he is the named
payee.

ISSUE: Whether or not De Ocampo is a holder in due course.

HELD: No. Section 52 of the Negotiable Instruments Law, defines holder in due course, thus:

A holder in due course is a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or
defect in the title of the person negotiating it.
The Supreme Court emphasized that if one is such a holder in due course, it is immaterial that he
was the payee and an immediate party to the instrument. The Supreme Court however ruled that
De Ocampo is not a holder in due course for his lack of good faith. De Ocampo should have
inquired as to the legal title of Manuel to the said check. The fact that Gatchalian has no obligation
to De Ocampo and yet hes named as the payee in the check hould have apprised De Ocampo;
that the check did not correspond to Matilde Gonzales obligation with the clinic because of the
fact that it was for P600.00 more than the indebtedness; that why was Manuel in possession of
the check all these gave De Ocampo the duty to ascertain from the holder Manuel Gonzales
what the nature of the latters title to the check was or the nature of his possession.

G.R. No. 156294

November 29, 2006

MELVA THERESA ALVIAR GONZALES vs. RIZAL COMMERCIAL BANKING CORPORATION

FACTS:

Gonzales, New Accounts Clerk in the Retail Banking Department at RCBC Head Office. Dr. Don
Zapanta of the Ade Medical Group drew a foreign check of $7,500 against the drawee bank
Wilshire Center Bank, LA, California payable to Eva Alviar (Alviar), Gonzales mother. Alviar then
endorsed this check. Since RCBC gives special accommodations to its employees to receive the
checks value w/o awaiting the clearing period, Gonzales presented the foreign check to Olivia
Gomez, the RCBCs Head of Retail Banking

Olivia Gomez requested Gonzales to endorse it which she did. Olivia Gomez then acquiesced to
the early encashment of the check and signed the check but indicated thereon her authority of "up
to P17,500.00 only". Carlos Ramos signed it with an "ok" annotation. Presented the check to
Rolando Zornosa, Supervisor of the Remittance section of the Foreign Department of the RCBC
Head Office, who after scrutinizing the entries and signatures authorized its encashment.
Gonzales received its peso equivalent P155,270.85 RCBC tried to collect through its
correspondent bank, the First Interstate Bank of California but it was dishonored the check
because: "END. IRREG" or irregular indorsemenT "account closed"

Unable to collect, RCBC demanded from Gonzales on November 27, 1987: Through letter
Gonzales agreed that the payment be made thru salary deduction. On October 1987, deductions
started On March 7, 1988, RCBC sent a demand letter to Alviar for the payment but she did not
respond. June 16, 1988, a letter was sent to Gonzales reminding her of her liability as an indorser
. However, on July 1988, Gonzales resigned from RCBC paying only P12,822.20 covering 10
months. RCBC filed a complaint for a sum of money against Eva Alviar, Melva Theresa Alviar-
Gonzales and the latters husband Gino Gonzales
ISSUE: Whether or not Eva Alviar and Melva Theresa Alvia-Gonzales are liable as general
endorsers

HELD: NO. RCBC should reimburse Gonzales. Under Sec. 66. Liability of general indorser. -
Every indorser who indorses without qualification, warrants to all subsequent holders in due
course

1. The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding
section;

(a) That the instrument is genuine and in all respects what it purports to be

(b) That he has a good title to it

(c) That all prior parties had capacity to contract

2. That the instrument is, at the time of his indorsement, valid and subsisting

In addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the
case may be, according to its tenor, and that if it be dishonored and the necessary proceedings
on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent
indorser who may be compelled to pay it. Under Section 66, the warranties for which Alviar and
Gonzales are liable as general endorsers in favor of subsequent endorsers extend only to the
state of the instrument at the time of their endorsements. This provision cannot be used by the
party which introduced a defect on the instrument (RCBC) w/c qualifiedly endorsed it. Had it not
been for the qualified endorsement "up to P17,500.00 only" of Olivia Gomez, who is the employee
of RCBC, there would have been no reason for the dishonor of the check. The holder or
subsequent endorser who tries to claim under the instrument which had been dishonored for
"irregular endorsement" must not be the irregular endorser himself who gave cause for the
dishonor. Otherwise, a clear injustice results when any subsequent party to the instrument may
simply make the instrument defective and later claim from prior endorsers who have no
knowledge or participation in causing or introducing said defect to the instrument, which thereby
caused its dishonor.

G.R. No. 105774

April 25, 2002

GREAT ASIAN SALES CENTER CORPORATION and TAN CHONG LIN vs. THE COURT OF
APPEALS and BANCASIA FINANCE AND INVESTMENT CORPORATION

FACTS:

On March 17, 1981, Great Asian BOD approved a resolution authorizing its Treasurer and
General Manager, Arsenio Lim Piat, Jr. (Arsenio) to secure a loan, not exceeding 1M, from Banc
asia. On February 10, 1982, Great Asian BOD approved a resolution authorizing Great Asian to
secure a discounting line with Bancasia in an amount not exceeding P2M. It also designated
Arsenio as the authorized signatory to sign all instruments, documents and checks necessary to
secure the discounting line. Tan Chong Lin signed 2 surety agreements in favor of Bancasia.
Great Asian, through its Treasurer and General Manager Arsenio, signed 4 Deeds of Assignment
of Receivables (Deeds of Assignment), assigning to Bancasia 15 postdated checks:

9 checks were payable to Great Asian

3 were payable to "New Asian Emp."

3 were payable to cash

Various customers of Great Asian issued these postdated checks in payment for appliances and
other merchandise.

Deed of Assignments of assignment:

January 12, 1982: 4 post-dated checks of P244,225.82 maturing March 17, 1982, 2 were
dishonored

January 12, 1982: 4 post-dated checks of P312,819 maturing April 1, 1982, all 4 were dishonored

February 11, 1982: 8 postdated checks of P344,475 maturing April 30, 1982, all 8 checks were
dishonored

March 5, 1982: 1 postdated checks of P200K maturing March 18, 1982 also dishonored

Great Asian assigned the postdated checks to Bancasia at a discount rate of less than 24% of the
face value of the checks. Arsenio endorsed all the 15 dishonored checks by signing his name at
the back of the checks. 8 dishonored checks bore the endorsement of Arsenio below the stamped
name of "Great Asian Sales Center". 7 dishonored checks just bore the signature of Arsenio. The
drawee banks dishonored the 15 checks on maturity when deposited for collection by Bancasia,
with any of the following as reason for the dishonor:

"account closed"

"payment stopped"

"account under garnishment"

"insufficiency of funds
On March 18, 1982: Bancasia's lawyer,Atty. Eladia Reyes, sent by registered mail to Tan Chong
Lin a letter notifying him of the dishonor and demanding payment from him. June 16, 1982,
Bancasia sent by personal delivery a letter to Tan Chong Lin. May 21, 1982: Great Asian filed a
case before the CFI for insolvency listing Bancasia as one of the creditors of Great Asian in the
amount of P1,243,632.00. June 23, 1982, Bancasia filed a complaint for collection of a sum of
money against Great Asian and Tan Chong Lin

ISSUE: Whether or not Bancasia and Tang Chon Lin should be held liable under the Civil Code
because it was a separate and distinct deed of assignment

HELD: YES. As plain as daylight, the two board resolutions clearly authorize Great Asian to
secure a loan or discounting line from Bancasia. Clearly, the discounting arrangements entered
into by Arsenio under the Deeds of Assignment were the very transactions envisioned in the two
board resolutions of Great Asian to raise funds for its business.

