#1 Lozano v.

Martinez - It is an order addressed to a bank and partakes of a representation that the drawer has
146 SCRA 323 funds on deposit against which the check is drawn, sufficient to ensure payment upon its
DATE: December 18, 1986 presentation to the bank
By: Calaguas - It is a money substitute since there is an element of certainty or assurance that the
Topic: Functions and Significance of Negotiable Instruments; Money substitute; BP 22 instrument will be paid upon presentation. This element of assurance allows it to be accepted
Petitioners: Florentina A. Lozano as a medium in trade and commerce
Respondents: Honorable Antonio M. Martinez in his capacity as presiding judge, Regional - It is not legal tender but it is still a substitute for commercial and financial transactions since
trial court, NCR, Branch XX, Manila and the Honorable Jose B. Flaminiano, in his capacity as it is founded on confidence.
City Fiscal of Manila 2. No. Checks are not contracts but are instead, commercial instruments used as a
Ponente: Yap, J: substitute for money.
- Because of this, checks are not free from the regulatory power of the state
- Besides, the constitutional guarantee that is freedom to contract refers to
DOCTRINE: Checks cannot be categorized as mere contracts. They are commercial
lawful contracts – and issuing worthless checks and including them in
instruments which, in this modern age, has become a convenient substitute for money. They
circulation is not lawful as it contravenes public policy
are not entirely free from the regulatory power of the state
3. No. This argument is tantamount to saying that the law should punish both the
swindler and the swindled.
FACTS
4. No. This is an absurd argument.
- BP 22 or Bouncing Check Law was approved on April 3, 1979
- The prohibition on delegating legislative powers means it is prohibited to
- Multiple petitions arose from cases involving prosecution of offenses involving BP 22
delegate creating laws, or to define the offense sought to be punished and to
- all petitions question the constitutionality of BP 22
prescribe the penalty
- BP 22 punishes a person who makes or draws and issues any check on account or for value,
- In no way does the payee do this
knowing at the time of the issue that they do not have sufficient funds in or credit
5. No. The minutes for the day (Feb 7, 1979) of the Second Reading reflected that the
- Essential element: Knowledge on the part of the drawer of the check of the insufficiency of
amendment was approved on the Second Reading.
his funds in or credit with the bank to cover the check upon its presentment
- Additionally, before the third reading, there was created a special committee
to investigate the matter – and they reported that the amendment was
ISSUE
approved on the second reading
Whether BP 22 is constitutional
1. Whether it goes against the constitutional provision forbidding imprisonment of
2.) FAR EAST BANK v. QUERIMIT
debt
GR NO. 148582
2. Whether it impairs freedom of contract
JANUARY 16, 2002
3. Whether it denies equal protection of the laws
By: RONNEL DEINLA
4. Whether it unduly delegates legislative powers
5. Whether it violated the constitutional provision of prohibiting amendments to a bill
Topic: FORMS/KINDS OF NEGOTIABLE INSTRUMENTS; OTHERS; CERTIFICATE OF DEPOSIT
on Third reading
Petitioners: FAR EAST BANK AND TRUST COMPANY
Respondents: ESTRELLA O. QUERIMIT
HELD/RATIO
Ponente: MENDOZA, J.
Yes. BP 22 is constitutional
1. No. BP 22 is valid exercise of Police Power and does not go against the
DOCTRINE:
constitutional provision forbidding imprisonment of debt.
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the
- What is being punished by BP 22 is the act of making and issuing a worthless
receipt of a sum of money on deposit which the bank or banker promises to pay to the
check.
depositor, to the order of the depositor, or to some other person or his order, whereby the
- NOT the non-payment of the obligation
relation of debtor and creditor between the bank and the depositor is created.
- BP 22 aims to stop the inclusion of worthless checks in circulation since this
could have disastrous effects on the public interest
The principles governing other types of bank deposits are applicable to certificates of deposit,
- BP 22 is an exercise of Police Power of the state, prohibiting the practice of
as are the rules governing promissory notes when they contain an unconditional promise to
destroying the confidence put on checks as a money substitute
pay a sum certain of money absolutely. The principle that payment, in order to discharge a
What is a check?
debt, must be made to someone authorized to receive it is applicable to the payment of
- A check is a bill of exchange drawn on a bank and payable on demand.
certificates of deposit.
A bank acts at its peril when it pays deposits evidenced by a certificate of deposit, without its
production and surrender after proper indorsement. The debtor has the burden of showing
with legal certainty that the obligation has been discharged by payment.
The business of banks is impressed with public interest, the degree of diligence required of
banks is more than that of a good father of the family or of an ordinary business firm. The
fiduciary nature of their relationship with their depositors requires them to treat the accounts
of their clients with the highest degree of care. Responsibility arising from negligence in the
performance of every kind of obligation is demandable.
FACTS:
● Querimit worked as internal auditor of the Philippine Savings Bank. She opened a dollar
savings account in FEBTC Harrison Plaza branch, for which she was issued four Certificates
of Deposit, each certificate representing the amount of $15,000.00.
● The certificates were to mature in 60 days and were payable to bearer at 4.5% interest per
annum. The certificates bore the word accrued, which meant that if they were not
presented for encashment or pre-terminated prior to maturity, the money deposited with
accrued interest would be rolled over by the bank and annual interest would accumulate
automatically.
● Querimit kept her dollars in the bank so that they would earn interest and so that she
could use the fund after she retired.
● A year after, she accompanied her husband Dominador to the United States for medical
treatment. She used her savings in BPI to pay for the trip and medical expenses.
● The following year, her husband died, and Estrella returned to the Philippines. She went to
FEBTC to withdraw her deposit, but she was told that her husband withdrew the money in
deposit.
● Querimit sent a demand letter to FEBTC.
● FEBTC presented certified true copies of documents showing that payment had been
made, to wit:
○ 4 FEBTC Harrison Plaza Branch Dollar Demand Drafts for US$15,110.96 each, allegedly
issued by FEBTC to Dominador after payment on the certificates of deposit;
○ A letter of Alicia de Bustos, branch cashier of FEBTC at Harrison Plaza, informing Citibank
that FEBTC had issued four drafts and requesting Citibank New York to debit from
petitioners account $60,443.84, the aggregate value of the four drafts;
○ Citicorp Remittance Service;
○ Debit Ticket showing the debit of US$60,443.84 from the FEBTC Harrison Plaza Branch;
and
○ An Interbranch Transaction Ticket Register or Credit Ticket showing that US$60,443.84
was credited to Querimit
ISSUE:
HELD/RATIO:
· FEBTC failed to prove that it had already paid Estrella Querimit, the bearer and lawful
holder of the subject certificates of deposit.
· This Court is not a trier of facts and generally does not weigh anew the evidence already
passed upon by the Court of Appeals. The finding of the CA which shows that the
subject certificates of deposit are still in the possession of Estrella Querimit and have
not been indorsed or delivered to petitioner FEBTC is substantiated by the record and
should therefore stand.
· The certificates of deposit were clearly marked payable to bearer, which means, to the
person in possession of an instrument, document of title or security payable to bearer or
indorsed in blank.
· FEBTC should not have paid Dominador or any third party without requiring the
surrender of the certificates of deposit.
· FEBTC claims that it did not demand the surrender of the subject certificates of deposit
since Dominador was one of the bank’s senior managers. But even long after Dominador
had allegedly withdrawn the deposits and before his retirement from service, the FEBTC
never required him to deliver the certificates of deposit in question. Moreover, such
accommodation was made in violation of the banks policies and procedures.
· FEBTC thus failed to exercise that degree of diligence required by the nature of its
business.
3. Firestone Tire & Rubber Company of the Philippines v. CA and Luzon Development Bank
GR NO. 113236
March 5, 2001
By: M. HADJIRUL
Topic: certificate of deposit
Petitioners: Firestone Tire & Rubber Company of the Philippines
Respondents: Court of Appeals and Luzon Development Bank
Ponente: Quisumbing, J.
RECIT-READY/SUMMARY: Fojas-Arca Enterprises Company maintained a special
account with respondent Luzon Development Bank which authorized and
allowed the former to withdraw funds from its account through the medium of
special withdrawal slips. Fojas-Arca and Firestone entered into a franchising
agreement whereby the former purchased tires from the latter with special
withdrawal slips drawn upon Fojas-Arca's special savings account with
respondent bank. Petitioner in turn deposited these withdrawal slips with
Citibank. The latter credited the same to petitioner's current account, then
presented the slips for payment to respondent bank. It was at this point that the
bone of contention arose.
