Nego-d: Lim vs.

Rodrigo (GR 76974, 18

November 1988)
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Lim vs. Rodrigo GR 76974, 18 November 1988 Third Division, Fernan (J)

Facts: Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in

payment of a certain obligation to 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 (This is similar to the People vs. Yabut case).

Thu 25 Mar 2004

Nego-d: Lim vs. People (GR 130038, 18

September 2000)
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Lim vs. People GR 130038, 18 September 2000 En Banc, Pardo (J)

Facts: Rosa Lim bought various kinds of jewelry worth P300,000 from the
store of Maria Antonia Seguan, by issuing a check payable to cash drawn
against MetroBank. The next day, Lim again purchased jewelry valued at
P241,668 by issuing another check payable to cash likewise drawn against
MetroBank. Seguan deposited the checks with her bank. The checks were
returned with a notice of dishonor as Lims accounts in said bank were
already closed. Upon demand, Lim promised to pay Seguan the amounts of
the two dishonored checks. She never did. Rosa Lim was charge for two
counts of violation of BP 22, where she was found guilty, and sentenced to 1
year imprisonment with fine (P200,000).

Issue: Whether Lim has knowledge of the insufficiency of funds when

issuing the checks.

Held: The elements of BP22 are (1) the making, drawing and issuance of
any check to apply for account or for value, (2) the knowledge of the maker,
drawer or issuer that at the time of issue he does not have sufficient funds in
or credit with the drawee bank for the payment of such check in full upon its
presentment, and (3) the subsequent dishonor of the check by the drawee
bank for insufficiency of funds or credit or dishonor for the same reason had
not the drawer, without any valid cause, ordered the bank to stop payment.
Lim never denied issuing the check. Section 2 of BP 22 creates a
presumption juris tantum that the second element prima facie exists when
the first and third elements are present. If not rebutted, it suffices to sustain
a conviction.

It must be noted that similar to the Vaca case, the Court deleted the prison
sentences imposed upon Lim, holding that the two fines imposed for each of
the violation (P200,000 each ) are appropriate and sufficient. Subsidiary
imprisonment not exceeding 6 months is provided in case of insolvency or
non-payment of the fines as decreed.

Thu 25 Mar 2004

Nego-d: Lim vs. CA (GR 107898, 19 December

1995)
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Lim vs. CA GR 107898, 19 December 1995 First Division, Bellosillo (J)

Facts: Spouses Manuel and Rosita Lim are the president and treasurer,
respectively, of RIGI Built Industries Inc. RIGI had been transacting business
with Linton Commercial Company for years, the latter supplying the former
with steel plates, steel bars, flat bars and purlin sticks which the company
uses in the fabrication, installation and building of steel structures. The Lims
ordered steel plates from Linton Commercial, delivering checks to the latters
collector as payment. The checks were dishonored for insufficiency of
funds with the additional notation payment stopped (The Lims claimed
that the supplies delivered by Linton Commercial were not in accordance
with the specifications of purchase orders). Despite demands, the Lims
refused to make good the checks or to pay value of the deliveries.

Issue: Whether the receipt of the checks by the collector of Linton is the
issuance and delivery to the payee within the contemplation of the law (as
prelude to jurisdiction issue).

Held: Issue means the first delivery of the instrument complete in form to
a person who takes it as a holder. Holder refers to the payee or indorsee of
a note or who is in possession of it or the bearer thereof. The issuance as
well as the delivery of the check must be to a person who takes it as a
holder. Delivery of the checks signifies transfer of possession (actual or
constructive) from one person to another with intent to transfer title thereto;
the delivery being the final act essential to its consummation as an
obligation. The collector was not the person who could take the checks as a
holder. Neither could the collector be deemed an agent of Linton Commercial
with respect to the checks because he was a mere employee.

Thu 25 Mar 2004

Nego-d: Lazaro vs. CA (GR 105461, 11

November 1993)
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Lazaro vs. CA GR 105461, 11 November 1993 Second Division, Padilla
(J)
Facts: Marlyn Lazaro received from Rudy Chua the amount of P90,000 as
advanced payment for deliveries of sugar, etc. Lazaro was only able to
deliver partial delivery. To refund the undelivered goods, she issued a check
for P72,000. When deposited, the check was dishonored and stamped
account closed. To make up for the dishonor, Lazaro indorsed a check
issued by one Lolita Soriano, payable to Cash. It was likewise dishonored
and marked account closed. Chua sent a demand letter asking for the
payment of the amount covered by the first check within days from receipt
of letter. For failure of the accused to pay the amount, Chua filed cases for
estafa and violation of BP 22.