There is nothing in the Negotiable Instruments Law or in the Financing Company Act (old or new),
that prohibits Great Asian and Bancasia parties from adopting the with recourse stipulation
uniformly found in the Deeds of Assignment. Instead of being negotiated, a negotiable instrument
may be assigned. The endorsement does not operate to make the finance company a holder in
due course. For its own protection, therefore, the finance company usually requires the assignor,
in a separate and distinct contract, to pay the finance company in the event of dishonor of the
notes or checks. (only security) Otherwise, consumers who purchase appliances on installment,
giving their promissory notes or checks to the seller, will have no defense against the finance
company should the appliances later turn out to be defective

As endorsee of Great Asian, Bancasia had the option to proceed against Great Asian under the
Negotiable Instruments Law. Had it so proceeded, the Negotiable Instruments Law would have
governed Bancasias cause of action. Bancasia, however, did not choose this route. Instead,
Bancasia decided to sue Great Asian for breach of contract under the Civil Code, a right that
Bancasia had under the express with recourse stipulation in the Deeds of Assignment. Great
Asian, after paying Bancasia, is subrogated back as creditor of the receivables. Great Asian can
then proceed against the drawers who issued the checks. Even if Bancasia failed to give timely
notice of dishonor, still there would be no prejudice whatever to Great Asian.

Under the Negotiable Instruments Law, notice of dishonor is not required if the drawer has no right
to expect or require the bank to honor the check, or if the drawer has countermanded payment.
Again, we reiterate that this obligation of Great Asian is separate and distinct from its warranties
as indorser under the Negotiable Instruments Law.Civil Code are applicable and not the
Negotiable Instruments Law.

Great Asians four contracts assigning its fifteen postdated checks to Bancasia expressly stipulate
the suspensive condition that in the event the drawers of the checks fail to pay, Great Asian itself
will pay Bancasia
The stipulations in the Surety Agreements undeniably mandate the solidary liability of Tan Chong
Lin with Great Asian

Moreover, the stipulations in the Surety Agreements are sufficiently broad, expressly
encompassing "all the notes, drafts, bills of exchange, overdraft and other obligations of every
kind which the PRINCIPAL may now or may hereafter owe the Creditor"

G.R. No. 132403

September 28, 2007

HI-CEMENT CORPORATION vs INSULAR BANK OF ASIA AND AMERICA

FACTS:

Enrique Tan and Lilia Tan (spouses Tan) were the controlling stockholders of E.T. Henry & Co.,
Inc. (E.T. Henry), a company engaged in the business of processing and distributing bunker fuel.
E.T. Henry's customers were Hi-Cement Corporation (Hi-Cement), Riverside Mills Corporation
(Riverside) and Kanebo Cosmetics Philippines, Inc. (Kanebo) who issued postdated checks for
their purchases Sometime in 1979: Insular Bank of Asia and America (turned PCIB then
Equitable PCI-Bank) granted E.T. Henry a credit facility known as Purchase of Short Term
Receivables. (re-discounting arrangement)

Through this, E.T. Henry was able to encash, with pre-deducted interest, the postdated checks of
its clients. For every transaction, E.T. Henry had to execute a promissory note and a deed of
assignment. 1979-1981: E.T. Henry was able to re-discount its clients' checks. On February 1981:
20 checks of Hi-Cement (which were crossed and which bore the restriction deposit to payees
account only) were dishonored. So were the checks of Riverside and Kanebo. The Bank filed a
complaint for sum of money in CFI against E.T. Henry, the spouses Tan, Hi-Cement (including its
general manager and its treasurer as signatories of the postdated crossed checks), Riverside and
Kanebo.

ISSUES:
1. Whether or not the bank was a holder in due course

2. Whether or not Hi-Cement can still be made liable for the checks

HELD

1. NO. As emphasized under Section 191 and Section 52 of the Negotiable Instruments Law, the
Bank was all too aware that subject checks were crossed and bore restrictions that they were for
deposit to payee's account only; hence, they could not be further negotiated to its iirregularity -
only the treasurer's signature appeared on the deed of assignment As a banking institution, it
behooved respondent to act with extraordinary diligence in every transaction. Its business is
impressed with public interest, thus, it was not expected to be careless and negligent, specially so
where the checks it dealt with were crossed. It is then settled that crossing of checks should put
the holder on inquiry and upon him devolves the duty to ascertain the indorsers title to the check
or the nature of his possession. - failure: guilty of gross negligence amounting to legal absence of
good faith

2. NO. The drawer of the postdated crossed checks was not liable to the holder who was
deemed not a holder in due course may recover from the party who indorsed/encashed the
checks if the latter has no valid excuse for refusing payment - E.T. Henry had no justification to
refuse payment, it should pay

G.R. No. 76788

January 22, 1990

JUANITA SALAS vs. HON. COURT OF APPEALS and FIRST FINANCE & LEASING
CORPORATION

Facts: Juanita Salas (Petitioner) bought a motor vehicle from the Violago Motor Sales Corporation
(VMS) for as evidenced by a promissory note. This note was subsequently endorsed to Filinvest
Finance & Leasing Corporation (private respondent) which financed the purchase.
Petitioner defaulted in her installments allegedly due to a discrepancy in the engine and chassis
numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of
registration and deed of chattel mortgage, which fact she discovered when the vehicle figured in
an accident.

This failure to pay prompted private respondent to initiate an action for a sum of money against
petitioner before the Regional Trial Court.

Issue: Whether or not private respondent is a holder in due course?

Held: YES. The PN was negotiated by indorsement in writing on the instrument itself payable to
the Order of Filinvest Finance and Leasing Corporation and it is an indorsement of the entire
instrument.

Under the circumstances, there appears to be no question that Filinvest is a holder in due course,
having taken the instrument under the following conditions: [a] it is complete and regular upon its
face; [b] it became the holder thereof before it was overdue, and without notice that it had
previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was
negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the
title of VMS Corporation.

Accordingly, respondent corporation holds the instrument free from any defect of title of prior
parties, and free from defenses available to prior parties among themselves, and may enforce
payment of the instrument for the full amount thereof. This being so, petitioner cannot set up
against respondent the defense of nullity of the contract of sale between her and VMS.

G.R. No. 70145

November 13, 1986

MARCELO A. MESINA vs THE HONORABLE INTERMEDIATE APPELLATE COURT, HON.

