1.

Philippine Deposit Insurance Corp (PDIC) v CA

FACTS

On September 22, 1983, plaintiffs-appellees invested in money market placements with the Premiere Financing Corporation (PFC) in
the sum of P10,000.00 each for which they were issued by the PFC corresponding promissory notes and checks. On the same date, John
Francis Cotaoco, for and in behalf of plaintiffs-appellees, went to the PFC to encash the promissory notes and checks, but the PFC
referred him to the Regent Saving Bank (RSB).

Instead of paying the promissory notes and checks, the RSB, upon agreement of Cotaoco, issued the subject 13 certificates of time
deposit (CTD), inclusive, each stating, among others, that the same certifies that the bearer thereof has deposited with the RSB the sum
of P10,000.00; that the certificate shall bear 14% interest per annum; that the certificate is insured up to P15,000.00 with the PDIC; and
that the maturity date thereof is on November 3, 1983.

On the aforesaid maturity date, Cotaoco went to the RSB to encash the said certificates. Thereat, RSB requested Cotaoco for a deferment
or an extension of a few days to enable the RSB to raise the amount to pay for the same. Cotaoco agreed. Despite said extension, the
RSB still failed to pay the value of the certificates. Instead, RSB advised Cotaoco to file a claim with the PDIC.

On September 4, 1984, plaintiffs-appellees filed with the PDIC their respective claims for the amount of the certificates. To their dismay,
PDIC refused the aforesaid claims on the ground that the Traders Royal Bank Check No. 299255 dated September 22, 1983 for the
amount of P125,846.07 issued by PFC for the aforementioned certificates was returned by the drawee bank for having been drawn
against insufficient funds; and said check was not replaced by the PFC, resulting in the cancellation of the certificates as indebtedness
or liabilities of RSB.

The trial court ordered both PDIC and RSB to pay plaintiffs.

CA ruled that the CTD’s are negotiable but petitioner contends that the CTDs are non-negotiable since they do not contain an
unconditional promise or order to pay a sum certain in money nor are they made payable to order or bearer, as required by Section 1 of
the Negotiable Instruments Law.

ISSUE: WON the court should hold the certificates to be guaranteed by PDIC because they are negotiable instruments.

HELD: NO

Whether the CTDs in question are negotiable or not is, however, immaterial in the present case. The Philippine Deposit Insurance
Corporation was created by law and, as such, is governed primarily by the provisions of the special law creating it.3 The liability of the
PDIC for insured deposits therefore is statutory and, under Republic Act No. 3591,4 as amended, such liability rests upon the existence
of deposits with the insured bank, not on the negotiability or nonnegotiability of the certificates evidencing these
deposits.

As held by The Supreme Court of Kansas, in a similar US case

x x x The argument confuses negotiability of commercial paper with statutory guaranty of deposits. The guaranty is something
extrinsic to all forms of evidence of bank obligation; and negotiability of instruments has no dependence on existence or nonexistence
of the guaranty.

x x x Whatever the status of the plaintiffs may be as holders in due course under the Negotiable Instruments Law, they cannot be
assignees of a deposit which was not made, and cannot be entitled to the benefit of a guaranty which did not come into existence. x x

2. Patrimonio v Gutierrez

FACTS

Patrimonio (basketball player) and Gutierrez entered into a business venture under the name of Slam Dunk Corporation. In the course
of their business, the petitioner 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.

In the middle of 1993, without the Patrimonio’s knowledge and consent, Gutierrez went to Marasigan (the petitioner’s former
teammate), 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. In addition to the payment of the principal, Gutierrez assured Marasigan that he would be paid an interest of 5% per month
from March to May 1994. Marasigan
acceded to Gutierrez’ request and gave him P200,000.00 sometime in February 1994. 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.” The upper right portion of the check corresponding to the date was
also filled out with the words “May 23, 1994”

On May 24, 1994, 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 since May 28, 1993.

A case for violation of BP 22 was filed by Marasigan against Patrimonio. Patrimonio, on the other hand, contends that he did not
authorize the issuance of the check and that he is not a privy to the loan agreement between Gutierrez and Marasigan.
ISSUE: WON Patrimonio should be held liable for the check issued with his signature but was not authorized by him.

