TRADERS ROYAL BANK VS CA

Facts:
Filriters registered owner of CBCI . Filriters transferred it to Philfinance by one of its officers without
authorization from the company. Subsequently Philfinance transferred same CBCI to TRB under a repurchase
agreement. When Philfinance failed to do so.The TRB tried to register in its name in the CB. The latter didnt
want to recognize the transfer.

Issue:
Whether the CBCI is negotiable instrument or not.
Whether the Assignment of registered certificate is valid or null and void.

Rule:
Under section 1 of Act no. 2031 an instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.

Under section 3, Article V of Rules and Regulations Governing Central Bank Certificates of Indebtedness states
that the assignment of registered certificates shall not be valid unless made at the office where the same have
been issued and registered or at the Securities Servicing Department, Central Bank of the Philippines, and by
the registered owner thereof, in person or by his representative, duly authorized in writing. For this purpose,
the transferee may be designated as the representative of the registered owner.

Application/Analysis:
The CBCI is not a negotiable instrument, since the instrument clearly stated that it was payable to Filriters,
and the certificate lacked the words of negotiability which serve as an expression of consent that the
instrument may be transferred by negotiation.

Obviously the Assignment of certificate from Filriters to Philfinance was null and void. One of officers who
signed the deed of assignment in behalf of Filriters did not have the necessary written authorization from the
Board of Directors of Filriters. For lack of such authority the assignment is considered null and void.

Conclusion/Holdings:

Before the instruments become negotiable instruments, the instrument must conform to the requirements
under the Negotiable Instrument Law. Otherwise instrument shall not bind the parties.
Clearly shown in the record is the fact that Philfinances title over CBCI is defective
since it acquired the instrument from Filriters fictitiously. Under 1409 of the Civil Code those contracts
which are absolutely simulated or fictitious are considered void and inexistent from the beginning.

CALTEX VS CA

FACTS
On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued 280 certificates of time
deposit (CTD) in favor of one Angel dela Cruz who deposited with the bank the aggregate amount of P1.12
million. Anger de la Cruz delivered the CTDs to Caltex in connection with his purchase of fuel products from the
latter. Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus executed an affidavit of loss
to facilitate the issuance of the replacement CTDs. De la Cruz was able to obtain a loan of P875,000 from the
bank, and in turn, he executed a notarized Deed of Assignment of Time Deposit in favor of the bank. Thereafter,
Caltex presented for verification the CTDs (which were declared lost by de la Cruz) with the bank. Caltex
formally informed the bank of its possession of the CTDs and its decision to preterminate the same. The bank
rejected Caltex claim and demand, after Caltex failed to furnish copy of the requested documents evidencing
the guarantee agreement, etc. In 1983, de la Cruz loan matured and the bank set-off and applied the time
deposits as payment for the loan. Caltex filed the complaint, but which was dismissed.
ISSUE [1]:
Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
HELD [1]:
The CTDs in question meet the requirements of the law for negotiability. Contrary to the lower courts findings,
the CTDs are negotiable instruments (Section 1). Negotiability or non-negotiability of an instrument is
determined from the writing, i.e. from the face of the instrument itself. The documents provided that the
amounts deposited shall be repayable to the depositor. The amounts are to be repayable to the bearer of the
documents, i.e. whosoever may be the bearer at the time of presentment.
ISSUE [2]:
Whether the CTDs negotiation require delivery only.
HELD [2]:
Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement
between it (Caltex) and de la Cruz requires both delivery and indorsement; as the CTDs were delivered to it as
security for dela Cruz purchases of its fuel products, and not for payment. Herein, there was no negotiation in
the sense of a transfer of title, or legal title, to the CTDs in which situation mere delivery of the bearer CTDs
would have sufficed. The delivery thereof as security for the fuel purchases at most constitutes Caltex as a
holder for value by reason of his lien. Accordingly, a negotiation for such purpose cannot be effected by mere
delivery of the instrument since the terms thereof and the subsequent disposition of such security, in the event
of non-payment of the principal obligation, must be contractually provided for.

