Sesbreno vs CA

Facts Issue Held

Sesbreno made a money market placement in the
amount of P300K with PhilFinance.


PhilFinance issued to Sesbreno:

a. Certificate of Sale of Delta Motor Corporation
Promissory Note (DMC PM),

b. Securities Delivery Receipt indicating the sale of
the DMC PM to Sesbreno, with notation that said
security was in the custody of Pilipinas Bank

c. and post-dated checks with Sesbreno as payee,
Philfinance as drawer, and Insular Bank of Asia and
America as drawee.

When Sesbreno tried to encash the checks, they were
dishonored because of insufficient funds.


Subsequently, Sesbreno found out that Pilipinas Bank
never released the note nor any instrument to him
Sesbreno. Sesbreno also found out that the security
receipt issued to him actually had PhilFinance as
payee and Delta Motors as maker; and was stamped
non-negotiable on its face.

Sesbreno was unable to collect his investment

He filed an action for damages against Delta Motors
and Pilipinas Bank.
Whether or not the non-negotiability of a promissory
note prevents its assignment.

The non-negotiability of the instrument doesnt
mean that it is non-assignable. The negotiation
and assignment of the instrument are different. It
may still be assigned or transferred if there is no
express prohibition against assignment or transfer
written in the face of the instrument.

SC ruled in favor of Sesbreno and ordered private
respondent Pilipinas to indemnify petitioner for
damages in plus interest.

Ponce vs CA
Facts Issue Held
Afable and two others procured a loan from Ponce in
dollars.

Afable and her co-debtors executed a promissory
note in favor of Ponce in the peso equivalent of the
loan.

The promissory note went due and was left unpaid
despite demands from Ponce.

This prompted Ponce to sue Afable et al.


The trial court ruled in favor of Ponce.


On petition, the Court of Appeals ruled that
promissory note was illegal because it was payable in
US dollars pursuant to Republic Act 529.



Whether or not Ponce may recover. Yes he may recover. RA 529 provides that an
agreement to pay in dollars is null and void and of no
effect. However what the law specifically
prohibits is payment in currency other than legal
tender in the Philippines.

On the face of the promissory note, it says that it is
payable in Philippine currency. It does not contain
any provision that gives the creditor the right to
require payment of currency other than
Philippine. If there is any agreement to pay an
obligation in a currency other than Philippine legal
tender, the same is null and void as pursuant to
Republic Act No. 529.

NOTE: RA 529 has already been repealed by
Republic Act 8183 which provides that every
monetary obligation must be paid in Philippine
currency which is legal tender in the Philippines.
However, the parties may agree that the obligation or
transaction shall be settled in any other currency at
the time of payment.













Kalalo vs Luz
Facts Issue Held
Kalalo is an engineer

Kalalos services were contracted by Architecht Luz.

Luz contracted Kalalo to work on ten projects across
the country, one of which was an in the International
Rice Research Institute (IRRI) Research Center.

Luz was to be paid $140K for the entire project.

For Kalalos work, Luz agreed to pay him 20% of
what IRRI is going to pay or equivalent to $28K.

Whether or not Kalalo should be paid in US
currency.

No. The agreement was forged in 1961, years before
the passage of Republic Act 529 in 1950. The said
law requires that payment in a particular kind of coin
or currency other than the Philippine currency shall
be discharged in Philippine currency measured at
the rate of exchange at the time the obligation was
incurred.

NOTE: RA 529 has already been repealed by
Republic Act 8183 which provides that every
monetary obligation must be paid in Philippine
currency which is legal tender in the
Philippines. However, the parties may agree that the
obligation or transaction shall be settled in any other
currency at the time of payment.








Caltex vs CA
Facts Issue Held
Dela Cruz obtained certificates of time deposit (CTDs) from
Security Bank and Trust Company for the deposit the latter made
with the said bank.

Dela Cruz subsequently delivered the CTDs to Caltex in
connection with the purchase of fuel products from Caltex.

Subsequently, Dela Cruz advised Security Bank that he lost the
CTDs. He executed an affidavit of loss then the bank issued
another set of CTDs.

Dela Cruz then acquired a loan from Security Bank and used the
time deposits as collateral.

