NEGOTIABLE INSTRUMENTS LAW pre-signed and consecutively numbered
CASE DIGESTS - 2C checks on the condition that these checks will
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I. ISSUANCE
1. TING TING PUA v. SPOUSES BENITO LO
BUN TIONG and CAROLINE SIOK CHING
TENG
October 23, 2013
FACTS: ​Petitioner alleged that she lent money
to the respondents on the ground that her
sister, Lilian Balboa, vouched the respondents’
ability to pay. The spouses issued 17
post-dated checks amounting to 1,975,000
pesos, which were thereafter dishonored upon
presentment to the drawee bank.
Consequently, petitioner demanded payment.
The spouses pleaded for more time because of
their financial difficulties. Petitioner obliged to
their request. The debt ballooned to 8, 500,000
pesos. Respondents then delivered a
check(Check A) to petitioner, bearing the same
amount. In turn, respondents demanded the
return of the 17 previously dishonored checks.
Petitioner refused, stating that she will do so
upon the encashment of the last check(Check
A) issued. However, Check A was also
dishonored. Hence, petitioner filed a complaint
for collection of money.
For their defense, respondents denied
obtaining a loan. They alleged that Caroline
and petitioner’s sister, Lilian, forged a
partnership that operated a mahjong business.
Their agreement was for Lilian to serve as the
capitalist while respondent Caroline was to act
as the cashier. Caroline also agreed to use her
personal checks to pay for the operational
expenses. As the partners anticipated that
Caroline will not always be in town to prepare
these checks, she left with Lilian five (5)
only be used to cover the costs of the business
operations and in no circumstance will the
amount of the checks exceed PhP 5,000.
However, due to a disagreement, their
partnership dissolved. Caroline alleged that
she forgot about the pre-signed checks.
Caroline denied having completed Check A.
She contended that the petitioner and her
sister completed the check after its delivery. As
for the 17 checks earlier issued, she insisted
that they were issued for the benefit of another
person.
ISSUE: ​Whether or not there is a loan
transaction.
RULING: YES. ​The checks issued prove a
loan transaction. Sec. 24 of the NIL states that
every negotiable instrument is deemed prima
facie to have been issued for a valuable
consideration; and every person whose
signature appears thereon to have become a
party for value. Consequently, the 17 original
checks, completed and delivered to petitioner,
are sufficient by themselves to prove the
existence of the loan obligation of the
respondents to petitioner. Note that respondent
Caroline had not denied the genuineness of
these checks. The respondents did not deny
the genuineness of these checks. Instead,
respondents argue that they were given to
various other persons and petitioner had
simply collected all these 17 checks from them
in order to damage respondents’ reputation.
This account is not only incredible; it runs
counter to human experience, as enshrined in
Sec. 16 of the NIL which provides that when an
instrument is no longer in the possession of the
person who signed it and it is complete in its
terms "a valid and intentional delivery by him is
presumed until the contrary is proved”.
2. QUIRINO GONZALES LOGGING
CONCESSIONAIRE v. CA and REPUBLIC
PLANTERS BANK
April 30, 2003
FACTS: Petitioner Quirino Gonzales Logging
Concessionaire (QGLC) applied for credit
accommodation which the Bank approved.
Their obligation was secured by a real estate
mortgage of parcels of land. QGLC executed a
promissory note, with a face value of 55,000
pesos, in which they defaulted. The Bank
foreclosed the property and was subsequently
owned by the Bank. The Bank then filed a
complaint for a sum of money in regards to the
unpaid notes.
The notes were payable 30 days after
date and provided for the solidary liability in
their non-payment at maturity. Petitioners deny
having received the value of the promissory
notes and they further alleged that petitioners
Quirino and Eufemia Gonzales signed the PN’s
in blank.
ISSUE: ​Whether or not the petitioners are
liable.
RULING:
Yes. The promissory notes were
negotiable as they met the requirements of
Sec. 1 of the NIL. The notes are prima facie
deemed to have been issued for consideration.
In any case, it is no defense that the
promissory notes were signed in blank as
Section 14 ​of the Negotiable Instruments Law
concedes the ​prima facie authority of the
person in possession of negotiable
instruments, such as the notes herein, to fill in
the blanks.
3. ALVIN PATRIMONIO v. NAPOLEON
GUTIERREZ
June 4, 2014
FACTS: ​The petitioner and the respondent
Gutierrez entered into a business venture
under the name of Slam Dunk Corporation, a
production outfit that produced mini-concerts
and shows related to basketball.
Patrimonio pre-signed several checks to
answer for the expenses of Slam Dunk.
Although signed, these checks had no payee’s
name, date or amount. The blank checks were
entrusted to Gutierrez with the specific
instruction not to fill them out without previous
notification to and approval by the petitioner.
Without the petitioner’s knowledge and
consent, Gutierrez went to Marasigan to
secure a loan in the amount of P200,000.00 on
the excuse that the petitioner needed the
money for the construction of his house.
Marasigan acceded to Gutierrez’
request and gave him P200,000.00. Gutierrez
simultaneously delivered to Marasigan one of
the blank checks the petitioner pre-signed with
Pilipinas Bank with the blank portions filled out
with the words “Cash” “Two Hundred
Thousand Pesos Only”, and the amount of
“P200,000.00.” Marasigan deposited the check
but it was dishonored for the reason
“ACCOUNT CLOSED.” It was later revealed
that petitioner’s account with the bank had
been closed.
Marasigan sought recovery from
Gutierrez, to no avail. He thereafter sent
several demand letters to the petitioner asking
for the payment of P200,000.00, but his
demands likewise went unheeded.
Consequently, he filed a criminal case for
violation of B.P. 22 against the petitioner.
ISSUE: ​Whether or not Patrimonio is liable.
RULING: NO. ​Section 14 of the Negotiable
Instruments Law provides for when blanks may
be filled. This provision applies to an
incomplete but delivered instrument. Under this
rule, if the maker or drawer delivers a
pre-signed blank paper to another person for
the purpose of converting it into a negotiable
instrument, that person is deemed to have
prima facie authority to fill it up. It merely
requires that the instrument be in the
possession of a person other than the drawer
or maker and from such possession, together
with the fact that the instrument is wanting in a
material particular, the law presumes agency to
fill up the blanks.
In order however that one who is not a
holder in due course can enforce the
instrument against a party prior to the
instrument’s completion, two requisites must
exist: (1) that the blank must be filled strictly in
accordance with the authority given; and (2) it
must be filled up within a reasonable time. If it
was proven that the instrument had not been
filled up strictly in accordance with the authority
given and within a reasonable time, the maker
can set this up as a personal defense and
avoid liability.
Marasigan is not a holder in due course.
He had notice that there was something wrong
about his assignor’s acquisition of title,
although he did not have notice of the
particular wrong that was committed. In the
present case, Marasigan’s knowledge that the
petitioner is not a party or a privy to the
contract of loan, and correspondingly had no
obligation or liability to him, renders him
dishonest, hence, in bad faith. Hence,
Patrimonio cannot be held liable because sec.
14 of the NIL is merely a personal defense.
However, Marasigan may claim
payment from Gutierrez because the latter
exceeded his authority.
4.) SAMSON CHING, ​Petitioner, vs. ​CLARITA
NICDAO
FACTS:
Petitioner Ching, a Chinese national, instituted
criminal complaints for eleven (11) counts of
violation of BP 22 against respondent Nicdao
Ching alleges that the said accused did then
and there willfully and unlawfully make or draw
and issue Hermosa Savings & Loan Bank, Inc.
Check No. [002524] dated October 06, 1997 in
the amount of [₱20,000,000.00] in payment of
her obligation with complainant Samson T.Y.
Ching,
Moreover, Ching alleges that the said accused
knowing fully well that at the time she issued
the said check she did not have sufficient funds
in or credit with the drawee bank for the
payment in full of the said check upon
presentment, which check when presented for
payment within ninety (90) days from the date
thereof, was dishonored by the drawee bank
for the reason that it was drawn against
insufficient funds and notwithstanding receipt
of notice of such dishonor the said accused
failed and refused and still fails and refuses to
pay the value of the said check in the amount
of [P20,000,000.00]
Petitioner Ching averred that the checks were
issued to him by respondent Nicdao as security
for the loans that she obtained from him. Their
transaction began sometime in October 1995
when respondent Nicdao, proprietor/manager
of Vignette Superstore, together with her
husband, approached him to borrow money in
order for them to settle their financial
obligations. They agreed that respondent
Nicdao would leave the checks undated and
that she would pay the loans within one year.
However, when petitioner Ching went to see
her after the lapse of one year to ask for
payment, respondent Nicdao allegedly said
that she had no cash.
Petitioner Ching reiterated that after the lapse
of one (1) year from the time respondent
Nicdao issued the checks to him, he went to
her several times to collect payment. In all
these instances, she said that she had no
cash. Finally, in September 1997, respondent
Nicdao allegedly went to his house and told
him that Janette was only willing to pay him
between ₱3,000,000.00 and ₱5,000,000.00
because, as far as her daughter was
concerned, that was the only amount borrowed
from petitioner Ching.
Respondent Nicdao stated that she only dealt
with Nuguid. She vehemently denied the
allegation that she had borrowed money from
both petitioner Ching and Nuguid in the total
amount of ₱22,950,000.00. Respondent Nicdao
admitted, however, that she had obtained a
loan from Nuguid but only for ₱2,100,000.00
and the same was already fully paid. As proof
of such payment, she presented a Planters
Bank demand draft. The annotation at the back
of the said demand draft showed that it was
endorsed and negotiated to the account of
petitioner Ching.
In addition, respondent Nicdao also presented
and identified several cigarette wrappers​18 at
the back of which appeared computations. She
explained that Nuguid went to the grocery store
everyday to collect interest payments. The
principal loan was ₱2,100,000.00 with 12%
interest per day. Nuguid allegedly wrote the
payments for the daily interests at the back of
the cigarette wrappers that she gave to
respondent Nicdao.
With respect to the ₱20,000,000.00 check,
respondent Nicdao admitted that the signature
thereon was hers but denied that she issued
the same to petitioner Ching. Anent the other
ten (10) checks, she likewise admitted that the
signatures thereon were hers while the
amounts and payee thereon were written by
either Jocelyn Nicdao or Melanie Tolentino,
who were employees of Vignette Superstore
and authorized by her to do so.
Respondent Nicdao clarified that, except for
the ₱20,000,000.00 check, the other ten (10)
checks were handed to Nuguid on different
occasions. Nuguid came to the grocery store
everyday to collect the interest payments.
Respondent Nicdao said that she purposely left
the checks undated because she would still
have to notify Nuguid if she already had the
money to fund the checks.
Respondent Nicdao alleges that what actually
transpired was that when she already had the
money to pay them, she went to them to
retrieve her checks. However, petitioner Ching
and Nuguid refused to return the checks
claiming that she still owed them money. She
demanded that they show her the checks in
order that she would know the exact amount of
her debt, but they refused. It was at this point
that she got angry and dared them to go to
court.
After the said incident, respondent Nicdao was
surprised to be notified by HSLB that her check
in the amount of ₱20,000,000.00 was just
presented to the bank for payment. She
claimed that it was only then that she
remembered that sometime in 1995, she was
informed by her employee that one of her
checks was missing. At that time, she did not
let it bother her thinking that it would eventually
surface when presented to the bank.
Respondent Nicdao could not explain how the
said check came into petitioner Ching’s
possession. She explained that she kept her
checks in an ordinary cash box together with a
stapler and the cigarette wrappers that
contained Nuguid’s computations. Her
saleslady had access to this box. Respondent
Nicdao averred that it was Nuguid who offered
to give her a loan as she would allegedly need
money to manage Vignette Superstore. Nuguid
used to run the said store before respondent
Nicdao’s daughter bought it from Nuguid’s
family, its previous owner. According to
respondent Nicdao, it was Nuguid who
regularly delivered the cash to respondent
Nicdao or, if she was not at the grocery store,
to her saleslady. Respondent Nicdao denied
any knowledge that the money loaned to her
by Nuguid belonged to petitioner Ching.
Respondent Nicdao said that she never dealt
with petitioner Ching because it was Nuguid
who went to the grocery store everyday to
collect the interest payments. When shown the
₱20,000,000.00 check, respondent Nicdao
admitted that the signature thereon was hers
but she denied issuing it as a blank check to
petitioner Ching.
On the other hand, with respect to the other ten
(10) checks, she also admitted that the
signatures thereon were hers and that the
amounts thereon were written by either Josie
Nicdao or Melanie Tolentino, her employees
whom she authorized to do so. With respect to
the payee, it was purposely left blank allegedly
upon instruction of Nuguid who said that she
would use the checks to pay someone else.
On cross-examination,​20 respondent Nicdao
explained that Josie Nicdao and Melanie
Tolentino were caretakers of the grocery store
and that they manned it when she was not
there. She likewise confirmed that she
authorized them to write the amounts on the
checks after she had affixed her signature
thereon. She stressed, however, that the
₱20,000,000.00 check was the one that was
reported to her as lost or missing by her
saleslady sometime in 1995.
Again, respondent Nicdao identified the
cigarette wrappers which indicated the daily
payments she had made to Nuguid. The latter
allegedly went to the grocery store everyday to
collect the interest payments. Further, the
figures at the back of the cigarette wrappers
were written by Nuguid. Respondent Nicdao
asserted that she recognized her handwriting
because Nuguid sometimes wrote them in her
presence.
Respondent Nicdao maintained that she had
already paid Nuguid the amount of
₱1,200,000.00 as evidenced by the Planters
Bank demand draft which she gave to the latter
and which was subsequently negotiated and
deposited in petitioner Ching’s account. In
connection thereto, respondent Nicdao refuted
the prosecution’s allegation that the demand
draft was payment for a previous transaction
that she had with petitioner Ching. She clarified
that the payments that Nuguid collected from
her everyday were only for the interests due.
She did not ask Nuguid to make written
acknowledgements of her payments.
The MCTC ruled in favor of Ching. It explained
that the crime of violation of BP 22 has the
following elements: (a) the making, drawing
and issuance of any check to apply to account
or for value; (b) 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 (c)
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.
According to the MCTC, all the foregoing
elements are present in the case of respondent
Nicdao’s issuance of the checks.
ISSUE:
1.) Whether or not Nicdao is guilty of violating
BP 22
2.) Whether or not respondent remains civilly
liable to petitioner despite her acquittal.
HELD:
No.
The CA reversed the decision of the trial court,
thus acquitting Nicdao. In acquitting
respondent Nicdao in CA-G.R. CR No. 23055,
the CA made the following factual findings:
Nuguid used to own a grocery store now
known as the Vignette Superstore. She sold
this grocery store, which was about to be
foreclosed, to petitioner’s daughter, Janette
Boyd. Since then, petitioner began managing
said store. However, since petitioner could not
always be at the Vignette Superstore to keep
shop, she entrusted to her salesladies, Melanie
Tolentino and Jocelyn Nicdao, pre-signed
checks, which were left blank as to amount and
the payee, to cover for any delivery of
merchandise sold at the store. The blank and
personal checks were placed in a cash box at
Vignette Superstore and were filled up by said
salesladies upon instruction of petitioner as to
amount, payee and date.
Soon thereafter, Emma Nuguid befriended
petitioner and offered to lend money to the
latter which could be used in running her newly
acquired store. Nuguid represented to
petitioner that as former manager of the
Vignette Superstore, she knew that petitioner
would be in need of credit to meet the daily
expenses of running the business, particularly
in the daily purchases of merchandise to be
sold at the store. After Emma Nuguid
succeeded in befriending petitioner, Nuguid
was able to gain access to the Vignette
Superstore where petitioner’s blank and
pre-signed checks were kept.​29
CA found that respondent Nicdao borrowed
money from Nuguid in the total amount of
₱2,100,000.00 secured by twenty-four (24)
checks drawn against respondent Nicdao’s
account with HSLB. Upon Nuguid’s instruction,
the checks given by respondent Nicdao as
security for the loans were left blank as to the
payee and the date. The loans totaled
₱2,100,000.00 and they were transacted
between respondent Nicdao and Nuguid only.
Respondent Nicdao never dealt with petitioner
Ching.
Against the foregoing factual findings, the CA
declared that, based on the evidence,
respondent Nicdao had already fully paid the
loans. In particular, the CA referred to the
Planters Bank demand draft in the amount of
₱1,200,000.00 which, by his own admission,
petitioner Ching had received.
Apart from the demand draft, the CA also
stated that respondent Nicdao made interest
payments on a daily basis to Nuguid as
evidenced by the computations written at the
back of the cigarette wrappers. Based on these
computations, as of July 21, 1997, respondent
Nicdao had made a total of ₱5,780,000.00
payments to Nuguid for the interests alone.
Adding up this amount and that of the
Planters Bank demand draft, the CA placed
the payments made by respondent Nicdao
to Nuguid as already amounting to
₱6,980,000.00 for the principal loan amount
of only ₱2,100,000.00.
The CA gave credence to the testimony of
respondent Nicdao that when she had fully
paid her loans to Nuguid, she tried to
retrieve her checks. Nuguid, however,
refused to return the checks to respondent
Nicdao. Instead, Nuguid and petitioner Ching
filled up the said checks to make it appear that:
(a) petitioner Ching was the payee in five
checks; (b) the six checks were payable to
cash; (c) Nuguid was the payee in fourteen
(14) checks. Petitioner Ching and Nuguid then
put the date October 6, 1997 on all these
checks and deposited them the following day.
On October 8, 1997, through a joint demand
letter, they informed respondent Nicdao that
her checks were dishonored by HSLB and
gave her three days to settle her indebtedness
or else face prosecution for violation of BP 22.
With the finding that respondent Nicdao had
fully paid her loan obligations to Nuguid, the
CA declared that she could no longer be held
liable for violation of BP 22. It was explained
that to be held liable under BP 22, it must be
established, inter alia, that the check was
made or drawn and issued to apply on account
or for value. According to the CA, the word
"account" refers to a pre-existing obligation,
while "for value" means an obligation incurred
simultaneously with the issuance of the check.
In the case of respondent Nicdao’s checks, the
pre-existing obligations secured by them were
already extinguished after full payment had
been made by respondent Nicdao to Nuguid.
Obligations are extinguished by, among others,
payment.​30 The CA believed that when
petitioner Ching and Nuguid refused to return
respondent Nicdao’s checks despite her total
payment of ₱6,980,000.00 for the loans
secured by the checks, petitioner Ching and
Nuguid were using BP 22 to coerce respondent
Nicdao to pay a debt which she no longer
owed them.
Moreover, the CA characterized as incredible
and contrary to human experience that
petitioner Ching would, as he claimed, deliver a
total sum of ₱20,000,000.00 to respondent
Nicdao without any documentary proof thereof,
e.g., written acknowledgment that she received
the same. On the other hand, it found plausible
respondent Nicdao’s version of the story that
the ₱20,000,000.00 check was the same one
that was missing way back in 1995. The CA
opined that this missing check surfaced in the
hands of petitioner Ching who, in cahoots with
Nuguid, wrote the amount ₱20,000,000.00
thereon and deposited it in his account. To the
mind of the CA, the inference that the check
was stolen was anchored on competent
circumstantial evidence. Specifically, Nuguid,
as previous manager/owner of the grocery
store, had access thereto. Likewise applicable,
according to the CA, was the presumption that
the person in possession of the stolen article
was presumed to be guilty of taking the stolen
article.​31
The CA emphasized that the ₱20,000,000.00
check was never delivered by respondent
Nicdao to petitioner Ching. As such, the said
check without the details as to the date,
amount and payee, was an incomplete and
undelivered instrument when it was stolen and
ended up in petitioner Ching’s hands. On this
point, the CA applied Sections 15 and 16 of the
Negotiable Instruments Law:
The CA held that the ₱20,000,000.00 check
was filled up by petitioner Ching without
respondent Nicdao’s authority. Further, it was
incomplete and undelivered. Hence, petitioner
Ching did not acquire any right or interest
therein and could not assert any cause of
action founded on thestolen checks. Under
these circumstances, the CA concluded that
respondent could not be held liable for violation
of BP 22.
2.) Yes.
Notwithstanding respondent Nicdao’s acquittal,
petitioner Ching is entitled to appeal the civil
aspect of the case within the reglementary
period.
What gives rise to the civil liability is really the
obligation of everyone to repair or to make
whole the damage caused to another by
reason of his act or omission, whether done
intentionally or negligently and whether or not
punishable by law.
Extinction of penal action does not carry with it
the eradication of civil liability, unless the
extinction proceeds from a declaration in the
final judgment that the fact from which the civil
liability might arise did not exist.
5.) ​LORETO D. DE LA VICTORIA, as City
Fiscal of Mandaue City and in his personal
capacity as garnishee, ​petitioner,
vs.
HON. JOSE P. BURGOS, Presiding Judge,
RTC, Br. XVII, Cebu City, and RAUL H.
SESBREÑO, ​respondents.
FACTS:
A notice of garnishment was served on
petitioner Loreto D. de la Victoria as City Fiscal
of Mandaue City where defendant Mabanto,
Jr., was then detailed. The notice directed
petitioner not to disburse, transfer, release or
convey to any other person except to the
deputy sheriff concerned the salary checks or
other checks, monies, or cash due or
belonging to Mabanto, Jr.
Private respondent filed a motion before the
trial court for examination of the
garnishees.Thereafter, the trial court, finding
no more legal obstacle to act on the motion for
examination of the garnishees, directed
petitioner to submit his report showing the
amount of the garnished salaries of Mabanto,
Jr.
Petitioner moved to quash the notice of
garnishment claiming that he was not in
possession of any money, funds, credit,
property or anything of value belonging to
Mabanto, Jr., except his salary and RATA
checks, but that said checks were not yet
properties of Mabanto, Jr., until delivered to
him.
He further claimed that, as such, they were still
public funds which could not be subject to
garnishment.
ISSUE:
(1) whether a check still in the hands of the
maker or its duly authorized representative is
owned by the payee before physical delivery to
the latter: and,
(2) whether the salary check of a government
official or employee funded with public funds
can be subject to garnishment.
