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(1) PHILIPPINE EDUCATION CO. vs.

SORIANO
39 SCRA 587

In 1983, de la Cruz loan matured and the bank set-off and applied the time deposits as
payment for the loan. Caltex filed the complaint, but which was dismissed.

FACTS:
Enrique Montinola sought to purchase from Manila Post Office ten money orders of 200php
each payable to E. P. Montinola. Montinola offered to pay with the money orders with a
private check. Private check were not generally accepted in payment of money orders, the
teller advised him to see the Chief of the Money Order Division, but instead of doing so,
Montinola managed to leave the building without the knowledge of the teller. Upon the
disappearance of the unpaid money order, a message was sent to instruct all banks that it
must not pay for the money order stolen upon presentment. The Bank of America received a
copy of said notice.

ISSUES:
1. Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
2. Whether the CTDs negotiation require delivery only.

However, The Bank of America received the money order and deposited it to the appellants
account upon clearance. Mauricio Soriano, Chief of the Money Order Division notified the Bank
of America that the money order deposited had been found to have been irregularly issued
and that, the amount it represented had been deducted from the banks clearing account. The
Bank of America debited appellants account with the same account and give notice by mean
of debit memo.
ISSUE:
Whether or not the postal money order in question is a negotiable instrument.
HELD:
No. It is not disputed that the Philippine postal statutes were patterned after similar statutes
in force in United States. The Weight of authority in the United States is that postal money
orders are not negotiable instruments, the reason being that in establishing and operating a
postal money order system, the government is not engaged in commercial transactions but
merely exercises a governmental power for the public benefit. Moreover, some of the
restrictions imposed upon money orders by postal laws and regulations are inconsistent with
the character of negotiable instruments. For instance, such laws and regulations usually
provide for not more than one endorsement; payment of money orders may be withheld
under a variety of circumstances.
(2) CALTEX PHILS. vs. CA
212 SCRA 448
FACTS:
On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued 280
certificates of time deposit (CTD) in favor of one Angel dela Cruz who deposited with the bank
the aggregate amount of P1.12 million. Anger de la Cruz delivered the CTDs to Caltex in
connection with his purchase of fuel products from the latter. Subsequently, dela Cruz
informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate
the issuance of the replacement CTDs. De la Cruz was able to obtain a loan of P875,000 from
the bank, and in turn, he executed a notarized Deed of Assignment of Time Deposit in favor
of the bank.
Thereafter, Caltex presented for verification the CTDs (which were declared lost by de la
Cruz) with the bank. Caltex formally informed the bank of its possession of the CTDs and its
decision to preterminate the same. The bank rejected Caltex claim and demand, after Caltex
failed to furnish copy of the requested documents evidencing the guarantee agreement, etc.

HELD:
1. The CTDs in question meet the requirements of the law for negotiability. Contrary to the
lower courts findings, the CTDs are negotiable instruments (Section 1). Negotiability or nonnegotiability of an instrument is determined from the writing, i.e. from the face of the
instrument itself. The documents provided that the amounts deposited shall be repayable to
the depositor. The amounts are to be repayable to the bearer of the documents, i.e.
whosoever may be the bearer at the time of presentment.
2. Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose
and agreement between it (Caltex) and de la Cruz requires both delivery and indorsement; as
the CTDs were delivered to it as security for dela Cruz purchases of its fuel products, and not
for payment. Herein, there was no negotiation in the sense of a transfer of title, or legal title,
to the CTDs in which situation mere delivery of the bearer CTDs would have sufficed. The
delivery thereof as security for the fuel purchases at most constitutes Caltex as a holder for
value by reason of his lien. Accordingly, a negotiation for such purpose cannot be effected by
mere delivery of the instrument since the terms thereof and the subsequent disposition of
such security, in the event of non-payment of the principal obligation, must be contractually
provided for.
(3) METROBANK vs. CA
194 SCRA 168
FACTS:
Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants.
All warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and
deposited to its Savings account in Metrobank branch in Calapan, Mindoro. They were sent for
clearance. Meanwhile, Gomez is not allowed to withdraw from his account, later, however,
exasperated over Floria repeated inquiries and also as an accommodation for a valued
client, Metrobank decided to allow Golden Savings to withdraw from proceeds of the warrants
before it was cleared. In turn, Golden Savings subsequently allowed Gomez to make
withdrawals from his own account.
Metrobank
Bureau of
previously
Metrobank

informed Golden Savings that 32 of the warrants had been dishonored by the
Treasury and demanded the refund by Golden Savings of the amount it had
withdrawn, to make up the deficit in its account. The demand was rejected.
then sued Golden Savings.

ISSUE:
1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the
amount withdraws to make up with the deficit as a result of the dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable instruments
HELD:

No. Metrobank is negligent in giving Golden Savings the impression that the treasury warrants
had been cleared and that, consequently, it was safe to allow Gomez to withdraw. Without
such assurance, Golden Savings would not have allowed the withdrawals. Indeed, Golden
Savings might even have incurred liability for its refusal to return the money that all
appearances belonged to the depositor, who could therefore withdraw it anytime and for any
reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited
them to its account with Metrobank. Golden Savings had no clearing facilities of its own. It
relied on Metrobank to determine the validity of the warrants through its own services. The
proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings
itself to withdraw them from its own deposit.
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 Sec. 66 of NIL. The simple reason that NIL is not applicable to non negotiable
instruments, treasury warrants.
No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is the
word: non negotiable. Moreover, and this is equal significance, 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. As provided
by Sec 3 of NIL an unqualified order or promise to pay is unconditional though coupled with:
1st, 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 2nd, a statement of the transaction
which give rise to the instrument. But an order to promise to pay out of 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.
(4) SESBRENO VS. CA
222 SCRA 466
FACTS:
On 9 February 1981, Raul Sesbreno made a money market placement in the amount of
P300,000 with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of
32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta
Motor Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt
indicating the sale of the note with notation that said security was in the custody of Pilipinas
Bank, and postdated checks drawn against the Insular Bank of Asia and America for
P304,533.33 payable on 13 March 1981. The checks were dishonored for having been drawn
against insufficient funds.
Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno; but
Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has a
face value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was
stamped non-negotiable on its face. As Sesbreno was unable to collect his investment and
interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.
ISSUE:
Whether non-negotiability of a promissory note prevents its assignment.

HELD:
Only an instrument qualifying as a negotiable instrument under the relevant statute may be
negotiated either by indorsement thereof coupled with delivery, or by delivery alone if it is in
bearer form. A negotiable instrument, instead of being negotiated, may also be assigned or
transferred. The legal consequences of negotiation and assignment of the instrument are
different. A negotiable instrument may not be negotiated but may be assigned or transferred,
absent an express prohibition against assignment or transfer written in the face of the
instrument. herein, there was no prohibition stipulated.
(5) FIRESTONE TIRE and RUBBER CO. vs. CA
353 SCRA 601
FACTS:
The check was intended as part of the payment of Ines Chaves debt. When presented to the
SecurityBank and Trust Co. by Firestone, the check was returned for insufficiency of funds.
Despite repeated demands, Ines Chaves failed to settle its account; hence, the suit.
ISSUE:
Whether good faith is required in the issuance of a check.
HELD:
Everyone must in the performance of his duties, observe honesty and good faith. Where a
person issues a postdated check without funds to cover it and informs the payee of this fact,
he cannot be held guilty of estafa because there is no deceit. Herein, there is nothing in the
record to show that Firestone knew that there were no funds when it accepted the check,
much less that Firestone agreed to take the check with knowledge of the lack of funds. As
Ines Chavez is guilty of fraud (bad faith) in the performance of its obligation, it is liable for
damages. Its conduct wanting in good faith, the award of attorneys fees was warranted.
(6) ANG TEK LIAN vs. CA
87 SCRA 383
FACTS:
In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He
said that he meant to withdraw from the bank but the banks already closed. In exchange, he
gave Lee Hua a check which is payable to the order of cash. The next day, Lee Hua
presented the check for payment but it was dishonored due to insufficiency of funds. Lee Hua
eventually sued Ang Tek Lian. In his defense, Ang Tek Lian argued that he did not indorse the
check to Lee Hua and that when the latter accepted the check without Ang tek Lians
indorsement, he had done so fully aware of the risk he was running thereby.
ISSUE:
Whether or not Ang Tek Lian is correct.
HELD:
No. Under the Negotiable Instruments Law (sec. 9 [d]), a check drawn payable to the order
of cash is a check payable to bearer hence a bearer instrument, and the bank may pay it to
the person presenting it for payment without the drawers indorsement. Where a check is
made payable to the order of cash, the word cash does not purport to be the name of any
person, and hence the instrument is payable to bearer. The drawee bank need not obtain any

indorsement of the check, but may pay it to the person presenting it without any
indorsement.

to convey title to the grantee, so must a negotiable instrument be delivered to the payee in
order to evidence its existence as a binding contract.

(7) DEVELOPMENT BANK OF RIZAL vs. SIMA WEI


219 SCRA 383

Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its
delivery to him. Delivery of an instrument means transfer of possession, actual or
constructive, from one person to another. Without the initial delivery of the instrument from
the drawer to the payee, there can be no liability on the instrument. Moreover, such delivery
must be intended to give effect to the instrument. Without the delivery of said checks to
petitioner-payee, the former did not acquire any right or interest therein and cannot therefore
assert any cause of action, founded on said checks, whether against the drawer Sima Wei or
against the Producers Bank or any of the other respondents.