Citibank informed petitioner that special withdrawal slips Nos. 42127 and
42129, were refused payment by respondent bank due to insufficiency of Fojas-
Arca's funds on deposit. That information came about six months from the time
Fojas-Arca purchased tires from petitioner using the subject withdrawal slips.
Citibank then debited the amount of these withdrawal slips from petitioner's
account, causing the alleged pecuniary damage subject of petitioner's cause of
action. Firestone then wrote a demand letter to Fojas-Arca for the payment and
damages but the latter refused to pay.
DOCTRINE: The essence of negotiability which characterizes a negotiable paper as credit
instrument lies in its freedom to circulate freely as a substitute for money.
FACTS
● Defendant (LDB) is a banking corporation.
o Said defendant had as one of its client-depositors the Fojas-Arca
Enterprises Company (Fojas-Arca).
 ● Plaintiff (Firestone) and Fojas-Arca entered into a "Franchised Dealership
Agreement" whereby Fojas-Arca has the privilege to purchase on credit and sell
plaintiff's products.
o In paying for these products, Fojas-Arca could pay through special
withdrawal slips drawn upon Fojas-Arca’s special savings account with
LDB.
● Pursuant to the aforesaid Agreement, Fojas-Arca purchased on credit Firestone
products from plaintiff with a total amount of P4,896,000.00.
● In payment of these purchases, Fojas-Arca delivered to plaintiff 6 special
withdrawal slips drawn upon the defendant. In turn, these were deposited by the
plaintiff with its current account with the Citibank. All of them were honored and
paid by the defendant.
● On the following dates Fojas-Arca purchased Firestone products on credit and
delivered to plaintiff the corresponding special withdrawal slips in payment thereof
drawn upon the defendant.
o These were likewise deposited by plaintiff in its current account with
Citibank.
● However, plaintiff was informed by Citibank that special withdrawal slips No. 42127
for P1,198,092.80 and No. 42129 for P880,000.00 were dishonored and not paid
for the reason 'NO ARRANGEMENT.'
o As a consequence, the Citibank debited plaintiff's account for the total
sum of P2,078,092.80 representing the aggregate amount of the above-
two special withdrawal slips.
● Counsel of plaintiff served a written demand upon the defendant for the
satisfaction of the damages suffered by it. And due to defendant's refusal to pay
plaintiff's claim, plaintiff has been constrained to file this complaint.
● Defendant asserted that the transactions mentioned by plaintiff are that of plaintiff
and Fojas-Arca only, in which defendant is not involved;
o it was denied by defendant that the special withdrawal slips were
honored and treated as if it were checks
● RTC dismissed the complaint
o Petitioner appealed the decision to the Court of Appeals.
o It averred that respondent Luzon Development Bank was liable for
damages.
o Petitioner alleged the following tortious acts on the part of private
respondent:
▪ 1) the acceptance and payment of the special withdrawal slips
without the presentation of the depositor's passbook thereby
giving the impression that the withdrawal slips are instruments
payable upon presentment;
▪ 2) giving the special withdrawal slips the general appearance of
checks; and
▪ 3) the failure of respondent bank to seasonably warn petitioner
that it would not honor two of the four special withdrawal slips.
● CA denied and affirmed decision of RTC
ISSUE
● W/N respondent bank should be held liable for damages suffered by petitioner,
due to its allegedly belated notice of non-payment of the subject withdrawal slips.
HELD/RATIO
● NO. Withdrawal slips in question were non negotiable instrument. Hence, the
rules governing the giving immediate notice of dishonor of negotiable instrument
do not apply.
● Citibank could not have missed the non-negotiable nature of the withdrawal slips.
o The essence of negotiability which characterizes a negotiable paper as a
credit instrument lies in its freedom to circulate freely as a substitute for
money. The withdrawal slips in question lacked this character.
● The withdrawal slips deposited with petitioner's current account with Citibank
were not checks, as petitioner admits.
● Citibank was not bound to accept the withdrawal slips as a valid mode of deposit.
But having erroneously accepted them as such, Citibank — and petitioner as
account-holder — must bear the risks attendant to the acceptance of these
instruments. Petitioner and Citibank could not now shift the risk and hold private
respondent liable for their admitted mistake.
● Petition DENIED.
4. CONSOLIDATED PLYWOOD INDUSTRIES INC vs IFC LEASING & ACCEPTANCE CORP
G.R. No. 72593
DATE: April 30, 1987
By: Enzo
Topic:
Petitioner: CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T.
VERGARA,
Respondents: IFC LEASING AND ACCEPTANCE CORPORATION,
Ponente:
SUMMARY: Pet is a business engaged in logging then it needed 2 tractors. Industrial
Product Mktg (IPM) then sold 2 of its used/2nd hand tractors to petitioner represented by a
chattel mortgage and a PN. IPM then assigned its rights over the PN to resp company. 14
days later 1 of the tractors was broken and the other one was broken also after 9 days. Pet
company requested for IPM to fix the tractors under the warranty agreement, but to no
avail. Hence, pet company’s projects were delayed and said that it will also delay the
payment of the chattel mortgage and the PN. Resp company now filed a collection against
pet company enforcing the PN it acquired from IPM. Pet company contended that the PN
was not a negotiable instrument because it didn’t contain “to the order of” or “to bearer”
hence, resp company cannot enforce it over them. Hence, the issue of WON THE PN IS A
NEGOTIABLE INSTRUMENT AND IS THEREFORE ENFORCEABLE AGAINST PET COMPANY?
Sabi ng SC NO because "The instrument in order to be considered negotiable must contain
the so called 'words of negotiability' — i.e., must be payable to 'order' or 'bearer'. These
words serve as an expression of consent that the instrument may be transferred. This
consent is indispensable since a maker assumes greater risk under a negotiable instrument
than under a non-negotiable one. . . . . In the case, reading the PN, it ddnt really contain the
words “to the order of” or “to bearer”. Hence, it is not a negotiable instrument. Petitioner
company won!
DOCTRINES:
 1. Section 1 of the Negotiable Instruments Law requires that a promissory note "must
be payable to order or bearer,"
2. "The instrument in order to be considered negotiable must contain the so called
'words of negotiability' — i.e., must be payable to 'order' or 'bearer'. These words
serve as an expression of consent that the instrument may be transferred. This
consent is indispensable since a maker assumes greater risk under a negotiable
instrument than under a non-negotiable one. . . . .
FACTS
1. The petitioner is a corporation engaged in the logging business. For its projects, it
needed two (2) additional units of tractors.
2. Industrial Products Marketing (the "seller-assignor"), a corporation dealing in tractors
and other heavy equipment business, offered to sell to petitioner-corporation two (2)
"Used" Allis Crawler Tractors,
3. In order to ascertain the extent of work to which the tractors were to be exposed and
to determine the capability of the "Used" tractors being offered, petitioner-corporation
requested the seller-assignor to inspect the jobsite.
4. After conducting said inspection, the seller-assignor assured petitioner-corporation
that the "Used" Allis Crawler Tractors which were being offered were fit for the job,
and gave the corresponding warranty of ninety (90) days performance of the machines
and availability of parts
5. Petitioner-corporation through petitioners Wee and Vergara, president and vice-
president agreed to purchase on installment said two (2) units of "Used" Allis Crawler
Tractors.
6. The seller-assignor issued the sales invoice for the two (2) units of tractors. At the same
time, the deed of sale with chattel mortgage with promissory note was executed
7. Simultaneously with the execution of the deed of sale with chattel mortgage with
promissory note, the seller-assignor assigned its rights and interest in the chattel
mortgage in favor of the respondent.
8. Barely fourteen (14) days had elapsed after their delivery when one of the tractors
broke down and after another nine (9) days, the other tractor likewise broke down
9. Petitioner Rodolfo T. Vergara formally requested for the seller-assignor's usual prompt
attention under the warranty. In response to the formal advice by petitioner Rodolfo T.
Vergara, the seller-assignor sent to the jobsite its mechanics to conduct the necessary
repairs but the tractors were no longer serviceable
10. Because of the breaking down of the tractors, the road building and simultaneous
logging operations of petitioner-corporation were delayed and petitioner Vergara
advised the seller-assignor that the payments of the installments as listed in the
promissory note would likewise be delayed until the seller-assignor completely fulfills
its obligation under its warranty
11. The seller-assignor did nothing with regard to the request, until the complaint in this
case was filed by the respondent against the petitioners, the corporation, Wee, and
Vergara.
12. The complaint was filed by the respondent against the petitioners for the recovery of
the principal sum
13. The petitioners filed their amended answer praying for the dismissal of the complaint
and asking the trial court to order the respondent to pay the petitioners damages. The
petitioners likewise prayed for such other and further relief as would be just under the
premises.
