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Caltex v.

Court of Appeals
In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs) from
Security Bank and Trust Company for the formers deposit with the said bank amounting
to P1, 120,000.00. The said CTDs are couched in the following manner:
This is to Certify that B E A R E R has deposited in this Bank the sum of _______
Pesos, Philippine Currency, repayable to said depositor _____ days. after date, upon
presentation and surrender of this certificate, with interest at the rate of ___ % per cent
per annum.
Angel de la Cruz subsequently delivered the CTDs to Caltex in connection with the
purchase of fuel products from Caltex.
In March 1982, Angel de la Cruz advised Security Bank that he lost the CTDs. He
executed an affidavit of loss and submitted it to the bank. The bank then issued another
set of CTDs. In the same month, Angel de la Cruz acquired a loan of P875,000.00 and
he used his time deposits as collateral.
In November 1982, a representative from Caltex went to Security Bank to present the
CTDs (delivered by de la Cruz) for verification. Caltex advised Security Bank that de la
Cruz delivered Caltex the CTDs as security for purchases he made with the latter.
Security Bank refused to accept the CTDs and instead required Caltex to present
documents proving the agreement made by de la Cruz with Caltex. Caltex however
failed to produce said documents.
In April 1983, de la Cruz loan with Security bank matured and no payment was made by
de la Cruz. Security Bank eventually set-off the time deposit to pay off the loan.
Caltex sued Security Bank to compel the bank to pay off the CTDs. Security Bank
argued that the CTDs are not negotiable instruments even though the word bearer is
written on their face because the word bearer contained therein refer to depositor and
only the depositor can encash the CTDs and no one else.
ISSUE: Whether or not the certificates of time deposit are negotiable.
HELD: Yes. The CTDs indicate that they are payable to the bearer; that there is an
implication that the depositor is the bearer but as to who the depositor is, no one knows.
It does not say on its face that the depositor is Angel de la Cruz. If it was really the
intention of respondent bank to pay the amount to Angel de la Cruz only, it could have
with facility so expressed that fact in clear and categorical terms in the documents,
instead of having the word BEARER stamped on the space provided for the name of
the depositor in each CTD. On the wordings of the documents, therefore, the amounts
deposited are repayable to whoever may be the bearer thereof.

Thus, de la Cruz is the depositor insofar as the bank is concerned, but obviously other
parties not privy to the transaction between them would not be in a position to know that
the depositor is not the bearer stated in the CTDs.

However, Caltex may not encash the CTDs because although the CTDs are bearer
instruments, a valid negotiation thereof for the true purpose and agreement between
Caltex and De la Cruz, requires both delivery and indorsement. As discerned from the
testimony of Caltex representative, the CTDs were delivered to them by de la Cruz
merely for guarantee or security and not as payment.

Ponce v. Court of Appeals

In 1969, Jesusa Afable and two others procured a loan from Nelia Ponce in the
amount of $194,016.29. In June 1969, Afable and her co-debtors executed a promissory
note in favor of Ponce in the peso equivalent of the loan amount which was
P814,868.42. The promissory note went due and was left unpaid despite demands from
Ponce. This prompted Ponce to sue Afable et al. The trial court ruled in favor of Ponce.
The Court of Appeals initially affirmed the trial court but it later reversed its decisions as
it ruled that the promissory note under consideration was payable in US dollars, and,
therefore pursuant to Republic Act 529, the transaction was illegal with neither party
entitled to recover under the in pari delicto rule.
ISSUE: Whether or not Ponce may recover.
HELD: Yes. RA 529 provides that an agreement to pay in dollars is null and void and of
no effect however what the law specifically prohibits is payment in currency other than
legal tender. It does not defeat a creditors claim for payment, as it specifically provides
that every other domestic obligation whether or not any such provision as to
payment is contained therein or made with respect thereto, shall be discharged upon
payment in any coin or currency which at the time of payment is legal tender for public
and private debts. A contrary rule would allow a person to profit or enrich himself
inequitably at anothers expense.
On the face of the promissory note, it says that it is payable in Philippine currency the
equivalent of the dollar amount loaned to Afable et al. It may likewise be pointed out that
the Promissory Note contains no provision giving the obligee the right to require
payment in a particular kind of currency other than Philippine currency, which is what
is specifically prohibited by RA No. 529. If there is any agreement to pay an obligation
in a currency other than Philippine legal tender, the same is null and void as contrary to
public policy, pursuant to Republic Act No. 529, and the most that could be demanded is
to pay said obligation in Philippine currency.

NOTE: RA 529 has already been repealed by Republic Act 8183 which provides that
every monetary obligation must be paid in Philippine currency which is legal tender in
the Philippines. However, the parties may agree that the obligation or transaction shall
be settled in any other currency at the time of payment. (The Philippine Negotiable
Instruments Law, De Leon and De Leon Jr., p. 29)

Kalalo v. Luz
Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an
architect in 1961. Luz contracted Kalalo to work on ten projects across the country, one
of which was an in the International Rice Research Institute (IRRI) Research Center in
Los Baos, Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalos
work, Luz agreed to pay him 20% of what IRRI is going to pay or equivalent to
ISSUE: Whether or not Kalalo should be paid in US currency.
HELD: No. The agreement was forged in 1961, years before the passage of Republic
Act 529 in 1950. The said law requires that payment in a particular kind of coin or
currency other than the Philippine currency shall be discharged in Philippine currency
measured at the prevailing rate of exchange at the time the obligation was incurred.
Nothing in the law however provides which rate of exchange shall be used hence it is
but logical to use the rate of exchange at the time of payment.

Tang Tiong Tick v. Phil. MFG Corp.

