Case No # 14 appellee is the payee, the maker and the payee being original parties.

And that
De Ocampo & Co., vs Gatchalian, et al. there was a defect in the title of the holder since it was named under Gonzales
Nov 30, 1961 | G.R. No. L-15126 | Sec 51 to 56 Holder in Due Course ISSUE: Whether Ocampo is a holder in due course? -no-
HELD:
Plaintiff-appellee: Vicente R. De Ocampo & Co 1. Although Ocampo was not aware of the circumstances under which the check was
Defendants-appellants: Anita Gatchalian, et al. delivered to Gonzales, the court agreed with Gatchalian that the check did not
correspond exactly with the obligation of Gonzales to Ocampo
DOCTRINE: : When the case has taken such shape that the plaintiff is called upon to 2. And that the check had two parallel lines in the upper left hand corner, which
prove himself a holder in due course to be entitled to recover, he is required to establish by practice, means that the check could only be deposited and not converted
the conditions entitling him to standing as such, including good faith in taking the into cash.
instrument. It devolves upon him to disclose the facts and circumstances attending the 3. These circumstances should put Ocampo into inquiry by the possession of the check
transfer, from which good or bad faith in the transaction may be inferred by Gonzales which had two parallel lines in the upper left hand corner.
4. It was Ocampo’s duty to ascertain the nature of the check. Having failed in this
FACTS: respect, Ocampo was guilty of gross neglect. Amounting to legal absence of good
1. Gatchalian was interested to obtain a car for her husband and family. A car was faith, and thus is not a holder in good faith.
offered by Manual Gonzales who was accompanied by Emil Fajardo who is well 5. Section 52(c) provides that a holder in due course is one who takes the instrument
known to Gatchalian. "in good faith and for value;" Section 59, "that every holder is deemed prima facie
2. Gonzales represented himself that he was duly authorized by the owner of the car, to be a holder in due course;" and Section 52 (d), that in order that one may be a
Ocampo Clinic (owned by plaintiff-appellee), to look for buyers. This was not holder in due course it is necessary that "at the time the instrument was negotiated
known to Ocampo, the plaintiff. to him "he had no notice of any . . . defect in the title of the person negotiating it;"
3. Gatchalian agreed to purchase the car, and told Gonzales to bring the car the next and lastly Section 59, that every holder is deemed prima facie to be a holder in due
day together with the certificate of registration of the car. However, Gonzales first course.
asked that she issues a check, which will be shown to the owner as evidence of 6. In this case, the rule that possessor of the instrument is prima facia a holder in due
buyer’s good faith to buy the car. course does not apply because there was a defect in the title of the holder.
4. Gonzales agreed that the check was for safekeeping only, and to be returned the
next day together with the car and certificate of registration. Still, these facts were
not known to plaintiff. DISPOSITIVE: For the foregoing considerations, the decision appealed from should be,
5. The next day, alerted that Gonzales did not appear, Gatchalian issued a “Stop as it is hereby, reversed, and the defendants are absolved from the complaint. With costs
Payment Order”. against plaintiff-appellee.
6. It was found out that Manuel Gonzales used the check in payment of the fees and
expenses from the hospitalization of his wife.
7. The Ocampo Clinic accepted the check for payment of fees and release of the wife
of Manuel Gonzales, amounting to P441.75, and delivering to Gonzales P158.25 as
change (sukli)
8. Since there was a “Stop Payment Order” the check bounced.
9. Ocampo filed a complaint against Gatchalian in the CFI. CFI ruled against
Gatchalian and ordered her to pay the sum of P600.
10. Gatchalian appealed arguing that the check is not a negotiable instrument because
she had no intention to make it negotiable since it was for safekeeping only which
was supposed to return to her. And even if it was not for safekeeping, the delivery
was condititonal, and the condition was not met.
