Caltex (Philippines), Inc.

vs Court of Appeals
212 SCRA 448 – Mercantile Law – Negotiable Instruments Law – Negotiable Instruments
in General – Bearer Instrument – Certificate of Time Deposit

In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs) from Security
Bank and Trust Company for the former’s 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.

Equitable Banking Corporation vs Intermediate Appellate Court

161 SCRA 518 – Mercantile Law – Negotiable Instruments Law – Negotiable Instruments
in General – Certainty of Payee

In 1975, Liberato Casals, majority stockholder of Casville Enterprises, went to buy two
garrett skidders (bulldozers) from Edward J. Nell Company amounting to P970,000.00.
To pay the bulldozers, Casals agreed to open a letter of credit with the Equitable
Banking Corporation. Pursuant to this, Nell Company shipped one of the bulldozers to
Casville. Meanwile, Casville advised Nell Company that in order for the letter of credit
to be opened, Casville needs to deposit P427,300.00 with Equitable Bank, and that
since Casville is a little short, it requested Nell Company to pay the deposit in the
meantime.
Nell Company agreed and so it eventually sent a check in the amount of P427,300.00.
The check read:

Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF CASVILLE

ENTERPRISES, INC.

Nell Company sent the check to Casville so that it would be the latter who could send it
to Equitable Bank to cover the deposit in lieu of the letter of credit. Casals received the
check, he went to Equitable Bank, and the teller received the check. The teller, instead
of applying the amount as deposit in lieu of the letter of credit, credited the check to
Casville’s account with Equitable Bank. Casals later withdrew all the P427,300.00 and
appropriated it to himself.

ISSUE: Whether or not Equitable Bank is liable to cover for the loss.

HELD: No. The subject check was equivocal and patently ambiguous. Reading on the
wordings of the check, the payee thereon ceased to be indicated with reasonable
certainty in contravention of Section 8 of the Negotiable Instruments Law. As worded,
it could be accepted as deposit to the account of the party named after the symbols
“A/C,” or payable to the Bank as trustee, or as an agent, for Casville Enterprises, Inc.,
with the latter being the ultimate beneficiary. That ambiguity is to be
taken contra proferentem that is, construed against Nell Company who caused the
ambiguity and could have also avoided it by the exercise of a little more care. Thus,
Article 1377 of the Civil Code, provides:
Art. 1377. The interpretation of obscure words or stipulations in a contract shall not favor
the party who caused the obscurity.

Yang V. Ca
Lessons Applicable: Rights of the holder (Negotiable Instruments Law)

FACTS:
December 22, 1987: Cely Yang and Prem Chandiramani
entered into an agreement whereby Yang was to give
2 P2.087M PCIB managers check in the amount of P4.2 million
both payable to the order of Fernando David. Yang and
Chandiramani agreed that the difference of P26K in the
exchange would be their profit to be divided equally between
them.

Yang and Chandiramani also further agreed that the Yang

would secure from FEBTC a dollar draft in the amount of
US$200K, payable to PCIB FCDU Account No. 4195-01165-2,
which Chandiramani would exchange for another dollar draft in
the same amount to be issued by Hang Seng Bank Ltd. of Hong
Kong.

December 22, 1987, Yang procured the ff:

a) Equitable Cashiers Check No. CCPS 14-009467 in the sum

of P2,087,000.00, dated December 22, 1987, payable to the order of
Fernando David;
b) FEBTC Cashiers Check No. 287078, in the amount
of P2,087,000.00, dated December 22, 1987, likewise payable to the
order of Fernando David; and
c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New York, in
the amount of US$200,000.00, dated December 22, 1987, payable to
PCIB FCDU Account No. 4195-01165-2.

December 22, 1987 1 p.m.: Yang gave the cashiers checks

and dollar drafts to her business associate, Albert Liong, to be
delivered to Chandiramani by Liongs messenger, Danilo Ranigo

Ranigo was to meet Chandiramani at 2 p.m. at Philippine

Trust Bank, Ayala Avenue, Makati where he would turn over
Yangs cashiers checks and dollar draft to Chandiramani who, in
turn, would deliver to Ranigo a PCIB managers check in the sum
of P4.2 million and a Hang Seng Bank dollar draft for US$200K in
exchange but Chandiramani did not appear

December 22, 1987 4 p.m.: Ranigo reported the alleged

loss of the checks and the dollar draft to Liong. Liong, in turn,
informed Yang, and the loss was then reported to the police.