Issue: Whether damage or prejudice is an element of BP 22

violation. Held: The clear intention of the framers of BP 22 is to make the
mere act of issuing a check that is worthless malum prohibitum. The law
does not require that there be damage or prejudice to the individual
complainant by reason of the issuance of the check. The fine provided for in
BP 22 was intended as an additional penalty for the act of issuing a
worthless check. BP 22 provides that a fine of not less than but not more
than double the amount of the dishonored check may be imposed by the
court.

Thu 25 Mar 2004

Nego-d: Lao vs. CA (GR 119178, 20 June

1997)
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Lao vs. CA GR 119178, 20 June 1997 Third Division, Panganiban (J)

Facts: Lim Lim Lao was a junior officer of Premier Investment House in its
Binondo branch. She was authorized to sign checks for and in behalf of the
corporation. In the course of business, she met Fr. Artelijo Palijo, provincial
treasurer of the Society of the Divine Word. Fr. Palijo was authorized to
invest donations of the society and had been investing the societys money
with Premiere. Fr. Palijo was issued checks in payment of interest for the
societys investments. The checks were dishonored for insufficiency of
funds. Fr. Palijo was only able to acquire P5,000 for his efforts in
demanding the payment of the checks. Premiere, subsequently, was placed
under receivership. Fr. Palijo filed a suit against Lim Lao and his co-
signatory, Teodulo Asprec, head of operations for violation of BP 22.

Issue: Whether an employee who, as part of her regular duties, signs blank
corporate check, be held for violation of BP22.

Held: The checks co-signed by Lim Lao were signed in advance and in blank,
delivered to the head of operations, who subsequently filled in the name of
he payee, the amounts and corresponding dates of maturity; this procedure
followed in keeping with her duties as a junior officer. Though BP 22
provides the presumption that a drawer is knowledgeable of the fact of
insufficiency of funds, such presumption may be debunked by contrary
evidence. Herein, Lim Lao does not have the power, duty or responsibility to
monitor and assess the balances against the issuance, nor to make sure that
the checks were funded. Such responsibility devolved upon the corporations
Treasury Department in Cubao, Quezon City. Furthermore, no notice of
dishonor was actually sent or received by Lim Lao to support the prima facie
evidence of knowledge of insufficient funds. She was thus acquitted.

Thu 25 Mar 2004

Nego-d: Kalalo vs. Luz (GR L-27782, 31 July

1970)
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Kalalo vs. Luz GR L-27782, 31 July 1970 En Banc, Zaldivar (J)

Facts: On 17 November 1959, Octavio Kalalo entered into an agreement

with Alfredo Luz where he was to render engineering design services for a
fee. On 11 December 1961, Kalalo sent Luz a statement of account where
the balance due for services rendered was P59,505. On 18 May 1962, Luz
sent Kalalo a resume of fees due to the latter, and a check for P10,861.08.
Kalalo refused to accept the check as full payment of the balance of the fees
due him. On 10 August 1962, Kalalo filed a complaint containing 4 causes of
action, i.e. $28,000 (representing 20% of the amount paid to Luz in the
International Research Institute project) and the balance of P30,881.25 as
fees; P17,0000 as consequential and moral damages; P55,000 as moral
damages, attorneys fees and litigation expenses; and P25,000 as actual
damages, attorneys fees and litigation expenses). The trial court ruled in
favor of Kalalo. Luz filed an appeal directly with the Supreme Court raising
only questions of law.

Issue: Whether the rate of exchange of dollar to peso are those at the time
of the payment of the judgment or at the time when the research institute
project became due and demandable.

Held: Luz obligation to pay Kalalo the sum of US$28,000 accrued on 25

August 1961, or after the enactment of RA 529 (16 June 1950). Thus, the
provision of the statute which requires payment at the prevailing rate of
exchange when the obligation was incurred cannot be applied. RA 529 does
not provide for the rate of exchange for the payment of obligation incurred
after the enactment of the Act, and thus the rate of exchange should be that
prevailing at the time of payment. The view finds support in the ruling of the
Court in Engel vs. Velasco & Co. The trial court did not err in holding the rate
of exchange is that at the time of payment.