11. She further argued that Ocampo is not a holder in due course because there was
no negotiation prior to Ocampo; that a holder in due course presupposes a prior
party from whose hands negotiation proceeded, and in the case at bar, plaintiff-
 Gempesaw vs CA
February 9, 1993 | G.R. 92244 |
Sec23: Persons Precluded from raising the defense of Forgery
Petitioners: Natividad Gempesaw
Respondent: CA & Philippine Bank of Communications
DOCTRINE: In the case of forgery when done by an agent of the drawer, forgery may not
be set up as a defense if the drawer fails to exercise due diligence regarding the information
within the instrument.
FACTS:
1. Gempesaw (petitioner) owns and operates four grocery stores located at Rizal
Avenue Extension and at Second Avenue, both in Caloocan City. Among these
groceries are D.G. Shoppers Mart and D.G. WholeSale Mart. She issues checks as
payment to her suppliers
2. The checks were prepared and filled up as to all material particulars by her trusted
bookkeeper, Alicia Galang, an employee for 8+ yrs. 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.
3. She 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
4. Most of the checks (82 checks in total) were for amounts in excess of actual
obligations as shown in their corresponding invoices. Practically all the checks
were cross checks
5. All the 82 checks with forged signatures of the payees were brought to Ernest L.
Boon, Chief Accountant of respondent drawee Bank at the Buendia branch, who,
being unaothrized, accepted them all for deposit at the Buendia branch to the
credit and/or in the accounts of Alfredo Y. Romero and Benito Lam. Ernest L.
Boon was a very close friend of Romero.
6. About 30 of the payees testified that they did not receive nor even see the subject
checks and that the indorsements appearing at the back of the checks were not
theirs.none of the banks auditors discovered, checked, or topped the unauthorized
acts of Boon.
7. It was only after the lapse of more than 2 years, on November 7, 1984 did she
discovered the fraudulent manipulations of her bookkeeper and the misdeeds of
Boon. Gempesaw made demand upon the bank to credit the amount charged due
the checks. The bank refused. Hence, the present action
ISSUE:
1. W/N forgery may still be availed as a defense = NO
2. Who is to bear the cost? =Bank and Maker, equally
HELD:
[Main Issue]This is not a suit by the party whose signature was forged on a check
drawn against the drawee bank. The payees are not parties to the case. Rather, it is
the drawer, whose signature is genuine, who instituted this action to recover from
the drawee bank the value 82 checks paid out by the drawee bank to holders of those
checks where the indorsements of the payees were forged. How and by whom the
forgeries were committed are not established on the record, but the respective
payees admitted that they did not receive those checks and therefore never indorsed
the same. Sec 23 of NIL is applicable
Under Sec 23, forgery is a real or absolute defense by the party whose signature is
forged. Forgery signifies lack of consent. 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. This applies for indorsements.
There are two types of forgeries
o (1) when accomplished by someone unassociated w/ the drawer
o (2) When accomplished by an agent of the drawer
This difference in situations would determine the effect of the drawer's negligence
with respect to forged indorsements. While there is no duty resting on the depositor
to look for forged indorsements on his cancelled checks in contrast to a duty
imposed upon him to look for forgeries of his own name, a depositor is under a duty
to set up an accounting system and a business procedure as are reasonably
calculated to prevent or render difficult the forgery of indorsements, particularly by
the depositor's own employees.
o If by someone else, you can use forgery as a defense. If by your employee/
agents, you must practice due diligence in ensuring the accuracy of the
instrument.
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.
o EXPN: where the drawer is guilty of such negligence which causes the
bank to honor such a check or checks
Gempesaw failed to examine her records with reasonable diligence whether before
she signed the checks or after receiving her bank statements. This negligence is the
proximate cause of her loss. She is now precluded from using forgery as a defense
On the other hand, respondent bank has also been negligent for failing to discover
the irregularity w/ respect to the acceptance of checks w/ 2nd indorsement
o [2nd issue] Since bith parties are negligent, both shall bear the cost in
accordance with Art. 1172 NCC
DISPOSITIVE: PREMISES CONSIDERED, the case is hereby ordered REMANDED to
the trial court for the reception of evidence to determine the exact amount of loss suffered by
the petitioner, considering that she partly benefited from the issuance of the questioned
checks since the obligation for which she issued them were apparently extinguished, such
that only the excess amount over and above the total of these actual obligations must be
considered as loss of which one half must be paid by respondent drawee bank to herein
petitioner.