Later, a representative from Caltex went Security Bank and
advised Caltex that Dela Cruz delivered to them the CTDs as
security for the purchases he made.

Security Bank refused to accept the CTDs and required Caltex to
present documents proving that an agreement was made between
them and Dela Cruz but Caltex failed to produce said documents.

Dela Cruz loan with Security bank matured and no payment was
made by de la Cruz. Security Bank eventually set-off the time
deposit to pay off the loan.

Caltex sued Security Bank and compel them to pay off the CTDs.

Security Bank argued that the CTDs are not negotiable instruments
because the word bearer contained in the instrument refer to
depositor and only the depositor can encash the CTDs and no one
else.
Whether or not the certificates of time
deposit are negotiable.
Yes. The CTDs indicate that they are payable to the
bearer; that there is an implication that the depositor
is the bearer but as to who the depositor is, no one
knows.

On the wordings of the documents, therefore, the
amounts deposited are repayable to whoever may be
the bearer thereof.

However, Caltex may not encash the CTDs because
although the CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and
agreement between Caltex and De la Cruz, requires
both delivery and indorsement. From the testimony
of Caltex representative, the CTDs were delivered to
them by de la Cruz merely for guarantee or
security and not as payment.


De La Victoria vs Burgos

Facts Issue Held
Sebreo filed a complaint for damages against
Fiscal Mabanto of Cebu City.

Sebreo won and he was awarded the payment of
damages.

The court ordered De La Victoria, custodian of the
paychecks of Mabanto, to hold the checks and
convey them to Sebreo instead.

De La Victoria assailed the order as he said that the
paychecks are not yet the property of Mabanto
because they are not yet delivered to him; and since
there is no delivery of the checks, the checks are still
part of the public funds and therefore cannot be
garnished.
Whether or not De La Victoria is correct. Yes. Under Section 16 of the Negotiable
Instruments Law, every contract on a negotiable
instrument is incomplete and revocable
until delivery of the instrument for the
purpose of giving effect thereto.

As ordinarily understood, delivery means the
transfer of the possession of the instrument by the
maker or drawer with intent to transfer title to
the payee and recognize him as the holder
thereof.










Republic Bank v Ebrada

Facts Issue Held
The Bureau of Treasury issued a back pay check to Lorenzo.

The drawee named therein is Republic Bank. The check was
subsequently indorsed to Lorenzo, then Dominguez and then to
Ebrada.

Ebrada encashed the check with the Republic Bank. Republic
Bank paid the amount of the check to Ebrada.

Ebrada, upon receiving the cash, gave it to Dominguez.

Later, the Bureau of Treasury notified that the check was a forgery
because the payee named therein (Lorenzo) was actually dead 11
years ago before the check was issued.

Republic Bank refunded the amount to the Bureau of Treasury.

The bank then demanded Ebrada to refund them.

Whether or not Republic Bank may
recover from Ebrada.
Yes. One who indorses a check is bound to satisfy
that the same is genuine. By presenting it for
payment or putting it into circulation, he impliedly
asserts that he has performed his duty. In this case
Republic Bank who has paid the forged check,
without actual negligence on his part, may recover
the money paid from such negligent purchasers.

Ebrada, being the last indorser, warranted the
genuineness of the signatures of the payee and the
previous indorsers. Although she did not profit, she is
still liable because she is considered as an
accommodation party. Section 29 of the Negotiable
Instruments Law. An accommodation party is one
who has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value
therefor, and for the purpose of lending his name to
some other person. Such a person is liable on the
instrument to a holder for value, notwithstanding
such holder at the time of taking the instrument knew
him to be only an accommodation party.







Republic Planters Bank v CA
Facts Issue Held
World Garment Manufacturing, through its board authorized
Yamaguchi (president) and Canlas (treasurer) to obtain credit
facilities from Republic Planters Bank (RPB).

For this, 9 promissory notes were executed. In the promissory
note, there is the presence of the phrase I/We, joint and severally,
promise to pay to the ORDER of the REPUBLIC PLANTERS
BANK

The note became due and no payment was made. RPB eventually
sued Yamaguchi and Canlas.

Canlas, in his defense, averred that he acts that he performed
inasmuch as he signed the promissory notes in his capacity as
officer of the defunct Worldwide Garment Manufacturing.

