Case No. 3: ANG TEK LIAN vs.

THE COURT OF APPEALS

FACTS:

On November 16, 1946, Ang Tek Lian drew the check 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. Ang Tek Lian told Lee Hua Hong that the he needed
badly the sum of P4, 000 represented by the check, but could not withdraw it because the bank
is already closed. He assured Lee Hua Hong that he has sufficient funds to meet the check
issued.

The next business day, the check was presented by Lee Hua Hong to the drawee bank for
payment, but it was dishonored for insufficiency of funds from the bank because the bank is
already closed.

Ang Tek Lian was sued for estafa. In his defense, however, he argues that as the check had been
made payable to “cash” and had not been endorsed by him, he is not guilty of the offense
charged.

ISSUE: Whether or not a check payable to “cash” needs indorsement?

RULING:

No. Under the Negotiable Instruments Law (sec. 9 [d], 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.

However, 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.
Case No. 5: Republic Planters vs CA
Facts: Private Respondent and one another, both officers of Worldwide Cement Manufacturing
Inc., were authorized to apply for credit facilities with petitioner bank, which issued nine
promissory notes uniformly worded except for the dates and amounts in the following manner

” ____, after date, for value received, I/We, jointly and severally promise ti pay, to the Order of
the Republic Planters Bank, at the office in Manila, Philippines, the sum of ____ Pesos”

On the right bottom margin of the promissory notes appeared the signatures of both officers
above their names with the phrase “and (in) his personal capacity” typewritten.

Issue: Whether or not private respondent is solidarity liable on the nine promissory notes.

Held: Yes, 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 solidarity 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.

Republic Planters Bank vs CA, Worldwide Garment/Pinch Manufacturing Corp., Fermin Canlas
Facts: Petitioner bank sued respondent company, along with its officers for the recovery of
money/credit by virtue of several promissory notes. The bank claims that agent Canlas should
also be held solidarily liable with the company for the payment of the said debts. On the other
hand, respondent Canlas claims that he should not be held liable since he stresses that he is a
mere “agent” of the company invoking Sections 20 of NIL as a defense, as stressed below:
Sec. 20. Liability of a person signing as agent and so forth. 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 filling a representative character,
without disclosing his principal, does not exempt him from personal liability.
This provision underscores that a mere agent acting in behalf of a “principal” within the
authority vested in him should not be liable for the instrument.
Ruling: The Court ruled that respondent Canlas should still be held liable for signing a
“complete” document with words synonymous that he is making himself jointly and severally
liable without words describing him as a mere agent only. Therefore, he should be considered a
principal to the instrument and liable for the payment of the credit.
Case No. 7: Victoria J. Ilano v. Hon. Dolores L. Español, Et Al.
G. R. No. 161756 December 16, 2005

Ponente: Carpio Morales J

Facts of the case:

Amelia Alonzo is a trusted employee of Victoria Ilano.During those times that Ilano is in the
United States of America for medical check-up; Alonzo was entrusted with Ilano’s Metrobank
Check Book which contains both signed and unsigned blank checks.

A Complaint for Revocation/Cancellation of Promissory Notes and Bills of Exchange (Cheques)

with Damages and Prayer for Preliminary Injunction or Temporary Restraining Order (TRO)
against Alonzo et al. before the Regional Trial Court of Cavite. Ilano contends that Alonzo, by
means of deceit and abuse of confidence succeeded in procuring Promissory Notes and signed
blank cheques. Alonzo likewise succeeded in inducing Ilano to sign antedated Promissory Notes.
The RTC rendered a decision dismissing the complaint for lack of cause of action and failure to
allege the ultimate facts of the case. On appeal, the Court of Appeals affirmed the dismissal of
the complaint.

Key dates to note:

Second week of December 1999- Alonzo by means of deceit and abuse of confidence
succeeded in procuring Promissory Notes and signed blank cheques from Ilano while
recuperating from illness.

Antedated Promissory notes June 8, 1999 and another promissory note dated March 1999

January 12, 2000 Cheque No. 0085134 was dishonored due to “Account Closed”

Issue:

Whether or Not the Court erred in dismissing the complaint

Supreme Court Ruling:

Petition was Partly Granted

The March 21, 2003 decision of the appellate court affirming the October 12, 2000 Order of the
trial court Branch 20 of the RTC of Imus Cavite is affirmed with modifications.
The Trial Court is Directed to Reinstate Civil Case No. 2079-00 to its docket and take further
proceedings thereon only insofar as the complaint seeks the revocation and cancellation of the
subject promissory notes and damages.