14. The RTC rendered its decision in favor respondent. Thus, the petitioners appealed
contending that respondent corporation is not a holder in due course of the promissory
note. That the PN is not a negotiable instrument
15. Respondent corp on the other contended that the promissory note is a negotiable
instrument and respondent a holder in due course. Hence, it can enforce the payment
of the PN from petitioners; that respondent is not liable for any breach of warranty;
and finally, that the promissory note is admissible in evidence.
ISSUE: WON THE PN IS A NEGOTIABLE INSTRUMENT? NO
HELD:
1. Section 1 of the Negotiable Instruments Law requires that a promissory note "must be
payable to order or bearer,"
2. "The instrument in order to be considered negotiable must contain the so called 'words
of negotiability' — i.e., must be payable to 'order' or 'bearer'. These words serve as an
expression of consent that the instrument may be transferred. This consent is
indispensable since a maker assumes greater risk under a negotiable instrument than
under a non-negotiable one. . . . .
3. In the case, The pertinent portion of the note is as follows:
"FOR VALUE RECEIVED, I/we jointly and severally promise to pay to the INDUSTRIAL
PRODUCTS MARKETING, the sum of ONE MILLION NINETY THREE THOUSAND SEVEN
HUNDRED EIGHTY NINE PESOS & 71/100 only (P1,093,789.71), Philippine Currency, the said
principal sum, to be payable in 24 monthly installments starting July 15, 1978 and every 15th
of the month thereafter until fully paid. . . . ."
4. Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires
that a promissory note "must be payable to order or bearer," it cannot be denied that
the promissory note in question is not a negotiable instrument.
5. Therefore, considering that the subject promissory note is not a negotiable instrument,
it follows that the respondent can never be a holder in due course but remains a mere
assignee of the note in question. Thus, the petitioner may raise against the respondent
all defenses available to it as against the seller-assignor,
RULING: WHEREFORE, in view of the foregoing, the decision of the respondent appellate
court dated July 17, 1985, as well as its resolution dated October 17, 1986, are hereby
ANNULLED and SET ASIDE. The complaint against the petitioner before the trial court is
DISMISSED.
5. BDO v. Equitable Banking Corp.
GR L-7491
Jan 20, 1988
By: Madrid
____________________________________________________________________________
Facts:
- Equitable Banking Corp. drew 6 crossed Manager’s Check payable to certain member of its
establishment. Subsequently, the Checks were deposited with Banco de Oro to the credit of
its depositor, a certain Aida Trencio.
- Following the normal procedures, and after stamping at the back of the of the Checks the
usual endorsements: “All prior and/or lack of endorsement guaranteed,” Banco de Oro sent
the checks for clearing through PCHC. Accordingly, Equitable Banking Corp. paid the Checks.
Its clearing account was debited for the value of the Checks and Banco de Oro’s clearing
account was credited for the same amount.
- Thereafter, Equitable Banking Corp. discovered that the endorsements at the back of the
Checks were forged or otherwise belong to the persons other than the payees. Pursuant to
the PCHC Clearing Rules and Regulations, Equitable Bank presented the checks directly to the
Banco de Oro to claim reimbursement. However, the latter refused.
Issue:
WON the subject Checks are non-negotiable.
WON BDO was negligent and thus responsible for any undue payment.
Held:
1.
- Banco de Oro by its own acts, stamped its guarantee is now estopped from claiming that
the checks under consideration are not negotiable instruments.
- The Checks were accepted for deposit by Banco de Oro stamping thereon its guarantee, in
order that it can clear said Checks with Equitable Banking Corp.
- By such deliberate and positive attitude of Banco de Oro, it has for all legal intents and
purposes treated the said Checks as negotiable instruments and accordingly assumed the
warranty of the endorser when it stamped its guarantee of prior endorsement at the back.
2.
- Although the subject Checks are non-negotiable, the responsibility of petitioner as endorser
thereof remains. While the drawer generally owes no duty of diligence to the collecting
banks, the law imposes a duty of diligence in the collecting bank to scrutinize Checks
deposited with it for the purpose of determining their genuineness and regularity.
- The collecting bank being primarily engaged in banking holds itself out to the public as the
expert and the law holds it to a high standard of conduct.
6. GSIS v. RACHO
GR NO. L-40824
FEBRUARY 23, 1989
By: BEATRIZ A. NICOR
Topic: NEGO – FORM AND INTERPRETATION OF NEGOTIABLE INSTRUMENTS; (SEC. 1)
REQUISITES OF NEGOTIABILITY
Petitioners: GOVERNMENT SERVICE INSURANCE SYSTEM
Respondents: COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO
Ponente: REGALADO, J
RECIT-READY: Sps. Racho and Sps. Lagasca executed 2 deeds of mortgage in favor of GSIS
for 2 loans they undertook. A property co-owned by both spouses was used as security
for the 2 mortgages. They also executed a promissory binding themselves jointly and
severally to pay a certain sum of money on a certain date to GSIS. Sps. Lagasca executed
an ‘Assumption of Mortgage’ instrument where they obligated themselves assume the
responsibility to pay GSIS alone. However, they failed to do this. GSIS then foreclosed
the property. Sps. Racho then learned about the foreclosure and filed a complaint for
recovery of their property and that the extrajudicial foreclosure be declared null and
void. They allege that they signed the mortgage contracts not as sureties for the Lagasca
spouses but merely as accommodation party. TC dismissed for lack of cause of action.
CA reversed. The SC held that the promissory note and mortgage deeds executed by the
spouses are non-negotiable instruments as they failed to comply with the fourth
requisite, it must be payable to order or to bearer. Decision of TC affirmed.
DOCTRINE: Promissory notes and mortgage deeds herein are not negotiable instruments
as these documents do not comply with the fourth requisite to be considered as such
under Section 1 of Act No. 2031 because they are neither payable to order nor to bearer.
FACTS:
· Spouses Racho, together with the Spouses Lagasca, executed a deed of mortgage,
dated November 13, 1957, in favor of Government Service Insurance System (GSIS), and
another deed of mortgage, dated April 14, 1958, in connection with two loans granted
by GSIS for 11.5k and 3k respectively.
· A parcel of land, co-owned by said mortgagor spouses, was given as security under
the aforesaid two deeds.
· They also executed a "promissory note" which states that they JOINTLY,
SEVERALLY and SOLIDARILY bound themselves and promised to pay the GSIS the sum
of 11.5k, with interest at the rate of 6% compounded monthly payable in 120 equal
monthly installments of P127.65 each.
· On July 11, 1961, Sps. Lagasca executed an instrument denominated "Assumption
of Mortgage" under which they obligated themselves to assume the obligation to the
GSIS and to secure the release of the mortgage covering that portion of the land
belonging to herein Sps. Racho and which was mortgaged to the GSIS. However, this
was not fulfilled.
· Upon failure of the mortgagors to pay the mortgage amortizations, GSIS
extrajudicially foreclosed the property and scheduled it to be sold at a public auction.
· 2 years after, Sps. Racho filed a complaint against Sps. Lagasca praying that the
extrajudicial foreclosure made on their property and all other documents executed in
relation thereto in favor of the GSIS be declared null and void. They also prayed that
they be allowed to recover said property, and/or GSIS be ordered to pay the them the
value thereof, and/or they be allowed to repurchase the land.
· They further alleged that that they signed the mortgage contracts not as sureties or
guarantors for Sps. Lagasca but they merely (as accommodation party) gave their
common property to the said co-owners who were solely benefited by the loans from
the GSIS.
· TC dismissed the complaint for failure to establish a cause of action.
· CA reversed and held that Sps. Racho have a valid cause for having foreclosed the
mortgage without having given sufficient notice to them as required either as to their
delinquency in the payment of amortization or as to the subsequent foreclosure of the
mortgage by reason of any default in such payment. The notice published in the
newspaper, and posted pursuant to Sec. 3 of Act 3135 is not the notice to which the
mortgagor is entitled upon the application being made for an extrajudicial foreclosure
ISSUE:
(1) WON the promissory note signed and executed by both spouses as well as the
mortgage deeds are valid negotiable instruments

HELD/RATIO:
(1) NO. The promissory note as well as the mortgage deeds subject of this case, are
clearly not negotiable instruments.
· Section 29 of Act No. 2031, or Negotiable Instruments Law, provides that an
accommodation party is one who has signed an instrument as maker, drawer, acceptor
of indorser without receiving value therefor, but is held liable on the instrument to a
holder for value although the latter knew him to be only an accommodation party. Both
parties appear to be misdirected and their reliance misplaced.