HELD: Petitioner is not liable.

The blank check is an incomplete but delivered instrument. Under section 14, 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.

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.

Marasigan is not a holder in due course – He did not acquire the instrument in good faith. He knew that the loan was for Gutierrez,
however he accepted the check of Patrimonio which is irregular. 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.

Check Was Not Completed Strictly Under The Authority Given by The Petitioner – the issuance of the check was not approved by petitioner.

Considering above reasons, petitioner is not liable.

3. Pacheco v CA

FACTS

Pacheco spouses are engaged in the construction business. Complainant Romualdo Vicencio was a former Judge and his wife, Luz
Vicencio, owns a pawnshop. On May 17, 1989, due to financial difficulties arising from the repeated delays in the payment of their
receivables for the construction projects from the DPWH, petitioners were constrained to obtain a loan of P10,000.00 from Mrs.
Vicencio. The latter acceded. Instead of merely requiring a note of indebtedness, however, her husband Mr. Vicencio required
petitioners to issue an undated check as evidence of the loan which allegedly will not be presented to the bank. Despite being informed
by petitioners that their bank account no longer had any funds, Mrs. Vicencio insisted that they issue the check, which according to her
was only a formality.

Mrs Pacheco also obtained additional loan from Vicencio in exchange for undated checks. The total indebtedness amounted to 75,000
for which 60,000 were paid.

When the remaining balance of P15,000.00 on the loans became due and demandable, petitioners were not able to pay despite demands
to do so. The Vicencio’s went to petitioners’ residence to persuade Virginia to place the date “August 15, 1992” on checks nos. 101756
and 101774, despite being informed by petitioner Virginia that their account with RCBC had been closed as early as August 17, 1989.

However, the checks were presented for payment and were dishonored due to “Account Closed”. A case for estafa was filed against
petitioner.

ISSUE: WON the check issued was negotiable, hence making petitioner liable.

HELD: No

BY MUTUAL AGREEMENT OF THE PARTIES, THE NEGOTIABLE CHARACTER OF A CHECK MAY BE WAIVED AND THE
INSTRUMENT BE SIMPLY TREATED AS PROOF OF AN OBLIGATION. There cannot be deceit on the part of the spouses because
they agreed with the lender at the time of the issuance and postdating of the checks that the same shall not be encashed or
presented to the bank. As per assurance of the lender, the checks are nothing but evidence of the loan or security thereof in lieu
of and for the same purpose as a promissory note.

Note: Also section 13 was discussed in the case.

Both courts below relied so much on the fact that Mrs. Vicencio’s husband is a former Judge who knows the law. He should have
known, then, that he need not even ask the petitioners to place a date on the check, because as holder of the check, he could have
inserted the date pursuant to Section 13 of the Negotiable Instruments Law (NIL).9
Moreover, as stated in Section 14 thereof, complainant, as the person in possession of the check, has prima facie authority to complete it
by filling up the blanks therein.

4. Asia Brewery, Inc v Equitable PCI Bank

FACTS

Within the period of September 1996 to July 1998, 10 checks and 16 demand drafts (collectively, “instruments”) were issued in the name
of Charlie Go. The instruments, with a total value of P3,785,257.38, bore the annotation “endorsed by PCI Bank, Ayala Branch, All Prior
Endorsement And/Or Lack of Endorsement Guaranteed.” All the demand drafts, except those issued by the Lucena City and Ozamis
branches of Allied Bank, were crossed.

In their Complaint, petitioners narrate:

10. None of the above checks and demand drafts set out under the First, Second, Third, Fourth, Fifth, and Sixth Causes of Action
reached payee, co-plaintiff Charlie S. Go.
11. All of the above checks and demand drafts fell into the hands of a certain Raymond U. Keh, then a Sales Accounting Manager of
plaintiff Asia Brewery, Inc., who falsely, willfully, and maliciously pretending to be the payee, co-plaintiff Charlie S. Go, succeeded in
opening accounts with defendant Equitable PCI Bank in the name of Charlie Go and thereafter deposited the said checks and demand
drafts in said accounts and withdrew the proceeds thereof to the damage and prejudice of plaintiff Asia Brewery, Inc.

