TITLE: FACTS: ISSUE/S:
(KEYWORDS)
1. CALTEX
(PHILIPPINES), INC., Security Bank and Trust Co. issued 280
VS. COURT OF certificates of time deposit (CTD) in Whether the
APPEALS and favor of one Mr. Angel dela Cruz who Certificates
SECURITY BANK AND deposited with the bank P1.12 million. of Time
TRUST COMPANY Dela Cruz delivered the CTDs to Caltex
Deposit
in connection with his purchase of fuel (CTDs) are
products from the latter. Subsequently, negotiable
dela Cruz informed the bank that he lost instruments.
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
Keywords: Certificates of time deposit
(CTD), Bearer Instrument
2. RIVERA VS. WON
SPOUSES CHUA The parties were friends and Negotiable
(2015) kumpadres for a long time already. Instruments
746 scra 1 Law is
RULINGS: PRINCIPLE
The CTDs in question are negotiable instruments as **The accepted rule is
they meet the requirements of the law for negotiability that the negotiability or
as provided for in Section 1 of the Negotiable non-negotiability of an
Instruments Law. The documents provide that the instrument is
amounts deposited shall be repayable to the depositor. determined from the
And according to the document, the depositor is the
writing, that is, from
"bearer." The documents do not say that the depositor
the face of the
is Angel de la Cruz and that the amounts deposited are
repayable specifically to him. Rather, the amounts are instrument itself.
to be repayable to the bearer of the documents or, for The CTDs in question
that matter, whosoever may be the bearer at the time are negotiable
of presentment. However, petitioner cannot recover instruments as they
on the CTDs. Although the CTDs are bearer meet the requirements
instruments, a valid negotiation thereof for the true of the law for
purpose and agreement between it and dela Cruz, as negotiability as
ultimately ascertained, requires both delivery and provided for in Section
indorsement. In this case, there was no indorsement 1 of the Negotiable
as the CTDs were delivered not as payment but only as
a security for dela Cruz' fuel purchases.
Instruments Law.
**The accepted rule is that the negotiability or non- Sec. 1
negotiability of an instrument is determined from the
writing, that is, from the face of the instrument itself.
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.
No. The subject promissory note is not a negotiable Section 1 of the NIL
instrument and the provisions of the NIL do not apply requires the
to this case. concurrence of the
 Rivera obtained a loan from the Spouses applicable in
Chua evidenced by a Promissory Note.
Three years from the date of payment case.
stipulated in the promissory note,
Rivera, issued and delivered to Spouses
Chua two (2) checks drawn against his
account at Philippine Commercial
International Bank (PCIB) but upon
presentment for payment, the two
checks were dishonored for the reason
“account closed.”
The Spouses Chua alleged that they have
repeatedly demanded payment from
Rivera to no avail. Because of Rivera’s
unjustified refusal to pay, the Spouses
Chua were constrained to file a suit
before the MeTC.
Rivera, in his Answer, countered that
he never executed the subject
Promissory Note.
After trial, the MeTC ruled in favor
of the Spouses Chua. The decision was
affirmed by both the RTC and the CA.
Keywords: Promissory Note, Payable
to order or to bearer
3. TRADERS ROYAL Filriters through a Detached
BANK V. CA Agreement transferred ownership to
269 SCRA 15 Philfinance a Central Bank Certificate of
Indebtedness. It was only through one
of its officers by which the CBCI was
conveyed without authorization from
the company. Petitioner and
Philfinance later entered into a
Repurchase agreement, on which
petitioner bought the CBCI from
Philfinance. The latter agreed to
repurchase the CBCI but failed to do so.
The Promissory Note in this case is made out to following elements to be
the present specific persons, herein respondents, the a negotiable instrument:
Spouses Chua, and not to order or to bearer, or
to the order of the Spouses Chua as payees. (a) It must be in writing
However, even if Rivera’s Promissory Note is not a and signed by the
negotiable instrument and therefore outside the maker or drawer;
coverage of Section 70 of the NIL which provides that (b) Must contain an
presentment for payment is not necessary to charge the unconditional promise
person liable on the instrument, Rivera is still liable or order to pay a sum
under the terms of the Promissory Note that he issued. 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.
