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SECTION 126.Bill of Exchange, Defined. A bill of exchange is an unconditional
order in writing addressed by one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on demand or at a fixed or
determinable future time a sum certain in money to order or to bearer.|||
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
a. Holder
"Holder" means the payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof
b. Maker/Drawer
c. Payee
d. Drawee/Acceptor
e. Bearer
f.
Indorser
g. Indorsee
Villanueva vs Nite
August 24, 1994: Villanueva filed an action for a sum of money and damages
against ABC for the full amount of the dishonored check (despite the loan not
being due and Nite away)
RTC: favored Villanueva
June 30, 1997: Nite went to ABC to withdraw but she was not able to because
of the RTC order
August 25, 1997: ABC remitted to the sheriff a managers check amounting
to P325,500 drawn on Nite's account
CA: favored Nite's appeal
Enrique Tan and Lilia Tan (spouses Tan) were the controlling stockholders of
E.T. Henry & Co., Inc. (E.T. Henry), a company engaged in the business of
processing and distributingbunker fuel.
E.T. Henry's customers were Hi-Cement Corporation (Hi-Cement), Riverside
Mills Corporation (Riverside) and Kanebo Cosmetics Philippines, Inc. (Kanebo)
who issued postdated checks for their purchases
Sometime in 1979: Insular Bank of Asia and America (turned PCIB then
Equitable PCI-Bank) granted E.T. Henry a credit facility known as Purchase of
Short Term Receivables. (re-discounting arrangement)
Through this, E.T. Henry was able to encash, with pre-deducted
interest, the postdated checks of its clients.
For every transaction, E.T. Henry had to execute a promissory note and
a deed of assignment
1979-1981: E.T. Henry was able to re-discount its clients' checks
February 1981: 20 checks of Hi-Cement (which were crossed and which bore
the restriction deposit to payees account only) were dishonored. So were the
checks of Riverside and Kanebo.
Bank filed a complaint for sum of money in CFI against E.T. Henry, the
spouses Tan, Hi-Cement (including its general manager and its treasurer as
signatories of the postdated crossed checks), Riverside and Kanebo
CA Affirmed RTC: Ordering E.T. Henry, spouses Tan, Hi-Cement, Riverside and
Kanebo, jointly and severally, to pay bank damages represented by the face
value of the postdated checks plus interests, services, charges and penalties
until fully paid
G.R. 132403: RTC & CA
Hi-Cement authorized its general manager and treasurer to issue the
subject postdated crossed checks
Hi-Cement was already estopped from denying such authority since it
never objected to the signatories' issuance of all previous checks to E.T. Henry
ISSUE:
1.
W/N bank was a holder in due course - NO
2.
W/N Hi-Cement can still be made liable for the checks NO
HELD: CA AFFIRMED with MODIFICATION remanded to RTC for recomputation
1.
NO.
Section 191
Section 52
Bank was all too aware that subject checks were crossed and bore restrictions
that they were for deposit to payee's account only; hence, they could not be
further negotiated to it
irregularity - only the treasurer's signature appeared on the deed of
assignment
As a banking institution, it behooved respondent to act with extraordinary
diligence in every transaction
Its business is impressed with public interest, thus, it was not expected to be
careless and negligent, specially so where the checks it dealt with were crossed.
It is then settled that crossing of checks should put the holder on inquiry and
upon him devolves the duty to ascertain the indorsers title to the check or the
nature of his possession. - failure: guilty of gross negligence amounting to legal
absence of good faith
2. NO.
the drawer of the postdated crossed checks was not liable to the holder who
was deemed not a holder in due course
may recover from the party who indorsed/encashed the checks if the
latter has no valid excuse for refusing payment - E.T. Henry had no justification
to refuse payment, it should pay
(2) Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases an agreement hereafter
made shall be unenforceable by action, unless the same, or
some note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed
within a year from the making thereof;
(b) A special promise to answer for the debt, default, or
miscarriage of another; cd i
(c) An agreement made in consideration of marriage, other
than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos,
unless the buyer accept and receive part of such goods
and chattels, or the evidences, or some of them, of such
things in action, or pay at the time some part of the
purchase money; but when a sale is made by auction
and entry is made by the auctioneer in his sales book, at
the time of the sale, of the amount and kind of property
sold, terms of sale, price, names of the purchasers and
person on whose account the sale is made, it is a
sufficient memorandum;
(e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest
therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a
contract.