Ernesto Tan-Chi, vice-president of the plaintiff corporation and the defendant Tan
Tiong Tick were friends of long standing whose business relations started before the
war and continued after the liberation. Sometime in 1951 the plaintiff corporation,
through one Andres Roldan Lao, now deceased sales manager of an affiliate firm, saw
an opportunity to buy textile good from a certain Lucilo Macaraig, who had the
necessary import license and dollar allocation for that purpose but did not have
sufficient funds that finance the importation. The plaintiff was willing to advance the sum
of P120.000.00 but did not knew Macaraig well-enough to give him the money outright.
So what the Plaintiff did was to issue a check for the said amount, payable to the

defendant Tan Tiong Tick. This check, marked Exhibit B-1, was drawn on the China
Banking Corporation and dated March 21, 1951. It was indorsed by the defendant and
cashed, and the proceeds turned over to Lucilo Macaraig. The latter, however, failed to
deliver the textile, which he was supposed to order and on April 14, 1958 the plaintiff
instituted the present action against the defendant for the collection of the face value of
the check, with interest at 6%, from March 21, 1951, plus damages, attorney's fees and
The appellee's theory about the nature of the terms of the agreement about the
P20,000.00 check payable to appellant, is, as stated by the Court of Appeals, as
The plaintiff's theory is that the check was made out in the defendant's name pursuant
to an agreement between him and Ernesto Tan-Chi to the effect that since Macaraig
was well known to the defendant but not to the plaintiff the former would assume
responsibility for the amount thus advanced on condition that the profits to be realized
from the transaction would be shared equally between them, that is, for the plaintiff
and for the defendant. The latter's theory, on the other hand, is that there was no
such agreement, that the transaction was exclusively between the plaintiff and Lucilo
Macaraig, and that the defendant signed on the back of the check merely as a witness
to the encashment thereof and to the delivery of the money to Macaraig. While that of
the defendant-appellant is as follows:
The defendant's theory that the check Exhibit B-1 was made out in his name by the
plaintiff and that he signed it on the back simply because the plaintiff wanted a witness
to its encashment and to the delivery of the money to Lucilo Macaraig and because the
latter did not wish to accept a check but wanted cash instead is really entitled to less
consideration and credence than has been accorded to it in the decision sought to be
reconsidered. For if that was the only reason, there was no need to bother the
defendant Tan Tiong Tick at all. The plaintiff could have made the check payable directly
to Macaraig and the latter's indorsement thereof would be sufficient proof of his receipt
of the amount without the necessity of any witness; or if Macaraig wished that cash be
given to him Tan-Chi himself could have cashed a check in the bank, delivered the
money directly to Macaraig and required the latter to sign the corresponding receipt,
with any person from the plaintiffs office signing as a witness. The procedure actually
adopted, that is, issuing the check in the name of Tan Tiong Tick and having him indorse
it was not only unnecessary but also too devious and round-about to be resorted to for
the purpose alleged by the defendant. And being the experienced businessman that he
was, the defendant would hardly have agreed to sign the check as payee and indorser if
his intention was only to act as witness, since he knew that he would be liable or
accountable to the drawer by indorsing and having it cashed in the bank.
The Court of Appeals, sustaining the findings of the trial court, found plaintiffrespondent's theory more credible, i.e., that plaintiff's witness Tan Chi delivered the
P20,000.00 check payable to Tan Tiong Tick to the latter, under an agreement that the

amount of the check was to be given to Macaraig in payment of textiles and that profits
to be derived from the investment was to be divided equally between plaintiffrespondent and defendant-petitioner. It rejected the latter's theory that petitioner was
merely a witness to the encashment of the check. The reasons for the conclusion are: In
defendant's answer it is alleged as special defense that Macaraig received the
P20,000.00 in cash from defendant-petitioner; the check does not show that any one
else received the cash representing the face value thereof by the payee or defendant
himself; and the further fact that the books of account of plaintiff-appellee contain any
entry of the said sum as indebtedness of the defendant from 1951 to 1958 and plaintiff's
accountants have sent yearly to defendant- petitioner confirmation slips of said
The first two issues raised by counsel for defendant-petitioner in their brief, namely, that
no written permission or resolution of the respondent corporation was shown authorizing
its vice-president to enter into the transaction in question, and that the transaction was
null and void both questions were never raised in the court below; hence they may
not be raised for the first time in this Court.
The second issue is petitioner's claim that the transaction involving the delivery of the
check and its encashment was merely an agreement of guaranty entered into by the
defendant-petitioner with Tan Chi. Neither was this defense ever raised in the
petitioner's answer in the Court of First Instance. This issue seems to be made to
depend on the testimony of defendant-petitioner that he did not himself cash the cheek
but only endorsed it and gave it to another for encashment. But the petitioner's
testimony to that effect was found by the Court of Appeals to be untrue because the
check appears to have been cash by the petitioner himself.
It is also argued on behalf of petitioner that the lack of a written agreement on the
understanding between petitioner and Tan Chi on such a big amount as P20,000.00
militates against the conclusion that the promise of petitioner to respond for the amount
was actually made. But the promise of petitioner was sufficiently proven by the
testimony of Tan Chi and the other facts and circumstances. It is also claimed that the
long period of time that lapsed before the suit to collect, creates a presumption against
the existence of the agreement. No such presumption could arise because the account
was carried in the books of Respondent Corporation and notice thereof was given every
year for confirmation by the respondent's accountants.
Finding no merit in the arguments of petitioner's counsel, the appeal should be, as it is
hereby, dismissed and the decision appealed from, affirmed. With costs. So ordered.

Republic Planters Bank v. Court of Appeals


In 1979, World Garment Manufacturing, through its board authorized Shozo

Yamaguchi (president) and Fermin Canlas (treasurer) to obtain credit facilities from
Republic Planters Bank (RPB). For this, 9 promissory notes were executed. Each
promissory note was uniformly written.
The note became due and no payment was made. RPB eventually sued Yamaguchi and
Canlas. Canlas, in his defense, averred that he should not be held personally liable for
such authorized corporate acts that he performed inasmuch as he signed the
promissory notes in his capacity as officer of the defunct Worldwide Garment
ISSUE: Whether or not Canlas should be held liable for the promissory notes.
HELD: Yes. The solidary liability of private respondent Fermin Canlas is made clearer
and certain, without reason for ambiguity, by the presence of the phrase joint and
several as describing the unconditional promise to pay to the order of Republic
Planters Bank. Where an instrument containing the words I promise to pay is signed
by two or more persons, they are deemed to be jointly and severally liable thereon.
Canlas is solidarily liable on each of the promissory notes bearing his signature for the
following reasons:
The promissory notes are negotiable instruments and must be governed by the
Negotiable Instruments Law. Under the Negotiable lnstruments Law, persons who write
their names on the face of promissory notes are makers and are liable as such. By
signing the notes, the maker promises to pay to the order of the payee or any holder
according to the tenor thereof.

