Metropolitan Bank vs.

Court of Appeals

FACTS:

In Golden Savings and Loan Association, Eduardo Gomez opened an account and
deposited over a period of two months 38 treasury warrants with a total value of
P1,755,228.37. The warrants were subsequently indorsed by Gloria Castillo – the
cashier of Golden Savings and deposited to its savings account in the Metrobank
branch in Calapan, Mindoro. It was sent for clearing to the principal office of Metrobank,
which forwarded them to the Bureau of Treasury for special clearing. Before they were
cleared, petitioner decided to allow Golden Savings to withdraw from the proceeds of
the warrants. Gomez was allowed by Golden Savings to make withdrawals from his own
account. Golden Savings was informed by Metrobank that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded the refund by Golden Savings of
the amount it had previously withdrawn, to make up the deficit in its account.

Golden Savings assumed that they were “genuine and in all respects what they purport
to be,” because Metrobank contends it by indorsing the warrants in general, in
accordance with section 66 of the Negotiable Instruments Law.

ISSUE:
Whether petitioner can hold Golden Savings liable as an indorser of the treasury warrants
based on the predication that the treasury warrants involved in this case are negotiable
instruments.

RULING:
Clearly stamped on the face of the treasury warrants is the word "non-negotiable." It is
also indicated that they are payable from a particular fund, to wit, Fund 501. 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. Petitioner cannot hold Golden Savings liable as an indorser under Section
66 of the NIL for the simple reason that this law is not applicable to the non-negotiable
treasury warrants.
Land Bank of the Philippines v. Perez
Erwin Fuentes
G.R. No. 166884

FACTS
Petitioner Land Bank of the Philippines (LBP) is a government financial institution and the official
depository of the Philippines. Respondents were officers of Asian Construction and Development
Corporation (ACDC), a corporation engaged in the construction business. On several occasions,
respondents executed in favor of Land Bank of the Philippines (LBP) trust receipts to secure the
purchase of construction materials that they will need in their construction projects. When the trust
receipts matured, ACDC failed to return to LBP the proceeds of the construction projects or the
construction materials subject of the trust receipts. After several demands went unheeded, LBP
filed a complaint for Estafa or violation of Art. 315, par. 1(b) of the RPC, in relation to PD 115,
against the respondent officers of ACDC.

ISSUE
WON the disputed transactions is a trust receipt or a loan?

HELD
The fact that LBP had knowingly authorized the delivery of construction materials to a
construction site of two government projects, as well as unspecified construction sites,
repudiates the idea that LBP intended to be the owner of those construction materials. As a
government financial institution, LBP should have been aware that the materials were to be
used for the construction of an immovable property, as well as a property of the public
domain. As an immovable property, the ownership of whatever was constructed with those
materials would presumably belong to the owner of the land, under Article 445 of the Civil
Code.
In contrast with the present situation, it is fundamental in a trust receipt transaction that the person
who advanced payment for the merchandise becomes the absolute owner of said merchandise and
continues as owner until he or she is paid in full, or if the goods had already been sold, the proceeds
should be turned over to him or to her.
WHEREFORE, we DENY the petition and AFFIRM the January 20, 2005 decision of the
Court of Appeals in CA-G.R. SP No. 76588. No costs.
Colinares v CA

Facts:

The petitioners , Melvin Colinares and Lordino Veloso, were given a consideration of P40000 by
the Carmelite Sisters of Cagayan de Oro City to renovate the latter’s covenant at Camaman-an,
Cagayan de Oro City. At Philippine Banking Corporation, Colinares applied for a commercial
letter of credit but in favor of CM Builders Center. The credit of P22,389.30 was approves by PBC
to cover the full invoice value of the goods. They signed a pro-forma trust receipt as security.
As partial payment of the loan PBC debited P6,720 from Petitioner’s marginal deposit. The
spouses defaulted after the initial payment. PBC wrote to Petitioners demanding that the
amount be paid within seven days from notice. Instead of complying with PBC’s demand, Veloso
confessed that they lost P19,195.83 in the Carmelite Monastery Project and requested for a grace
period of until 15 June 1980 to settle the account. Colinares proposed that the terms of payment
of the loan be modified P2,000 on or before 3 December 1980, and P1,000 per month . Pending
approval of the proposal, Petitioners paid P1,000 to PBC on 4 December 1980, and
thereafter P500 on 11 February 1981, 16 March 1981, and 20 April 1981. Concurrently with the
separate demand for attorney’s fees by PBC’s legal counsel, PBC continued to demand payment
of the balance. On 14 January 1983, Petitioners were charged with the violation of P.D. No. 115
(Trust Receipts Law) in relation to Article 315 of the Revised Penal Code.During trial, petitioner
Veloso insisted that the transaction was a “clean loan” as per verbal guarantee of Cayo Garcia
Tuiza, PBC’s former manager. He and petitioner Colinares signed the documents without reading
the fine print, only learning of the trust receipt implication much later. The Trust Receipts Law
does not seek to enforce payment of the loan, rather it punishes the dishonesty and abuse of
confidence in the handling of money or goods to the prejudice of another regardless of whether
the latter is the owner. Here, it is crystal clear that on the part of Petitioners there was neither
dishonesty nor abuse of confidence in the handling of money to the prejudice of PBC. Petitioners
continually endeavored to meet their obligations, as shown by several receipts issued by PBC
acknowledging payment of the loan.