Whether or The CBCI is not a negotiable instrument. The As held in Caltex
not the CBCI instrument provides for a promise to pay the (Philippines),
is a registered owner Filriters. Very clearly, the instrument Inc. v. Court of
negotiable was only payable to Filriters. It lacked the words of Appeals, 16:
instrument. negotiability which should have served as an The accepted rule is that
expression of the consent that the instrument may the negotiability or non-
be transferred by negotiation. negotiability of an
instrument is determined
The language of negotiability which characterize a from the writing, that is,
negotiable paper as a credit instrument is its from the face of the
freedom to circulate as a substitute for money. instrument itself.
Hence, freedom of negotiability is the touchstone
relating to the protection of holders in due course, and
 When the petitioner tried to have it
registered in its name in the CB, the
latter didn't want to recognize the
transfer.
Keywords: Central Bank Certificate of
Indebtedness,
4. Quirino Gonzales On October 15, 1962, petitioner Quirino
Logging Gonzales Logging Concessionaire (QGLC),
Concessionaire vs. through its general manager Quirino
The Court of Appeals Gonzales, applied for credit accommodation
G.R. No. 126568. with Republic Bank, later known as,
April 30, 2003. Republic Planters Bank (the Bank). The
obligation was secured by a real estate
mortgage of parcels of land. QGLC executed
a promissory note, which they later on
defaulted. The Bank foreclosed the property
and was subsequently owned by the same
bank. The latter then filed a complaint for a
sum of money in regards to the unpaid notes.
the freedom of negotiability is the foundation for the Under section 1 of Act no.
protection, which the law throws around a holder 2031 an instrument to be
in due course. This freedom in negotiability is negotiable must conform
totally absent in a certificate of indebtedness as it to the following
merely acknowledges to pay a sum of money to a requirements: (a) It must
specified person or entity for a period of time. be in writing and signed
xxx----------------------------------------------xxx by the maker or drawer;
The transfer of the instrument from Philfinance to (b) Must contain an
TRB was merely an assignment, and is not governed unconditional promise or
by the negotiable instruments law. The pertinent order to pay a sum certain
question then is—was the transfer of the CBCI in money; (c) Must be
from Filriters to Philfinance and subsequently from payable on demand, or at
Philfinance to TRB, in accord with existing law, so as a fixed or determinable
to entitle TRB to have the CBCI registered in its name future time; (d) Must be
with the Central Bank? (Whether the Assignment of payable to order or to
registered certificate is valid or null and void.) Clearly bearer; and (e) Where the
shown in the record is the fact that Philfinance’s instrument is addressed
title over CBCI is defective since it acquired the to a drawee, he must be
instrument from Filriters fictitiously. Although the named or otherwise
deed of assignment stated that the transfer was for indicated therein with
value received‘, there was really no consideration reasonable certainty.
involved. What happened was Philfinance merely
borrowed CBCI from Filriters, a sister corporation.
Thus, for lack of any consideration, the assignment
made is a complete nullity. Furthermore, the transfer
wasn't in conformity with the regulations set by the CB.
Giving more credence to rule that there was no valid
transfer or assignment to petitioner.