HELD:
1. NO.
Salary checks were not owned by Mabanto,
Jr., because they were not yet delivered to him,
and that petitioner as garnishee has no legal
obligation to hold and deliver them to the trial
court to be applied to Mabanto, Jr.'s judgment
debt. The salary checks still formed part of
public funds and therefore beyond the reach of
garnishment proceedings.
Garnishment is considered as a species of
attachment for reaching credits belonging to
the judgment debtor owing to him from a
stranger to the litigation. Emphasis is laid on
the phrase ​"belonging to the judgment
debtor" since it is the focal point in resolving
the issues raised.
As Assistant City Fiscal, the source of the
salary of Mabanto, Jr., is public funds. He
receives his compensation in the form of
checks from the Department of Justice. Under
Sec. 16 of the Negotiable Instruments Law,
every contract on a negotiable instrument is
incomplete and revocable until ​delivery o ​ f 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.
The salary check of a government officer or
employee such as a teacher does not belong
to him before it is physically delivered to him.
Until that time the check belongs to the
government. Accordingly, before there is actual
delivery of the check, the payee has no power
over it; he cannot assign it without the consent
of the Government.
2.) NO.
As a necessary consequence of being public
fund, the checks may not be garnished to
satisfy the judgment. The functions and public
services rendered by the State cannot be
allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate
and specific objects, as appropriated by law.
6.)​ SAN MIGUEL CORPORATION,​ Petitioner,
vs.
BARTOLOME PUZON, JR.,​ Respondent.
FACTS:
Respondent Bartolome V. Puzon, Jr., (Puzon)
owner of Bartenmyk Enterprises, was a dealer
of beer products of petitioner San Miguel
Corporation (SMC) for Parañaque City. Puzon
purchased SMC products on credit. To ensure
payment and as a business practice, SMC
required him to issue postdated checks
equivalent to the value of the products
purchased on credit before the same were
released to him. Said checks were returned to
Puzon when the transactions covered by these
checks were paid or settled in full.
Puzon purchased products on credit amounting
to ₱11,820,327 for which he issued, and gave
to SMC, checks to cover the said transaction.
Puzon, together with his accountant, visited the
SMC Sales Office in Parañaque City to
reconcile his account with SMC. During that
visit Puzon allegedly requested to see BPI
Check No. 17657. However, when he got hold
of BPI Check No. 27903 which was attached to
a bond paper together with BPI Check No.
17657 he allegedly immediately left the office
with his accountant, bringing the checks with
them.
SMC sent a letter to Puzon demanding the
return of the said checks. Puzon ignored the
demand hence SMC filed a complaint against
him for theft.
ISSUE:
1. Whether or not Puzon is liable for Theft
HELD:
1. NO.
The essential elements of the crime of theft are
the following: (1) that there be a taking of
personal property; (2) that said property
belongs to another; (3) that the taking be done
with intent to gain; (4) that the taking be done
without the consent of the owner; and (5) that
the taking be accomplished without the use of
violence or intimidation against persons or
force upon things."
Considering that the second element is that the
thing taken ​belongs to another,​ it is relevant to
determine whether ownership of the subject
check was transferred to petitioner.
On this point the Negotiable Instruments Law
provides:
Sec. 12. Antedated and postdated – The
instrument is not invalid for the reason only that
it is antedated or postdated, provided this is not
done for an illegal or fraudulent purpose. The
person to whom an instrument so dated is
delivered acquires the title thereto as of the
date of delivery. (Underscoring supplied.)
Note however that delivery as the term is used
in the aforementioned provision means that the
party delivering did so for the purpose of giving
effect thereto. Otherwise, it cannot be said that
there has been delivery of the negotiable
instrument. Once there is delivery, the person
to whom the instrument is delivered gets the
title to the instrument completely and
irrevocably.
If the subject check was given by Puzon to
SMC in payment of the obligation, the purpose
of giving effect to the instrument is evident thus
title to or ownership of the check was
transferred upon delivery. However, if the
check was not given as payment, there being
no intent to give effect to the instrument, then
ownership of the check was not transferred to
SMC.
The evidence of SMC failed to establish that
the check was given in payment of the
obligation of Puzon. There was no provisional
receipt or official receipt issued for the amount
of the check.
Furthermore, the petitioner's demand letter
sent to respondent states "As per company
policies on receivables, all issuances are to be
covered by post-dated checks. However, you
have deviated from this policy by forcibly taking
away the check you have issued to us to cover
the December issuance."​14 Notably, the term
"payment" was not used instead the terms
"covered" and "cover" were used.
Although the petitioner's witness states that the
check was given in payment of the obligation of
Puzon, the same is contradicted by his
statements where he states that "As a standard
company operating procedure, all beer
purchases by dealers on credit shall be
covered b​ y postdated checks equivalent to the
value of the beer products purchased"; in
paragraph 9 where he states that "the
transaction ​covered by the said check had not
yet been paid for," and in paragraph 8 which
clearly shows that partial payment is expected
to be made by the return of beer empties, and
not by the deposit or encashment of the
check.1avvphi1 ​Clearly the term "cover" was
not meant to be used interchangeably with
"payment."
When taken in conjunction with the
counter-affidavit of Puzon – where he states
that "As the [liquid beer] contents are paid for,
SMC return[s] to me the corresponding PDCs
or request[s] me to replace them with whatever
was the unpaid balance."​15 – it becomes clear
that both parties did not intend for the check to
pay for the beer products. The evidence proves
that the check was accepted, not as payment,
but in accordance with the long-standing policy
of SMC to require its dealers to issue
postdated checks to cover its receivables. The
check was only meant to ​cover the transaction
and in the meantime Puzon was to pay for the
transaction by some other means other than
the check. This being so, title to the check did
not transfer to SMC; it remained with Puzon.
The second element of the felony of theft was
therefore not established. Petitioner was not
able to show that Puzon took a check that
belonged to another​. Hence, the prosecutor
and the DOJ were correct in finding no
probable cause for theft.
7. TRAVEL-ON INC. vs. Court of Appeals
Facts:
Petitioner Travel-On Inc. is a travel agency
from which Arturo Miranda procured tickets on
behalf of airline passengers and derived
commissions therefrom. Miranda was sued by
petitioner to collect on the six postdated checks
he issued which were all dishonored by the
drawee banks. Miranda, however, claimed that
he had already fully paid and even overpaid his
obligations and that refunds were in fact due to
him. He argued that he had issued the
postdated checks not for the purpose of
encashment to pay his indebtedness but for
purposes of accommodation, as he had in the
past accorded similar favors to petitioner.
Petitioner however urges that the postdated
checks are ​per se ​evidence of liability on the
part of private respondent and further argues
that even assuming that the checks were for
accommodation, private respondent is still
liable thereunder considering that petitioner is
a holder for value.
ISSUE:
Whether Miranda is liable on the postdated
checks he issued even assuming that said
checks were issued for accommodation only.
HELD:
There was no accommodation transaction in
the case at bar. In accommodation
transactions recognized by the Negotiable
Instruments Law, an accommodating party
lends his credit to the accommodated party, by
issuing or indorsing a check which is held by a
payee or indorsee as a holder in due course,
who gave full value therefor to the
accommodated party. The latter, in other
words, receives or realizes full value which the
accommodated party then must repay to the
accommodating party. But the accommodating
party is bound on the check to the holder in
due course who is necessarily a third party and
is not the accommodated party. In the case at
bar, Travel-On was payee of all six (6) checks,
it presented these checks for payment at the
drawee bank but the checks bounced.
Travel-On obviously was not an
accommodated party; it realized no value on
the checks which bounced. Miranda must be
held liable on the checks involved as petitioner
is entitled to the benefit of the statutory
presumption that it was a holder in due course
and that the checks were supported by
valuable consideration.
8. REMIGIO ONG vs. PEOPLE
Facts
Remigio Ong approached Marcial De Jesus
and requested to be accommodated a loan of
P130,000.00 which he needed to pay the 13th
month pay of his employees. De Jesus obliged
by issuing Ong a check payable to Ong’s
business and required Mr. Ong to issue a
post-dated check for the same amount. Mr.
Ong obliges and he encashed the check given
to him by De Jesus. However, the check
issued by Ong bounced and despite repeated
demands by De Jesus, Mr. Ong failed to make
good of the checks.
ISSUE
Whether or not the issuance of the subject
check is a violation, even if its not considered
drawn and issued "to apply on account or for
value"
HELD
Yes, The SC held that what is being punished
by BP22 is the mere issuance of a bouncing
check, not the purpose for which it was issued
nor the terms and conditions relating to its
issuance, The mere act of issuing a worthless
check is malum prohibitum.
In actions based upon a negotiable instrument,
it is unnecessary to aver or prove
consideration, for consideration is imported
and presumed from the fact that it is a
negotiable instrument. The presumption exists
whether the words "value received" appear on
the instrument or not.
9. Lee et. al. vs Court of Appeals
Facts
The Board of Directors of MICO Metals
Corporation in a resolution authorized
petitioners Lee and Sio to negotiate and secure
the approable of commercial loans and other
banking facilities and accommodations from
respondent bank. MICO availed of several
loands whcih were credited to its current
checking account. In addition, MICO also
applied for domestic and foreign letters of
credit, which were negotiated and accepted by
MICO as evidenced by corresponding bank
drafts issued and trust receipts executed.
Issue
Whether or not letters of credit and trust
receipts are negotiable instruments.
Held
NO. Negotiable Instruments which are menat
to be substitutes for money, must conform to
the requisites stated in Sec 1. of the NIL. While
the presumption found under the Negotiable
Instruments Law may not necessarily be
applicable to trust receipts and letters of credit,
the presumption that the drafts drawn in
connection with the letters of credit have
sufficient consideration.
11. Cayanan Vs North Star
FACTS:
North Star extended credit to Cayanan
for air tickets of clients - P510,034.47, and for
payment to View Sea Ventures of the amounts
of $60,000 which came from respondent
General Manager’s (Virginia) personal
account (ordered by Cayanan), and another
$40,000 by telegraphic transfer with $15,000
from petitioner. Cayanan then issued 3 checks
drawn from Republic Planters Bank (RPB) and
2 checks from PCIB.
When drawn for payment, the checks
from PCIB amounting to 1.5M and 35,000 were
dishonored for insufficiency of funds while the
3 checks from RPB were dishonored due to a
stop payment by Cayanan. Upon demand for
payment, Cayanan failed to settle.5 violations
of BP 22 were filed by North Star in MeTC.
which found Cayanan Guilty. On Appeal, the
RTC acquitted him. The CA, however, held
Cayanan civilly liable.
. II.
ISSUE/S:
1. WON checks issued by Cayanan were for
valuable consideration?
2. WON Cayanan is civilly liable to North Star
for the value of the checks?
HELD:
1. ​Yes​, checks were issued for a valuable
consideration.
Cayanan has not presented credible evidence
to rebut resumption that checks were issued
for a valuable consideration. Contrary to
petitioners claims that North Star did not give
any valuable
consideration for the checks since the
US$85,000 was taken from the personal dollar
account of Virginia and not the corporate funds
of North Star, the fact that petitioner himself
specifically named North Star as the payee of
the checks is an admission of his liability to
North Star and not to Virginia Balagtas. Also,
his defense that dollars sent to View Sea in
Nigeria was Virginia’s own investment could
not hold as she only remitted such money due
to Cayanan’s request/ instructions – this he
never denied. It was him who had business
transactions with View Sea and not Virginia.
Transaction between North Star and Cayanan
was actually in the nature of a loan, and
checks were issued as payment of such; hence
there was no absence of consideration for the
issuance of checks.
2. Yes, Cayanan is liable. Having failed to fully
settle his obligation (loan) under the checks,
the appellate court was correct in holding
petitioner liable to pay the value of the five
checks he issued in favor of North Star.
NEGOTIATION (Gab)
1. SESBRENO v. CA
FACTS: ​Raul Sesbreno made a money market
placement in the amount of PHP300,000 with
PhilFinance to mature after 32 days.
PhilFinance issued to Sesbreno the Certificate
of Confirmation of Sale of a Delta Motor
Corporation ​Promissory Note 2731​, 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 post-dated checks drawn against
the Insular Bank of Asia and America for
PHP304,533.33. Upon maturity, petitioner
sought to encash the said checks but were
unfortunately dishonored for having insufficient
funds. Petitioner then issued a demand letter to
private respondent Pilipinas Bank, but the note
was never released nor any instrument related
thereto. Petitioner also made a written demand
upon private respondent Delta as maker for the
partial satisfaction of ​DMC PN No. 2731​,
explaining that PhilFinance, as a payee
thereof, had ​assigned to him said PN. Delta,
however, denied any liability to petitioner on
the promissory note. Petitioner learned that the
instrument was stamped “non-negotiable” on
its face. As he was unable to collect his invest
and and interest thereon, he filed an action for
damages against Delta Motors and Pilipinas
Bank.
ISSUE: WON the PN marked as
non-negotiable may be assigned
RULING: YES. O ​ nly an instrument qualifying
as a negotiable instrument under the relevant
statute may be negotiated either by
indorsement thereof coupled with delivery, or
by delivery alone where the negotiable
instrument is in bearer form. A negotiable
instrument may, however, instead of being
negotiated, also be assigned or transferred.
The legal consequences of negotiation as
distinguished from assignment of a negotiable
instrument are, of course, different. A
non-negotiable instrument may, obviously, not
be negotiated; but it may be assigned or
transferred, absent an express prohibition
against assignment or transfer written in the
face of the instrument. The words “not
negotiable,” stamped on the face of the bill of
lading, did not destroy its assignability, but the
sole effect was to exempt the bill from the
statutory provisions relative thereto, and a bill,
though not negotiable, may be transferred by
assignment; the assignee taking subject to the
equities between the original parties.
In this case, DMC PN No. 2731, while marked
“non-negotiable,” was not at the same time
stamped “non-transferable” or
“non-assignable.” It contained no stipulation
which prohibited Philfinance from assigning or
transferring, in whole or in part, that Note.
2. ANG TEK LIAN v. CA
FACTS: ​Ang Tek Lian, knowing that he had no
funds therefor, drew a check upon China
Banking Corporation payable to the order of
“cash”. He delivered it to Lee Hua Hong in
exchange for money. The check was
presented by Lee Hua hong to the drawee
bank for payment, but it was dishonored for
insufficiency of funds. An information for the
crime of estafa was filed against Ang Tek Lian.
Petitioner however argues that he is not guilty
of the offense charged because he did not
endorse the check which was made payable to
"cash".
ISSUE: WON a check payable to "cash"
requires an indorsement by the drawer for it
to be encashed.
RULING: NO. ​Under Sec. 9 of NIL a check
drawn payable to the order of “cash” is a check
payable to bearer and the bank may pay it to
the person presenting it for payment without
the drawer’s indorsement. However, if the bank
is not sure of the bearer’s identity or financial
solvency, it has the right to demand
identification or assurance against possible
complication, such as forgery of drawer’s
signature, loss of the check by the rightful
owner, raising of the amount payable, etc. But
where the bank is satisfied of the identity or
economic standing of the bearer who tenders
the check for collection, it will pay the
instrument without further question; and it
would incur no liability to the drawer in thus
acting.
3. PEOPLE v. GILBERT REYES WAGAS
FACTS: ​Gilbert Wagas ordered from Alberto
Ligaray 200 bags of rice over the telephone. As
payment, Wagas issued a check in favor of
Ligaray. When the check was deposited it was
dishonored due to insufficiency of funds.
Ligaray notified Wagas and demanded
payment from the latter but Wagas refused and
failed to pay the amount, Ligaray filed a
complaint for estafa before the RTC. RTC
convicted Wagas of estafa because the RTC
believed that the prosecution had proved that it
was Wagas who issued the dishonored check,
despite the fact that Ligaray had never met
Wagas in person. Hence, this direct appeal.
ISSUE: WON Wagas is guilty of Estafa

RULING: NO. ​His guilt cannot be established
beyond reasonable doubt. The check delivered
to Ligaray was made payable to cash. Under
the Negotiable Instruments Law, this type of
check was payable to the bearer and could be
negotiated by mere delivery without the need
of an indorsement. This rendered it highly
probable that Wagas had issued the check not
to Ligaray, but to somebody else like Cañada,
his brother-in-law, who then negotiated it to
Ligaray. Relevantly, Ligaray confirmed that he
did not himself see or meet Wagas at the time
of the transaction and thereafter, and expressly
stated that the person who signed for and
received the stocks of rice was Cañada. It
bears stressing that the accused, to be guilty of
estafa as charged, must have used the check
in order to defraud the complainant. What the
law punishes is the fraud or deceit, not the
mere issuance of the worthless check. Wagas
could not be held guilty of estafa simply
because he had issued the check used to
defraud Ligaray. The proof of guilt must still
clearly show that it had been Wagas as the
drawer who had defrauded Ligaray by means
of the check.
4. CALTEX v. SBTC
FACTS: ​Security Bank and Trust Co. issued
280 certificates of time deposit (CTD) in favor
of one Mr. Angel dela Cruz who deposited with
the bank P1.12 million. Dela 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. When Caltex presented said CTDs for
verification with the bank and formally informed
the bank of its decision to preterminate the
same, the bank rejected Caltex’ claim and
demand as Caltex failed to furnish copies of
certain requested documents. In 1983, dela
Cruz’ loan matured and the bank set-off and
applied the time deposits as payment for the
loan. Caltex filed a complaint which was
dismissed on the ground that the subject
certificates of deposit are non-negotiable.
ISSUE: ​WON the Certificates of Time Deposit
(CTDs) are negotiable instruments.
RULING: ​The CTDs in question are negotiable
instruments as they meet the requirements of
the law for negotiability as provided for in
Section 1 of the Negotiable Instruments Law.
The documents provide that the amounts
deposited shall be repayable to the depositor.
And according to the document, the depositor
is the "bearer." The documents do not say that
the depositor is Angel de la Cruz and that the
amounts deposited are repayable specifically
to him. Rather, the amounts are to be
repayable to the bearer of the documents or,
for that matter, whosoever may be the bearer
at the time of presentment. However, petitioner
cannot recover on the CTDs. Although the
CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and
agreement between it and dela Cruz, as
ultimately ascertained, requires both delivery
and indorsement. In this case, there was no
indorsement as the CTDs were delivered not
as payment but only as a security for dela
Cruz' fuel purchases.
III. INDORSEMENT (First two cases,
Mark)
1. Vicente R. De Ocampo vs. Anita
Gatchalian [G.R. No. L-15126, November
30,1961]
En Banc, Labrador (J)
Facts: ​Anita Gatchalian was interested in
buying a car. Manuel Gonzales offered to her a
car owned by plaintiff. Gonzales claimed that
he was authorized by the plaintiff to sell the
car. Gonzales order defendant to issue a
cross-check to comply on showing interest in
buying the car. Gonzales promised to return
the check the next day.
When Gonzales never appeared after,
defendant issue a stop payment order on the
check. She found out that Gonzales used the
check as payment to plaintiff's clinic for his
wife's fees. Plaintiff now demands defendant
for payment of the check, in which defendant
refused citing that plaintiff is a not a holder in
due course.
The lower court held that defendant should pay
plaintiff.
Issue: ​Whether or not De Ocampo is a holder
in due course.
Ruling: ​The SC held that plaintiff is a not a
holder in due course. There were obvious
instances to show that the check was
negligently acquired like plaintiff having no
liability with defendant and that the check was
crossed. Plaintiff failed to exercise prudence
and caution. Plaintiff should have asked
questions to further inquire upon suspicion.
The presumption of good faith did not apply to
plaintiff because the defect was apparent on
the instruments face – it was not payable to
defendant or bearer.
2. Juanita Salas vs. Hon. Court of Appeals
and First Finance & Leasing Corporation
[G.R. No. 76788, January 22, 1980]
Third Division, Fernan (CJ)
Facts: ​Juanita Salas (Petitioner) bought a
motor vehicle from the Violago Motor Sales
Corporation (VMS) for as evidenced by a
promissory note. This note was subsequently
endorsed to Filinvest Finance & Leasing
Corporation (private respondent) which
financed the purchase.
Petitioner defaulted in her installments
allegedly due to a discrepancy in the engine
and chassis numbers of the vehicle delivered
to her and those indicated in the sales invoice,
certificate of registration and deed of chattel
mortgage, which fact she discovered when the
vehicle figured in an accident.
This failure to pay prompted private respondent
to initiate an action for a sum of money against
petitioner before the Regional Trial Court.
Issue: ​WON private respondent is a holder in
due course?
Ruling: YES. The PN was negotiated by
indorsement in writing on the instrument itself
payable to the Order of Filinvest Finance and
Leasing Corporation and it is an indorsement
of the entire instrument.
Under the circumstances, there appears to be
no question that Filinvest is a holder in due
course, having taken the instrument under the
following conditions:
[a] it is complete and regular upon its face;
[b] it became the holder thereof before it was
overdue, and without notice that it had
previously been dishonored;
[c] it took the same in good faith and for value;
and
[d] when it was negotiated to Filinvest, the
latter had no notice of any infirmity in the
instrument or defect in the title of VMS
Corporation.

Accordingly, respondent corporation holds the
instrument free from any defect of title of prior
parties, and free from defenses available to
prior parties among themselves, and may
enforce payment of the instrument for the full
amount thereof. This being so, petitioner
cannot set up against respondent the defense
of nullity of the contract of sale between her
and VMS.
3. Stelco Marketing Corp. vs. Court of
Appeals [GR 96160, 17 June 1992]
Second Division, Narvasa (J)
Facts: ​Stelco Marketing Corporation is
engaged in the distribution and sale to the
public of structural steel bars. On 7 different
occasions in September and October 1980, it
sold to RYL Construction, Inc. quantities of
steel bars of various sizes and rolls of G.I. wire.
