-1-

Traders Royal Bank vs Court of Appeals, Filriters

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

Caltex vs CA

The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself. In the
construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained. While the writing may be read in the light of surrounding
circumstances in order to more perfectly understand the intent and meaning of the parties, yet as they have constituted the writing to be the only outward and visible
expression of their meaning, no other words are to be added to it or substituted in its stead.

Metropolitan Bank vs CA

The document bearing on its face the words payable from the appropriation for food administration, is actually an order for payment out of a particular fund and is
not unconditional and does not fulfill one of the essential requirements of a negotiable instrument.

PNB vs Concepcion Mining Company

Sec. 17 g Where an instrument containing the word “I promise to pay” is signed by two or more persons, they are deemed to be jointly and severally liable thereon.

-2-

Development Bank of Rizal vs Sima Wei

A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of property. A negotiable instrument must be
delivered to the payee in order to evidence its existence as a binding contract. 1

Delivery of an instrument means transfer of possession, actual or constructive from one person to another.

Lim vs CA

“Issue” means the first delivery of the instrument complete in form to a person who takes it as a holder 2
“Holder” refers to the payee or indorsee of a bill or note who is in possession of it or the bearer thereof.

The delivery of the instrument is the final act essential to its consummation as an obligation. An undelivered bill or note is inoperative. Until delivery the contract is
revocable.3

Republic Planters Bank vs CA & Fermin Canlas

Persons who write their names on the face of promissory notes are makers and are liable as such.

An instrument which begins with “I”, “We”, or “Either of us” promise to, pay, when signed by two or more persons, makes them solidarily liable. The fact that the
singular pronoun is used indicates that the promise is individual as to each other; meaning that each of the co-signers is deemed to have made an independent
singular promise to pay the notes in full.

The agent is personally liable to take holder of the instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic
evidence is not admissible to avoid the agent’s personal liability.

[Astro-Ilusorio]

-3-

Pineda vs Dela Rama

1
Sec 16
2
Sec 191
3
People vs Yabut
The presumption that a negotiable instrument is issued for a valuable consideration is only prima faci. It can be rebutted by proof to the contrary.

The consideration for the promissory note – to influence public officers in the performance of their duties – is contrary to law and public policy. The promissory note is
void ab initio and no cause of action for the collection cases can arise from it.

Philippine Bank of Commerce vs Aruego

An accommodation party is one who has signed the instrument as maker, drawer, indorser without receiving value therefor and for the purpose of lending his name to
some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of the taking of the instrument knew him to
be only an accommodation party.

He receives no part of the consideration for the instrument but assumes liability to other parties thereto because he wants to accommodate another.

A bill of exchange is 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.

Clark vs Sellner

The liability of the defendant (accommodation party) as one of the signers of the note, is not dependent on whether he has, or has not, received any part of the
amount of debt. The defendant is really and expressly one of the joint and several debtors on the note and as such he is liable under section 60 of Act 2031 entitled
Negotiable Instruments Law.

PNB vs Maza

As accommodation parties, the defendants having signed the instruments without receiving value therefor and for the purpose of lending their names to some other
person, are still liable on the instruments. The law now is that the accommodation party can claim no benefit as such, but he is liable according to the face of his
undertaking, the same as if he were himself financially interested in the transaction.

When the accommodation parties make payment to the holder of the notes, they have the right to sue the accommodated party for reimbursement, since the relation
between them is in effect that of principal and sureties, the accommodation parties being the sureties.

Sadaya vs Sevilla

While these two (Sevilla and Sadaya) did not receive value on the promissory note, they executed the same with, and for the purpose of lending their names to Oscar
Varona. Their liability to the bank upon the explicit terms of the promissory note is joint and several. They stand on the same footing, in misfortune, their burderns
should be equally spread.

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. 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 he (a) Made the payment by virtue of a judicial demand or (b) the principal debtor is
insolvent.

Republic Bank vs Ebrada

Where the signature on a negotiable instrument is forged, the negotiation of the check is without force or effect. It is only the negotiation based on the forged or
unauthorized signature is inoperative 4.

Where the bank pays the amount of a check to a third person who has forged the signature of the payee, the loss falls upon the bank who cashed the check, and its
only remedy is against the person to whom it paid the money.

United General Industries vs Paler & Dela Rama

An agreement to stifle the prosecution of a crime is manifestly contrary to public policy and due administration of justice will not be enforced in a court of law. There
can be no recovery against De La Rama who incidentally appears to have been an accommodation signer only of the promissory note which is vitiated by the illegality
of the cause.

Prudencio vs CA

4
Beam vs Farrel 135 Iowa 670
A Payee who receives a negotiable promissory note, in good faith, for value, before maturity, and without any notice of any infirmity, from a holder, not the maker to
whom it was negotiated as a completed instrument, is a holder in due course within the purview of a Negotiable Instruments Law, so as to preclude the defense of
fraud and failure of consideration between the maker and the holder to whom the instrument was delivered.

Crisologo-Jose vs CA
To be considered an accommodation party, a person must be (1) A party to the instrument, singing as a maker, drawer, acceptor, or indorser (2) Not receive value
therefor, (3) sign for the purpose of lending his name for the credit of some other person.

It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument.

One who has taken the instrument with knowledge of the accommodation nature thereof cannot recover against a corporation where it is only an accommodation
party. An officer or agent of a corporation have the power to execute a negotiable paper in the name of the corporation for the accommodation of a third part only if
specifically authorized to do so.The signatories thereof shall be personally liable therefor.

-4-

De Ocampo vs Gatchalian
In order to show that 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. It being sufficient to show that the defendant had notice there was something wrong about his assignor’s
acquisition of the title

Green vs Lopez
Equitable defenses of this nature can in no event defeat the right of the holders of a negotiable note by indorsement and for valuable consideration until and unless
knowledge of the existence of such equitable defenses is brought home to them or until it appears that the holders had such knowledge of the existence of defects in
the instrument as to charge them with bad faith in acquiring it under all the circumstances.

Bataan Cigar vs CA
The negotiability of a check is not affected by it being crossed, whether specially or general. It may legally be negotiated from one person to another as long as the
one who encashes the check with the drawee bank is another bank or if specially crossed, the bank mentioned.

The crossing of a check should have the following effects.

a. The check may not be encashed but only deposited in the bank

b. The check may be negotiated only once – to one who has an account with a bank

c. The act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he
has received the check pursuant to that purpose, otherwise he is not a holder in due course. (as adopted in SIHI vs IAC)

Consolidated Plywood vs IFC Leasing and Acceptance Corporation

Even assuming that the PN in question is a negotiable instrument, respondent cannot be a holder in due course. The respondent had actual knowledge of the fact that
the seller-assignor’s right to collect the purchase price was not unconditional and that it was subject to the condition that the tractors were not defective. The
respondents knew that when the tractors turned out to be defective, it would be subject to the defense of failure of consideration and cannot recover the purchase
price from petitioners. The respondent took the same with actual knowledge of the foregoing facts so that its action in taking the instrument amounted to bad faith.

State Investment House Inc vs IAC

The NIL does not mention crossed checks but the Court has taken cognizance of the practice that a check with two parallel lines in the upper left hand corner means
that it could only be deposited and may not be converted to a cash. The act of crossing a check serves as a warning to the holder that the check has been issued for a
definite purpose so that must inquire if he has received the check pursuant for that purpose, otherwise he is not a holder in due course.