Astro Electronics v. Phil. Export

Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting
to P 3M with interest and secured by 3 promissory notes, 2 of which were dated Dec.
14, 1981 and signed by the petitioner Peter Roxas in his personal capacity and as
President of Astro Electronics Corp. Roxas also signed a Continuing Suretyship
Agreement in favor of Philtrust Bank in his capacity as President of Astro and as a
Philguarantee, with Astro's consent, guaranteed in favor of Philtrust, the payment of
70% of Astro's loan on the condition that upon payment by the former, it shall be
proportionally subrogated to the rights of Philtrust against Astro. Astro failed to pay the
loans despite repeated demands. Philguarantee paid 70% of Astro's loan.
Consequently, Philguarantee instituted a collection suit against Astro and Roxas.

Roxas interposed a defense that he signed those promissory notes in blank and that the
phrases "in his personal capacity" and "in his official capacity" were fraudulently
inserted. However, the trial court rendered a decision ordering Astro and Roxas to pay
Philguarantee jointly and severally the sum of Php 3,621,187.52 representing the total
obligation. Roxas appealed but the CA affirmed the RTC decision. Hence, this petition to
review on certiorari.
(1)Whether or not Roxas should be jointly and severally liable with Astro in the sum
awarded by the RTC?
(2)Whether or not Philguarantee is subrogated to the rights of Philtrust when the former
paid 70% of Astro's loan in compliance with its contract of Guarantee in favor of
(1)Under the Negotiable Instruments Law, persons who write their names on the face of
a promissory note are makers, promising that they will pay to the order of the payee or
any holder according to its tenor. Thus, even without the phrase "in his personal
capacity", Roxas will still be primarily liable as a joint and several debtor under the notes
considering that his intention to be liable as such is manifested by the fact that he
affixed his signature on each of the promissory notes twice which necessarily would
imply that he is undertaking the obligation in 2 different capacities, official and personal.
Furthermore, Roxas is a businessman, thus he is presumed to know his acts and that
he is expected to take care of his own affairs.
(2)SC held that Philguarantee has all the rights to proceed against petitioner. It is
subrogated to the rights of Philtrust to demand for and collect payment from both Roxas
and Astro since it already paid 70% of the latter's loan. Roxas acquiescence is not
necessary for subrogation to take place because the instant case is one of legal
subrogation that occurs by operation of law and without the need of the debtor's
Evangelista v. Mercator
The spouses Evangelista filed a complaint for annulment of titles against the
respondents, claiming to be the registered owners of five (5) parcels of land contained
in the real estate mortgage executed by them and Embassy Farms Inc. in favor of
Mercator Financing Corporation (Mercator). The mortgage was in consideration of
certain loans and credit accommodations amounting to P844, 625.78.
The spouses alleged the following: (1) that they executed the said real estate mortgage
merely as officers of Embassy Farms; (2) that they did not receive the proceeds of the
loan evidenced by the promissory note, as all went to Embassy Farms; (3) that the real

estate mortgage is void due to absence of a principal obligation on which it rests; (4)
that since the real estate mortgage is void, the foreclosure proceedings, the subsequent
sale as well as the issuance of transfer certificates of title are likewise void. Petitioners
further alleged ambiguity in the wording of the promissory note, which should be
resolved against Mercator who provided the form thereof.
Mercator admitted that petitioners were the owners of the subject parcels of land. It,
however, contended that the spouses executed a Mortgage in favor of Mercator Finance
Corporation for and in consideration of certain loans, and/or other forms of credit
accommodations obtained from the Mortgagee (defendant Mercator Finance
HUNDRED TWENTY-FIVE & 78/100 (P844,625.78) and to secure the payment of the
same and those others that the MORTGAGEE may extend to the MORTGAGOR
(plaintiffs) x x x. It contended that since petitioners and Embassy Farms signed the
promissory note as co-makers (the note being worded as For value received, I/We
jointly and severally promise to pay to the order of Mercator), aside from the
Continuing Suretyship Agreement subsequently executed to guarantee the
indebtedness, the petitioners are jointly and severally liable with Embassy Farms. Due
to their failure to pay the obligation, the foreclosure and subsequent sale of the
mortgaged properties are thus valid. Respondents Salazar and Lamecs asserted that
they are innocent purchasers for value and in good faith.
ISSUE: May the spouses be held solidarily liable with Embassy Farms?
HELD: YES. Courts can interpret a contract only if there is doubt in its letter. But, an
examination of the promissory note shows no such ambiguity. Besides, assuming
arguendo that there is an ambiguity, Section 17 of the Negotiable Instruments Law
states, viz:
SECTION 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: (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
Petitioners also insist that the promissory note does not convey their true intent in
executing the document. The defense is unavailing. Even if petitioners intended to sign
the note merely as officers of Embassy Farms, still this does not erase the fact that they
subsequently executed a continuing suretyship agreement. A surety is one who is
solidarily liable with the principal. Petitioners cannot claim that they did not personally
receive any consideration for the contract for well-entrenched is the rule that the
consideration necessary to support a surety obligation need not pass directly to the
surety, a consideration moving to the principal alone being sufficient. A surety is bound
by the same consideration that makes the contract effective between the principal

parties thereto. Having executed the suretyship agreement, there can be no dispute on
the personal liability of petitioners.

De la Victoria v. Burgos
Private respondent filed a complaint for damages against certain Fiscal Mabanto,
Jr., whose judgment is favorable to the former. The decision became final and executory
and notice of garnishment was served on petitioner to withhold Mabantos salary
(a) Whether or not a check in the hands of the drawer is already owned by the payee.
(b) Whether or not an undelivered salary check may already transfer title to the payee.
(a) NO. Section 16 of the Negotiable Instruments Law is clear that where the
instrument is no longer in the possession of a party whose signature appears thereon, a
valid and intentional delivery by him is presumed until the contrary is proved. Proof to
the contrary is its own finding that the checks were in the custody of petitioner. In this
case, as said checks had not yet been delivered to Mabanto, Jr., they did not belong to
him and still had the character of public funds.
(b) NO. Under Section 16 of the Negotiable Instruments Law, every contract on a
negotiable instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of
the possession of the instrument by the maker or drawer with intent to transfer title to
the payee and recognize him as the holder thereof. Here, there is no delivery to speak
of as the salary check is not yet in the hands of Mabanto Jr. as the holder.