Held:

While some of the allegations my lack particulars, and are in the form of conclusions of law, the
elements of a cause of action are present. For even if some are not stated with particularity,
Ilano alleged

1) Her legal right not to be bound by the instruments which were bereft of consideration
and to which her consent was vitiated

2) The correlative obligation on the part of the defendants-respondents to respect said

right

3) The act of the defendant-respondents in procuring her signature on the instruments

through “deceit”, “ abuse of confidence”, “machination” “fraud”, “falsification”,
“forgery”, “defraudation”, and “bad faith” and “with malice, malevolence and selfish
intent”

NIL Section 6 Omissions, seal particular money – The validity and negotiable character of an
instrument are not affected by the fact that –

a. It is not dated; or

b. Does not specify the value given, or that any value had been given therefore ; or

c. Does not specify the place where it is drawn or the place where it is payable; or

d. Bears a seal; or

e. Designates a particular kind of current money in which payment is to be made.

Case No. 8: Consolidated Plywood Industries, iNC. v. IFC Leasing and Acceptance Corporation

G.R. No. L-72593, 149 SCRA 448, April 30, 1987

* Petitioner is a corporation engaged in the logging business which was in need for 2 additional
tractors for its operation.
* Industrial Products Marketing (seller-assignor) then offered to sell to petitioner corporation 2
used Allis Crawler tractors.
* Petitioner purchased said equipments in instalment basis UNDER A NINETY (90) DAY
WARRANTY; thereafter, the seller assignor issued a sales invoice and the parties (petitioner
and seller-assignor IPM) executed a deed of sale with chattel mortgage and PROMISSORY
 NOTE, which reads: “For value received, I/ we jointly and severally PROMISE TO PAY TO
THE INDUSTRIAL PRODUCTS MARKETING, the sum of 1,093,789.1 xxx xxx xxx”
* Subsequently, the seller-assignor assigned its rights & interests in the mortgage in favour of
respondent IFC Leasing through a deed of assignment.
* barely 14 days after the delivery of the tractors, one of it broke down, nine days after which the
second one broke down as well. Although, the seller-assignor sent mechanics for the repairs,
the units were no longer serviceable.
* Petitioner-corporation then asked the seller-assignor to pull out the units, have them
reconditioned, and re-sell them, proceeds of said sales to be given to respondent IFC.
However, petitioner-corporation did not received any response from IPM. 7. Respondent IFC
leasing then filed a complaint for recovery of the principal sum of P1,093,789.
* 71 against herein petitioner-corporation which was granted by the RTC and subsequently
affirmed by the Intermediate Appellate Court. Now, petitioner-corporation claims that the
PROMISSORY NOTE is NOT a negotiable instrument as it is not payable to order or bearer.
Which will have the effect of: (1) respondent IFC not being a holder in due course; (2) the
transfer of rights between IPM and IFC being merely that of a mere assignment; (3) respondent
being vulnerable to all of the available defences that the petitioner-corporation may raise as
against the seller assignor IPM.

* ISSUE: WON the PN between the petitioner-corporation and seller assignor IPM, which was
subsequently assigned to the respondent IFC is a negotiable instrument.

* RULING: NO. Par. (d), Section 1 of the NIL requires hat a promissory note “must be payable
to order or bearer. An instrument to be considered negotiable MUST CONTAIN the so-called
‘WORDS OF NEGOTIABILITY’ - i.e. must be payable to ‘order’ or ‘bearer’. These words
serve as an expression of consent that the instrument may be transferred. This consent is
indispensable since a maker assumes greater risk under a negotiable instrument than under a
non-negotiable one. There are only two way by which an instrument may be made payable to
order: There must be a specified person named in the instrument which means that the bill or
note is to be paid to the person designated in the instrument OR to any person to whom he has
endorsed and delivered the same. WITHOUT THE WORDS ’TO ORDER’ OR ’TO THE
ORDER OF’, THE INSTRUMENT IS PAYABLE ONLY TO THE PERSON DESIGNATED
THEREIN AND IS THEREFORE NON-NEGOTIABLE.

* Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a
negotiable instruments, but will merely step into the shoes of the person designated in the
instrument and will thus be open to all defences available against the latter. In this case, it is
patent that the subject promissory note is not a negotiable instrument. It follows that the
respondent can never be a holder in due course but remains a mere assignee of the PN. Thus,
the petitioner-corporation may raise against the respondent all defences available to it as
against the seller assignor IPM (in this case the defence against IPM’s breach of the 90-day
warranty, liability of which extending to the corporation to whom it assigned its rights and
interests unless the assignee is a holder in due course of the promissory note). Thus: the subject
PN is a non-negotiable instrument and the respondent IFC is not a holder in due course but a
MERE ASSIGNEE, to whom the liability for the breach of warranty committed by the seller-
assignor to the petitioner-corporation extends. Further (you may disregard), the petitioner-
 corporation merely exercised its power to rescind its agreement with the seller-assignor in view
of the non compliance of IPM with what is incumbent upon him (warranty), sustaining the
RTC and the appellate court’s judgment will result to unjust enrichment on the part of the
seller-assignor and respondent IFC at the expense of the petitioner-corporation.