Dino vs Judal-Loot
In the case of a crossed check, as in this case, the following principles must be additionally considered A crossed check may not be encashed but only deposited in the
bank; may be negotiated only once – to one who has an account with a bank and; warns the holder that is has been issued for a definite purpose so the holder must
inquire if he has received the check pursuant to that definite purpose.

-5-

People vs Julia Maniego

The holder or last indorsee of a negotiable instrument has the right to “enforce payment of the instrument for the full amount thereof against all parties liable
thereon.” Among the parties liable thereon is an indorser of the instrument i.e. a person placing his signature upon an instrument otherwise than as maker, drawer or
acceptor unless he clearly indicates by appropriate words his intention to be bound in some other capacity.

The instrument shall be accepted or paid or both as the case may be according to its tenor that if it be dishonored and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it. Maniego may also be deemed an “accommodation
party” in light of the facts.

Ang Tiong vs Lorenzo Ting

Nothing in the check indicates that appellant is not a general indorser within the purview of 63 NIL which makes “A person placing his signature upon an instrument
otherwise than as maker, drawer or acceptor” a general indorser – unless he clearly indicates plaintiff appropriate words his intention to be bound in some other
capacity which he did not do.

Banco De Oro vs Equitable Bank, Philippine Clearing House Corporation

It has been enunciated in American Exchange National Bank vs Yorkville Bank that the drawer owes no duty of diligence to the collecting bank (one who accepted an
altered check and paid over the proceeds to the depositor) except of seasonably discovering the alteration by a comparison of its returned checks and check stubs or
other equivalent record, and to inform the drawee thereof.

Negligence on the part of the drawer cannot create any liability from it to the collecting bank and the draw is thus neither a necessary nor a proper party to an action
by the drawee bank against such bank. While the drawer generally owes no duty of diligence to the collecting bank, the law imposes a duty of diligence on the
collecting bank to scrutinize checks deposited with it for the purpose of determining their genuiness and regularity.

Associated Bank vs CA, Province of Tarlac, PNB

By reason of the statutory warranty of a general indorser in section 66 of the Negotiable Instruments Law, a collecting bank which indorses a check bearing a forged
indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement. It warrants that the instrument is genuine, and
that it is valid and subsisting at the time of his indorsement. Because the indorsement is a forgery, the collecting bank commits a breach of this warranty and will be
accountable to the drawee bank. This liability scheme operates without regard to fault on the part of the collecting/presenting bank. Even if the latter bank was not
negligent, it would still be liable to the drawee bank because of its indorsement.

The collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuiness of all prior endorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuiness of the
endorsements.

-6-

Far East Realty Investment Inc vs CA

No hard and fast demarcation line can be drawn between what may be considered as a reasonable or an unreasonable time, because “reasonable time” depends upon
the peculiar facts and circumstances in each case.

“Reasonable time” has been defined as so much time as is necessary under the circumstances for a reasonable prudent and diligent man to do, conveniently, what the
contract or duty requires should be done, having a regard for the rights and possibility of loss, if any, to the other party.

PNB vs Seeto

The indorser of a check, unlike the drawer, is relieved of liability thereon by an unreasonable delay in presenting the same for payment, whether or not he is injured by
the delay, is supported by the great weight of authority.

We have been unable to find any authority sustaining the proposition that an indorser of a check is not discharged from liability for an unreasonable delay in
presentation for payment. They are supposed to be passed on with promptness in the ordinary course of business transactions; not to be retained or kept for such
time as the holder may want, otherwise the smooth flow of commercial transactions would be hindered.

Crystal vs CA

For a check to the dishonored upon presentment on the one hand, and to be stale for not being presented at all in time, on the other, are incompatible developments
that naturally have variant legal consequences. If needed the check in question had been dishonored, then there can be no doubt that petitioner’s redemption was null
and void. On the other hand if it only becomes stale, then it becomes imperative that the circumstances that caused its non-presentment be determined, for if this was
not due to the fault of the petitioner, then it would be unfair to deprive him of the rights he had acquired as redemptioner.

Papa vs A.U. Valencia

While it is true that the delivery of a check produces the effect of payment only when it is cashed pursuant to NCC1249, the rule is otherwise if the debtor is
prejudiced by the creditor’s unreasonable delay in the presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment,
and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given.
If no presentment was made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused.

International Corporate Bank vs Sps Gueco

A stale check is one which has not been presented for payment within a reasonable time after its issue. It is valueless and should not be paid. Under NIL, an instrument
not payable on demand must be presented for payment on the day it falls due. When the instrument is payable on demand, presentment must be made within a
reasonable time after its issue.

The test for reasonable time is whether the payee employed such diligence as a prudent man exercises in his own affairs. A check payable on demand which was
overdue by about 2 ½ years was considered a stale check. Failure of a payee to encash a check for more than 10 years undoubtedly resulted in the check becoming
stale.

Failure to present on time, does not totally wipe out all liability. In fact, the legal situation amounts to an acknowledgement of liability in the sum stated in the check.
Gueco spouses have not alleged much less shown that they or the bank which issued the manager’s check suffered damage or loss caused by the delay of non-
presentment. Definitely the original obligation to pay certainly has not been erased.

If the check had become stable, it becomes imperative that the circumstances that caused its non-presentment be determined.

PNB vs CA
When one of two innocent persons must suffer the wrongful act of a third person, the loss must be borne by the one whose negligence was the proximate cause of
the loss or who put it into the power of the 3rd person to perpetrate the wrong.

-7-

Metropol Financing vs Sambok Motors

A qualified indorsement 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 word of similar import. It may be made by adding to the indorser’s signature the words without recourse or any words of similar import.
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.

Lopez vs People

Section 114 (d) NIL provides that notice of dishonor is not required to be given to the drawer (d) where the drawer has no right to expect or require that the drawee
or acceptor will honor the check.

-8-

PNB vs CA

An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to modify in any respect the
obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. A material
alteration is one which changes the items which are required under NIL 1.

American Bank vs Macondray and Wolff

The liability of an indorser of a bill of exchange, after due protest and notice of non-payment and dishonor, is the same as that of the original obligors on such a
contract, and any material alteration in the terms of this contract by the holder of the same, without the consent of the obligor, will relieve such obligor from all liability
thereon.

Montinola vs PNB

The insertion of the words "Agent, Phil. National Bank" which converts the bank from a mere drawee to a drawer and therefore changes its liability, constitutes a
material alteration of the instrument without the consent of the parties liable thereon, and so discharges the instrument.

State Investment House vs CA and Nora Moulic

MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument. But, the intentional cancellation contemplated under
paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up, burning it, or writing the word "cancelled" on the instrument. The act of
destroying the instrument must also be made by the holder of the instrument intentionally. Since MOULIC failed to get back possession of the post-dated checks, the
intentional cancellation of the said checks is altogether impossible.

Bank of America vs Philippine Racing Club

Although not in the strict sense "material alterations," the misplacement of the typewritten entries for the payee and the amount on the same blank and the repetition
of the amount using a check writer were glaringly obvious irregularities on the face of the check.

Areza vs Express Savings Bank

A material alteration avoids an instrument except as against an assenting party and subsequent indorsers, but a holder in due course may enforce payment according
to its original tenor. Thus, when the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge its client’s account only
for bona fide disbursements he had made. If the drawee did not pay according to the original tenor of the instrument, as directed by the drawer, then it has no right
to claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from the drawer’s account which it was expected to treat with
utmost fidelity.