Thu 25 Mar 2004

Nego-d: Jimenez vs. Bucoy (GR L-10221, 28

February 1958)
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Jimenez vs. Bucoy GR L-10221, 28 February 1958 En Banc, Bengzon (J)

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 Jimemez 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.

Thu 25 Mar 2004

Nego-d: Ibasco vs. CA (GR 117488, 5

September 1996)
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Ibasco vs. CA GR 117488, 5 September 1996 Third Division, Davide Jr.
(J)

Facts: The Ibasco spouses requested credit accommodation fro the supply
of ingredients in the manufacture of animal feeds from the Trivinio spouses.
Ibasco issued 3 checks for 3 deliveries of darak. The checks bounced and the
Ibasco spouses were notified of the dishonor. Ibasco instead offered a
property in Daet. The property, being across the sea, the Trivinio spouses
did not inspect the property. For the failure of the Ibasco spouses to settle
their account, the Trivinio spouses filed criminal cases against the former for
violation of BP22.

Issue: Whether the checks were for accommodation or guarantee to acquire

the benefits of the interpretation of Ministry Circular 4 of the Department of
Justice in relation to BP 22.

Held: Ministry Circular 4, issued 1 December 1981 by the Department of

Justice, provides that where a check is issued as part of an arrangement to
guarantee or secure the payment of the obligation, pre-existing or not, the
drawer is not criminally liable for either estafa or violation of BP 22.
Incidents however indicate that the checks were issued as payment and for
value, and not for accommodation (i.e. pertaining to an arrangement made a
favor to another, not upon a consideration received). as the checks failed to
bear any statement for accommodation and for guarantee to show
Ibascos intent. ( It must be noted, however, that BP22 does not distinguish
and applies even in cases where dishonored checks were issued as a
guarantee or for deposit only. The erroneous interpretation of Ministry
Circular 4 was rectified by the repealing Ministry Circular 12, issued on 8
August 1984).

Thu 25 Mar 2004

Nego-d: Hongkong & Shanghai Bank vs.

Peoples Bank and Trust (GR L-28226, 30
September 1970)
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Hongkong & Shanghai Bank vs. Peoples Bank and Trust GR L-28226,
30 September 1970 First Division, Fernando (J)

Facts: The Philippine Long Distance Telephone Company (PLDT) drew a

check on the Hongkong & Shanghai Banking Corporation (HSBC) in the
latters favor for P14,608.05, and sent it through mail. The check fell into the
hands of Florentino Changco, who was able to erase the name of the payee
and substituted his own, and deposited the altered check in his current
account with the Peoples Bank and Trust Co. (PBTC). The check was cleared
by HSBC, and PBTC credited Changco the amount. The alteration was known
when the cancelled check was returned to PLDT. HSBC requested PBTC to
refund the amount, but the latter refused.

Issue: Whether HSBC can claim reimbursement from PBTC. Held: A

person who presents fro payment checks guarantees the genuineness of the
check, and the drawee bank need to concern itself with nothing but the
genuineness of the signature, and the state of the account with it of the
drawee. If at all, whatever remedy, whatever remedy HSBC has would lie
not against PBTC but as against the party responsible for changing the name
of the payee (i.e. Changco). Its failure to call the attention of PBTC as to
such alteration until after the lapse of 27 days would, in the light of Central
Bank Circular 9 (24-hour clearing house rule), negate whatever right it
might have had against PBTC.

Thu 25 Mar 2004

Nego-d: Gempesaw vs. CA (GR 92244, 9
February 1993)
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Gempesaw vs. CA GR 92244, 9 February 1993 Second Division, Campos
Jr. (J)

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.

Nego-d: Firestone Tire and Rubber vs. Ines

Chaves & Co. (GR L-17106, 19 October 1966)
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Firestone Tire and Rubber vs. Ines Chaves & Co. GR L-17106, 19
October 1966 En Banc, Regala (J)

Facts: The check was intended as part of the payment of Ines Chaves debt.
When presented to the Security Bank and Trust Co. by Firestone, the check
was returned for insufficiency of funds. Despite repeated demands, Ines
Chaves failed to settle its account; hence, the suit.

Issue: Whether good faith is required in the issuance of a check.