· These documents do not comply with the fourth requisite to be considered as
such under Section 1 of Act No. 2031 because they are neither payable to order nor to
bearer.
· The note is payable to a specified party, the GSIS. Absent the aforesaid requisite,
the provisions of Act No. 2031 would not apply, governance shall be afforded, instead,
by the provisions of the Civil Code and special laws on mortgages.
Other issues:
· It cannot be said that private respondents are without liability under the mortgage
contracts. The factual context of this case is precisely what is contemplated in the last
paragraph of Article 2085 of the Civil Code to the effect that third persons who are not
parties to the principal obligation may secure the latter by pledging or mortgaging their
own property.
· So long as valid consent was given, the fact that the loans were solely for the
benefit of the Lagasca spouses would not invalidate the mortgage with respect to
private respondents' share in the property.
· Bonnevie, et al. vs. Court of Appeals, et al., - the Court ruled that Act No. 3135, as
amended, does not require personal notice on the mortgagor, quoting the requirement
on notice in such cases as follows:
"Section 3. Notice shall be given by posting notices of sale for not less than twenty days in
at least three public places of the municipality where the property is situated, and if such
property is worth more than four hundred pesos, such notice shall also be published once
a week for at least three consecutive weeks in a newspaper of general circulation in the
municipality or city."
· There is no showing that the foregoing requirement on notice was not complied
with in the foreclosure sale complained of.
· Therefore, CA erred in annulling the mortgage insofar as it affected the share of
Sps. Racho or in directing reconveyance of their property of the payment or value
thereof. Indubitably, whether or not private respondents herein benefited from the
loan, the mortgage and the extrajudicial foreclosure proceedings were valid.
WHEREFORE, judgment is hereby rendered REVERSING the decision of the respondent
Court of Appeals and REINSTATING the decision of the court a quo in Civil Case No. Q-
9418 thereof.
NOTES:
Section 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.
7. SALAS VS. CA and FIRST FINANCE AND LEASING CORPORATION
GR NO. 76788
JANUARY 22, 1990
BY: Ryan
TOPIC: REQUISITES OF NEGOTIABILITY
PETITIONERS: SALAS
RESPONDENTS: FIRST FINANCE AND LEASING CORPORATION (PERO SA CASE MISMO
FILINVEST ANG NAME NG RESPONDENT)
PONENTE: BARRIOS, J.
____________________________________________________________________________
DOCTRINE: Promissory Note as a Negotiable Instrument bears the following marks:
o It is in writing and signed by its maker;
o It contains an unconditional promise to pay;
o It is payable at fixed/determinable future time
o It is payable; and
o The drawee is named
FACTS:
● Salas bought a vehicle from Violago Motor Corp. (VMS) for P58,138.20 as evidenced by a
promissory note. Said note was endorsed to Filinvest Finance & Leasing Corporation w/c
financed the purchase.
● Salas defaulted in her payments allegedly due to a discrepancy in the engine and chassis
number of the vehicle delivered to her and those indicated in the sales invoice, registration
and chattel mortgage,
● Due to failure to pay her dues, Filinvest Finance & Leasing Corp. filed a case for a sum of
money before the RTC.
● The RTC ordered Salas to pay the balance of P28,414.40 w/ 14% interest. The counterclaim
of Filinvest Finance was dismissed. Both parties appealed to the CA.
● Imputing fraud against VMS for delivering a different vehicle, Salas prayed for the reversal
of the RTC decision so that she may be absolved of any obligation.
● The CA ruled that the allegations contained in the pleading are conclusive against the
pleader. Evidence shows that the amount of P58,138.20 as stated in the promissory note is
the amount assumed by Filinvest Finance & Leasing Corp. in financing Salas’ purchase from
VMS with a monthly amortization of P1,614.95 for 36 months.
o Considering that Salas was able to pay twice (or P3,229.90), then she is liable for the
remaining balance.
● Salas filed an MR but was denied.
● Salas argued that in light of the provisions of law on sales by description, which she says is VMS. Assuming that that there was deception made upon her in that the vehicle she
applicable, as no contract existed between her and VMS hence none has been assigned in bought was different from what was actually delivered, this matter cannot be passed
favor of Filinvest Finance & Leasing Corp. upon in this case as VMS was never the impleaded party.
o Just in case: Salas contended that it was unnecessary to implead VMS as a party to the
case as VMS was earlier sued for breach of contract in RTC Olongapo. She cited that DISPOSITIVE PORTION: IN VIEW OF THE FOREGOING, the assailed decision is hereby
similar case as authority as the court therein ordered Salas to pay the remaining AFFIRMED. With costs against petitioner.
balance of the vehicle amounting to PhP31,644.30 which represented the difference
between the agreed consideration of PhP49,000.00 and the PhP17,000.00 8 CALTEX vs CA
downpayment. This decision was reversed later on and ordered VMS to return Salas’ GR No 97753
downpayment. This case is still pending at the CA upon VMS’s appeal, DATE: August 10, 1992
● Filinvest Finance prayed to dismiss the petition arguing that the issues raised were a By: Julpha
rehash of those presented and was already passed on by the lower courts. The judgement Topic:
in the breach of contract case cannot be invoked as authority as it still was pending. Petitioner:CALTEX (PHILIPPINES), INC
Respondents: COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY
ISSUE: WON the promissory note in this case is a negotiable instrument Ponente:

HELD/RATIO: YES
SUMMARY: Certificate of Time Deposists CTDs were issued by respondent bank to a
● In order for an instrument to be considered negotiable, it must contain words of
certain Angel Dela Cruz for the amount of 1.2M. later on, these CTDs were delivered by
negotiability (i.e. must be payable to order/bearer). Sec. 8 of the NegoTin Law, there are 2
Angel to pet Caltex in connection with his (angel) purchase of its (pet Caltex) fuel products.
ways by which an instrument may be payable to order.
Later on, Angel said to resp bank that it lost the CTDs, so the resp bank replaced the CTDs.
o There must be always be a specified person named in the instrument and the bill/note is
Angel now loaned from resp bank 800K guaranteed by the CTDs presented to them by
to be paid to the person designated in the instrument or to any person to whom he has
angel. Later on, pet Caltex went to resp bank and presented the CTDs given to them by
indorsed and delivered the same.
angel and said that those CTDs were used to guaranty the fuel products bought from them
o W/o the words “or order”/”to the order of”, the instrument is payable only to the person
by Angel. Resp bank then requested for an evidence from pet Caltex showing the guaranty
designated therein hence is non-negotiable.
agreement it had with angel dela cruz, but pet bank wasn’t able to give one. Pet Caltex
o Any subsequent purchase will not enjoy the benefits of being a holder of a negotiable
wanted to be paid of the value of the CTDs by the resp bank, but resp bank refused.
instrument, but will merely step into the shoes of the person designated in the
Hence, pet Caltex filed a case against resp bank. The CA ruled against pet Caltex saying
instrument thus opening all defenses available to the latter.
that the CTDs were not negotiable instruments because the name of Angel Dela Cruz was
● In this case, the basis of Filinvest Finance against Salas is a promissory note which bears
specified therein and didn’t contain “to bearer” or “to bearer” meaning, it can only be
all the marks of negotiability. A careful study of said promissory note shows it is a
used by the person whose name appears on it. Hence, Caltex cannot use the CTDs to claim
negotiable instrument as it complied with the following requisites:
money from resp bank. Hence, the issue of WON THE CTDs ARE NON NEGOTIABLE
O It is in writing and signed by its maker, Salas;
INSTRUMENTS? The SC said that the CTDs were negotiable instruments because that the
o It contains an unconditional promise to pay PhP58,138.20;
negotiability or non-negotiability of an instrument is determined from the writing, that is,
o It is payable at fixed/determinable future time which is PhP1,614.95 for 36 months.
from the face of the instrument itself.In the case, reading the CTDs in question, it had the
o It is payable to VMS; and
word “bearer” near the name of Angel Dela Cruz. Hence the SC ruled that the parties
o The drawee is named.
intended the CTDs to be negotiable and not only for the perusal of Angel Dela Cruz.
● The promissory note is negotiated by indorsement in writing on the instrument itself
payable to Filinvest Finance and is an indorsement in the entire instrument.