FACTS:
Sima Wei acquired a loan from Development Bank of Rizal. He executed and delivered to the
former a promissory note, engaging to pay the petitioner Bank or order the amount of
P1,820,000.00 on or before June 24, 1983 with interest at 32% per annum.
Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02. On
November 18, 1983, Sima Wei issued two crossed checks payable to petitioner Bank drawn
against China Banking Corporation, bearing respectively the serial numbers 384934, for the
amount of P550,000.00 and 384935, for the amount of P500K. The said checks were allegedly
issued in full settlement of the drawers account evidenced by the promissory note.
These two checks were not delivered to the Development Bank. For reasons not shown, these
checks came into the possession of respondent Lee Kian Huat, who deposited the checks
without the Developments indorsement (forged or otherwise) to the account of respondent
Plastic Corporation, at the Balintawak branch, Caloocan City, of the Producers Bank. The
Branch Manager of the Balintawak branch of Producers Bank, relying on the assurance of
respondent Samson Tung, President of Plastic Corporation, that the transaction was legal and
regular, instructed the cashier of Producers Bank to accept the checks for deposit and to
credit them to the account of said Plastic Corporation, inspite of the fact that the checks were
crossed and payable to petitioner Bank and bore no indorsement of the latter. Hence,
Development filed the complaint for sum of money against Wei and/or Kian Huat, Uy, Tung,
Plastic Corporation and the Producers Bank.
Bank alleged that its cause of action was not based on collecting the sum of money evidenced
by the negotiable instruments stated but on quasi-delict a claim for damages on the
ground of fraudulent acts and evident bad faith of the alternative respondents.
ISSUE:
WON Development Bank has a cause of action against the respondents?
HELD:
No. Unless respondent Sima Wei proves that she has been relieved from liability on the
promissory note by some other cause, petitioner Bank has a right of action against her for the
balance due thereon.
The normal parties to a check are the drawer, the payee and the drawee bank. Courts have
long recognized the business custom of using printed checks where blanks are provided for
the date of issuance, the name of the payee, the amount payable and the drawers signature.
All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and
sign it. However, the mere fact that he has done these does not give rise to any liability on
his part, until and unless the check is delivered to the payee or his representative.
A negotiable instrument, of which a check is, is not only a written evidence of a contract right
but is also a species of property. Just as a deed to a piece of land must be delivered in order

However, insofar as the other respondents are concerned, petitioner Bank has no privity with
them. Since petitioner Bank never received the checks on which it based its action against
said respondents, it never owned them (the checks) nor did it acquire any interest therein.
(8) PHILIPPINE BANK OF COMMERCE vs. ARUEGO
102 SCRA 530
FACTS:
To facilitate payment of the printing of a periodical called World Current Events., Aruego, its
publisher, obtained a credit accommodation from the Philippine Bank of Commerce. For every
printing of the periodical, the printer collected the cost of printing by drawing a draft against
the bank, said draft being sent later to Aruego for acceptance. As an added security for the
payment of the amounts advanced to the printer, the bank also required Aruego to execute a
trust receipt in favor of the bank wherein Aruego undertook to hold in trust for the bank the
periodicals and to sell the same with the promise to turn over to the bank the proceeds of the
sale to answer for the payment of all obligations arising from the draft. The bank instituted an
action against Aruego to recover the cost of printing of the latters periodical. Aruego
however argues that he signed the supposed bills of exchange only as an agent of the
Philippine Education Foundation Company where he is president.
ISSUES:
Whether Aruego can be held liable by the petitioner although he signed the supposed bills of
exchange only as an agent of Philippine Education Foundation Company.
HELD:
Aruego did not disclose in any of the drafts that he accepted that he was signing as
representative of the Philippine Education Foundation Company. For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted, pursuant to Section 20 of the
NIL which provides that when a person adds to his signature words indicating that he signs
for or on behalf of a principal or in a representative capacity, he is not liable on the
instrument if he was duly authorized; but the mere addition of words describing him as an
agent or as filing a representative character, without disclosing his principal, does not exempt
him from personal liability.
(9) FRANCISCO vs. CA
319 SCRA 354
FACTS:

A. Francisco Realty & Development Corporation (AFRDC), of which petitioner Francisco is the
president, entered into a Land Development and Construction Contract with private
respondent Herby Commercial & Construction Corporation (HCCC), represented by its
President and General Manager private respondent Ong. Under the contract, HCCC was to be
paid on the basis of the completed houses and developed lands delivered to and accepted by
AFRDC and the GSIS. Sometime in 1979, Ong discovered that Diaz and Francisco, the VicePresident of GSIS, had executed and signed seven checks of various dates and amounts
payable to HCCC for completed and delivered work under the contract. Ong, however, claims
that these checks were never delivered to HCCC. It turned out that Francisco forged the
indorsement of Ong on the checks and indorsed the checks for a second time by signing her
name at the back of the checks, petitioner then deposited said checks in her savings account.
A case was brought by private respondents against petitioner to recover the value of said
checks. Petitioner however claims that she was authorized to sign Ong's name on the checks
by virtue of the Certification executed by Ong in her favor giving her the authority to collect
all the receivables of HCCC from the GSIS, including the questioned checks.
ISSUE:
Whether petitioner cannot be held liable on the questioned checks by virtue of the
Certification executed by Ong giving her the authority to collect such checks from the GSIS.
HELD:
Petitioner is liable. The Negotiable Instruments Law provides that where any person is under
obligation to indorse in a representative capacity, he may indorse in such terms as to negative
personal liability. An agent, when so signing, should indicate that he is merely signing in
behalf of the principal and must disclose the name of his principal; otherwise he shall be held
personally liable. Even assuming that Francisco was authorized by HCCC to sign Ong's name,
still, Francisco did not indorse the instrument in accordance with law. Instead of signing Ong's
name, Francisco should have signed her own name and expressly indicated that she was
signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate
her act of forgery.
(10) JAI-ALAI CORP. vs BPI
66 SCRA 29
FACTS:
Petitioner deposited 10 checks in its current account with BPI. The checks which were
acquired by petitioner from Ramirez, a sales agent of the Inter-Island Gas were all payable to
Inter-Island Gas Service, Inc. or order. After the checks had been submitted to Inter-bank
clearing, Inter-Island Gas discovered that all the indorsements made on the checks
purportedly by its cashiers were forgeries. BPI thus debited the value of the checks against
petitioner's current account and forwarded to the latter the checks containing the forged
indorsements which petitioner refused to accept.
ISSUE:
Whether BPI had the right to debit from petitioner's current account the value of the checks
with the forged indorsements.
HELD:
BPI acted within legal bounds when it debited the petitioner's account. Having indorsed the
checks to respondent bank, petitioner is deemed to have given the warranty prescribed in
Section 66 of the NIL that every single one of those checks "is genuine and in all respects

what it purports to be." Respondent which relied upon the petitioner's warranty should not
be held liable for the resulting loss.
**The depositor of a check as indorser warrants that it is genuine and in all respects what it

purports to be. Having indorsed the checks to respondent bank, petitioner is deemed to have
given the warranty prescribed in Section 66 of the NIL that every single one of those checks "
is genuine and in all respects what it purports to be."
(11) REPUBLIC V. EBRADA
65 SCRA 680

FACTS:
Ebrada encashed a Back Pay Check issued by the Bureau of Treasury at the Republic Bank
in Escolta Manila. The Bureau of Treasury advised the Republic Bank that the instrument was
forged. It informed the bank that the original payee of the check died 11 years before the
check was issued. Therefore, there was a forgery of his signature.
This is the sequence:
Martin Lorenzo The deceased person, original payee, where the forgery happened
Ramon Lorenzo
Delia Dominguez
Mauricia Ebrada Defendant-appelant
Ebrada refuses to return the proceeds of the check claiming that she already gave it to Delia
Dominguez. She also claims that she is a HDC (holder in due course) and that the bank is
already estopped.
HELD:
Ebrada should return the proceeds of the check to Republic Bank. As an indorser of the check,
she was supposed to have warranted that she has good title to said check. See Section 65.
Section 23: When the 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 instruments, or
to give a discharge 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.
It is only the negotiation based on the forged or unauthorized signature which is inoperative.
Therefore:
Martin Lorenzo Signature inoperative
Ramon Lorenzo To Dominguez: operative
Delia Dominguez To Ebrada: operative
Mauricia Ebrada
Drawee bank can collect from the one who encashed the check. If Ebrada performed the duty
of ascertaining the genuiness of the check, in all probability, the forgery wouyld have been
detected and the fraud defeated.
(12) MWSS vs. CA
143 SCRA 20