Held: Everyone must in the performance of his duties, observe honesty and
good faith. Where a person issues a postdated check without funds to cover
it and informs the payee of this fact, he cannot be held guilty of estafa
because there is no deceit. Herein, there is nothing in the record to show
that Firestone knew that there were no funds when it accepted the check,
much less that Firestone agreed to take the check with knowledge of the
lack of funds. As Ines Chavez is guilty of fraud (bad faith) in the
performance of its obligation, it is liable for damages. Its conduct wanting in
good faith, the award of attorneys fees was warranted.

Thu 25 Mar 2004

Nego-d: Dela Victoria vs. Burgos (GR 111190,

27 June 1995)
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Dela Victoria vs. Burgos GR 111190, 27 June 1995 First Division,
Bellosillo (J)

Facts: Raul Sesbreno filed a complaint for damages against Assistant City
Fiscal Bienvenido Mabanto before the RTC of Cebu City. After trial, judgment
was rendered ordering Mabanto to pay Sesbreno P11,000. The decision
having become final and executory, the trial court ordered its execution
upon Sesbrenos motion. The writ of execution was issued despite Mabantos
objection. A notice of garnishment was served upon Loreto de la Victoria as
City Fiscal of Mandaue City where Mabanto was then detailed. De la Victoria
moved to quash the notice of garnishment claiming that he was not in
possession of any money, funds, etc. belonging to Mabanto until delivered to
him, and as such are still public funds which could not be subject of
garnishment..

Issue: Whether the checks subject of garnishment belong to Mabanto or

whether they still belong to the government.

Held: 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 the intent to transfer title to the payee and recognize
him as the holder thereof. Herein, the salary check of a government officer
or employee does not belong to him before it is physically delivered to him.
Inasmuch as said checks had not yet been delivered to Mabanto, they did
not belong to him and still had the character of public funds. As a necessary
consequence of being public fund, the checks may not be garnished to
satisfy the judgment.

Thu 25 Mar 2004

Nego-d: Vaca vs. CA (GR 43596, 31 October

1936)
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Vaca vs. CA GR 43596, 31 October 1936 En Banc, Recto (J)

Facts: Eduardo Vaca is the president and owner of Ervine International while
Fernando Nieto, Vacas son-in-law, is the firms purchasing manager. They
issued a check for P10,000 to the General Agency for Reconnaissance,
Detection and Security (GARDS) and drawn against China Bank. When
deposited with PCIBank, the check was dishonored for insufficiency of funds.
GARDS sent a demand letter but the drawers failed to pay within the time
given (7 days from notice). A few days later, however, Vaca issued a check
to GARDS for P19,866.16, drawn against Associated Bank, replacing the
dishonored check. GARDS did not return the dishonored check. Later on,
GARDS Acting Operations Manager filed a criminal suit against Vaca and
Nieto for violation of BP 22. The trial court sentenced each to 1 year
imprisonment and to pay a fine of P10,000 and costs.

Issue [1]: Whether the drawers had knowledge of insufficient funds in

issuing the check.

Held [1]: Section 2 of BP 22 provides a presumption of knowledge of

insufficiency of funds if the drawer fails to maintain sufficient funds within 90
days after the date of the check, or to make arrangement for payment in full
by the drawee of such check within 5 days after receiving notice that such
check has not been paid by the drawee. Herein, the second check
supposedly replacing the dishonored check is actually the payment of two
separate bills, and was issued 15 days after notice. Such replacement
cannot negate the presumption that the drawers knew of the insufficiency of
funds.

Issue [2]: Whether the absence of damages incurred by the payee absolves
the drawers from liability.

Held [2]: The claim that the case was simply a result of a
misunderstanding between GARDS and the drawers and that the security
agency did not suffer any damage from the dishonor of the check is
flimsy. Even if the payee suffered no damage as a result of the issuance of
the bouncing check, the damage to the integrity of the banking system
cannot be denied. Damage to the payee is not an element of the crime
punished in BP 22.

Note: In this case, the Court recognized the contribution of Filipino

entrepreneurs to the national economy; and that to serve the ends of
criminal justice, instead of the 1 year imprisonment, a fine of double the
amount of the check involved was imposed as penalty. This was made to
redeem valuable human material and prevent unnecessary deprivation of
personal liberty and economic usefulness with due regard to the protection
of the social order.