Whether or Yes, the promissory notes were valid. The petitioners Section 1 and Section 14
not the claim that they signed the notes in blank but did not Sec. 14. Blanks; when
promissory receive the value of the notes. They also admit the may be filled. - Where the
notes were genuineness and due execution of the notes. The instrument is wanting in
valid promissory notes were negotiable as they met the any material particular,
requirements of Section 1 of the Negotiable the person in possession
Instruments Law. The notes are prima facie deemed to thereof has a prima facie
have been issued for consideration. authority to complete it by
filling up the blanks
In any case, it is no defense that the promissory therein. And a signature
notes were signed in blank as Section 14 of the on a blank paper delivered
Negotiable Instruments Law concedes the prima by the person making the
facie authority of the person in possession of signature in order that the
paper may be converted
 The notes were payable 30 days after negotiable instruments, such as the notes herein, to fill into a negotiable
date and provided for the solidary liability in in the blanks. instrument operates as a
their non-payment at maturity. Petitioners prima facie authority to
deny having received the value of the fill it up as such for any
promissory notes. amount. In order,
The trial court favored the however, that any such
petitioners, but the CA reversed the decision. instrument when
completed may be
Keywords: Promissory note 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.
5. G.R. No.
76788 JUANITA
SALAS vs. CA and
FIRST FINANCE &
LEASING
CORPORATION

Eduardo Gomez opened an account with Whether or No. The treasury warrants are not negotiable Sec. 3. When promise
6. Golden Savings and deposited 38 not treasury instruments. Clearly stamped on their face is the is unconditional. - An
Metropolitan Bank treasury warrants. All warrants were warrants are word: non negotiable.” Moreover, and this is unqualified order or
& Trust Company subsequently indorsed by Gloria Castillo negotiable equal significance, it is indicated that they promise to pay is
vs. Court of as Cashier of Golden Savings and instruments are payable from a particular fund, to wit, unconditional within the
Appeals deposited to its Savings account in Fund 501. An instrument to be negotiable
meaning of this Act
G.R. No. 88866 though coupled with:
Metrobank branch in Calapan, Mindoro. instrument must contain an unconditional promise
 They were sent for clearance.
Meanwhile, Gomez is not allowed to
withdraw from his account, later,
however, “exasperated” over Floria
repeated inquiries and also as an
accommodation for a “valued” client
Metrobank decided to allow Golden
Savings to withdraw from proceeds of
the warrants. In turn, Golden Savings
subsequently allowed Gomez to make
withdrawals from his own account.
Metrobank informed Golden Savings
that 32 of the warrants had been
dishonored by the Bureau of Treasury
and demanded the refund by Golden
Savings of the amount it had previously
withdrawn, to make up the deficit in its
account. The demand was rejected.
Metrobank then sued Golden Savings.
Keywords: Treasury Warrants,
unconditional promise or orders to pay
a sum certain in money, Unqualified
order or Promise to pay
7. Hong Kong and
Shanghai Banking Hong Kong and Shanghai Banking
Corporation, Corporation, Limited (HSBC) performs,
Limited (HSBC) vs. among others, custodial services on behalf
COMMISSIONER OF of its investor clients. HSBC’s investor-
INTERNAL clients maintain Philippine peso and
REVENUE foreign currency accounts which are
managed by HSBC through electronic
messages, known in the banking industry as
Society for Worldwide Interbank Financial
Telecommunication (SWIFT).
In purchasing shares of stocks and
other investment in securities here in the
Philippines, the investor clients would send
electronic messages from abroad
instructing HSBC to debit their accounts
or orders to pay a sum certain in money. As (a) An indication of a
provided by Sec 3 of NIL an unqualified order or particular fund out of
promise to pay is unconditional though coupled which reimbursement is
with: 1st, an indication of a particular fund out of to be made or a particular
which reimbursement is to be made or a particular account to be debited with
the amount; or
account to be debited with the amount; or 2nd, a
statement of the transaction which give rise to the (b) A statement of the
instrument. But an order to promise to pay out of transaction which gives
particular fund is not unconditional. The indication rise to the instrument.
of Fund 501 as the source of the payment to be But an order or promise
made on the treasury warrants makes the order or to pay out of a particular
promise to pay “not conditional” and the warrants fund is not unconditional.
themselves non-negotiable. There should be no
question that the exception on Section 3 of NIL is
applicable in the case at bar.
