NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 188 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
! As stated, Under banking laws and practices, by the certification, the
funds represented by the check were transferred from the credit of the
maker to that of the payee or holder, and for all intents and purposes,
the latter became the depositor of the bank, with rights and duties of
one in such relation. But the transfer of the corresponding funds from
the credit of the depositor to that of the payee had to be co-extensive
with the life of the checks, which in this case was 90 days. If the
checks were not presented for payment within that period they
became invalid and the funds were automatically restored to the credit
of the drawer though not as a current deposit but as special deposit.

UNCERTIFIED CHECK IS NOT AN ASSIGNMENT OF FUNDS
! A check of itself is not an assignment of the funds of the drawer in the
bank
! A general deposit in the bank is so much money to the depositors
credit. It is a debt to him by the bank, payable on demand to his
order, not property capable of identification and specific appropriation.
A check drawn upon the bank in usual form, not accepted or certified
by its cashier to be good, doesnt constitute transfer of any money to
the credit of the holder. It is simply an order which may be
countermanded and payment forbidden by the drawer at any time
before it is actually cashed. It creates no lien on the money which the
holder can enforce against the bank. It doesnt of itself operate as an
equitable assignment.

DRAWEE BANK NOT LIABLE TO HOLDER ON CHECK UNLESS ACCEPTED OR
CERTIFIED
! Before acceptance or certification, the bank isnt liable and the holder
has no right to sue the drawee bank on the check
! On this question, we conclude that the general rule is that an action
cannot be maintained by the payee of the check against the bank on
which it is drawn, unless the check has been certified or accepted by
the bank in compliance with the statute, even though at the time the
check is that an action cannot be maintained by the payee of the
drawer of the check out of which the check is legally payable; and that
the payment of the check by the bank on which it is drawn, even
though paid on the unauthorized indorsement of the name of the
holder; doesnt constitute as certification thereof, neither is it an
acceptance thereof; and without acceptance or certification, as
provided by statute, there is no privity of contract between the drawee
bank and the payee, or the holder of the check. Neither is there
assignment of the funds where the check isnt drawn on a particular
fund, or doesnt show on its face that it is an assignment of a
particular fund.

SUMMARY OF RIGHTS AND LIABILITIES OF PARTIES
1. The holder has no action against it as a check is not in itself an
assignment of funds of the drawer in the hands of the drawee
bank, and the drawee bank isnt liable on the check until it has
accepted or certified it
2. Neither has the holder a right of action against the drawer where
the drawee bank refuses to accept or certify the check but he has
a right of action against the drawer where the drawee bank
refuses to pay
3. And while the holder has no right of action against the drawee
bank which refuses to pay, accept or certify the check, the drawer
has a right of action against the drawee bank so refusing. Such
right of action, however, isnt based on the check drawn but on
the original contract of deposit between them

DUTY OF DEPOSITOR TO BANK
! Where a drawer of a check has prepared his check so negligentlythat it
can be altered easily without giving the instrument a suspicious
appearance and alterations are afterwards made, he cannot blame
anyone but himself and in such case, he cannot hold the bank liable
for the consequences of his own negligence in the respect
! But negligence of depositor in drawing a check will not excuse the
paying bank unless it is misled by such negligent act, and if the drawer
of a check is first in fault and if his negligence contributes directly to
its wrongful and fraudulent appropriation, he isnt entitled to recover

DUTY OF DEPOSITOR WHERE PASSBOOK RETURNED TO HIM
! It is his duty to examine such checks within a reasonable time and if
they disclose forgeries or alterations, to report them to the bank,
dispute the correctness of payments thereafter made by it on similar
checks.
! This rule assumes that the bank itself hasnt been guilty of negligence
in making the payment for when, by the exercise of proper case, it
could have discovered the alteration of forgery, it must bear the loss
notwithstanding that the depositor failed in his duty to examine the
accounts

STOPPING PAYMENT
! As a check is itself doesnt operate as an assignment of funds to the
credit of the drawer, the latter may countermand payment before its
acceptance or certification.
! The order to stop payment must be communicated to the bank before
the check to which it refers has been paid; and in the absence of this