FACTS:
Metropolitan Waterworks and Sewerage System (MWSS) had an account with PNB. When it
was still called NAWASA, MWSS made a special arrangement with PNB so that it may have
personalized checks to be printed Mesina Enterprises. These personalized checks are the ones
being used by MWSS in its business transactions.
From March to May 1969, MWSS issued 23 checks to various payees in the aggregate amount
of P320,636.26. During the same months, another set of 23 checks containing the same
check numbers earlier issued were forged. The aggregate amount of the forged checks
amounted to P3,457,903.00. This amount was distributed to the bank accounts of three
persons: Arturo Sison, Antonio Mendoza, and Raul Dizon.
MWSS then demanded PNB to restore the amount of P3,457,903.00. PNB refused. The trial
court ruled in favor of MWSS but the Court of Appeals reversed the trial courts decision.
ISSUE:
Whether or not PNB should restore the said amount.
HELD:
No. MWSS is precluded from setting up the defense of forgery. It has been proven that MWSS
has been negligent in supervising the printing of its personalized checks. It failed to provide
security measures and coordinate the same with PNB. Further, the signatures in the forged
checks appear to be genuine as reported by the National Bureau of Investigation so much so
that the MWSS itself cannot tell the difference between the forged signature and the genuine
one. The records likewise show that MWSS failed to provide appropriate security measures
over its own records thereby laying confidential records open to unauthorized persons. Even if
the twenty-three (23) checks in question are considered forgeries, considering the MWSSs
gross negligence, it is barred from setting up the defense of forgery under Section 23 of the
Negotiable Instruments Law.
The Supreme Court further emphasized that forgery cannot be presumed. It must be
established by clear, positive, and convincing evidence. This was not done in the present
case.
(13) BANCO DE ORO SAVING V. EQUITABLE
157 SCRA 188
FACTS:
BDO drew checks payable to member establishments. Subsequently, the checks were
deposited in Trencios account with Equitable. The checks were sent for clearing and was
thereafter cleared. Afterwards, BDO discovered that the indorsements in the back of the
checks were forged. It then demanded that Equitable credit its account but the latter refused
to do so. This prompted BDO to file a complaint against Equitable and PCHC. The trial court
and RTC held in favor of the Equitable and PCHC.
HELD:
First, PCHC has jurisdiction over the case in question. The articles of incorporation of PHHC
extended its operation to clearing checks and other clearing items. No doubt transactions on
non-negotiable checks are within the ambit of its jurisdiction. Further, the participation of the
two banks in the clearing operations is submission to the jurisdiction of the PCHC. Petitioner is
likewise estopped from raising the non-negotiability of the checks in issue. It stamped its

guarantee at the back of the checks and subsequently presented it for clearing and it was in
the basis of these endorsements by the petitioner that the proceeds were credited in its
clearing account. The petitioner cannot now deny its liability as it assumed the liability of an
indorser by stamping its guarantee at the back of the checks. Furthermore, the bank cannot
escape liability of an indorser of a check and which may turn out to be a forged indorsement.
Whenever a bank treats the signature at the back of the checks as indorsements and thus
logically guarantees the same as such there can be no doubt that said bank had considered
the checks as negotiable. A long line of cases also held that in the matter of forgery in
endorsements, it is the collecting bank that generally suffers the loss because it had the duty
h to ascertain the genuineness of all prior indorsements considering that the act of presenting
the check for payment to the drawee is an assertion that the party making the presentment
has done its duty to ascertain the genuineness of the indorsements.
(14) GEMPESAW vs. CA, PNB
218 SCRA 682
FACTS:
Gempesaw was the owner of many grocery stores. She paid her suppliers through the
issuance of checks drawn against her checking account with respondent bank. The checks
were prepared by her bookkeeper Galang. In the signing of the checks prepared by Galang,
Gempensaw did not bother in verifying to whom the checks were being paid and if the
issuances were necessary. She did not even verity the returned checks of the bank when the
latter notifies her of the same. During her two years in business, there were incidents shown
that the amounts paid for were in excess of what should have been paid. It was also shown
that even if the checks were crossed, the intended payees did not receive the amount of the
checks. This prompted Gempensaw to demand the bank to credit her account for the amount
of the forged checks. The bank refused to do so and this prompted her to file the case against
the bank.
ISSUE:

Is the drawer precluded from setting up forgery or want of authority as a defense?


HELD:
Yes. AS a general rule forgery is a defense. The applicable rule is found under Sec. 23 of NIL.
A party whose signature was forged was never a party and never gave his consent to the
instrument. The instrument can not even be enforced against him even by a holder in due
course. The drawee bank can not charge the account of the drawer whose signature was
forged because he never gave the bank the order to pay. However, the petitioner Gempesaw
falls under the exception. Gempesaw was guilty of such negligence which causes the bank to
honor such checks.
In the case at bar, the agent (Galang) was the one who perpetrated the series of forgeries.
Had the petitioner been more prudent under the circumstances, she could have discovered
the fraud earlier.
(15) ASSOCIATED BANK V. CA
252 SCRA 620
FACTS:
The province of Tarlac maintains an account with PNB-Tarlac. Part of its funds is appropriated
for the benefit of Concepcion Emergency Hospital. During a post-audit done by the province,

it was found out that 30 of its checks werent received by the hospital. Upon further
investigation, it was found out that the checks were encashed by Pangilinan who was a
former cashier and administrative officer of the hospital through forged indorsements. This
prompted the provincial treasurer to ask for reimbursement from PNB and thereafter, PNB
from Associated Bank. As the two banks didn't want to reimburse, an action was filed against
them.

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

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

In instruments payable to order, the signature of the rightful holder is essential to transfer
title to the same instrument. When the holders signature is forged, all parties prior to the
forgery may raise the real defense of forgery against all parties subsequent thereto. In
connection to this, an indorser warrants that the instrument is genuine. A collecting bank is
such an indorser. So even if the indorsement is forged, the collecting bank is bound by his
warranties as an indorser and cannot set up the defense of forgery as against the drawee
bank.
Furthermore, in cases involving checks with forged indorsements, such as the case at bar, the
chain of liability doesn't end with the drawee bank. The drawee bank may not debit the
account of the drawer but may generally pass liability back through the collection chain to the
party who took from the forger and of course, the forger himself, if available. In other words,
the drawee bank can seek reimbursement or a return of the amount it paid from the
collecting bank or person. The collecting bank generally suffers the loss because it has the
duty to ascertain the genuineness of all prior endorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the
party making the presentment has done its duty to ascertain the genuineness of the
indorsements.
With regard the issue of delay, a delay in informing the bank of the forgery, which deprives it
of the opportunity to go after the forger, signifies negligence on the part of the drawee bank
and will preclude it from claiming reimbursement. In this case, PNB wasn't guilty of any
negligent delay. Its delay hasn't prejudiced Associated Bank in any way because even if there
wasn't delay, the fact that there was nothing left of the account of Pangilinan, there couldn't
be any more reimbursement.
(16) METROBANK V. FNCB
118 SCRA 537
FACTS:

August 25, 1964: Check dated July 8, 1964 for P50,000.00, payable to CASH, drawn by
Joaquin Cunanan & Company on First National City Bank (FNCB) was deposited with
Metropolitan Bank and Trust Company (Metro Bank) by Salvador Sales.
Earlier that day, Sales had opened a current account with Metro Bank depositing P500.00
in cash

Metro Bank immediately sent the cash check to the Clearing House of the Central Bank
with the following words stamped at the back of the check:
Metropolitan Bank and Trust Company Cleared (illegible) office All prior endorsements
and/or Lack of endorsements Guaranteed.
The check was cleared the same day. Private respondent paid petitioner through clearing
the amount of P50,000.00, and Sales was credited with the said amount in his deposit
with Metro Bank.
August 26, 1964: Sales made his 1st withdrawal of P480.00 from his current account
August 28, 1964: he withdrew P32,100.00
August 31, 1964: he withdrew the balance of P17,920 and closed his account with Metro
Bank
September 3, 1964: FNCB returned cancelled Check to drawer Joaquin Cunanan &
Company, together with the monthly statement of the company's account with FNCB.
Notified FNCB that the check had been altered
Actual amount of P50.00 was raised to P50,000.00
Name of the payee, Manila Polo Club, was superimposed the word CASH.
September 10, 1964: FNCB wrote Metro Bank asking for reimbursement
June 29, 1965: FNCB filed for recovery
CA affirmed Trial Court: Metro Bank to reimburse FNCB

ISSUE:
W/N Metrobank should reimsburse FNCB for the altered amount as indorser
HELD:
NO. FNCB liable. Under the procedure prescribed, the drawee bank receiving the check for
clearing from the Central Bank Clearing House must return the check to the collecting bank
within the 24-hour period if the check is defective for any reason. FNCB failed to do so.
Also, indorsement must be read together with the 24-hour regulation on clearing House
Operations of the Central Bank. Metro Bank cannot be held liable for the payment of the
altered check.
Moreover, FNCB did not deny the allegation of Metro Bank that before it allowed the
withdrawal of the balance of P17,920.00 by Salvador Sales, Metro Bank withheld payment and
first verified, through its Assistant Cashier Federico Uy, the regularity and genuineness of the
check deposit from Marcelo Mirasol, Department Officer of FNCB, because its (Metro Bank)
attention was called by the fast movement of the account.
(17) REPUBLIC BANK vs. CA
196 SCRA 100
FACTS:
San Miguel Corporation issued a dividend check for P240 in favor of J. Roberto Delgado, a
stockholder. Delgado altered the amount of the check to P9,240. The check was indorsed and
deposited by Delgado with Republic Bank. Republic Bank endorsed the check to First National
City Bank (FNCB), the drawee bank, by stamping on the back of the check all prior and / or
lack of indorsements guaranteed. Relying on the endorsement, FNCB paid the amount to
Republic Bank. Later on, San Miguel informed FNCB of the material alteration of the amount.
FNCB recredited the amount to San Miguels account, and demanded refund from Republic
Bank. Republic Bank refused. Hence, the present action.

ISSUE:
Who shall bear the loss resulting from the altered check.

(19) ILLUSORIO vs. CA


393 SCRA 89

HELD:
When an indorsement is forged, the collecting bank or last indorser, as a general rule, bears
the loss. But the unqualified indorsement of the collecting bank on the check should be read
together with the 24-hour regulation on clearing house operation. Thus, when the drawee
bank fails to return a forged or altered check to the collecting bank within the 24-hour
clearing period (as provided by Section 4c of Central Bank Circular 9, as amended), the
collecting bank is absolved from liability. The drawee bank, FNCB, should bear the loss for the
payment of the altered check for its failure to detect and warn Republic Bank of the
fraudulent character of the check within the 24-hour clearing house rule.

FACTS:
Petitioner was a prominent businessman who, because of different business commitments,
entrusted to then secretary the handling of his credit cards and checkbooks. For a material
period of time, the secretary was able to encash and deposit in her personal account money
from the account of the petitioner. Upon knowledge of her acts, she was fired immediately
and criminal actions were filed against her. Thereafter, petitioner requested the bank to
restore his money but the bank refused to do so.