These bars and wire were delivered at different
places at the indication of RYL Construction,
Inc. The aggregate price for the purchases was
P126,859.61. Although the corresponding
invoices issued by STELCO stipulated that
RYL would pay "COD" (cash on delivery), the
latter made no payments for the construction
materials thus ordered and delivered despite
insistent demands for payment by the former.
On April 4, 1981, RYL gave to Armstrong
Industries — described by STELCO as its
"sister corporation" and "manufacturing arm" —
a check drawn against Metrobank in the
amount of P126,129.86, numbered 765380
and dated 4 April 1981. That check was a
company check of another corporation,
Steelweld Corporation of the Philippines,
signed by its President, Peter Rafael Limson,
and its Vice-President, Artemio Torres. The
check was issued by Limson at the behest of
his friend, Romeo Y. Lim, President of RYL.
Romeo Lim had asked Limson for financial
assistance, and the latter had agreed to give
Lim a check only by way of accommodation,
"only as guaranty but not to pay for anything."
Why the check was made out in the amount of
P126,129.86 is not explained. The check was
actually issued in said amount ofP126,129.86,
and as already stated, was given by R.Y. Lim
to Armstrong, Industries, in payment of an
obligation. When the latter deposited the check
at its bank, it was dishonored because "drawn
against insufficient funds." When so deposited,
the check bore two (2) indorsements, that of
"RYL Construction," followed by that of
"Armstrong Industries." On account of the
dishonor of Metrobank Check 765380, and on
complaint of Armstrong Industries (through a
Mr. Young), Rafael Limson and Artemio Torres
were charged in the Regional Trial Court of
Manila with a violation of Batas Pambansa
Bilang 22. They were acquitted in a decision
rendered on 28 June 1984 "on the ground that
the check in question was not issued by the
drawer 'to apply on account for value,' it being
merely for accommodation purposes." That
judgment however conditioned the acquittal
with the pronouncement that "this is not
however to release Steelweld Corporation from
its liability under Sec. 29 of the Negotiable
Instruments Law for having issued it for the
accommodation of Romeo Lim."
Eleven months later — and some 4 years after
issuance of the check — in May, 1985,
STELCO filed with the Regional Trial Court of
Caloocan City a civil complaint against both
RYL and STEELWELD for the recovery of the
value of the steel bars and wire sold to and
delivered to RYL in the amount of
P126,129.86, plus 18% interest from 20 August
1980 and 25% of the total amount sought to be
recovered as and by way of attorney's fees. A
preliminary attachment was issued by the trial
court on the basis of the averments of the
complaint but was shortly dissolved upon the
filing of a counter-bond by STEELWELD. RYL
could no longer be located and could not be
served with summons. It never appeared. Only
STEELWELD filed an answer, under date of 16
July 1985. Judgment was rendered on 26 June
1986. The judgment sentenced Steelweld to
pay to Stelco the amount of P126,129.86 with
legal rate of interest from 9 May 1985, when
the case was instituted until fully paid, plus
another sum equivalent to 25% of the total
amount due as and for attorney's fees.
STELCO's motion for reconsideration was
denied by the Appellate Tribunal's resolution
dated 13 November 1990. STELCO appealed.
Issue [1]: Whether the fourth condition, i.e. as
to notice, for a holder in due course is
applicable to an accommodation party.
Held [1]: "A holder in due course," says the
law, "is a holder who has taken the instrument
under the following conditions: (a) That it is
complete and regular upon its face; (b) That he
became the holder of it before it was overdue,
and without notice that it had been previously
dishonored, if such was the fact; (c) That he
took it in good faith and for value; (d) That at
the time it was negotiated to him, he had no
notice of any infirmity in the instrument or
defect in the title of the persons negotiating it."
As regards an accommodation party (such as
STEELWELD), the fourth condition, i.e., lack of
notice of any infirmity in the instrument or
defect in title of the persons negotiating it, has
no application. This is because Section 29 of
the law above quoted preserves the right of
recourse of a "holder for value" against the
accommodation party notwithstanding that
"such holder, at the time of taking the
instrument, knew him to be only an
accommodation party."
Issue [2]: Whether STELCO ever became a
holder in due course of Check 765380, a
bearer instrument within the contemplation of
the Negotiable Instruments Law.
Held [2]: NO. It never did. There is no evidence
whatever that STELCO's possession of Check
765380 ever dated back to any time before the
instrument's presentment and dishonor. There
is no evidence whatsoever that the check was
ever given to it, or indorsed to it in any manner
or form in payment of an obligation or
assecurity for an obligation, or for any other
purpose before it was presented for payment.
On the contrary, STELCO never became a
holder for value and that "(n)owhere in the
check itself does the name of Stelco Marketing
appear as payee, indorsee or depositor
thereof." What the record shows is that: (1) the
STEELWELD company check in question was
given by its president to R.Y. Lim; (2) it was
given only by way of accommodation, to be
"used as collateral for another obligation;" (3) in
breach of the agreement, however, R.Y. Lim
indorsed the check to Armstrong in payment of
an obligation; (4) Armstrong deposited the
check to its account, after indorsing it; (5) the
check was dishonored. The record does not
show any intervention or participation by
STELCO in any manner or form whatsoever in
these transactions, or any communication of
any sort between STEELWELD and STELCO,
or between either of them and Armstrong
Industries, at any time before the dishonor of
the check. The record does show that after the
check had been deposited and dishonored,
STELCO came into possession of it in some
way, and was able, several years after the
dishonor of the check, to give it in evidence at
the trial of the civil case it had instituted against
the drawers of the check (Limson and Torres)
and RYL. Possession of a negotiable
instrument after presentment and dishonor, or
payment, is utterly inconsequential; it does not
make the possessor a holder for value within
the meaning of the law; it gives rise to no
liability on the part of the maker or drawer and
indorsers. It is clear from the relevant
circumstances that STELCO cannot be
deemed a holder of the check for value. It does
not meet two of the essential requisites
prescribed by the statute. It did not become
"the holder of it before it was overdue, and
without notice that it had been previously
dishonored," and it did not take the check "in
good faith and for value." Neither is there any
evidence whatever that Armstrong Industries,
to whom R.Y. Lim negotiated the check,
accepted the instrument and attempted to
encash it in behalf, and as agent of STELCO.
On the contrary, the indications are that
Armstrong was really the intended payee of the
check and was the party actually injured by its
dishonor; it was after all its representative (a
Mr. Young) who instituted the criminal
prosecution of the drawers, Limson and Torres,
albeit unsuccessfully.
4. Bataan Cigar and Cigarette Factory vs.
Court of Appeals [GR 93048, 3 March 1994]
Second Division, Nocon (J)
Facts​: Bataan Cigar & Cigarette Factory, Inc.
(BCCFI), a corporation involved in the
manufacturing of cigarettes, engaged one of its
suppliers, King Tim Pua George (George
King), to deliver 2,000 bales of tobacco leaf
starting October 1978. In consideration thereof,
BCCFI, on 13 July 1978 issued crossed checks
post dated sometime in March 1979 in the total
amount of P820,000.00. Relying on the
supplier's representation that he would
complete delivery within three months from 5
December 1978, BCCFI agreed to purchase
additional 2,500 bales of tobacco leaves,
despite the supplier's failure to deliver in
accordance with their earlier agreement. Again
BCCFI issued postdated crossed checks in the
total amount of P1,100,000.00, payable
sometime in September 1979. During these
times, George King was simultaneously
dealing with State Investment House, Inc.
(SIHI) On 19 July 1978, he sold at a discount
check TCBT 551826 bearing an amount of
P164,000.00, post dated 31 March 1979,
drawn by BCCFI, naming George King as
payee to SIHI. On December 19 and 26, 1978,
he again sold to SIHI checks TCBT 608967 &
608968, both in the amount of P100,000.00,
post dated September 15 & 30, 1979
respectively, drawn by BCCFI in favor of
George King. In as much as George King failed
to deliver the bales of tobacco leaf as agreed
despite BCCFI's demand, BCCFI issued on 30
March 1979, a stop payment order on all
checks payable to George King, including
check TCBT 551826. Subsequently, stop
payment was also ordered on checks TCBTs
608967 & 608968 on September 14 & 28,
1979, respectively, due to George King's failure
to deliver the tobacco leaves. Efforts of SIHI to
collect from BCCFI having failed, it instituted
the case for collection on three unpaid checks,
naming only BCCFI as party defendant. The
trial court pronounced SIHI as having a valid
claim being a holder in due course. It further
said that the non-inclusion of King Tim Pua
George as party defendant is immaterial in the
case, since he, as payee, is not an
indispensable party. The Court of Appeals
affirmed the decision of the trial court. BCCFI
filed the petition for review.
Issue​: Whether SIHI, a second indorser, a
holder of crossed checks, is a holder in due
course, to be able to from the drawer, BCCFI.
Held​: The Negotiable Instruments Law states
what constitutes a holder in due course, i.e. "A
holder in due course is a holder who has taken
the instrument under the following conditions:
(a) That it is complete and regular upon its
face; (b) That he became the holder of it before
it was overdue, and without notice that it had
been previously dishonored, if such was the
fact; (c) That he took it in good faith and for
value; (d) That at the time it was negotiated to
him he had no notice of any infirmity in the
instrument or defect in the title of the person
negotiating it." Section 59 of the NIL further
states that every holder is deemed prima facie
a holder in due course. However, when it is
shown that the title of any person who has
negotiated the instrument was defective, the
burden is on the holder to prove that he or
some person under whom he claims, acquired
the title as holder in due course. Crossing of
checks should put the holder on inquiry and
upon him devolves the duty to ascertain the
indorser's 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 Sec.
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. Herein, BCCFI's defense
in stopping payment is as good to SIHI as it is
to George King. Because, really, the checks
were issued with the intention that George King
would supply BCCFI with the bales of tobacco
leaf. There being failure of consideration, SIHI
is not a holder in due course. Consequently,
BCCFI cannot be obliged to pay the checks.
5. Atrium Management Corporation v. Court
of Appeals, G.R. No. 109491, February 28,
2001.
Facts:
Hi-Cement Corporation through its corporate
signatories, petitioner Lourdes M. de Leon,
treasurer, and the late Antonio de las Alas,
Chairman, issued checks in favor of E.T. Henry
and Co. Inc., as payee. E.T. Henry and Co.,
Inc., in turn, endorsed the four checks to
Atrium for valuable consideration. Enrique Tan
of E.T. Henry approached Atrium for financial
assistance, offering to discount four RCBC
checks in the total amount of P2 million, issued
by Hi-Cement in favor of E.T. Henry. Atrium
agreed to discount the checks, provided it be
allowed to confirm with Hi-Cement the fact that
the checks represented payment for petroleum
products which E.T. Henry delivered to
Hi-Cement. Upon presentment for payment,
the drawee bank dishonored all four checks for
the common reason “payment stopped”. As a
result thereof, Atrium filed an action for
collection of the proceeds of 4 PDC in the total
amount of 2M with RTC Manila. Judgment was
rendered in favor of Atrium ordering Lourdes
and Rafael de Leon, E.T. Henry and Co., and
Hi-Cement to pay Atrium the said amount plus
interest and attorneys fees. CA absolved
Hi-cement Corporation from liability. It also
ruled that since Lourdes was not authorized to
issue the subjects checks in favor of E.T.
Henry Inc., the said act was ultra vires.
Issue​: Whether the issuance of the questioned
checks was an ​ultra vires​ act;
Ruling​: Yes.
An ​ultra vires act is one committed outside the
object for which a corporation is created as
defined by the law of its organization and
therefore beyond the power conferred upon it
by law. The term ​“ultra vires” is “distinguished
from an illegal act for the former is merely
voidable which may be enforced by
performance, ratification, or estoppel, while the
latter is void and cannot be validated.
Personal liability of a corporate director, trustee
or officer along (although not necessarily) with
the corporation may so validly attach, as a rule,
only when:
 1. He assents (a) to a patently unlawful act
of the corporation, or (b) for bad faith or
gross negligence in directing its affairs,
or (c) for conflict of interest, resulting in
damages to the corporation, its
stockholders or other persons;
2. He consents to the issuance of watered
down stocks or who, having knowledge
thereof, does not forthwith file with the
corporate secretary his written objection
thereto;
3. He agrees to hold himself personally
and solidarily liable with the corporation;
or
4. He is made, by a specific provision of
law, to personally answer for his
corporate action.
In the case at bar, Lourdes M. de Leon and
Antonio de las Alas as treasurer and Chairman
of Hi-Cement were authorized to issue the
checks. However, Ms. de Leon was negligent
when she signed the confirmation letter
requested by Mr. Yap of Atrium and Mr. Henry
of E.T. Henry for the rediscounting of the
crossed checks issued in favor of E.T. Henry.
She was aware that the checks were strictly
endorsed for deposit only to the payee’s
account and not to be further negotiated. What
is more, the confirmation letter contained a
clause that was not true, that is, “that the
checks issued to E.T. Henry were in payment
of Hydro oil bought by Hi-Cement from E.T.
Henry”. Her negligence resulted in damage to
the corporation. Hence, Ms. de Leon may be
held personally liable therefor.
6​. ​Atrium Management Corporation v. Court
of Appeals, G.R. No. 109491, February 28,
2001. ​(diba Cely Yang dapat to?)
Facts:
Hi-Cement Corporation through its corporate
signatories, petitioner Lourdes M. de Leon,
treasurer, and the late Antonio de las Alas,
Chairman, issued checks in favor of E.T. Henry
and Co. Inc., as payee. E.T. Henry and Co.,
Inc., in turn, endorsed the four checks to
Atrium for valuable consideration. Enrique Tan
of E.T. Henry approached Atrium for financial
assistance, offering to discount four RCBC
checks in the total amount of P2 million, issued
by Hi-Cement in favor of E.T. Henry. Atrium
agreed to discount the checks, provided it be
allowed to confirm with Hi-Cement the fact that
the checks represented payment for petroleum
products which E.T. Henry delivered to
Hi-Cement. Upon presentment for payment,
the drawee bank dishonored all four checks for
the common reason “payment stopped”. As a
result thereof, Atrium filed an action for
collection of the proceeds of 4 PDC in the total
amount of 2M with RTC Manila. Judgment was
rendered in favor of Atrium ordering Lourdes
and Rafael de Leon, E.T. Henry and Co., and
Hi-Cement to pay Atrium the said amount plus
interest and attorneys fees. CA absolved
Hi-cement Corporation from liability. It also
ruled that since Lourdes was not authorized to
issue the subjects checks in favor of E.T.
Henry Inc., the said act was ultra vires.
Issue​: Whether the issuance of the questioned
checks was an ​ultra vires​ act;
Ruling​: Yes.
An ​ultra vires act is one committed outside the
object for which a corporation is created as
defined by the law of its organization and
therefore beyond the power conferred upon it
by law. The term ​“ultra vires” is “distinguished
from an illegal act for the former is merely
voidable which may be enforced by
performance, ratification, or estoppel, while the
latter is void and cannot be validated.
Personal liability of a corporate director, trustee
or officer along (although not necessarily) with
the corporation may so validly attach, as a rule,
only when:
 1. He assents (a) to a patently unlawful act
of the corporation, or (b) for bad faith or
gross negligence in directing its affairs,
or (c) for conflict of interest, resulting in
damages to the corporation, its
stockholders or other persons;
2. He consents to the issuance of watered
down stocks or who, having knowledge
thereof, does not forthwith file with the
corporate secretary his written objection
thereto;
3. He agrees to hold himself personally
and solidarily liable with the corporation;
or
4. He is made, by a specific provision of
law, to personally answer for his
corporate action.
In the case at bar, Lourdes M. de Leon and
Antonio de las Alas as treasurer and Chairman
of Hi-Cement were authorized to issue the
checks. However, Ms. de Leon was negligent
when she signed the confirmation letter
requested by Mr. Yap of Atrium and Mr. Henry
of E.T. Henry for the rediscounting of the
crossed checks issued in favor of E.T. Henry.
She was aware that the checks were strictly
endorsed for deposit only to the payee’s
account and not to be further negotiated. What
is more, the confirmation letter contained a
clause that was not true, that is, “that the
checks issued to E.T. Henry were in payment
of Hydro oil bought by Hi-Cement from E.T.
Henry”. Her negligence resulted in damage to
the corporation. Hence, Ms. de Leon may be
held personally liable therefor.
7. Republic Planters Bank V. CA G.R.
No. 93073 December 21, 1992
FACTS:
Shozo Yamaguchi (President/Chief Operating
Officer) and Fermin Canlas (Treasurer) by
virtue of Board Resolution of Worldwide
Garment Manufacturing, Inc were authorized
to apply for credit facilities with the Republic
Planters Bank in the forms of export advances
and letters of credit/trust receipts
accommodations.
9 promissory notes with Worldwide Garment
Manufacturing, Inc. was apparently rubber
stamped above the signatures of Yamaguchi
and Canlas were issued to Republic Planters
Bank.
December 20, 1982: Worldwide Garment
Manufacturing, Inc. changed its corporate
name to Pinch Manufacturing Corporation
February 5, 1982: Republic Planters filed a
complaint for the recovery of sums of money
Shozo Yamaguchi did not file an Amended
Answer and failed to appear at the scheduled
pre-trial conference despite due notice
Fermin Canlas denied having issued the
promissory notes as an officer of Pinch
Manufacturing Corporation and when he
issued said promissory notes in behalf of
Worldwide Garment Manufacturing, Inc., it was
in blank (typewritten entries not appearing
when he signed)
ISSUE: W/N Fermin Canlas is solidarily liable
with the other defendants, namely Pinch
Manufacturing Corporation and Shozo
Yamaguchi on the 9 promissory notes because
they are negotiable and ruled by the
Negotiable Instruments Law
HELD:
CA absolving Fermin Canlas is REVERSED
and SET ASIDE. Judgement is hereby
rendered declaring private respondent Fermin
Canlas jointly and severally liable on ​all ​9
promissory notes with the following sums and
at 16% interest per annum
Under the Negotiable instruments Law, a
persons who write their names on the face of
promissory notes are makers and are liable as
such.
Fermin Canlas, one of the co-makers of the
promissory notes, cannot escape liability
arising therefrom. It was 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 Severally
and jointly or solidarily liable.
"I promise to pay" is signed by 2 or more
persons, "I" ,We" , or "Either of us" promise to,
pay, when signed by two or more persons,
"and (in) his personal capacity" below the
signatures of the makers - immaterial and will
not affect to the liability of Fermin Canlas as a
joint and several debtor of the notes.
With or without it, he is primarily liable as a
co-maker of each of the notes and his liability
is that of a solidary debtor.
A change in the corporate name does not
make a new corporation, and whether affected
by special act or under a general law, has no
effect on the identity of the corporation, or on
its property, rights, or ​liabilities
The corporation continues, as before,
responsible in its new name for all debts or
other liabilities which it had previously
contracted or incurred.
As a general rule, officers or directors under
the old corporate name bear no personal
liability for acts done or contracts entered into
by officers of the corporation, if duly
authorized. Inasmuch as such officers acted in
their capacity as agent of the old corporation
and the change of name meant only the
continuation of the old juridical entity, the
corporation bearing the same name is still
bound by the acts of its agents if authorized by
the Board.
Where the agent signs his name but nowhere
in the instrument has he disclosed the fact that
he is acting in a representative capacity or the
name of the third party for whom he might have
acted as agent, the agent is personally liable to
take holder of the instrument and cannot be
permitted to prove that he was merely acting
as agent of another and parol or extrinsic
evidence is not admissible to avoid the agent's
personal liability.
incomplete stereotype printed form of
promissory notes generally used by
commercial banking institutions to be signed by
their clients in obtaining loans.
blank spaces to be filled up on material
particulars such as payee's name, amount of
the loan, rate of interest, date of issue and the
maturity date.
An incomplete instrument which has been
delivered to the borrower for his signature is
governed by Section 14 of the Negotiable
Instruments Law:
Sec. 14. ​Blanks: when may be filled.​ — Where
the instrument is wanting in any material
particular, the person in possesion thereof has
a ​prima facie ​authority to complete it by filling
up the blanks therein. ... In order, however, that
any such instrument when completed may be
enforced against any person who became a
party thereto prior to its completion, it must be
filled up strictly in accordance with the authority
given and within a reasonable time...
The notes were not incomplete instruments;
neither were they given to private respondent
Fermin Canlas in blank as he claims. Thus,
Section 14 of the NegotiabIe Instruments Law
is not applicable.
8. Papa v. Valencia
G.R. No. 105188 January 23, 1998
FACTS: ​On June 15 a parcel of land was
allegedly sold to private respondent Pearroyo
by petitioner acting as attorney-in-fact of Anne
Butte. The purchaser, through Valencia, made
a check payment in the amount of P40,000 and
in cash, P5,000. Both were accepted by
petitioner as evidenced by various receipts.
Prior to the alleged sale, the said property,
together with other properties of Butte, had
been mortgaged by her to the Associated
Banking Corporation. Butte passed away after
the sale but before the release of the
properties which prompted the private
respondent Penarroyo to demand that the title
to the property be conveyed to him, however
the bank refused. Upon release of the
properties, petitioner refused and failed to
deliver the title to the property. Hence, private
respondents filed a suit for specific
performance against the petitioner. The lower
court ruled in favor of the private respondents
and ordered herein petitioner the conveyance
or the property or if not, its payment. The
petitioner appealed the lower court's decision
alleging that the sale was not consummated as
he never encashed the check given as part of
the purchase price. The Court of Appeals
affirmed with modifications the lower court's
decision that there was a consummated sale of
the subject property.