Raymond Keh was allegedly charged with and convicted of theft and ordered to pay the value of the checks, but not a single centavo
was collected, because he jumped bail and left the country while the cases were still being tried.

ISSUE

Petitioners argue that the trial court seriously erred in dismissing their Complaint for lack of cause of action since the checks were
never delivered to the payee Charlie Go. (hence, wala daw right si Go sa instruments).

or

WON actual delivery to the payee is required for delivery to be effectual. – No.

HELD: RTC committed an error.

The Court believes that it need not delve into the issue of whether the instruments have been delivered, because it is a matter of defense
that would have to be proven during trial on the merits. In Aquino v. Quiazon, we held that if the allegations in a complaint furnish
sufficient basis on which the suit may be maintained, the complaint should not be dismissed regardless of the defenses that may be
raised by the defendants. In other words, "[a]n affirmative defense, raising the ground that there is no cause of action as against the
defendants poses a question of fact that should be resolved after the conduct of the trial on the merits.”

Moreover, Sec. 16. Delivery; when effectual; when presumed.—Every contract on a negotiable instrument is incomplete and revocable until
delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as regards a remote party other
than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making,
drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a
special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands
of a holder in due course, a valid delivery thereof by all parties prior to him
so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose
signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.

5. Samsung Construction v. Far East Bank

FACTS:
Samsung Construction maintained a current account with Far East Bank and Trust Bank (FETBC) in its Bel-Air Makati Branch, with
Jong Kyu Lee who is the Project Manager as the sole signatory and Kyu Yong Lee having the
checks in his custody as the company’s accountant. A certain Roberto
Gonzaga presented an FETBC Check on the same branch. The check was payable to cash and drawn against the account of Samsung
Construction amounting to P995, 500.00. The teller and the bank officers were satisfied with the genuineness of the signature in the
check and confirmed the identity of Gonzaga with the assistant accountant of Samsung Construction who was also familiar and known
to them, the latter being present at the bank premises at that time. In the end, the check was authorized to be encashed. The Project
Manager and the Accountant of the company found out the next day that the last blank check was missing and that the check was
encashed with Jong’s
signature being forged. Samsung Construction demanded reimbursement of the amount encashed and when it was not heeded
immediately, it filed a Complaint against the bank for violation of Sec. 23 of Negotiable Instruments Law.

In the RTC, it held that Jong’s signature on the check was forged and ordered the bank to pay company for the amount plus interest.
During appeal in CA, this decision was reversed by stating that even assuming there was forgery, it occurred due to the negligence of
Samsung Construction specifically the accountant for lack of care in keeping the checks. The decision was appealed to SC, based on the
grounds that the CA misapprehended the facts and erred when it said that the company has been negligent in safekeeping the check.

Issue: Is bank liable to reimburse the amount encashed through forgery?

HELD:
Yes, the bank is liable to pay Samsung Construction. Therefore, the decision of CA is set aside. Under Sec. 23 of Negotiable Instruments
Law, forgery is a real or absolute defense by the party whose signature is forged. 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. The Court finds no basis to conclude that Samsung Construction was negligent in the
safekeeping of its checks especially that Samsung Construction reported the forgery almost immediately upon discovery. The general
rule imputing liability on the drawee who paid out on the forgery holds in this case. The circumstances 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. Extraordinary diligence dictates that FEBTC should have ascertained from Jong personally
that the signature in the questionable check was his. 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. Bank of America v Philippine Racing Club (PRC)

FACTS:
1. Plaintiff PRCI is a domestic corporation which maintains a current account with petitioner Bank of America. Its authorized
signatories are the company President and Vice-President. By virtue of a travel abroad for these officers, they pre-signed checks to
accommodate any expenses that may come up while they were abroad for a business trip. The said pre-signed checks were left for
safekeeping by PRCs accounting officer.