Whether or not Canlas should be held
liable for the promissory notes.
Yes. The solidary liability of private respondent
Canlas is made clearer without ambiguity, by the
presence of the phrase joint and several as
describing the unconditional promise to pay to the
order of Republic Planters Bank.

Canlas is solidarily liable on each of the promissory
notes bearing his signature.

Under the Negotiable lnstruments Law, persons who
write their names on the face of promissory notes are
makers and are liable as such. By signing the notes,
the maker promises to pay to the order of the payee
or any holder according to the tenor thereof.










Association Bank v CA
Facts Issue Held
The Province of Tarlac was disbursing funds to Concepcion
Emergency Hospital via checks drawn against its account with the
Philippine National Bank (PNB).

These checks were drawn payable to the order of Concepcion
Emergency Hospital.

Pangilinan was the cashier of Concepcion Emergency Hospital.

Pangilinan handle checks issued by the provincial government of
Tarlac to the said hospital.

However, after his retirement, the provincial government still
delivered checks to him.

By forging the signature of the chief payee of the Pangilinan was
able to deposit 30 checks amounting to P203k to his account with
the Associated Bank.

When the province of Tarlac discovered this irregularity, it
demanded PNB to reimburse the said amount.

PNB in turn demanded Associated Bank to reimburse said amount.

PNB averred that Associated Bank is liable to reimburse because
of its indorsement borne on the face of the checks:
All prior endorsements guaranteed ASSOCIATED BANK.

W/N PNB and Associated Bank should
be held liable.
The checks involved in this case are order instruments.

Liability of Associated Bank
Where the instrument is payable to order at the time of the
forgery, the signature of its rightful holder (here, the payee
hospital) is essential to transfer title to the same instrument.
When the holders indorsement is forged, all parties prior to
the forgery may raise the real defense of forgery against all
parties subsequent thereto.

A collecting bank (in this case Associated Bank) where a
check is deposited and which indorses the check upon
presentment with the drawee bank (PNB), is such an
indorser. So even if the indorsement on the check deposited
by the bankss client is forged, Associated Bank is bound by
its warranties as an indorser and cannot set up the defense
of forgery as against the PNB.
EXCEPTION: If it can be shown that the drawee bank (PNB)
unreasonably delayed in notifying the collecting bank
(Associated Bank) of the fact of the forgery so much so that
the latter can no longer collect reimbursement from the
depositor-forger.
Liability of PNB
The bank on which a check is drawn, known as the drawee
bank (PNB), is under strict liability to pay the check to the
order of the payee (Provincial Government of Tarlac).
Payment under a forged indorsement is not to the drawers
order. When the drawee bank pays a person other than the
payee, it does not comply with the terms of the check and
violates its duty to charge its customers (the drawer)
account only for properly payable items. Since the drawee
bank did not pay a holder or other person entitled to receive
payment, it has no right to reimbursement from the drawer.
The general rule then is that the drawee bank may not debit
the drawers account and is not entitled to indemnification
from the drawer. The risk of loss must perforce fall on the
drawee bank.
EXCEPTION: If the drawee bank (PNB) can prove a failure
by the customer/drawer (Tarlac Province) to exercise
ordinary care that substantially contributed to the making of
the forged signature, the drawer is precluded from asserting
the forgery.
In sum, by reason of Associated Banks indorsement and
warranties of prior indorsements as a party after the forgery,
it is liable to refund the amount to PNB. The Province of
Tarlac can ask reimbursement from PNB because the
Province is a party prior to the forgery. Hence, the
instrument is inoperative. HOWEVER, it has been proven
that the Provincial Government of Tarlac has been negligent
in issuing the checks especially when it continued to deliver
the checks to Pangilinan even when he already retired. Due
to this contributory negligence, PNB is only ordered to pay
50% of the amount or half of P203 K.
BUT THEN AGAIN, since PNB can pass its loss to
Associated Bank (by reason of Associated Banks
warranties), PNB can ask the 50% reimbursement from
Associated Bank. Associated Bank can ask reimbursement
from Pangilinan but unfortunately in this case, the court did
not acquire jurisdiction over him.

The SC held that the Province and
Associated Bank should bear
losses in the proportion of 50-50.