Thu 25 Mar 2004

Nego-d: Vda. de Eduque vs. Ocampo (GR L-

222, 26 April 1950)
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Vda. de Eduque vs. Ocampo GR L-222, 26 April 1950 Second Division,
Moran (CJ)

Facts: On 16 February 1935, Dr. Jose Eduque secured two loans from
Mariano Ocampo de Leon, Dona Escolastica delos Reyes and Don Jose M.
Ocampo, with amount s of P40,000 and P15,000, both payable within 20
years with interest of 5% per annum. Payment of the loans was guaranteed
by mortgage on real property. On 6 December 1943, Salvacion F. Vda de
Eduque, as administratrix of the estate of Dr. Jose Eduque, tendered
payment by means of a cashiers check representing Japanese War notes to
Jose M. Ocampo, who refused payment. By reason of such refusal, an action
was brought and the cashiers check was deposited in court. After trial,
judgment was rendered against Ocampo compelling him to accept the
amount, to pay the expenses of consignation, etc. Ocampo accepted the
judgment as to the second loan but appealed as to the first loan.

Issue: Whether there is a tender of payment by means of a cashiers check

representing war notes.

Held: Japanese military notes were legal tender during the Japanese
occupation; and Ocampo impliedly accepted the consignation of the cashiers
check when he asked the court that he be paid the amount of the second
loan (P15,000). It is a rule that a cashiers check may constitute a sufficient
tender where no objection is made on this ground.

Thu 25 Mar 2004

Nego-d: Crystal vs. CA (GR L-35767, 18 June

1976)
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Crystal vs. CA GR L-35767, 18 June 1976 Resolution of the Second
Division, Barredo (J)

Facts: The Supreme Court, in its decision of 25 February 1975, affirmed the
decision of the Court of Appeals, holding that Raymundo Crystals
redemption of the property acquired by Pelagia Ocang, Pacita, Teodulo,
Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de Garcia, was
invalid as the check which Crystal used in paying the redemption price has
been either dishonored or had become stale (Ergo, the value of the check
was never realized). Crystal filed a motion for reconsideration.

Issue: Whether the conflicting circumstances of the check being dishonored

and becoming stale affect the validity of the redemption sale.

Held: For a check to be dishonored upon presentment and to be stale for

not being presented at all in time are incompatible developments that have
variant legal consequences. If indeed the questioned check was dishonored,
the redemption was null and void. If it had only become state, it becomes
imperative that the circumstances that caused its non-presentment be
determined, for if it was not due to the fault of the drawer, it would be unfair
to deprive him of the rights he had acquired as redemptioner. Herein, it
appears that there is a strong showing that the check was not dishonored,
although it became stale, and that Pelagia Ocang had actually been paid the
full value thereof. The Supreme Court, thus, reconsidered its decision and
remanded the case to the trial court for further proceedings.

Thu 25 Mar 2004

Nego-d: Cruz vs. CA (GR 108738, 17 June

1994)
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Cruz vs. CA GR 108738, 17 June 1994 First Division, Kapunan (J)

Facts: Andrea Mayor is engaged in the business of granting interest-bearing

loans and in rediscounting checks. Roberto Cruz, on the other hand, is
engaged in selling ready to wear clothes at the Pasay Commercial Center.
Cruz frequently borrows money from Mayor. In 1989, Cruz borrowed
P176,000 from mayor, which Mayor delivered. In turn, Cruz issued a
Premiere Bank check for the same amount. When the check matured, Mayor
presented it to the bank but was dishonored and marked account closed.
When notified of the dishonor, Cruz promised to pay in cash. No payment
was made, and thus the criminal action for violation of BP 22 was instituted.

Issue: Whether Cruz is liable for violating BP 22, even upon the claim that
the check was issued to serve a mere evidence of indebtedness, and not for
circulation or negotiation.

Held: A check issued as an evidence of debt, though not intended to be

presented for payment has the same effect of an ordinary check, hence, it
falls within the ambit of BP 22. When a check is presented for payment, the
drawee bank will generally accept the same regardless of whether it was
issued in payment of an obligation or merely to guarantee the said
obligation. What the law punishes is the issuance of a bouncing check, not
the purpose for which it was issued nor the term and conditions relating to
its issuance. The mere act of issuing a worthless check is malum prohibitum.