Lim v. Court of Appeals (Estafa/Agency)


This is a petition to review the Decision of the Court of Appeals in CA-G.R. CR No.
10290, entitled People v. Rosa Lim, promulgated on August 30, 1991.

On January 26, 1989, an Information for Estafa was filed against petitioner Rosa Lim
before Branch 92 of the Regional Trial Court of Quezon City.[1] The Information reads:

That on or about the 8th day of October 1987, in Quezon City, Philippines and within
the jurisdiction of this Honorable Court, the said accused with intent to gain, with
unfaithfulness and/or abuse of confidence, did, then and there, wilfully, unlawfully and
feloniously defraud one VICTORIA SUAREZ, in the following manner, to wit: on the date
and place aforementioned said accused got and received in trust from said complainant
one (1) ring 3.35 solo worth P169,000.00, Philippine Currency, with the obligation to sell
the same on commission basis and to turn over the proceeds of the sale to said
complainant or to return said jewelry if unsold, but the said accused once in possession
thereof and far from complying with her obligation despite repeated demands therefor,
misapplied, misappropriated and converted the same to her own personal use and
benefit, to the damage and prejudice of the said offended party in the amount
aforementioned and in such other amount as may be awarded under the provisions of
the Civil Code.


After arraignment and trial on the merits, the trial court rendered judgment, the
dispositive portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense of
estafa as defined and penalized under Article 315, paragraph 1(b) of the Revised Penal

Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and
TWO (2) MONTHS of prision correccional as minimum, to TEN (10) YEARS of prision
mayor as maximum;

Ordering her to return to the offended party Mrs. Victoria Suarez the ring or its
value in the amount of P169,000 without subsidiary imprisonment in case of insolvency;


To pay costs.[3]

On appeal, the Court of Appeals affirmed the Judgment of conviction with the
modification that the penalty imposed shall be six (6) years, eight (8) months and
twenty- one (21) days to twenty (20) years in accordance with Article 315, paragraph 1
of the Revised Penal Code.[4]

Petitioner filed a motion for reconsideration before the appellate court on September 20,
1991, but the motion was denied in a Resolution dated November 11, 1991.

In her final bid to exonerate herself, petitioner filed the instant petition for review alleging
the following grounds:









BE PERMITTED TO SWAY JUDGMENT. (People v. Austria, 195 SCRA 700)[5]

Herein the pertinent facts as alleged by the prosecution.

On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu received
from private respondent Victoria Suarez the following two pieces of jewelry: one (1) 3.35
carat diamond ring worth P169,000.00 and one (1) bracelet worth P170,000.00, to be
sold on commission basis. The agreement was reflected in a receipt marked as Exhibit
A[6] for the prosecution. The transaction took place at the Sir Williams Apartelle in
Timog Avenue, Quezon City, where Rosa Lim was temporarily billeted.

On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed to
return the diamond ring or to turn over the proceeds thereof if sold. As a result, private
complainant, aside from making verbal demands, wrote a demand letter[7] to petitioner
asking for the return of said ring or the proceeds of the sale thereof. In response,
petitioner, thru counsel, wrote a letter[8] to private respondents counsel alleging that
Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in September,
1987, for which reason, petitioner had no longer any liability to Mrs. Suarez insofar as
the pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa
under Article 315, par. 1(b) of the Revised Penal Code for which the petitioner herein
stands convicted.

Petitioner has a different version.

Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October
1987, together with one Aurelia Nadera, who introduced petitioner to private
respondent, and that they were lodged at the Williams Apartelle in Timog, Quezon City.

Petitioner denied that the transaction was for her to sell the two pieces of jewelry on
commission basis. She told Mrs. Suarez that she would consider buying the pieces of
jewelry for her own use and that she would inform the private complainant of such
decision before she goes back to Cebu. Thereafter, the petitioner took the pieces of
jewelry and told Mrs. Suarez to prepare the necessary paper for me to sign because I
was not yet prepare(d) to buy it.[9] After the document was prepared, petitioner signed
it. To prove that she did not agree to the terms of the receipt regarding the sale on
commission basis, petitioner insists that she signed the aforesaid document on the
upper portion thereof and not at the bottom where a space is provided for the signature
of the person(s) receiving the jewelry.[10]

On October 12, 1987 before departing for Cebu, petitioner called up Mrs. Suarez by
telephone in order to inform her that she was no longer interested in the ring and
bracelet. Mrs. Suarez replied that she was busy at the time and so, she instructed the
petitioner to give the pieces of jewelry to Aurelia Nadera who would in turn give them
back to the private complainant. The petitioner did as she was told and gave the two
pieces of jewelry to Nadera as evidenced by a handwritten receipt, dated October 12,

Two issues need to be resolved: First, what was the real transaction between Rosa Lim
and Vicky Suarez - a contract of agency to sell on commission basis as set out in the
receipt or a sale on credit; and, second, was the subject diamond ring returned to Mrs.
Suarez through Aurelia Nadera?

Petitioner maintains that she cannot be liable for estafa since she never received the
jewelries in trust or on commission basis from Vicky Suarez. The real agreement
between her and the private respondent was a sale on credit with Mrs. Suarez as the
owner-seller and petitioner as the buyer, as indicated by the fact that petitioner did not
sign on the blank space provided for the signature of the person receiving the jewelry
but at the upper portion thereof immediately below the description of the items taken.

The contention is far from meritorious.