Chandiramani was able to get hold of the instruments

Chandiramani delivered the 2 cashiers checks to Fernando

David at China Banking Corporation branch in San Fernando
City, Pampanga

In exchange, he got US$360K from David, which he

deposited in the savings account of his wife, Pushpa; and
his mother, Rani Reynandas, who held FCDU Account No.
124 with the United Coconut Planters Bank branch in
Greenhills

He also deposited FEBTC Dollar Draft No. 4771,

dated December 22, 1987, drawn upon the Chemical Bank,
New York for US$200K in PCIB FCDU Account No. 4195-
01165-2 on the same date.

Yang requested FEBTC and Equitable to stop payment on

the instruments she believed to be lost

Both banks complied with her request

Yang filed against David and Chandiramani

CA affirms RTC: in favor of David

ISSUE: W/N David is a holder in due course

HELD:
Although negotiable instruments do not constitute legal
tender, they often take the place of money as a means of
payment

checks were crossed

Section 24 of the Negotiable Instruments Law creates a

presumption that every party to an instrument acquired the
same for a consideration or for value

David took the step of asking the manager of his bank to

verify from FEBTC and Equitable as to the genuineness of the
checks and only accepted the same after being assured that
there was nothing wrong with said checks

David did not close his eyes deliberately to the nature or

the particulars of a fraud allegedly committed by Chandiramani upon
the petitioner, absent any knowledge on his part that the action in
taking the instruments amounted to bad faith

Gempesaw v. Ca
Lessons Applicable: Promissory Notes and Checks (Negotiable
Instruments Law)

FACTS:

Gempesaw owns and operates four grocery stores

 to pay their debts of her supplies, she draws checks
against her account
she signed each and every crossed check without
bothering to verify the accuracy of the checks against the
corresponding invoices because she reposed full and
implicit trust and confidence on her bookkeeper.
although the Bank notified her of all checks
presented to and paid by the bank, petitioner did not verify
he correctness of the returned checks, much less check if
the payees actually received the checks in payment for the
supplies she received
It was only after the lapse of more 2 years that
petitioner found out about the fraudulent manipulations of
her bookkeeper
November 7, 1984: Gempesaw made a written demand on
respondent drawee Bank to credit her account with the money
value of the 82 checks totalling P1,208.606.89 for having been
wrongfully charged against her account
January 23, 1985: Gempesaw filed against Philippine Bank
of Communications (drawee Bank) for recovery of the money
value of 82 checks charged against the Gempesaw's account on
the ground that the payees' indorsements were forgeries
RTC: dismissed the complaint
CA: affirmed
Gempesaw gross negligence = promixate cause of
the loss
ISSUE: W/N Gempesaw has a right to recover the amount attributable
to the forgeries

HELD: NO. REMANDED to the trial court for the reception of evidence
to determine the exact amount of loss suffered by the petitioner,
considering that she partly benefited from the issuance of the
questioned checks since the obligation for which she issued them were
apparently extinguished, such that only the excess amount over and
above the total of these actual obligations must be considered as loss
of which one half must be paid by respondent drawee bank to herein
petitioner.
Petitioner completed the checks by signing them as drawer
and thereafter authorized her employee Alicia Galang to deliver
to payees
GR: drawee bank who has paid a check on which an
indorsement has been forged cannot charge the drawer's
account for the amount of said check
EX: where the drawer is guilty of such negligence which
 causes the bank to honor such a check or checks.
Under the NIL, the only kind of indorsement which stops
the further negotiation of an instrument is a restrictive
indorsement which prohibits the further negotiation thereof.