Case no. 9: De La Victoria vs. Burgos - JANINE BOLLOSA

G.R. No. 111190. June 27, 1995

Bellosillo, J.

Assistant City Fiscal Bienvenido N. Mabanto was ordered to pay herein private respondent Raul
Sesbreño P11,000.00 as damages. A notice of garnishment was served on herein petitioner
Loreto D. de la Victoria as City Fiscal of Mandaue City where Mabanto was detailed. V was
directed not to disburse, transfer, release or convey to any other person except to the deputy
sheriff concerned the salary checks or other checks, monies, or cash due or belonging to
Mabanto, Jr., under penalty of law. Later, V was directed to submit his report showing the
amount of the garnished salaries. V 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: W/N 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.

RULING:

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 DOJ through V 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. The salary check of a government officer or employee
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. Being public fund, the
checks may not be garnished to satisfy the judgment in consideration of public policy.

Case no. 11: Metropol vs. Sambok

L-39641 February 28, 1983
De Castro, J.:
Facts:
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd.
Payable in 12 equal monthly installments with interest. It is further provided that in case on non-
payment of any of the installments, 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 failed to pay the
promissory note as demanded, hence Ng Sambok Sons Motors Co., Ltd. notified Sambok as
indorsee that the promissory note has been dishonored and demanded payment. Sambok failed to
pay. Ng Sambok Sons filed a complaint for the collection of sum of money. During the pendency
of the case Villaruel died. Sambok 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 indorser’s 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 dishonored 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 dishonored, 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.

Case No. 12: VICENTE R. DE OCAMPO & CO. v. ANITA GATCHALIAN.

G.R. No. L-15126. November 30, 1961.

FACTS:

Herein respondent, Anita Gatchalian was interested in buying a car. Manuel Gonzales offered to
her a car owned by Ocampo Clinic. Gonzales claimed that he was authorized by the plaintiff to
sell the car. Gonzales order defendant to issue a check to comply on showing interest in buying
the car. Gonzales promised to return the check worth P 600 the next day.
When Gonzales failed to return the check or present the certificate of registration of the car,
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 the plaintiff.

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

RULING:

The Supreme Court ruled that the plaintiff is a not a holder in due course.
Section 52, 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.
In order to show that the defendant had "knowledge of such facts that his action in taking the
instrument amounted to bad faith," it is not necessary to prove that the defendant knew the
exact fraud that was practiced upon the plaintiff by the defendant's assignor, it being sufficient
to show that the defendant had notice that there was something wrong about his assignor's
acquisition of title, although he did not have notice of the particular wrong that was
committed.

In the case at bar as the payee acquired the check under circumstances which should have put
it to inquiry, why the holder had the check and used it to pay his own personal account, the
duty devolved upon it, plaintiff-appellee, to prove that it actually acquired said check in good
faith. The stipulation of facts contains no statement of such good faith.

Case No 13: YANG V. COURT OF APPEALS

409 SCRA 159

FACTS:
Yang and Chandimari entered into an agreement that the latter would issue to the former a
manager’s check in exchange for two checks that Yang has payable to the order of David.
The difference in amount would be the profit of the two of them. It was further
agreed upon that Yang would
secure a dollar draft, which Chandimari would exchange with another dollar draft to be
secured from a Hong Kong bank. At the agreed time of rendezvous, it was reported by
Yang’s messenger that Chandimari didn't show up and the drafts and checks were allegedly
stolen. This wasn't true however. Chandimari was able to get hold of the drafts and checks.
He was even able to deliver to David the two checks and was able to get money in
return. Consequently, Yang asked for the stoppage of payment of the checks she believe to
be lost, relying on the report of her messenger. The stoppage order was eventually lifted by
the banks and the drafts and checks were able to be encashed. Yang then filed an action for
injunction and damages against the banks, Chandimari and David. The
trial court and CA held in favor of David as a holder in due course.

Issue: WON David a holder in due course

HELD:
Every holder of a negotiable instrument is presumed to be a holder in due course. This is
specially true if one is a holder because he is the payee or indorsee of the instrument. In the
case at bar, it is evident that David was the payee of the checks. The prima facie
presumption of him being a holder in due course is in his favor. Nonetheless, this
presumption is disputable. On whether he took the check under the conditions set forth in
Section 52 must be proven. Petitioner relies on two arguments on why
David isn’t a holder in due course—first, because he took the checks without valuable
consideration; and second, he failed to inquire on Chandimari’s title to the checks given to
him.
The law gives rise to the presumption of valuable consideration. Petitioner has the burden of
debunking such presumption, which it failed to do so. Her allegation that David received
the checks without consideration is unsupported and devoid of any evidence.