(18) PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. CA


350 SCRA 446
FACTS:
Ford issued Citibank checks in favor of the Commissioner of Internal Revenue as payments of
itstaxes, through the depository bank Insular Bank of Asia and America (later PCIBank).
Proceeds of the checkswere never received by the Commissioner, but were encashed and
diverted to the accounts of members of asyndicate, to which Fords General Ledger
Accountant Godofredo Rivera belongs. Upon demand of theCommissioner anew, Ford was
forced to make second payment of its taxes. Thus, Ford instituted actions torecover the
amounts from the collecting (depository) and drawee banks.
ISSUE:
Whether Ford has the right to recover from the collecting bank (PCI Bank) and/or the drawee
bank(Citibank) the value of the checks.
HELD:
The mere fact that forgery was committed by a drawer-payors confidential employee or
agent, who by virtue of his position had unusual facilities to perpetrate the fraud and
imposing the forged paper upon the bank, does not entitle the bank to shift the loss to the
drawer-payor, in the absence of some circumstance raising estoppel against the drawer. The
rule applies to checks fraudulently negotiated or diverted by the confidential employees who
hold them in their possession. In GRs 121413 and 121479, PCIBank failed to verify the
authority of Mr. Rivera to negotiate the checks. Furthermore, PCI Banks clearing stamp which
guarantees prior or lack of indorsements render PCI Bank liable as it allowed Citibank without
any other option but to pay the checks. PCI Bank, being a depository /collecting bank of the
BIR, had the responsibility to make sure that the crossed checks were deposited in Payees
account only as found in the instrument. In GR 128604, on the other hand, the switching
operation involving the checks, while in transit for clearing, were the clandestine or hidden
actuations performed by the members of the syndicate in their own personal, covert and
private capacity; without the knowledge nor official or conscious participation of PCI Bank in
the process of embezzlement. Central Bank Circular 580 (1977), however, provide d that any
theft affecting items in transit for clearing are for the account of the sending bank (herein PCI
Bank). Still, Citibank was likewise negligent in the performance of its duties as it failed to
establish its payment of Fords checks were made in due course and legally in order. The fact
that drawee bank did not discover the irregularity seasonably constitutes negligence in
carrying out the banks duty to its depositors.

ISSUE:

Can petitioner recover his money by contending that his signature was forged thus the
instrument was inoperative the moment it was presented to the bank?
HELD:
No. It is true that Sec. 23 of NIL provides that a forged check is inoperative and would give
no authority to the drawee bank to pay the forged check. It is also a rule that when a
signature is forged or made without the authority of the person whose signature it purports to
be, the check is wholly inoperative. No right to retain the instrument, or to give a discharge
therefor, or to enforce payment thereof against any party, can be acquired through or under
such signature. However, the rule does provide for an exception, namely: "unless the party

against whom it is sought to enforce such right is precluded from setting up the forgery or
want of authority."
In the instant case, it is the exception that applies. In our view, petitioner is precluded from
setting up the forgery, assuming there is forgery, due to his own negligence in entrusting to
his secretary his credit cards and checkbook including the verification of his statements of
account. He failed to examine his bank statements and this was the proximate case of his
own damage.
(20) SAMSUNG CONSTRUCTION CO. vs. FEBTC and CA
GR. No. 129015, August 13, 2004

FACTS:
Samsung Construction held an account with Far East Bank. One day a check worth 900,000,
payable to cash, was presented by one Roberto Gonzaga in the Makati Branch of Far East
Bank. The check was certified to be true by Jose Sempio, the assistant accountant of
Samsung, who was also present during the time the check was cashed. Later however it was
discovered that no such check was ever approved by the Samsungs head accountant, the
president of the company also never signed any such check.
ISSUES:
Whether or not Far East Bank is liable to reimburse Samsung for cashing out the forged
check, which was drawn from the accountof Samsung
HELD:
Far East Bank is liable for reimbursement. Sec. 23 of the Negotiable Instrument Law states
that a forged signature makes the instrument wholly inoperative. If payment is made the
drawee (Far East) cannot charge it to the drawers account (Samsung). The fact that the
forgery is clever is immaterial. The forged signature may so closely resemble the genuine as

to defy detection by the depositor himself. And yet, if the bank pays the check, it is paying
out with its own money and not of the depositors. This rule of liability can be stated briefly in
these words: A bank is bound to know its depositors signature. The accusation of
negligence on the part of Samsung was not clearly proven. Absence of proof to the contrary,
the presumption is that the ordinary course of business was followed.
(21) PNB V. CA
256 SCRA 491
FACTS:
DECS issued a check in favor of Abante Marketing containing a specific serial number, drawn
against PNB. The check was deposited by Abante in its account with Capitol and the latter
consequently deposited the same with its account with PBCOM which later deposited it with
petitioner for clearing. The check was thereafter cleared. However, on a relevant date,
petitioner PNB returned the check on account that there had been a material alteration on it.
Subsequent debits were made but Capitol cannot debit the account of Abante any longer for
the latter had withdrawn all the money already from the account. This prompted Capitol to
seek reclarification from PBCOM and demanded the recrediting of its account. PBCOM
followed suit by doing the same against PNB. Demands unheeded, it filed an action against
PBCOM and the latter filed a third-party complaint against petitioner.
HELD:
An alteration is said to be material if it alters the effect of the instrument. It means an
unauthorized change in the instrument that purports to modify in any respect the obligation
of a party or an unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of the party. In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of the NIL.
In this case, the alleged material alteration was the alteration of the serial number of the
check in issuewhich is not an essential element of a negotiable instrument under Section 1.
PNB alleges that the alteration was material since it is an accepted concept that a TCAA check
by its very nature is the medium of exchange of governments, instrumentalities and agencies.
As a safety measure, every government office or agency is assigned checks bearing different
serial numbers. But this contention has to fail. The checks serial number is not the sole
indicia of its origin. The name of the government agency issuing the check is clearly stated
therein. Thus, the checks drawer is sufficiently identified, rendering redundant the referral to
its serial number.
Therefore, there being no material alteration in the check committed, PNBcould not return the
check to PBCOM. It should pay the same.
(22) MONTINOLA V. PNB
88 PHIL 178
FACTS:
Ramos, as a disbursing officer of an army division of the USAFE, made cash advancements w/
the Provincial Treasurer of Lanao. In exchange, the Provl Treasurer of Lanao gave him a
P500,000 check. Thereafter, Ramos presented the check to Laya for encashment. Laya in his
capacity as Provincial Treasurer of Misamis Oriental as drawer, issued a check to Ramos in the

sum of P100000, on the Philippines National Bank as drawee; the P400000 value of the check
was paid in military notes.
Ramos was unable to encash the said check for he was captured by the Japanese. But after
his release, he sold P30000 of the check to Montinola for P90000 Japanese Military notes, of
which only P45000 was paid by the latter. The writing made by Ramos at the back of the
check was to the effect that he was assigning only P30000 of the value of the document with
an instruction to the bank to pay P30000 to Montinola and to deposit the balance to Ramos's
credit. This writing was, however, mysteriously obliterated and in its place, a supposed
indorsement appearing on the back of the check was made for the whole amount of the
check. At the time of the transfer of this check to Montinola, the check was long overdue by
about 2-1/2 years.
Montinola instituted an action against the PNB and the Provincial Treasurer of Misamis
Oriental to collect the sum of P100,000, the amount of the aforesaid check. There now
appears on the face of said check the words in parenthesis "Agent, Phil. National Bank" under
the signature of Laya purportedly showing that Laya issued the check as agent of the
Philippine National Bank.
HELD:
The words "Agent, Phil. National Bank" now appearing on the face of the check were added
or placed in the instrument after it was issued by the Provincial Treasurer Laya to Ramos. The
check was issued by only as Provincial Treasurer and as an official of the Government, which
was under obligation to provide the USAFE with advance funds, and not as agent of the bank,
which had no such obligation. The addition of those words was made after the check had
been transferred by Ramos to Montinola. The insertion of the words "Agent, Phil. National
Bank," which converts the bank from a mere drawee to a drawer and therefore changes its
liability, constitutes a material alteration of the instrument without the consent of the parties
liable thereon, and so discharges the instrument.
(23) SADAYA VS SEVILLA
19 SCRA 924
FACTS:
Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the bank. Varona
was the only one who received the proceeds of the note. Sadaya and Sevilla both signed as
co-makers to accommodate Varona. Thereafter, the bank collected from Sadaya. Varona
failed to reimburse. Consequently, Sevilla died and intestate estate proceedings were
established. Sadaya filed a creditors claim on his estate for the payment he made on the
note. The administrator resisted the claim on the ground that Sevilla didn't receive any
proceeds of the loan. The trial court admitted the claim of Sadaya though this was reversed
by the CA.
HELD:
Sadaya could have sought reimbursement from Varona, which is right and just as the latter
was the only one who received value for the note executed. There is an implied
contract of indemnity between Sadaya and Varona upon the formers payment of the
obligation to the bank.
Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be joint and several.
For indeed, had payment been made by Varona, Varona couldn't had reason to seek