ARSENIO M. GONONG, in his capacity as Judge of Regional Trial Court Manila (Branch VIII),
JOSE GO, and ALBERT UY

FACTS:

Jose Go maintains an account with Associated Bank. He needed to transfer P800,000.00 from
Associated Bank to another bank but he realized that he does not want to be carrying that cash so
he bought a cashiers check from Associated Bank worth P800,000.00. Associated Bank then
issued the check but Jose Go forgot to get the check so it was left on top of the desk of the bank
manager. The bank manager, when he found the check, entrusted it to Albert Uy for the later to
safe keep it. The check was however stolen from Uy by a certain Alexander Lim.

Jose Go learned that the check was stolen son he made a stop payment order against the check.
Meanwhile, Associated Bank received the subject check from Prudential Bank for clearing.
Apparently, the check was presented by a certain Marcelo Mesina for payment. Associated Bank
dishonored the check.

When asked how Mesina got hold of the check, he merely stated that Alfredo Lim, whos already
at large, paid the check to him for a certain transaction.

ISSUE: Whether or not Mesina is a holder in due course.

HELD: No. Admittedly, Mesina became the holder of the cashiers check as endorsed by
Alexander Lim who stole the check. Mesina however refused to say how and why it was passed to
him. Mesina had therefore notice of the defect of his title over the check from the start. The holder
of a cashiers check who is not a holder in due course cannot enforce such check against the
issuing bank which dishonors the same. The check in question suffers from the infirmity of not
having been properly negotiated and for value by Jose Go who is the real owner of said
instrument.

G.R. No. L-17845

April 27, 1967

INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON SADAYA vs FRANCISCO SEVILLA

FACTS:

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 tis was reversed by the CA.

ISSUE:

Whether or not Varona and Sevilla are jointly and severally liable

HELD:

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 makerwho made paymenthas the right to

contribution, from his co-accomodation 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 thay 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
reimbursement.

G.R. No. 141408

October 18, 2007

Metropolitan Bank & Trust Co. vs Philippine Bank of Communications

FACTS:

Sometime in 1978, Pipe Master Corporation (Pipe Master) represented by Yu Kio, its president,
applied for check discounting with Filipinas Orient Finance Corporation (Filipinas Orient). The
latter approved and granted the same. On July 1, 1978, the Board of Directors of Pipe Master
issued a Board Resolution authorizing Yu Kio, in his capacity as president, and/or Tan Juan Lian,
in his capacity as vice-president, to execute, indorse, make, sign, deliver or negotiate instruments,
documents and such other papers necessary in connection with any transaction coursed through
Filipinas Orient for and in behalf of the corporation. On April 9, 1980, under the check discounting
agreement between Pipe Master and Filipinas Orient, Yu Kio sold to Filipinas Orient four
Metropolitan Bank and Trust Company (Metro Bank) checks amounting to P1,000,000.00. In
exchange for the four Metro Bank checks, Filipinas Orient issued to Yu Kio four Philippine Bank of
Communications (PBCom) crossed checks totaling P964,303.62, payable to Pipe Master with the
statement for payees account only.

Upon his receipt of the four PBCom checks, Yu Kio indorsed and deposited in the Metro Bank, in
his personal account, three of the checks valued at P721,596.95. As to the remaining check
amounting to P242,706.67, he deposited it in the Solid Bank Corporation (Solid Bank), also in his
personal account. Eventually, PBCom paid Metro Bank and Solid Bank the amounts of the
checks. In turn, Metro Bank and Solid Bank credited the value of the checks to the personal
accounts of Yu Kio.

Subsequently, when Filipinas Orient presented the four Metro Bank checks equivalent to
P1,000,000.00 it received from Yu Kio, they were dishonored by the drawee bank. Pipe Master,
the drawer, refused to pay the amounts of the checks, claiming that it never received the proceeds
of the PBCom checks as they were delivered and paid to the wrong party, Yu Kio, who was not
the named payee.
ISSUE:

Whether or not Metro Bank and Solid Bank, petitioners, are liable to respondent Filipinas Orient
for accepting the PBCom crossed checks payable to Pipe Master

HELD:

Yes. A check is defined by law as a bill of exchange drawn on a bank payable on demand.[1]
The Negotiable Instruments Law is silent with respect to crossed checks. Nonetheless, this Court
has taken judicial cognizance of the practice that a check with two parallel lines on the upper left
hand corner means that it could only be deposited and not converted into cash.[2] The crossing of
a check with the phrase Payees Account Only is a warning that the check should be deposited in
the account of the payee. It is the collecting bank which is bound to scrutinize the check and to
know its depositors before it can make the clearing indorsement, all prior indorsements and/or
lack of indorsement guaranteed. Here, petitioner banks have the obligation to ensure that the
PBCom checks were deposited in accordance with the instructions stated in the checks.[4] The
four PBCom checks in question had been crossed and issued for payees account only. This could
only mean that the drawer, Filipinas Orient, intended the same for deposit only by the payee, Pipe
Master. The effect of crossing a check means that the drawer had intended the check for deposit
only by the rightful person, i.e., the payee named therein[5] Pipe Master.

In fine, it must be emphasized that the law imposes on the collecting bank the duty to diligently
scrutinize the checks deposited with it for the purpose of determining their genuineness and
regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public as
the expert on this field, and the law thus holds it to a high standard of conduct.[8] Since petitioner
banks negligence was the direct cause of the misappropriation of the checks, they should bear
and answer for respondent Filipinas Orients loss, without prejudice to their filing of an appropriate
action against Yu Kio.

G.R. No. 187769

June 4, 2014

Alvin Patrimonio v. Napoleon Guttierez and Octavio Marasigan III

FACTS:

Herein petitioner and respondent Guttierez entered into a business venture under the name Slam
Dunk Corporation. To start it up, petitioner pre-signed several check for the expenses of the
business. Although signed, however, there was no payees name, date or amount indicated in the
said checks. The blank checks were entrusted to Guttierez with the instruction that he cannot fill
them out without petitioners approval.
In 1993, without petitioners knowledge and consent, Guttierez borrowed money from co-
respondent Marasigan in the amount of 200,000php. The latter aceded to Guttierez request and
gave him the amount. Simultaneously, Guttierez deliverd to Marasigan one of the blank checks
pre-signed by petitioner. However, the same was dishonored by the bank on the reason of closed
account.

Marasigan sought recovery from Guttierez, but to no avail. Hence, he sent several demand letters
to petitioner, but to no avail as well. Thus, he filed a criminal case under BP 22 against petitioner.
On the other hand, Petitioner filed with the Regional Trial Court (RTC) a Complaint for Declaration
of Nullity of Loan and Recovery of Damages against Respondents, invoking that he never
authorized the loan.

The trial court ruled in favor of Marasigan and found petitioner, in issuing the pre-signed blank
checks, had the intention of issuing the check even without his approval. On appeal to the Court
of Appeals (CA), the appellate court affirmed the decision of the RTC. Hence, this present case.

ISSUE:

Whether or not petitioner is liable to the loan contracted by Guttierez to Marasigan?

RULING:

The court held no.

That under Article 1878, paragraph 7 of the Civil Code, a written authority is required when the
loan is contracted through an agent.