Furthermore, petitioner wasn't able to show any circumstance which should have placed David
in inquiry as to why and wherefore of the possession of the checks by Chandimari. David
wasn't a privy to the transactions between Yang and Chandimari. Instead, Chandimari
and David had the agreement between themselves of the delivery of the checks. David even
inquired with the banks on the genuineness of the checks in issue. At that time, he wasn't
aware of any request for the stoppage of payment. Under
these circumstances, David had no obligation to ascertain from Chandimari what the nature of
the latter’s title to the checks was, if any, or the nature of his possession.
Case no. 14: Mesina vs. IAC
Case no. 15: ASTRO ELECTRONICS CORP. & PETER ROXAS v. PHILIPPINE EXPORT
AND FOREIGN LOAN GUARANTEE CORPORATION
G.R. No. 136729 September 23, 2003

Facts:
Astro was granted several loans by the Philippine Trust Company (Philtrust) 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.

Thereafter, Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust the
payment of 70% of Astro’s 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 Astro’s 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.

The trial court ruled in favor of Philguarantee, stating that if Roxas really intended to sign the
instruments merely in his capacity as President of Astro, then he should have signed only once
in the promissory note. On appeal, the Court of Appeals affirmed the RTC decision.

Issue:
Whether or not Roxas should be solidarily liable with Astro for the sum awarded by the RTC

Held:
Yes. In signing his name aside from being the President of Astro, 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.
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.

Moreover, an instrument which begins with “I”, “We”, or “Either of us” promise to pay, when
signed by two or more persons, makes them solidary liable (Republic Planters Bank vs. Court of
Appeals, G.R. No. 93073, December 21, 1992). Having signed under such terms, Roxas assumed
the solidary liability of a debtor and Philtrust Bank may choose to enforce the notes against him
alone or jointly with Astro.

It devolves upon one to overcome the presumptions that private transactions are presumed to
be fair and regular and that a person takes ordinary care of his concerns (Mendoza vs. Court of
Appeals, G.R. No. 116710). Bare allegations, when unsubstantiated by evidence, documentary
or otherwise, are not equivalent to proof under our Rules of Court (Coronel vs. Constantino,
G.R. No. 121069, February 7, 2003). Since Roxas failed to prove the truth of his allegations that
the phrases “in his personal capacity” and “in his official capacity” were inserted on the notes
without his knowledge, said presumptions shall prevail over his claims.

Case no. 16: ROMEO GARCIA VS. DIONISIO LLAMAS - CHRISTIAN LABAJOY
SYLLABUS - PROMISSORY NOTE
G.R. No. 154127. December 8, 2003
Facts: A complaint for sum of money was filed by respondent Dionisio Llamas against
Petitioner Romeo Garcia and Eduardo de Jesus alleging that the two borrowed Php 400, 000
from him. They bound themselves jointly and severally to pay the loan on or before January 23,
1997 with a 15% interest per month. The loan remained unpaid despite repeated demands by
respondent.
Petitioner resisted the complaint alleging that he signed the promissory note merely as an
accommodation party for de Jesus and the latter had already paid the loan by means of a check
and that the issuance of the check and acceptance thereof novated or superseded the note.
The trial court rendered a judgment on the pleadings in favor of the respondent and directed
petitioner to pay jointly and severally respondent the amounts of Php 400, 000 representing the
principal amount plus interest at 15% per month from January 23, 1997 until the same shall have
been fully paid, less the amount of Php 120,000 representing interests already paid.
The Court of Appeals 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.
Respondent’s 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 beenintended to extinguish the obligation bounced upon its presentment.
Issue: WON by its terms, the note was made payable to a specific person rather than bearer to or
order.
Ruling: A requisite for negotiability. Hence, petitioner cannot avail himself of the NIL’s
provisions on the liabilities and defenses of an accommodation party. Besides, a non-negotiable
note is merely a simple contract in writing and 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 that the NIL was applicable, still petitioner would be liable for the note. An
accommodation party is liable for the instrument to a holder for value even if, at the time of its
taking, the latter knew theformer to be only an accommodation party. The relation between an
accommodation party and the party accommodated is, in effect, one of principal and surety. It is
a settled rule that a surety is bound equally and absolutely with the principal and is deemed an
original promissory debtor from the beginning. The liability is immediate and direct.