Whether or The court ruled to the negative. Sec. 1. Form of negotiable
not electronic The electronic messages through SWIFT cannot instruments.– An
messages be constituted as a Bill of Exchange for it does not instrument to be
through comply with the Section 1 of the Negotiable negotiable must conform
SWIFT is Instruments Law for it does not contain an to the following
considered as unconditional order to pay a sum certain in requirements:
a bill of money and they are not payable to order or (a) It must be in writing
exchange and bearer but to a specifically designated person. and signed by the maker
therefore, Thus, no bill of exchange was made on the part or drawer;
must be of HSBC and therefore, the covered transactions (b) Must contain an
subject to should not be subject to DST. Wherefore, erroneous unconditional promise or
DST. payment of taxes for the abovementioned transactions order to pay a sum certain
entitles HSBC to a tax refund. in money;
Whether or (c) Must be payable on
not the demand, or at a fixed or
overpayment determinable future time;
 here in the Philippines to pay for the of DST by (d) Must be payable to
purchase price thereof. HSBC be order or to bearer; and
Pursuant to the electronic messages entitled to tax (e) Where the instrument
of its investor-clients, HSBC purchases the refund. is addressed to a drawee,
investments and pays the corresponding he must be named or
Documentary Stamp Taxes to the Bureau of otherwise indicated
Internal Revenue pursuant to Sec. 181 of therein with reasonable
the Tax Code which states that certainty.
Documentary Stamp Tax must be paid upon The electronic messages
acceptance of a bill of exchange. are not signed by the
However, on 1999, the BIR through investor-clients as
its Commissioner issued a ruling which supposed drawers of a bill
states that transactions from electronic of exchange; they do not
instructions from abroad should not be contain an unconditional
subject to Documentary Stamp Taxes (DST) order to pay a sum certain
if the funds used are already in Philippine in money as the payment
accounts and the DST were already paid for is supposed to come from
the investment purchase pursuant with Sec. a specific fund or account
230 of the Tax Code. of the investor-clients;
Thereafter, HSBC filed for the and, they are not payable
refund of the overpaid DST to the BIR. to order or bearer but to a
specifically designated
third party. Thus, the
Keywords: Documentary Stamp Tax(DST), electronic messages are
bill of exchange not bills of exchange.

8. ILANO VS HON. Amelia Alonzo is a trusted employee of 1. While some of the allegations may lack
1. Whether or For Section 6 of the
DOLORES L. Victoria Ilano. During those times that not the Court
particulars, and are in the form of conclusions of Negotiable Instruments
ESPAÑOL Ilano is in the United States for erred in law, the elements of a cause of action are present. Law provides:
medical check-up, Alonzo was entrusted dismissingFor even if some are not stated with particularity,
with Ilano‘s Metrobank Check Book the complaint
Ilano alleged 1) her legal right not to be bound by Section 6. Omission;
which contains both signed and the instruments which were bereft of consideration seal; particular money.
unsigned blank checks. 2. Whether or and to which her consent was vitiated; 2) the
not the checks correlative obligation on the part of the –
A Complaint for issued are not defendants-respondents to respect said right; and
Revocation/Cancellation of Promissory negotiable. 3) the act of the defendants-respondents in The validity and
Notes and Bills of Exchange (Checks) procuring her signature on the instruments negotiable character of
with Damages and Prayer for through “deceit,” “abuse of confidence” an instrument are not
Preliminary Injunction or Temporary “machination,” “fraud,” “falsification,” “forgery,” affected by the fact that
Restraining Order (TRO) against Alonzo
et al. before the Regional Trial Court of
 Cavite. Ilano contends that Alonzo, by
means of deceit and abuse of confidence
succeeded in procuring Promissory
Notes and signed blank checks. Alonzo
likewise succeeded in inducing Ilano to
sign antedated Promissory Notes. The
RTC rendered a decision dismissing the
complaint for lack of cause of action and
failure to allege the ultimate facts of the
case. On appeal, the Court
Appeals affirmed the dismissal of the
complaint. Hence, this petition.
