De Ocampo vs.
Gatchalian P600, with legal interest from 10 September 1953 until paid,
Facts: On or about 8 September 1953, in the evening, Anita
C. Gatchalian who was then interested in looking for a car
for the use of her husband and the family, was shown and
offered a car by Manuel Gonzales who was accompanied by
Emil Fajardo, the latter being personally known to
Gatchalian. Gonzales represented to Gatchalian that he was
duly authorized by the owner of the car, Ocampo Clinic, to
look for a buyer of said car and to negotiate for and
accomplish said sale. Gatchalian, finding the price of the car
quoted by Gonzales to her satisfaction, requested Gonzales
to bring the car the day following together with the
certificate of registration of the car, so that her husband
would be able to see same. On this request of Gatchalian,
Gonzales advised her that the owner of the car will not be
willing to give the certificate of registration unless there is a
showing that the party interested in the purchase of said car
is ready and willing to make such purchase and that for this
purpose Gonzales requested Gatchalian to give him a check
which will be shown to the owner as evidence of buyer's
good faith in the intention to purchase the said car, the said
check to be for safekeeping only of Gonzales and to be
returned to Gatchalian the following day when Gonzales
brings the car and the certificate of registration.
Relying on these representations of Gonzales and with this
assurance that said check will be only for safekeeping and
which will be returned to Gatchalian the following day when
the car and its certificate of registration will be brought by
Gonzales to Gatchalian, Gatchalian drew and issued a check
that Gonzales executed and issued a receipt for said check.
On the failure of Gonzales to appear the day
following and on his failure to bring the car and its certificate
of registration and to return the check on the following day
as previously agreed upon, Gatchalian issued a "Stop
Payment Order" on the check with the drawee bank. When
Gonzales received the check from Gatchalian under the
representations and conditions above specified, he delivered
the same to the Ocampo Clinic, in payment of the fees and
expenses arising from the hospitalization of his wife.
Vicente R. De Ocampo & Co. for and in consideration of
fees and expenses of hospitalization and the release of the
wife of Gonzales from its hospital, accepted said check,
applying P441.75 thereof to payment of said fees and
expenses and delivering to Gonzales the amount of P158.25
representing the balance on the amount of the said check.
The acts of acceptance of the check and application of its
proceeds in the manner specified were made without
previous inquiry by De Ocampo from Gatchalian. De
Ocampo filed with the Office of the City Fiscal of Manila, a
complaint for estafa against Gonzales based on and arising
from the acts of Gonzales in paying his obligations with De
Ocampo and receiving the cash balance of the check and that
said complaint was subsequently dropped.
De Ocampo subsequently filed an action for the recovery of
the value of a check for P600 payable to De Ocampo and
drawn by Gatchalian. The Court of First Instance of Manila,
through Hon. Conrado M. Vasquez, presiding, sentenced
Gatchalian and Gonzales to pay De Ocampo the sum of
and to pay the costs. Gatchalian, et al. appealed.
Issue [1]: Whether De Ocampo is a holder in due course.
Held [1]: NO. Section 52, Negotiable Instruments Law,
defines holder in due course as "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."
Although De Ocampo was not aware of the circumstances
under which the check was delivered to Gonzales, the
circumstances -- such as the fact that Gatchalian had no
obligation or liability to the Ocampo Clinic, that the amount
of the check did not correspond exactly with the obligation
of Matilde Gonzales to Dr. V. R. de Ocampo; and that the
check had two parallel lines in the upper left hand corner,
which practice means that the check could only be deposited
but may not be converted into cash - should have put De
Ocampo to inquiry as to the why and wherefore of the
possession of the check by Gonzales, and why he used it to
pay Matilde's account. It was payee's duty to ascertain from
the holder Gonzales what the nature of the latter's title to the
check was or the nature of his possession. Having failed in
this respect, De Ocampo was guilty of gross neglect in not
finding out the nature of the title and possession of Gonzales,
amounting to legal absence of good faith, and it may not be
considered as a holder of the check in good faith
Issue [2]: Whether the rule that a possessor of the instrument
is prima facie a holder in due course applies.
Held [2]: The rule that a possessor of the instrument is prima
facie a holder in due course does not apply
because there was a defect in the title of the holder (Manuel
Gonzales), because the instrument is not payableto him or to
bearer. On the other hand, the stipulation of facts -- like the
fact that the drawer had no account with the payee; that the
holder did not show or tell the payee why he had the check
in his possession and why he was using it for the payment of
his own personal account - show that holder's title was
defective or suspicious, to say the least. As holder's title was
defective or suspicious, it cannot be stated that the payee
acquired the check without knowledge of said defect in
holder's title, and for this reason the presumption that it is a
holder in due course or that it acquired the instrument in
good faith does not exist. And having presented no evidence
that it acquired the check in good faith, it (payee) cannot be
considered as a holder in due course. In other words, under
the circumstances of the case, instead of the presumption that
payee was a holder in good faith, the fact is that it acquired
possession of the instrument under circumstances that
should have put it to inquiry as to the title of the holder who
negotiated the check to it. The burden was, therefore, placed
upon it to show that notwithstanding the suspicious
circumstances, it acquired the check in actual good faith.