● It is undisputed that Filinvest Finance is a holder in due course, having taken the DOCTRINES:
instrument in the following conditions: 1. the accepted rule is that the negotiability or non-negotiability of an instrument is
o It is complete and regular upon its face; determined from the writing, that is, from the face of the instrument itself
O It became the holder thereof before it was overdue and w/o notice that it had 2. The duty of the court in such case is to ascertain, not what the parties may have
previously been dishonored; secretly intended as contradistinguished from what their words express, but what is the
o It took the same in good faith and for value; and meaning of the words they have used.
o When it was negotiated to Filinvest, the latter had no notice of any infirmity in the
instrument/defect in the title of VMS FACTS
● Filinvest hold the instrument free from any defect of title and free from defenses ● On various dates, defendant, a commercial banking institution issued 280
available and may enforce payment of the instrument for the full amount. Being this, certificates of time deposit (CTDs) in favor of one Angel dela Cruz who deposited
Salas cannot set up against Filinvest the defense of nullity of contract between her and with herein defendant the aggregate amount of P1,120,000.00
 ● Angel dela Cruz delivered the said certificates of time deposit (CTDs) to herein
plaintiff in connection with his purchase of fuel products from the latter
● Later on, Angel dela Cruz informed Mr. Timoteo Tiangco, the Branch Manager of
resp bank company, that he lost all the certificates of time deposit in dispute. Mr.
Tiangco advised said depositor to execute and submit a notarized Affidavit of Loss,
as required by defendant bank's procedure, if he desired replacement of said lost
CTDs
● Angel dela Cruz executed and delivered to defendant bank the required Affidavit of
Loss. On the basis of said affidavit of loss, 280 replacement CTDs were issued in
favor of said depositor
● Angel dela Cruz negotiated and obtained a loan from defendant bank in the
amount of (P875,000.00). On the same date, said depositor executed a notarized
Deed of Assignment of Time Deposit which stated, among others, that he (dela
Cruz) surrenders to defendant bank `full control of the indicated time deposits from
and after date of the assignment and further authorizes said bank to pre-terminate,
set-off and 'apply the said time deposits to the payment of whatever amount or
amounts may be due' on the loan upon its maturity
● Later on, Mr. Aranas, Credit Manager of plaintiff Caltex (Phils.) Inc. went to the
defendant bank's and presented for verification the CTDs declared lost by Angel
dela Cruz alleging that the same were delivered to herein plaintiff `as security for
purchases made with Caltex
● Defendant received a letter from herein plaintiff formally informing it of its
possession of the CTDs in question and of its decision to pre-terminate the same.
● On December 8, 1982, plaintiff was requested by herein defendant to furnish the
former 'a copy of the document evidencing the guarantee agreement with Mr.
Angel dela Cruz' as well as 'the details of Mr. Angel dela Cruz' obligations against
which' plaintiff proposed to apply the time deposits
● No copy of the requested documents was furnished to herein defendant.
● Accordingly, defendant bank rejected the plaintiff's demand and claim for payment
of the value of the CTDs in a letter dated February 7, 1983
● In April 1983, the loan of Angel dela Cruz with the defendant bank matured and fell
due and the latter set-off and applied the time deposits in question to the payment
of the matured loan
● In view of the foregoing, plaintiff filed the instant complaint, praying that
defendant bank be ordered to pay it the aggregate value of the certificates of time
deposit of P1,120,000.00.
● Respondent court ruled that the CTDs in question are non-negotiable instruments
because the document provides that the amount deposited shall be `repayable to
said depositor' on the period indicated. Therefore, the text of the instrument(s)
themselves manifest with clarity that they are payable, not to whoever purports to
be the `bearer' but only to the specified person indicated therein, the depositor.
● In effect, the appellee bank acknowledges its depositor Angel dela Cruz as the
person who made the deposit and further engages itself to pay said depositor the
amount indicated thereon at the stipulated date.
ISSUE: WON THE CTDs WERE NON NEGOTIABLE INSTRUMENTS? NO THEY WERE NEGOTIABLE
INSTRUMENTS!
HELD:
● The accepted rule is that the negotiability or non-negotiability of an instrument is
determined from the writing, that is, from the face of the instrument itself
● The duty of the court in such case is to ascertain, not what the parties may have
secretly intended as contradistinguished from what their words express, but what is
the meaning of the words they have used.
● In the case, If it was really the intention of respondent bank to pay the amount to
Angel de la Cruz only, it could have with facility so expressed that fact in clear and
categorical terms in the documents, instead of having the word "BEARER" stamped
on the space provided for the name of the depositor in each CTD. On the wordings
of the documents, therefore, the amounts deposited are repayable to whoever
may be the bearer thereof.
● However, pet Caltex cannot still recover from resp bank. Aside from the fact that
the CTDs were only delivered but not indorsed, the factual findings of respondent
court quoted at the start of this opinion show that petitioner failed to produce any
document evidencing any contract of pledge or guarantee agreement between it
and Angel de la Cruz. Consequently, the mere delivery of the CTDs did not legally
vest in petitioner any right effective against and binding upon respondent bank.
9. TRADERS ROYAL BANK v. CA
G.R. NO. 117356
JUNE 19, 2000
By: JANINE
____________________________________________________________________
Topic: [Sec. 1] REQUISITES of NEGOTIABILITY
Petitioners: TRADERS ROYAL BANK
Respondents: COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and
CENTRAL BANK of the PHILIPPINES
Ponente: TORRES, JR., J
____________________________________________________________________
RECIT-READY: Filriters registered owner of Central Bank Certificate of Indebtedness (CBCI).
Filriters transferred it to Philfinance by one of its officers without authorization from the
company. Subsequently, Philfinance transferred same CBCI to Traders Royal Bank (TRB)
under a repurchase agreement. When Philfinance failed to do so, The TRB tried to register in
its name in the CBCI. The Central Bank did not want to recognize the transfer. SC ruled that
the CBCI is not a negotiable instrument, since the instrument clearly stated that it was
payable to Filriters, and the certificate lacked the words of negotiability which serve as an
expression of consent that the instrument may be transferred by negotiation.
DOCTRINE: The language of negotiability which characterize a negotiable paper as a credit
instrument is its freedom to circulate as a substitute for money.
FACTS
● The action was originally filed as a Petition for Mandamus to compel the Central
Bank of the Philippines to register the transfer of the subject CBCI to petitioner
Traders Royal Bank.
● In November 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a
"Detached Assignment" whereby Filriters sold, transferred, assigned and delivered
unto Philippine Underwriters Finance Corporation (Philfinance) all its rights and
 title to Central Bank Certificates of Indebtedness (CBCI) of P500,000 and having an
aggregate value of P3.5M.
● The Detached Assignment contains an express authorization executed by the
transferor intended to complete the assignment through the registration of the
transfer in the name of PhilFinance, which authorization is specifically phrased as
follows: Filriters hereby irrevocably authorized the said issuer (Central Bank) to
transfer the said bond/certificates on the books of its fiscal agent.
● In February 1981, petitioner entered into a Repurchase Agreement with
PhilFinance whereby for P500,000, PhilFinance sold, transferred and delivered to
petitioner CBCI with a face value of P500,000, which CBCI was among those
previously acquired by PhilFinance from Filriters.
● Pursuant to the Repurchase Agreement, Philfinance agreed to repurchase the CBCI
at the stipulated price of P519,361.11 in April 1981.
● PhilFinance failed to repurchase the CBCI on the agreed date of maturity, April 27,
1981, when the checks it issued in favor of petitioner were dishonored for
insufficient funds.
● Owing to the default of PhilFinance, petitioner executed a Detached Assignment in
favor of the petitioner to enable the latter to have its title completed and
registered in the books of the respondent. And by means of said Detachment,
Philfinance transferred and assigned all, its rights and title in the said CBCI to
petitioner and, furthermore, it did thereby "irrevocably authorize the said issuer
(respondent herein) to transfer the said bond/certificate on the books of its fiscal
agent.
● Petitioner presented the CBCI together with the 2 aforementioned Detached
Assignments to the Securities Servicing Department of the respondent, and
requested the latter to effect the transfer of the CBCI on its books and to issue a
new certificate in the name of petitioner as absolute owner thereof.
● Respondent failed and refused to register the transfer as requested, and continues
to do so notwithstanding petitioner's valid and just title over the same and despite
repeated demands in writing.
● Petitioner argued that the CBCI was a negotiable instrument, and having acquired
the said certificate from Philfinance as a holder in due course, its possession of the
same is thus free from any defect of title of prior parties and from any defense
available to prior parties among themselves, and it may thus, enforce payment of
the instrument for the full amount thereof against all parties liable thereon.