-9-

Republic vs PNB

Demand Drafts are not included to be escheated due to non-presentment, no liability yet while telegraphic payment orders are to be included and should be
escheated.

A demand draft is a bill of exchange payable on demand. A draft is an open letter of request from, and an order by, one person on another to pay s um of money
therein mentioned to a third person on demand or a future time. The term ‘draft’ is often used for all bills of exchange.

A draft being a bill of exchange, does not operate as an assignment of funds in the hands of the drawee who is not liable on the instrument until he accepts it. Since it
is admitted that the demand drafts herein involved have not been presented either for acceptance or for payment, the consequence is that the appellee bank never
had any chance of accepting or rejecting them.

A cashier’s check issued by a bank is not an ordinary draft, this is a bill of exchange payable on demand. Demand draft is not there of the same category as a cashier’s
check which should come within the purview of the law.

Sumacad vs Samar

It voluntarily assumed the obligation of holding so much of the deposit of Samar as would be sufficient to cover the amount of the check. All of these would be an
empty gesture if PNB did not mean to assume the obligation of paying the check.

Prudential Bank vs IAC

A letter of credit is an engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon
compliance with the conditions specified in the credit. Through a letter of credit, the bank merely substitutes its own to pay for one of its customers who in return
promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon. There is no need for acceptance
as the issued drafts are sight drafts. Presentment for acceptance is necessary only in cases provided in Section 143.

New Pacific Timber vs Seneris

It is to be emphasized that the P50,000 is not an ordinary check but a Cashier’s check. It is well-known and accepted practice that a Cashier’s check is deemed as cash.
Said check is certified by the drawee bank. Where a check is certified by the bank, the certification is equivalent to acceptance. Said certification implies that the check
is drawn upon sufficient funds in the hands of the drawee, that they have been set apart for its satisfaction, and that they shall be so applied whenever the check is
presented for payment.

Velasquez vs Solidbank

Not liable under sight draft but letter of undertaking. Petitioner is discharged from liability under the sight draft when Solidbank failed to protest it for non-acceptance
by the Bank of Seoul. When a foreign bill is dishonored by non-acceptance or non-payment, protest is necessary to hold the drawer and indorsers liable.

-10-

PNB vs Quimpo
A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot
ordinarily change the amount so paid to the account of the depositor whose name was forged.

If the paper comes to the drawee in the regular course of business, and he, having the opportunity ascertaining its character, pronounces it to be valid and pays it, it is
not only a question of payment under mistake, but payment in neglect of duty which the commercial law places upon him and the result of neglect must rest upon
him.

Hongkong & Shanghai Banking vs Peoples Bank and Trust

. The 24-hour clearing house rule is embodied in Section 4 (c) of Circular 9 of the Central Bank dtd. Feb 17 1949 and reads “Items which should be returned for any
reason whatsoever shall be returned directly to the bank, institution, or entity from which the item was received”. All items cleared at 11am shall be returned not later
than 2pm on the same day and all items cleared at 3pm shall be returned not later than 8:30am of the following business day… xxx It is apparent from the above that
the attempted distinction sought to be made by the plaintiff to the effect that it refers to forged, but not to altered checks is not warranted.

A person who presents for payment checks such as here involved guarantees the genuiness of the check and the drawee bank need concern itself with nothing but the
genuiness of the signature and the state of the account with it of the drawee. The remedy would lie not against Peoples Bank but against the party responsible for
changing the name of the payee.

Republic Bank vs CA and FNCB

Every bank that issues checks for the use of its customers should know whether or not the drawer’s signature thereon is genuine, whether there are sufficient funds in
the drawers account to cover the checks issued, and it should be able to detect alterations, erasures, superimpositions or intercalations thereon, for these instruments
are prepared, printed and issued by itself, it has control of the drawer’s account, and it is supposed to be familiar with the drawer’s signature.

Unless an alteration is attributable to the fault or negligence of the drawer himself such as when he leaves spaces on the check which would allow the fraudulent
insertion of additional numerals, the remedy of the drawee bank that negligently clears a forged and/or altered check for payment is against the party responsible for
the forgery.

BPI vs CA

In the passbook that BPI issued to Nappiza, the rules on withdrawals of deposits appear:

“neither a deposit nor a withdrawal will be permitted except upon the presentation of the depositors savings passbook, in which the amount deposited withdrawn shall
be entered only by the bank”

Two requisites must be presented by the person withdrawing a) Duly filled-up withdrawal slip b) depositors passbook. In allowing the withdrawal, BPI overlook another
rule that is printed in the passbook

A bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. A bank should
exercise its functions not only with the diligence of a good father but it should do so with the highest degree of care.

The proximate cause of the withdrawal and eventual loss of the amount on petitioners’ part was its personnel’s negligence in allowing such withdrawal in disregard of
its own rules.

Manila Lighter Transportation vs CA

Respondent Bank was not negligent because, in accordance with banking practice, it caused the checks to pass through the clearing house before it allowed their
proceeds to be withdrawn by the depositors.

Ramon Tan vs CA

An ordinary check is not a mere undertaking to pay an amount of money. There is an element of certainty or assurance that it will be paid upon presentation that is
why it is perceived as a convenient substitute. A cashier’s check by its peculiar character and general use in the commercial world is regarded substantially to be as
good as the money which it represents.

Teller should not have accepted the local deposit slip with the cashier’s check that on its face was clearly a regional check without calling the depositor’s attention to
the mistake at the very moment this was presented to her. Depositers do not pretend to be past master of banking technicalities much more of clearing procedures.

RCBC had been remiss in the performance of its duty and obligation to its client.

PNB vs Spouses Chea Chee Chong

The 15 day clearing period alluded to is construed as 15 banking days. The lapse of 15 banking days was not observed. The 15 th banking day from date of deposit
should fall on November 25, however PNB allowed the proceeds to be withdrawn on November 17 and 18, a week before the lapse. PNB Buendia was able to learn
about the dishonor on November 20.

Bank of America vs Associated Citizen’s Bank [Collecting bank and Drawee bank]

The bank on which a check is drawn, known as drawee bank, is under strict liability based on the contract between the bank and its customer (drawer), to pay the
check only to the payee or the payee’s order. The drawer’s instruction are reflected on the face and by the terms of the check. When the drawee bank pays a person
other than the payee, it does not comply with the terms of the check and violates its duty to charge the drawer’s account only for properly payable items.

Westmont Bank vs Ong

Petitioner’s correlative duty as collecting bank to ensure that the amount gets to the rightful payee or his order, and a breach of that duty because of a blatant act of
negligence on part of petitioner violated Ong’s rights.

Since the signature of the payee was forged to make it appear he had made an indorsement, such signature should be deemed as inoperative. Petitioner, as collecting
bank, grossly erred in making payment by virtue of said signature. The payee should be allowed to recover.

Far East Bank vs Gold Palace

The drawee bank is in a better position compared to the holder to verify with the drawer matters in the instrument. Were it not for LBP’s communication with the
drawer that its account in the Philippines was being depleted, the alteration would not have discovered. What Sc cannot understand is why LBP having the most
convenient means to correspond with UOB, did not first verify the amount before it cleared.

Far East did not own the draft, it merely presented it for payment. Considering the warranties of a general indorser are based upon transfer of title available to holders
in due course, these warranties did not attach to the indorsement and for deposit and collection made by Gold Palace to Far East. The collecting bank could not debit
respondent’s account for the amount it refunded to LBP.