On the space where the name of the payee should be indicated (Pay To The Order Of) the following 2-line entries were instead
typewritten: on the upper line was the word CASH while the lower line had the following typewritten words, viz: ONE HUNDRED
TEN THOUSAND PESOS ONLY.

2. Clearly there was an irregularity with the filling up of the blank checks as both showed similar infirmities and irregularities and yet,
the petitioner bank did not try to verify with the corporation and proceeded to encash the checks.

3. PRC filed an action for damages against the bank. The lower court awarded actual and exemplary damages. On appeal, the CA
affirmed the lower court’s decision and held that the bank was negligent. Hence this appeal. Petitioner contends that it was merely
doing its obligation under the law and contract in encashing the checks, since the signatures in the checks are genuine.

ISSUES: (1) WON the bank was negligent

(2) WON Section 14 of the Negotiable Instruments Law must be applied

Petitioner insists that it merely fulfilled its obligation under law and contract when it encashed the aforesaid checks. Invoking Sections
126[7] and 185[8] of the Negotiable Instruments Law (NIL), petitioner claims that its duty as a drawee bank to a drawer-client
maintaining a checking account with it is to pay orders for checks bearing the drawer-clients genuine signatures. Thus, pursuant to the
said obligation, the drawee bank has the duty to determine whether the signatures appearing on the check are the drawer-clients or its
duly authorized signatories. If the signatures are genuine, the bank has the unavoidable legal and contractual duty to pay. If the
signatures are forged and falsified, the drawee bank has the corollary, but equally unavoidable legal and contractual, duty not to pay.

Although not in the strict sense material alterations, the misplacement of the typewritten entries for the payee and the amount on the
same blank and the repetition of the amount using a check writer were glaringly obvious irregularities on the face of the check. Clearly,
someone made a mistake in filling up the checks and the repetition of the entries was possibly an attempt to rectify the mistake.

Indeed, it is highly uncommon for a corporation to make out checks payable to CASH for substantial amounts such as in this case. If
each irregular circumstance in this case were taken singly or isolated, the banks employees might have been justified in ignoring them.
However, the confluence of the irregularities on the face of the checks and circumstances that depart from the usual banking practice of
respondent should have put petitioners employees on guard that the checks were possibly not issued by the respondent in due course
of its business. Petitioners subtle sophistry cannot exculpate it from behavior that fell extremely short of the highest degree of care and
diligence required of it as a banking institution.

Sec. 14. Blanks, when may be filled. Where the instrument is wanting in any material particular, the person in possession thereof has a
prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making
the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as
such for any amount. 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.
But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his
hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.

Sec. 16, Delivery; when effectual; when presumed. Every contract on a negotiable instrument is incomplete and revocable until
delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other
than a holder in due course, the delivery in order to be effectual, must be made either by or under the authority of the party making,
drawing, accepting, or indorsing as the case may be; and in such case the delivery may be shown to have been conditional, or for a
special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands
of a holder of a due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively
presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional
delivery by him is presumed until the contrary is proved.

In defense of its cashier/tellers questionable action, petitioner insists that pursuant to Sections 14 and 16 of the NIL, it could validly
presume, upon presentation of the checks, that the party who filled up the blanks had authority and that a valid and intentional
delivery to the party presenting the checks had taken place. Thus, in petitioners view, the sole blame for this debacle should be shifted
to respondent for having its signatories pre-sign and deliver the subject checks.

Petitioners contention would have been correct if the subject checks were correctly and properly filled out by the thief and presented to
the bank in good order. In that instance, there would be nothing to give notice to the bank of any infirmity in the title of the holder of
the checks and it could validly presume that there was proper delivery to the holder. The bank could not be faulted if it encashed the
checks under those circumstances. However, the undisputed facts plainly show that there were circumstances that should have alerted
the bank to the likelihood that the checks were not properly delivered to the person who encashed the same. In all, we see no reason to
depart from the finding in the assailed CA Decision that the subject checks are properly characterized as incomplete and undelivered
instruments thus making Section 15 [20] of the NIL applicable in this case.