● Filriters contend that petitioner had acted in bad faith and with knowledge of the
illegality and invalidity of the assignment- the CBCI is not a negotiable instrument
and as a certificate of indebtedness is not payable to bearer but is a registered in
the name of Filriters.
● RTC Manila ruled in favor of Filriters Guaranty Assurance and found the assignment
of the CBCI in favor of Philfinance and the subsequent assignment of the same CBCI
by Philfinance in favor of Traders Royal Bank null and void and of no force and
effect.
● CA affirmed- ruled that the CBCI is not a negotiable instrument.
ISSUE: WON the CBCI is a negotiable instrument
HELD: NO
The pertinent portions of the subject CBCI read:
The Central Bank of the Philippines (the Bank) for value received, hereby
promises to pay bearer, of if this Certificate of indebtedness be
registered, to FILRITERS GUARANTY ASSURANCE CORPORATION, the
registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND
PESOS.
Properly understood, a certificate of indebtedness pertains to certificates for the
creation and maintenance of a permanent improvement revolving fund, is similar to a
"bond," (82 Minn. 202). Being equivalent to a bond, it is properly understood as
acknowledgment of an obligation to pay a fixed sum of money. It is usually used for the
purpose of long term loans.
The appellate court ruled that the subject CBCI is not a negotiable instrument,
stating that:
As worded, the instrument provides a promise "to pay Filriters Guaranty
Assurance Corporation, the registered owner hereof." Very clearly, the
instrument is payable only to Filriters, the registered owner, whose name
is inscribed thereon. It lacks the words of negotiability which should have
served as an expression of consent that the instrument may be
transferred by negotiation.
A reading of the subject CBCI indicates that the same is payable to FILRITERS
GUARANTY ASSURANCE CORPORATION, and to no one else, thus, discounting the petitioner's
submission that the same is a negotiable instrument, and that it is a holder in due course of
the certificate.
The language of negotiability which characterize a negotiable paper as a credit
instrument is its freedom to circulate as a substitute for money. Hence, freedom of
negotiability is the touchtone relating to the protection of holders in due course, and the
freedom of negotiability is the foundation for the protection which the law throws around a
holder in due course (11 Am. Jur. 2d, 32). This freedom in negotiability is totally absent in a
certificate indebtedness as it merely to pay a sum of money to a specified person or entity
for a period of time.
As held in Caltex (Philippines), Inc. v. Court of Appeals,:
The accepted rule is that the negotiability or non-negotiability of an
instrument is determined from the writing, that is, from the face of the
instrument itself. In the construction of a bill or note, the intention of the
parties is to control, if it can be legally ascertained. While the writing may
be read in the light of surrounding circumstance in order to more
perfectly understand the intent and meaning of the parties, yet as they
have constituted the writing to be the only outward and visible
expression of their meaning, no other words are to be added to it or
substituted in its stead. The duty of the court in such case is to ascertain,
not what the parties may have secretly intended as contradistinguished
from what their words express, but what is the meaning of the words
they have used. What the parties meant must be determined by what
they said.
 Thus, the transfer of the instrument from Philfinance to TRB was merely an
assignment, and is not governed by the negotiable instruments law.
#10 JUAN CASABUENA VS. CA
GR # 115410
DATE: February 27, 1998
By: Jus
Topic: Requisites of negotiability
Petitioners: Juan Casabuena
Respondents: CA, Sps. Ciriaco Urdaneta and Ofelia Ipil-Urdaneta
Ponente: Romero, J.
SUMMARY:
A parcel of land purchased by City of Manila was granted to Sps. Ciriaco Urdaneta.
He then executed deed of assignment in favor of Arsenia Benin for his indebtedness with the
agreement that Ciriaco can redeem the property back once he would be able to pay. Benin
then transferred her rights to her brothers, one of them is Juan Casabuena. But their
relationship soured. So then Benin asked for ejectment. Urdaneta figuring out the conflict
and litigation between the 2, Urdaneta asked for ejectment and vacancy of the property. SC
held that Urdaneta still is the lawful owner of the lot since there was only a deed of
assignment which only grants rights and not ownership.
DOCTRINE:
The assignment involves no transfer of ownership but merely effects the transfer of
rights which the assignor has at the time, to the assignee.
FACTS:
● 100 sqm lot in Sta. Mesa, Manila is coveted by two hopeful parties:
● Sps. Ciriaco and Ofelia Ipil-Urdaneta – beneficiary of Land of the Landless
Program of City of Manila (land reform program)
● Juan Casabuena – transferee of right, title and interest of Ciriaco’s
assignee, Arsenia Benin
● HISTORY:
● Aug. 12, 1965: Ciriaco assigned his rights and interest – ½ of lot to Arsenia Benin for
Ciriaco’s indebtness – and a deed of sale with mortgage to pay the city for a period
of 40 years in 48 equal installments
● Feb. 16, 1967: Ciriaco incurred additional indebtedness so he executed another
deed of assignment now involving the whole lot to Benin agreeing to shoulder all
obligations of the lot (including amortizations to City)
● Ciriaco and Benin agreed that Ciriaco could redeem the property upon payment of
indebtedness within 3 years and if cannot pay, possession would be transferred to
Benin but without actual transfer of title and ownership.
● Benin then transferred her right, title and interest to Candido and Juan Casabuena,
his brothers, for P7.5k
● Benin constructed apartment on the lot in which Juan Casabuena collects.
● Juan and Benin’s relationship soured so Benin assigned one Tanjuakio as
administrator.
● Tanjuakio filed ejectment against Juan but was dismissed for lack of evidence of
ownership.
● Ciriaco then figured out about the litigation so he asked Juan and Benin to vacate
the property and surrender the possession back to him.
● Juan refused to comply so Ciriaco filed for ejectment but due to lack of jurisdiction,
complaint was dismissed.
● Sps. Urdaneta then entered into an agreement with Benin in where Benin would
surrender to them the property with the apartment constructed thereon.
ISSUE: Whether or not Sps. Urdaneta are still the lawful owners of the property after
having deed of assignment in favor of Benin - YESSS
HELD/RATIO:
● SC was convinced that Sps. Urdaneta as the true and lawful owner of the property
having the deed of assignment to Benin merely serving as evidence of Ciriaco’s
indebtedness to Benin.
● Assignment of credit – agreement by virtue of which the owner of a credit
(assignor) by a legal cause transfers his credit and its accessory rights to another
(assignee) who acquires the power to enforce it to the same extent as the assignor
could have enforced it against the debtor; the process of transferring the right of
the assignor to the assignee who would then be allowed to proceed against the
debtor.
● The assignment involves no transfer of ownership but merely effects the transfer of
rights which the assignor has at the time, to the assignee.
● Through the deed of assignment, even though Benin is the owner of the
construction on said lot, right of ownership over the land is excluded from the
construction.
● Sps. Urdaneta remain to be the owner of the said lot.
11 Rivera v Sps Chua
GR NO. 184458
January 12. 2015
By: Iñigo
Topic: Requisites for Negotiability
Petitioners: Rodrigo Rivera
Respondents: Sps Salvador Chua and Violeta Chua
Ponente: Justice Perez
RECIT-READY/SUMMARY: Rivera obtained a loan from Sps Chua. He was not
able to pay them back after repeated demands. The Sposues were forced to
file a case to be able to collect what they were due from Rivera. However
Rivera countered that the Promissory Note issued was a forgery, and that
assuming that the P.N was valid, he was still not in delay as Sec. 70 (exempts
presentation of payment to charge person primarily liable) should not have
been applied. The Court ruled that his signature was not a forgery as per the
account of the NBI handwriting expert. The SC agreed with him that Sec. 70 of
the NIL should not have been applied, as the P.N was not a Negotiable
Instrument by definition. However, being that the P.N had a provision on
when the due date would fall and the concurrent interest rate per month upon
failure to pay, no demand/presentation of “instrument” was needed to hold
him in delay.
DOCTRINE: o He specifically asserts that it would be absurd for a money lender to extend
FACTS: him another loan, secured by a mortgage, when he was already in default
● Parties were friends of long standing, having known each other since 1973 o He argues that even assuming the validity of the Promissory Note, demand
● On 24 Feb 1995, Rivera obtained a loan from the Spouses Chua was still necessary in order to charge him liable thereunder; trial courts should
o A promissory note was shown—Rodirigo promised to pay Sps Chua Php not have applied Sec. 70 of the NIL
120,000 on 31 Dec 1995; 5% monthly interest form date of default until
obligation is fully paid for ISSUE
● 3 years from the date of payment stipulated in the promissory note, Rivera issued and 1. W/N the signature found on the Promissory note was a forgery?
delivered, as payee, a Check with # 012467 on 30 Dec 1998; check was drawn against 2. W/N the Promissory note was valid and binding?