In the present case, the petitioner is not bound by the contract of loan since the records reveal
that Guttierez did not have any authority to borrow money in behalf of petitioner. Records do not
show that the petitioner executed any special power of attorney in favor of Guttierez to borrow in
his behalf, hence, the act of Guttierez is in violation of the said provision, and thus, he should be
the only one liable for the loan he was not able to settle.
In the present case, the petitioner is not bound by the contract of loan since the records reveal
that Guttierez did not have any authority to borrow money in behalf of petitioner. Records do not
show that the petitioner executed any special power of attorney in favor of Guttierez to borrow in
his behalf, hence, the act of Guttierez is in violation of the said provision, and thus, he should be
the only one liable for the loan he was not able to settle.

G.R. No. L-34539

July 14, 1986

EULALIO PRUDENCIO and ELISA T. PRUDENCIO vs THE HONORABLE COURT OF

APPEALS, THE PHILIPPINE NATIONAL BANK, RAMON C. CONCEPCION and MANUEL M.
TAMAYO, partners of the defunct partnership Concepcion & Tamayo Construction Company,
JOSE TORIBIO, Atty-in-Fact of Concepcion & Tamayo Construction Company, and THE
DISTRICT ENGINEER, Puerto Princesa, Palawan

FACTS:

Appellants are the owners of a property, which they mortgaged to help secure a loan of a
certain Domingo Prudencio. On a later date, they were approached by their relative who was the
attorney-in-fact of a construction company, which was in dire need of funds for the completion of a
municipal building. After some persuasion, the appellants amended the mortgage wherein
the terms and conditions of the original mortgage was made an integral part of the new
mortgage. The promissory note covering the second loan was signed by their relative.
It was also signed by them, indicating the request that the check be released by the bank.

After the amendment of the mortgage was executed, a deed of assignment was made by
Toribio, assigning all the payments to the Bureau to the construction company. This
notwithstanding, the Bureau with approval of the bank, conditioned however that they should be
for labor and materials,

made three payments to the company. The last request was denied by the bank, averring that the
account was long overdue, the remaining balance of the contract price should be applied to the
loan.

The company abandoned the work and as consequence, the Bureau rescinded the
contract and assumed the work. Later on, the appellants wrote to the PNB that since the
latter has authorized payments to the company instead of on account of the loan
guaranteed by the mortgage, there was a change in the conditions of the contract without the
knowledge of appellants, which entitled the latter to cancel the mortgage contract.
The trial court held them still liable together with their co-makers. It has also been held that if the
judgment is not satisfied within a period of time, the mortgaged properties would be foreclosed
and sold in public auction.

In their appeal, petitioners contend that as accommodation makers, the nature of their
liability is only that of mere sureties instead of solidary co-debtors such that a material alteration in
the principal contract, effected by the creditor without the knowledge and consent of the sureties,
completely discharges the sureties from all liabilities on the contract of suretyship.

ISSUE:

Whether or not accommodation makers are primarily and unconditionally liable

HELD:

There is 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. Consequently, the petitioners
cannot claim to have been released from their obligation simply because at the time of payment
of such obligation was temporarily deferred by the

PNB without their knowledge and consent. There has to be another basis for their claim of
having been freed from their obligation. It has to be determined if PNB was a holder for
value.

A holder for value is one who meets the requirement of being a holder in due course except the
notice for want of consideration. In the case at bar, PNB may not be considered as a holder
for value. Not only was PNB an immediate party or privy to the promissory note, knowing
fully well that petitioners only signed as accommodation parties, but more importantly it was the
Deed of Assignment which moved the petitioners to sign the promissory note. Petitioners
also relied on the belief that there will be no alterations to the terms of the agreement. The deed
provided that there will no further conditions which could possibly alter the agreement without the
consent of the petitioner such as the grant of greater priority to obligations other than the
payment of the loan. This notwithstanding, the bank approved the release of payments to the
Company instead of the same to the bank. This was in violation of the deed of
assignment and prejudiced the rights of petitioners. The bank was not in good faitha
requisite for a holder to be one in due course.

G.R. No. 96160

June 17, 1992

Stelco Marketing vs The Honorable Court of Appeals and Steelweld Corporation of the Philippines

FACTS:

Petitioner was engaged in the distribution and sale of structural steel bars. RYL bought on
several occasion large quantities of steel bars but the same were never paid for despite several
demands by petitioner.

On a relevant date, RYL gave to Armstrong Industries a check in payment of its obligations.
The check was drawn by Steelweld Corporationallegedly the owner of RYL persuaded
the president of Steelweld to accommodate the former in its obligation. The check, when
deposited was thereafter dishonored due to insufficient funds. A case ensued for violations
of BP22 but the case was dismissed as the check was held to be for accommodation purposes
only.

Thereafter a complaint was filed by petitioner against RYL and Steelweld for the recovery
of sum of money in payment of the steel bars ordered. RYL was nowhere to be found that
is why the proceedings commenced as against Steelweld only. The trial court decided in
favor of petitioner but this was reversed by the CA.

HELD:

Petitioner contends that the acquittal of Lim and Tianson didn't operate to release Steelweld from
its liability as an accommodation party. Noteworthy is that neither said pronouncement nor any
other part of the judgment of acquittal declared it liable to petitioner. To be sure, as
regards an accommodation party, the condition of lack of notice of any infirmity or defect in
title of the persons negotiating it is of no application since the law preserves the right of
recourse of a holder for value against an

accommodation party notwithstanding knowledge that at the time of taking the instrument, knew
him only as an accommodation party.

Further, there is no evidence to show that petitioner possessed the check before the instruments
presentment and dishonor. In what transpired during the transactions involving the check,
evidence and facts show that there was any participation or intervention on the part of petitioner.
What the record shows is that only after the check was deposited and dishonored,
petitioner came into possession of it in some way and was able to give it in evidence at the trial of
the civil case it has instituted against the drawers of the check.
GR No. L-15126

November 30, 1961

Vicente R. De Ocampo $ Co. vs Anita Gatchalian, et al.

FACTS: Anita Gatchalian was interested in buying a car. Manuel Gonzales offered to her a car
owned by plaintiff. Gonzales claimed that he was authorized by the plaintiff to sell the car.
Gonzales order defendant to issue a cross-check to comply on showing interest in buying the car.
Gonzales promised to return the check the next day.

When Gonzales never appeared after, defendant issue a stop payment order on the check. She
found out that Gonzales used the check as payment to plaintiff's clinic for his wife's fees. Plaintiff
now demands defendant for payment of the check, in which defendant refused citing that plaintiff
is a not a holder in due course.

The lower court held that defendant should pay plaintiff.

ISSUE: Whether or not De Ocampo is a holder in due course.

RULING:

The SC held that plaintiff is a not a holder in due course. There were obvious instances to show
that the check was negligently acquired like plaintiff having no liability with defendant and that the
check was crossed. Plaintiff failed to exercise prudence and caution. Plaintiff should have asked
questions to further inquire upon suspicion.
The presumption of good faith did not apply to plaintiff because the defect was apparent on the
instruments face it was not payable to defendant or bearer.

GR No. 158262

July 21, 2008

Spouses Pedro and Florencio Violago vs BA Finance Corporation el al.