7. Associated Bank v Court of Appeals

FACTS:

The province of Tarlac maintains an account with PNB-Tarlac. Part of its funds is appropriated for the benefit of Concepcion
Emergency Hospital. During a post-audit done by the province, it was found out that 30 of its checks weren’t received by the hospital.
Upon further investigation, it was found out that the checks were encashed by Pangilinan who was a former cashier and
administrative officer of the hospital through forged indorsements with Associated Bank as the collecting bank. This
prompted the provincial treasurer to ask for reimbursement from PNB and thereafter, PNB from Associated Bank. As the
two banks didn't want to reimburse, an action was filed against them.

ISSUE: Where 30 checks bearing forged endorsement were paid, who bears the loss, the drawer, the drawee bank or the collecting
bank.

HELD:
There is a distinction on forged indorsements with regard bearer instruments and instruments payable to order.

With instruments payable to bearer, the signature of the payee or holder is unnecessary to pass title to the instrument. Hence, when the
indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against holder in due course.

In instruments payable to order, the signature of the rightful holder is essential to transfer title to the same instrument.
When the holder’s signature is forged, all parties prior to the forgery may raise the real defense of forgery against all parties
subsequent thereto. In connection to this, an indorser warrants that the instrument is genuine. A collecting bank is such an
indorser. So even if the indorsement is forged, the collecting bank is bound by his warranties as an indorser and cannot set up
the defense of forgery as against the drawee bank.

Furthermore, in cases involving checks with forged indorsements, such as the case at bar, the chain of liability doesn't 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, the forger himself, if available. In other words, the drawee
bank can seek reimbursement or a return of the amount it paid from the collecting bank or person. The collecting bank generally
suffers the loss because it has te 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 indorsements.

With regard the issue of delay, a delay in informing the bank of the forgery, which deprives it of the opportunity to go after the
forger, signifies negligence on the part of the drawee bank and will preclude it from claiming reimbursement. In this case, PNB
wasn't guilty of any negligent delay. Its delay hasn't prejudiced Associated Bank in any way because even if there wasn't
delay, the fact that there was nothing left of the account of Pangilinan, there couldn't be anymore reimbursement.

8. Gempesaw v CA

FACTS
Gempensaw was the owner of many grocery stores. She paid her suppliers through the issuance of checks drawn against her
checking account with respondent bank. The checks were prepared by her bookkeeper Galang. In the signing of the checks
prepared by Galang, Gempensaw didn't bother
herself in verifying to whom the checks were being paid and if the issuances were necessary. She didn't even verify the
returned checks of the bank when the latter notifies her of the same. During her two years in business, there were incidents shown
that the amounts paid for were in excess of what should have been paid. It was also shown that even if the checks were crossed, the
intended payees didn't receive the amount of the checks. This prompted Gempensaw to demand the bank to credit her account
for the amount of the forged checks. The bank refused to do so and this prompted her to file the case against the bank.

ISSUE: W/N Gempesaw has a right to recover the amount attributable to the forgeries

HELD:
Forgery is a real defense by the party whose signature was forged. A party whose signature was forged was never a party and never
gave his consent to the instrument. Since his signature doesn’t appear in the instrument, the same cannot be enforced against
him even by a holder in due course. The drawee bank cannot charge the account of the drawer whose signature was forged because he
never gave the bank the order to pay.

In the case at bar the checks were filled up by petitioner’s employee Galang and were later given to her for signature. Her
signing the checks made the negotiable instruments complete. Prior to signing of the checks, there was no valid contract yet.
Petitioner completed the checks by signing them and thereafter authorized Galang to deliver the same to their respective payees.
The checks were then indorsed, forged indorsements thereon.

As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot debit the account of a drawer for
the amount of said check. An exception to this rule is when the drawer is guilty of negligence which causes the bank to honor
such checks. Petitioner in this case has relied solely on the honesty and loyalty of her bookkeeper and never bothered to verify
the accuracy of the amounts of the checks she signed the invoices attached thereto. And though she received her bank
statements, she didn't carefully examine the same to double-check her
payments. Petitioner didn't exercise reasonable diligence which eventually led to the fruition of her bookkeeper’s fraudulent schemes.