Rivera’s current account with the Philippine Commercial International Bank in the
amount of Php 25,000 HELD/RATIO
o Rodrigo issued another Check with # 013224, duly signed and date, but blank
as to payee and amount Forgery of Promissory Note
▪ As per the understanding of the parties, the amount of Php 133, ● SC does not find any reason, nor did Rodrigo present any evidence, to warrant an
354.00 was to be “written” on the check with “Cash” as payee otherwise ruling
o Both checks were in partial payment for the principal amount loaned ● NBI Handwriting expert found that the signatures presented to him for examination
▪ Both checks were dishonored upon presentment—“Account Closed” were done by one and the same person
● Sps Chua alleged that they have repeatedly demanded payment from Rivera to no avail
o Sps Chua were constrained to file a suit on 11 June 1999 Subsequent Grant of Another Loan
● Rivera, in his Counterclaim, countered that: ● It was because of their close relationship, Kumpadres, that Rivera was allowed another
o He never executed the subject promissory note loan
o In all instances when he obtained a loan from the Sps Chua, the loans were o This time, the loan was secured by a real estate mortgage
always covered by a security ● There were 2 loans handed out by the Sps Chua
o At thte time of the filing of the complaint, he still had an existing indebtedness o One secured by a real estate mortgage
to the Sps Chua, secured by a real estate mortgage, but not yet in default o Another secured only by a Promissory Note
o PCIB Check No. 132224 signed by him, which he delivered to Sps Chua should
have been issued in the amount of only Php 1,300 Application of Sec. 70 of NIL
o Contrary to supposed agreement, Sps Chua presented the check for payment
in the amount of Php 133, 454
o There was no demand for payment of the amount of Php 120,000 prior to the
encashment of PCIB Check No. 0132224
o Rivera claimed that the subject Promissory Note was forged and denied
indebtedness thereunder
● MeTC testimonies summarized:
o Signature appearing in the Promissory Note and the specimen signatures of
Rivera appearing on the other documents were written by one and the same
person
o MeTC ruled in favor of Chua
● RTC affirmed MeTC decision—both courts fund the Promissory Note as authentic and
validly bore the signature of Rivera
o CA affirmed Rivera’s liability
● Rivera continues to deny that he executed the Promissory Note
o He claims that given his friendship with the Sps Chua, he has been able to
maintain a loan account with them—each loan was secured by checks or
sufficient collateral
o He points out that the Sps Chua never demanded payment for the loan nor
interest thereof for almost 4 years from the time of the alleged default in
payment
 SECTION 70.Effect of Want of Demand on Principal Debtor. — Presentment
for payment is not necessary in order to charge the person primarily liable on
the instrument; but if the instrument is, by its terms, payable at a special
place, and he is able and willing to pay it there at maturity, such ability and
willingness are equivalent to a tender of payment upon his part. But, except
as herein otherwise provided, presentment for payment is necessary in order
to charge the drawer and indorsers
SECTION 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
SECTION 184.Promissory Note, Defined. — A negotiable promissory note
within the meaning of this Act is an unconditional promise in writing made by
one person to another, signed by the maker, engaging to pay on demand, or
at a fixed or determinable future time, a sum certain in money to order or to
bearer. Where a note is drawn to the maker's own order, it is not complete
until indorsed by him
● The Promissory Note in this case is made out to specific persons—Sps Chua
o NOT to order or to bearer, or to the order of Sps Chua as payees
o What was written on the check was “Cash”
● Section 70 should have not been applied
Rodrigo’s Liabilty
● Even if the Promissory Note is not a Negotiable Instrument, Rivera is still liable under
the terms of the P.N
o P.N was unequivocal about the date when the obligation fals due and
becomes demandable—31 Dec 1995
o Art. 1169, NCC: Demand by the creditor shall not be necessary in order that
delay may exist… when the obligation or the law expressly so declares
▪ P.N: “It is agreed and understood that failure on my part to pay the
amount of Php 120,000 on 31 December 1995… I agree to pay the
sume equivalent to 5% interest monthly…”
▪ Date of default on the P.N was 1 January 1996
Art. 2209— If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is 6% per annum
● Stipulation in the P.M is not a penal clause as the 5% would be paid on top of the
principal amount and it was not specifically set forth in the obligation
Validity of 5% Monthly
● CA found the amount illegal, if not unconscionable
● Proper Interest rate:
● Central Bank Circular No. 416—12% per annum
o For the first “half” of the defaulted period; 1 Jan 96 to 30 June 2013
● BSP Circular NO. 799, Series of 2013—6% per annum
o For the period covering 1 July 2013 to finality of the present decision
● Legal Interest (Art. 2212, New Civil Code)
o Counted from time of judicial demand
Rodrigo is ordered to pay respondents Spouse Salvador and Violeta Chua
12. NICOLAS and MATIAS. vs MATIAS
G.R. No. L-8093
DATE: October 29, 1955, 1989
By: YRREVERRE
Topic: NEGOTIABLE INSTRUMENTS
Petitioner: DOMINADOR NICOLAS and OLIMPIA MATIAS
Defendant-Appellants: VICENTA MATIAS, AMADO CORNEJO JR., JOSE POLICARPIO, and
MATILDE MANUEL
Ponente: CONCEPCION, J.
DOCTRINE: It is settled that the contracting parties are free to stipulate on the currency in
which their respective obligations shall be settled.
FACTS
· By an instrument dated June 29, 1944, Vicenta Matias Vda. de Cornejo, and her son,
Amado Cornejo, Jr. (defendants) mortgaged to the spouses Dominador Nicolas and
Olimpia Matias (plaintiff) four (4) parcels of land in Nueva Ecija.
· The lands are mortgaged to guarantee the payment of the sum of P30,000. (In
Japanese military notes)
· It should be paid within 1 year after the expiration of 􏰅5 years from said date with
interest thereon, at the rate of 6% per annum.
· On July 15, 1944, said mortgagors offered to pay the debt, with interest for 􏰅5
years, but the mortgagees rejected the offer.
· August 1944, the mortgagors deposited judicially the sum of P39,000 (principal and
interest) and instituted a civil case in the CFI of Nueva Ecija to compel the plaintiffs to
accept the payment.
· CFI - rendered consignation invalid for failure of the mortgagors to give previous
notice thereof, and sentencing the mortgagors to pay the mortgagees the sum of P2,000
as the equivalent in Philippine currency, pursuant to the Ballantyne schedule.
· CA - valid consignation
· SC - invalid consignation
 · Few years after, in August 22, 1951 the mortgagees instituted the present action for
foreclosure of said mortgage. Asking whether the mortgagors should pay in P30,000
Japanese Military notes or P2,000 pursuant to the Ballantyne Schedule.
ISSUE: W/N the mortgagors should pay in P30,000 Philippine Currency Japanese Military
Notes – YES.
HELD:
· YES. It should be paid in the sum of P30,000 since it was intended to be payable 5
years from the date agreed upon where the liberation of the Philippines has already
been done.
· in the case of Wilson vs. Berkenkotter (49 Off. Gaz., p. 1401), in which we said:
"In several cases involving the application of the Ballantyne schedule, this
Court has held that said schedule is applicable to obligations contracted during
the Japanese occupation where said obligations are made payable on demand
or during said Japanese occupation, but not after the war or at a specified
date or period which may indicate that the parties were speculating on the
continuation or cessation of the war at time of payment. If the obligation on
the part of Wilson to pay Berkenkotter the amount paid by the latter to wipe
out their debt to the Bank was created during the occupation, then the
Ballantyne schedule is applicable; but if said obligation was created before the
war, particularly on date when plaintiff and defendant signed the promissory
note in favor of the Bank, then the Ballantyne schedule may not be applied."
· It is thus settled that the contracting parties are free to stipulate on the
currency in which their respective obligations shall be settled, and that
whenever, pursuant to the terms of an agreement, an obligation assumed
during the Japanese occupation is not payable until after liberation of the
Philippines, the parties to the agreement are deemed to have intended that
the amount stated in the contract be paid in such currency as may be legal
tender at the time when the obligation becomes due.
· The deed of mortgage in question provides that the obligation of the
mortgagees shall be paid one year after the expiration of 􏰅five (5) years from
June 29, 1944, which is the date of said instrument. In other words, the
obligation is not payable until June 29, 1949.
