NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 185 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
! On the other hand, mere payment of the paper at the termination of
its course doesnt act as an act of estoppel
! Payment is the final act which extinguishes a bill
! Acceptance is the promise to pay in the future and continues the life of
the bill

RIGHT OF THE HOLDER TO SUE DRAWER WHERE CHECK NOT CERTIFIED
! The drawer of a check certifies that it will be paid on presentment but
not that it will be certified
! This is the theory on which the law discharging the drawer and
indorsers upon certification is based
! Certification is different from acceptance in that the refusal of the
drawee bank to certify doesnt amount to a dishonor of the check
! There is no need for a notice of non-certification and the check must
still be presented for paymenht

CASE DIGESTS: SECTION 187

187 PANLILIO V. DAVID
50 PHIL 105

FACTS:
Panlilio and David are both bidders for lease of a big chunk of land owned
by the government. Panlilio had a higher bid than David. Both of their
bids were accompanied by uncertified checks, the amount for Davids is
lesser than that of Panlilios. Later, David equaled the bid of Panlilo by
adding cash to the amount of his check. With this, the lease was awarded
to David. His check was encashed and the proceeds were deposited with
the Treasury. This award was questioned by Panlilio by averting that the
bid of David should have been denied since the check he offered was
uncertified. This prompted the withdrawal of the award to David and
instead, the lease was awarded to Panlilio, whom it was thought to have
submitted a certified check. After knowing that he too didnt have a
certified check, his award was cancelled. Both appealed this to the
appellate court.

HELD:
The rule that the check to be offered should be certified is an office rule. It
sought to prevent the presentation of frivolous bids and to avoid difficulties
in the collection of the amount of the accepted bid. The Director of Lands
therefore had the authority to reject both bids in question on the ground
that they werent accompanied by certified checks. Nonetheless, this
doesnt mean that if he accepted one of them, a merely formal defect
would vitiate the award. When Davids bid was accepted and the amount
of the bid was paid and covered into the Treasury, the government could
hardly be heard to say that the award was invalid because the amount paid
was originally represented in part by an uncertified check.

188 NEW PACIFIC TIMBER V. SENERIS
101 SCRA 686

FACTS:
New Pacific Timber and Supply was the defendant in a case for collection of
money. Upon failure to comply with the compromise agreement, a writ of
execution was issued and its properties were levied. Prior though to the
auction sale, petitioner deposited with the trial court a cashiers check but
private respondent refused to accept.

HELD:
The check deposited by the petitioner is no ordinary check but a cashiers
check. It is a well-known and accepted practice in the business sector that
a cashiers check is deemed as cash. Moreover, since the said check had
been certified by the drawee bank, by the certification, the funds
represented by the check are transferred from the credit of the maker to
that of the payee or holder, and for all intents and purposes, the latter
becomes the depositor of the drawee bank, with rights and duties of one in
such situation. The certification by the bank is equivalent to acceptance.
It is an understanding that the check is good then, and shall continuegood,
and this agreement is binding on the bank as its notes in circulation, a
certificate of deposit payable to the order of the depositor, or any other
obligation it can assume. The object of certifying the check as regards
both parties is to enable the holder to use it as money. Hence the
exception to the rule on Section 64 of the CB Act to the effect that a check
which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to a creditor in cash in an amount equal to the
amount credited to his account shall apply in this case.

189 PNB V. NATIONAL CITY BANK OF NY
63 PHIL 711

FACTS:
Unknown persons negotiated with Motor Services Company checks, which
were part of the stipulation in payment of automobile tires purchased from
the latters store. It purported to have been issued by Pangasinan
Transportation Company. The said checks were indorsed at the back by
said unknown persons, the Motor company believing at that time that the
signatures contained therein were genuine. The checks were later
deposited with the companys account in National City Bank of NY. The