Allied Bank vs Lim Sio Wan

The warranty that “the instrument is genuine and in all respects what it purports to be” covers all the defects in the instrument affecting the validity thereof, including a
forged indorsement. The last indorser will be liable for the amount indicated in the negotiable instrument even if a previous indorsement was forged.

An exception here is when the issuance of the check itself was attended with negligence. The institution issuing the check is just as liable as or more liable than the
collecting bank.

Security Bank vs RCBC

Security Bank cannot escape liability by invoking Resolution 2202. In the Memorandum, the banks were given the discretion to allow immediate drawings on
uncollected deposits of manager’s check. RCBC, in allowing the immediate withdrawal against the manager’s check, only exercised a prerogative expressly granted to it
by the Monetary Board.

Security Bank’s liability as a 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.

RCBC vs Hi-Tri Development

The issuance of the check does not of itself operate as an assignment of any part of the funds in the bank to the credit of the drawer. The bank becomes liable only
after it accepts or certifies the check. After the check is accepted for payment, the bank would then debit the amount to be paid to the holder of the check from the
account of the depositor-drawer.

Since there was no delivery, presentment of the check for the bank for payment did not occur. The assigned fund is deemed to remain part of the account of Hi-Tri.
There was no effective delivery of the check.

Equitable Banking vs Special Steel

Equitable did not observe the required degree of diligence expected of a banking institution under the existing circumstances. The fact that a person, other than the
named payee of the crossed check, was presenting it for deposit should have put the bank on guard. Considering that the payee does not have an account with
Equitable, they had no specimen signature. The bank knowingly assumed risk relying solely on Uy’s words that he had a good title.

Lozano vs Martinez
Petitioners insist that since BP 22 is consummated upon dishonor or non-payment of the check, it is really a bad debt law. What is punishes is the non-payment of the
check, not the act of issuing it.

BP 22 is not intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit under penal sanctions the making of worthless checks and
putting them in circulation. The law punishes the act not as an offense against property, but an offense against public order.

Acts mala in se are not the only acts which the law can punish. An act may not be considered by the society as inherently wrong, hence not malum in se but because
of the harm it inflicts on the community , it can be outlawed as malum prohibitum.

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

Recuerdo vs People

By postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient
to cover the amount of the check. The failure of the drawer of the check to deposit the amount necessary to cover his check within 3 days from receipt of notice from
the bank and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds shall be prima facie evidence of deceit constituting false
pretense or fraudulent act.

Elements

1. A check is postdated or issued in payment of an obligation contracted at the time it is issued

2. Lack or insufficiency of funds to cover the check

3. Damages to the payee

It is criminal fraud or deceit in the issuance of a check which is made punishable under the law and not the non-payment of debt. The postdating or issuing of a
check in payment of an obligation when the offender had no funds is a false pretense or a fraudulent act.

Good faith is a defense to a charge of Estafa by postdating a check. This may be manifested by the accused’s offering to make arrangements with his creditor. Herein
accused only made payments after CA promulgated its decision.

People vs Nitafan

A memorandum check must therefore fall within the ambit of BP 22 which does not distinguish but merely provides that “any person who makes or draws and issues
any check at the time of issue that he does not have sufficient funds in or credit with the drawee bank. Ubi Lex no distinguit nec nos distinguere debemus.

The members of the then Batasang Pambansa intended it to be comprehensive as to include all checks drawn against banks.

People vs Chua

Naty should be acquitted for Estafa. Naty cannot be convicted of Estafa since the subject checks were replacement checks issued and delivered in payment of a pre-
existing obligation. Hence the checks could no longer be considered as a means employed by Naty to obtain a loan. The element of deceit was lacking.

However, Naty is liable under BP 22 for issuing the 4 replacement checks. The gravamen of the offense under this law is the act of issuing a worthless check or a check
that is dishonored upon its presentment for payment.

People vs Cuyugan

BP22 cannot be deemed necessarily included in the crime of Estafa. The offense of fraud under RPC is malum in se, whereas BP 22 is a special which is a malum
prohibitum. Fraud or Estafa under RPC is a distinct offense from the Violation of the Bouncing Checks Law. They are different offenses, having different elements.

Cueme vs People

The checks issued assuming they were not intended to be encashed or deposited produce the same effect as ordinary checks. The law does not make any distinction
as to the kind of checks which are the subject of its provisions, hence, no such distinction can be made.

Wong vs CA
Given the fact that the checks lost their reason for being, is it not then a duty of complainant knowing he is no longer a holder for value to return the checks and not
to deposit them ever? Petitioner contends that respondent is not a holder for value considering that the checks were deposited after the customers already paid the
orders. They found that the checks were eventually used to settle the remaining obligations of petitioner with LPI.

Petitioner contends that he should not be expected to keep his bank account active and funded beyond the 90-day period. Contrary to petitioner’s assertion, nowhere
in said provision does the law require a maker to maintain funds in his bank for only 90 days. Rather the import of the law is to establish a prima facie presumption of
knowledge of such insufficiency of funds under the following conditions

1. Presentment within 90 days from date of check

2. Dishonor of the check and failure of the maker to make arrangements for payment within 5 banking days.

Respondent deposited the check 157 days after the date of the check, hence the checks cannot be considered stale. Only the presumption of knowledge of
insufficiency of funds was lost but such knowledge could still be proven by direct or circumstantial evidence.

Nagrampa vs People

The fact that the checks were presented beyond the 90-day period is of no moment. That the check must be deposited within 90 days is simply one of the conditions
for the presumption of knowledge of lack of funds to arise. It is not an element of the offense. Neither does it discharge petitioner from his duty. Administrative
Circular 13-2001 clarifying Administrative Circular 12-2000: The clear tenor and intention of AC 12-2000 is not to remove imprisonment as an alternative penalty but to
lay down a rule of preference in the application of the penalties in BP22. AC 12-2000 establishes a rule of preference such that where the circumstances of both the
offense and the offender clearly indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone should be considered as the
more appropriate penalty.

When the petitioner issued the checks even though he had no more account with the bank, having closed it more than 4 years, he manifested utter lack of good faith.

Victor Ting and Emily Chan vs CA

For liability to attach under BP 22, it is not enough the prosecution establishes that a check was issued and that the same was subsequently dishonored. The
prosecution must prove the 2nd element that is, at the time of the check’s issuance, the issuer had knowledge he did not have enough funds. Since it is a state of
mind, Section 2 of BP 22 creates a presumption of juris tantum and the second element exists prima facie when the 1st and 3rd elements are present.

The prosecution is required to show that the issuer knew of the insufficiency of funds by proving he received a notice of dishonor and, within 5 baking days, failed to
satisfy the amount of the check or make arrangement for its payment. The absence of a notice of dishonor necessarily deprives an accused an opportunity to
preclude a criminal prosecution.

Danao vs Court of Appeals

In order to create the prima facie presumption that the issuer knew of the insufficiency of funds, it must be shown that he or she received a notice of dishonor and,
within 5 banking days thereafter,f ailed to satisfy the amount of the check or make arrangement for its payment.

If such notice of non-payment by the drawee bank is not sent to the maker or drawer of the bum check, or if there is no proof as to when such notice was received by
the drawer, then the presumption or prima facie evidence in Section 2 of BP 22 cannot arise since there would simply be no way of reckoning the crucial 5 day period.
No proof of receipt by petitioner of any notice of non-payment was ever presented during the trial.