Thu 25 Mar 2004

Nego-d: Co vs. PNB (GR L-51767, 29 June

1982)
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Co vs. PNB GR L-51767, 29 June 1982 Second Division, Barredo (J)

Facts: Standard Parts Manufacturing Corporation mortgaged properties to

PNB. When Standard failed to pay its obligation (P4,296,803,56 secured by
said properties), PNB extra-judicially foreclosed the mortgages. Standard,
meanwhile, transferred its rights in the mortgages to Citadel Insurance and
Surety Co., which wrote PNB its interest to redeem the Makati property (one
of the property mortgaged) for P1,621,970. PNB rejected the offer. Citadel
filed suit against PNB, where the complaint was accompanied by an RCBC
managers check and which was deposited under a savings bank account
with RCBC by order of the trial court.

Issue: Whether there was a valid and effective tender of payment.

Held: The unequivocal tender of redemption was made, through a

managers check of RCBC (a well-known, big and reputable banking
institution) for the amount it believed it should pay as redemption price. PNB
rejected it on the sole and only ground that it considered the amount
insufficient. Redemption was made on time, i.e. 1 year from the date
appearing as the date of the registration of the certificate of sale. Tender by
managers check was not inefficacious as the Court has already sanctioned
redemption by check (See Javellana vs. Mirasol).

Thu 25 Mar 2004

Nego-d: Clark vs. Sellner (GR 16477, 22

November 1921)
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Clark vs. Sellner GR 16477, 22 November 1921 First Division,
Romualdez (J)

Facts: George Sellner, with WH Clarke and John Mave, signed a note in
favor of RN Clark dated 1 July 1914 in Manila for the amount of P12,000.
The note matured, but its amount was not paid. Action was filed in court.
Sellners counsel allege that Sellner did not receive anything of value for the
transaction, that the instrumnet was not presented to sellner for payment,
and that Sellner, being an accommodation party is not liable unless the note
is negotiated, which was allegedly not done.

Issue: Whether Sellner is an accommodation party liable for the note.

Held: Sellner, as one of the signers of the note, is one of the joint and
several debtors on the note, and as such he is liable under Section 60 of the
Negotiable Instruments Law/ Sellner lent his name, not to the creditor, but
to those who signed with him placing himself with respect to the creditor in
the same position and with the same liability as the said signers; and thus is
a joint surety rather than an accommodation party. As to the presentment
for payment, such action is not necessary in order to charge the person
primarily liable, as is Sellner (Section 70, Negotiable Instruments Law).

Thu 25 Mar 2004

Nego-d: City Trust Banking vs. CA (GR 92591,

30 April 1991)
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City Trust Banking vs. CA GR 92591, 30 April 1991 Third Division,
Gutierrez Jr. (J)

Facts: William Samara purchased from Citytrust Bank Draft 23681 for US$
40,000 the payee being Thai International Airways and the corresponding
drawee bank in the United States is Marine Midland. Samara executed a
stop-payment order of the bank draft instructing Citytrust to inform Marine
Midland about the order through telex. Marine Midland noted the order, and
thus Citytrust credited Samaras account. Seven months later, Citytrust re-
debited Samaras account upon discovery that Marine Midland had already
debited Citytrusts account.

Issue: Who shall be liable for the amount.

Held: Citytrust and Marine Midland were not in privity with each other in a
transaction involving payment through a bank draft. A bank draft is a bill of
exchange drawn by a bank upon its correspondent bank issued at the
solicitation of a stranger who purchases and pays therefor. It is an order for
payment of money. Citytrust was the drawer of the draft through which it
ordered Marine Midland, the drawee bank, to pay Thai Airways. The drawee
bank acting as payor bank is solely liable for acts not done in accordance
with the instructions of the drawer bank or the purchaser of the draft. The
drawee bank has the burden of proof that it did not so violate. Meanwhile,
the drawer, if sued by the purchaser of the draft, is liable for the act of
debiting the customers account despite an instruction to stop payment. The
drawer has the duty to prove that he complied with the order to inform the
drawee.

Thu 25 Mar 2004

Nego-d: Caram Resources vs. Contreras (AM

MTJ0830849, 26 October 1994)
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Caram Resources vs. Contreras AM MTJ0830849, 26 October
1994 First Division, Davide Jr. (J)

Facts: Teresita Dizon obtained a loan from Caram Resources payable in

installments. She issued a promissory note and postdated BPI checks, four
of which were dishonored when presented to the bank as the account
against which they were drawn had been closed. Caram charged Dizon for
violation of BP22, but where Judge Contreras acquitted Dizon on the ground
of reasonable doubt. Subsequently, Caram charged Judge Maximo Contreras
with gross ignorance of the law and gross misconduct committed in Dizons
criminal case.