FACTS:

In 1983, Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a
Toyota Cressida Model 1983 to increase the sales quota to his cousin, Pedro F. Violago and his
wife, Florencia. The spouses would just have to pay a down payment of PhP 60.5K while the
balance would be financed by BA Finance. They would pay the monthly installments to BA
Finance while Avelino would take care of the documentation and approval of financing of the car.

On August 4, 1983, the spouses and Avelino signed a promissory note under which they bound
themselves to pay jointly and severally to the order of VMSC the amount of PhP 209,601 in 36
monthly installments of PhP 5,822.25 a month, the first installment to be due and payable on
September 16, 1983. Avelino prepared a Disclosure Statement of Loan/Credit Transportation
which showed the net purchase price of the vehicle, down payment, balance, and finance
charges. VMSC then issued a sales invoice in favor of the spouses with a detailed description of
the Toyota Cressida car. In turn, the spouses executed a chattel mortgage over the car in favor of
VMSC as security for the amount of PhP 209,601.

VMSC, through Avelino, endorsed the promissory note to BA Finance without recourse. After
receiving the amount of PhP 209,601. VMSC executed a Deed of Assignment of its rights and
interests under the promissory note and chattel mortgage in favor of BA Finance. Meanwhile, the
spouses remitted the amount of PhP 60,500 to VMSC through Avelino. The spouses were
unaware that the same car had already been sold in 1982 to Esmeraldo Violago, another cousin
of Avelino. Since VMSC failed to deliver the car, Pedro did not pay any monthly amortization to
BA Finance. Thus, on March 1, 1984, BA Finance filed with the RTC a complaint for Replevin
with Damages against the spouses

ISSUE:

Whether or not the holder of an invalid promissory note may be considered a holder in due
course

HELD:
Yes. Under Section 1. Form of Negotiable Instruments. An instrument to be negotiable must
conform to the following requirements:

(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

(e) Where the instrument is addressed to a drawee, he must be named or otherwise

indicated therein with reasonable certainty.

Section 52. What constitutes a holder in due course.A holder in due course is a holder who has
taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or
defect in the title of the person negotiating it.

In this case, (a) the Promissory Note, Exhibit A, is complete and regular; (b) the Promissory
Note was endorsed by the VMSC in favor of the Appellee; (c) the Appellee, when it accepted the
Note, acted in good faith and for value; (d) the Appellee was never informed, before and at the
time the Promissory Note was endorsed to the Appellee, that the vehicle sold to the Defendants-
Appellants was not delivered to the latter and that VMSC had already previously sold the vehicle
to Esmeraldo Violago. Although Jose Olvido mortgaged the vehicle to Generoso Lopez, who
assigned his rights to the BA Finance Corporation (Cebu Branch), the same occurred only on May
8, 1987, much later than August 4, 1983, when VMSC assigned its rights over the Chattel
Mortgage by the Defendants-Appellants to the Appellee. Hence, Appellee was a holder in due
course

Since BA Finance is a holder in due course, petitioners cannot raise the defense of non-delivery
of the object and nullity of the sale against the corporation. VMSC is a family-owned corporation
of which Avelino was president. Avelino committed fraud in selling the vehicle to petitioners, a
vehicle that was previously sold to Avelinos other cousin, Esmeraldo Avelino clearly defrauded
petitioners. His actions were the proximate cause of petitioners loss. He cannot now hide behind
the separate corporate personality of VMSC to escape from liability for the amount adjudged by
the trial court in favor of petitioners. The obligation was incurred in the name of the corporation,
the petitioner [Arcilla] would still be personally liable therefor because for all legal intents and
purposes, he and the corporation are one and the same
G.R. No. 197857

September 10, 2014

SPOUSES FRANCISCO SIERRA vs.PAIC SAVINGS AND MORTGAGE BANK, INC.,

FACTS:

On May 31, 1983, Goldstar Conglomerates, Inc. (GCI), represented by Guillermo Zaldaga
(Zaldaga), obtained from First Summa Savings and Mortgage Bank (Summa Bank), now
respondent Paic Savings and Mortgage Bank, Inc. (PSMB),4 a loan in the amount of
P1,500,000.00 as evidenced by a Loan Agreement5 dated May 31, 1983. As security therefor,
GCI executed in favor of PSMB six (6) promissory notes6 in the aggregate amount of
P1,500,000.00 as well as a Deed of Real Estate Mortgage over a parcel of land covered by
Transfer Certificate of Title (TCT) No. 308475.7 As additional security, petitioners Francisco
Sierra, Rosario Sierra, and Spouses Felix Gatlabayan and Salome Sierra mortgaged four(4)
parcels of land in Antipolo City.

Eventually, GCI defaulted in the payment of its loan to PSMB, thereby prompting the latter to
extrajudicially foreclose the mortgage on the subject properties. Since petitioners failed to redeem
the subject properties within the redemption period, their certificates of title were cancelled and
new ones were issued in PSMBs name.15

On September 16, 1991, petitioners filed a complaint16 for the declaration of nullity ofthe real
estate mortgage and its extrajudicial foreclosure, and damages against PSMB and Summa Bank
before the RTC, docketed as Civil Case No. 91-2153.

In the said complaint, petitioners averred that under pressing need of money, with very limited
education and lacking proper instructions, they fell prey to a group who misrepresented to have
connectionswith Summa Bank and, thus, could help them secure a loan.17 They were made to
believe that they applied for a loan, the proceeds of which would be released through checks
drawn against Summa Bank.18 Relying in good faith on the checks19 issued to them, petitioners
unsuspectingly signed a document denominated as Deed of Real Estate Mortgage (subject deed),
couched in highly technical legal terms, which was notinterpreted in a language/dialect known to
them, and which was not accompanied by the loan documents. However, when they presented for
payment the earliest-dated checks to the drawee bank, the same were dishonored for the reason
"Account Closed."

ISSUE:
Whether or not the the petitioners were aware that they were mere accommodation mortgagor

HELD:

Yes. Time and again, the Court has stressed that allegations must be proven by sufficient
evidence because mere allegation is not evidence.47 Thus,one who alleges any defect or the lack
ofa valid consent toa contract must establish the same by full, clear, and convincing evidence, not
merely by preponderance of evidence. As correctly observed by the CA, the testimony of
petitioner Francisco Sierra as to petitioners respective educational backgrounds51 remained
uncorroborated. The other petitioners-signatories to the deed never testified that their educational
background prevented them from knowingly executing the subject deed as mere accommodation
mortgagors. Petitioners claim of lack of "proper instruction on the intricacies in securing [the] loan
from the bank" is further belied by the fact that petitioners Francisco and Rosario Sierra had
previously mortgaged two (2) of the subject properties twiceto the Rural Bank of
Antipolo.Moreover, petitioners did not: (a) demand for any loan document containingthe details of
the transaction, i.e., monthly amortization, interest rate, added charges, etc., and the release of
the remaining amount of their alleged loan; and (b) offer to pay the purported partial loan
proceeds they received at any time,52 complaining thereof only in 1991 when they filed their
complaint. Indeed, the foregoing circumstances clearly show that petitioners are aware that they
were mere accommodation mortgagors, debunking their claim that mistake vitiated their consent
to the mortgage. As mere accommodation mortgagors, petitioners are not entitled to the
proceeds of the loan, nor were required to be furnished with the loan documents53 or notice of the
borrowers default in payingthe principal, interests, penalties, and other charges on due date,54 or
of the extrajudicial foreclosure proceedings, unless stipulated in the subject deed.55 As
jurisprudence states, an accommodation mortgagor is a third person who is not a debtor to a
principal obligation but merely secures it by mortgaging his or her own property.56 Like an
accommodation party to a negotiable instrument, the accommodation mortgagor in effect
becomes a surety to enable the accommodated debtor to obtain credit,57 as petitioners in this
case.