Wherefore, the defendants-appellees are hereby sentenced to pay to the plaintiffs-
appellants, either directly or through the Clerk of the lower court, within ninety (90) days
from the date on which this decision shall become final, the sum of P30,000, in Philippine
currency, with interest thereon at the rate of six per centum (6%) a year, from June 29, 1945.
In default of such payment, let the mortgage in question be foreclosed in the manner
provided by law and the rules of court.
13. Republic Resources v CA
By: Shang Boligor
G.R. No. L-33438 | October 28, 1991
Topic: Sec. 2, Sum Certain in Money
Petitioner: Republic Resources and Development Corporation
Respondents: Court of Appeals and United Geophysical Company, S.A. (Costa Rica)
Summary: United Valenzuela entered into a contract with Republic Resources wherein it
agreed to conduct for Republic Resources geophysical services. In the amount of 3,000USD
per month- 50% to be paid in USD and the other 50% in Php. Republic Resources partly failed
to fulfill its obligation to payable in dollars after several demands. This was brought to court.
Republic Resources proposed a counter offer which the United Venezuela accepted under
certain conditions however, it did not proceed. Both tc and ca ruled that Republic Resources
should pay United Venezuela its remaining balance at the exchange rate prevailing at the
time of payment which lead Republic Resources to question before the sc whether is should
pay the remaining balance at the current exchange rate prevailing at the time of payment.
The SC held that (ratio)
Doctrines: The value in domestic money of a payment made in foreign money is fixed in
reference to the rate of exchange at the time of such payment
Facts:
· The United Geophysical Company S.A. (Costa Rica) is a corporation duly organized
and existing under the laws of Costa Rica. It is the successor-in-interest of the
United Geophysical Company, S. A. (Venezuela)
· The plaintiff-appellee United Venezuela and defendant-appellant Republic
Resources herein, executed with the approval of the Doctor of Mines, a
seismograph conduct wherein the United Venezuela undertook to conduct for the
Republic Resources for a period of 12 months, commencing from January 1960,
geophysical surveys in the Philippines
· Republic Resources agreed to pay a contract fee in the amount of 3,000 USD per
month, 50% of which was to be paid in U.S. dollars and the other 50 in Philippine
pesos. It also agreed to reimburse the United Valenzuela at cost, plus 5% of the
cost of returning to the point of origin all the expatriate personnel, equipment and
supplies utilized by Valenzuela
· Republic Resources paid in full the contract fees payable in Philippine Pesos by but
it failed to pay the contract fees payable in dollars amounting to $34,908.33 and
the sum of $3,713.33 representing the cost plus 5% of returning the equipment
· After several demands upon Republic Resources, it paid as a part payment $10,000
with the request that the balance of USD28,622.66 be reduced
· Republic Resources, by way of amicable settlement of said balance, offered to pay
another $10,000 requesting condonation of $18,000. This offer was rejected and
thus an action was filed to recover said balance of USD23,622.66
· When this case was filed, Republic Resources renewed its offer to pay its
outstanding balance. United Valenzuela accepted this offer in condition that the
proposed settlement be submitted to the Court for approval and such proposed
payment be secured by a surety bond but defendant did not act upon this counter-
proposal; and instead, it filed an answer with counterclaim to the complain
· This case was set for trial but appellant failed to appear with its counsel several
times after being granted its postponement requests. The trial court ruled in favor
of United Venezuela and ordered Republic Resources to pay 28,622.66USD
converted into php at the rate of exchange equivalent at the time of payment with
 legal interest therefrom from 8 Nov 1962 and whatever fees the commercial banks
will charge from transmitting the same to the principal office in U.S.; and other fees
· Republic Resources then filed this appeal. It raised the issue of whether its
28,622.26 obligation should be paid at the rate of exchange prevailing at the time
of the payment
Issue: Whether Republic Resources’ obligation should be paid at the rate of exchange
prevailing at the time of payment - NO
Ratio:
· First, a party is not permitted to raise before this court and issue which he did not
raise either in the lower court or in the CA
· It is clear from Section 21 of R.A. No. 529 [this ra was only mentioned in the sc
part] that what is declared null and void is the "provision contained in, or made
with respect to, any domestic obligation to wit, any obligation contracted in the
Philippines which provision purports to give the obligee the right to require
payment in gold or in a particular kind of coin or currency other than Philippine
currency or in an amount of money of the Philippines measured thereby" and not
the contract or agreement which contains such proscribed provision
· As to the rate of exchange, a distinction has to be made between obligations
incurred prior to the Act and those incurred after its enactment. As to the former,
Section 1 of the Act explicitly provides that:
“. . . if the obligation was incurred prior to the enactment of the Act, 6 and required
payment in a particular kind of coin or currency other than Philippine currency, it shall
be discharged in Philippine currency measured at the prevailing rates of exchange at the
time the obligation was incurred, except in case of a loan made in a foreign currency
stipulated to be payable in the same currency, in which case the rate of exchange
prevailing at the time of the stipulated date of payment shall prevail."
· As to obligations incurred after enactment such as that of the petitioner's in favor
of private respondent, Kalalo vs. Luz ruled that the rate of exchange should be that
prevailing at the time of payment. Thus:
o The value in domestic money of a payment made in foreign money is fixed
with respect to the rate of exchange at the time of payment'. (70 CJS, p.
228)
o "According to the weight of authority the amount of recovery depends
upon the current rate of exchange, and not the par value of the particular
money involved." (48 C.J. 605-606)
o "The value in domestic money of a payment made in foreign money is
fixed in reference to the rate of exchange at the time of such payment.
"(48 C.J. 605)
14. MBTC v CA
GR NO. 88866
FEBRUARY 18, 1991
By: CHESKA DOMINGUEZ
Topic: UNCONDITIONAL PROMISE OR ORDER TO PAY
Petitioners: METROPOLITAN BANK & TRUST COMPANY
Respondents: COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA
CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO
Ponente: CRUZ, J.
RECIT-READY/SUMMARY: Gomez deposited 38 treasury warrants with Golden Savings
which were indorsed by cashier Castillo. Castillo deposited the same to Metrobank. She
went to inquire with Metrobank several times. Since nakulitan na si Metrobank, it allowed
Golden Savings to withdraw the proceeds although they were not yet cleared by the
Bureau of Treasury. When the Bureau finally dishonored the warrants, Metrobank
demanded a refund from Golden Savings, which the latter rejected so Metrobank sued
Golden Savings.
DOCTRINE: An instrument to be negotiable instrument must contain an unconditional
promise or orders to pay a sum certain in money.
FACTS:
· A certain Eduardo Gomez opened an account with Golden Savings and deposited
over a period of two months 38 treasury warrants with a total value of P1,755,228.37.
o Six of these were directly payable to Gomez while the others
appeared to have been indorsed by their respective payees,
followed by Gomez as second indorser.
· All these warrants were subsequently indorsed by Gloria Castillo as Cashier of
Golden Savings and deposited to her savings account in the Metrobank-Calapan. She
went to the branch several times to ask whether the warrant had been cleared. She was
told to wait. Meanwhile, Gomez was not allowed to withdraw from his account.
· Later, however, "exasperated" over Gloria's repeated inquiries, Metrobank finally
allowed Golden Savings to withdraw from the proceeds of the warrants. In turn, Golden
Savings 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 demand the refund from Golden Savings. The demand
was rejected. Metrobank then sued Golden Savings.
· RTC dismissed the complaint. CA affirmed. Hence, this petition.
ISSUE:
(1) Whether or not treasury warrants are negotiable instruments
HELD/RATIO:
(1) NO. The treasury warrants are not negotiable instruments.
· Clearly stamped on their face is the word: "non negotiable."
· It is indicated that they are payable from a particular fund, to wit, Fund 501. An
instrument to be negotiable instrument must contain an unconditional promise or
orders to pay a sum certain in money.
· SEC. 3. When promise is unconditional. — An unqualified order or promise to pay is
unconditional within the meaning of this Act though coupled with — (a) An indication of
a particular fund out of which reimbursement is to be made or a particular account to
be debited with the amount; or(b) A statement of the transaction which gives rise to the
instrument. But an order or promise to pay out of a particular fund is not unconditional.
· The indication of Fund 501 as the source of the payment to be made on the
treasury warrants makes the order or promise to pay “not conditional” and the warrants
themselves non-negotiable. There should be no question that the exception on Section
3 of NIL is applicable in the case at bar.
· Metrobank cannot contend that by indorsing the warrants in general, Golden
Savings assumed that they were "genuine and in all respects what they purport to be,"
in accordance with Section 66 of the Negotiable Instruments Law. The simple reason is
that this law is not applicable to the non-negotiable treasury warrants.
· SC dismissed the petition.