reimbursement from either Sadaya or Sevilla. After all, the proceeds of the loan went to
Varona alone.
On principle, a solidary accommodation maker-who made payment-has the right to
contribution, from his co-accomodation maker, in the absence of agreement to the contrary
between them, subject to conditions imposed by law.
This right springs from an implied
promise to share equally the burdens that may ensue from their having consented to stamp
their signatures on the promissory note.
The following are the rules:
1. A joint and several accommodation maker of a negotiable promissory note may demand
from the principal debtor reimbursement for the amount that he paid to the payee.
2. A joint and several accommodation maker who pays on the said promissory note may
directly demand reimbursement from his co-accommodation maker without first directing his
action against the principal debtor provided that:
a. He made the payment by virtue of a judicial demand
b. A principal debtor is insolvent.
It was never shown that there was a judicial demand on Sadaya to pay the obligation and
also, it was never proven that Varona was insolvent. Thus, Sadaya cannot proceed against
Sevilla for reimbursement.
(24) CRISOLOGO JOSE v CA
177 SCRA 594
FACTS:
Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge of
marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares.
Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong, issued
check against Traders Royal Bank, payable to defendant Ernestina Crisologo-Jose. Since the
check was under the account of Mover Enterprises, Inc., the same was to be signed by its
president, Atty. Oscar Z. Benares, and the treasurer of the said corporation. However, since at
that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed upon
the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check. The check was issued to
defendant Ernestina Crisologo-Jose in consideration of the waiver or quitclaim by said
defendant over a certain property which the Government Service Insurance System (GSIS)
agreed to sell to the spouses Jaime and Clarita Ong, with the understanding that upon
approval by the GSIS of the compromise agreement with the spouses Ong, the check will be
encashed accordingly. Since the compromise agreement was not approved within the
expected period of time, the aforesaid check was replaced by Atty. Benares. This replacement
check was also signed by Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr.
When defendant deposited this replacement check with her account at Family Savings Bank,
Mayon Branch, it was dishonored for insufficiency of funds. The petitioner filed an action
against the corporation for accommodation party.
ISSUE:
WON the corporation can be held liable as accommodation party?
HELD:

No. Accommodation party liable on the instrument to a holder for value, although such holder
at the time of taking the instrument knew him to be only an accommodation party, does not
include nor apply to corporations which are accommodation parties. This is because the issue
or indorsement of negotiable paper by a corporation without consideration and for the
accommodation of another is ultra vires. Hence, one who has taken the instrument with
knowledge of the accommodation nature thereof cannot recover against a corporation where
it is only an accommodation party. If the form of the instrument, or the nature of the
transaction, is such as to charge the indorsee with knowledge that the issue or indorsement
of the instrument by the corporation is for the accommodation of another, he cannot recover
against the corporation thereon. By way of exception, an officer or agent of a corporation
shall have the power to execute or indorse a negotiable paper in the name of the corporation
for the accommodation of a third person only if specifically authorized to do so. Corollarily,
corporate officers, such as the president and vice-president, have no power to execute for
mere accommodation a negotiable instrument of the corporation for their individual debts or
transactions arising from or in relation to matters in which the corporation has no legitimate
concern. Since such accommodation paper cannot thus be enforced against the corporation,
especially since it is not involved in any aspect of the corporate business or operations, the
inescapable conclusion in law and in logic is that the signatories thereof shall be personally
liable therefor, as well as the consequences arising from their acts in connection therewith.
(25) STELCO MARKETING vs. CA
210 SCRA 51
FACTS:
Stelco Marketing Corporation sold steel bars and GI wires to RYL Construction Inc. worthP126
,859.61. RYL gave Stelcos sister corporation,
Armstrong Industries, a MetroBank check
fromSteelweld Corporation (The check was issued apparently by Steelwelds President Peter
Rafael Limson toRomeo Lim, President of RYL and Limson friend, by way of accommodation,
as a guaranty and not inpayment of an obligation). When Armstrong deposited the check
at its bank, it was dishonored because it wasdrawn against insufficient funds. When so
deposited, the check bore 2 indorsements, i.e. RYL and Armstrong.A criminal case was
instituted against Limson, etc. for violation of BP 22, Subsequently, Stelco filed a civilcase
against RYL and Steelweld to recover the value of the steel products.
ISSUE:
Whether Stelco was a holder in due course of the check issued by Steelweld.
HELD:
The records do not show any intervention or participation by Stelco in any manner or form
whatsoeverin the transaction involving the check, or any communication of any sort between
Steelweld and Stelco, orbetween either of them and Armstrong Industries, at any time before
the dishonor of the check. The recorddoes show that after the check was deposited and
dishonored, Stelco came into possession of it in some way.Stelco cannot thus be deemed a
holder of the check for value as it does not meet two essential requisitesprescribed by the
statute, i.e. that it did not become the holder of it before it was overdue, and without
noticethat it had been previously dishonored, and that it did not take the check in good faith
and for value.
(26) TRAVEL-ON vs. CA
210 SCRA 352

FACTS:
Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on
behalf of airline passengers and derived commissions therefrom. Miranda was sued by
petitioner to collect on the six postdated checks he issued which were all dishonored by the
drawee banks. Miranda, however, claimed that he had already fully paid and even overpaid
his obligations and that refunds were in fact due to him. He argued that he had issued the
postdated checks not for the purpose of encashment to pay his indebtedness but for purposes
of accommodation, as he had in the past accorded similar favors to petitioner. Petitioner
however urges that the postdated checks are per se evidence of liability on the part of private
respondent and further argues that even assuming that the checks were for accommodation,
private respondent is still liable thereunder considering that petitioner is a holder for value.
ISSUE:
Whether Miranda is liable on the postdated checks he issued even assuming that said checks
were issued for accommodation only.
HELD:
There was no accommodation transaction in the case at bar. In accommodation transactions
recognized by the Negotiable Instruments Law, an accommodating party lends his credit to
the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee
as a holder in due course, who gave full value therefor to the accommodated party. The
latter, in other words, receives or realizes full value which the accommodated party then must
repay to the accommodating party. But the accommodating party is bound on the check to
the holder in due course who is necessarily a third party and is not the accommodated party.
In the case at bar, Travel-On was payee of all six (6) checks, it presented these checks for
payment at the drawee bank but the checks bounced. Travel-On obviously was not an
accommodated party; it realized no value on the checks which bounced. Miranda must be
held liable on the checks involved as petitioner is entitled to the benefit of the statutory
presumption that it was a holder in due course and that the checks were supported by
valuable consideration.

withdrawal, the check was not yet cleared. Then days later, BPI was notified by the drawee
bank named in the check that the check is actually a counterfeit.
ISSUE:
Whether or not Napiza may be held liable to refund the amount of the check.
HELD:
No. The Supreme Court ruled that ordinarily, Napiza would have been liable because he is an
accommodation indorser. But due to the attendant circumstances, Napiza is discharged from
liability.
The withdrawal slip indicates as well as the rules promulgated by BPI that withdrawal from
the bank should be accompanied by the presentment of the account holders (Napizas)
savings bankbook. This was not done so in the case at bar because Gayon was able to
withdraw without it. Further, BPI allowed the withdrawal even before the check cleared. BPI
already credited the $2,500.00 to Napizas account even without the drawee bank clearing the
check. This is contrary to common banking practices and because of such negligence and lack
of diligence, BPI, as the collecting bank, shall suffer the loss.
(28) AGRO CONGLOMERATES vs. CA
348 SCRA 450
FACTS:
Petitioner sold to Wonderland Food Industries two parcels of land. They stipulated under a
Memorandum of Agreement that the terms of payment would be P1,000,000 in cash,
P2,000,000 in shares of stock, and thebalance would be payable in monthly installments.
Thereafter, an addendum was executed between them, qualifying the cash payment. Instead
of cash payment, the vendee authorized the vendor to obtain a loan from the financier on
which the vendee bound itself to pay for. This loan was to cover for the payment of
P1,000,000. This addendum was not notarized.

**In accommodation transactions recognized by the Negotiable Instruments Law, an


accommodating party lends his credit to the accommodated party, by issuing or indorsing a
check which is held by a payee or indorsee as a holder in due course, who gave full value
therefor to the accommodated party. In the case at bar, Travel-On was the payee of all six
(6) checks, it presented these checks for payment at the drawee bank but the checks
bounced. Travel-On obviously was not an accommodated party; it realized no value on the
checks which bounced.

Petitioner Soriano signed as maker the promissory notes payable to the bank. However, the
petitioners failed to pay the obligations as they were due. During that time, the bank was in
financial distress and this prompted it to endorse the promissory notes for collection. The
bank gave ample time to petitioners then to satisfy their obligations.

(27) BANK OF PHILIPPINE ISLANDS vs. CA


326 SCRA 641

HELD:
First, there was no contract of sale that materialized. The original agreement was that
Wonderland would pay cash and petitioner would deliver possession of the farmlands. But this
was changed through an addendum, that petitioner would instead secure a loan and the
settlement of the same would be shouldered by Wonderland.

FACTS:
Benjamin Napiza maintains an account with the Bank of the Philippine Islands (BPI). In 1987,
Napiza was approached by Henry Chan and the latter gave him a $2,500 Continental Bank
Managers check. Chan asked if Napiza can deposit the check to his (Napizas BPI account) by
way of accommodation and for the purpose of clearing the said check. Napiza agreed and so
he deposited the check on September 3, 1987. Napiza then delivered a signed blank
withdrawal slip to Chan with the condition that the $2,500.00 may only be withdrawn if the
check cleared. For some reason, the withdrawal slip ended up in the hands of one Ruben
Gayon who went to BPI and successfully withdrew the $2,500.00. At the time of the

The trial court held in favor of the bank. It didn't find merit to the contention that Wonderland
was the one to be held liable for the promissory notes.