ISSUE: ​Whether or not the check is a valid
tender of payment
HELD: Yes​. While it is true that the delivery of
check produces payment only when encashed
(pursuant to Art. 1249, Civil Code), the rule is
otherwise if the debtor is prejudiced by the
delay in presentment. In this case, it is an
undisputed fact that respondents Valencia and
Pearroyo had given petitioner Myron C. Papa
the amounts of Five Thousand Pesos
(P5,000.00) in cash and Forty Thousand Pesos
(P40,000.00) in check, in payment of the
purchase price of the subject lot. Granting that
petitioner never encashed the check, his failure
to do so for more than ten (10) years
undoubtedly resulted in the impairment of the
check through his unreasonable and
unexplained delay. Check acceptance implied
an undertaking of due diligence in presenting it
for payment. If the person who receives it
sustains loss by want of this diligence, this will
operate as actual payment of the debt or
obligation for which the check was given. The
debtor cannot now be held liable if
non-presentment of the check was through the
fault of the creditor. The payee of a check
would be a creditor if its non-payment is
caused by his negligence, payment will be
deemed effected and the obligation for which
the check was given as conditional payment
will be discharged.
9. BPI v. Suarez
G.R. No. 167750, March 15, 2010
Facts: ​Reynaldo Suarez, a lawyer, used to
maintain both savings and current account with
petitioner in its Ermita branch. Sometime in
1997, respondent had a client who wanted to
buy several parcels of land in Tagaytay but the
latter did not want to deal directly with the
owners of said land. In accordance with his
client’s instruction, Suarez transacted with the
owners of the Tagaytay properties, making it
appear that he was the buyer of the lots. As
regards the payment of the purchase money,
Suarez and his client made an arrangement
such that Suarez’s client would deposit the
money in Suarez’s BPI account and then,
Suarez would issue checks to the sellers.
Suarez’s client deposited a Rizal Commercial
Banking Corporation (RCBC) check with a face
value of ₱19,129,100, representing the total
consideration of the sales, in BPI Pasong
Tamo Branch to be credited to Suarez’s
current account in BPI Ermita Branch. Aware
that a check has 3-days clearing time, Suarez'
assistant called the bank which confirmed that
the said amount had been credited to his
account on that same day. Relying on this
confirmation, Suarez issued five (5) checks in
the name of the sellers. Unfortunately, all
checks were dishonored due to insufficient
funds. A penalty amounting P57,000 was also
debited from his account. The checks were
dishonored despite the assurance by RCBC,
the drawee bank that the amount has been
debited from the account of the drawee. On top
of this, the bank noted on the checks 'DAIF'
(drawn against insufficient fund) and not
'DAUD'' (drawn against uncollected deposit).
The bank offered to reverse the penalty but
denied Suarez claim for damages. Suarez
rejected this offer hence the case filed for
damages. The lower court ruled in favor of
Suarez and awarded actual, moral, and
exemplary damages. BPI appealed but the
Court of Appeals affirmed the lower court
ruling. The CA ruled that the bank was
negligent in handling the accounts of the
respondent hence the latter's entitlement to
damages.
Issue: Whether or not petitioner bank is
liable for its negligence in handling the
respondent's account
Held: No​. BPI was not negligent because it
was justified in dishonoring the checks for lack
of sufficient funds in Suarez account. There
was no sufficient evidence to prove that BPI
conclusively confirmed the same-day crediting
of the amount of the check to Suarez account.
While BPI has the discretion to disregard the
3-day clearing policy, Suarez failed to prove his
entitlement to such privilege. Considering that
there was no binding representation on BPI’s
part as regards the same-day crediting of the
RCBC check, no negligence can be ascribed to
BPI’s dishonor of the checks precisely because
BPI was justified in dishonoring the checks for
lack of available funds in Suarez’s account.
However, BPI mistakenly marked the
dishonored checks with "drawn against
insufficient funds (DAIF), " instead of "drawn
against uncollected deposit (DAUD). Still, the
award of actual damages is without basis since
BPI is justified in dishonoring the checks for
being drawn against uncollected deposit,
hence BPI can rightfully impose the said
penalty charges against Suarez' account. The
award of moral damages has no basis because
Suarez failed to prove that his claimed injury
was proximately caused by the erroneous
marking of the 'DAIF' on the checks. Suarez is
however entitled to nominal damages due to
BPI's failure to exercise the diligence required
as the bank's business is deemed to be
affected with public interest. The bank must at
all times maintain a high level of
meticulousness and should guard against
injury attributable to negligence or bad faith on
its part. Suarez therefore has the right to
expect a high level of care and and diligence
from BPI.
10. FEBTC vs ​GOLD PALACE JEWELLERY
CO
FACTS:
On June 1998, Samuel Tagoe, a foreigner,
purchased from Gold Palace Jewellery Co.'s
(Gold Palace's) store at SM-North EDSA
several pieces of jewelry valued at P258,000
paid with Foreign Draft issued by the United
Overseas Bank (Malaysia) to Land Bank of the
Philippines, Manila (LBP) for P380,000. Teller
of Far East Bank, respondent’s next door
tenant, informed Julie Yang-Go (manager of
Gold Palace) that a foreign draft has similar
nature to a manager's check, but advised her
not to release the pieces of jewelry until the
draft had been cleared. Yang issued Cash
Invoice so the jewelries can be released. Yang
issued Cash Invoice to the foreigner, asked
him to come back, and informed him that the
pieces of jewelry would be released when the
draft had already been cleared. ​Respondent
Julie Yang-Go, the manager of Gold Palace,
consequently deposited the draft in the
company's account with the aforementioned
Far East branch on June 2, 1998.
Subsequently, it was cleared hence, the
foreigner eventually returned to claim the
purchased goods. Yang released the pieces of
jewelry and gave him his change -- a Far East
Check of P122,000 paid by the bank. On June
26, 1998, LBP informed Far East that the
Foreign Draft had been materially altered from
P300 to P300,000 and that it was returning the
same. Far East refunded the amount to LBP
and debit only P168,053.36 of the amount left
in Gold Palace' account without prior written
notice to the account holder. Far East only
notified by phone the representatives of the
Gold Palace. Far East demanded from Gold
Palace the payment of balance and upon
refusal an action for sum of money in the RTC.
The trial court ruled in favor of Far East on the
basis that Gold Palace was liable under the
liabilities of a general indorser. CA, however,
reversed RTC’s ruling since Far East failed to
undergo the proceedings on the protest of the
foreign draft or to notify Gold Palace of the
draft's dishonor; thus, Far East could not
charge Gold Palace on its secondary liability as
an indorser.
ISSUE: WON Gold Palace should be liable for
the altered Foreign Draft
HELD: NO. Act No. 2031, or the Negotiable
Instruments Law (NIL), explicitly provides that
the acceptor, by accepting the instrument,
engages that he will pay it ​according to the
tenor of his acceptance.​ This provision applies
with equal force in case the drawee pays a bill
without having previously accepted it. LBP
was liable on its payment of the check
according to the tenor of the check at the time
of payment, which was the raised amount.
Gold Palace was not a participant in the
alteration of the draft, was not negligent, and
was a holder in due course. LBP, having the
most convenient means to correspond with
UOB, did not first verify the amount of the draft
before it cleared and paid the same. Gold
Palace had no facility to ascertain with the
drawer, UOB Malaysia, the true amount in the
draft. It was left with no option but to rely on the
representations of LBP that the draft was good.
Gold Palace is protected by Section 62 of the
NIL, its collecting agent, Far East, should not
have debited the money paid by the drawee
bank from respondent company's account.
When Gold Palace deposited the check with
Far East, it, under the terms of the deposit and
the provisions of the NIL, became an agent of
the Gold Palace for the collection of the
amount in the draft. The subsequent payment
by the drawee bank and the collection of the
amount by the collecting bank closed the
transaction insofar as the drawee and the
holder of the check or his agent are concerned,
converted the check into a mere voucher, and,
as already discussed, foreclosed the recovery
by the drawee of the amount paid. As the
transaction in this case had been closed and
the principal-agent relationship between the
payee and the collecting bank had already
ceased, the latter in returning the amount to
the drawee bank was already acting on its own
and should now be responsible for its own
actions.
11. Cesar V. Areza and Lolita B. Areza vs.
Express Savings Bank, Inc. and Michael
Potenciano
G.R. No. 176697
September 10, 2014
Perez, J.
FACTS:
 Petitioners maintained two bank deposits
with Express Savings Bank (ESB). In the course of
their business, Gerry Mambuhay paid them
Philippine Veterans Affairs Office (PVAO) checks,
drawn against Philippine Veterans Bank (drawee)
amounting to 1,800,000.00 pesos.
Consequently, petitioners deposited the
checks in their savings account. ESB, in turn,
deposited the checks with its depository bank,
Equitable-PCI Bank, which honored the checks.
Sometime in July 2000, the checks were returned by
PVAO to the drawee on the ground that the amount
on the face of the checks was altered. The drawee
returned the checks to Equitable-PCI Bank.
Equitable-PCI Bank then informed ESB that the
drawee dishonored the checks on the ground of
material alterations. When the material alteration
was discovered, the checks were already cleared by
the drawee. Three months had lapsed before the
drawee dishonored the checks and returned them to
Equitable-PCI. Equitable-PCI initially files a protest
with the Philippine Clearing House where the latter
ruled in favor of the drawee. Upon such resolution,
Equitable-PCI Bank debited the aggregate sum of
the checks to the deposit accounts of the petitioners.
The petitioners then issued a check in the amount of
P500,000.00 but it was dishonored by the Bank for
the reason “Deposit Under Hold”. Petitioners
contend that the Bank unilaterally and unlawfully
put their account on hold. The petitioners requested
that the Bank honor the check but were refused and
closed one of the accounts of the petitioners and
retained the Saving Account where a certain of
money was transferred to the latter.
Due to the alleged groundless dishonoring of
checks, the petitioners filed a suit against the Bank.
ISSUE:
WON the Bank have the right to debit
P1.8M from the bank of the petitioners when the
drawee dishonored the checks issued by the
depositary bank of ESB on the ground of material
alterations.
RULING:
No​, Express Savings Bank cannot debit the
savings account of petitioners.
When the drawee bank pays a materially altered
check, it violates the terms of the check, as well as
its duty to charge its client’s account only for bona
fide disbursements he had made. If the drawee did
not pay according to the original tenor of the
instrument, as directed by the drawer, then it has no
right to claim reimbursement from the drawer,
much less, the right to deduct the erroneous
payment it made from the drawer’s account which it
was expected to treat with utmost fidelity. The
drawee, however, still has recourse to recover its
loss. It may pass the liability back to the collecting
bank which is what the drawee bank exactly did in
this case. It debited the account of Equitable-PCI
Bank for the altered amount of the checks.
In check transactions, the
depositary/collecting bank or last endorser 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 drawee is an assertion that the party
making the presentment has done its duty to
ascertain the genuineness of the endorsements. If
any of the warranties made by the
depositary/collecting bank turns out to be false, then
the drawee bank may recover from it up to the
amount of the check.
As collecting banks, the Bank and Equitable-PCI
Bank are both liable for the amount of the
materially altered checks. Since Equitable-PCI
Bank is not a party to this case and the Bank
allowed its account with Equitable-PCI Bank to be
debited, it has the option to seek recourse against
the latter in another forum.
12. Ang Tiong vs. Lorenzo Ting
G.R. No. L-26767
February 22, 1968
Castro, J.
FACTS:
In 1960, Lorenzo Ting issued Philippine Bank of
Communications check payable to "cash or bearer".
With Felipe Ang's signature at the back thereof, the
instrument was received by Ang Tiong who
thereafter presented it to the drawee bank for
payment. The bank dishonored it. Ang Tiong then
made written demands on both Lorenzo Ting and
Felipe Ang that they make good the amount
represented by the check. These demands went
unheeded which prompted petitioner to file a suit
for collection. The trial court ruled in favor of
petitioner. Felipe Ang then elevated the case to the
Court of Appeals contending that he is a mere
accommodation party.
ISSUE:
WON Felipe is an accommodation party.
RULING:
No. ​Felipe Ang is a general indorser as
provided under Section 63 of the NIL, in the
absence of any indication by appropriate words his
intention to be bound in some other capacity.
Even on the assumption that Felipe Ang is a mere
accommodation party, as he professes to be, he is
nevertheless, by the clear mandate of section 29 of
the Negotiable Instruments Law, yet "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." The
accommodation party is liable to a holder for value
as if the contract was not for accommodation. It is
not a valid defense that the accommodation party
did not receive any valuable consideration when he
executed the instrument. Nor is it correct to say that
the holder for value is not a holder in due course
merely because at the time he acquired the
instrument he knew that the indorser was only an
accommodation party.
That Felipe Ang, again assuming him to be an
accommodation indorser, 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
accommodation indorser and accommodated party.
So that the fact that Felipe Ang stands only as a
surety in relation to the maker, granting this to be
true for the sake of argument, is immaterial to the
claim of Ang Tiong, and does not a whit diminish
nor defeat the rights of the latter who is a holder for
value. The liability of Felipe Ang remains primary
and unconditional. To sanction Felipe Ang's theory
is to give unwarranted legal recognition to the
patent absurdity of a situation where an indorser,
when sued on an instrument by a holder in due
course and for value, can escape liability on his
indorsement by the convenient expedient of
interposing the defense that he is a mere
accommodation indorser.
13. MARIA TUAZON v. HEIRS OF
BARTOLOME RAMOS
G.R. No. 156262, July 14, 2005, Panganiban,
J.
FACTS:
Respondent alleged that between the period of
May 2, 1988 and June 5, 1988, spouses
Leonila and Maria Tuazon purchased a total of
8, 326 cavans of rice from Ramos. Only 4,437
cavans have paid for so far, leaving unpaid 3,
889 cavans valued at P1, 211,919.00. In the
payment therefor, the spouses Tuazon issued
Traders Royal Bank checks. But when these
checks were encashed, all of the checks
bounced due to insufficiency of funds.
Defendant denied having purchased rice from
Ramos. They alleged that it was Magdalena
Ramos, wife of Bartolome Ramos, who owned
and traded the merchandise and Maria Tuazon
was merely here agent. They argued that it
was Evangeline Santos who was the buyer of
the rice and issued the checks to Maria Tuazon
as payment therefor. ​In good faith, the checks
were received by petitioner from Evangeline
Santos and turned over to Ramos without
knowing that these were not funded. They
assert that they were merely agents and
should not be held answerable.
The corresponding civil and criminal cases
were filed by respondents against Spouses
Tuazon.
The RTC ruled against Santos. The CA held
that inasmuch as all the checks had been
indorsed by Maria Tuazon, who thereby
became liable to subsequent holders for the
amounts stated in those checks, there was no
need to implead Santos.
ISSUE: Whether or not Tuazon is liable as an
indorser
RULING: ​NO. The court held that respondents'
cause of action is clearly founded on
petitioners' failure to pay the purchase price of
the rice. The trial court held that Petitioner
Maria Tuazon had indorsed the questioned
checks in favor of respondents, in accordance
with Sections 31 and 63 of the Negotiable
Instruments Law. That Santos was the drawer
of the checks is thus immaterial to the
respondents' cause of action.
As indorser, Petitioner Maria Tuazon warranted
that upon due presentment, the checks were to
be accepted or paid, or both, according to their
tenor; and that in case they were dishonored,
she would pay the corresponding amount. After
an instrument is dishonored by nonpayment,
indorsers cease to be merely secondarily
liable; they become principal debtors whose
liability becomes identical to that of the original
obligor. The holder of a negotiable instrument
need not even proceed against the maker
before suing the indorser​.
14. ALLIED BANKING CORPORATION vs.
BPI
G.R. No. 188363, February 27, 2013,
Villarama Jr. J.
FACTS:
A check in the amount of P1M payable to
MMGI was presented for deposit and accepted
at petitioner’s Kawit Branch. The check,
post-dated “Oct. 9, 2003,” was drawn against
the account of Silva with respondent BPI
Bel-Air Branch. The check was cleared by
respondent and petitioner credit the account of
MMGI with P1M. MMGI’s account was closed
and all the funds therein were withdrawn. A
month later, Silva discovered the debit of P1M
from his account. In response to Silva’s
complaint, respondent credit his account with
the aforesaid sum.
On March 21, 2003, respondent returned a
photocopy of the check to petitioner for the
reason: “Postdated.” Petitioner, however,
refused to accept and sent back to respondent
a photocopy of the check. The check was
tossed several times from petitioner to
respondent. PCHC directed the respondent to
deliver the original check and informed it of
PCHC’s authority under Clearing House
Operating Memo (CHOM) No. 279 dated to
split 50/50 the amount of the check subject of a
“Ping-pong” controversy which shall be
implement thru the issuance of Debit
Adjustment Tickets against the outward
demands of the banks involved.
However, it was petitioner who filed a
complaint before the Arbitration Committee,
asserting that respondent should solely bear
the entire face value of the check due to its
negligence in failing to return the check to
petitioner.
In its Answer with Counterclaims, respondent
charged petitioner with gross negligence for
accepting the post-dated check in the first
place. It contended that petitioner’s admitted
negligence was the sole and proximate cause
of the loss.
The Arbitration Committee rendered its
Decision in favor of petitioner and against the
respondent. Finding both parties negligent in
the performance of their duties, the Committee
applied the doctrine of “Last Clear Chance”
and ruled that the loss should be shouldered
by respondent alone​. The RTC affirmed. ​The
CA set aside the RTC judgment and ruled for a
60-40 sharing of the loss as it found petitioner
guilty of contributory negligence in accepting
what is clearly a post-dated check. The CA
found that petitioner’s failure to notice the
irregularity on the face of the check was a
breach of its duty to the public and a telling
sign of its lack of due diligence in handling
checks coursed through it.
ISSUE: Whether or not the doctrine of “Last
Clear Chance” apply in this case
RULING: YES. The doctrine of last clear
chance, stated broadly, is that the negligence
of the plaintiff does not preclude a recovery for
the negligence of the defendant where it
appears that the defendant, by exercising
reasonable care and prudence, might have
avoided injurious consequences to the plaintiff
notwithstanding the plaintiff’s negligence. In
this case, the evidence clearly shows that the
proximate cause of the unwarranted
encashment of the subject check was the
negligence of respondent who cleared a
post-dated check sent to it thru the PCHC
clearing facility without observing its own
verification procedure.
Respondent could have then promptly returned
the check and with the check thus dishonored,
petitioner would have not credited the amount
thereof to the payee’s account. Thus,
notwithstanding the antecedent negligence of
the petitioner in accepting the post-dated check
for deposit, it can seek reimbursement from
respondent the amount credited to the payee’s
account covering the check. ​Admittedly,
petitioner’s acceptance of the subject check for
deposit despite the one year postdate written
on its face was a clear violation of established
banking regulations and practices. In such
instances, payment should be refused by the
drawee bank and returned through the PCHC
within the 24-hour reglementary period. As
aptly observed by the CA, petitioner’s failure to
comply with this basic policy regarding
post-dated checks was “a telling sign of its lack
of due diligence in handling checks coursed
through it.
(Actually, di ko alam bakit to naging under ng
indorsement L)
15. MELVA THERESA ALVIAR GONZALES
vs. RIZAL COMMERCIAL BANKING
CORPORATION
G.R. No. 156294, November 29, 2006,
Garcia, J.
FACTS:
Gonzales was an employee of RCBC as
New Accounts Clerk. A foreign check in the
amount of $7,500 was drawn by Dr. Don
Zapanta against the drawee bank Wilshire
Center Bank payable to Gonzales’ mother,
Alviar. Alviar then endorsed the check.
Gonzales presented the foreign check to Olivia
Gomez, the RCBC’s Head of Retail Banking.
Gomez requested Gonzales to endorse it
which she did. Olivia Gomez then acquiesced
to the early encashment of the check and
signed the check but indicated thereon her
authority of up to P17,500.00 only. Gomez
directed Gonzales to present the check to
RCBC employee Ramos and procure his
signature and then presented the same to
Zornosa, Supervisor of the Remittance section,
who after scrutinizing the entries and signature
therein authorized its encashment. Gonzales
then received its peso equivalent of
P155,270.85. RCBC then tried to collect the
amount of the check with the drawee bank and
were dishonored because of irregular
indorsement. RCBC sent the check to the
drawee bank, but this time the check was
returned due to “account closed.” Unable to
collect, RCBC demanded from Gonzales the
payment of the peso equivalent of the check
that she received. RCBC then filed a complaint
for a sum of money against Eva Alviar, Melva
Theresa Alviar-Gonzales and the latter’s
husband Gino Gonzales. RTC ruled in favor of
the plaintiff and against defendant Alviar as
principal debtor and Gonzales as guarantor.
On appeal, CA affirmed.
ISSUE: Whether or not Eva Alviar and Melva
Theresa Alvia-Gonzales is liable as general
endorsers
RULING: ​NO. While the foreign drawee bank
did not specifically state which among the four
signatures found on the dorsal portion of the
check made the check irregularly endorsed, it
is absolutely undeniable that only the signature
of Olivia Gomez, an RCBC employee, was a
qualified endorsement because of the phrase
"up to ₱17,500.00 only." There can be no other
acceptable explanation for the dishonor of the
foreign check than this signature of Olivia
Gomez with the phrase "up to ₱17,500.00 only"
accompanying it. This Court definitely agrees
with the petitioner that the foreign drawee bank
would not have dishonored the check had it not
been for this signature of Gomez with the same
phrase written by her.
Under Section 66, the warranties for which
Alviar and Gonzales are liable as general
endorsers in favor of subsequent endorsers
extend only to the state of the instrument at the
time of their endorsements, specifically, that
the instrument is genuine and in all respects
what it purports to be; that they have good title
thereto; that all prior parties had capacity to
contract; and that the instrument, at the time of
their endorsements, is valid and subsisting.
This provision, however, cannot be used by the
party which introduced a defect on the
instrument, such as respondent RCBC in this
case, which qualifiedly endorsed the same, to
hold prior endorsers liable on the instrument
because it results in the absurd situation
whereby a subsequent party may render an
instrument useless and inutile and let innocent
parties bear the loss while he himself gets
away scot-free.