Domagsang vs CA

A mere oral notice or demand to pay would appear to be insufficient for conviction under law.

Rico vs People

Where the presumption of knowledge of insufficiency of funds does not arise due to the absence of notice of 34.dishonor of the check, the accused should not be held
liable for the offense defined under the first paragraph of section of BP22.

A notice of dishonor personally sent to and received by the accused is necessary before one can be held liable.

Yu Oh vs CA

Petitioner insists that CA, in construing BP 22 to embrace cases of “no funds” or “closed accounts” when the express language of BP 22 penalizes only the issuance of
checks that are dishonored for “insufficiency” has enlarged the implication of the statute amounting to judicial legislation.

Petitioner is wrong. The gravamen of the offense is the act of making and issuing a worthless check or a check that is dishonored upon its presentation or payment.
The term “closed accounts” is within the meaning of the phrase “does not have sufficient funds in or credit with the drawee bank.
Tadeo vs People

The prosecution may present only complainant as a witness to prove all the elements of the offense charged. Complainant’s sole testimony suffices to identify the
dishonored checks with the drawee bank’s notation stamped or written on the dorsal side “Drawn against insufficient funds” or in a notice attached thereto and such
notice of dishonor given to drawer.

Llamado vs CA

His claim that he signed the check in blank which allegedly is common business practice, is hardly a defense. As a treasurer of the corporation who signed the check in
his capacity as an officer of the corporation, lack of involvement in the negotiation for the transaction is not a defense.

Petitioner also argues that the check was a contingent payment for investment which had not been proven to be successful, thus the check was not issued to apply on
account or for value. To determine the reason for which checks are issued, or the terms and conditions for their issuance will greatly erode the faith the public reposes
in the stability and commercial value of checks as currency substitutes. The mere act of issuing a worthless check is malum prohibitum.

Vaca vs CA

Even if such check was intended to replace the bad one, its issuance on April 13 1988 – 15 days after notification of dishonor – cannot negate the presumption that
petitioners knew of the insufficiency of funds to cover the amount of their previous check.

Lim vs CA

In acts mala prohibita, the only inquiry is “has the law been violated?” This case is a perfect example of an act mala prohibita. Hoc quidem per quam durum est sed it
lex scripta est. The law may be exceedingly hard but so the law is written.

Tan vs Mendez

Petitioners rely on the principle of compensation or offset under civil law to avoid criminal prosecution. Their defense is unavailing. The trial court found the 2 checks
issued by petitioners is P293,625 while the total amount of the reutnred checks amounted to P66,939. Petitioners did not clearly specify in the memorandum which
dishonored check is being offset.

Svendsen vs People

The failure of the prosecution to prove the existence and receipt by petitioner of the requisite written notice of dishonor and that he was given at least 5 banking days
within which to settle his account constitutes sufficient ground for his acquittal. The evidence for prosecution failed to prove the second element.

Walter Wilkie vs Atty. Limos

Respondent’s claim that the loan was only an accommodation for a former client who already died cannot be given credence and too specious to be believed. She did
not file any answer nor even appeared personally before the CBD. The deliberate failure to pay just debts and the issuance of worthless checks constitute gross
misconduct, for which a lawyer may be sanctioned with suspension from practice of law.

Mitra vs People

3rd Paragraph of Section 1 of BP22 recognizes the reality that a corporation can only act through its officers. Hence its wording is unequivocal and mandatory that the
person who actually signed the corporate check shall be held liable for a violation of BP22. This provision does not contain any condition, qualification or limitation.

Heirs of Simon vs Elvis Chan

Civil liability to the offended party cannot be denied. The payee of the check is entitled to receive the payment of the money for which the worthless check is issued.

Surely, it could not have been the intention of the framers of BP22 to leave the offended private party defrauded and empty handed by excluding the civil liability of
the offender, resulting in a Pyrrhic Victory, of having to file a separate civil suit.

There is no independent civil action to recover the value of a bouncing check issued in contravention of BP 22.

-12-

People vs Versola

Section 3 of Act 3893 reads that “No person shall engage in the business of receiving rice for storage without first securing a license therefor from the Director of the
Bureau of Commerce and Industry.”
Section: The term “warehouse” shall be deemed to mean every building, structure, or other protected enclosure in which rice is kept for storage. The term “rice” shall
be deemed to mean either palay, in bundles or in grains, of cleaned rice, or both.

For the purpose of this act, the business of receiving rice for storage shall include (1) any contract or transaction wherein the warehouseman is obligated to return the
same rice delivered to him or pay its value or (2) any contract or transaction wherein the rice delivered is to be milled for and on account of the owner thereof
(3) any contract or transaction wherein the rice delivered is commingled with rice delivered by or belonging to other persons and the warehouseman is obligated to
return the rice of the same kind or to pay its value.

Versola insists that the provisions could have no application where rice is delivered, not for storage , but for milling purposes. However, the law explicitly applies to any
mill enclosed in a structure where palay is received mainly for milling.

When the commodity belonging to a customer cannot be milled right away, he is constrained to leave it in the camarin for it would be inconvenient and impractical for
him to take the grains back to his place, not only because of the time consumed, the trouble taken, and perhaps, the expenses incurred in bringing the cereals to the
mill but he would have to haul the palay once more.

It is not expected that the owner of the mill would refuse to receive palay which owing to pending work could not be milled. What more, Versola had to increase the
size of his camarin.

Whenever a rice mill is engaged in the business of hulling palay is housed in a “camarin”, the keeping of palay or rice follows as a necessary consequence. Even if the
grains were received exclusively for milling purposes, there is a form of storage. In any event, the rice mill operator is responsible for the palay or rice while the same is
in his possession, and public policy or public interest demand that the rights of the owners of commodity – which is our main staple – be duly protected. Hence, the
license prescribed in Act 3893, in order that the Director of Commerce could determine the conditions under which the mill may be authorized to operate, conformably
with the objective of said legislation and the amount of the bond to be required for the protection of the people who avail themselves of its service.

Limjoco vs Director of Commerce

Yes. Section 2 Act 3893 is clear. the business of receiving rice for storage shall include (2) any contract or transaction wherein the rice delivered is to be milled for
and on account of the owner thereof.

Section 2 is too clear to permit of any exercise in construction. It does not stop at the bare use of the word “storage” but provides that any contract or transaction
wherein the palay delivered is to be milled for and on account of the owner shall be deemed included in the business of receiving rice for storage. It is enough that the
palay is delivered, even if only to have it milled.

The main intention of the lawmaker is to give protection to the owner of the commodity against possible abuses of the person to whom the physical control of his
properties is delivered.

On the one subject, one title issue, The subject matter of said Act as expressed in its title, namely the regulation of the business of receiving commodity for storage, is
sufficiently broad to cover the business of milling palay where the palay is delivered to the mill operator and kept in construction which serves the purpose of a
warehouse as in this case.

Philippine Tobacco vs Pablo

The main intention of the lawmaker, in requiring the millers to post the necessary bond, is to give protection to the owner of the commodity against possible abuses of
the person to whom the physical control of his properties is delivered.

In the case at bar ACCFA had insured its tobacco with the GSIS. ACCFA had also required to file a performance bond in the amount of P700,000 which may be
increased at the option of the ACCFA as the amount and value of the tobacco increases. It is evident that ACCFA is amply protected. It would be unreasonable and
oppressive to compel PTFCRC to put up a bond.