Petitioners became liable as accommodation parties. They have the right after paying the
instrument to seek reimbursement from the party accommodated, since the relation between
them has in effect became oneof principal and surety.
Furthermore, as it turned out, the contract of surety between Woodland and petitioner was
extinguished by the rescission of the contract of sale of the farmland. With the rescission,

there was confusion in the persons ofthe principal debtor and surety. The addendum thereon
likewise lost its efficacy.
(29) DE OCAMPO vs. GATCHALIAN
3 SCRA 596
FACTS:
Matilde Gonzales was a patient of the De Ocampo Clinic. She incurred a debt amounting to
P441.75. Her husband, Manuel Gonzales designed a scheme in order to pay off this debt: In
1953, Manuel went to a certain Anita Gatchalian. Manuel purported himself to be selling the
car of De Ocampo. Gatchalian was interested in buying said car but Manuel told her that De
Ocampo will only sell the car if Gatchalian shows her willingness to pay for it. Manuel advised
Gatchalian to draw a check of P600.00 payable to De Ocampo so that Manuel may show it to
De Ocampo and that Manuel in the meantime will hold it for safekeeping. Gatchalian agreed
and gave Manuel the check. After that, Manuel never showed himself to Gatchalian.
Meanwhile, Manuel gave the check to his wife who in turn gave the check to De Ocampo as
payment of her bills with the clinic. De Ocampo received the check and even gave Matilde her
change (sukli). On the other hand, since Gatchalian never saw Manuel again, she placed a
stop-payment on the P600.00 check so De Ocampo was not able to cash on the check.
Eventually, the issue reached the courts and the trial court ordered Gatchalian to pay de
Ocampo the amount of the check.
Gatchalian argued that De Ocampo is not entitled to payment because there was no valid
indorsement. De Ocampo argued tha he is a holder in due course because he is the named
payee.
ISSUE:
Whether or not De Ocampo is a holder in due course.
HELD:
No. Section 52 of the Negotiable Instruments Law, defines holder in due course, thus:
A holder in due course is a holder who has taken the instrument under the following
conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it
had been previously
dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any infirmity in the
instrument or defect
in the title of the person negotiating it.
The Supreme Court emphasized that if one is such a holder in due course, it is immaterial that
he was the payee and an immediate party to the instrument. The Supreme Court however
ruled that De Ocampo is not a holder in due course for his lack of good faith. De Ocampo
should have inquired as to the legal title of Manuel to the said check. The fact that Gatchalian
has no obligation to De Ocampo and yet hes named as the payee in the check hould have
apprised De Ocampo; that the check did not correspond to Matilde Gonzales obligation with
the clinic because of the fact that it was for P600.00 more than the indebtedness; that why
was Manuel in possession of the check all these gave De Ocampo the duty to ascertain from
the holder Manuel Gonzales what the nature of the latters title to the check was or the nature
of his possession.

(30) MESINA vs. IAC


145 SCRA 497
FACTS:
Jose Go maintains an account with Associated Bank. He needed to transfer P800,000.00 from
Associated Bank to another bank but he realized that he does not want to be carrying that
cash so he bought a cashiers check from Associated Bank worth P800,000.00. Associated
Bank then issued the check but Jose Go forgot to get the check so it was left on top of the
desk of the bank manager. The bank manager, when he found the check, entrusted it to
Albert Uy for the later to safe keep it. The check was however stolen from Uy by a certain
Alexander Lim.
Jose Go learned that the check was stolen son he made a stop payment order against the
check. Meanwhile, Associated Bank received the subject check from Prudential Bank for
clearing. Apparently, the check was presented by a certain Marcelo Mesina for payment.
Associated Bank dishonored the check.When asked how Mesina got hold of the check, he
merely stated that Alfredo Lim, whos already at large, paid the check to him for a certain
transaction.
ISSUE:
Whether or not Mesina is a holder in due course.
HELD:
No.
Admittedly, Mesina became the holder of the cashiers check as endorsed by Alexander Lim
who stole the check. Mesina however refused to say how and why it was passed to him.
Mesina had therefore notice of the defect of his title over the check from the start. The holder
of a cashiers check who is not a holder in due course cannot enforce such check against the
issuing bank which dishonors the same. The check in question suffers from the infirmity of
not having been properly negotiated and for value by Jose Go who is the real owner of said
instrument.
(31) METROPOL vs. SAMBOK MOTORS CO.
120 SCRA 864
FACTS:
Dr. Villareal issued a promissory note in favor of Sambok, which was payable in monthly
installments. The promissory note was then indorsed to Metropol. Villareal defaulted payment
and this prompted Metropol to run after Sampol. Sampol alleged that it is not liable since it
was a qualified indorser through the wordings it inserted in its indorsementwith recourse.
HELD:
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 relieves the indorser of the general obligation to
pay if the instrument is dishonored but not of the liability arising from warranties on the
instrument as provided in Section 65 of the Negotiable Instruments Law already mentioned
herein. However, appellant Sambok indorsed the note "with recourse" and even waived the
notice of demand, dishonor, protest and presentment.

"Recourse" means resort to a person who is secondarily liable after the default of the person
who is primarily liable. Appellant, by indorsing the note "with recourse" does not make itself a
qualified indorser but a general indorser who is secondarily liable, because by such
indorsement, it agreed that if Dr. Villaruel fails to pay the note, plaintiff-appellee can go after
said appellant. The effect of such indorsement is that the note was indorsed without
qualification. A person who indorses without qualification engages that on due presentment,
the note shall be accepted or paid, or both as the case may be, and that if it be dishonored,
he will pay the amount thereof to the holder. Appellant Sambok's intention of indorsing the
note without qualification is made even more apparent by the fact that the notice of demand,
dishonor, protest and presentment were an waived. The words added by said appellant do
not limit his liability, but rather confirm his obligation as a general indorser.
(32) MARALIT vs. IMPERIAL
301 SCRA 605
FACTS:
Maralit filed three complaints for estafa through falsification of commercial documents
through reckless imprudence against respondent Imperial. Maralit alleged that she was
assistant manager of the Naga City branch of the Philippine National Bank (PNB); that on May
20, 1992, June 1, 1992, and July 1, 1992 respondent Imperial separately deposited in her
savings account at the PNB three United States treasury warrants and on the same days
withdrew their peso equivalent of P59,216.86, P130,743.60, and P130,326.00, respectively;
and that the treasury warrants were subsequently returned one after the other by the United
States Treasury, on the ground that the amounts thereof had been altered. Maralit claimed
that, as a consequence, she was held personally liable by the PNB for the total amount
of P320,287.30.
Judgment of the MTC was rendered as follows:
WHEREFORE, in view of the foregoing considerations, the Court finds no ground to
hold the accused criminally liable for which she is charged, hence Corazon Jesusa L.
Imperial is ACQUITTED of all the charges against her. The accused however is civilly
liable as indorser of the checks which is (sic) the subject matter of the criminal
action.
The decision having become final and executory, the MTC ordered the enforcement of the
civil liability against the accused arising from the criminal action.
Imperial moved to quash the writ of execution on the that the judgment did not order the
accused to pay a specific amount of money to a particular person as it merely adjudicated the
criminal aspect but not the civil aspect hence there was no judgment rendered which can be
the subject of execution.
ISSUE:
Is Imperial liable to pay the amount in the treasury warrant?
HELD:
Yes. The loss is chargeable to the accused who upon her indorsements warrant that the
instrument is genuine in all respect what it purports to be and that she will pay the amount
thereof in case of dishonor. (Sec. 66 Negotiable Instrument Law)

It is argued that the decision of the MTC did not order respondent, as accused in the case, to
pay a specific amount of money to any particular person such that it could not be an
adjudication of respondents civil liability. However, the ambiguity can easily be clarified by a
resort to the text of the decision or, what is properly called, the opinion part. Doing so, it is
clear that it can only be to petitioner that respondent was made liable as the former was the
offended party in the case. As for what amount respondent is liable, it can only be for the
total amount of the treasury warrants subject of the case, determined according to their peso
equivalent, in the decision of the MTC.
(33) SAPIERA vs. CA
314 SCRA 370
FACTS:
Remedios Nota Sapiera, a sari-sari store owner, on several occasions, purchased from
Monrico Mart grocery items, mostly cigarettes and paid for them with checks issued by one
Arturo de Guzman. These checks were signed by Sapiera on the back. When they were
presented for payment, the checks were dishonoured because the drawers account was
already closed. Respondent Ramon Samua informed Arturo de Guzman and petitioner but
both failed to pay. Hence, four charges of Estafa were filed against Sapiera while two counts
of BP 22 was filed against Arturo de Guzman. These cases were consolidated. On December
27 1999, the RTC Dagupan city acquitted Sapiera of all charges of Estafa but did not rule on
the civil aspect of the case. Arturo de Guzman was held liable for the 2 BP 22 cases and was
ordered to pay Sua 167,150 Php as civil indemnity and was sentenced for imprisonment of 6
months and 1 day. Respondent Sua appealed regarding the civil aspect of Sapieras case but
the courtdenied it saying that the acquittal of petitioner was absolute. Respondent filed a
petition for mandamus with the Court of Appeals praying that the appeal be given due course,
this was granted. On January 1996, CA rendered a decision ordering Sapiera to pay 335000
php to Sua. Sapiera filed a motion for reconsideration. The CA the issued a resolution noting
that the admission of both parties that Sua already collected 125000 for the 2 check paid by
De Guzman on the BP 22 cases. It appears that the payment should be deducted on her
liability as they involved the same two checks which Sapiera was involved in. the CA deducted
the liability to 210,000 Php. Hence this petition by Sapiera claiming that the CA erred in
rendering such decision because she was acquitted and the fact from which the civil liability
exists did not exist.
ISSUE:
Whether or not Sapiera could be held civilly liable when she was acquitted in the criminal
charges against her.
HELD:
Yes. Sec. 2 of rule 111 of the rules of court provides that extinction of the penal action does
not carry with it the extinction of the civil, unless this shows that the fact from which the civil
liability is based is proven to not have existed because of such acquittal. Civil liability is not
extinguished where: (a) the acquittal is not based on reasonable doubt. (b) Where the court
expressly declares that the liability is not criminal but only civil, (c) where the civil liability is
not derived from or based on the criminal act. The decision of the case would show that the
acquittal was based on failure of the prosecution to present sufficient evidence showing
conspiracy between her and De Guzman. Since all checks were signed by Sapiera on the
back, sec 17 of Negotiable instruments law says that she would be considered an indorser of