Keywords: Validity and Negotiability,
Revocation/Cancellation of Promissory
Notes and Bills of Exchange, Deceit, Fraud,
Falsfication
“defraudation,” and “bad faith,” and “with malice, –
malevolence and selfish intent.”
(a) It is not dated; or
2. With respect to the checks subject of the
complaint, it is gathered that, except for Check No. (b) Does not specify the
0084078, they were drawn all against Ilano’s value given, or that any
Metrobank Account No. 00703-955536-7 shows value had been given
that it was dishonored due to “Account Closed.” therefor; or (c) Does not
When Ilano then filed her complaint, all the checks specify the place where
of subject hereof which were drawn against the same it is drawn or the place
closed account were already rendered valueless or where it is payable; or
non-negotiable, hence, Ilano had, with respect to (d) Bears a seal; or (e)
them, no cause of action. Designates a particular
kind of current money in
With respect to above-said Check No. 0084078, which payment is to be
however, which was drawn against another account made. However, even if
of petitioner, albeit the date of issue bears only the the holder of Check No.
year − 1999, its validity and negotiable character at 0084078 would have
the time the complaint was filed on March 28, filled up the month and
2000 was not affected. Sec. 6 of NIL provides - day of issue thereon to
be “December” and
“31,”respectively, it
would have, as it did,
become stale six (6)
months or 180 days
thereafter, following
current banking
practice. It is, however,
with respect to the
questioned promissory
notes that the present
petition assumes merit.

9. G.R. No. 170325 The spouses were engaged in the Whether the A check is “a bill of exchange drawn on a bank In a fictitious-payee
PHILIPPINE informal lending business. In line with subject payable on demand.” It is either an order or a situation, the drawee
NATIONAL BANK their business, they had a checks are bearer instrument. bank is absolved from
vs. discounting arrangement with the payable to liability and the drawer
Philnabank Employees Savings and order or to bears the loss. When
 ERLANDO T. Loan Association (PEMSLA), an bearer and faced with a check
RODRIGUEZ and association of PNB employees. who bears payable to a fictitious
NORMA Naturally, PEMSLA was likewise a client the loss. As a rule, when the payee is fictitious or not payee, it is treated as a
RODRIGUEZ of PNB Amelia Avenue Branch. The intended to be the true recipient of the proceeds, bearer instrument that
association maintained current and the check is considered as a bearer instrument. can be negotiated by
savings accounts with petitioner bank. delivery. The
underlying theory is
PEMSLA regularly granted loans to its that one cannot expect a
members. Spouses Rodriguez would Under Section 30 of the NIL, an order instrument fictitious payee to
rediscount the postdated checks issued requires an indorsement from the payee or holder negotiate the check by
to members whenever the association before it may be validly negotiated. A bearer placing his indorsement
was short of funds. As was customary, instrument, on the other hand, does not require an thereon. And since the
the spouses would replace the postdated indorsement to be validly negotiated. It is maker knew this
checks with their own checks issued in negotiable by mere delivery. limitation, he must
the name of the members. have intended for the
instrument to be
It was PEMSLA’s policy not to approve negotiated by mere
applications for loans of members with Under Section 9(c) of the NIL, a check payable to a delivery. Thus, in case
outstanding debts. To subvert this specified payee may nevertheless be considered as of controversy, the
policy, some PEMSLA officers devised a a bearer instrument if it is payable to the order of a drawer of the check will
scheme to obtain additional loans fictitious or non-existing person, and such fact is bear the loss. This rule
despite their outstanding loan accounts. known to the person making it so payable. Thus, is justified for
They took out loans in the names of checks issued to “Prinsipe Abante” or “Si Malakas otherwise, it will be
unknowing members, without the at si Maganda,” who are well-known characters in most convenient for the
knowledge or consent of the latter. The Philippine mythology, are bearer instruments maker who desires to
PEMSLA checks issued for these loans because the named payees are fictitious and non- escape payment of the
were then given to the spouses for existent. check to always deny
rediscounting. The officers carried this the validity of the
out by forging the indorsement of the indorsement. This
named payees in the checks. despite the fact that the
For the fictitious-payee rule to be available as a fictitious payee was
In return, the spouses issued their defense, PNB must show that the makers did not purposely named
personal checks (Rodriguez checks) in intend for the named payees to be part of the without any intention
the name of the members and delivered transaction involving the checks. At most, the that the payee should
the checks to an officer of PEMSLA. The bank’s thesis shows that the payees did not have receive the proceeds of
PEMSLA checks, on the other hand, were knowledge of the existence of the checks. This lack the check. (Philippine
deposited by the spouses to their of knowledge on the part of the payees, however, National Bank vs.
