FACTS: Samuel Tagoe, a foreigner, purchased from Gold Palace
(SM North) jewelries worth PHP 258,000.00. As payment, he offered a foreign draft issued by the United Overseas Bank of Malaysia addressed to Land Bank, and payable to Gold Palace for PHP 380,000.00. Judy Yang, the assistant GM of Gold Palace inquired from Far East Bank (SM North) regarding the draft’s nature. The teller told her that it was similar to a manager’s check but advised her to not release the jewelry until the draft has been cleared. Following the advice, Yang Issued a cash invoice to Tagoe & told him that the jewelries would be released when the draft had been cleared. Julie Yang-Go, the manager of Gold Palace, deposited the draft in the company’s account with Far East Bank SM North. The latter presented it for clearing to LBP,the drawee bank, who cleared the same. United Overseas account with LBP was debitedand Gold Palace’s account with Far East was credited with the amount stated in the draft. The pieces of jewelry were then released to Tagoe and because the amount in the draft wasmore than the value of the goods, a check for PHP 122,000 was issued to him. It wasencashed by Tagoe.3 weeks after, LBP informed Far East that the amount in the foreign draft had beenmaterially-altered from PHP 300.00 to PHP 380,000.00 and that they will be returning it. FarEast thus refunded the amount paid by LBP. Thus, Far East had to seek reimbursement fromGold Palace but they were only able to debit PHP 168,053.37, which was done without aprior written notice to Gold Palace as they only informed them by phone. They thusdemanded the difference of PHP 211,946.64 from Gold Palace. As the latter did not respondfavorably, Far East instituted a civil case for sum of money and damages. Gold Palacedenies the allegations in the complaint and claims as their defense that the subject foreigndraft has been cleared and it was not they who caused the alteration. The RTC ruled in favorof Far East but this was reversed by the CA as Far East failed to undergo the proceedings onthe protest and thus, Far East could not charge Gold Palace on its secondary liability as anindorser. It further said that the drawee bank had cleared the check and its remedy shouldbe against the part responsible for the alteration.
ISSUE: WHETHER OR NOT FAR EAST BANK COULD PROCEED
AGAINST GOLDPALACE.
HELD: No.The acceptor, by accepting the instrument, engages
that he will pay it according tothe tenor of his acceptance . This provision applies with equal force in case the drawee paysa bill without having previously accepted it. His actual payment of the amount in the checkimplies not only his assent to the order of the drawer and a recognition of his corresponding obligation to pay the aforementioned sum, but also, his clear compliance with thatobligation. Actual payment by the drawee is greater than his acceptance, which ismerely a promise in writing to pay. The payment of a check includes its acceptance.
Unmistakable herein is the fact that the drawee bank cleared
and paid the subject foreigndraft and forwarded the amount thereof to the collecting bank. LBP was liable on itspayment of the check according to the tenor of the check at the time of payment, which wasthe raised amount. Thus, LBP could no longer repudiate the payment it erroneously made toa due course holder. Gold Palace was not a participant in the alteration of the draft, was notnegligent, and was a holder in due course—it received the draft complete and regular on itsface, before it became overdue and without notice of any dishonor, in good faith and forvalue, and absent any knowledge of any infirmity in the instrument or defect in the title of the person negotiating it.