G.R. No. 185945

December 5, 2012

FIDELIZA J. AGLIBOT vs. INGERSOL L. SANTIA

FACTS:

Engr. Ingersol L. Santia (Santia) loaned the amount of P2,500,000.00 to Pacific Lending & Capital
Corporation (PLCC), through its Manager, petitioner Fideliza J. Aglibot (Aglibot). The loan was
evidenced by a promissory note. Allegedly as a guaranty for the payment of the note, Aglibot
issued and delivered to Santia eleven (11) post-dated personal checks drawn from her own
account maintained at Metrobank. Upon presentment of the checks for payment, they were
dishonored by the bank for having been drawn against insufficient funds or closed account. Santia
thus demanded payment from PLCC and Aglibot of the face value of the checks, but neither of
them heeded his demand. Consequently, eleven (11) Informations for violation of B.P. 22 were
filed before the MTCC.

MTCC acquitted Aglibot. On appeal, the RTC rendered a decision absolving Aglibot and
dismissing the civil aspect of the case on the ground of failure to fulfill a condition precedent of
exhausting all means to collect from the principal debtor.

On appeal, the Court of Appeals ruled that the RTC erred when it dismissed the civil aspect of the
case. Hence, the CA ruled that Aglibot is personally liable for the loan.

Thus, Aglibot filed this instant petition for certiorari. She argued that she was merely a guarantor
of the obligation and therefore, entitled to the benefit of excussion under Article of the 2058 of the
Civil Code. She further posited that she is not personally liable on the checks since she merely
contracted the loan in behalf of PLCC.

ISSUE:

I. Whether or not Aglibot is personally liable on the checks?

HELD:

Yes. Aglibot is an accommodation party and therefore liable to Santia. The appellate court ruled
that by issuing her own post-dated checks, Aglibot thereby bound herself personally and solidarily
to pay Santia, and dismissed her claim that she issued her said checks in her official capacity as
PLCCs manager merely to guarantee the investment of Santia. The facts present a clear situation
where Aglibot, as the manager of PLCC, agreed to accommodate its loan to Santia by issuing her
own post-dated checks in payment thereof. She is what the Negotiable Instruments Law calls an
accommodation party.

The relation between an accommodation party and the party accommodated is, in effect, one of
principal and surety the accommodation party being the surety. It is a settled rule that a surety is
bound equally and absolutely with the principal and is deemed an original promisor and debtor
from the beginning. The liability is immediate and direct. It is not a valid defense that the
accommodation party did not receive any valuable consideration when he executed the
instrument; nor is it correct to say that the holder for value is not a holder in due course merely
because at the time he acquired the instrument, he knew that the indorser was only an
accommodation party. 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.

G.R. No. 180257

February 23, 2011

EUSEBIO GONZALES vs PHILIPPINE COMMERCIAL AND INTERNATIONAL BANK, EDNA

OCAMPO, and ROBERTO NOCEDA

FACTS:

Gonzales was a client of PCIB. He was granted a credit line by the bank through a Credit-On-
Hand-Loan Agreement (COHLA). He drew from the credit line through a check and said credit line
was secured by a collateral in the form of his accounts with PCIB which was a foreign currency
deposit worth USD 8000.

He obtained below loans from PCIB:

1. obtained with his wife P500K

2. obtained with spouses Panlilio P1M, P300K

The above loans (total: 1.8M) were covered by 3 promissory notes and were secured by a real
estage mortgage on a land co owned by Gonzales and spouses Panlilio. the promissory notes
states the solidary liability of Gonzales andspouses Panlilio. However, it was the spouses Panlilio
who received the proceeds of 1.8M. The monthly interest dues were paid by the spouses Panlilio
through auto debit from their PCIB account. however, they defaulted in the payment because their
PCIB account had insufficient deposits. Gonzales issued a check to Rene Unson worth 250K
drawn against his credit line but said check was subsequently dishonored due to termination of
gonzales credit line because of the unpaid period interest dues from the loans. PCIB also froze
the foreign currency deposit account of Gonzales.

Issue: Whether or not Gonzales is liable for the three promissory notes covering PHP1.8M loan he
made with spouses Panlilio
Held:

Yes. Gonzales was an accommodation party of the loan. An accommodation party is one who
meets all the three requisites according to Sec 29 of NIL:

1. he must be a party to the instrument, signing as a maker, drawer, acceptor, or indorser

2. he must not receive value therefor

3. he must sign for the purpose of lending his name or credit to some other person.

An accommodation party lends his name to enable the accommodated partyy to obtain credit or
raise money. he receives no part but assumed liability. The relation between an accommodation
party is one of principal and surety, the AP being the surety. As such, he is deemed an original
promisor and debtor from the beginning. he is considered in law as the same party as the debtor
in relation to whatever is adjudged toruching the obligation of the latter since their liabilities are
interwoven.

G.R. No. 166405

August 6, 2008

CLAUDE P. BAUTISTA vs AUTO PLUS TRADERS, INCORPORATED and COURT OF

APPEALS

FACTS:

Claude P. Bautista, in his capacity as President and Presiding Officer of Cruiser Bus Lines and
Transport Corporation (Cruiser), purchased various spare parts from Auto Plus Traders, Inc. (Auto
Plus) and issued 2 postdated checks. The checks were subsequently dishonored. Two
Informations for violation of BP Blg. 22 were filed with the MTCC. The MTCC ruled Cruiser to pay
the Auto Plus. The CA then affirmed RTC and held that it wasBautista who personally issued the
check
According to Auto Plus, Bautista, by issuing his check to cover the obligation of the corporation,
became an accommodation party

ISSUE:

Whether or not Bautista, as an officer of the corporation, is personally and civilly liable for the two
(2) checks

HELD:

NO. Under Section 29 of the Negotiable Instruments Law, an accommodation party is liable on the
instrument to a holder for value Private respondent adds that petitioner should also be liable for
the value of the corporation check because instituting another civil action against the corporation
would result in multiplicity of suits and delay. Generally the Court, in a petition for review on
certiorari under Rule 45 of the Rules of Court, has no jurisdiction over questions of facts. But,
considering that the findings of the MTCC and the RTC are at variance, we are compelled to settle
this issue.