The receipt marked as Exhibit A which establishes a contract of agency to sell on

commission basis between Vicky Suarez and Rosa Lim is herein reproduced in order to
come to a proper perspective:

THIS IS TO CERTIFY, that I received from Vicky Suarez PINATUTUNAYAN KO na

aking tinanggap kay _______________ the following jewelries:
ang mga alahas na sumusunod:

Mga Uri

1 ring 3.35 dolo

1 bracelet
total Kabuuan


P 169,000.00
P 339.000.00

in good condition, to be sold in CASH ONLY within . . .days from date of signing this
receipt na nasa mabuting kalagayan upang ipagbili ng KALIWAAN (ALCONTADO)
lamang sa loob ng. . . araw mula ng ating pagkalagdaan:

if I could not sell, I shall return all the jewelry within the period mentioned above; if I
would be able to sell, I shall immediately deliver and account the whole proceeds of sale
thereof to the owner of the jewelries at his/her residence; my compensation or
commission shall be the over-price on the value of each jewelry quoted above. I am
prohibited to sell any jewelry on credit or by installment; deposit, give for safekeeping;
lend, pledge or give as security or guaranty under any circumstance or manner, any
jewelry to other person or persons.

kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning na

panahong nakatala sa itaas; kung maipagbili ko naman ay dagli kong isusulit at ibibigay
ang buong pinagbilhan sa may-ari ng mga alahas sa kanyang bahay tahanan; ang
aking gantimpala ay ang mapapahigit na halaga sa nakatakdang halaga sa itaas ng
bawat alahas HIND I ko ipinahihintulutang ipa-u-u-tang o ibibigay na hulugan ang alin
mang alahas, ilalagak, ipagkakatiwala; ipahihiram; isasangla o ipananagot kahit sa
anong paraan ang alin mang alahas sa ibang mga tao o tao.

I sign my name this . . . day of. . . 19 . . . at Manila, NILALAGDAAN ko ang kasunduang

ito ngayong ika____ ng dito sa Maynila.

Signature of Persons who

received jewelries (Lagda
ng Tumanggap ng mga

Address: . . . . . . . . . . .

Rosa Lims signature indeed appears on the upper portion of the receipt immediately
below the description of the items taken. We find that this fact does not have the effect
of altering the terms of the transaction from a contract of agency to sell on commission
basis to a contract of sale. Neither does it indicate absence or vitiation of consent
thereto on the part of Rosa Lim which would make the contract void or voidable. The
moment she affixed her signature thereon, petitioner became bound by all the terms
stipulated in the receipt. She, thus, opened herself to all the legal obligations that may
arise from their breach. This is clear from Article 1356 of the New Civil Code which

Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. x x x.

However, there are some provisions of the law which require certain formalities for
particular contracts. The first is when the form is required for the validity of the contract;
the second is when it is required to make the contract effective as against third parties
such as those mentioned in Articles 1357 and 1358; and the third is when the form is
required for the purpose of proving the existence of the contract, such as those provided
in the Statute of Frauds in Article 1403.[13] A contract of agency to sell on commission
basis does not belong to any of these three categories, hence it is valid and enforceable
in whatever form it may be entered into.

Furthermore, there is only one type of legal instrument where the law strictly prescribes
the location of the signature of the parties thereto. This is in the case of notarial wills
found in Article 805 of the Civil Code, to wit:

Every will, other than a holographic will, must be subscribed at the end thereof by the
testator himself x x x.

The testator or the person requested by him to write his name and the instrumental
witnesses of the will, shall also sign, as aforesaid, each and every page thereof, except
the last, on the left margin x x x.

In the case before us, the parties did not execute a notarial will but a simple contract of
agency to sell on commission basis, thus making the position of petitioners signature
thereto immaterial.

Petitioner insists, however, that the diamond ring had been returned to Vicky Suarez
through Aurelia Nadera, thus relieving her of any liability. Rosa Lim testified to this
effect on direct examination by her counsel:

Q: And when she left the jewelries with you, what did you do thereafter?

A: On October 12, I was bound for Cebu. So I called up Vicky through telephone and
informed her that I am no longer interested in the bracelet and ring and that 1 will just
return it.


And what was the reply of Vicky Suarez?

A: She told me that she could not come to the apartelle since she was very busy. So,
she asked me if Aurelia was there and when I informed her that Aurelia was there, she
instructed me to give the pieces of jewelry to Aurelia who in turn will give it back to


And you gave the two (2) pieces of jewelry to Aurelia Nadera?


Yes, Your Honor.[14]

This was supported by Aurelia Nadera in her direct examination by petitioners counsel:

Q: Do you know if Rosa Lim in fact returned the jewelries ?


She gave the jewelries to me.


Why did Rosa Lim give the jewelries to you?

A: Rosa Lim called up Vicky Suarez the following morning and told Vicky Suarez that
she was going home to Cebu and asked if she could give the jewelries to me.


And when did Rosa Lim give to you the jewelries?


Before she left for Cebu.[15]

On rebuttal, these testimonies were belied by Vicky Suarez herself:

Q: It has been testified to here also by both Aurelia Nadera and Rosa Lim that you
gave authorization to Rosa Lim to turn over the two (2) pieces of jewelries mentioned in
Exhibit A to Aurelia Nadera, what can you say about that?

A:. That is not true sir, because at that time Aurelia Nadera is highly indebted to me in
the amount of P 140,000.00, so if I gave it to Nadera, I will be exposing myself to a high

The issue as to the return of the ring boils down to one of credibility. Weight of evidence
is not determined mathematically by the numerical superiority of the witnesses testifying
to a given fact. It depends upon its practical effect in inducing belief on the part of the
judge trying the case.[17] In the case at bench, both the trial court and the Court of
Appeals gave weight to the testimony of Vicky Suarez that she did not authorize Rosa
Lim to return the pieces of jewelry to Nadera. The respondent court, in affirming the trial
court, said:

x x x This claim (that the ring had been returned to Suarez thru Nadera) is
disconcerting. It contravenes the very terms of Exhibit A. The instruction by the
complaining witness to appellant to deliver the ring to Aurelia Nadera is vehemently
denied by the complaining witness, who declared that she did not authorize and/or
instruct appellant to do so. And thus, by delivering the ring to Aurelia without the
express authority and consent of the complaining witness, appellant assumed the right
to dispose of the jewelry as if it were hers, thereby committing conversion, a clear
breach of trust, punishable under Article 315, par. 1(b), Revised Penal Code.