The Province can only recover
50% of the P203,300 from PNB
because of the negligence they



exhibited in releasing the checks to
the then already retired Pangilinan
who is an unauthorized person to
handle the said checks.

On the other hand, Associated
Bank is liable to PNB only to 50%
of the same amount because of
its liability as indorser of the
checks that were deposited by
Pangilinan, and guaranteed the
genuineness of the said checks.
They failed to exercise due
diligence in checkingthe veracity of
indorsements.
When a signature is forged or made without
authority of the person whose signature it purports
to be, it is wholly inoperative, and no right to retain
the instrument, or to give a discharge therefor, or to
enforce payment thereof against any party thereto,
can be acquired through or under such signature
unless the party against whom it is sought to
enforce such right is precluded from setting up the
forgery or want of authority.

















PNB v CA

Facts Issue Held
One Augusto Lim deposited in his current account with PCI Bank (Padre
Faura Branch) a GSIS check drawn against PNB. The signatures of the
General Manager and Auditor of GSIS were forged. PCIBank stamped at
the back of the check All prior indorsements or lack of indorsements
guaranteed, PCI Bank. PCIBank sent the check to PNB through the
Who shall bear the loss resulting from the
forged check.
The collecting bank is not liable as the forgery existing are
those of the drawers and not of the indorsers. The
indorsement of the intermediate bank does not guarantee
the signature of the drawer. PNBs failure to return the
check to the collecting bank implied that the check was
Central Bank. PNB did not return the check to PCIBank; and thus PCIBank
credited Lims account. As GSIS has informed PNB that the check was lost
two months before said transaction, its account was recredited by PNB
upon its demand (due to the forged check). PNB requested for refund
with PCI Bank. The latter refused.
good. In fact, PNB even honored the check even if GSIS has
reported two months earlier that the check was stolen and
the bank thus should stop payment. PNBs negligence was
the main and proximate cause for the corresponding loss.
PNB thus should bear such loss. Upon payment by PNB, as
drawee, the check ceased to be a negotiable instrument,
and became a mere voucher or proof of payment.


















Prudencio v CA

Facts Issue Held
In 1955, Concepcion and Tamayo Construction Enterprise had a contract
with the Bureau of Public Works. The firm needed fund to push through
with the contract so it convinced spouses Eulalio and Elisa Prudencio to
mortgage their parcel of land with the Philippine National Bank for
P10,000.00. Prudencio, without consideration, agreed and so he
mortgaged the land and executed a promissory note for P10k in favor of
PNB. Prudencio also authorized PNB to issue the P10k check to the
construction firm.
In December 1955, the firm executed a Deed of Assignment in favor of
PNB which provides that any payment from the Bureau of Public Works in
consideration of work done (by the firm) so far shall be paid directly to PNB
this will also ensure that the loan gets to be paid off before maturity.
Notwithstanding the provision in the Deed of Assignment, the Bureau of
Public Works asked PNB if it can make the payments instead to the firm
because the firm needs the money to buy construction materials to
complete the project. Notwithstanding the provision of the Deed of
Assignment, PNB agreed. And so the loan matured without PNB actually
receiving any payment from the Bureau of Public Works. Prudencio, upon
learning that no payment was made on the loan, petitioned to have the
mortgage canceled (to save his property from foreclosure). The trial court
ruled against Prudencio; the Court of Appeals affirmed the trial court.

Whether or not Prudencio should pay the
promissory note to PNB.
No. PNB is not a holder in due course.
Prudencio is an accommodation party for he signed the
promissory note as maker but he did not receive value or
consideration therefor. He expected the firm
(accommodated party) to pay the loan this obligation was
shifted to the Bureau of Public Works by way of the Deed of
Assignment). As a general rule, an accommodation party is
liable on the instrument to a holder for value/in due course,
notwithstanding such holder at the time of taking the
instrument knew him to be only an accommodation party.
The exception is that if the holder, in this case PNB, is not a
holder in due course. The court finds that PNB is not a
holder in due course because it has not acted in good faith
(pursuant to Section 52 of the Negotiable Instruments Law)
when it waived the supposed payments from the Bureau of
Public Works contrary to the Deed of Assignment. Had the
Deed been followed, the loan would have been paid off at
maturity.