The 2 check return slips in conjunction with the Current Account Statements would show that the
check for P151,200 was drawn against the current account of Claude Bautista while the check for
P97,500 was drawn against the current account of Cruiser Bus Lines and Transport Corporation.
Hence, we sustain the factual finding of the RTC. Nonetheless, appellate court in error for
affirming the decision of the RTC holding petitioner liable for the value of the checks considering
that he was acquitted of the crime charged and that the debts are clearly corporate debts for
which only Cruiser Bus Lines and Transport Corporation should be held liable.There is no
agreement that petitioner shall be held liable for the corporation's obligations in his personal
capacity. Hence, he cannot be held liable for the value of the 2 checks issued in payment for the
corporation's obligation.

Section 29 of the Negotiable Instruments Law states:

Accommodation party: 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.

The requisites are: (1) he must be a party to the instrument, signing as maker, drawer, acceptor,
or indorser present; (2) he must not receive value therefor present; (3) he must sign for the
purpose of lending his name or credit to some other person - lacking

Therefore, Cruiser Bus Lines and Transport Corporation, however, remains liable for the checks
especially since there is no evidence that the debts covered by the subject checks have been
paid.
G.R. No. 117660

December 18, 2000

AGRO CONGLOMERATES, INC. and MARIO SORIANO vs. THE HON. COURT OF APPEALS
and REGENT SAVINGS and LOAN BANK, INC.

FACTS:

Petitioner sold to Wonderland Food Industries two parcels of land. They stipulated under a
Memorandum of Agreement that the terms of payment would be P1,000,000 in cash,
P2,000,000 in shares of stock, and the balance would be payable in monthly installments.
Thereafter, an

addendum was executed between them, qualifying the cash payment. Instead of cash
payment, the vendee authorized the vendor to obtain a loan from the financier on which the
vendee bound itself to pay for. This loan was to cover for the payment of P1,000,000. This
addendum was not notarized.

Petitioner Soriano signed as maker the promissory notes payable to the bank. However,
the petitioners failed to pay the obligations as they were due. During that time, the bank was
in financial distress and this prompted it to endorse the promissory notes for collection. The
bank gave ample time to petitioners then to satisfy their obligations.

The trial court held in favor of the bank. It didn't find merit to the contention that
Wonderland was the one to be held liable for the promissory notes.

ISSUE:

Whether or not the addendum, signed by the petitioners, respondent bank and wonderland
inc., constitutes a novation of the contract by substitution of debtor, which exempts the petitioners
from any liability over the promissory notes

HELD:

No. First, there was no contract of sale that materialized. The original agreement was
that Wonderland would pay cash and petitioner would deliver possession of the farmlands.
But this was changed through an addendum, that petitioner would instead secure a loan and
the settlement of the same would be shouldered by Wonderland.
Petitioners became liable as accommodation parties. They have the right after paying the
instrument to seek reimbursement from the party accommodated, since the relation between
them has in effect became one of principal and surety.

Furthermore, as it turned out, the contract of surety between Woodland and petitioner was
extinguished by the rescission of the contract of sale of the farmland. With the rescission, there
was confusion in the persons of the principal debtor and surety. The addendum thereon
likewise lost its efficacy.

G.R. No. 146511

September 5, 2007

TOMAS ANG vs ASSOCIATED BANK and ANTONIO ANG ENG LIONG

Facts:

On August 28, 1990, respondent Associated Bank (formerly Associated Banking Corporation and
now known as United Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng
Liong and petitioner Tomas Ang for the two (2) promissory notes that they executed as principal
debtor and co-maker, respectively. In the Complaint, respondent Bank alleged that on October 3
and 9, 1978, the defendants obtained a loan of P evidenced by a promissory note bearing PN-No.
DVO-78-382, and P 50,000, 30,000, evidenced by a promissory note bearing PNNo. DVO-78-390.
As agreed, the loan would be payable, jointly and severally, on January 31, 1979 and December
8, 1978, respectively. In addition, subsequent amendments to the promissory notes as well as the
disclosure statements6 stipulated that the loan would earn 14% interest rate per annum, 2%
service charge per annum, 1% penalty charge per month from due date until fully paid, and
attorneys fees equivalent to 20% of the outstanding obligation. Despite repeated demands for
payment, the latest of which were on September 13, 1988 and September 9, 1986, on Antonio
Ang Eng Liong and Tomas Ang, respectively, respondent Bank claimed that the defendants failed
and refused to settle their obligation, resulting in a total indebtedness of P 539,638.96 as of July
31, 1990. In his Answer, Antonio Ang Eng Liong only admitted to have secured a loan amounting
to P 80,000. He pleaded though that the bank be ordered to submit a more reasonable
computation considering that there had been no correct and reasonable statement of account
sent to him by the bank, which was allegedly collecting excessive interest, penalty charges, and
attorneys fees despite knowledge that his business was destroyed by fire, hence, he had no
source of income for several years. For his part, petitioner Tomas Ang filed an Answer with
Counterclaim and Cross-claim. He interposed the affirmative defenses that: the bank is not the
real party in interest as it is not the holder of the promissory notes, much less a holder for value or
a holder in due course; the bank knew that he did not receive any valuable consideration for
affixing his signatures on the notes but merely lent his name as an accommodation party; he
accepted the promissory notes in blank, with only the printed provisions and the signature of
Antonio Ang Eng Liong appearing therein.

Issue:

Whether or not Petitioner is liable to the obligation despite being a mere co-maker and
accommodation party.

Held:

Yes. Notably, Section 29 of the NIL defines an accommodation party as 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. As gleaned from the text, an
accommodation party is one who meets all the three requisites, viz: (1) he must be a party to the
instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value
therefor; and (3) he must sign for the purpose of lending his name or credit to some other person.
An accommodation party lends his name to enable the accommodated party to obtain credit or to
raise money; he receives no part of the consideration for the instrument but assumes liability to
the other party/ies thereto. The accommodation party is liable on the instrument to a holder for
value even though the holder, at the time of taking the instrument, knew him or her to be merely
an accommodation party, as if the contract was not for accommodation.

As petitioner acknowledged it to be, the relation between an accommodation party and the
accommodated party is one of principal and surety the accommodation party being the surety.
from the beginning; As such, he is deemed an original promisor and debtor he is considered in
law as the same party as the debtor in relation to whatever is adjudged touching the obligation of
the latter since their liabilities are interwoven as to be inseparable. Although a contract of
suretyship is in essence accessory or collateral to a valid principal obligation, the suretys liability
to the creditor is immediate, primary and absolute; he is directly and equally bound with the
principal. As an equivalent of a regular party to the undertaking, a surety becomes liable to the
debt and duty of the principal obligor even without possessing a direct or personal interest in the
obligations nor does he receive any benefit therefrom.