Issue: Whether or not the transaction of Colinares falls within the ambit of the Law on Trust
Receipt

Held: Colinares received the merchandise from CM Builders Centre on 30 October 1979. On that
day, ownership over the merchandise was already transferred to Petitioners who were to use
the materials for their construction project. It was only a day later, 31 October 1979, that they
went to the bank to apply for a loan to pay for the merchandise. This situation belies what
normally obtains in a pure trust receipt transaction where goods are owned by the bank and only
released to the importer in trust subsequent to the grant of the loan.

To secure that the bank shall be paid, it takes full title to the goods at the very beginning and
continues to hold that title as his indispensable security until the goods are sold and the vendee
is called upon to pay for them; hence, the importer has never owned the goods and is not able to
deliver possession. The first is covered by the provision which refers to money received under
the obligation involving the duty to deliver it (entregarla) to the owner of the merchandise sold.
The second is covered by the provision which refers to merchandise received under the
obligation to “return” it (devolvera) to the owner. Failure of the entrustee to turn over the
proceeds of the sale of the goods, covered by the trust receipt to the entruster or to return said
goods if they were not disposed of in accordance with the terms of the trust receipt shall be
punishable as estafa under Article 315 (1) of the Revised Penal Code, without need of proving
intent to defraud.
 FEATI Bank v. Court of Appeals

FACTS:

Axel Christiansen (AC), a ship and merchandise broker, buys a 2,000 cubic meter of lauan logs to
Bernardo Villaluz(BV). AC issued a purchase order for the said logs after inspecting the logs.
On the arrangements made and upon the instructions of the consignee, Hanmi Trade Development,
Ltd. (HTDL), Santa Ana, California, the Security Pacific National Bank (SPNB), California issued an
Irrevocable Letter of Credit (L/C) available at sight in favor of BV for the total purchase price of the
logs. The L/C was mailed to FEATI Bank and Trust Company (FBTC) with instruction that the draft
to be drawn is on SPNB and that it be accompanied by the following documents, among others: a
Certification from AC stating that the logs have been approved prior to shipment in accordance with
terms and conditions of corresponding purchase order.
When the Chief Mate of the vessel knew that the cargo is also in the same are in good condition, he
now issued a mate receipt of the cargo. Although BV made a several requests to issue the certification
required in the L/C, AC still refused. Because of what happened, FBTC refused to advance the
payment on the L/C. It eventually lapsed without BV receiving any certification from AC.
BV instituted an action for mandamus and specific performance against AC and FBTC nefore the
then Court of First Instance(CFI) of Rizal.AC left the Philippines without any notice to give the CFI
and his counsel; hence, BV filed an amended complaint to make FBTC solidarily liable with AC..

ISSUE: Whether or not FBTC, as correspondent bank, is to be held liable under the L/C despite
non-compliance by the beneficiary, BV, with the terms thereof?

HELD: No. It is a settled rule in commercial transactions involving L/Cs that the documents
tendered must strictly conform to its terms. The tender of documents by the beneficiary (seller) must
include all documents required by the L/C. A correspondent bank which departs from what has been
stipulated under the L/C, as when it accepts a faulty tender, acts on its own risks and it may not
thereafter be able to recover from the buyer or the issuing bank, as the case may be, the money thus
paid to the beneficiary.
An irrevocable credit refers to the duration of the L/C. What it simply means is that the issuing
bank may not without the consent of the beneficiary (seller) and the applicant (buyer) revoke his
undertaking under the letter. The issuing bank does not reserve the right to revoke the credit. On the
other hand, a confirmed L/C pertains to the kind of obligation assumed by the correspondent bank.
In this case, the correspondent bank gives an absolute assurance to the beneficiary that it will
undertake the issuing bank's obligation as its own according to the terms and conditions of the credit.
Hence, the mere fact that a L/C is irrevocable does not necessarily imply that the correspondent bank
in accepting the instructions of the issuing bank has also confirmed the L/C.
Dino v. Judal-Loot
Facts:
Dino was approached by the people who posed as owners of parcels of land in Canjulao, Lapu-lapu City, and
induced him to lend them P3M, secured by REMs on the properties. A person naming Vivencia Ompok
Concing offered a deed of absolute sale covering the properties.
Enticed by the offer, Dino issued 3 Metrobank checks totalling P3M, one of which, a postdated check in the
amount of P1M, Check No. C-MA-142119406-CA (the check), was made payable to Vivencia Ompok
Consing and/or Fe Lobitana.
However, upon scrutinizing the documents involving the properties, Dino discovered that they referred to
government properties. Realizing he had been deceived, he told Metrobank to stop payment of his checks.
However, only the check issued to Concing was stopped, as the other two had already been encashed..
However, when the Loots tried to encash the check, it was dishonoured, the reason given being “PAYMENT
STOPPED.” Thus the Loots filed a collection suit against Dino and Lobitana, alleging that they were holders
in due course and for value of the check and that they had no prior information concerning the transaction
between Dino and Lobitana. Dino made a denial, while Lobitana claimed that the transaction leading to the
issuance of the check was between Consing and Dino, and that she was only made payee to facilitate
discounting.
Issues:
1. WON the crossing of the check was passable by the SC.