(6) Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained; acd
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
3. Exceptions with respect to Negotiable Instruments
a. Incapacity
SECTION 22.Effect of Indorsement by Infant or Corporation. The indorsement or
assignment of the instrument by a corporation or by an infant passes the property
therein, notwithstanding that from want of capacity the corporation or infant may
incur no liability thereon.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])
b. Illegality
SECTION 38.Qualified Indorsement. A qualified indorsement constitutes the
indorser a mere assignor of the title to the instrument. It may be made by adding
to the indorser's signature the words "without recourse" or any words of similar
import. Such an indorsement does not impair the negotiable character of the
instrument.
SECTION 39.Conditional Indorsement. Where an indorsement is conditional, a
party required to pay the instrument may disregard the condition and make
payment to the indorsee or his transferee whether the condition has been fulfilled
or not. But any person to whom an instrument so indorsed is negotiated will hold
the same, or the proceeds thereof, subject to the rights of the person indorsing
conditionally.
c. Forgery
SECTION 18.Liability of Person Signing in Trade or Assumed Name. No person is
liable on the instrument whose signature does not appear thereon, except as herein
otherwise expressly provided. But one who signs in a trade or assumed name will be
liable to the same extent as if he had signed in his own name.||| (Negotiable
Instruments Law, ACT NO. 2031, [1911])
SECTION 23.Forged Signature; Effect of . When a signature is forged or made
without the 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.||| (Negotiable
Instruments Law, ACT NO. 2031, [1911])
d. Duress
SECTION 55.When Title Defective. The title of a person who negotiates an
instrument is defective within the meaning of this Act when he obtained the
instrument, or any signature thereto, by fraud, duress, or force and fear, or other
unlawful means, or for an illegal consideration, or when he negotiates it in breach of
faith, or under such circumstances as amount to a fraud
5. Indorser vs Guarantor/Surety
Allied Banking Corp. V. CA (Jan - Dec 2006)
G.R. No. 125851
July 11, 2006
Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)
FACTS:
January 6, 1981: Allied Bank (Allied) purchased Export Bill of $20,085 from
G.G. Sportswear Mfg. Corporation (GGS)
The bill, drawn under a letter of credit covered Men's Valvoline Training
Suit that was in transit to West Germany
The export bill was issued by Chekiang First Bank Ltd., Hongkong.
With the purchase of the bill, ALLIED credited GGS the peso equivalent
of the bill amounting to P151,474.52
spouses Leon and Leticia de Villa and Nari Gidwani also executed a
Continuing Guaranty/Comprehensive Surety (surety), guaranteeing payment of
any and all such creditaccommodations which ALLIED may extend to GGS
When ALLIED negotiated the export bill to Chekiang, payment was refused
due to some material discrepancies in the documents submitted by GGS relative
to the exportation covered by the letter of credit.
GGS and Nari Gidwani: signed blank forms of the Letters of Guaranty
and the Surety, and the blanks were only filled up by ALLIED after they had
affixed their signatures. They also added that the documents did not cover the
transaction involving the subject export bill.
spouses de Villa: not aware of the existence of the export bill; they
signed blank forms of the surety; and averred that the guaranty was not meant
to secure the export bill
ISSUE: W/N Gidwani, Alcron and Spouses Villa can be held jointly and severally liable
becuase of their capacity as guarantors and surety in the absence of protest on the
bill in accordance with Section 152 of the Negotiable Instruments Law?
HELD: YES. CA modified. Nari Gidwani, and Spouses Leon and Leticia de Villa are
jointly and severally liable together with G.G. Sportswear
Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor
to fulfill the obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4,Chapter 3, Title I of this Book shall be observed. In such case the
contract is called a suretyship.
Unless the bill is promptly presented for payment at maturity and due
notice of dishonor given to the indorser within a reasonable time, he will be
discharged from liability thereon. On the other hand, except where required by
the provisions of the contract of suretyship, a demand or notice of default is not
required to fix the surety's liability.