ISSUE: Whether or not petitioner may be compelled to cause the garnishments of Mabanto’
Jr.’s salary and RATA checks.
De La Victoria V. Burgos (Andrew)
June 27, 1995 | G.R. No. 111190 |
HELD:
Petitioners: LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his
personal capacity as garnishee,
Respondent: HON. JOSE BURGOS, Presiding Judge, RTC, and RAUL H. SESBREÑO
FACTS:
SESBREÑO filed a complaint for damages against Assistant city fiscals Mabanto,
Jr. and Rama, Jr in the RTC.
Judgement was rendered ordering defendants to pay the plaintiff, private respondent
in this case.
Such order was questioned by defendants on the CA. On Jan 1992, a writ of
execution was issued. On Feb 4, 1992 a notice of garnishment was served on
petitioner De La Victoria. The Notice directed petitioner not to disburse, transfer,
release or convey to any other person except to the deputy sheriff concerned the
salary checks, monies, or cash due or belonging to Mabanto, Jr., under penalty of
law.
March 10, 1992 - private respondents filed a motion before the TC for examination
of garnishees.
The petition pending before the CA was dismissed. Thus the RTC found no more
legal obstacle to act on the motion for garnishees.
Nov 4, 1992 - CA Directed the petitioner to submit a report showing the amount of
garnished salaries of Mabanto, Jr. within 15 days. Petitioner failed to do so and was
thus required to explain why he should not be cited in contempt of court
Jan 19, 1993 - Petitioner moved to quash notice of garnishment claiming that he
was not in possession of any money or funds belonging to Mabanto, Jr. except his
salary and RATA funds. However, such checks are not yet properties until delivered
to him and such public funds are not subject to garnishment.
The RTC ordered petitioner to comply with his order. Upon service of the writ of
garnishment, petitioner as custodian of the checks was under obligation to hold
them for the judgment creditor. Petitioner became a virtual party to, or a forced
intervenor in, the case and the trial court hereby acquired jurisdiction to bind him
to its orders and processes with a view to the complete satisfaction of the judgment.
Additionally there was no sufficient reason for petitioner to hold the checks because
they were no longer government funds and presumably delivered to the payee,
conformably with the last sentence of Sec. 16 of the Negotiable Instruments
Law
NO. Garnishment is considered as a species of attachment for reaching credits
belonging to the judgment debtor owing to him from a stranger to the litigation.
Emphasis is laid on the phrase “belonging to the judgment debtor” since it is the
focal point in resolving the issues raised. The source of the salary of Mabanto, Jr.,
is public funds. Salary and RATA checks were not owned by Mabanto, Jr., because
they were not yet delivered to him, and that petitioner as garnishee has no legal
obligation to hold and deliver them to the trial court to be applied to Mabanto, Jr.’s
judgment debt. The salary and RATA checks still formed part of public funds and
therefore beyond the reach of garnishment proceedings.
As a necessary consequence of being public fund, the checks may not be garnished
to satisfy the judgment.The rationale behind this doctrine is obvious consideration
of public policy.
As Assistant City Fiscal, the source of Mabanto’s salary is public funds.
Under Section 16 of the NIL, 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.
The petitioner is the custodian of the checks. Inasmuch as said checks
were in the custody of the petitioner and not yet delivered to Mabanto, they
didn't belong to him and still had the character of public funds. The salary check
of a government officer or employee doesn't belong to him
before it has been 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.
*If public funds would be allowed to be garnished, then basic services of
the government may be hampered.