RCBC, which caused the dishonor of the check
upon presentment to the drawee bank, through
the qualified endorsement of its employee,
Olivia Gomez, cannot hold prior endorsers,
Alviar and Gonzales in this case, liable on the
instrument. Moreover, it is a well-established
principle in law that as between two parties, he
who, by his acts, caused the loss shall bear the
same. RCBC, in this instance, should therefore
bear the loss.
 b. ​WON Ong is barred to recover money from
IV. FORGERY
Ruling:
1. WESTMONT BANK (FORMERLY
​ a. YES. Pursuant to Section 23 of the NIL,
ASSOCIATED BANKING CORP.),
PETITIONER, VS. EUGENE ONG,
RESPONDENT.
[ G.R. No. 132560, January 30, 2002 ]
Facts: ​Eugene Ong maintained a current
account with Associated Banking Corporation,
now known as Westmong Bank. He sold
certain shares of stocks through Island
Securities Corporation. To pay Ong, Island
Securities purchased two (2) Pacific Banking
Corporation manager’s checks issued in the
name of Eugene Ong as payee. Before Ong
could get hold of the checks, his friend,
Paciano Tanlimco, got hold of the checks and
deposited it in his own account in Westmont
Bank by forging Ong’s signature. Even though
Ong’s specimen signature was on file,
petitioner accepted and credited both checks to
the account of Tanlimco, without verifying the
‘signature indorsements’ appearing at the back
thereof. Tanlimco then immediately withdrew
the money and absconded. Instead of going
straight to the bank to stop or question the
payment, Ong first sought the help of
Tanlimco’s family to recover the amount.
Later, he reported the incident to the Central
Bank, which like the first effort, unfortunately
proved futile.
As a result, Ong filed a complaint against
Westmont to collect the value of the checks on
the ground of the negligence of the bank. The
bank argued that Ong never received the
checks and thus, he did not acquired
ownership of these checks. The RTC ruled in
favor of Ong. The CA affirmed in toto the
decision of the RTC.
Issues:
a. ​WON Ong has a cause of action against
Westmont Bank
Westmont Bank due to laces
since the signature of the payee (Ong)
was forged, such signature should be
deemed as inoperative and ineffectual.
As a general rule, a bank or corporation
who has obtained possession of a check
upon an unauthorized or forged
indorsement of the payee’s signature and
who collects the amount of the check from
the drawee, is liable for the proceeds
thereof to the payee or other owner,
notwithstanding that the amount has been
paid to the person from whom the check
was obtained. The position of the bank
taking the check on the forged or
unauthorized indorsement is the same as if
it had taken the check and collected the
money without indorsement at all and the
act of the bank amounts to conversion of
the check.
Furthermore, even if the absence of
delivery is considered, such consideration
is not material. The rationale for this view is
that in previous cases the plaintiff uses one
action to reach, by a desirable short cut, the
person who ought in any event to be
ultimately liable as among the innocent
persons involved in the transaction. In
other words, the payee ought to be allowed
to recover directly from the collecting bank,
regardless of whether the check was
delivered to the payee or not.
Banks are engaged in a business
impressed with public interest, and it is their
duty to protect in return their many clients
and depositors who transact business with
them. However, Westmont Bank apparently
failed to a verification or, what is worse did
so but, chose to disregard the obvious
dissimilarity of the signatures. The first
 omission makes it guilty of gross
negligence; the second of bad faith. In
either case, defendant is liable to plaintiff
for the proceeds of the checks in question.
b. NO. It cannot be said that respondent
sat on his rights. He immediately acted
after knowing of the forgery by
proceeding to seek help from the
Tanlimco family and later the Central
Bank, to remedy the situation and
recover his money from the forger,
Paciano Tanlimco. Only after he had
exhausted possibilities of settling the
matter amicably with the family of
Tanlimco and through the CB, about five
months after the unlawful transaction
took place, did he resort to making the
demand upon the petitioner and
eventually before the court for recovery
of the money value of the two checks.
These acts cannot be construed as
undue delay in or abandonment of the
assertion of his rights.
2. ASSOCIATED BANK and CONRADO
​ The effects therefore of crossing a check relate
CRUZ v. HON. COURT OF APPEALS,
and MERLE V. REYES, doing
business under the name and style
"Melissa's RTW”
G.R. No. 89802 May 7, 1992
Facts: ​Merle Reyes is engaged in the business
of ready-to-wear garments under the firm name
“Melissa’s RTW.” Some of her customers
include Robinson's Department Store, Payless
Department Store, Rempson Department
Store, and the Corona Bazaar. These
companies issued in payment of their
respective accounts 6 crossed checks payable
to Melissa's RTW.
When she went to these companies to collect
on what she thought were still unpaid
accounts, she was informed of the issuance of
the 6 crossed checks. Further inquiry revealed
that the said checks had been deposited with
the Associated Bank and subsequently paid by
it to one Rafael Sayson, one of its "trusted
depositors," in the words of its branch manager
and co-petitioner, Conrado Cruz, Sayson had
not been authorized by the private respondent
to deposit and encash the said checks.
Thus, Reyes sued Associated Bank. The RTC
ruled in favor of Reyes. The Bank appealed the
decision of the RTC on the ground that Reyes
had no cause of action. The CA affirmed the
decision of the RTC.
Issue: ​WON Reyes has a cause of action
against the bank
Ruling: ​YES. The effects of crossing a check
are: (1) that the check may not be encashed
but only deposited in the bank; (2) that the
check may be negotiated only once –– to one
who has an account with a bank; and (3) that
the act of crossing the check serves as a
warning to the holder that the check has been
issued for a definite purpose so that he must
inquire if he has received the check pursuant to
that purpose."
to the mode of its presentment for payment.
Under Sec. 72 of the Negotiable Instruments
Law, presentment for payment, to be sufficient,
must be made by the holder or by some person
authorized to receive payment on his behalf.
Who the holder or authorized person is
depends on the instruction stated on the face
of the check.
The six checks in the case at bar had been
crossed and issued "for payee's account only."
This could only signify that the drawers had
intended the same for deposit only by the
person indicated, to wit, Melissa's RTW.
The subject checks were accepted for deposit
by the Bank for the account of Rafael Sayson
although they were crossed checks and the
payee was not Sayson but Melissa's RTW. The
Bank stamped thereon its guarantee that "all
prior endorsements and/or lack of
endorsements (were) guaranteed." By such
deliberate and positive act, the Bank had for all
legal intents and purposes treated the said
checks as negotiable instruments and,
accordingly, assumed the warranty of the
endorser.
The bank was negligent when they permitted
the encashment of the checks by Sayson. The
Bank should have first verified his right to
endorse the crossed checks, of which he was
not the payee, and to deposit the proceeds of
the checks to his own account. The Bank was
by reason of the nature of the checks put upon
notice that they were issued for deposit only to
the private respondent's account. Its failure to
inquire into Sayson's authority was a breach of
a duty it owed to the private respondent. . The
failure of the Bank to make this inquiry was a
breach of duty that made it liable to the private
respondent for the amount of the checks.
3. ​RAMON K. ILUSORIO, PETITIONER,
VS. HON. COURT OF APPEALS, AND
THE MANILA BANKING
CORPORATION, RESPONDENTS.
[ G.R. No. 139130, November 27, 2002 ]
Facts: ​Ilusorio was a prominent businessman
who is running several corporations and was
depositor in good standing of respondent bank,
Manila Banking Corporation. As he was then
running about 20 corporations, and was going
out of the country a number of times, petitioner
entrusted to his secretary, Katherine E.
Eugenio, his credit cards and his checkbook
with blank checks. It was also Eugenio who
verified and reconciled the statements of said
checking account.
Between the dates September 5, 1980 and
January 23, 1981, Eugenio was able to encash
and deposit to her personal account about
seventeen (17) checks drawn against the
account of the petitioner at the respondent
bank, with an aggregate amount of
P119,634.34. Ilusorio did not bother to check
his statement of account until a business
partner apprised him that he saw Eugenio use
his credit cards. Ilusorio fired Eugenio
immediately, and instituted a criminal action
against her for estafa thru falsification. On the
other hand, the bank, through an affidavit
executed by its employee, Razaon, also lodged
a complaint for estafa through falsification of
commercial documents against Eugenio on the
basis that Ilusorio’s signatures were forged.
Ilusorio then requested the respondent bank to
credit back and restore to its account the value
of the checks which were wrongfully encashed
but respondent bank refused. Hence, petitioner
filed the instant case.
Manila Bank sought the expertise of the
National Bureau of Investigation (NBI) in
determining the genuineness of the signatures
appearing on the checks. However, the NBI
informed the trial court that they could not
conduct the desired examination for the reason
that the standard specimens submitted were
not sufficient for purposes of rendering a
definitive opinion. The NBI then suggested that
petitioner be asked to submit seven (7) or more
additional standard signatures executed before
or about, and immediately after the dates of the
questioned checks. Ilusorio, however, failed to
comply with this request.
The RTC ruled in favor of the bank. The CA
affirmed the decision of the RTC.
Issues:
a. ​WON Ilusorio has a cause of action
against the bank
b. ​WON the filing of Manila Bank of a case
for estafa against Eugenio would estop
it from asserting the fact that forgery has
not been establihed
Ruling:
a. NO. To be entitled to damages,
petitioner has the burden of proving
negligence on the part of the bank for
 failure to detect the discrepancy in the
signatures on the checks. It is
incumbent upon petitioner to establish
the fact of forgery, ​i.e.​, by submitting his
specimen signatures and comparing
them with those on the questioned
checks. Curiously though, petitioner
failed to submit additional specimen
signatures as requested by the National
Bureau of Investigation from which to
draw a conclusive finding regarding
forgery.
Furthermore, consistently, the CA and the
RTC found that Manila Bank employees
exercised due diligence in cashing the
checks. The bank’s employees in the
present case did not have a hint as to
Eugenio’s ​modus operandi because she
was a regular customer of the bank, having
been designated by petitioner himself to
transact in his behalf.
It was Ilusorio and not the bank who was
negligent. He accorded is secretary unusual
degree of trust and unrestricted access to
his credit cards, passbooks, check books,
bank statements including custody and
possession of cancelled checks and
especially, reconciliation of his accounts.
Petitioner’s failure to examine his bank
statements appears as the proximate cause
of his own damage. Proximate cause is that
cause, which, in natural and continuous
sequence, unbroken by any efficient
intervening cause, produces the injury, and
without which the result would not have
occurred.​[21] In the instant case, the bank
was not shown to be remiss in its duty of
sending monthly bank statements to
petitioner so that any error or discrepancy
in the entries therein could be brought to
the bank’s attention at the earliest
opportunity. But, petitioner failed to
examine these bank statements not
because he was prevented by some cause
in not doing so, but because he did not pay
sufficient attention to the matter. In view of
Article 2179 of the New Civil Code when
the plaintiff’s own negligence was the
immediate and proximate cause of his
injury, no recovery could be had for
damages.
b. NO. Ilusorio cannot hold the bank in
​
estoppel for the bank is not the actual
party in the criminal action. In a criminal
action, the State is the plaintiff, for the
commission of a felony is an offense
against the State.
4. BANK OF THE PHILIPPINE ISLANDS,
PETITIONER, VS. CASA
MONTESSORI INTERNATIONALE
AND LEONARDO T. YABUT,
RESPONDENTS.
[ G.R. No. 149454 and G.R. No. 149507,
May 28, 2004 ]
Facts: ​Casa Montessori opened a current
account with the petitioner, BPI with Ms.
Lebron, Casa’s president as one of its
authorized signatories. After conducting an
investigation, the Casa discovered Sonny D.
Santos encashed 9 of its checks. It turned out
that Sonny D. Santos was a fictitious name of
Leonardo T. Yabut who worked as an external
editor of the Casa. He admitted that he forged
the signature of Ms. Lebron and encashed the
checks. The PNP Crime Laboratory conducted
an examination of the nine (9) checks and
concluded that the handwritings thereon
compared to the standard signature of Ms.
Lebron were not written by the latter. As a
result, the Casa filed a complaint for the
collection of the amount of the checks with
interest and damages against BPI.
The RTC ruled in favor of the Casa. On one
hand, the CA apportioned the loss between
BPI and CASA. The appellate court took into
account CASA’s contributory negligence that
resulted in the undetected forgery. It then
ordered Leonardo T. Yabut to reimburse BPI
half the total amount claimed; and CASA, the
other half. It also disallowed attorney’s fees
and moral and exemplary damages.
Issues:
a.​ ​WON there is forgery
b.​ ​WON BPI is liable to the CASA
c. ​WON the Casa is entitled of moral
damages, exemplary damages,
attorney’s fees, and interest
Ruling:
a.​ ​YES.
Forgery “cannot be presumed. It must be
established by clear, positive and
convincing evidence. Under the best
evidence rule as applied to documentary
evidence like the checks in question, no
secondary or substitutionary evidence may
inceptively be introduced, as the original
writing itself must be produced in court. But
when, without bad faith on the part of the
offeror, the original checks have already
been destroyed or cannot be produced in
court, secondary evidence may be
produced. Without bad faith on its part,
CASA proved the loss or destruction of the
original checks through the Affidavit of the
one person who knew of that fact ​-- Yabut.
He clearly admitted to discarding the paid
checks to cover up his misdeed. In such a
situation, secondary evidence like microfilm
copies may be introduced in court.
The drawer’s signatures on the microfilm
copies were compared with the standard
signature. PNP Document Examiner II
Josefina de la Cruz testified on
cross-examination that two different
persons had written them. The Court
affirmed the RTC’s reliance on the PNP
Examiner’s report because RTC explained
that although the Report was inconclusive,
no conclusive report could have been given
by the PNP, anyway, in the absence of the
original checks. This explanation is valid;
otherwise, no such report can ever be relied
upon in court.
Furthermore, the testimony of Lebron is
also admissible. She testified many times
that she had never signed those checks.
Her testimonial evidence is admissible; the
checks have not been actually executed.
The genuineness of her handwriting is
proved, not only through the court’s
comparison of the questioned handwritings
and admittedly genuine specimens thereof,
but above all by her.
b.​ ​YES.
Having established the forgery of the
drawer’s signature, BPI -- the drawee
--erred in making payments by virtue
thereof. The forged signatures are wholly
inoperative, and CASA -- the drawer whose
authorized signatures do not appear on the
negotiable instruments --cannot be held
liable thereon. Neither is the latter
precluded from setting up forgery as a real
defense.
BPI failed to detect the eight instances of
forgery. Its negligence consisted in the
omission of that degree of diligence
required of a bank. It cannot now feign
ignorance, for very early on we have
already ruled that 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 charge the
amount so paid to the account of the
depositor whose name was forged.
The monthly statements issued by BPI to its
clients contain a notice worded as follows:
“If no error is reported in ten (10) days,
account will be correct.” ​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.
For allowing payment on the checks to a
wrongful and fictitious payee, BPI -- the
drawee bank --becomes liable to its
depositor-drawer. Since the encashing
bank is one of its branches,​[101] BPI can
easily go after it and hold it liable for
reimbursement. It “may not debit the
drawer’s account and is not entitled to
indemnification from the drawer.” In both
law and equity, when one of two innocent
persons “must suffer by the wrongful act of
a third person, the loss must be borne by
the one whose negligence was the
proximate cause of the loss or who put it
into the power of the third person to
perpetrate the wrong.
BPI is negligence on the following grounds:
First, Yabut was able to open a bank
account in one of its branches without
privity; ​that is, without the proper verification
of his corresponding identification papers
(note of the fictitious name: Sonny Santos).
Second, BPI was unable to discover early
on not only this irregularity, but also the
marked differences in the signatures on the
checks and those on the signature card.
Third, despite the examination procedures it
conducted, the Central Verification Unit of
the bank even passed off these evidently
different signatures as genuine.
On the other hand, the Casa was not
negligent. Being Casa’s independent
auditor Yabut had access to all relevant
documents and checkbooks. It was Yabut’s
task to make the bank reconciliations.
CASA had every right to rely solely upon
his output -- based on the terms of the audit
engagement -- and could thus be
unwittingly duped into believing that
everything was in order. Besides, “[g]ood
faith is always presumed and it is the
burden of the party claiming otherwise to
adduce clear and convincing evidence to
the contrary.”
Clearly then, Yabut was able to perpetrate
the wrongful act through no fault of CASA.
If auditors may be held liable for breach of
contract and negligence with all the more
reason may they be charged with the
perpetration of fraud upon an unsuspecting
client. CASA had the discretion to pursue
BPI alone under the NIL, by reason of
expediency or munificence or both. Money
paid under a mistake may rightfully be
recovered and under such terms as the
injured party may choose.
c.​ ​Moral damages – NO
CASA was unable to identify the particular
instance -- enumerated in the Civil Code --
upon which its claim for moral damages is
predicated. As a general rule, a corporation
-- being an artificial person without feelings,
emotions and senses, and having existence
only in legal contemplation -- is not entitled
to moral damages, because it cannot
experience physical suffering and mental
anguish.
Exemplary damages – NO
 Imposed by way of correction for the public
good exemplary damages cannot be
recovered as a matter of right. There is no
bad faith on the part of BPI for paying the
checks of CASA upon forged signatures.
Attorney’s fees – NO
BPI persistently denied the claim of CASA
under the NIL to recredit the latter’s account
for the value of the forged checks. This
denial constrained CASA to incur expenses
and exert effort for more than ten years in
order to protect its corporate interest in its
bank account.
Interests – YES
For the failure of BPI to pay CASA upon
demand and for compelling the latter to
resort to the courts to obtain payment, legal
interest may be adjudicated at the
discretion of the Court.
5. SAMSUNG CONSTRUCTION
COMPANY PHILIPPINES, INC.,
PETITIONER, VS. FAR EAST BANK
AND TRUST COMPANY AND COURT
OF APPEALS, RESPONDENTS.
[ G.R. No. 129015, August 13, 2004 ]
Facts: ​Samsung Construction maintained a
current account with Far East Bank and Trust
Company (FEBTC). The sole signatory to
Samsung Construction’s account was Jong
Kyu Lee, its Project Manager while the checks
remained in the custody of the company’s
accountant, Kyu Yong Lee.
On 19 March 1992, a certain Roberto Gonzaga
presented for payment FEBTC Check No.
432100 to the bank’s branch in Bel-Air, Makati.
The check, payable to cash and drawn against
Samsung Construction’s current account, was
in the amount of P999,500. The bank teller,
Cleofe Justiani, first checked the balance of
Samsung Construction’s account. After
ascertaining there were enough funds to cover
the check, ​she compared the signature
appearing on the check with the specimen
signature of Jong as contained in the specimen
signature card with the bank. After comparing
the two signatures, Justiani was satisfied as to
the authenticity of the signature appearing on
the check. She then asked Gonzaga to submit
proof of his identity, and the latter presented
three (3) identification cards. At the same time,
Justiani forwarded the check to the branch
Senior Assistant Cashier Gemma Velez, as it
was bank policy that two bank branch officers
approve checks exceeding P100,000, for
payment or encashment. Velez likewise
counterchecked the signature on the check as
against that on the signature card. He too
concluded that the check was indeed signed by
Jong. Velez then forwarded the check and
signature card to Shirley Syfu, another bank
officer, for approval. Syfu then noticed that
Jose Sempio III, the assistant accountant of
Samsung Construction, was also in the bank.
Sempio was well-known to Syfu and the other
bank officers, he being the assistant
accountant of Samsung Construction. Syfu
showed the check to Sempio, who vouched for
the genuineness of Jong’s signature.
Confirming the identity of Gonzaga, Sempio
said that the check was for the purchase of
equipment for Samsung Construction. Satisfied
with the genuineness of the signature of Jong,
Syfu authorized the bank’s encashment of the
check to Gonzaga.
The following day, Kyu examined the balance
of Samsung’s bank account and found out that
a check with an amount of P999,500 has been
encashed. He learned that the last blank check
was missing in the checkbook and reported the
matter to Jong. Jong went to the bank and the
bank’s manager promised to return the amount
to Samsung Construction.
Later, Samsung Construction demanded
FEBTC for the amount but FEBTC responded
that the matter was still under investigation. As
a result, Samsung Construction filed a
complaint against FEBTC for the violation of
Sec. 23 of the NIL.
During trial, Samsung presented Senior NBI
Document Examiner Roda B. Flores. She
testified that based on her examination, she
concluded that Jong’s signature had been
forged on the check. . On the other hand,
FEBTC, which had sought the assistance of
the Philippine National Police (PNP),​[14]
presented Rosario C. Perez, a document
examiner from the PNP Crime Laboratory. She
testified that her findings showed that Jong’s
signature on the check was genuine.
Confronted with conflicting expert testimony,
the RTC chose to believe the findings of the
NBI expert and ruled in favor of Samsung. The
CA reversed the RTC and chose to believe the
findings of the PNP expert.
Issues: ​WON FEBTC is liable to Samsung
Construction under Section 23 of the NIL
Ruling: ​YES. A document formally presented
is presumed to be genuine until it is proved to
be fraudulent. In a forgery trial, this
presumption must be overcome but this can
only be done by convincing testimony and
effective illustrations.
The PNP examiner downplayed the
uniqueness of the final stroke in the questioned
signature as a mere variation the same excuse
she proffered for the other marked differences
noted by the Court and the counsel for
petitioner. There is no reason to doubt why the
RTC gave credence to the testimony of the NBI
examiner, and not the PNP expert’s. The NBI
expert, Rhoda Flores, clearly qualifies as an
expert witness. A document examiner for
fifteen years, she had been promoted to the
rank of Senior Document Examiner with the
NBI, and had held that rank for twelve years
prior to her testimony. In analyzing the
signatures, NBI Examiner Flores utilized the
scientific comparative examination method
consisting of analysis, recognition, comparison
and evaluation of the writing habits with the
use of instruments such as a magnifying lense,
a stereoscopic microscope, and varied lighting
substances. She also prepared enlarged
photographs of the signatures in order to
facilitate the necessary comparisons.
The RTC was sufficiently convinced by the NBI
examiner’s testimony, and explained her
reasons in its ​Decisions.​ While the Court of
Appeals disagreed and upheld the findings of
the PNP, it failed to convincingly demonstrate
why such findings were more credible than
those of the NBI expert. Now, that there is a
finding of forgery, the next question to be
resolved is whether Samsung Construction
was precluded from setting up the defense of
forgery under Section 23.
