(4) PAY v VDA DE PALANCA

FACTS:
George Pay, petitioner, is the creditor of the late Justo
Palanca who died in 1963. The latter and his wife,
respondent Rosa Gonzalez vda. de Palanca, issued a
promissory note in 1952, in the amount of P26,900 with
interest of 12% per annum.
The PN contained the following:
For value received from time to time since 1947, we
[jointly and severally promise to] pay to Mr. [George Pay]
at his office at the China Banking Corporation the sum of
[Twenty Six Thousand Nine Hundred Pesos] (P26,900.00),
with interest thereon at the rate of 12% per annum upon
receipt by either of the undersigned of cash payment
from the Estate of the late Don Carlos Palanca or upon
demand'. . .
ISSUE:
W/N a creditor is barred by prescription in his attempt
to collect on a promissory note executed more than
fifteen years earlier with the debtor sued promising to
pay either upon receipt by him of his share from a
certain estate or upon demand
HELD:
YES, the creditor is barred from collecting. The SC ruling
is based on Article 1179 of the Civil Code, which
provides: "Every obligation, whose performance does not
depend upon a future or uncertain event, or upon a past
event unknown to the parties, is demandable at once."
The obligation being due and demandable (payable on
demand), it would appear that the filing of the suit after
fifteen years was much too late. For again, according to
the Civil Code, which is based on Section 43 of Act No.
190, the prescriptive period for a written contract is that
of ten years.
*N.B. This case was decided in 1974, but for some reason
the SC cited the Civil Code provision on CONTRACTS
when in fact the NIL was already effective (as of June 2,
1911). Nevertheless, the ruling is consistent with Sec. 7
(a) of the NIL, which states, An instrument is payable on
demand, where it is expressed to be payable on demand,
or at sight, or on presentation...

Gaston vs. Republic Planter Bank| Melencio-Herrera (1988)

Keywords: [special fund, sugar producers]
FACTS

On 2 February 1974, PD 3881 was promulgated, which created the Philippine Sugar
Commission (PHILSUCOM) and provided for the collection of a Stabilization Fund,
primarily, from the production of sugar planters and millers.
Sometime in 1978, as the Republic Planters Bank (Bank) was undergoing difficulties, Mr.
Roberto Benedicto, then Chairman of the PHILSUCOM submitted a proposal to the Central Bank
for the rehabilitation of the bank.
The Central Bank approved the proposal subject to the infusion of fresh capital by the
Benedicto Group.
The capital investment was made by PHILSUCOM which used money from the
stabilization fund to pay for its subscription in shares of stock of the Bank.
The petitioners who are sugar producers, sugarcane planters and millers brought
this class suit praying for the issuance of a Writ of Mandamus commanding the
respondents, PHILSUCOM and its successor Sugar Regulatory Administration (SRA), to
transfer and distribute the shares of stock in the said bank, which are held in the
respondents name, to the sugar producers, planters, and millers, who are the true
beneficial owners thereof, because their contributions to the stabilization fund were used in
the purchase of said stocks.
PHILSUCOM and SRA oppose the petition arguing that there was no resulting trust from Sec.
7 of PD 388 and that the stabilization fees collected are considered government funds.

ISSUES/HELD
Are the stabilization fees public funds or funds in trust for the sugar planters and millers?
PUBLIC FUNDS.
RATIONALE

There was no trust that was created by PD 388.

o
While the element of an intent to create a trust is present, a resulting trust in favor
of the sugar producers, millers and planters cannot be said to have ensued because the
presumptive intention of the parties is not reasonably ascertainable from the language of
the statute itself.
o
There is no implied trusted that can be deduced either because it is not
categorically demonstrated that the PHILSUCOM imposed on itself the obligation of holding
the stabilization fund for the benefit of the sugar producers.
o
The historical background also does not show that the investment of the proceeds
form the stabilization fund in subscriptions to the capital stock of the Bank were being
made for and on behalf of the petitioners.

The fact is that the stabilization fees collected are in the nature of a tax, which is
within the power of the State to impose for the promotion of the sugar industry; they
constitute sugar liens.

However, the tax collected is not a pure exercise of the taxing power; it is levied
with a regulatory purpose (to provide means for the stabilization of the sugar industry) and
is, primarily in the exercise of the police power of the State.
o
The fact that the State has taken possession of moneys pursuant to law is
sufficient to constitute them state funds, even though they are held for a special
purpose.
o
Having been levied for a special purpose, the revenues collected are to be
treated as a special fund, to be administered in trust for the purpose intended;
1

Sec. 7. Capitalization, Special Fund of the Commission, Development and Stabilization Fund. There is hereby
established a fund for the commission for the purpose of financing the growth and development of the sugar industry
and all its components, stabilization of the domestic market including the foreign market to be administered in trust by
the Commission and deposited in the Philippine National Bank derived.