Case no. 17: SADAYA V. SEVILLA

19 SCRA 924
FACTS:
Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly and severally, in favor of the Bank of
the Philippine Islands, or its order, a promissory note for P15,000.00 with interest at 8% per annum,
payable on demand.
The entire, amount of P15,000.00, proceeds of the promissory note, was received from the bank by Oscar
Varona alone. Victor Sevilla and Simeon Sadaya signed the promissory note as co-makers only as a favor
to Oscar Varona.
Payments were made on account. As of June 15, 1950, the outstanding balance stood P4,850.00. No
payment thereafter made. On October 6, 1952, the bank collected from Sadaya the foregoing balance
which, together with interest, totaled P5,416.12. Varona failed to reimburse Sadaya despite repeated
demands.
Victor Sevilla died. Intestate estate proceedings were started in the Court of First Instance of Rizal,
Special Proceeding No. 1518. Francisco Sevilla was named administrator.
In Special Proceeding, Sadaya filed a creditor's claim for the above sum of P5,746.12, plus attorney’s fees
in the sum of P1,500.00. The administrator resisted the claim upon the averment that the deceased Victor
Sevilla "did not receive any amount as consideration for the promissory note," but signed it only "as
surety for Oscar Varona".
On June 5, 1957, the trial court issued an order admitting the claim of Simeon Sadaya in the amount of
P5,746.12, and directing the administrator to pay the same from any available funds belonging to the
estate of the deceased Victor Sevilla.
The Court of Appeals, in a decision promulgated, voted to set aside the order appealed from and to
disapprove and disallow "appellee's claim of P5,746.12 against the intestate estate."

Issue: Whether or not Sadaya can claim against the estate of Sevilla as co-accommodation party
when Verona as principal debtor is not yet insolvent.
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 former’s 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 maker—who made payment—has 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.

Case no. 18: Travel-On, Inc. vs Court of Appeals

G.R. No. L-56169 June 26, 1992

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.

**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. In the case at bar, Travel-On was the 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.

Case no. 19: Negotiable Instruments Case Digest: Ang v. Associated Bank (2007)
G.R. No. 146511 September 5, 2007

Lessons Applicable: Consideration and Accommodation (Negotiable Instruments)

FACTS:

August 28, 1990: Associated Bank (formerly Associated Banking Corporation and now known as
United Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng Liong
(principal debtor) and petitioner Tomas Ang (co-maker) for the 2 promissory notes

October 3 and 9, 1978: obtained a loan of P50,000 and P30,000 evidenced by promissory note
payable, jointly and severally, on January 31, 1979 and December 8, 1978

Despite repeated demands for payment, the latest on September 13, 1988 and September 9,
1986, they failed to settle their obligations totalling to P539,638.96 as of July 31, 1990

Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80,000
Tomas Ang: 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

bank granted his co-defendant successive extensions of time within which to pay, without his
knowledge and consent

the bank imposed new and additional stipulations on interest, penalties, services charges and
attorney's fees more onerous than the terms of the notes, without his knowledge and consent

he should be reimbursed by his co-defendant any and all sums that he may be adjudged liable
to pay, plus P30,000, P20,000 and P50,000 for moral and exemplary damages, and attorney's
fees, respectively.

October 19, 1990: RTC held Antonio Ang Eng Liong was ordered to pay the principal amount of
P80,000 plus 14% interest per annum and 2% service charge per annum

Lower Court: Granted against the bank, dismissing the complaint for lack of cause of action.

CA: ordered Ang to pay the bank - bank is a holder

CA observed that the bank, as the payee, did not indorse the notes to the Asset Privatization
Trust despite the execution of the Deeds of Transfer and Trust Agreement and that the notes
continued to remain with the bank until the institution of the collection suit.

With the bank as the "holder" of the promissory notes, the Court of Appeals held that Tomas
Ang is accountable therefor in his capacity as an accommodation party.

Tomas Ang cannot validly set up the defense that he did not receive any consideration therefor
as the fact that the loan was granted to the principal debtor already constitutes a sufficient
consideration.

ISSUE: W/N Ang is liable as accomodation party even without consideration and his co-
accomodation party was granted accomodation w/o his knowledge

HELD: CA AFFIRMED

At the time the complaint was filed in the trial court, it was the Asset Privatization Trust which
had the authority to enforce its claims against both debtors
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

petitioner signed the promissory note as a solidary co-maker and not as a guarantor. This is
patent even from the first sentence of the promissory note which states as follows:

"Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to
pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro,
Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency,
together with interest x x x at the rate of SIXTEEN (16) per cent per annum until fully paid."

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.

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.

Case no. 20: GONZALES VS PHILIPPINE COMMERCIAL AND INTERNATIONAL

BANK
FACTS:
Eusebio 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:
W/N 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.
Lastly, the solidary nature of the loan was expressly stated in the promissory notes which state:
“…the undersigned JOINTLY AND SEVERALLY promise to pay xx”.