Samsung Construction is not precluded from
setting up the defense of forgery. Section 23 of
the Negotiable Instruments Law bars a party
from setting up the defense of forgery if it is
guilty of negligence.
In the case at bar, the forgery appears to have
been made possible through the acts of one
Jose Sempio III, an assistant accountant
employed by the plaintiff Samsung. The bare
fact that the forgery was committed by an
employee of the party whose signature was
forged cannot necessarily imply that such
party’s negligence was the cause for the
forgery.
Admittedly, the record does not clearly
establish what measures Samsung
Construction employed to safeguard its blank
checks. In the absence of evidence to the
contrary, we can conclude that there was no
negligence on Samsung Construction’s part.
The presumption remains that every person
takes ordinary care of his concerns and that
the ordinary course of business has been
followed. Negligence is not presumed, but
must be proven by him who alleges it.
Furthermore, the general rule remains that the
drawee who has paid upon the forged
signature bears the loss. The exception to this
rule arises only when negligence can be traced
on the part of the drawer whose signature was
forged, and the need arises to weigh the
comparative negligence between the drawer
and the drawee to determine who should bear
the burden of loss.
In this case, FEBTC failed to exercise the level
of diligence that is expected of a bank. The fact
that the check was made out in the amount of
nearly one million pesos is unusual enough to
require a higher degree of caution on the part
of the bank. Indeed, FEBTC confirms this
through its own internal procedures. Checks
below twenty-five thousand pesos require only
the approval of the teller; those between
twenty-five thousand to one hundred thousand
pesos necessitate the approval of one bank
officer; and should the amount exceed one
hundred thousand pesos, the concurrence of
two bank officers is required. In this case, not
only did the amount in the check nearly total
one million pesos, it was also payable to cash.
That latter circumstance should have aroused
the suspicion of the bank, as it is not ordinary
business practice for a check for such large
amount to be made payable to cash or to
bearer, instead of to the order of a specified
person. Moreover, the check was presented for
payment by one Roberto Gonzaga, who was
not designated as the payee of the check, and
who did not carry with him any written proof
that he was authorized by Samsung
Construction to encash the check. Gonzaga, a
stranger to FEBTC, was not even an employee
of Samsung Construction. Given the shadiness
attending Gonzaga’s presentment of the check,
it was not sufficient for FEBTC to have merely
complied with its internal procedures, but
mandatory that all earnest efforts be
undertaken to ensure the validity of the check,
and of the authority of Gonzaga to collect
payment therefor.
Still, even if the bank performed with utmost
diligence, the drawer whose signature was
forged may still recover from the bank as long
as he or she is not precluded from setting up
the defense of forgery. After all, Section 23 of
the Negotiable Instruments Law plainly states
that no right to enforce the payment of a check
can arise out of a forged signature. Since the
drawer, Samsung Construction, is not
precluded by negligence from setting up the
forgery, the general rule should apply.
Consequently, if a bank pays a forged check, it
must be considered as paying out of its funds
and cannot charge the amount so paid to the
account of the depositor. A bank is liable,
irrespective of its good faith, in paying a forged
check.
6. PHILIPPINE NATIONAL BANK vs. F.F.
CRUZ and CO., INC.
G.R. No. 173259 July 25, 2011
DEL CASTILLO, ​J.
FACTS: ​F.F. Cruz & Co., Inc. (FFCCI) opened
savings/current or so-called combo account
No. 0219-830-146 and dollar savings account
No. 0219-0502-458-6 with Philippine National
Bank (PNB) at its Timog Avenue Branch. Its
President Felipe Cruz and Secretary-Treasurer
Angelita A. Cruz were the named signatories
for the said accounts.
The said signatories left for and returned from
the Unites States of America. While they were
thus out of the country, applications for
cashier’s and manager’s bearing Felipe’s
signature were presented to and both
approved by the PNB. The first was for
₱9,950,000.00 payable to a certain Gene B.
Sangalang and the other one was for
₱3,260,500.31 payable to one Paul Bautista.
The amounts of these checks were then
debited by the PNB against the combo account
of FFCCI.
When Angelita returned to the country, she
examineD the PNB statements of account of
FFCCI she noticed the deductions. Claiming
that these were unauthorized and fraudulently
made, FFCCI requested PNB to credit back
and restore to its account the value of the
checks. PNB refused, and thus FFCCI filed the
instant suit for damages against the PNB and
its own accountant Aurea Caparas. PNB
alleged that it exercised due diligence in
handling the account of FFCCI. The
applications for manager’s check have passed
through the standard bank procedures and it
was only after finding no infirmity that these
were given due course. In fact, it was no less
than Caparas, the accountant of FFCCI, who
confirmed the regularity of the transaction.
ISSUE: ​Whether or not PNB is guilty of
negligence.
HELD: ​Yes. PNB is guilty of negligence. PNB
contends that it was not negligent in verifying
the genuineness of the signatures appearing
on the subject applications for manager’s
check. However, the Court find no reversible
error in the findings of the appellate court that
PNB was negligent in the handling of FFCCI’s
combo account, specifically, with respect to
PNB’s failure to detect the forgeries in the
subject applications for manager’s check which
could have prevented the loss. The banking
business is impressed with public trust. A
higher degree of diligence is imposed on banks
relative to the handling of their affairs than that
of an ordinary business enterprise. Thus, the
degree of responsibility, care and
trustworthiness expected of their officials and
employees is far greater than those of ordinary
officers and employees in other enterprises. In
the case at bar, PNB failed to meet the high
standard of diligence required by the
circumstances to prevent the fraud. Where the
bank’s negligence is the proximate cause of
the loss and the depositor is guilty of
contributory negligence, the allocated damages
between the bank and the depositor is on a
60-40 ratio. This is applied in the present case.
As shown, PNB’s negligence is the proximate
cause of the loss while the issue as to FFCCI’s
contributory negligence has been settled with
finality in G.R. No. 173278. Thus, the appellate
court properly adjudged PNB to bear the
greater part of the loss consistent with these
rulings.
7. NATIVIDAD GEMPESAW vs. THE
HONORABLE COURT OF APPEALS and
PHILIPPINE BANK OF COMMUNICATIONS
G.R. No. 92244 February 9, 1993
CAMPOS, JR., ​J.
FACTS: ​Natividad O. Gempesaw owns and
operates four grocery stores located at Rizal
Avenue Extension and at Second Avenue,
Caloocan City. Petitioner maintains a checking
account numbered 13-00038-1 with
respondent drawee Bank. To facilitate payment
of debts to her suppliers, petitioner draws
checks against her checking account with the
respondent bank as drawee. Her customary
practice of issuing checks is that the checks
were prepared and filled up as to all material
particulars by her trusted bookkeeper, Alicia
Galang, an employee for more than eight
years. After the preparation, the completed
checks were submitted to the petitioner for her
signature, together with the corresponding
invoice receipts which indicate the correct
obligations due and payable to her suppliers.
Petitioner signed each and every 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. The issuance
and delivery of the checks to the payees
named therein were left to the bookkeeper.
Petitioner admitted that she did not make any
verification as to whether or not the checks
were delivered to their respective payees.
Although the respondent drawee Bank notified
her of all checks presented to and paid by the
bank, petitioner did not verify the correctness
of the returned checks, much less check if the
payees actually received the checks in
payment for the supplies she received.
Petitioner filed a Complaint against Philippine
Bank of Communications for recovery of the
money value of eighty-two (82) checks charged
against the petitioner's account with the
respondent drawee Bank on the ground that
the payees' indorsements were forgeries.
Practically, all the checks issued and honored
by the respondent drawee bank were crossed
checks. All the eighty-two checks were brought
to Ernest L. Boon, Chief Accountant of
respondent drawee Bank who, without
authority therefor, accepted them all for deposit
to credit the accounts.
ISSUE: ​Whether or not the petitioner can
recover from the drawee bank who pays a
check with a forged indorsement of the payee,
debiting the same against the drawer's
account.
HELD: ​No. As a rule, a 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. An
exception to this rule is where the drawer is
guilty of such negligence which causes the
bank to honor such a check or checks. The
negligence of a depositor which will prevent
recovery of an unauthorized payment is based
on failure of the depositor to act as a prudent
businessman would under the circumstances.
In the case at bar, the petitioner relied implicitly
upon the honesty and loyalty of her
bookkeeper, and did not even verify the
accuracy of amounts of the checks she signed
against the invoices attached thereto.
Furthermore, although she regularly received
her bank statements, she apparently did not
carefully examine the same nor the check
stubs and the returned checks, and did not
compare them with the same invoices.
Otherwise, she could have easily discovered
the discrepancies between the checks and the
documents serving as bases for the checks.
With such discovery, the subsequent forgeries
would not have been accomplished. It was not
until two years after the bookkeeper
commenced her fraudulent scheme that
petitioner discovered that eighty-two (82)
checks were wrongfully charged to her
account, at which she notified the respondent
drawee bank.
the petitioner failed to examine her records
with reasonable diligence whether before she
signed the checks or after receiving her bank
statements. Thus, petitioner's negligence was
the proximate cause of her loss.
However, under Article 1170 of the same Code
the respondent drawee Bank may be held
liable for damages. The fact that petitioner's
negligence was found to be the proximate
cause of her loss does not preclude her from
recovering damages. In the performance of its
obligation, the drawee bank is bound by its
internal banking rules and regulations which
form part of any contract it enters into with any
of its depositors. 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. We hold that banking business
is so impressed with public interest where the
trust and confidence of the public in general is
of paramount importance such that the
appropriate standard of diligence must be a
high degree of diligence, if not the utmost
diligence.
8. PHILIPPINE COMMERCIAL
INTERNATIONAL BANK vs.
ANTONIO B. BALMACEDA and ROLANDO
N. RAMOS
G.R. No. 158143 September 21,
2011
BRION, ​J.
FACTS: ​PCIB alleged that between 1991 and
1993, Balmaceda, by taking advantage of his
position as branch manager, fraudulently
obtained and encashed 31 Manager’s checks
in the total amount of ₱10,782,150.00. PCIB
moved to be allowed to file an amended
complaint to implead Rolando Ramos as one
of the recipients of a portion of the proceeds
from Balmaceda’s alleged fraud. PCIB also
increased the number of fraudulently obtained
and encashed Manager’s checks to 34, in the
total amount of ₱11,937,150.00. Ramos filed
an Answer denying any knowledge of
Balmaceda’s scheme. According to Ramos, he
is a reputable businessman engaged in the
business of buying and selling fighting cocks,
and Balmaceda was one of his clients. Ramos
admitted receiving money from Balmaceda as
payment for the fighting cocks that he sold to
Balmaceda, but maintained that he had no
knowledge of the source of Balmaceda’s
money. PCIB maintains that it had the right to
freeze and debit the amount of ₱251,910.96
from Ramos’ bank account, even without his
consent, since legal compensation had taken
place between them by operation of law. PCIB
debited Ramos’ bank account, believing in
good faith that Ramos was not entitled to the
proceeds of the Manager’s checks and was
actually privy to the fraud perpetrated by
Balmaceda.
ISSUES:
a. Whether or not Ramos can be held
liable for the fraudulent scheme.
b. Whether or not PCIB is at fault.
c. Whether or not PCIB can recover
form Ramos based on unjust
enrichment.
d. Whether or not PCIB can unilaterally
freeze the account of Ramos.
HELD:
a. No. The mere fact that Balmaceda
made Ramos the payee on some of
the Manager’s checks is not enough
basis to conclude that Ramos was
complicit in Balmaceda’s fraud; a
number of other people were made
payees on the other Manager’s
checks yet PCIB never alleged them
to be liable, nor did the Bank adduce
any other evidence pointing to
Ramos’ participation that would
justify his separate treatment from
the others. Also, while Ramos is
Balmaceda’s brother-in-law, their
relationship is not sufficient, by itself,
to render Ramos liable, absent
concrete proof of his actual
participation in the fraudulent
scheme.
Moreover, the evidence on record
clearly shows that Balmaceda acted on
his own when he applied for the
Manager’s checks against the bank
account of one of PCIB’s clients, as well
as when he encashed the fraudulently
acquired Manager’s checks. The Court
found no reason to doubt Ramos’ claim
that Balmaceda deposited these large
sums of money into his bank account as
payment for the fighting cocks that
Balmaceda purchased from him. Given
that PCIB failed to establish Ramos’
participation in Balmaceda’s scheme, it
was not even necessary for Ramos to
provide an explanation for the money he
received from Balmaceda. Even if the
evidence adduced by the plaintiff
appears stronger than that presented by
the defendant, a judgment cannot be
entered in the plaintiff’s favor if his
evidence still does not suffice to sustain
his cause of action; a preponderance of
evidence must be established to
achieve this result.
b. Yes. PCIB itself at fault as employer.
The banking business is impressed
with public interest. Of paramount
importance is the trust and
confidence of the public in general in
the banking industry. Consequently,
the diligence required of banks is
more than that of a Roman ​pater
familias or a good father of a family.
The highest degree of diligence is
expected. It cannot be ignored that
Balmaceda managed to carry out his
fraudulent scheme primarily because
other PCIB employees failed to carry
out their assigned tasks – flaws
imputable to PCIB itself as the
employer. PCIB’s own employees
were unwitting accomplices in
Balmaceda’s fraud. Another telling
indicator of PCIB’s negligence is the
fact that it allowed Balmaceda to
encash the Manager’s checks that
were plainly crossed checks. The
crossing of a check has the following
effects: (a) the check may not be
encashed but only deposited in the
bank; (b) the check may be
negotiated only once — to the one
who has an account with the bank;
and (c) the act of crossing the check
serves as a warning to the holder
that the check has been issued for a
definite purpose and he must inquire
if he received the check pursuant to
this purpose; otherwise, he is not a
holder in due course. In complete
disregard of this duty, PCIB’s
systems allowed Balmaceda to
encash 26 Manager’s checks which
were all crossed checks, or checks
payable to the "payee’s account
only."
c. No. Unjust enrichment claims do not
lie simply because one party benefits
from the efforts or obligations of
others, but instead it must be shown
that a party was unjustly enriched in
the sense that the term unjustly
could mean illegally or unlawfully.
Ramos cannot be held liable to PCIB
on account of unjust enrichment
simply because he received
payments out of money secured by
fraud from PCIB. To hold Ramos
accountable, it is necessary to prove
that he received the money from
Balmaceda, knowing that he
(Ramos) was not entitled to it. PCIB
must also prove that Ramos, at the
time that he received the money
from Balmaceda, knew that the
money was acquired through fraud.
Knowledge of the fraud is the link
between Ramos and PCIB that
would obligate Ramos to return the
money based on the principle of
unjust enrichment. However, as the
evidence on record indicates, Ramos
accepted the deposits that
Balmaceda made directly into his
bank account, believing that these
deposits were payments for the
fighting cocks that Balmaceda had
purchased. Significantly, PCIB has
not presented any evidence proving
 that Ramos participated in, or that he
even knew of, the fraudulent sources
of Balmaceda’s funds.
d. No. PCIB acted illegally in freezing
and debiting Ramos’ bank account.
The court cautioned against the
unilateral freezing of bank accounts
by banks. They do not have a
unilateral right to freeze the accounts
of depositors based on its mere
suspicion. It would open the
floodgates of public distrust in the
banking industry.
9. METROPOLITAN WATERWORKS AND
SEWERAGE SYSTEM vs.
COURT OF APPEALS (Now INTERMEDIATE
APPELLATE COURT) and THE PHILIPPINE
NATIONAL BANK
G.R. No. L-62943 July 14, 1986
GUTIERREZ, JR., ​J.
FACTS: ​The Philippine National Bank (PNB) is
the depository bank of Metropolitan
Waterworks and Sewerage System (MWSS)
and its predecessor-in-interest NWSA. Among
the several accounts of NWSA with PNB is
NWSA Account No. 6. The authorized
signature for said Account No. 6 were those of
MWSS treasurer Jose Sanchez, its auditor
Pedro Aguilar, and its acting General Manager
Victor L. Recio. Their respective specimen
signatures were submitted by the MWSS to
and on file with the PNB. By special
arrangement with the PNB, the MWSS used
personalized checks in drawing from this
account.
During the months of March, April and May
1969, twenty-three (23) checks were prepared,
processed, issued and released by NWSA, all
of which were paid and cleared by PNB and
debited by PNB against NWSA Account No. 6.
During the same months of March, April and
May 1969, twenty-three (23) checks bearing
the same numbers as the former NWSA
checks were likewise paid and cleared by PNB
and debited against NWSA Account No. 6. The
foregoing checks were deposited by the
payees Raul Dizon, Arturo Sison and Antonio
Mendoza in their respective current accounts
with the Philippine Commercial and Industrial
Bank (PCIB) and Philippine Bank of Commerce
(PBC) in the same months. These checks were
presented for payment by PBC and PCIB to
the defendant PNB, and paid, also in the same
months. At the time of their presentation to
PNB these checks bear the standard
indorsement which reads 'all prior indorsement
and/or lack of endorsement guaranteed.'
Subsequent investigation however, conducted
by the NBI showed that Raul Dizon, Arturo
Sison and Antonio Mendoza were all fictitious
persons. NWSA addressed a letter to PNB
requesting the immediate restoration to its
Account No. 6, of the total sum of
P3,457,903.00 corresponding to the total
amount of these twenty-three (23) checks
claimed by NWSA to be forged and/or spurious
checks.
PNB contended among others, that the checks
in question were regular on its face in all
respects, including the genuineness of the
signatures of authorized NWSA signing officers
and there was nothing on its face that could
have aroused any suspicion as to its
genuineness and due execution and; that
NWSA was guilty of negligence which was the
proximate cause of the loss.
ISSUE: ​Whether or not there was forgery.
HELD: ​No. The findings of the National Bureau
of Investigation in its Report show that the
MWSS fraud was an "inside job" and that the
petitioner's delay in the reconciliation of bank
statements and the laxity and loose records
control in the printing of its personalized
checks facilitated the fraud. The National
Bureau of Investigation likewise does not
declare or prove that the signatures appearing
on the questioned checks are forgeries. The
report merely mentions the alleged differences
in the type face, checkwriting, and printing
characteristics appearing in the standard or
submitted models and the questioned
typewritings. The NBI Chemistry Report No.
C-74-891 merely describes the inks and pens
used in writing the alleged forged signatures. It
is clear that these NBI Reports relied upon by
the petitioner are inadequate to sustain its
allegations of forgery. These reports did not
touch on the inherent qualities of the
signatures which are indispensable in the
determination of the existence of forgery.
There must be conclusive findings that there is
a variance in the inherent characteristics of the
signatures and that they were written by two or
more different persons. Forgery cannot be
presumed. It must be established by clear,
positive, and convincing evidence. This was
not done in the present case.
Moreover, the petitioner is barred from setting
up the defense of forgery because it was guilty
of negligence not only before the questioned
checks were negotiated but even after the
same had already been negotiated. The
records show that at the time the twenty-three
(23) checks were prepared, negotiated, and
encashed, the petitioner was using its own
personalized checks, instead of the official
PNB Commercial blank checks. In the exercise
of this special privilege, however, the petitioner
failed to provide the needed security
measures. Furthermore, drawee bank cannot
be faulted as the records show that the
respondent drawee bank, had taken the
necessary measures in the detection of forged
checks and the prevention of their fraudulent
encashment. We cannot fault the respondent
drawee Bank for not having detected the
fraudulent encashment of the checks because
the printing of the petitioner's personalized
checks was not done under the supervision
and control of the Bank. There is no evidence
on record indicating that because of this private
printing the petitioner furnished the respondent
Bank with samples of checks, pens, and inks
or took other precautionary measures with the
PNB to safeguard its interests.
10. ASSOCIATED BANK vs. HON. COURT
OF APPEALS, PROVINCE OF TARLAC and
PHILIPPINE NATIONAL BANK
G.R. No. 107382/G.R. No. 107612 January
31, 1996
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. Checks issued by the
Province are signed by the Provincial
Treasurer and countersigned by the Provincial
Auditor or the Secretary of the Sangguniang
Bayan.
A portion of the funds of the province is
allocated to the Concepcion Emergency
Hospital. The checks are released by the
Office of the Provincial Treasurer and received
for the hospital by its administrative officer and
cashier. In January 1981, the books of account
were post-audited. It was then discovered that
the hospital did not receive several allotment
checks drawn by the Province. The Provincial
Treasurer requested the manager of the PNB
to return all of its cleared checks which were
issued from 1977 to 1980 in order to verify the
regularity of their encashment. After the checks
were examined, the Provincial Treasurer
learned that 30 checks amounting to
P203,300.00 were encashed by one Fausto
Pangilinan, with the Associated Bank acting as
collecting bank.
It turned out that Fausto Pangilinan, who was
the administrative officer and cashier of payee
hospital until his retirement, collected the
questioned checks from the office of the
Provincial Treasurer.
After forging the signature of Dr. Adena Canlas
who was chief of the payee hospital,
Pangilinan was able to withdraw the money
when the check was cleared and paid by the
drawee bank, PNB. All the checks bore the
stamp of Associated Bank which reads "All
prior endorsements guaranteed ASSOCIATED
BANK." The Provincial Treasurer wrote the
manager of the PNB seeking the restoration of
the various amounts debited from the current
account of the Province. In turn, the PNB
manager demanded reimbursement from the
Associated Bank on May 15, 1981.
As both banks resisted payment, the Province
of Tarlac brought suit against PNB which, in
turn, impleaded Associated Bank as third-party
defendant. The latter then filed a fourth-party
complaint against Adena Canlas and Fausto
Pangilinan.
ISSUE: ​Whether or not Associated Bank is
liable to PNB.
HELD: ​Yes. The checks involved in this case
are order instruments. Where the instrument is
payable to order at the time of the forgery,
such as the checks in this case, the signature
of its rightful holder is essential to transfer title
to the same instrument. When the holder's
indorsement is forged, all parties prior to the
forgery may raise the real defense of forgery
against all parties subsequent thereto. In cases
involving checks with forged indorsements,
such as the present petition, the chain of
liability does not end with the drawee bank.
