Case Digests

August 06, 2015

JIMENEZ V. BUCOY, 103 PHIL. 40, G.R. NO. L-10221
Facts: In the proceedings in the intestate of Luther Young and Pacita Young who died in
1954 and 1952, respectively, Pacifica Jimenez presented for payment 4 promissory notes
signed by Pacita for different amounts totalling P21,000. Acknowledging receipt by Pacita
during the Japanese occupation, in the currency then prevailing, the Administrator
manifested willingness to pay provided adjustment of the sums be made in line with the
Ballantyne schedule. The claimant objected to the adjustment insisting on full payment in
accordance with the notes. The court held that the notes should be paid in the currency
prevailing after the war, and thus entitling Jimenez to recover P21,000 plus P2,000 as
attorneys fees. Hence, the appeal.
Issue: Whether the amounts should be paid, peso for peso; or whether a reduction
should be made in accordance with the Ballantyne schedule.
Held: If the loan was expressly agreed to be payable only after the war, or after
liberation, or became payable after those dates, no reduction could be effected, and
peso-for-peso payment shall be ordered in Philippine currency. The Ballantyne Conversion
Table does not apply where the monetary obligation, under the contract, was not payable
during the Japanese occupation. Herein, the debtor undertook to pay six months after
the war, peso for peso payment is indicated.
ABUBAKAR V. AUDITOR GENERAL, 81 PHIL. 359, G.R. NO. L-1405
Facts: In 1941, a treasury warrant was issued in favor of Placido Urbanes, a government
employee in the province of La Union. The said treasury warrant was meant to augment
the Food Production Campaign in the said province. It was then negotiated by Urbanes to
Benjamin Abubakar, a private individual. When Abubakar sought to have the treasury
warrant encashed, the Auditor General denied payment because first of, it is against the
appropriating law (Republic Act 80) to authorize payments to private individuals when it
comes to treasury warrants. Abubakar then contends that he is entitled to encash as he
was a holder in good faith.

ISSUE: Whether or not a treasury warrant is a negotiable instrument.

HELD: No. A treasury warrant is not a negotiable instrument. One of the requirements of
a negotiable instrument is that it must be unconditional. In Section 3 of the Negotiable
Instruments Law, an order or promise to pay out of a particular fund makes the
instrument conditional. A treasury warrant, like the one in this case, comes from a
particular fund, a particular appropriation. In this case, it was written on the face of the
treasury warrant that it is payable from the appropriation for food administration. Thus,
it is not negotiable for being conditional.

NOTE the difference: However, an instrument is negotiable if it merely

mentions/indicates a particular fund out of which reimbursement is to be made. This
does not make the instrument conditional because it does not say that such particular
fund is the source of payment. It is only a notice to the drawee that he can reimburse
himself out of that particular fund after paying the payee. As to the source of payment to
the payee, there is no mention of it.

METROPOLITAN BANK & TRUST COMPANY V. COURT OF APPEALS, 194 SCRA

169, G.R. NO. 88866
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 "nonnegotiable." 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.

GARCIA V. LLAMAS, 417 SCRA 292, G.R. NO. 154127

Facts: A complaint for sum of money was filed by respondent Dionisio Llamas against
Petitioner Romeo Garcia and Eduardo de Jesus alleging that the two borrowed Php 400,
000 from him. They bound themselves jointly and severally to pay the loan on or before
January 23, 1997 with a 15% interest per month. The loan remained unpaid despite
repeated demands by respondent.
Petitioner resisted the complaint alleging that he signed the promissory note merely as
an accommodation party for de Jesus and the latter had already paid the loan by means
of a check and that the issuance of the check and acceptance thereof novated or
superseded the note.
The trial court rendered a judgment on the pleadings in favor of the respondent and
directed petitioner to pay jointly and severally respondent the amounts of Php 400, 000
representing the principal amount plus interest at 15% per month from January 23, 1997
until the same shall have been fully paid, less the amount of Php 120,000 representing
interests already paid.
The Court of Appeals ruled that no novation, express or implied, had taken place when
respondent accepted the check from de Jesus. According to the CA, the check was issued
precisely to pay for the loan that was covered by the promissory note jointly and
severally undertaken by petitioner and de Jesus. Respondents acceptance of the check
did not serve to make de Jesus the sole debtor because first, the obligation incurred by
him and petitioner was joint and several; and second, the check which had been
intended to extinguish the obligation bounced upon its presentment.

Issues: (1) Whether or not there was novation of the obligation

(2) Whether or not the defense that petitioner was only an accommodation party had any
basis.

Held: For novation to take place, the following requisites must concur: (1) There must be
a previous valid obligation; (2) the parties concerned must agree to a new contract; (3)
the old contract must be extinguished; and (4) there must be a valid new contract.
The parties did not unequivocally declare that the old obligation had been extinguished
by the issuance and the acceptance of the check or that the check would take the place
of the note. There is no incompatibility between the promissory note and the check.
Neither could the payment of interests, which in petitioners view also constitutes
novation, change the terms and conditions of the obligation. Such payment was already

provided for in the promissory note and, like the check, was totally in accord with the
terms thereof.
Also unmeritorious is petitioners argument that the obligation was novated by the
substitution of debtors. In order to change the person of the debtor, the old must be
expressly released from the obligation, and the third person or new debtor must assume
the formers place in the relation. Well-settled is the rule that novation is never
presumed. Consequently, that which arises from a purported change in the person of the
debtor must be clear and express. It is thus incumbent on petitioner to show clearly and
unequivocally that novation has indeed taken place. Note also that for novation to be
valid and legal, the law requires that the creditor expressly consent to the substitution of
a new debtor.
In a solidary obligation, the creditor is entitled to demand the satisfaction of the whole
obligation from any or all of the debtors. It is up to the former to determine against whom
to enforce collection. Having made himself jointly and severally liable with de Jesus,
petitioner is therefore liable for the entire obligation.

(2) By its terms, the note was made payable to a specific person rather than bearer to or
ordera requisite for negotiability. Hence, petitioner cannot avail himself of the NILs
provisions on the liabilities and defenses of an accommodation party. Besides, a nonnegotiable note is merely a simple contract in writing and evidence of such intangible
rights as may have been created by the assent of the parties. The promissory note is
thus covered by the general provisions of the Civil Code, not by the NIL.
Even granting that the NIL was applicable, still petitioner would be liable for the note. An
accommodation party is liable for the instrument to a holder for value even if, at the time
of its taking, the latter knew the former to be only an accommodation party. The relation
between an accommodation party and the party accommodated is, in effect, one of
principal and surety. It is a settled rule that a surety is bound equally and absolutely with
the principal and is deemed an original promissory debtor from the beginning. The
liability is immediate and direct.