Issue: Whether malice is an essential element in BP 22.

Held: In the 4 criminal cases before Judge Contreras, Dizon as accused

admitted that a loan was granted to her and in connection therewith she
executed a promissory note wherein she bound herself to pay the loan in 12
installments. She issued the postdated checks to cover the installments as
they fall due. The checks were drawn against her BPI current account,
which she closed in the same months she obtained the loan, so that when
the checks were presented for payment they were dishonored. Malice and
intent in issuing a worthless check are immaterial. The offense is committed
by the very fact of its performance, i.e. the mere act of issuing a worthless
check. The offense is malum prohibitum. An act may not be considered by
society as inherently wrong, hence, not malum in se, but because of the
harm that it inflicts on the community, it can be outlawed and criminally
punished as malum prohibitum, pursuant to the States exercise of police
power.

Nego-d: Caltex (Philippines) Inc. vs. CA (GR

97753, 10 August 1992)
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Caltex (Philippines) Inc. vs. CA GR 97753, 10 August 1992 Second
Division, Regalado (J)

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.

Wed 24 Mar 2004

Nego-d: Bataan Cigar and Cigarette Factory

vs. CA (GR 93048, 3 March 1994)
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Bataan Cigar and Cigarette Factory vs. CA GR 93048, 3 March
1994 Second Division, Nocon (J)
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 Instruments 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.

Wed 24 Mar 2004

Nego-d: Associated Bank vs. CA (GR 107382,

31 January 1996)
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Associated Bank vs. CA GR 107382, 31 January 1996 Second Division,
Romero (J)

Facts: The Province of Tarlac maintains a current account with the Philippine
National Bank (PNB Tarlac Branch) where the provincial funds are deposited.
Portions of the funds were allocated to the Concepcion Emergency Hospital.
Checks were issued to it and were received by the hospitals administrative
officer and cashier (Fausto Pangilinan). Pangilinan, through the help of
Associated Bank but after forging the signature of the hospitals chief (Adena
Canlas), was able to deposit the checks in his personal account. All the
checks bore the stamp All prior endorsement guaranteed Associated Bank.
Through post-audit, the province discovered that the hospital did not receive
several allotted checks, and sought the restoration of the debited amounts
from PNB. In turn, PNB demanded reimbursement from Associated Bank.
Both banks resisted payment. Hence, the present action.

Issue: Who shall bear the loss resulting from the forged checks.

Held: PNB is not negligent as it is not required to return the check to the
collecting bank within 24 hours as the banks involved are covered by Central
Bank Circular 580 and not the rules of the Philippine Clearing House.
Associated Bank, and not PNB, is the one duty-bound to warrant the
instrument as genuine, valid and subsisting at the time of indorsement
pursuant to Section 66 of the Negotiable Instruments Law. The stamp
guaranteeing prior indorsement is not an empty rubric; the collecting bank is
held accountable for checks deposited by its customers. However, due to the
fact that the Province of Tarlac is equally negligent in permitting Pangilinan
to collect the checks when he was no longer connected with the hospital, it
shares the burden of loss from the checks bearing a forged indorsement.
Therefore, the Province can only recover 50% of the amount from the
drawee bank (PNB), and the collecting bank (Associated Bank) is liable to
PNB for 50% of the same amount.

Wed 24 Mar 2004

Nego-d: Associated Bank vs. CA (GR 89802, 7

May 1992)
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Associated Bank vs. CA GR 89802, 7 May 1992 First Division, Cruz (J)

Facts: Melissas RTWs customers issued cross checks payable to Melissas

RTW, which its proprietor Merle Reyes did not receive. It was learned that
the checks had been deposited with the Associated Bank by one Rafael
Sayson. Sayson was not authorized by Reyes to deposit and encash said
checks. Reyes filed an action for the recovery of the total value of the checks
plus damages.
Issue: Whether the bank was negligent for the loss.

Held: Crossing a check means that the drawee bank should not encash the
check but merely accept it for deposit, that the check may be negotiated
only once by one who has an account in a bank, and that the check serves
as warning that it was issued for a definite purpose so that he must inquire if
he has received the check pursuant to that purpose. The effect, thus, relate
to the mode of its presentment for payment, in accordance with Section 72
of the Negotiable Instruments Law. The bank paid the checks
notwithstanding that title had not passed to the indorser, as the checks had
been crossed and issued for payees account only. It does did so in its own
peril and became liable to the payee for the value of the checks. The failure
of the bank to make an inquiry as to Saysons authority was a breach of its
duty. The bank is negligent and is thus liable to Reyes.