the bill of exchange and under section 66 thereof would be held liable for breach of warranty
and is held liable to pay the holder who may be compelled to pay the instrument.
(34) BPI vs. CA and Napiza
326 SCRA 641
FACTS:
Benjamin Napiza maintains an account with the Bank of the Philippine Islands (BPI). In 1987,
Napiza was approached by Henry Chan and the latter gave him a $2,500 Continental Bank
Managers check. Chan asked if Napiza can deposit the check to his (Napizas BPI account) by
way of accommodation and for the purpose of clearing the said check. Napiza agreed and so
he deposited the check on September 3, 1987. Napiza then delivered a signed blank
withdrawal slip to Chan with the condition that the $2,500.00 may only be withdrawn if the
check cleared. For some reason, the withdrawal slip ended up in the hands of one Ruben
Gayon who went to BPI and successfully withdrew the $2,500.00. At the time of the
withdrawal, the check was not yet cleared. Then days later, BPI was notified by the drawee
bank named in the check that the check is actually a counterfeit.
ISSUE:
Whether or not Napiza may be held liable to refund the amount of the check.
HELD:
No. The Supreme Court ruled that ordinarily, Napiza would have been liable because he is an
accommodation indorser. But due to the attendant circumstances, Napiza is discharged from
liability.
The withdrawal slip indicates as well as the rules promulgated by BPI that withdrawal from
the bank should be accompanied by the presentment of the account holders (Napizas)
savings bankbook. This was not done so in the case at bar because Gayon was able to
withdraw without it. Further, BPI allowed the withdrawal even before the check cleared. BPI
already credited the $2,500.00 to Napizas account even without the drawee bank clearing the
check. This is contrary to common banking practices and because of such negligence and lack
of diligence, BPI, as the collecting bank, shall suffer the loss.
(35) PRUDEBTIAL BANK vs. IAC
216 SCRA 257
FACTS:
Salvador B. Chaves drew a check on the Philippine National Bank for P11,000 in favor of La
Insular. This check was indorsed by the limited partners of La Insular, and then deposited by
Salvador B. Chaves in his current account with the plaintiff, Asia Banking Corporation.
Another check was drawn and deposited in similar fashion. The amount represented by both
checks was used by Salvador B. Chaves after they were deposited in the plaintiff bank,
by drawing checks on the plaintiff. Subsequently these checks were presented by the
plaintiff to the Philippine National Bank for payment, but the latter refused to pay on the
ground that the drawer, Salvador B. Chaves, had no funds therein. The lower court sentenced
the defendant, as indorser, to pay the plaintiff P11,000. From this judgment the defendant
appealed.
ISSUE:
Whether or not the defendants liability as an indorser is extinguished for lack of notice

HELD:
Yes. Section 89 of the Negotiable Instruments Law provides that, when a negotiable
instrument is dishonored for non-acceptance or non-payment, notice thereof must be given to
the drawer and each of the indorsers, and those who are not notified shall be discharged from
liability, except where this act provides otherwise. According to this, the indorsers are not
liable unless they are notified that the document was dishonored. Then, under the general
principle of the law of procedure, it will be incumbent upon the plaintiff, who seeks to enforce
the defendants liability upon these checks as indorser, to establish said liability by proving
that notice was given to the defendant within the time, and in the manner, required by the
law that the checks in question had been dishonored. If these facts are not proven, the
plaintiff has not sufficiently established the defendants liability. There is no proof in the
record tending to show that plaintiff gave any notice whatsoever to the defendant that the
checks in question had been dishonored, and there it has not established its cause of action
(36) WONG vs. CA
351 SCRA 100
FACTS:
Wong is a collector of Limtong Press, Inc., a company which prints calendars. Wong was
assigned to collect check payments from LPI clients. One time, 6 of LPIs clients were not
able to give the check payments to Wong. Wong then made arrangement with LPI so that for
the meantime, Wong can use his personal checks to guarantee the calendar orders of the
LPIs clients. LPI however has a policy of not accepting personal checks of its agents. LPI
instead proposed that the personal checks should be used to cover Wongs debt with LPI
which arose from unremitted checks by Wong in the past. Wong agreed. So he issued 6
checks dated December 30, 1985.
Before the maturity of the checks, Wong persuaded LPI not to deposit the checks because he
said hell be replacing them within 30 days. LPI complied however Wong reneged on the
payment. On June 5, 1986 or 157 days from date of issue, LPI presented the check to RCBC
but the checks were dishonored (account closed). On June 20, 1986, LPI sent Wong a notice
of dishonor. Wong failed to make good the amount of the checks within 5 banking days from
his receipt of the notice. LPI then sued Wong for violations of Batas Pambansa Blg. 22.
Among others, Wong argued that hes not guilty of the crime of charged because one of the
elements of the crime is missing, that is, prima facie presumption of knowledge of lack of
funds against the drawer. According to Wong, this element is lost by reason of the belated
deposit of the checks by LPI which was 157 days after the checks were issued; that he is not
expected to keep his bank account active beyond the 90-day period 90 days being the
period required for the prima facie presumption of knowledge of lack of fund to arise.
ISSUE:
Whether or not Wong is guilty of the crime charged.
HELD:
Yes. Wong is guilty of violating BP 22. The elements of violation of BP 22 pertinent to this
case are:
(1) The making, drawing and issuance of any check to apply for account or for
value;

(2) The knowledge of the maker, drawer, or issuer that at the time of issue he does
not have sufficient funds in or credit with the drawee bank for the payment of such
check in full upon its presentment; and
(3) The subsequent dishonor of the check by the drawee bank for insufficiency of
funds or credit or dishonor for the same reason had not the drawer, without any
valid cause, ordered the bank to stop payment.
Under the second element, the presumption of knowledge of the insufficiency arises if the
check is presented within 90 days from the date of issue of the check. This presumption is
lost, as in the case at bar, by failure of LPI to present it within 90 days. But this does not
mean that the second element was not attendant with respect to Wong. The presumption is
lost but lack of knowledge can still be proven, LPI did not deposit the checks because of the
reassurance of Wong that he would issue new checks. Upon his failure to do so, LPI was
constrained to deposit the said checks. After the checks were dishonored, Wong was duly
notified of such fact but failed to make arrangements for full payment within five (5) banking
days thereof. There is, on record, sufficient evidence that Wong had knowledge of the
insufficiency of his funds in or credit with the drawee bank at the time of issuance of the
checks.
The Supreme Court also noted that nnder Section 186 of the Negotiable Instruments Law, a
check must be presented for payment within a reasonable time after its issue or the drawer
will be discharged from liability thereon to the extent of the loss caused by the delay. By
current banking practice, a check becomes stale after more than six (6) months, or 180 days.
LPI deposited the checks 157 days after the date of the check. Hence said checks cannot be
considered stale.
(37) THE INTERNATIONAL CORPORATE BANK vs. SPS. GUECO
351 SCRA 516
FACTS:
Respondent spouses, obtained a loan from petitioner bank for the purchase of a car secured
by chattel mortgage. Unable to pay the monthly amortizations, the bank sued for collection.
Thru negotiations, the amount was reduced and payment would release the car.
Respondent spouses delivered a managers check in the said amount but petitioner bank
refused to release the car for respondents refusal to sign the joint motion to dismiss. Unable
to recover possession of the car, respondent filed an action for damages against petitioner
based on fraud. Respondents alleged that delivery of the check produced the effect of
payment.
Petitioner, however, did not encash the check because of the present case and the said check
became stale.
ISSUE:
Whether the bank was negligent in opting not to deposit or use the managers check.
HELD:
NO.
A check must be presented for payment within a reasonable period of time after its issue. In
the case at bar, the check involved is a managers check and is accepted in advance by the

act of issuance. Assuming that presentment is needed, failure to present on time will result to
the discharge of the drawer only to the extent of the loss caused by the delay.
If a check had become stale, it becomes imperative that the circumstances that caused its
non-presentment be determined. In the case at bar, there is no doubt that the petitioner bank
held on the check and refused to encash the same because of the controversy surrounding
the signing of the joint Motion to Dismiss. The Court sees no bad faith or negligence on this
position taken by the bank.
(38) STATE INVESTMENT HOUSE vs. CA
217 SCRA 32
FACTS:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on
commission, two postdated checks in the amount of fifty thousand each. Thereafter,
Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell
the jewellry, she returned it to Victoriano before the maturity of the checks. However, the
checks cannot be retrieved as they have been negotiated. Before the maturity date Moulic
withdrew her funds from the bank contesting that she incurred no obligation on the checks
because the jewellery was never sold and the checks are negotiated without her knowledge
and consent. Upon presentment of for payment, the checks were dishonoured for
insufficiency of funds.
ISSUES:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure
or absence of consideration
HELD:
(1)Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence
shows that: on the faces of the postdated checks were complete and regular; that State
Investment House Inc. bought the checks from Victoriano before the due dates; that it was
taken in good faith and for value; and there was no knowledge with regard that the checks
were issued as security and not for value. A prima facie presumption exists that a holder of a
negotiable instrument is a holder in due course. Moulic failed to prove the contrary.
(2)No, Moulic can only invoke this defense against the petitioner if it was a privy to the
purpose for which they were issued and therefore is not a holder in due course.
Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke
paragraphs c and d as possible grounds for the discharge of the instruments. Since Moulic
failed to get back the possession of the checks as provided by paragraph c, intentional
cancellation of instrument is impossible. As provided by paragraph d, the acts which will
discharge a simple contract of payment of money will discharge the instrument. Correlating
Article 1231 of the Civil Code which enumerates the modes of extinguishing obligation, none
of those modes outlined therein is applicable in the instant case. Thus, Moulic may not
unilaterally discharge herself from her liability by mere expediency of withdrawing her funds
from the drawee bank. She is thus liable as she has no legal basis to excuse herself from
liability on her check to a holder in due course. Moreover, the fact that the petitioner failed to