Case no. 21: Republic vs. Ebrada

(Republic Bank vs. Mauricia T. Ebrada, 65 SCRA 680, July 31, 1975

FACTS:
Mauricia T. Ebrada (Ebrada) encashed a back pay check issued by the Bureau of Treasury
in the amount of Php1,246.08 at the Republic Bank in Escolta, Manila. The Bureau of Treasury
later advised the Republic Bank that the alleged indorsement on the reverse side of the check
was a forgery because the payee, MARTIN LORENZO, already died more than 11 years ago. The
Bureau of Treasury requested the Republic Bank to refund the amount of P1,246.08 which the
latter complied and granted. To recover the said amount it refunded to the Bureau of Treasury,
the Republic Bank demanded from Ebrada to account for the Php1,246.08 but Ebrada refused.
The sequence of indorsements on the check was as follows:

MARTIN LORENZO (the original payee whose signature was forged)

RAMON LORENZO
DELIA DOMINGUEZ
MAURICIA EBRADA (the defendant-appellant)

The Republic Bank sued Ebrada at the City Court of Manila which rendered judgment for
Republic Bank against Ebrada. Ebrada appealed the case at the Court of First Instance (CFI) of
Manila, Branch XXIII, which decided and ordered Ebrada to pay the Republic Bank the amount
of Php1,246.08. Thereafter, Ebrada appealed to the Highest Court on a question of law of the
decision of the CFI of Manila.

ISSUE:
Whether or not the drawee-bank, after its discovery that the signature of the payee was
forged and after it has paid the amount of the check to the holder thereof, can recover the
amount paid from the said holder.

HELD:
Yes. The Supreme Court speaking through Hon. Justice Martin held that, one who
purchases a check or draft is bound to satisfy himself that the paper is genuine and that by
indorsing it or presenting it for payment or putting it into circulation before presentation he
impliedly asserts that he has performed his duty and the drawee who has paid the forged
check, without actual negligence on his part may recover the money paid from such negligent
purchasers. In such cases the recovery is PERMITTED because although the drawee was in a
way negligent in failing to detect the forgery, yet if the encasher of the check had performed his
duty, the forgery would in all probability, have been detected and the fraud defeated. Similarly,
in the case before Us, Ebrada, upon receiving the check in question from Adelaida Dominguez,
was duty-bound to ascertain whether the check in question was genuine before presenting it to
the Republic Bank for payment. Her failure to do so makes her liable for the loss and the
Republic Bank may RECOVER from her the money she received for the check.
It can safely be concluded that it is only the negotiation predicated on the forged
indorsement that should be declared inoperative. This means that the negotiation of the check
in question from MARTIN LORENZO, the original payee, to RAMON R. LORENZO, the second
indorsee, should be declared of no effect, but the negotiation of the aforementioned check
from RAMON R. LORENZO to ADELAIDA DOMINGUEZ, the third indorsee, and from ADELAIDA
DOMINGUEZ to MAURICIA T. EBRADA who did not know of the forgery, should be considered
valid and enforceable, barring any claim of forgery.
The fact that immediately after receiving the cash proceeds of the check in question,
Ebrada immediately turned over said amount to Adelaida Dominguez who in turn handed the
amount to Justinia Tinio on the same date would not exempt her form liability because by
doing so, she acted as an accommodation party to the check for which she is also liable under
Section 29 of the Negotiable Instruments Law.
(Judgment appealed from is affirmed in toto with costs against defendant-appellant.)

Case no. 22: NATIVIDAD GEMPESAW VS COURT OF APPEALS

G.R. No. 92244, February 9, 1993
Campos, Jr., J.

TOPIC: Liabilities of Parties

DOCTRINE:

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.