The drawee 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, to the
forger himself, if available. In other words, the
drawee bank can seek reimbursement or a
return of the amount it paid from the presentor
bank or person. Theoretically, the latter can
demand reimbursement from the person who
indorsed the check to it and so on. The loss
falls on the party who took the check from the
forger, or on the forger himself.
In this case, the checks were indorsed by the
collecting bank (Associated Bank) to the
drawee bank (PNB). The former will
necessarily be liable to the latter for the checks
bearing forged indorsements. If the forgery is
that of the payee's or holder's indorsement, the
collecting bank is held liable, without prejudice
to the latter proceeding against the forger.
Since a forged indorsement is inoperative, the
collecting bank had no right to be paid by the
drawee bank. The former must necessarily
return the money paid by the latter because it
was paid wrongfully. The loss incurred by
drawee bank-PNB can be passed on to the
collecting bank-Associated Bank which
presented and indorsed the checks to it.
Associated Bank can, in turn, hold the forger,
Fausto Pangilinan, liable.
After careful examination of the records, the
Court finds that the Province of Tarlac was
equally negligent and should, therefore, share
the burden of loss from the checks bearing a
forged indorsement. The Province of Tarlac
permitted Fausto Pangilinan to collect the
checks when the latter, having already retired
from government service, was no longer
connected with the hospital.
11. LAND BANK OF THE PHILIPPINES ​v.
NARCISO L. KHO
G.R. No. 205840
MA. LORENA FLORES AND ALEXANDER
CRUZ, ​Petitioners​, ​v.​ NARCISO L. KHO,
G.R. No. 205839
July 07, 2016
BRION, ​J.
FACTS: ​The respondent Narciso Kho is the
sole proprietor of United Oil Petroleum, a
business engaged in trading diesel fuel. He
entered into a verbal agreement to purchase
lubricants from Red Orange International
Trading (​Red Orange)​ , represented by one
Rudy Medel. Red Orange insisted that it would
only accept a Land Bank manager's check as
payment. Kho, accompanied by Rudy Medel,
opened Savings Account No. 0681-0681-80 in
Land Bank of the Philippines (​Land Bank)​ . His
initial P25,993,537.37 deposit consisted of the
three manager's checks. Kho also purchased
Land Bank Manager's Check No. 07410
leveraged by his newly opened savings
account. The check was postdated to January
2, 2006, and scheduled for actual delivery on
the same date after the three checks were
expected to have been cleared. It was valued
at P25,000,000.00 and made payable to Red
Orange. On January 2, 2006, Kho returned to
the bank and picked up check No. 07410.
Accordingly, P25,000,000.00 was debited from
his savings account. Unfortunately, his deal
with Red Orange did not push through.
On January 3, 2006, an employee of the Bank
of the Philippine Islands (​BPI)​ called Land
Bank, Araneta Branch, to inform them that Red
Orange had deposited check No. 07410 for
payment. Flores confirmed with BPI that Land
Bank had issued the check to Kho. The Central
Clearing Department (​CCD)​ of the Land Bank
Head Office faxed a copy of the deposited
check to the Araneta branch for payment. The
officers of the Araneta branch ​examined the
fax copy and thought that the details matched
the check purchased by Kho. Thus, Land Bank
confirmed the deposited check.
Kho claimed that he never negotiated the
check because the deal did not materialize.
More importantly, ​the actual check was still in
his possession.​ They discovered that what was
deposited and encashed with BPI was a
spurious manager's check. Kho demanded the
cancellation of his manager's check and the
release of the remaining money in his account
(then P995,207.27). Kho filed a ​Complaint for
Specific Performance and Damages against
Land Bank.
ISSUE: ​Whether or not Landbank is liable.
HELD: ​Yes. The business of banking is
imbued with public interest; it is an industry
where the general public's trust and confidence
in the system is of paramount importance.
Consequently, banks are expected to exert the
highest degree of, if not the ​utmost​, diligence.
They are obligated to treat their depositors'
accounts with meticulous care, always keeping
in mind the fiduciary nature of their
relationship.
Banks hold themselves out to the public as
experts in determining the genuineness of
checks and corresponding signatures thereon.
Stemming from their primordial duty of
diligence, one of a bank's prime duties is to
ascertain the genuineness of the drawer's
signature on check being encashed. ​This holds
especially true for manager's checks.
A manager's check is a bill of exchange drawn
by a bank upon itself, and is accepted by its
issuance. It is an order of the bank to pay,
drawn upon itself, committing in effect its total
resources, integrity, and honor behind its
issuance. The check is signed by the manager
(or some other authorized officer) for the bank.
In this case, the signatories were Macarandan
and Benitez.
The genuine check No. 07410 remained in
Kho's possession the entire time and Land
Bank admits that the check it cleared was a
fake. When Land Bank's CCD forwarded the
deposited check to its Araneta branch for
inspection, its officers had every opportunity to
recognize the forgery of their signatures or the
falsity of the check. Whether by error or
neglect, the bank failed to do so, which led to
the withdrawal and eventual loss of the
P25,000,000.00.
This is the proximate cause of the loss. Land
Bank breached its duty of diligence and
assumed the risk of incurring a loss on account
of a forged or counterfeit check. Hence, it
should suffer the resulting damage.
V. MATERIAL ALTERATION
1. PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS, CAPITOL CITY
DEVELOPMENT BANK, PHILIPPINE BANK
OF COMMUNICATIONS, and F. ABANTE
MARKETING, respondents.
G.R. No. 107508 April 25, 1996
KAPUNAN, ​J.:
FACTS:
Ministry of Education Culture issued a
check payable to Abante Marketing and drawn
against Philippine National Bank (PNB) dated
August 7, 1981, amounting to P97,650.00.
Abante Marketing, deposited the questioned
check in its savings account with Capitol City
Development Bank (CAPITOL). Capitol then
deposited the same in its account with the
Philippine Bank of Communications (PBCom)
which, in turn, sent the check to PNB for
clearing. PNB cleared the check as good and
thereafter, PBCom credited Capitol's account
for the amount stated in the check. However,
PNB returned the check to PBCom and debited
PBCom's account for the amount covered by
the check, the reason being that there was a
"material alteration" of the check number.
PBCom, as collecting agent of Capitol, then
proceeded to debit the Capitol’s account for the
same amount, and subsequently, sent the
check back to PNB. PNB, however, returned
the check to PBCom. On the other hand,
Capitol could not in turn, debit Abante
Marketing's account since the latter had
already withdrawn the amount of the check.
Capitol sought clarification from PBCom and
demanded the re-crediting of the amount.
PBCom followed suit by requesting an
explanation and re-crediting from PNB. Since
the demands of Capitol were not heeded, they
filed a civil suit against PBCom which in turn,
filed a third-party complaint against PNB for
reimbursement/indemnity with respect to the
claims of Capitol. PNB, on its part, filed a
fourth-party complaint against Abante
Marketing.
The Trial Court rendered its decision,
ordering PBCom to re-credit or reimburse; PNB
to reimburse and indemnify PBCom for
whatever amount PBCom pays to Capitol;
Abante Marketing to reimburse and indemnify
PNB for whatever amount PNB pays to
PBCom. The court dismissed the
counterclaims of PBCom and PNB. The
appellate court modified the appealed
judgment by ordering PNB to honor the check.
After the check shall have been honored by
PNB, the court ordered PBCom to re-credit
Capitol's account with it the amount. PNB filed
the petition for review on certiorari averring that
under Section 125 of the NIL, any change that
alters the effect of the instrument is a material
alteration. Hence, petitioner filed the instant
petition.
ISSUE:
 Whether or not an alteration of the serial
number of a check is a material alteration
under the negotiable instruments law.
RULING:
NO. ​An alteration is said to be material if
it alters the effect of the instrument. ​It means
an unauthorized change in an instrument that
purports to modify in any respect the obligation
of a party or an unauthorized addition of words
or numbers or other change to an incomplete
instrument relating to the obligation of a party.
In other words, a material alteration is one
which changes the items which are required to
be stated under Section 1 of the Negotiable
Instruments Law.
Sec. 1. — Form of negotiable
instruments. An instrument to be negotiable
must conform to the following requirements:
(a) It must be in writing and signed by the
maker or drawer;
(b) Must contain an unconditional promise or
order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed
or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a
drawee, he must be named or otherwise
indicated therein with reasonable certainty.
The case at bench is unique in the
sense that what was altered is the serial
number of the check in question, an item
which, it can readily be observed, is not an
essential requisite for negotiability under
Section 1 of the Negotiable Instruments Law.
The aforementioned alteration did not change
the relations between the parties. The name of
the drawer and the drawee were not altered.
The intended payee was the same. The sum of
money due to the payee remained the same.
The check's serial number is not the sole
indication of its origin. As succinctly found by
the Court of Appeals, the name of the
government agency which issued the subject
check was prominently printed therein. The
check's issuer was therefore sufficiently
identified, rendering the referral to the serial
number redundant and inconsequential.
2. THE INTERNATIONAL CORPORATE
BANK, INC., petitioner,
vs.
COURT OF APPEALS and PHILIPPINE
NATIONAL BANK, respondents.
G.R. No. 129910 September 5, 2006
CARPIO, ​J​.:
FACTS:
The Ministry of Education and Culture
issued 15 checks drawn against PNB which
International Corp. Bank accepted for deposit
on various dates. After 24 hours from
submission of the checks to International Corp.
Bank for clearing, it paid the value of the
checks and allowed the withdrawals of the
deposits. However, on October 14, 1981, PNB
returned all the checks to International Corp.
Bank without clearing them on the ground that
they were materially altered which led to the
institution of an action for collection of sums of
money against PNB to recover the value of the
checks. RTC dismissed the case on the ground
that respondent is expected to use reasonable
business practices in accepting and paying the
checks presented to it, thus, respondent
cannot be faulted for the delay in clearing the
checks considering the ingenuity in which the
alterations were effected. According to the trial
court, petitioner, as collecting bank, could have
inquired by telephone from respondent, as
drawee bank, about the status of the checks
before paying their value. Since the immediate
cause of petitioner’s loss was the lack of
caution of its personnel, the trial court held that
petitioner is not entitled to recover the value of
the checks from respondent. Court of Appeals
reversed the RTC’s decision and applied
Section 4(c) of Central Bank Circular No. 580,
series of 1977 and held that checks that have
been materially altered shall be returned within
24 hours after discovery of the alteration.
However, the Court of Appeals ruled that even
if the drawee bank returns a check with
material alterations after discovery of the
alteration, the return would not relieve the
drawee bank from any liability for its failure to
return the checks within the 24-hour clearing
period. Petitioner moved for the
reconsideration of the Amended Decision to
which the CA denied for lack of merit.Hence,
the recourse to SC.
ISSUE:
Whether or not an alteration of the serial
number of a check is a material alteration
under the negotiable instruments law.
RULING:
NO. ​The alterations in the checks were
made on their serial numbers, thus, it is not
material.
Section 125 of Act No. 2031, otherwise known
as the Negotiable Instruments Law, provides:
What constitutes a material alteration. ― any
alteration which changes:
(a) The date;
(b) The sum payable, either for principal or
interest;
(c) The time or place of payment;
(d) The number or the relations of the parties;
(e) The medium or currency in which payment
is to be made;
The question on whether an alteration of the
serial number of a check a material alteration
under the Negotiable Instruments Law is
already a settled matter. In Philippine National
Bank v. Court of Appeals, this Court ruled that
the alteration on the serial number of a check
is not a material alteration. A material alteration
is one which changes the items which are
required to be stated under Section 1 of the
Negotiable Instruments Law.
The case at the bench is unique in the sense
that what was altered is the serial number of
the check in question, an item which, it can
readily be observed, is not an essential
requisite for negotiability under Section 1 of the
Negotiable Instruments Law. The
aforementioned alteration did not change the
relations between the parties. The name of the
drawer and the drawee were not altered. The
intended payee was the same. The sum of
money due to the payee remained the same.
3. METROPOLITAN BANK AND TRUST
COMPANY, petitioners,
vs.
RENATO D. CABILZO, respondent.
G.R. No. 154469 December 6, 2006
CHICO-NAZARIO, ​J.​
FACTS:
Renato Cabilzo issued a Metrobank
Check payable to "CASH" and postdated on
November 24, 1994 in the amount of
P1,000.00. The check was drawn against
Cabilzo’s Account with Metropolitan Bank
(Metrobank) and was paid by Cabilzo to a
certain Mr. Marquez, as his sales commission.
Subsequently, the check was presented to
Westmont Bank for payment. Westmont Bank,
in turn, indorsed the check to Metrobank for
appropriate clearing. After the entries thereon
were examined, including the availability of
funds and the authenticity of the signature of
the drawer, Metrobank cleared the check for
encashment in accordance with the Philippine
Clearing House Corporation (PCHC) Rules.
Cabilzo discovered that Metrobank Check No.
985988 which he issued on 12 November 1994
in the amount of P1,000.00 was altered to
P91,000.00 and the date 24 November 1994
was changed to 14 November 1994. Cabilzo
demanded that Metrobank re-credit the amount
of P91,000.00 to his account. A third-party
complaint was then filed by Westmont bank
because another case involving the same
cause of action was pending before a different
court. The trial court granted the motion to
dismiss the third-party complaint on the ground
of litis pendentia. On September 4, 1998, the
RTC rendered a Decision in favor of Cabilzo
and thereby ordered Metrobank to pay the sum
of P90,000.00, the amount of the check. The
Court of Appeals affirmed the RTC’s decision.
Hence this petition.
ISSUE:
Whether or not Metrobank is liable for
the alterations on the subject check bearing the
forged signature of the drawer
RULING:
YES. ​An alteration is said to be material
if it changes the effect of the instrument. It
means that an unauthorized change in an
instrument that purports to modify in any
respect the obligation of a party or an
unauthorized addition of words or numbers or
other change to an incomplete instrument
relating to the obligation of a party. In other
words, a material alteration is one which
changes the items which are required to be
stated under Section 1 of the Negotiable
Instruments Law. In the present case, it is
obvious that Metrobank was remiss in that duty
and violated that relationship. As observed by
the Court of Appeals, there are material
alterations on the check that are visible to the
naked eye. The check was altered so that the
amount was increased from P1,000.00 to
P91,000.00 and the date was changed from 24
November 1994 to 14 November 1994.
Apparently, since the entries altered were
among those enumerated under Section 1 and
125, namely, the sum of money payable and
the date of the check, the instant controversy
therefore squarely falls within the purview of
material alteration.
Indubitably, Cabilzo was not the one
who made nor authorized the alteration neither
did he assent to the alteration by his express or
implied acts. There is no showing that he failed
to exercise such reasonable degree of
diligence required of a prudent man which
could have otherwise prevented the loss. As
correctly ruled by the appellate court, Cabilzo
was never remiss in the preparation and
issuance of the check, and there were no
indicia of evidence that would prove otherwise.
Indeed, Cabilzo placed asterisks before and
after the amount in words and figures in order
to forewarn the subsequent holders that
nothing follows before and after the amount
indicated other than the one specified between
the asterisks.
The degree of diligence required of a
reasonable man in the exercise of his tasks
and the performance of his duties has been
faithfully complied with by Cabilzo. In fact, he
was wary enough that he filled with asterisks
the spaces between and after the amounts, not
only those stated in words, but also those in
numerical figures, in order to prevent any
fraudulent insertion, but unfortunately, the
check was still successfully altered, indorsed
by the collecting bank, and cleared by the
drawee bank, and encashed by the perpetrator
of the fraud, to the damage and prejudice of
Cabilzo.
Metrobank cannot lightly impute that
Cabilzo was negligent and is therefore
prevented from asserting his rights under the
doctrine of equitable estoppel when the facts
on record are bare of evidence to support such
conclusion. The doctrine of equitable estoppel
states that when one of the two innocent
persons, each guiltless of any intentional or
moral wrong, must suffer a loss, it must be
borne by the one whose erroneous conduct,
either by omission or commission, was the
cause of injury. Metrobank’s reliance on this
dictum​, is misplaced. For one, Metrobank’s
representation that it is an innocent party is
flimsy and evidently, misleading. At the same
time, Metrobank cannot asseverate that
Cabilzo was negligent and this negligence was
the proximate cause of the loss in the absence
of even a scintilla proof to buttress such claim.
Negligence is not presumed but must be
proven by the one who alleges it. Surprisingly,
however, Metrobank failed to detect the above
alterations which could not escape the
attention of even an ordinary person. This
negligence was exacerbated by the fact that,
as found by the trial court, the check in
question was examined by the cash custodian
whose functions do not include the
examinations of checks indorsed for payment
against drawer’s accounts. Obviously, the
employee allowed by Metrobank to examine
the check was not verse and competent to
handle such duty.
Undoubtedly, Cabilzo was an innocent party in
this instant controversy. He was just an
ordinary businessman who, in order to facilitate
his business transactions, entrusted his money
with a bank, not knowing that the latter would
yield a substantial amount of his deposit to
fraud, for which Cabilzo can never be faulted.
VI. ACCEPTANCE
G.R. No. 74886 December 8, 1992
PRUDENTIAL BANK, petitioner,
vs.
INTERMEDIATE APPELLATE COURT,
PHILIPPINE RAYON MILLS, INC. and
ANACLETO R. CHI, respondents.
Facts:
On August 8, 1962, defendant-appellant
Philippine Rayon Mills, Inc. entered into a
contract with Nissho Co., Ltd. of Japan for the
importation of textile machineries under a
five-year deferred payment plan. To effect
payment for said machineries, the
defendant-appellant applied for a commercial
letter of credit with the Prudential for
$128,548.78. Against this letter of credit, drafts
were drawn and issued by Nissho which were
all paid by the Prudential Bank through its
correspondent in Japan, the Bank of Tokyo,
Ltd. As indicated on their faces, two of these
drafts were accepted by the
defendant-appellant through its president,
Anacleto R. Chi, ​while the others were not.
Upon the arrival of the machineries, the
Prudential Bank indorsed the shipping
documents to the defendant-appellant which
accepted delivery of the same. To enable
delivery a trust receipt which was signed by
Anacleto R. Chi in his capacity as President of
defendant-appellant company was executed.
At the back of the trust receipt is a printed form
to be accomplished by two sureties who were
to be jointly and severally liable to the
Prudential Bank should the
defendant-appellant fail to pay the total amount
or any portion of the drafts issued by Nissho
and paid for by Prudential Bank.
Sometime in 1967, the defendant-appellant
ceased business operation. On December 29,
1969, defendant-appellant's factory was leased
by Yupangco Cotton Mills for an annual rental
of P200,000.00. On January 5, 1974, all the
textile machineries in the defendant-appellant's
factory were sold to AIC Development
Corporation for P300,000.00.
The obligation of the defendant-appellant
arising from the letter of credit and the trust
receipt remained unpaid and unliquidated.
Repeated formal demands for the payment of
the said trust receipt yielded no result Hence,
the present action for the collection of the
principal amount of P956,384.95 was filed on
October 3, 1974 against the
defendant-appellant and Anacleto R. Chi. ​In
their respective answers, the defendants
interposed identical special defenses, viz., the
complaint states no cause of action; if there is,
the same has prescribed; and the plaintiff is
guilty of laches​.
Issue/s:
1. Whether presentment for acceptance of
the drafts was indispensable to make
Philippine Rayon liable thereon; - ​MAIN ISSUE
2. Whether Philippine Rayon is liable on the
basis of the trust receipt;
3. Whether private respondent Chi is jointly
and severally liable with Philippine Rayon for
the obligation sought to be enforced and if not,
whether he may be considered a guarantor.
Ruling:
#1. No. The transaction in the case at bar
stemmed from Philippine Rayon's application
for a commercial letter of credit with the
petitioner in the amount of $128,548.78 to
cover the former's contract to purchase and
import loom and textile machinery from Nissho
Company, Ltd. of Japan under a five-year
deferred payment plan.
A letter of credit is defined as an engagement
by a bank or other person made at the request
of a customer that the issuer will honor drafts
or other demands for payment upon
compliance with the conditions specified in the
credit. ​Through a letter of credit, the bank
merely substitutes its own promise to pay for
one of its customers who in return promises to
pay the bank the amount of funds mentioned in
the letter of credit plus credit or commitment
fees mutually agreed upon​.
In the instant case then, the drawee was
necessarily the herein petitioner. It was to the
latter that the drafts were presented for
payment. In fact, there was no need for
acceptance as the issued drafts are sight
drafts. Presentment for acceptance is
necessary only in the cases expressly provided
for in Section 143 of the Negotiable
Instruments Law (NIL).
Sec. 143. When presentment for
acceptance must be made. — Presentment for
acceptance must be made:
(a) Where the bill is payable after sight, or in
any other case, where presentment for
acceptance is necessary in order to fix the
maturity of the instrument; or
(b) Where the bill expressly stipulates that it
shall be presented for acceptance; or
(c) Where the bill is drawn payable elsewhere
than at the residence or place of business of
the drawee.
In no other case is presentment for acceptance
necessary in order to render any party to the
bill liable.
Obviously then, sight drafts do not require
presentment for acceptance.
The acceptance of a bill is the signification by
the drawee of his assent to the order of the
drawer; 14 this may be done in writing by the
drawee in the bill itself, or in a separate
instrument.
Corollarily, they are, pursuant to Section 7 of
the NIL, payable on demand. Section 7
provides:
Sec. 7. When payable on demand. — An
instrument is payable on demand —
(a) ​When so it is expressed to be payable on
demand, or at sight, or on presentation; or
(b) ​In which no time for payment in
expressed.
Where an instrument is issued, accepted, or
indorsed when overdue, it is, as regards the
person so issuing, accepting, or indorsing it,
payable on demand.