We shall not disturb this finding of the respondent court. It is well settled that we should
not interfere with the judgment of the trial court in determining the credibility of
witnesses, unless there appears in the record some fact or circumstance of weight and
influence which has been overlooked or the significance of which has been
misinterpreted. The reason is that the trial court is in a better position to determine
questions involving credibility having heard the witnesses and having observed their
deportment and manner of testifying during the trial.[18]

Article 315, par. 1(b) of the Revised Penal Code provides:

ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the
means mentioned hereinbelow shall be punished by:
(b) By misappropriating or converting, to the prejudice of another, money, goods, or any
other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of or to
return the same, even though such obligation be totally or partially guaranteed by a
bond; or by denying having received such money, goods, or other property.
The elements of estafa with abuse of confidence:
1. That money, goods, or other personal property be received by the offender in
trust, or on commission, or for administration, or under any other obligation
involving the duty to make delivery of, or to return, the same;
2. That there be misappropriation or conversion of such money or property by the
offender or denial on his part of such receipt;
3. That such misappropriation or conversion or denial is to the prejudice of another;
4. That there is a demand made by the offended party to the offender (Note: The
4th element is not necessary when there is evidence of misappropriation of the
goods by the defendant).

All the elements of estafa under Article 315, Paragraph 1(b) of the Revised Penal Code,
are present in the case at bench. First, the receipt marked as Exhibit A proves that
petitioner Rosa Lim received the pieces of jewelry in trust from Vicky Suarez to be sold
on commission basis. Second, petitioner misappropriated or converted the jewelry to
her own use; and, third, such misappropriation obviously caused damage and prejudice
to the private respondent.

Lim vs. Rodrigo

Facts: Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in payment
of a certain obligationto Benito Lim. Said checks were handed to Lims brother, Vicente,
at Ko Hus office in Nueva Street, Manila for delivery to Benito Lim in Baguio City. When
presented at Lims depository bank in Baguio City, the checks were dishonored for
having been drawn against a closed account. Lim filed a suit against Ko Hu for violation
of BP 22 in Baguio City.
Issue: Whether the delivery of the checks to Benito Lims brother is the delivery
contemplated by law (prelude to juridictional issue)
Held: The venue of the offense lies at the place where the check was executed and
delivered to the payee and that the place where a check was written, signed or dated
does not fix the place where it was executed, as what is of decisive importance is the
delivery thereof which is the final act essential to its consummation as an obligation.
The delivery contemplated by law must be to a person who takes the check as a
holder, i.e. the payee or indorsee of a bill or note, who is in possession of it, or the
bearer thereof. Vicente Lim, Benitos brother, cannot be said to have taken the checks
in the concept of a holder for he is neither the payee or indorsee thereof. Neither could
he be deemed to be Benitos agent with respect thereto, for he was purposely sent to
Ko Hu to get certain stock certificates and not the checks in question.

People v Grospe
Manuel Parulan is an authorized dealer of San Mig Corp in Bulacan. He issued 2checks
in connection with beer purchases and which he delivered to the Sales supervisor (Mr.
Cornelio) of San Mig. The checks were dishonored by Planters Devt Bank (drawee) in
Bulacan. From the evidence presented, Parulan made false assurances that the checks

issued by him were good and backed by sufficient funds. But Judge Grospe of RTC
Pampanga dismissed the case for lack of jusrisdiction.
Whether or not Judge Grospe was correct in dismissing the case.
No. He had jurisdiction to try and decide the case.
Estafa is a transitory crime. There are the elements of deceit and damage. Deceit took
place in Pampanga and damage was done in Bulacan where the check was
dishonored. While the check was issued in Bulan, it was not completely drawn. It was in
Pampanga where the check was uttered and delivered.
The delivery of the instrument is the final act essential to the consummation of the
obligation. Although the check was received by San Mig in Bulacan, it was not the
delivery contemplated by the law to the payee (San Mig). Mr. Cornelio is not the person
who could take the check as a holder. Thus, he had to forward the check to the regional
office of San Mig in Pampanga. Deceit took place in Pampanga where the check was
legally issued and delivered.


Respondent Sima Wei executed and delivered to petitioner Bank a promissory
note engaging 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.
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered
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.

Sesbreno vs. Court of Appeals

Petitioner Sesbreno made a money market placement in the amount of P300,000 with
the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32
days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta
Motor Corporation Promissory Note, the Certificate of Securities Delivery Receipt
indicating the sale of the note with notation that said security was in the custody of
Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and
America for P304,533.33 payable on March 13, 1981. The checks were dishonored for
having been drawn against insufficient funds. Pilipinas Bank never released the note,
nor any instrument related thereto, to Sesbreno; but Sesbreno learned that the security
which was issued on April 10, 1980, maturing on 6 April 1981, has a face value of
P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was
stamped non-negotiable on its face. As Sesbreno was unable to collect his
investment and interest thereon, he filed an action for damages against Delta Motors
and Pilipinas Bank. Delta Motors contents that said promissory note was not intended
to be negotiated or otherwise transferred by Philfinance as manifested by the word
"non-negotiable" stamped across the face of the Note.
Whether the non-negotiability of a promissory note prevents its assignment.
A negotiable instrument, instead of being negotiated, may also be assigned or
transferred. The legal consequences of negotiation and assignment of the instrument
are different. A non-negotiable instrument may not be negotiated but may be assigned
or transferred, absent an express prohibition against assignment or transfer written in
the face of the instrument. The subject promissory note, while marked "nonnegotiable," was not at the same time stamped "non-transferable" or "non-assignable."
It contained no stipulation which prohibited Philfinance from assigning or transferring
such note, in whole or in part.
**A non-negotiable instrument may not be negotiated but may be assigned or
transferred, absent an express prohibition against assignment or transfer written
on the face of the instrument.