Also, this controversy involves the keeping of Tobacco harvested in 1959, curing and ageing which was contracted more than 15 years ago. Whereas the ageing
process takes from 18-24 months before tobacco is sold to cigarette manufacturers. For sure, the commodity has already been withdrawn and disposed of by ACCFA.

Lee Bog & Co vs Hanover Fire Insurance, Republic as intervenor

There is a difference between bonded and unbonded palay and one is distinct from the other, each subject must really be treated separately. The palay insured by Lee
Bog included no more than such of the palay as the warehouse received as deposits. The palay insured by Lee Bog payable to Bureau of Commerce in case of loss
covered only the palay that was received as deposits.

This is the object of the requirement of the law that “every person licensed to engage in the business of receiving rice for storage shall insure the rice as received and
stored against fire”. The appellants cannot pretend that they were not aware of the fact that the subject matter of the insurance policies upon which Republic is suing
was solely the palay covered by the Bonded Warehouse Act.
-13-

Gonzales vs Go Tiong

Act 3893 as amended is a special law regulating the business of receiving commodities for storage and defining the rights and obligations of a bonded warehouseman
and those transacting business with him.

The kind or nature of the receipts issued by him for the deposits is not very material much less decisive. Though it is desirable that receipts issued by a bonded
warehouseman should conform to the provisions of the warehouse receipts law, said provisions in our opinion are not mandatory and indispensable in the sense that if
they fell short of the requirement of the warehouse receipts act, then the commodities delivered for storage become ordinary deposits and will not be governed by the
provisions of the Bonded Warehouse Act. It is merely permissive and directory and not obligatory.

Consolidated Terminals Inc vs Artex Development

. It does not show that, as a warehouseman, it has a cause of action against Artex. The real parties interested in the bales of cotton were Luzon Brokerage and its
consignee. These parties have not sued CTI for damages or for recovery of the bales. The case might have been different if it was alleged in the complaint that the
depositor, consignee, and shipper had required CTI to pay damages, or that Internal Revenue held CTI liable for duties and taxes.

PNB vs Judge Se

Section 31 – Warehouseman need not deliver until lien is satisfied.

The warehouseman cannot be legally deprived of their right to enforce their claim for warehouseman’s lien for reasonable storage fees and preservation expenses.

While PNB is entitled to the stocks of sugar as the endorsee of the quedans, delivery shall be effected only upon payment of the storage fees. Imperative is the right of
the warehouseman to demand payment of his lien because the warehouseman loses his lien upon goods by surrendering (29) possession thereof. Lien may be lost
where the warehouseman surrenders the possession of the goods without requiring payment of his lien, because a warehouseman lien is possessory in nature.

-14-

Siy Cong Bieng vs HSBC

The warehouse receipt represents the good, but the intrusion of the receipt, as stated, is more than mere delivery of the goods; it is a representation that the one to
whom the possession of the receipt has been so intrusted has the title to the goods. By Sec 47, negotiation of the receipt to a purchaser for value without notice is not
impaired by the fact that it is a breach of duty, or that the owner of the receipt was induced by fraud, mistake or duress to intrust the receipt to the person who
negotiated it.

If the owner of the goods permit another to have the possession or custody of negotiable warehouse receipts running to the order of the latter, or to bearer, it is a
representation of title upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent
owner.

Martinez vs PNB

For purposes of facilitating commercial transaction, the endorsee of transferee of a warehouse receipt or quedan should be regarded as the owner of the goods
covered by it. As regards the endorser or transferor, even if he were the owner of the goods, he may not take possession and dispose of the goods without the
consent of the transferee of the quedan or warehouse receipt. The bank became and remained the owner of the 5 quedans. As such owner, it was legally entitled to
the possession and control of the property therein described.

Section 58 provides that “to purchase” includes to take as mortgagee or pledgee’ and clear that, as to the legal title to the property covered by a warehouse receipt, a
pledgee is on the same footing as a vendee except that the pledgee is under the obligation of surrendering his title upon payment of the debt secured.

Where the transaction involved in the transfer of a warehouse receipt or quedan is not sale but pledge or security, the transferee or endorsee does not become the
owner of the goods but that he may only have the property sold then satisfy the obligation from proceeds of the sale. At the time the sugar was lost during the war,
estate of Pedro Rodriguez was still the owner.

Where a warehouse receipt or quedan is transferred or endorsed to a creditor only to secure payment of a loan or debt, the transferee or endorsee does not
automatically become the owner of the goods covered by the warehouse receipt but he merely retains the right to keep and with the consent of the owner to sell
them as to satisfy the obligation. This for the simple reason that the transaction involved is not a sale covered by the warehouse receipts is lost without the fault or
negligence of the mortgagee or pledgee or quedan, then said goods are regarded as lost on account of the real owner.

Paras Dissent: The applicable provision is Section 41. The provision plainly states that a person to whom a negotiable receipt has been negotiated to the goods
covered by the receipt, as well as the possession of the goods through the warehouseman, as if the latter had contracted directly with the person to whom the
negotiable receipt has been duly negotiated. Consequently, the bank to whom the quedans have been indorsed and delivered, acquired ownership of the sugar
covered by the quedans. The loss of the article should be borne by the bank. The fact that the quedans were indorsed and delivered as a security for the payment of
an indebtedness did not prevent the bank from acquiring ownership, since the only effect of the transfer was that the debtor could reacquire ownership upon payment
of obligation.

Roman vs Asia Banking Corp

Where a negotiable receipts has been issued for goods, no seller’s lien or right of stoppage in transit shall defeat the rights of any purchaser for value in good faith to
whom such receipt has been negotiated, whether such negotiation be prior or subsequent to the notification to the warehouseman who issued such receipt of the
seller’s claim to a lien or right of stoppage in transit. Nor shall the warehouseman be obliged to deliver or justified in delivering the goods to an unpaid seller unless
receipt is first surrendered for cancellation.

The words “por orden” (by order) are used instead of “ala orden” (to the order) is very evidently merely a clerical or grammatical error. The phrase must be construed
to mean that U. De Poli was the person authorized to endorse and deliver the receipt; any other interpretation would mean that no one had such power and the
clause, as well as the entire receipt, would be rendered nugatory.

American Foreign Banking vs Herridge

The intention of the parties to the transaction must prevail against such a technical objection as to the sufficiency of the description of the tobacco. It might be
different if there had been Cagayan tobacco in the warehouse at the time of the issuance of the quedan, or if there were any doubt whatever as to the identity of the
tobacco intended to be covered by the quedan. The assignee stands in the shoes of the insolvent and while it is his duty to protect the general creditors, he is not in
the position of a judgement creditor with an unsatisfied execution.

BPI vs Herridge

The receipt is not marked “non-negotiable” and is endorsed “Umberto De Poli”. The receipt is contains all the requisites of a warehouse receipt as prescribed by
section except that it does not, in express terms, state whether the goods are to be delivered to bearer, to a specified person, or to his order.

The intention to make it a negotiable warehouse receipt, nevertheless appears. De Poli deposited the goods in his own warehouse; the warehouse receipt states that he
is the owner of the goods deposited; there is no statement that the goods are to be delivered to the bearer of the receipt or to a specified person and the
presumption must therefore be that the goods are in the warehouse subject to the orders of their owner. We certainly cannot assume that it was the intention to have
the goods in the warehouse subject to no one’s orders.