Acceptance, however, was not even necessary
in the first place because the drafts which were
eventually issued were sight drafts And even if
these were not sight drafts, thereby
necessitating acceptance, it would be the
petitioner — and not Philippine Rayon — which
had to accept the same for the latter was not
the drawee. Presentment for acceptance is
defined an the production of a bill of exchange
to a drawee for acceptance. The trial court and
the public respondent, therefore, erred in ruling
that presentment for acceptance was an
indispensable requisite for Philippine Rayon's
liability on the drafts to attach. Contrary to both
courts' pronouncements, Philippine Rayon
immediately became liable thereon upon
petitioner's payment thereof. Such is the
essence of the letter of credit issued by the
petitioner. A different conclusion would violate
the principle upon which commercial letters of
credit are founded because in such a case,
both the beneficiary and the issuer, Nissho
Company Ltd. and the petitioner, respectively,
would be placed at the mercy of Philippine
Rayon even if the latter had already received
the imported machinery and the petitioner had
fully paid for it.
#2. Yes. Under P.D. No. 115, otherwise known
an the Trust Receipts Law, a trust receipt
transaction is defined as "any transaction by
and between a person referred to in this
Decree as the entruster, and another person
referred to in this Decree as the entrustee,
whereby the entruster, who owns or holds
absolute title or security interests' over certain
specified goods, documents or instruments,
releases the same to the possession of the
entrustee upon the latter's execution and
delivery to the entruster of a signed document
called the "trust receipt" wherein the entrustee
binds himself to hold the designated goods,
documents or instruments in trust for the
entruster and to sell or otherwise dispose of
the goods, documents or instruments with the
obligation to turn over to the entruster the
proceeds thereof to the extent of the amount
owing to the entruster or as appears in the trust
receipt or the goods, instruments themselves if
they are unsold or not otherwise disposed of, in
accordance with the terms and conditions
specified in the trusts receipt, or for other
purposes substantially equivalent to any one of
the following: . . ."
It is alleged in the complaint that private
respondents "not only have presumably put
said machinery to good use and have profited
by its operation and/or disposition but very
recent information that reached plaintiff bank
that defendants already sold the machinery
covered by the trust receipt to Yupangco
Cotton Mills," and that "as trustees of the
property covered by the trust receipt, . . . and
therefore acting in fiduciary capacity,
defendants have willfully violated their duty to
account for the whereabouts of the machinery
covered by the trust receipt or for the proceeds
of any lease, sale or other disposition of the
same that they may have made,
notwithstanding demands therefor; defendants
have fraudulently misapplied or converted to
their own use any money realized from the
lease, sale, and other disposition of said
machinery." While there is no specific prayer
for the delivery to the petitioner by Philippine
Rayon of the proceeds of the sale of the
machinery covered by the trust receipt, such
relief is covered by the general prayer for "such
further and other relief as may be just and
equitable on the premises." And although it is
true that the petitioner commenced a criminal
action for the violation of the Trust Receipts
Law, no legal obstacle prevented it from
enforcing the civil liability arising out of the
trust, receipt in a separate civil action. Under
Section 13 of the Trust Receipts Law, the
failure of an entrustee to turn over the
proceeds of the sale of goods, documents or
instruments covered by a trust receipt to the
extent of the amount owing to the entruster or
as appear in the trust receipt or to return said
goods, documents or instruments if they were
not sold or disposed of in accordance with the
terms of the trust receipt shall constitute the
crime of estafa, punishable under the
provisions of Article 315, paragraph 1(b) of the
Revised Penal Code. Under Article 33 of the
Civil Code, a civil action for damages, entirely
separate and distinct from the criminal action,
may be brought by the injured party in cases of
defamation, fraud and physical injuries. Estafa
falls ​under fraud​.
#3. No. We also conclude that private
respondent Chi's signature in the dorsal portion
of the trust receipt did not bind him solidarily
with Philippine Rayon.
Our own reading of the questioned solidary
guaranty clause yields no other conclusion
than that the obligation of Chi is only that of ​a
guarantor.
Furthermore, any doubt as to the import, or
true intent of the solidary guaranty clause
should be resolved against the petitioner. The
trust receipt, together with the questioned
solidary guaranty clause, is on a form drafted
and prepared solely by the petitioner; Chi's
participation therein is limited to the affixing of
his signature thereon. It is, therefore, a contract
of adhesion; as such, it must be strictly
construed against the party responsible for its
preparation.
G.R. No. L-26001 October 29, 1968
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS and PHILIPPINE
COMMERCIAL AND INDUSTRIAL BANK,
respondents.
Facts:
On January 15, 1962, Augusto Lim deposited
in his current account with the PCIB branch at
Padre Faura, Manila, GSIS Check in the sum
of P57,415.00, drawn against the PNB; that,
following an established banking practice in the
Philippines, the check was, on the same date,
forwarded, for clearing, through the Central
Bank, to the PNB, which did not return said
check the next day, or at any other time, but
retained it and paid its amount to the PCIB, as
well as debited it against the account of the
GSIS in the PNB; that, subsequently, or on
January 31, 1962, upon demand from the
GSIS, said sum of P57,415.00 was re-credited
to the latter's account, for the reason that the
signatures of its officers on the check were
forged; and that, thereupon, or on February 2,
1962, the PNB demanded from the PCIB the
refund of said sum, which the PCIB refused to
do. Hence, the present action against the
PCIB, which was dismissed by the Court of
First Instance of Manila, whose decision was,
in turn, affirmed by the Court of Appeals.
Issue:
Whether or not PCIB as indorser is liable
despite the fact that the check is forged when
PNB is also negligent.
Ruling:
No. It should be noted that the PCIB thereby
guaranteed "all prior indorsements," ​not the
authenticity of the signatures of the officers of
the GSIS who signed on its behalf​, because
the GSIS is not an indorser of the check, but its
drawer. Said warranty is irrelevant, therefore,
to the PNB's alleged right to recover from the
PCIB. It could have been availed of by a
subsequent indorsee or a holder in due course
subsequent to the PCIB, but, the PNB is
neither. Indeed, upon payment by the PNB, as
drawee, the check ceased to be a negotiable
instrument, and became a mere voucher or
proof of payment.
Further, we must bear in mind that, in general,
"acceptance", in the sense in which this term is
used in the Negotiable Instruments Law is not
required for checks, for the same are payable
on demand. Indeed, "acceptance" and
"payment" are, within the purview of said Law,
essentially different things, for the former is "a
promise to perform an act," whereas the latter
is the "actual performance" thereof. In the
words of the Law, "the acceptance of a bill is
the signification by the drawee of his assent to
the order of the drawer," which, in the case of
checks, is the payment, on demand, of a given
sum of money. Upon the other hand, actual
payment of the amount of a check implies not
only an assent to said order of the drawer and
a recognition of the drawer's obligation to pay
the aforementioned sum, but, also, a
compliance with such obligation.
Finally, PCIB had been guilty of negligence in
not discovering that the check was forged.
Assuming that there had been such negligence
on the part of the PCIB, it is undeniable,
however, that the PNB has, also, been
negligent, with the particularity that the PNB
had been guilty of a ​greater degree of
negligence, because ​it had a previous and
formal notice from the GSIS that the check had
been lost,​ with the request that payment
thereof be stopped. Just as important, if not
more important and decisive, is the fact that
the PNB's negligence was the main or
proximate cause for the corresponding loss.
It is a well-settled maxim of law and equity that
when one of two (2) innocent persons must
suffer by the wrongful act of a third person, the
loss must be borne by the one whose
negligence was the proximate cause of the
loss or who put it into the power of the third
person to perpetrate the wrong.
Then, again, it has, likewise, been held that,
where the collecting (PCIB) and the drawee
(PNB) banks are equally at fault, the court will
leave the parties where it finds them.
Lastly, Section 62 of Act No. 2031 provides:
The acceptor by accepting the instrument
engages that he will pay it according to the
tenor of his acceptance; and admits:
(a) The existence of the drawer, the
genuineness of his signature, and his capacity
and authority to draw the instrument; and
(b) The existence of the payee and his then
capacity to indorse.
G.R. No. L-41764 December 19, 1980
NEW PACIFIC TIMBER & SUPPLY
COMPANY, INC., petitioner,
vs.
HON. ALBERTO V. SENERIS, RICARDO A.
TONG and ​EX-OFFICIO SHERIFF HAKIM S.
ABDULWAHID, respondents.
Facts:
Herein petitioner is the defendant in a
complaint for collection of a sum of money filed
by the private respondent. A compromise
judgment was rendered by the respondent
Judge in accordance with an amicable
settlement entered into by the parties the
defendant will pay to the plaintiff the amount of
P54,500.00 at 6% interest per annum; and that
defendant will pay to the plaintiff the amount of
P6,000.00 as attorney's fees for which
P5,000.00 had been acknowledged received
by the plaintiff leaving a balance of P1,000.00.
Upon failure of the petitioner to pay the
judgment obligation, a writ of execution worth
P63,130.00 was issued levied on the personal
properties of the petitioner. Before the auction
sale petitioner deposited with the Clerk of
Court the sum of P63,130.00 for the payment
of the judgment obligation, consisting of the
following: (1) P50.000.00 in Cashier's Check;
and (2) P13,130.00 in cash.
Private respondent refused to accept the check
as well as the cash deposit and requested the
scheduled auction sale to proceed if the
petitioner cannot produce the cash. Hence, the
properties were sold for P50,000.00 to the
highest bidder with a deficiency of P13,130.00.
Subsequently, petitioner filed an ex-parte
motion for issuance of certificate of satisfaction
of judgment which was denied by the
respondent Judge.
Issue:
Whether or not the private respondent can
validly refuse acceptance of the payment of the
judgment obligation made by the petitioner
consisting of P50,000.00 in Cashier's Check
and P13,130.00 in cash which it deposited with
the Ex-Officio Sheriff before the date of the
scheduled auction sale.
Ruling:
No. In upholding private respondent's claim
that he has the right to refuse payment by
means of a check, the respondent Judge cited
the following:
Section 63 of the Central Bank Act – ‘Legal
Character. — Checks representing deposit
money do not have legal tender power and
their acceptance in payment of debts, both
public and private, is at the option of the
creditor, …’
Article 1249 of the New Civil Code — ‘…….
The delivery of promissory notes payable to
order, or bills of exchange or other mercantile
documents shall produce the effect of payment
only when they have been cashed, or when
through the fault of the creditor they have been
impaired.
Art. 1248. Unless there is an express
stipulation to that effect, the creditor cannot be
compelled partially to receive the presentations
in which the obligation consists. Neither may
the debtor be required to make partial
payment……
It is to be emphasized that the check deposited
by the petitioner is not an ordinary check but a
Cashier's Check of the Equitable Banking
Corporation, a bank of good standing and
reputation​. It is a well-known and accepted
practice in the business sector that a ​Cashier's
Check is deemed as cash​. Moreover, since the
said check had been certified by the drawee
bank, it implies that the check is drawn upon
sufficient funds in the hands of the drawee, that
they have been set apart for its satisfaction,
and that they shall be so applied whenever the
check is presented for payment. The object of
certifying a check, as regards both parties, is to
enable the holder to use it as money." When
the holder procures the check to be certified,
"the check operates as an assignment of a part
of the funds to the creditors." ​Hence, the
exception to the rule enunciated under Section
63 of the Central Bank ​Act to the effect "that a
check which has been cleared and credited to
the account of the creditor shall be equivalent
to a delivery to the creditor in cash in an
amount equal to the amount credited to his
account" shall apply in this case.
We see no valid reason for the private
respondent to have refused acceptance of the
payment of the obligation in his favor.
Furthermore, it appears that the Cashier's
Check was even withdrawn by the petitioner
and replaced with cash in the corresponding
amount of P50,000.00 However, the private
respondent still refused to receive the same.
Obviously, the private respondent is more
interested in the levied properties than in the
mere satisfaction of the judgment obligation.
It is also contended by the private respondent
that Appeal and not a special civil action for
certiorari is the proper remedy in this case, and
that since the period to appeal from the
decision of the respondent Judge has already
expired, then, the present petition has been
filed out of time. The contention is untenable.
The subject of the petition at bar as having
been issued in grave abuse of discretion of the
respondent Judge which was merely issued in
execution of the said decision. Thus, even
granting that appeal is open to the petitioner,
the same is not an adequate and speedy
remedy for the respondent Judge had already
issued a writ of execution.
G.R. No. 219037, October 19, 2016
RCBC SAVINGS BANK, ​Petitioner​, ​v. NOEL
M. ODRADA, ​Respondent​.
Facts:
In April 2002, respondent Noel M. Odrada
(Odrada) sold a second​hand Mitsubishi
Montero (Montero) to Teodoro L. Lim (Lim) for
P1,510,000 Of the total consideration,
P610,000 was initially paid by Lim and the
balance of P900,000 was financed by
petitioner RCBC Savings Bank (RCBC)
through a car loan obtained by Lim.
After the issuance of the manager's checks
and their turnover to Odrada but prior to the
checks' presentation, Lim notified Odrada in a
letter that there was an issue regarding the
roadworthiness of the Montero and Odrada to
addressed the issue and meet him at the
specified place indicated in the letter.
Odrada did not go to the slated meeting and
instead deposited the manager's checks with
International Exchange Bank (Ibank) and
redeposited them but the checks were
dishonored both times apparently upon Lim's
instruction to RCBC. Consequently, Odrada
filed a collection suit against Lim and RCBC in
the Regional Trial Court.
Lim alleged that the cancellation of the loan
was at his instance, upon discovery of the
misrepresentations by Odrada about the
Montero's roadworthiness. Lim claimed that the
cancellation was not done ex parte but through
a letter. He further alleged that the letter was
delivered to Odrada prior to the presentation of
the manager's checks to RCBC.
RCBC contended that the manager's checks
were dishonored because Lim had cancelled
the loan. RCBC claimed that the cancellation of
the loan was prior to the presentation of the
manager's checks. Moreover, RCBC alleged
that despite notice of the defective condition of
the Montero, which constituted a failure of
consideration, Odrada still proceeded with
presenting the manager's checks.
Issue:
Whether or not drawee bank has the option to
deny payment of a manager’s check by
interposing Personal Defense of Lim that a
defective Montero was sold to Lim.
Ruling:
Yes. Under Article 1547 of the Civil Code
states: "In a contract of sale, unless a contrary
intention appears, there is an implied warranty
that the thing shall be free from any hidden
faults or defects."
Article 1566 of the Civil Code provides that "the
vendor is responsible to the vendee for any
hidden faults or defects in the thing sold, even
though he was not aware thereof." As a
consequence, the law fixes the liability of the
vendor for hidden defects whether known or
unknown to him at the time of the sale.
As a general rule, the drawee bank is not liable
until it accepts. Acceptance, therefore, creates
a privity of contract between the holder and the
drawee so much so that the latter, once it
accepts, becomes the party primarily liable on
the instrument. Accordingly, acceptance is the
act which triggers the operation of the liabilities
of the drawee (acceptor) under Section 62 of
the Negotiable Instruments Law. Thus, once he
accepts, the drawee admits the following: (a)
existence of the drawer; (b) genuineness of the
drawer's signature; (c) capacity and authority of
the drawer to draw the instrument; and (d)
existence of the payee and his then capacity to
endorse.
As can be gleaned in a long line of cases
decided by this Court, a manager's check is
accepted by the bank upon its issuance.
Notably, the mere issuance of a manager's
check creates a privity of contract between the
holder and the drawee bank, the latter primarily
binding itself to pay according to the tenor of its
acceptance.
The drawee bank, as a result, has the
unconditional obligation to pay a manager's
check to a ​holder in due course irrespective of
any available personal defenses. However,
while this Court has consistently held that a
manager's check is automatically accepted, ​a
holder other than a holder in due course is still
subject to defenses.
To be a holder in due course, the law requires
that a party must have acquired the instrument
in good faith and for value. Odrada is in bad
faith for he intended to deposit the checks w/o
addressing the issue made to him.
Section 58 of the Negotiable Instruments Law
provides: "In the hands of any holder other
than a holder in due course, a negotiable
instrument is subject to the same defenses as
if it were non-negotiable, x x x." Since Odrada
was not a holder in due course, the instrument
becomes subject to personal defenses under
the Negotiable Instruments Law. Hence, RCBC
may legally act on a countermand by Lim, the
purchaser of the manager's checks.

VII. OTHER POINTS OF CONSIDERATION
G.R no. 221058, July 5, 2017
WESTMONT INVESTMENT CORP VS
ALEJANDRO NG WEE
Facts:
Respondent Alejandro Ng Wee was a valued
client of Westmont Bank, he was enticed by
the branch manager to make money
placements or investments with petitioner
WINCORP, a domestic corporation engaged in
the business and licensed to operate as an
investment house. Lured by representations
that such transactions are safe, stable and
involve little to no risk, respondent made
placements totalling P210,595,991.62 with
wincorp.
The investments of respondent were matched
with POWERMERGE CORPORATION
(borrower) and its credit facility originated from
the loan of Hottick Holdings, Inc. Powermerge
Corp. issued promissory notes in favor of
petitioner Wincorp for each drawn from its
credit line amounting to P 2,183,755,253
billion. Powermerge Corp. then defaulted in its
obligation.
Respondent Alejandro Ng Wee allege that
there was gross negligence on the part of
petitioner Wincorp for approving Powermerge
Corporation’s credit line application
Petitioner Wincorp alleged that under the
corporation code, they shall not be liable
because the approval of the said credit line
was done in good faith and relied on the vetting
done by the departments of the company.
Issue:
Whether or not respondent was able to
establish his cause of action against Wincorp
and Powermerge Corp.
Ruling:
Yes, Wincorp is liable for fraud and
Powermerge is liable based on the contract.
Respondent was deceived into believing that
powermerge corporation is financially capable
of paying the returns of his investments.
Petitioner wincorp accredited powermerge
corporation as a borrower and was given a
credit line in the maximum amount of P 2.5
Billion regardless of signs which cause doubts
on its ability to perform its obligation. Wincorp
also executed two side agreements that the
investors could not have been aware of.
Powermerge corporation is liable to respondent
under its Promissory Note. Under sec. 60 of
the Negotiable Instruments Law, the maker of
the PN engages that he will pay it accordingly
to its tenor. It is very clear that powermerge
obligated itself to pay wincorp and those who
invested through its values stated in the PN.
On the record, it reveals that powermerge
actually received proceeds from the credit line
agreement. Even if powermerge corp, through
hottick holdings, is a mere accommodation
parry under the PN’s, liability would still attach
to them in favor of the instrument for value as a
surety.
GR NO. 199455, June 27, 2018
FEDERAL EXPRESS CORPORATION VS
LUWALHATI ANTONIO AND ELIZA
ANTONIO
Facts:
Respondent were in the Philippines and
decided to send 2 checks to Veronica Sison,
who was based in New York through FedEx.
Such checks were sent for the payment of real
estate taxes.
However, it was not received by Sison,
resulting to non-payment of obligation of the
respondents.
Sison then contacted FedEx to inquire about
the non-delivery. She was informed that the
package was delivered to her neighbor but
there was no signed receipt.
Respondent, demanded payment of damages
due to non-delivery of the package.
FedEx claimed that respondent has no cause
of action against it because the respondent
shipped a prohibited items under AIRWAY
BILL prohibiting the transportation of money.
Issue:
Whether or not petitioner FedEx corporation
may be held liable for damages on its failure to
deliver checks shipped by respondents
Ruling:
Yes, because what is prohibited under the
terms of the air waybill is the transportation of
money. Money, is the generally acceptable in
exchange for goods and under RA 7653, “New
central bank act” defines legal tender as “all
notes and coins issued by the Bangko Sentral
ng Pilipinas shall be legal tender in the
Philippines.
It is settled in jurisprudence that checks, being
only negotiable instruments are only substitute
for money and are not legal tender. There is no
question that checks, whether payable to order
or to bearer, so long as they comply with the
essential requirements under sec. 1 of the
Negotiable Instruments Law are, are
negotiable instruments
GR NO. 166018, June 4, 2014
HONGKONG AND SHANGHAI BANKING
CORP LIMITED PHIL. BRANCHES VS
COMMISSIONER OF INTERNAL REVENUE
Facts:
HSBC performs as a custodial bank which
serves as the payment agent with respect to
dividends and other income derived from its
investor-clients’ passive investments. In
purchasing shares of stock and other
investment in securities, the investor-clients
would send electronic messages from abroad
instructing HSBC to debit their local or foreign
currency accounts and to pay the purchase
price therefor upon receipt of the securities.
Pursuant to the electronic messages of its
investor-clients, HSBC purchased and paid
Documentary Stamp Tax from September to
December 1997 and also from January to
December 1998.
The BIR issued a Ruling to the effect that
instructions or advises from abroad on the
management of funds located in the
Philippines which do not involve transfer of
funds from abroad are not subject to DST.
HSBC filed an administrative claim for the
refund of the amount allegedly representing
erroneously paid DST to the BIR. The claims
were not acted upon, promted HSBC to
subsequently brought the matter to the CTA.
CTA favaroed HSBC and order CIR to refund
or issue a tax credit in favor of HSBC and ruled
that HSBC is entitled to a tax refund or tax
credit because Sections 180 and 181 of the
1997 Tax Code do not apply to electronic
message instructions transmitted by HSBC’s
non-resident investor-clients. CA reversed the
decision of CIR and ruled that the electronic
message instructions are subject to DST. The
CIR maintains that Tax Code imposes DST on
the acceptance or payment of a bill of
exchange or order for the payment of money

Issue:

Whether or not The electronic message

instructions are considered as negotiable
instrument subject to DST.

Ruling:

No. A bill of exchange is an unconditional order

in writing addressed by one person to another,
signed by the person giving it, requiring the
person to whom it is addressed to pay on
demand or at a fixed or determinable future
time a sum certain in money to order or to
bearer. The electronic messages cannot be
considered negotiable instruments as they lack
the feature of negotiability, which, is the ability
to be transferred and that the said electronic
messages are “mere memoranda” of the
transaction consisting of the actual debiting of
the payor’s local or foreign currency account in
the Philippines” and “entered as such in the
books of account of the local bank,” HSBC.