once the purpose has been fulfilled or abandoned, the balance, if any, is to be
transferred to the general funds of the Government (Art. VI, Sec. 29 [3],
Constitution).
The character of the Stabilization Fund as a special fund is emphasized by the fact that the
funds are deposited in the PNB and not in the Philippine Treasure, which means that there is no
need for an appropriation from Congress to be used.
Also, the fact that half of the amount levied is to be used to pay the officers and employees
of PHILSUCOM immediately negated the claim that the fund is held in trust for petitioners.
To grant the petition would contravene the general principle that revenues
derived from taxes cannot be used for purely private purposes or for the exclusive
benefit of private persons because the Stabilization fund is to be utilized for the
benefit of the entire sugar industry.

PNB v. Rodriguez
GR No. 170325
Justice Reyes
Facts: Respondents-Spouses Erlando and Norma Rodriguez were clients of
petitioner Philippine National Bank (PNB), Amelia Avenue
Branch, Cebu City. They maintained savings and demand/checking accounts,
namely, PNBig Demand Deposits (Checking/Current Account No. 810624-6 under
the account name Erlando and/or Norma Rodriguez), and PNBig Demand Deposit
(Checking/Current Account No. 810480-4 under the account name Erlando T.
Rodriguez).
The spouses were engaged in the informal lending business. In line with their
business, they had a discounting arrangement with the Philnabank Employees
Savings and Loan Association (PEMSLA), an association
of PNB employees. Naturally, PEMSLA was likewise a client of PNB Amelia Avenue
Branch. The association maintained current and savings accounts with petitioner
bank.
PEMSLA regularly granted loans to its members. Spouses Rodriguez would
rediscount the postdated checks issued to members whenever the association
was short of funds. As was customary, the spouses would replace the postdated
checks with their own checks issued in the name of the members.
It was PEMSLAs policy not to approve applications for loans of members with
outstanding debts. To subvert this policy, some PEMSLA officers devised a
scheme to obtain additional loans despite their outstanding loan accounts. They
took out loans in the names of unknowing members, without the knowledge or
consent of the latter. The PEMSLA checks issued for these loans were then given
to the spouses for rediscounting. The officers carried this out by forging the
indorsement of the named payees in the checks. In return, the spouses issued
their personal checks (Rodriguez checks) in the name of the members and
delivered the checks to an officer of PEMSLA. The PEMSLA checks, on the other
hand, were deposited by the spouses to their account.
Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its
savings account without any indorsement from the named payees. This was
an irregular procedure made possible through the facilitation of Edmundo
Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch. It appears

that this became the usual practice for the parties. For the period November 1998
to February 1999, the spouses issued sixty nine (69) checks, in the total amount
ofP2,345,804.00. These were payable to forty seven (47) individual payees who
were all members of PEMSLA.
Petitioner PNB eventually found out about these fraudulent acts. To put a stop to
this scheme, PNB closed the current account of PEMSLA. As a result, the PEMSLA
checks deposited by the spouses were returned or dishonored for the reason
Account Closed. The corresponding Rodriguez checks, however, were deposited
as usual to the PEMSLA savings account. The amounts were duly debited from
the Rodriguez account. Thus, because the PEMSLA checks given as payment
were returned, spouses Rodriguez incurred losses from the rediscounting
transactions.
Issue: Whether the subject checks are payable to order or to bearer and who
bears the loss?
Held: In the case at bar, respondents-spouses were the banks depositors. The
checks were drawn against respondents-spouses accounts. PNB, as the drawee
bank, had the responsibility to ascertain the regularity of the indorsements, and
the genuineness of the signatures on the checks before accepting them for
deposit. Lastly, PNB was obligated to pay the checks in strict accordance with the
instructions of the drawers. Petitioner miserably failed to discharge this burden.
The checks were presented to PNB for deposit by a representative of PEMSLA
absent any type of indorsement, forged or otherwise. The facts clearly show that
the bank did not pay the checks in strict accordance with the instructions of the
drawers, respondents-spouses. Instead, it paid the values of the checks not to
the named payees or their order, but to PEMSLA, a third party to the transaction
between the drawers and the payees.
Moreover, PNB was negligent in the selection and supervision of its
employees. The trustworthiness of bank employees is indispensable to maintain
the stability of the banking industry. Thus, banks are enjoined to be extra vigilant
in the management and supervision of their employees.
ANG TEK LIAN V. CA
87 PHIL 383
FACTS:
Knowing he had insufficient funds, Ang Tek Lian issued a check for P4000,
payable to cash. This was given to Lee Hua Hong in exchange for cash.
Upon presentment of the check, it was dishonored for having insufficient
funds. It is argued that the check, being payable to cash, wasnt indorsed by the
defendant, and thus, isnt guilty of the crime charged.
HELD:
A check drawn to the order of cash is payable to bearer, and the bank
may pay it to the person presenting it for payment without the drawers