People vs. Maniego

Facts: Julia Maniego was an indorser of several checks drawn by her sister, Milagros
Pamintuan, which were dishonored after they had been exchange with cash belonging
to the Government, then in the official custody of Lt. Rizalino Ubay. Ubay, Pamintuan
and Maniego were indicted for the crime of malversation. Ubay and Maniego were
arraigned, while Pamintuan fled to the United States. Ubay was found guilty while
Maniego was acquitted. Both, however, were ordered to pay in solidum the amount of
P57,434.50 to the government. Maniego appealed.
Issue: Whether Maniego is liable even if she is a mere indorser.
Held: Under the law, 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. Such an
indorser who indorses without qualification, inter alia, engaged that on due presentment,
the instrument shall be accepted or paid, or both, according to its tenor, and 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 the light of the facts
(i.e. without receiving value for the same). As such, she is liable on the instrument to a
holder for value, notwithstanding such holder at the time of taking the instrument knew
her to be only an accommodation party, although she has the right, after paying the
holder, to obtain reimbursement from the party accommodated.

Bataan Cigar and Cigarette Factory vs. CA

Facts: Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its suppliers,
Kim Tim Pua George (George King), to deliver bales of tobacco leaf. In consideration
thereof, BCCFI issued postdated cross checks to King. King sold the checks, at a
discount, to the State Investment House Inc. (SIHI). As King failed to deliver the bales of
tobacco leaf despite demand, BCCFI issued stop payment orders on the checks. Efforts
by SIHI to collect from BCCFI failed. SIHI filed suit.
Issue: Whether SIHI can recover the value of the checks, premised on the issue
whether SIHI is a holder in due course.
Held: The facts of the case are on all fours to the case of SIHI vs. Intermediate
Appellate Court. The crossing of the checks should put the holder on inquiry and upon
him devolves the duty to ascertain the indorsers title to the check or the nature of his

possession. Failing in this respect, the holder is declared guilty of gross negligence
amounting to legal absence of good faith, contrary to Section 52 (c) of the Negotiable
Law, and as such the consensus of authority is to the effect that the holder of the check
is not a holder in due course. BCCFI cannot be obliged to pay the checks as there is a
failure of consideration (King being unable to supply the bales of tobacco leaf, for which
the checks were intended for). Still, SIHI -- a holder not in due course -- can collect from
the immediate indorser, George King. Such is the disadvantage of a holder not in due
course, i.e. the instrument is subject to defenses as if it were non-negotiable.

De Ocampo v. Gatchalian
Anita Gatchalian was interested in buying a car when she was offered by Manuel
Gonzales to a car owned by the Ocampo Clinic. Gonzales claim that he was duly
authorized to look for a buyer, negotiate and accomplish the sale by the Ocampo Clinic.
Anita accepted the offer and insisted to deliver the car with the certificate of registration
the next day but Gonzales advised that the owners would only comply only upon
showing of interest on the part of the buyer. Gonzales recommended issuing a check
(P600 / payable-to-bearer /cross-checked) as evidence of the buyers good faith.
Gonzales added that it will only be for safekeeping and will be returned to her the
following day.
The next day, Gonzales never appeared. The failure of Gonzales to appeal resulted in
Gatchalian to issue a STOP PAYMENT ORDER on the check. It was later found out that
Gonzales used the check as payment to the Vicente de Ocampo (Ocampo Clinic) for
the hospitalization fees of his wife (the fees were only P441.75, so he got a refund of
P158.25). De Ocampo now demands payment for the check, which Gatchalian refused,
arguing that de Ocampo is not a holder in due course and that there is no negotiation of
the check.
The Court of First Instance ordered Gatchalian to pay the amount of the check to De
Ocampo. Hence this case.
Issue: Whether or not De Ocampo is a holder in due course.
Held: NO. De Ocampo is not a holder in due course. De Ocampo was negligent in his
acquisition of the check. There were many instances that arouse suspicion: the drawer
in the check (Gatchalian) has no liability with de Ocampo ; it was cross-checked(only for
deposit) but was used a payment by Gonzales; it was not the exact amount of the
medical fees. The circumstances should have led him to inquire on the validity of the
check. However, he failed to exercise reasonable prudence and caution.

In showing a person had knowledge of facts that his action in taking the instrument
amounted to bad faith need not prove that he knows the exact fraud. It is sufficient to
show that the person had NOTICE that there was something wrong. The bad faith here
means bad faith in the commercial sense obtaining an instrument with no questions
asked or no further inquiry upon suspicion.
The presumption of good faith did not apply to de Ocampo because the defect was
apparent on the instruments face it was not payable to Gonzales or bearer. Hence,
the holders title is defective or suspicious. Being the case, de Ocampo had the burden
of proving he was a holder in due course, but failed.

Stelco Mktg. v. Court of Appeals

Petitioner Stelco Marketing Corp (Stelco) is engaged in the distribution and sale
to the public of structural steel bars. It sold on 7 occasions quantities of steel bars and
rolls of G.I sheets with an aggregate amount of P126,859.61 to RYL Construction, Inc.
(RYL). Despite the parties agreement that payment would be on COD basis, RYL never
paid upon delivery of the materials and despite insistent demands.

One year later, RYL issued a check drawn against Metrobank to Armstrong Industries,
the sister company and manufacturing arm of Stelco, to the amount of its obligations to
the latter. The check however was a company check of another corporation Steelweld
Corporation of the Philippines (Steelweld) signed by its President and Vice President.
Said check was issued by the president of Steelweld at the request of the president of
RYL as an accommodation and only as guaranty but not to pay for anything.
Armstrong subsequently deposited the check but was dishonoured because it was
DAIF*. It bore the endorsements of RYL and Armstrong. The latter filed a complaint
against the pres and vp of Steelweld for violation of BP22. The trial court acquitted the
defendants noting that the checks were not issued to apply on account for value, it
being merely for accommodation purposes. However, the court did not release
Steelweld from its liabilities, relying on Sec 29 of the NIL for issuing a check for

Relying on the previous decision and averring that it was a holder in due course, Stelco
subsequently filed a complaint for recovery of the value of the materials from RYL and
Steelweld. However, RYL had already been dissolved leading the trial court to rule
against Steelweld and hold them liable. Steelweld appealed to the CA which reversed
the decision of the RTC declaring that STELCO was not a holder in due course and
Steelweld was a stranger to the contract between STELCO and RYL.