2. WON the Loots were holders in due course

Ratio:
1. Dino filed an MR in the CA, raising the defense that the check was a crossed check. The CA found
that it could not pass on the issue, in the interests of fair play, justice and due process, and that a
change in his theory would be improper.

However, the SC found that the defense of a crossed check is consistent with Dino’s main argument
that the Loots are not holders in due course, which is one of the possible effects of crossing a check.
Crossing a check serves as a warning to the holder that the check has been issued for a definite
purpose so that the holder thereof must inquire if he has received the check pursuant to that
purpose. Otherwise, he is not a holder in due course.
2. Sec. 52, the ff. must be considered:

a. A crossed check may not be encashed but only deposited in a bank.

b. It may only be negotiated once, to one who has an account with a bank, and

c. It warns the holder that it has been issued for a definite purpose so that the holder thereof
must inquire if he has received the check pursuant to that purpose, otherwise he is not a
holder in due course.

The Loots had the duty to ascertain the indorser’s, i.e. Lobitana’s title to the check and the nature of
her possession. They failed to do so. The verification from Metrobank that the check was funded
was not determinative of Lobitana’s title to the check. Thus, the Loots were grossly negligent,
amounting to absence of good faith, contrary to Sec. 52(c) of the NIL, and not holders in due course.
The crossing of the check relates to the mode of its presentment for payment; it must be made by a
holder or by some authorized person, whose authority depends on the instructions on the face of the
check. In the absence of such due presentment, the drawer is not liable.( State Investment House v. IAC,
(Campos, pp. 149-153)
Here, the payees, Lobitana or Consing, were not the ones who presented the check for payment. As
a result, presentment was not proper, and Dino, the drawer, is not liable. No recourse is available to
the Loots against Dino.
However, this does not mean that they automatically cannot collect upon the checks, as the NIL
does not provide that holders not in due course may not in any case recover on the instrument. The
only disadvantage to holders not in due course is that the negotiable instrument is subject to defences
as if it were non-negotiable.
HSBC vs. CIR, 04 June 2014
FACTS:

HSBC serves as the collection/payment agent as a custodian bank and also performs custodial services
on behalf of its investor-clients with respect to their passive investments in the Philippines, particularly
investments in shares of stocks in domestic corporations.

HSBC’s investor-clients also maintain Philippine peso and other foreign currenct accounts, managed
through electronically messaged instructions. These instructions are known as SWIFT or Society for
Worldwide Interbank Financial Telecommunication.

HSBC purchased and paid Documentary Stamp Tax from September to December 1997 and January to
December 1998 amounting to 19 572 992.1 and 32 904 437.3 respectively.

BIR then issued BIR Ruling to the effect that instructions or advices from abroad on the management of
funds located in the Philippines which don’t involve transfer of funds are not subject to DST. A DST shall
be imposed on any bill of exchange or order for payment purporting to be drawn in a foreign country but
payable in the Philippines.

The BIR Ruling is issued for 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.
Any bill of exchange must imposed a documentary stamp tax or order for payable purporting to be drawn
in another country but payable here in Philippines.

ISSUE: Whether or not the electronic messages are considered transactions pertaining to negotiable instruments that
warrant the payment of DST.

HELD: NO.

The Court agrees with the CTA that the DST under Section 181 of the Tax Code is levied on the acceptance or payment
of "a bill of exchange purporting to be drawn in a foreign country but payable in the Philippines" and that "a bill of
exchange is an unconditional order in writing 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."

The Court further agrees with the CTA that the electronic messages of HSBC’s 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 Court favorably adopts the finding of the CTA that 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-payor’s] local or foreign currency account in the Philippines" and "entered as such in the books of
account of the local bank," HSBC..

In these cases, the electronic messages received by HSBC from its investor-clients abroad instructing the former to
debit the latter's local and foreign currency accounts and to pay the purchase price of shares of stock or investment in
securities do not properly qualify as either presentment for acceptance or presentment for payment. There being neither
presentment for acceptance nor presentment for payment, then there was no acceptance or payment that could have
been subjected to DST to speak of.

WHEREFORE, the petitions are hereby GRANTED and the Decisions dated May 2, 2002 in CTA Case No. 6009 and dated December
18, 2002 in CT A Case No. 5951 of the Court of Tax Appeals are REINSTATED. SO ORDERED.