Sec. 36. When indorsement restrictive. - An indorsement is restrictive

which either chanrobles virtual law library
(a) Prohibits further negotiation of the instrument; or
xxx xxx xxx

In this kind of restrictive indorsement, the prohibition to

transfer or negotiate must be written in express words at the
back of the instrument, so that any subsequent party may be
forewarned that ceases to be negotiable.
However, the restrictive indorsee acquires the right
to receive payment and bring any action thereon as any
indorser, but he can no longer transfer his rights as such
indorsee where the form of the indorsement does not
authorize him to do so.
When it violated its internal rules that second
endorsements are not to be accepted without the approval of its
branch managers and it did accept the same upon the mere
approval of Boon, a chief accountant, it contravened the tenor of
its obligation at the very least, if it were not actually guilty of
fraud or negligence
drawee Bank did not discover the irregularity with respect
to the acceptance of checks with second indorsement for deposit even
without the approval of the branch manager despite periodic
inspection conducted by a team of auditors from the main office
constitutes negligence on the part of the bank in carrying out its
obligations to its depositors

BPI vs. Casa Montessori Internationale, G. R. No. 149454 & 149507, May 28,
2004

Facts: CASA Montessori International opened an account with BPI, with CASA’s
President as one of its authorized signatories. It discovered that 9 of its checks
had been encashed by a certain Sonny D. Santos whose name turned out to be
fictitious, and was used by a certain Yabut, CASA’s external auditor. He
voluntarily admitted that he forged the signature and encashed the checks.

RTC granted the Complaint for Collection with Damages against BPI ordering to
reinstate the amount in the account, with interest. CA took account of CASA’s
contributory negligence and apportioned the loss between CASA and BPI, and
ordred Yabut to reimburse both.

BPI contends that the monthly statements it issues to its clients contain a notice
worded as follows: “If no error is reported in 10 days, account will be correct” and
as such, it should be considered a waiver.

Issue:Whether or not waiver or estoppel results from failure to report the error in
the bank statement

Held: Such notice cannot be considered a waiver, even if CASA failed to report
the error. Neither is it estopped from questioning the mistake after the lapse of
the ten-day period.

This notice is a simple confirmation or "circularization" -- in accounting parlance -

- that requests client-depositors to affirm the accuracy of items recorded by the
banks. Its purpose is to obtain from the depositors a direct corroboration of the
correctness of their account balances with their respective banks.

Every right has subjects -- active and passive. While the active subject is entitled
to demand its enforcement, the passive one is duty-bound to suffer such
enforcement. On the one hand, BPI could not have been an active subject,
because it could not have demanded from CASA a response to its notice. CASA,
on the other hand, could not have been a passive subject, either, because it had
no obligation to respond. It could -- as it did -- choose not to respond.

Estoppel precludes individuals from denying or asserting, by their own deed or

representation, anything contrary to that established as the truth, in legal
contemplation. Our rules on evidence even make a juris et de jure presumption
that whenever one has, by one’s own act or omission, intentionally and
deliberately led another to believe a particular thing to be true and to act upon
that belief, one cannot -- in any litigation arising from such act or omission -- be
permitted to falsify that supposed truth.

In the instant case, CASA never made any deed or representation that misled
BPI. The former’s omission, if any, may only be deemed an innocent mistake
oblivious to the procedures and consequences of periodic audits. Since its
conduct was due to such ignorance founded upon an innocent mistake, estoppel
will not arise. A person who has no knowledge of or consent to a transaction may
not be estopped by it. "Estoppel cannot be sustained by mere argument or
doubtful inference x x x." CASA is not barred from questioning BPI’s error even
after the lapse of the period given in the notice.

Philippine National Bank vs Romulo Quimpo

158 SCRA 582 – Mercantile Law – Negotiable Instruments Law – Liabilities of Parties –
Forgery – Liability of the Drawee Bank

In June 1973, Francisco Gozon II went to the Philippine National Bank (Caloocan City)
accompanied by his friend Ernesto Santos. Gozon left Santos in his car and while Gozon
was at the bank, Santos took a check from Gozon’s checkbook. Santos forged Gozon’s
signature and filled out the check with the amount of P5,000.00. Santos was able to
encash the check that day with PNB. Gozon learned of this when his statement arrived.
Santos eventually admitted to forging Gozon’s signature. Gozon then demanded the
PNB to refund him the amount. PNB refused. Judge Romulo Quimpo ruled in favor of
Gozon.

ISSUE: Whether or not PNB is liable.

HELD: Yes. A bank is bound to know the signatures of its customers; and if it pays a
forged check, it must be considered as making the payment out of its own funds, and
cannot ordinarily change the amount so paid to the account of the depositor whose
name was forged. PNB failed to meet its obligation to know the signature of its
correspondent (Gozon). Further, it was found by the court that there are glaring
differences between Gozon’s authentic specimen signatures and that of the forged
check.