FACTS:
 Natividad Gempesaw (Gempesaw/petitioner) owns and operates four grocery stores
located along Rizal Avenue Extension and Second Avenue, Caloocan.
 She maintains a checking account with the private respondent, Philippine National Bank
(PNB).
 Her customary practice of issuing checks in payment of her suppliers was to have the
checks prepared with all necessary details by her trusted bookkeeper of 8 years, Alicia
Galang (Galang). After the checks are prepared, Galang, then, submits it to petitioner for
signing, together with the corresponding invoice receipts which indicate the correct
obligations due and payable to her suppliers.
 Petitioner signs the checks without verifying the accuracy of the information stated in
the invoice because of her full trust to Galang.
 The issuance and delivery of said checks to the suppliers were left in the hands of
Galang.
 Although PNB notified her of all the checks, petitioner did not bother to make
verification as to whether or not the checks were received by the respective payees.
 In a span of two years, the customary of issuing checks as stated above was followed
with a total of 82 checks.
 All the checks were also crossed checks.
 All checks with forged signature of the payees were brought to Ernest Boon, Chief
Accountant of PNB at the Buendia Branch, who, without authority, accepted the said
checks to be deposited at the accounts of Alfredo Romero and Benito Lam.
 About 30 of the payees named in the checks testified that they did not receive the said
checks and that the indorsements appearing at the back of the checks were not theirs.
  The team of auditors of the main branch of PNB failed to discover and stop the
unauthorized acts of Boon. For under their rules, only the branch manager may accept a
second indorsement of checks for deposit.
 It was only after the lapse of more than two years that petitioner found out about the
fraudulent manipulations of her bookkeeper.
 [November 7, 1984] Petitioner made a written demand on PNB to credit her account
with the value of the 82 checks totaling to P1,208,606.89 for having been wrongfully
charged against her account.
 [January 23, 1985] Gempesaw filed a complaint against PNB for recovery of the money-
value of 82 checks charged against her account on the ground that the payee’s
indorsements were forgeries.
 [November 17, 1987] The RTC of Caloocan City dismissed the complaint of herein
petitioner.
 [February 22, 1990] The CA affirmed the decision of the RTC based on two grounds,
namely: (1) that Gempesaw’s gross negligence in issuing the checks was the proximate
cause of the loss and (2) assuming that the bank was also negligent, the loss must
nevertheless be borne by the party whose negligence was the proximate cause of the
loss.
 [March 5, 1990] Gempesaw filed a petition under Rule 45 of the Rules of Court at the
SC.

ISSUE:
WON Gempesaw may rightfully recover from the drawee bank who pays a check with a forged
indorsement of the payee. – NOT FULLY.

HELD:
 The SC held that in the case at bar, petitioner admitted that the checks were filled up
and completed by her trusted employee, Alicia Galang, and were later given to her for
her signature. Her signing the checks made the negotiable instrument complete. Prior to
signing the checks, there was no valid contract yet.

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 the 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
sales 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 time she
notified the respondent drawee Bank.

It is highly improbable that in a period of two years, not one of petitioner's suppliers
complained of non-payment. Assuming that even one single complaint had been made,
petitioner would have been duty-bound, as far as the respondent drawee Bank was
concerned, to make an adequate investigation on the matter. Had this been done, the
discrepancies would have been discovered, sooner or later. Petitioner's failure to make
such adequate inquiry constituted negligence which resulted in the bank's honoring of
the subsequent checks with forged indorsements. On the other hand, since the record
mentions nothing about such a complaint, the possibility exists that the checks in
question covered inexistent sales. But even in such a case, considering the length of a
period of two (2) years, it is hard to believe that petitioner did not know or realize that
she was paying much more than she should for the supplies she was actually getting. A
depositor may not sit idly by, after knowledge has come to her that her funds seem to
be disappearing or that there may be a leak in her business, and refrain from taking the
steps that a careful and prudent businessman would take in such circumstances and if
taken, would result in stopping the continuance of the fraudulent scheme. If she fails to
take such steps, the facts may establish her negligence, and in that event, she would be
estopped from
recovering from the bank.

Thus, petitioner's negligence was the proximate cause of her loss. And since it was her
negligence which caused the respondent drawee Bank to honor the forged checks or
prevented it from recovering the amount it had already paid on the checks, petitioner
cannot now complain should the bank refuse to recredit her account with the amount of
such checks. Under Section 23 of the NIL, she is now precluded from using the forgery to
prevent the bank's debiting of her account.
Furthermore, the fact that the PNB did not discover the irregularity with respect to the
acceptance of checks with second indorsement for deposit even without the approval of
the branch manager despite periodic inspection conducted by a team of auditors from
the main office, constitutes negligence on the part of the PNB in carrying out its
obligations to its depositors.

We hold that banking business is so impressed with public interest where the trust and
confidence of the public in general is of paramount importance such that the
appropriate standard of diligence must be a high degree of diligence, if not the utmost
diligence. Surely, respondent drawee Bank cannot claim it exercised such a degree of
diligence that is required of it. There is no way We can allow it now to escape liability for
such negligence.

Premises considered, respondent drawee Bank is adjudged liable to share the loss with
the petitioner on a fifty-fifty ratio in accordance with Article 1172.
 The SC hereby ordered the case 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.

Case no. 24: METROPOLITAN BANK AND TRUST COMPANY vs.

BA FINANCE CORPORATION and MALAYAN INSURANCE CO., INC.
G.R. No. 179952. December 4, 2009.