METROBANK VS CA

FACTS:
Eduardo Gomez opened an account with Golden Savings and Loan Association and deposited over a period of
two months 38 treasury warrants with a total value of P1,755,228.37. All these warrants were subsequently
indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its savings account in the Metrobank
branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the principal office of
Metrobank, which forwarded them to the Bureau of Treasury for special clearing. Before they were cleared,
petitioner decided to allow Golden Savings to withdraw from the proceeds of the warrants. Golden Savings in
turn subsequently allowed Gomez to make withdrawals from his own account. Subsequently, Metrobank
informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury and
demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its
account. Metrobank contends that by indorsing the warrants in general, Golden Savings assumed that they
were "genuine and in all respects what they purport to be," in accordance with Section 66 of the Negotiable
Instruments Law.

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

RULING:
Clearly stamped on the face of the treasury warrants is the word "non-negotiable." It is also indicated that
they are payable from a particular fund, to wit, Fund 501. The indication of Fund 501 as the source of the
payment to be made on the treasury warrants makes the order or promise to pay "not unconditional" and the
warrants themselves non-negotiable. Petitioner cannot hold Golden Savings liable as an indorser under
Section 66 of the NIL for the simple reason that this law is not applicable to the non-negotiable treasury
warrants.

PNB VS CONCEPCION MINING
A promissory note dated march 12, 1954 was executed by Vicente Legarda, president of Concepcion Mining
Company, and Jose Sarte. On the face of the promissory note partially reads:
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .
The promissory note matured and without payment from the makers. PNB sued Concepcion Mining and Sarte.
ISSUE: Whether or not the estate of Legarda should be included in the suit.
HELD: No. There is no need for pursuant to Section 17 (g) of the Negotiable Instruments Law:
SEC. 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous or
there are omissions therein, the following rules of construction apply:
x x x x x x x x x
(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.
DEVELOPMENT BANK OF RIZAL VS SIMA WEI
DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL.
G.R. No. 85419 March 9, 1993
--complete undelivered

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

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

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

ILUSORIO VS CA
FACTS:
Ilusorio was a businessman who was in charge of 20 or so corporations. He was a depositor in good standing of
Manila Banking Corporation. As he was in charge of a big number of corporations, he was usually out of the
country for business. He then entrusted his credit cards, checkbook, blank checks, passbooks, etc to his
secretary, Katherine Eugenio. Eugenio was also in charge of verifying and reconciling the statements of
Ilusorios checking account.

Eugenio was able to encash and deposit to her personal account checks drawn against Ilusorios account with
an aggregate amount of 119K. Ilusorio didnt bother to check his statement of account until a business partner
informed him that he saw Eugenio using his credit cards. Ilusorio then fired her and instituted criminal case of
Estafa thru falsification against Eugenio. Manila Banking Corp. also instituted a complaint of estafa against
Eugenio based on the affidavit of Dante Razon, an employee. Razon stated that he personally examined and
scrutinized the encashed checks in accordance with their verification procedures.

Manila Bank sought the expertise of NBI in determining the genuineness of the checks but Ilusorio failed to
submit specimen signatures and thus, NBI could not conduct the examination.

Issue: W/N Manila Bank is liable for damages for failing to detect a forged check

Held:

No. To be entitled to damages, Ilusorio has the burden of poving that the bank was negligent in failing to detect
the discrepancy in the signatures on the checks. Ilusorio had to establish the fact of forgery which he failed to
do by failing to submit his specimen signatures for NBI to conclusively establish forgery.

Furthermore, the Bank was not negligent in verifying the checks as they verified the drawers signatures against
their specimen signatures and in doubt, referred to more experienced verifier for further verification.

On the contrary, it was Ilusorio who was found to be negligent. He accorded his secretary with an unusual
degree of trust and unrestricted access to his finances. Furthermore, despite the fact that the bank was regularly
sending statements of account, he failed to check them until he found out that his secretary was using his credit
cards.

Sec. 23 of the Negotiable Instruments law provides that a forged check is inoperative, meaning there was no
right to enforce payment against any party. But it also provides an exception: unless the party against whom it
is sought enforce such right is precluded from setting up the forgery or want of authority. This case falls under
the exception since Ilusorio is precluded from setting up forgery due to his own negligence considering that he
allowed his secretary access to his credit cards, checkbook, and allowed his secretary to verify his statements of
account.