account. was not tantamount to a lack of intention on the Erlando T. Rodriguez
part of respondents-spouses that the payees would
Meanwhile, the Rodriguez checks were
deposited directly by PEMSLA to its
savings account without any
indorsement from the named payees.
This was an irregular procedure made
possible through the facilitation of
Edmundo Palermo, Jr., treasurer of
PEMSLA and bank teller in the PNB
Branch. It appears that this became the
usual practice for the parties.
For the period November 1998 to
February 1999, the spouses issued sixty
nine (69) checks, in the total amount
of P2,345,804.00. These were payable to
forty seven (47) individual payees who
were all members of PEMSLA.4
Petitioner PNB eventually found out
about these fraudulent acts. To put a stop
to this scheme, PNB closed the current
account of PEMSLA. As a result, the
PEMSLA checks deposited by the
spouses were returned or dishonored for
the reason "Account Closed." The
corresponding Rodriguez checks,
however, were deposited as usual to the
PEMSLA savings account. The amounts
were duly debited from the Rodriguez
account. Thus, because the PEMSLA
checks given as payment were returned,
spouses Rodriguez incurred losses from
the rediscounting transactions.
The spouses Rodriguez filed a civil
complaint for damages against PEMSLA
and PNB. They sought to recover the
value of their checks that were deposited
to the PEMSLA savings account
not receive the checks’ proceeds. Considering that and Norma Rodriguez,
respondents-spouses were transacting with supra)
PEMSLA and not the individual payees, it is
understandable that they relied on the information However, there is a
given by the officers of PEMSLA that the payees ‘commercial bad
would be receiving the checks. faith’ exception to the
fictitious-payee rule. A
Verily, the subject checks are presumed order showing of commercial
instruments. This is because, as found by both bad faith on the part of
lower courts, PNB failed to present sufficient the drawee bank, or any
evidence to defeat the claim of respondents that the transferee of the check
named payees were the intended recipients of the for that matter, will
checks’ proceeds. The bank failed to satisfy a work to strip it of its
requisite condition of a fictitious-payee situation – defense. The exception
that the maker of the check intended for the payee will cause it to bear the
to have no interest in the transaction. loss. Commercial bad
faith is present if the
Because of a failure to show that the payees were transferee of the checks
“fictitious” in its broader sense, the fictitious-payee acts dishonestly, and is
rule does not apply. Thus, the checks are to be a party to the
deemed payable to order. Consequently, the fraudulent scheme.
drawee bank bears the loss. (Philippine National
Bank vs. Erlando T.
Rodriguez, et al, G.R.
No. 170325, September
26, 2008 [Reyes, R.T.,
J.])
amounting to P2,345,804.00. The
spouses contended that PNB paid the
wrong payees, hence, it should bear the
loss.

The RTC rendered judgment in favor of

spouses Rodriguez, and ruled that PNB
is liable to return the value of the checks.

On appeal, the CA affirmed the RTC

Decision..

Keywords: Fictitious payee,

Commercial Bad Faith