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. The car was stolen. On Bitanga’s claim, Malayan Insurance
issued a check payable to the order of "B.A. Finance Corporation and Lamberto Bitanga", drawn
against China. The check was crossed with the notation "For Deposit Payees’ Account Only."
Without the indorsement or authority of his co-payee BA Finance, Bitanga deposited the check
to his account with the Asianbank, now merged with herein petitioner Metrobank. Bitanga
subsequently withdrew the entire proceeds of the check. In the meantime, Bitanga’s loan
became past due, but despite demands, he failed to settle it. BA Finance eventually learned of
the loss of the car and of Malayan Insurance’s issuance of a crossed check payable to it and
Bitanga, and of Bitanga’s depositing it in his account at Asianbank and withdrawing the entire
proceeds thereof. BA Finance thereupon demanded the payment of the value of the check from
Asianbank but to no avail, prompting it to file a complaint before the RTC for sum of money and
damages against Asianbank and Bitanga, alleging that, inter alia, it is entitled to the entire
proceeds of the check. The trial court, holding that Asianbank was negligent in allowing Bitanga
to deposit the check to his account and to withdraw the proceeds thereof, without his co-payee
BA Finance having either indorsed it or authorized him to indorse it in its behalf, found
Asianbank and Bitanga jointly and severally liable to BA Finance following Section 41 of the
Negotiable Instruments Law. The appellate court, affirming the trial court’s decision, held that
BA Finance has a cause of action against [it] even if the subject check had not been delivered to
BA Finance by the issuer itself. Hence, the present Petition for Review on Certiorari filed by
Metrobank to which Asianbank was, as earlier stated, merged, faulting the appellate court.

ISSUE: WON the petitioner is liable for the full value of the check?

HELD: Yes. Affirming the decision of the CA, the SC held that 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 Bitanga’s co-
payee BA Finance to endorse it on its behalf. 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. Clearly, petitioner, through its employee, was
negligent when it allowed the deposit of the crossed check, despite the lone endorsement of
Bitanga, ostensibly ignoring the fact that the check did not, it bears repeating, carry the
indorsement of BA Finance.
Case no. 26: State Investment House vs. CA
Case no. 30: SECURITY BANK VS RCBC

FACTS:

On January 9, 1981, Security Bank and Trust Company (SBTC)) issued a manager’s check for
P8M, payable to “CASH”, as proceeds of the loan granted to Guidon Construction and
Development Corporation (GCDC).

The check was deposited by continental manufacturing corporation (CMC) in its Current
Account with Rizal Commercial BAnking Corporation (RCBC). immediately, RCBC honored the
P8M check and allowed CMC to withdraw.

On january 12, 1981, GCDC issued a “Stop Payment Order” to SBTC claiming that the P8M check
was released to a 3rd party by mistake. SBTC dishonored and returned the manager’s check to
RCBC.

On February 13, 1981, RCBC filed a complaint for damages against SBTC with CFI then
transferred to RTC, following the rules of the Philippine Clearing House RCBC and SBTC stopped
returning the checks to each other, by way of a temporary arranement pending resolution of
the case, the PM check was equally divided between RCBC and SBTC.

On May 9, 2000, RTC of Makati City, Branch 143, rendered a decision in favor of RCBC and finds
defendant SBTC justly iable to RCBC and sentence SBTC to pay RCBC the amount of 4M for
actual damages, and 100k for attorney’s fees; and the cost in favor of RCBC.

C. A affirmed tith the modification of TRC decisiob by adding interest. Hence this petition.

ISSUES: Whether or not the SBTC should liable for its manager’s check’

HELD:

Yes. SBTC should be liable for its manager’s check.

The questioned check issued by SBTC is not just an ordinary check but a manager’s check.
Manager’s check is one drawn by a bank’s manager upon the bank itself and in the same
footing as a certified check which is deemed to have been accepted by the bank that certified it.
As the bank’s own check, a manager’s check becomes the primary obligation of the bank and is
accepted in advance by the act of its issuance. RCBC, in immediately crediting the amount of P8
million to CMC’s account, relied on the integrity and honor of the check as it is regarded in
commercial transactions. Where the questioned check, which was payable to Cash, appeared
regular on its face, and the bank found nothing unusual in the transaction, as the drawer
usually issued checks in big amounts made payable to cash, RCBC cannot be faulted in paying
the value of the questioned check. In a July 9, 1980 Memorandum, banks were given the
discretion to allow immediate drawings on uncollected deposits of manager’s checks, among
others. Consequently, RCBC, in allowing the immediate withdrawal against the subject
managers check, only exercised a prerogative expressly granted to it by the Monetary Board.
Moreover, neither Monetary Board Resolution No. 2202 nor the July 9, 1980 Memorandum
alters the extraordinary nature of the managers check and the relative rights of the parties
thereto. SBTC’s liability as drawer remains the same − by drawing the instrument, it admits the
existence of the payee and his then capacity to indorse; and engages that on due presentment,
the instrument will be accepted, or paid, or both, according to its tenor