Wed 24 Mar 2004

Nego-d: Arrieta vs. National Rice & Corn

Corporation (GR L-15645, 31 January 1964)
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Arrieta vs. National Rice & Corn Corporation (NARIC) GR L-15645, 31
January 1964 En Banc, Regala (J)

Facts: On 19 May 1952, Paz and Vitaliado Arrieta participated in the public
bidding called by NARIC for the supply of 20,000 metric tons of Burmese
rice. Ad her bid of $203 per metric ton was the lowest, she was awarded the
contract for the same. As a result of the delay in the opening of the letter of
credit by NARIC, the allocation of Arrietas supplier in Rangoon was cancelled
and the 5% deposit amounting to an equivalent of P200,000 was forfeited.
Arrieta endeavored but failed to restore the cancelled Burmese rice
allocation, and thus offered Thailand rice instead. Such offer was rejected by
NARIC. Subsequently, Arrieta sent a letter to NARIC, demanding
compensation for the damages caused her in the sum of US$286,000
representing unrealized profit. The demand having been rejected, she
instituted the case.

Issue: Whether the rate of exchange to be applied in the conversion is that

prevailing at the time of breach, or at the time the obligation was incurred,
or on the promulgation of the decision.

Held: As pronounced in Eastboard Navigation vs. Ismael, if there is any

agreement to pay an obligation in the currency other than Philippine legal
tender, the same is null and void as contrary to public policy (RA 529), and
the most that could be demanded is to pay said obligation in Philippine
currency to be measured in the prevailing rate of exchange at the time the
obligation was incurred. Herein, the rate of exchange to be applied is that of
1 July 1952, when the contract was executed.

Wed 24 Mar 2004

Nego-d: Ang Tiong vs. Ting (GR L-26767, 22

February 1968)
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Ang Tiong vs. Ting GR L-26767, 22 February 1968 En Banc, Castro (J)

Facts: Lorenzo Ting issued a check for P4,000 payable to cash or bearer.
With Felipe Angs signature (indorsement in blank) at the back thereof, the
instrument was received by Ang Tiong who thereafter presented it to the
bank for payment. The drawee bank dishonored it. Ang Tiong made written
demands on both Ting and Ang to make good the amount represented by
the check. These demands unheeded. Ang Tiong filed suit for collection. The
trial court adjudged for Ang Tiong. Only Ang appealed, maintaining that he is
only an accommodation party.

Issue: Whether Felipe Ang is an accommodation party.

Held: Felipe Ang is a general indorser (Section 63, Negotiable Instruments

Law), in the absence of any indication by appropriate words his intention to
be bound in some other capacity. Even on the assumption that Ang is a
mere accommodation party, he is liable on the instrument to a holder for
value notwithstanding that such holder at the time of taking the instrument
knew him to be only an accommodation party (Section 29, Negotiable
Instruments Law). Assuming further that Ang is an accommodation indorser,
the fact that Ang may obtain security from the maker to protect himself
against the danger of insolvency of the latter cannot in any manner affect
his liability to Ang Tiong, as the said remedy is a matter of concern
exclusively between an accommodation indorser and an accommodated
party. The liability of Felipe Ang remains primary and unconditional.

Wed 24 Mar 2004

Nego-d: Abubakar vs. Auditor General (GR L-

1405, 31 July 1948)
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Abubakar vs. Auditor General GR L-1405, 31 July 1948 First Division,
Bengzon (J)

Facts: Treasury Warrant A-2867376 was issued in favor of Placide S.

Urbanes on 10 December 1941 for P1,000, but is now in the hands of
Benjamin Abubakar. The Auditor refused to authorize the payment of the
treasury warrant. Abubakar contends he is a holder in good faith and for
value and thus, entitled to the rights and privileges of a holder in due
course.

Issue: Whether Abubakar is a holder in due course.

Held: A treasury warrant is not a negotiable instrument; it being an order

for payment out of a particular fund, and is not unconditional and does not
fulfill one of the essential requirements of a negotiable instrument.
Therefore, a holder of a treasury warrant cannot argue that he is a holder in
good faith and for value of a negotiable instrument and thus entitled to the
rights and privileges of a holder in due course, free from defenses.