-15-

Keng Hua Paper vs CA

A bill of lading serves two functions. It is a receipt for the goods shipped. It is a contract by which 3 parties, the shipper, the carrier and the consignee undertake
specific responsibilities and assume stipulated obligations. A bill of lading delivered and accepted constitutes the contract of carriage even though not signed, because
the acceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all its terms and conditions of which
the acceptor has actual or constructive notice. The acceptance of a bill of lading by the shipper and consignee, with full knowledge of its contents, gives rise to the
presumption that the same was a perfected and binding contract.

In a letter of credit, there are 3 distinct and independent contracts

1. The contract of sale between the buyer and the seller

2. The contract of the buyer with the issuing bank

3. The letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein.

The contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer,
and the contract for the issuance of a letter of credit between the buyer and issuing bank.

Bank of America vs CA

A letter of credit is a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly
irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying. The buyer
may be required to contract a bank to issue a letter of credit in favor of the seller so that, by virtue of the letter of credit, the issuing bank can authorize the seller to
draw drafts and engage to pay them upon their presentment simultaneously with the tender of documents required by the letter of credit.
There would at least be three (3) parties: (a) the buyer, who procures the letter of credit and obliges himself to reimburse the issuing bank upon receipts of the
documents of title; (b) the bank issuing the letter of credit, which undertakes to pay the seller upon receipt of the draft and proper document of titles and to
surrender the documents to the buyer upon reimbursement; and, (c) the seller, who in compliance with the contract of sale ships the goods to the buyer and delivers
the documents of title and draft to the issuing bank to recover payment.

Reliance Commodities vs Daewoo

The failure of an importer (Reliance) to open a letter of credit makes him liable to the exporter

We believe and so hold that failure of a buyer seasonably to furnish an agreed letter of credit is a breach of the contract between buyer and seller. Where the buyer
fails to open a letter of credit as stipulated, the seller or exporter is entitled to claim damages for such breach. Damages for failure to open a commercial credit may, in
appropriate cases, include the loss of profit which the seller would reasonably have made had the transaction been carried out.

Schuback vs CA

The situation reveals that Ramon failed to open an irrevocable letter of credit without recourse in favor of Johannes Schuback of Hamburg. This omission, however,
does not prevent the perfection of the contract between the parties, for the opening of the letter of credit is not to be deemed a suspensive condition.

Feati Bank vs CA

A correspondent bank which departs from what has been stipulated under the letter of credit, 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 thus the rule of Strict Compliance.

The incorporation of Uniform Customs and Practice for Documentary Credit (UCP) in the letter of credit resulted in the applicability of said rules in the governance of
the relation between parties.

Under UCP, the bank may only negotiate, accept or pay if the documents tendered to it are on their face in accordance with the terms and conditions of the
documentary credit. Since a correspondent bank, like petitioner, principally deals only with documents, the absence of any document required in the documentary
credit justifies the refusal by the bank to negotiate, accept or pay the beneficiary, as it is not its obligation to look beyond the documents.

Prudential Bank vs IAC, Philippine Rayon Mills

A letter of credit is defined as an engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for
payment upon compliance with the conditions specified in the credit. Through a letter of credit, the bank merely substitutes its own promise to pay for one of its
customers who in return promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon.
Presentment for acceptance is necessary only in the cases expressly provided for in NIL 143. There was no need for acceptance as the issued drafts are sight
drafts.

Lee vs CA

While the presumption found under NIL may not necessarily be applicable to trust receipts and letters of credit, the presumption that the drafts drawn in connection
with the letters of credit have sufficient consideration. Under Section 3r Rule 131 there is a presumption that sufficient consideration was given in a contract.

-16-

Vintola vs Insular Bank

Section 4 PD 115 defines a trust receipt as: Any transaction by and between a person referred to in this decree as the entruster, and another person referred to in this
decree as the entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases
the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt” wherein the
entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods thereof to the
extent of the amount owing to the entruster or as appears in the trust receipt or the goods if they are unsold or not otherwise disposed of, in accordance with the
terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any one of the following:

A trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a "security interest" in the goods. "It secures an indebtedness and there can be
no such thing as security interest that secures no obligation.

Security Interest means a property interest in goods, documents or instruments to secure performance of some obligations of the entrustee or of some third persons to
the entruster and includes title, whether or not expressed to be absolute, whenever such title is in substance taken or retained for security only.

Metropolitan Bank vs Tonda

The failure of an entrustee to turn over the proceeds of the sale of the goods shall constitute the crime of estafa. The Trust Receipts Law declare the failure to turn
over the goods or the proceeds realized from the sale thereof, as a criminal offense punishable under RPC 315 (1b). The Law is violated whenever the entrustee or the
person to whom the trust receipts were issued in favor fails to

1. return the goods covered by the trust receipts; or

2. return the proceeds of the sale of the said goods.

The foregoing acts constitute estafa punishable under Article 315 (1) (b) of the Revised Penal Code. The offense is punished as a malum prohibitum regardless of the
existence of intent or malice. A mere failure to deliver the proceeds of the sale or the goods if not sold, constitutes a criminal offense that causes prejudice not only to
another, but more to the public interest.

Colinares vs CA

The ownership of the merchandise continues to be vested in the person who had advanced payment until he has been paid in full, or if the merchandise has already
been sold, the proceeds of the sale should be turned over to him by the importer or by his representative or successor in interest.36 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. 37 In a certain manner, trust receipts partake of the nature
of a conditional sale where the importer becomes absolute owner of the imported merchandise as soon as he has paid its price.

The antecedent acts in a trust receipt transaction consist of the application and approval of the letter of credit, the making of the marginal deposit and the effective
importation of goods through the efforts of the importer.

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. Petitioners continually endeavored to meet their obligations, as shown by several receipts issued
by PBC acknowledging payment of the loan.

The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats of criminal prosecution should they be
unable to pay it may be unjust and inequitable, if not reprehensible.

Consolidated Bank vs CA

The bank failed to prove that its transaction with the corporation is really a trust receipt transaction instead of merely a simple loan, as found by the lower court and
CA. The delivery to corporation of the goods subject of the trust receipt occurred long before the trust receipt itself was executed

Abad vs CA

The marginal deposit requirement is a Central Bank measure to cut off excess currency liquidity which would create inflationary pressure. It is a collateral security given
by the debtor, and is supposed to be returned to him upon his compliance with his secured obligation. Consequently, the bank pays no interest on the marginal
deposit, unlike an ordinary bank deposit which earns interest in the bank. As a matter of fact, the marginal deposit requirement for letters of credit has been
discontinued, except in those cases where the applicant for a letter of credit is not known to the bank or does not maintain a good credit standing therein.

People vs Yu Chai Ho (1928)

Par 5 of 535 of the Penal Code is clear. The person whose interests are prejudiced through the conversion or misappropriation of the money, goods, or other personal
property need not be the owner thereof; if such had been the intention of the authors, the phrase would have read “to the prejudice of the owner”.

People vs Cuevo

Section 13 of the decree provides that "the failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust
receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or
disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions" of article 315 of the Revised Penal
Code.

The enactment of the said penal provision is confirmatory of existing jurisprudence and should not be construed as meaning that, heretofore, the misappropriation of
the proceeds of a sale made under a trust receipt was not punishable under article 315. That penal provision removed any doubt as to the criminal liability of the
holder of a trust receipt who misappropriated the proceeds of the sale.