indorsement. Of course, if the bank is not sure of the bearers identity or

financial solvency, it has the right to demand for identification
and/or assurance against possible complicationsfor instance, forgery of the
drawers signature, loss of the check by the rightful owner, raising the
amount payable, etc. The bank therefore, requires for its protection that the
indorsement of the draweror some other persons known to itbe
obtained. A check payable to bearer is authority for payment to the
holder. Where a check is in the ordinary form and is payable to bearer so that
no indorsement is required, a bank to which it is presented for payment
need not have the holder identified, and is not negligent in failing to do so.
Equitable vs. IAC
FACTS
-In 1975 Casals (who represented himself as general manager of Casville Enterprises, a businessengaged in processing and
procurement of lumber products) went to Edward J. Nell Co. and told the
companys sales engineer Claustro of his interest in purchasing a Garrett skidder, one of the many
merchandise the company was selling.Casals was referred to Javier, Nells EVP, who asked for cash payment for the skidders. Casals
said that Casvile had a credit line with Equitable Bank. Javier then agreed to have two units ofskidders paid by way of
domestic letter of credit instead of cash. Each unit was to cost P485,000.The domestic letter of credit was to be payable in
36 months and was to be opened within 90 daysafter date of shipment of the skidders. The first installement was to be due
180 days after shipmentand interest was pegged at 14% p.a.-Casals requested that one unit be delivered to Cagayan de Oro
before April 24, 1976 together withall its accessories. The letter of credit was to be opened on or before June 30, 1976. The
skidderwas shipped on May 3.-June 15, 1976

Casals handed Nell Co. a check amounting to P300,000 postdated August 4, 1976followed by another check with the same
date. Nell Co. considered the checks as partial paymentfor the skidder or as reimbursement for the marginal deposit due
from Casals.-Casals informed Nell Co. that its application for a letter of credit had been approved by Equitablebut informed
the company that a sum of P400,000 was needed to stand as collateral in favor ofEquitable. The amount include P100,000 to
clear the title of the Estrada property which was to actas security for the trust receipts issued by the bank. To facilitate the
transaction, Nell Co. issued acheck for the said amount in favor of Equitable even if the marginal deposit was supposed to
beproduced by Casville.-Casals wrote Equitable to apply for two letters of credit (an on sight letter of credit for P485,000,
a36-month letter of credit for P606,000 and cash marginal deposit of P300,000) to cover its purchaseof the skidders. The
skidders were to be mortgaged as security. The bank responded favorably,stipulating a required 30% cash margin deposit, a
real estate collateral and chattel mortgage of theequipment.-Casville sent three postdated checks to Nell Co. attached to a
letter informing the latter of the bankrequirements. The cash margin deposit was to amount to P327,300 and adding the
P100,000needed for the Estrada property, the total amount due to Equitable was P427,300. The postdatedchecks from
Casville were intended to cover the checks issued by Nell Co. to Equitable. Thepostdated checks amounted to P427,300.Nell Co. issued a check worth P427,300 payable to Equitable Bank. The check was made payable
to the order of Equitable Banking Corp. A/C of Casville Enterprises. The check was
sent toEquitable through Casals. Casals deposited the check in Equitable Bank and the teller accepted itas deposit in Casals
checking account. Casals then withdrew the amount deposited.-Upon presentation for encashment, Nell Co. discovered that
the three checks amounting toP427,300 were all dishonored for having been drawn against a closed account. Nell Co.
checkedthe status of the letter of credit and was informed by Equitable that no letter of credit had beenopened and that the
entire amount of P427,300 had been withdrawn.-Casals and Casville recognized their liability towards Nell Co. so they
assigned the Garrett skidderto the latter for the amount of P450,000 as partial satisfaction.-In determining the liability of
Equitable Bank to Nell Co., the trial court held that Casals, Casvilleand Equitable Bank were solidarily liable to Nell Co. for
the amount of P427,300 erroneously
credited by Equitable to Casvilles account.
ISSUE
WON Equitable is liable to Nell Co.
HELD: NO
The check was patently ambiguous. By making the check read Pay to Equitable Banking Corp.,order of A/C of Casville

Enterprises, the payee ceased to be indicated with reasonable certainty.

As worded it could be accepted as deposit to the account of the party named after the symbols A/Cor payable to the bank as
trustee or as agent for Casville Enterprises with the latter being theultimate beneficiary. The ambiguity was to be construed
against Nell Co. who caused theambiguity.-The check was also initially negotiable and neither was it crossed. The crossing
of the check and
the stamping of the words non
negotiable were made by the bank and not by Nell. It simply meant
that the same check would thereafter be no longer negotiated.Nells own acts
and omissions were the proximate causes of its own defraudation.
Disposition
Petition granted.