In the instant case, petitioner agreed to be jointly and severally liable under the two promissory
notes that he co-signed with Antonio Ang Eng Liong as the principal debtor. This being so, it is
completely immaterial if the bank would opt to proceed only against petitioner or Antonio Ang Eng
Liong or both of them since the law confers upon the creditor the prerogative to choose whether to
enforce the entire obligation against any one, some or all of the debtors. Nonetheless, petitioner,
as an accommodation party, may seek reimbursement from Antonio Ang Eng Liong, being the
party accommodated.
Consequently, in issuing the two promissory notes, petitioner as accommodating party warranted
to the holder in due course that he would pay the same according to its tenor. value therefore It is
no defense to state on his part that he did not receive any because the phrase without receiving
value therefor used in Sec. 29 of the NIL means without receiving value by virtue of the
instrument and not as it is apparently supposed to mean, without receiving payment for lending
his name. Stated differently, when a third person advances the face value of the note to the
accommodated party at the time of its creation, the consideration for the note as regards its maker
is the money advanced to the accommodated party. It is enough that value was given for the note
at the time of its creation. As in the instant case, a sum of money was received by virtue of the
notes, hence, it is immaterial so far as the bank is concerned whether one of the signers,
particularly petitioner, has or has not received anything in payment of the use of his name.

Furthermore, since the liability of an accommodation party remains not only primary but also
unconditional to a holder for value, 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.

G.R. No. 80599

September 15, 1989

ERNESTINA CRISOLOGO-JOSE vs .COURT OF APPEALS and RICARDO S. SANTOS, JR. in

his own behalf and as Vice-President for Sales of Mover Enterprises, Inc.

FACTS:

The president of Movers Enterprises, to accommodate its clients Spouses Ong, issued a
check in favor of petitioner Crisologo-Jose. This was in consideration of a quitclaim by
petitioner over a parcel of land, which the GSIS agreed to sell to spouses Ong, with the
understanding that upon approval of the compromise agreement, the check will be
encashed accordingly. As the compromise agreement wasn't approved during the expected
period of time, the aforesaid check was replaced with another one for the same value. Upon
deposit though of the checks by petitioner, it was dishonored. This prompted the petitioner to
file a case against Atty. Bernares and Santos for violation of BP22. Meanwhile, during the
preliminary investigation, Santos tried to tender a cashiers check for the value of the
dishonored check but petitioner refused to accept such. This was consigned by Santos with the
clerk of court and he instituted charges against petitioner. The trial court held that consignation
wasn't applicable to the case at bar but was reversed by the CA.

ISSUE:
 Whether or not the private respondent, one of the signatories of the check issued under the
account of Mover Enterprises, Inc., is an accommodation party under the Negotiable Instruments
Law and a debtor of petitioner to the extent of the amount of said check

HELD:

Petitioner averred that it is not Santos who is the accommodation party to the instrument but the
corporation itself. But assuming arguendo that the corporation is the accommodation party, it
cannot be held liable to the check issued in favor of petitioner. The rule on
accommodation party

doesn't include or apply to corporations which are accommodation parties. This is because the
issue or indorsement of another is ultra vires. Hence, one who has taken the instrument with
knowledge of the accommodation nature thereof cannot recover against a corporation where
it is only an accommodation party. If the form of the instrument, or the nature of the transaction,
is such as to charge the indorsee with the knowledge that the issue or indorsement of the
instrument by the corporation is for the accommodation of another, he cannot recover
against the corporation thereon.

By way of exception, an officer or agent of a corporation shall have the power to execute
or indorse a negotiable paper in the name of the corporation for the accommodation of a
third party only is specifically authorized to do so. Corollarily, corporate officers have no
power to execute for mere accommodation a negotiable instrument of the corporation
for their individual debts and transactions arising from or in relation to matters in which
the corporation has no legitimate concern. Since such accommodation paper cannot be
enforced against the corporation, the signatories thereof shall be personally liable therefore, as
well as the consequences arising from their acts in connection therewith.

G.R. No. L-24224

November 3, 1925

THE PHILIPPINE NATIONAL BANK vs RAMON MAZA and FRANCISCO MECENAS

FACTS:

Maza and Macenas executed a total of five promissory notes. These were not paid at maturity.
And to recover the amounts stated on the face of the promissory notes, PNB initiated an action
against the two. The special defense posed by the two is that the promissory notes were
delivered to

them in blank by a certain Enchaus and were made to sign the notes so that the latter
could secure a loan from the bank. They also alleged that they never negotiated the notes with
the bank nor have they received any value thereof. They also prayed that Enchaus be
impleaded in the

complaint but such was denied. The trial court then held in favor of the bank.

HELD:

The defendants attested to the genuineness of the instruments sued on. Neither did they
point out any mistake in regard to the amount and interest that the lower court sentenced
them to pay. Given such, the defendants are liable. They appear as the makers of the
promissory notes

and as such, they must keep their engagement and pay as promised.

And assuming that they are accommodation parties, the defendants having signed the
instruments without receiving value thereof, for the purpose of lending their names to some other
person, are still liable for the promissory notes. The law now is such that an accommodation party
cannot claim no benefit as such, but he is liable according to the face of his undertaking,
the same as he himself financially interest in the transaction. It is also no defense to say that they
didn't receive the value of the notes. To fasten

liability however to an accommodation maker, it is not necessary that any consideration should
move to him. The accommodation which supports the promise of the accommodation maker is
that parted with by the person taking the note and received by the person accommodated.

G.R. No. L-16477

November 22, 1921

R. N. CLARK vs GEORGE C. SELLNER

FACTS:

Sellner with two other persons, signed a promissory note solidarily binding themselves to pay to
the order of R.N Clark. The note matured but the amount wasn't paid. The defendant
alleges that he didn't receive any amount of the debt; that the instrument wasn't presented
to him for
payment and being an accommodation party, he is not liable unless the note is negotiated,
which wasn't done.

ISSUE:

Whether or not the defendant, being an accommodation party, is not liable unless the note is
negotiated, which was not done, as shown by the evidence

HELD:

The liability of Sellner as one of the signers of the note, is not dependent on whether he has or
has not, received any part of the debt. The defendant is really and expressly one of the
joint and several debtors of the note and as such he is liable under the provisions of Section 60
of the Negotiable Instruments Law.

As to the presentment for payment, such action is not necessary in order to charge the person
primarily liable, as is the defendant Sellner.

As to whether or not Sellner is an accommodation party, it should be taken into account that by
putting his signature to the note, he lent his name, not to the creditor, but to those who signed with
him placing him in the same position and with the same liability as the said signers. It should be
noted that the phrasewithout receiving value therefore as used in section 29 means
without receiving value by virtue of the instrument and not, as it apparently is supposed to mean,
without receiving payment for lending his name. It is immaterial as far as the creditor is
concerned, whether one of the signers has or has not received anything in payment for the use of
his name. In this case, the legal situation of Sellner is that of a joint surety who upon the
maturity of the note, pay the debt, demand the collateral security and dispose of it to his
benefit. As to the plaintiff, he is a holder for value.

G.R. No. L-17845

April 27, 1967

INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON SADAYA vs FRANCISCO SEVILLA

FACTS:

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 tis was reversed by the CA.

ISSUE:

Whether or not Victor Sevilla and Simeon Sadaya were joint and several accommodation makers
and are thus also jointly and severally liable

HELD:

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 makerwho made paymenthas the right to

contribution, from his co-accomodation 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 thay 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
reimbursement.