Issue: Whether or not STELCO was a holder in due course

Held: STELCOs reliance on the RTCs decision in the previous criminal case is
misplaced. Although the RTC maintained that Steelweld was liable for issuing a check
for accommodation, the RTC did not specify to whom it was liable. Despite the records
showing that STELCO was in possession of the check, such possession does not give a
presumption that the holder is one for value. There was no evidence that STELCO had
possession before the checks were presented and dishonoured nor evidence that the
checks were given to STELCO, indorsed to STELCO in any manner or form of payment.
Only after said checks were dishonoured were they acquired by STELCO.
STELCO never became a holder for value since nowhere in the check was STELCO
identified as payee, indorsee, or depositor. Evidence shows that Armstrong was the
intended payee, that it was the injured party, and the proper party to bring the action.

Yang v. Court of Appeals


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

Every holder of a negotiable instrument is presumed to be a holder in due course. This
is especially true if one is a holder because he is the payee or indorse of the
instrument. In the case at bar, it is evident that David was the payee of the checks.
The prima facie presumption of him being a holder in due course is in his
favor. Nonetheless, this presumption is disputable. On whether he took the check

under the conditions set forth in Section 52 must be proven. Petitioner relies on two
David isnt a holder in due coursefirst, because he took the checks without
valuable consideration; and second, he failed to inquire on Chandigarhs title to the
The law gives rise to the presumption of valuable consideration. Petitioner has the
burden of debunking such presumption, which it failed to do so.
Her allegation that David received the checks without consideration is unsupported and
Furthermore, petitioner wasn't able to show any circumstance which should have placed
David in inquiry as to why and wherefore of the possession of
the checks by Chandimari. David wasn't a privy to the transactions between
Yang and Chandimari. Instead, Chandimari and David had the agreement between
themselves of the delivery of the checks. David even inquired with the banks on the
genuineness of the checks in issue. At that time, he wasn't aware of any request for the
these circumstances, David had no obligation to ascertain from Chandimari what the
nature of the latters title to the checks was, if any, or the nature of his possession.

State Investment House v. Court of Appeals

Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to
be sold on commission, two postdated checks in the amount of fifty thousand each.
Thereafter, Victoriano negotiated the checks to State Investment House, Inc. When
Moulic failed to sell the jewellry, she returned it to Victoriano before the maturity of the
checks. However, the checks cannot be retrieved as they have been negotiated. Before
the maturity date Moulic withdrew her funds from the bank contesting that she incurred
no obligation on the checks because the jewellery was never sold and the checks are
negotiated without her knowledge and consent. Upon presentment of for payment, the
checks were dishonoured for insufficiency of funds.
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was
failure or absence of consideration.
Yes, Section 52 of the NIL provides what constitutes a holder in due course. The
evidence shows that: on the faces of the postdated checks were complete and regular;

that State Investment House Inc. bought the checks from Victoriano before the due
dates; that it was taken in good faith and for value; and there was no knowledge with
regard that the checks were issued as security and not for value. A prima facie
presumption exists that a holder of a negotiable instrument is a holder in due course.
Moulic failed to prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the
purpose for which they were issued and therefore is not a holder in due course.
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only
invoke paragraphs c and d as possible grounds for the discharge of the instruments.
Since Moulic failed to get back the possession of the checks as provided by paragraph
c, intentional cancellation of instrument is impossible. As provided by paragraph d, the
acts which will discharge a simple contract of payment of money will discharge the
instrument. Correlating Article 1231 of the Civil Code which enumerates the modes of
extinguishing obligation, none of those modes outlined therein is applicable in the
instant case. Thus, Moulic may not unilaterally discharge herself from her liability by
mere expediency of withdrawing her funds from the drawee bank. She is thus liable as
she has no legal basis to excuse herself from liability on her check to a holder in due
course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no
moment. The need for such notice is not absolute; there are exceptions provided by Sec
114 of NIL.

Assoc. Bank v. Court of Appeals

The province of Tarlac maintains an account with PNB-Tarlac. Part of its
funds is appropriated for the benefit of Concepcion Emergency Hospital. During a
post-audit done by the province, it was found out that 30 of its checks werent received
by the hospital. Upon further investigation, it was found out that the checks were
encashed by Pangilinan who was a former cashier and administrative officer of
the hospital through forged indorsements.
This prompted the provincial
treasurer to ask for
reimbursement from PNB and thereafter, PNB from Associated Bank. As the two
banks didn't want to reimburse, an action was filed against them.

There is a distinction on forged indorsements with regard bearer instruments
and instruments payable to order.
With instruments payable to bearer, the signature of the payee or holder is unnecessary

to pass title to the instrument. Hence, when the indorsement is a forgery, only the
person whose signature is forged can raise the defense of forgery against holder in
due course.
In instruments payable to order, the signature of the rightful holder is essential
to transfer title to the same instrument. When the holders signature is forged,
all parties prior to the forgery may raise the real defense of forgery against all
parties subsequent thereto. In connection to
this, an indorser warrants that the instrument is genuine. A collecting
bank is such an indorser. So even if the indorsement is forged, the collecting bank is
bound by his warranties as an indorser and cannot set up
the defense of forgery as against the drawer bank.
Furthermore, in cases involving checks with forged indorsements, such as the case at
bar, the chain of liability doesn't end with the drawer bank. The drawer bank
may not debit the account of the drawer but may generally pass liability back
through the collection chain to the party who took from the forger and of course,
the forger himself, if available. In other words, the drawer bank can seek
reimbursement or a return of the amount it paid from the collecting bank or person.
The collecting bank generally suffers the loss because it has the duty to
ascertain the genuineness of all prior endorsements considering that the act
of presenting the check for payment to the drawer is an assertion that the party
making the presentment has done its duty to ascertain the
genuineness of the indorsements.
With regard the issue of delay, a delay in informing the bank of the forgery,
which deprives it of the opportunity to go after the forger, signifies negligence on the
part of the drawer bank and will preclude it from claiming reimbursement. In this
case, PNB wasn't guilty of any negligent delay. Its delay hasn't prejudiced
Associated Bank in any way because even if there wasn't delay, the fact that
there was nothing left of the account of Pangilinan, there couldn't be anymore