REPUBLIC BANK VS EBRADA
FACTS:
Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank (Escolta Branch). The Bureau of
Treasury, which issued the check advised the bank that the alleged indorsement of the check by one Martin
Lorenzo was a forgery as the latter has been dead since 14 July 1952; and requested that it be refunded he sum
deducted from its account. The bank refunded the amount to the Bureau and demanded upon Ebrada the sum
in question, who refused. Hence, the present action.
ISSUE:
Whether the bank can recover from the last indorser.
HELD:
According to Section 23 of the Negotiable Instruments Law, where the signature on a negotiable instrument is
forged, the negotiation of the check is without force or effect. However, following the ruling in Beam vs. Farrel
(US case), where a check has several indorsements on it, only the negotiation based on the forged or
unauthorized signature which is inoperative. The last indorser, Ebrada, was duty-bound to ascertain whether
the check was genuine before presenting it to the bank for payment. Her failure to do so makes her liable for
the loss and the Bank may recover from her the money she received for the check. Had she performed her duty,
the forgery would have been detected and fraud defeated. Even if she turned over the amount to Dominguez
immediately after receiving the cash proceeds of the check, she is liable as an accommodation party under
Section 29 of the Negotiable Instruments Law.

GEMPESAW VS CA
GR 92244, 9 February 1993
FACTS:
Natividad Gempesaw issued checks, prepared by her bookkeeper, a total of 82 checks in favor of several
supplies. Most of the checks for amounts in excess of actual obligations as shown in their corresponding
invoices. It was only after the lapse of more than 2 years did she discovered the fraudulent manipulations of her
bookkeeper. It was also learned that the indorsements of the payee were forged, and the checks were brought
to the chief accountant of Philippine Bank of Commerce (the Drawee Bank, Buendia Branch) who deposited
them in the accounts of Alfredo Romero and Benito Lam. Gempesaw made demand upon the bank to credit the
amount charged due the checks. The bank refused. Hence, the present action.
ISSUE:
Who shall bear the loss resulting from the forged indorsements.
HELD:
As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the
drawers account for the amount of said check. An exception to the rule is where the drawer is guilty of such
negligence which causes the bank to honor such checks. Gempesaw did not exercise prudence in taking steps
that a careful and prudent businessman would take in circumstances to discover discrepancies in her account.
Her negligence was the proximate cause of her loss, and under Section 23 of the Negotiable Instruments Law, is
precluded from using forgery as a defense.
On the other hand, the banking rule banning acceptance of checks for deposit or cash payment with more than
one indorsement unless cleared by some bank officials does not invalidate the instrument; neither does it
invalidate the negotiation or transfer of said checks. The only kind of indorsement which stops the further
negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation thereof,
pursuant to Section 36 of the Negotiable Instruments Law.
In light of any case not provided for in the Act that is to be governed by the provisions of existing legislation,
pursuant to Section 196 of the Negotiable Instruments Law, the bank may be held liable for damages in
accordance with Article 1170 of the Civil Code. The drawee bank, in its failure to discover the fraud committed
by its employee and in contravention banking rules in allowing a chief accountant to deposit the checks bearing
second indorsements, was adjudged liable to share the loss with Gempesaw on a 50:50 ratio.
PINEDA VS DELA RAMA
FACTS:
Pineda was caught in a case against the NARIC for his alleged
misappropriation of many cavans of palay. He hired Atty. Dela Rama to delay the filing of the
complaint against him, on alleged representation of the lawyer that he is a friend of the NARIC administrator.
Pineda then issued a promissory note in favor of dela Rama to pay for the advances that the lawyer made to the
administrator to delay the filing of the complaint. Dela Rama on the other hand contended that the
promissory note was for the loan advanced to Pineda by him. Dela Rama filed an action against Pineda for the
collection of the amount of the note.

HELD:
The presumption that a negotiable instrument was issued for valuable consideration is a rebuttable
presumption. It can be rebutted by proof to the contrary.

In the case at bar, the claims of dela Rama that the promissory note was
for a loan advanced to Pineda is unbelievable. The grant of a loan by a lawyer to a moneyed
client and whom he has known for only 3 months can not be relied on. Pineda had actually just purchased
numerous properties. It is highly illogical that he would loan from dela Rama P9500 for 5 days apart.

Furthermore, the note was void ab initio because the consideration given
was to influence the administrator to delay charges against Pineda. The consideration was void for
being against law and public policy.