give notice of dishonor is of no moment. The need for such notice is not absolute; there are
exceptions provided by Sec 114 of NIL.
(39) BATAAN CIGAR vs. CA
230 SCRA 640
FACTS:
Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its suppliers, Kim Tim Pua
George(George King), to deliver bales of tobacco leaf. In consideration thereof, BCCFI issued
postdated crosschecks to King. King sold the checks, at a discount, to the State Investment
House Inc. (SIHI). As King failedto deliver the bales of tobacco leaf despite demand, BCCFI
issued stop payment orders on the checks. Effortsby SIHI to collect from BCCFI failed. SIHI
filed suit.
ISSUE:
Whether SIHI can recover the value of the checks, premised on the issue whether SIHI is a
holder indue course.
HELD:
The facts of the case are on all fours to the case of SIHI vs. Intermediate Appellate Court.
The crossingof the checks should put the holder on inquiry and upon him devolves the duty to
ascertain the indorsers titleto the check or the nature of his possession. Failing in this
respect, the holder is declared guilty of grossnegligence amounting to legal absence of good
faith, contrary to Section 52 (c) of the Negotiable InstrumentsLaw, and as such the consensus
of authority is to the effect that the holder of the check is not a holder in duecourse. BCCFI
cannot be obliged to pay the checks as there is a failure of consideration (King being unable
tosupply the bales of tobacco leaf, for which the checks were intended for). Still, SIHI -- a
holder not in duecourse -- can collect from the immediate indorser, George King. Such is the
disadvantage of a holder not indue course, i.e. the instrument is subject to defenses as if it
were non-negotiable.
(40) CITYTRUST BANKING CORP. vs. IAC
232 SCRA 643
FACTS:
This case emanated from a complaint filed by private respondent Emme Herrero for damages
against petitioner Citytrust Banking Corporation. In her complaint, private respondent averred
that she, a businesswoman, made regular deposits, starting September of 1979, with
petitioner Citytrust Banking Corporation at its Burgos branch in Calamba, Laguna. On 15 May
1980, she deposited with petitioner the amount of Thirty One Thousand Five Hundred Pesos,
in cash, in order to amply cover six postdated checks she issued.
When presented for encashment upon maturity, all the checks were dishonored due to
"insufficient funds." The last check No. 007400, however, was personally redeemed by private
respondent in cash before it could be redeposited.
Petitioner, in its answer, asserted that it was due to private respondent's fault that her checks
were dishonored. It averred that instead of stating her correct account number was
29000823, in her deposit slip, she inaccurately wrote 2900823.
ISSUE:
Whether petitioner was at fault when the check was dishonored.

HELD:
We cannot uphold the position of defendant. For, even if it be true that there was error on
the part of the plaintiff in omitting a "zero" in her account number, yet, it is a fact that her
name, "Emme E. Herrero", is clearly written on said deposit slip. This is controlling in
determining in whose account the deposit is made or should be posted. This is so because it
is not likely to commit an error in one's name than merely relying on numbers which are
difficult to remember, especially a number with eight digits as the account numbers of
defendant's depositors. We view the use of numbers as simply for the convenience of the
bank but was never intended to disregard the real name of its depositors. The bank is
engaged in business impressed with public interest, and it is its duty to protect in return its
many clients and depositors who transact business with it. It should not be a matter of the
bank alone receiving deposits, lending out money and collecting interests. It is also its
obligation to see to it that all funds invested with it are properly accounted for and duly
posted in its ledgers.
In the case before Us, We are not persuaded that defendant bank was not free from blame
for the fiasco. In the first place, the teller should not have accepted plaintiff's deposit without
correcting the account number on the deposit slip which, obviously, was erroneous because,
as pointed out by defendant, it contained only seven digits instead of eight. Second, the
complete name of plaintiff depositor appears in bold letters on the deposit slip. There could
be no mistaking in her name, and that the deposit was made in her name, "Emma E.
Herrero." In fact, defendant's teller should not have fed her deposit slip to the computer
knowing that her account number written thereon was wrong as it contained only seven
digits. As it happened, according to defendant, plaintiff's deposit had to be consigned to the
suspense accounts pending verification. This, indeed, could have been avoided at the first
instance had the teller of defendant bank performed her duties efficiently and well. For then
she could have readily detected that the account number in the name of "Emma E. Herrero"
was erroneous and would be rejected by the computer. That is, or should be, part of the
training and standard operating procedure of the bank's employees. On the other hand, the
depositors are not concerned with banking procedure. That is the responsibility of the bank
and its employees. Depositors are only concerned with the facility of depositing their money,
earning interest thereon, if any, and withdrawing therefrom, particularly businessmen, like
plaintiff, who are supposed to be always "on-the-go". Plaintiff's account is a "current account"
which should immediately be posted. After all, it does not earn interest. At least, the
forbearance should be commensurated with prompt, efficient and satisfactory service.
Bank clients are supposed to rely on the services extended by the bank, including the
assurance that their deposits will be duly credited them as soon as they are made. For, any
delay in crediting their account can be embarrassing to them as in the case of plaintiff.
(41) TAN vs. CA, RCBC
239 SCRA 310
FACTS:
Tan, who was a businessman from Palawan, secured a cashier check from PCIB Puerto
Princesa branch. Upon arriving in Mania, he deposited the said cashier check to RCBC Binondo
branch which he has an existing account. Petitioner Tan used a local check deposit slip
instead of using a regional deposit slip. Respondent RCBC sent the same cashier check to the
Central Bank for clearing. The Central Bank returned the same check for having been
misspent by RCBC. No notification was sent by RCBC to petitioner Tan.

Believing that the cashier check has been cleared, Tan issued two personal checks in favor of
two different business entities. Subsequently, the two personal checks bounced due to
insufficiency of funds in his RCBC account. He learned that the cashier check was not credited
to his account. Due to intense humiliation, Tan filed a civil suit for damages against
respondent RCBC.
ISSUE:
(1) Was respondent bank liable for damages even if it was petitioner Tan who erroneously
used the wrong check deposit slip?
(2) Was RCBC correct in not applying its discretion on the immediate payment of the cashier
check to the account of Tan, pending the clearance of the check?
HELD:
Yes. The respondent bank cannot exculpate itself from liability by claiming that its depositor
"impliedly instructed" the bank to clear his check with the Central Bank by filling a local check
deposit slip. Bank clients are supposed to rely on the services extended by the bank, including
the assurance that their deposits will be duly credited them as soon as they are made.
In the instant case, the teller should not have accepted the local deposit slip with the cashier's
check that on its face was clearly a regional check without calling the depositor's attention to
the mistake at the very moment this was presented to her. Neither should everyone else
down the line who processed the same check for clearing have allowed the check to be sent
to Central Bank.
No. What was presented for deposit in the instant cases was not just an ordinary check but a
cashier's check payable to the account of the depositor himself. A cashier's check is a primary
obligation of the issuing bank and accepted in advance by its mere issuance. By its very
nature, a cashier's check is the bank's order to pay drawn upon itself, committing in effect its
total resources, integrity and honor behind the check. A cashier's check by its peculiar
character and general use in the commercial world is regarded substantially to be as good as
the money which it represents. In this case, therefore, PCIB by issuing the check created an
unconditional credit in favor of any collecting bank.
All these considered, petitioner's reliance on the layman's perception that a cashier's check is
as good as cash is not entirely misplaced, as it is rooted in practice, tradition, and principle.
We see no reason thus why this so-called discretion was not exercised in favor of petitioner,
especially since PCIB and RCBC are members of the same clearing house group relying on
each other's solvency. RCBC could surely rely on the solvency of PCIB when the latter issued
its cashier's check.
(42) PAPA vs. A.U. VALENCIA AND CO.
284 SCRA 643
FACTS:
Myron Papa is the administrator of the estate of Angela Butte. In 1973, he sold a portion of
said estate to Felix Pearroyo through A.U. Valencia and Co. Inc. Pearroyo gave Papa
P5,000.00 plus a check worth P40,000.00. However, Papa was not able to deliver the
certificate of title to Pearroyo. A litigation ensued and ten years after, Papa argued that the
sale between him and Pearroyo was never consummated because he did not encash the
P40,000.00 check and that the P5,000.00 cash was merely earnest money.

ISSUE:
Whether or not Papa is correct.
HELD:
No. After more than ten (10) years from the payment in part by cash and in part by check,
the presumption is that the check had been encashed. Granting that Papa had never
encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in
the impairment of the check through his unreasonable and unexplained delay. While it is true
that the delivery of a check produces the effect of payment only when it is cashed, pursuant
to Article 1249 of the Civil Code, the rule is otherwise if the debtor (Pearroyo) is prejudiced
by the creditors (Papas) unreasonable delay in presentment. The acceptance of a check
implies an undertaking of due diligence in presenting it for payment, and if he from whom it is
received sustains loss by want of such diligence, it will be held to operate as actual payment
of the debt or obligation for which it was given.