De Castro Dissent: There is no more doubt that under PD 115, the violation is defined as estafa, but before promulgation of said decree, I have entertained grave
doubts to such an extent that I would acquit a person accused of the crime allegedly committed before said decree, the promulgation of which serves to confirm my
doubt.
I consider the view that the trust receipt arrangement gives rise only to civil liability as the more feasible, before the promulgation of PD 115. The transaction being
contractual, the intent of the parties should govern.

Sia vs People

In the light of the promulgation of P.D. 115 providing for the regulation of trust receipts transaction, which is a very comprehensive piece of legislation, and includes an
express provision that if the violation or offense is committed by a corporation, partnership, association or other juridical entities the penalty provided for in this Decree
shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to civil liabilities arising from
the criminal offense

We consider the view that the trust receipt arrangement gives rise only to civil liability as the more.

while the trust receipt speaks of authority to sell, the fact is undisputed that the imported goods were to be manufactured into finished products first before they could
be sold, as the Bank had full knowledge of. This fact is, however, not embodied in the trust agreement, thus impressing on the trust receipt vagueness and ambiguity
which should not be the basis for criminal prosecution, in the event of a violation of the terms of the trust receipt. Again, P.D. 115 has express provision relative to the
"manufacture or process of the good with the purpose of ultimate sale," as a distinct condition from that of "to sell the goods or procure their sale" (Section 4, (1).
Note that what is embodied in the receipt in question is the sale of imported goods, the manufacture thereof not having been mentioned

Lee vs Rodil

PD115 is a declaration by the legislative authority that, as a matter of public policy, the failure of a person to turn over the proceeds of the sale of goods covered by a
trust receipt or to return said goods if not sold is a public nuisance to be abated by the imposition of penal sanctions.

PD 115 is a valid exercise of police power and is not repugnant to the constitutional provision on non-imprisonment for non-payment of debt.

An examination of P.D. 115 shows the growing importance of trust receipts in Philippine business, the need to provide for the rights and obligations of parties to a
trust receipt transaction, the study of the problems involved and the action by monetary authorities, and the necessity of regulating the enforcement of rights arising
from default or violations of trust receipt agreements. The legislative intent to meet a pressing need is clearly expressed. We see no unconstitutionality in the means
deliberately employed to enforce the integrity of trust receipts.

Allied Banking vs Ordonez

The penal provision of PD 115 encompasses any act violative of an obligation covered by the trust receipt; it is not limited to transactions in goods which are to be
sold (retailed), reshipped, stored or processed as a component of a product ultimately sold.

People vs Nitafan

The Trust Receipts Law 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 or not. The law does not seek to enforce payment of the loan. Thus, there can be no violation of a right against imprisonment for non-payment of a
debt.

Prudential Bank vs NLRC (levy)

A trust receipt arrangement does not involve a simple loan transaction between a creditor and debtor-importer. Apart from a loan feature, the trust receipt
arrangement has a security feature that is covered by the trust receipt itself. (Vintola v. Insular Bank of Asia and America, 150 SCRA 578 [1987] That second feature is
what provides the much needed financial assistance to our traders in the importation or purchase of goods or merchandise through the use of those goods or
merchandise as collateral for the advancements made by a bank (Samo v. People, 115 Phil 346 [1962]). The title of the bank to the security is the one sought to be
protected and not the loan which is a separate and distinct agreement.

By this arrangement a banker advances money to an intending importer, and thereby lends the aid of capital, of credit, or of business facilities and agencies abroad, to
the enterprise of foreign commerce. Much of this trade could hardly be carried on by any other means, and therefore it is of the first importance that the fundamental
factor in the transaction, the banker's advance of money and credit, should receive the amplest protection. Accordingly, in order to secure that the banker shall be
repaid at the critical point — that is, when the imported goods finally reach the hands of the intended vendee — the banker takes the full title to the goods at the
very beginning; he takes it as soon as the goods are bought and settled for by his payments or acceptances in the foreign country, and he continues to hold that title
as his indispensable security until the goods are sold in the United States and the vendee is called upon to pay for them. This security is not an ordinary pledge by the
importer to the banker, for the importer has never owned the goods, and moreover, he is not able to deliver the possession; but the security is the complete title
vested originally in the bankers, and this characteristic of the transaction has again and again been recognized and protected by the courts. Of course, the title is at
bottom a security title, as it has sometimes been called, and the banker is always under the obligation to reconvey ; but only after his advances have been fully repaid
and after the importer has fulfilled the other terms of the contract
]n a certain manner, (trust receipt contracts) partake of the nature of a conditional sale as provided by the Chattel Mortgage Law, that is, the importer becomes
absolute owner of the imported merchandise as soon as he has paid its price . The ownership of the merchandise continues to be vested in the owner thereof or in the
person who has advanced payment, until he has been paid in full, or if the merchandise has already been sold, the proceeds of the sale should be turned over to him
by the importer or by his representative or successor in interest (emphasis supplied).

PNB vs Catipon [1956]

The decision acquitting Catipon of Esafa does not preclude the filing of this action to enforce his liability as one of the signers of the trust receipt. Because he executed
the trust receipt, he is liable ex contractu, for its breach, whether he did or he did not “misappropriate, misapply or convert the said merchandise“ as charged in the
information filed in the criminal case. The acquittal is equivalent to one on reasonable and does not preclude a suit to enforce civil liability under Art 29 of the Civil
Code.

Likewise, the declaration in the decision of acquittal to the effect that “If any responsibility was incurred by the accused – that is civil in nature and not criminal”
amounts to a reservation of the civil action.

Ong vs CA

. The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a corporation. Hence, if the entrustee is a corporation, the law makes
the officers or employees or other persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships,
associations and other juridical entities cannot be put to jail. Hence, the criminal liability falls on the human agent responsible for the violation of the Trust Receipts
Law.

Ching vs CA

Even on the assumption that the documents are declared of null, it does not ipso facto follow that such declaration of nullity shall exonerate the accused from criminal
prosecution and liability.

It will be readily seen that the alleged prejudicial question is not determinative of the guilt or innocence of the parties charged with estafa, because even on the
assumption that the execution of the receipt whose annulment they sought in the civil case was vitiated by fraud, duress or intimidation, their guilt could still be
established by other evidence showing, to the degree required by law, that they had actually received from the complainant the sum of P20,000,00 with which to buy
for him a fishing boat, and that, instead of doing so, they misappropriated the money and refused or otherwise failed to return it to him upon demand.

A trust receipt partakes the nature of a security transaction. It could never be a mere additional or side document as alleged by petitioner. Otherwise, a party to a trust
receipt agreement could easily renege on its obligations thereunder, thus undermining the importance and defeating with impunity the purpose of such an
indispensable tool in commercial transactions.

Pilipinas Bank vs Ong (novation as defense)

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this Court held that there are two ways which could indicate the presence of novation, thereby producing the effect of extinguishing an obligation by another which
substitutes the same. The first is when novation has been stated and declared in unequivocal terms. The second is when the old and the new obligations are
incompatible on every point. The test of incompatibility is whether or not the two obligations can stand together. If they cannot, they are incompatible and the latter
obligation novates the first. Corollarily, changes that breed incompatibility must be essential in nature and not merely accidental. The incompatibility must take place in
any of the essential elements of the obligation, such as its object, cause or principal conditions, otherwise, the change is merely modificatory in nature and insufficient
to extinguish the original obligation.