Marcelo A. Mesina vs. Intermediate Appellate Court
G.R. No. 70145 November 13, 1986, 145 SCRA 497
--holder in due course
FACTS:
Jose Go purchased from Associated Bank a cashier's check
for P800,000.00. Unfortunately, he left said check on the top
of the desk of the bank manager when he left the bank. The
bank manager entrusted the check for safekeeping to a bank
official, a certain Albert Uy. While Uy went to the men's
room, the check was stolen by his visitor in the person of
Alexander Lim. Upon discovering that the check was lost,
Jose Go accomplished a "STOP PAYMENT" order. Two
days later, Associated Bank received the lost check for
clearing from Prudential Bank. After dishonoring the same
check twice, Associated Bank received summons and copy
of a complaint for damages of Marcelo Mesina who was in
possession of the lost check and is demanding
payment. Petitioner claims that a cashier's check cannot be
countermanded in the hands of a holder in due course.
ISSUE:
Whether or not petitioner can collect on the stolen check on
the ground that he is a holder in due course.
RULING:
No. Petitioner failed to substantiate his claim that he is a
holder in due course and for consideration or value as shown
by the established facts of the case. Admittedly, petitioner
became the holder of the cashier's check as endorsed by
Alexander Lim who stole the check. He refused to say how
and why it was passed to him. He had therefore notice of the
defect of his title over the check from the start. The holder
of a cashier's check who is not a holder in due course cannot
enforce such check against the issuing bank which dishonors
the same.
**A person who became the holder of a cashier's check as
endorsed by the person who stole it and who refused to say
how and why it was passed to him is not a holder in due
course.
Metropol (Bacolod) Financing & Investment
Corporation vs. Sambok Motors Co.
Facts: On 15 April 1969 Dr. Javier Villaruel executed a
promissory note in favor of Ng Sambok Sons Motors Co.,
Ltd., in the amount of P15,939.00 payable in 12 equal
monthly installments, beginning 18 May 1969, with interest
at the rate of 1% per month. It is further provided that in case
on non-payment of any of the installments, the total principal
sum then remaining unpaid shall become due and payable
with an additional interest equal to 25% of the total amount
due. On the same date, Sambok Motors Company, a sister
company of Ng Sambok Sons Motors Co., Ltd., and under
the same management as the former, negotiated and indorsed
the note in favor of Metropol Financing & Investment
Corporation with the following indorsement: "Pay to the
order of Metropol Bacolod Financing & Investment
Corporation with recourse. Notice of Demand; Dishonor;
Protest; and Presentment are hereby waived. SAMBOK
MOTORS CO. (BACOLOD) By: RODOLFO G.
NONILLO, Asst. General Manager." The maker, Dr.
Villaruel defaulted in the payment of his installments when
they became due, so on 30 October 1969, Metropol formally
presented the promissory note for payment to the maker. Dr.
Villaruel failed to pay the promissory note as demanded,
hence Metropol notified Sambok as indorsee of said note of
the fact that the same has been dishonored and demanded
payment. Sambok failed to pay, so on 26 November 1969
Metropol filed a complaint for collection of a sum of money
before the Court of First Instance of Iloilo, Branch I. Sambok
did not deny its liability but contended that it could not be
obliged to pay until after its co-defendant Dr. Villaruel, has
been declared insolvent. During the pendency of the case in
the trial court, Dr. Villaruel died, hence, on 24 October 1972
the lower court, on motion, dismissed the case against Dr.
Villaruel pursuant to Section 21, Rule 3 of the Rules of
Court. On Metropol's motion for summary judgment, the
trial court rendered its decision dated 12 September 1973,
ordering Sambok to pay to Metropol the sum of P15,939.00
plus the legal rate of interest from 30 October 1969; the sum
equivalent to 25% of P15,939.00 plus interest thereon until
fully paid; and to pay the cost of suit. Not satisfied with the
decision, Samboc appealed. Sambok argue that by adding
the words "with recourse" in the indorsement of the note, it
becomes a qualified indorser; that being a qualified indorser,
it does not warrant that if said note is dishonored by the
maker on presentment, it will pay the amount to the holder;
that it only warrants the following pursuant to Section 65 of
the Negotiable Instruments Law:
(a) that the instrument is genuine and in all
respects what it purports to be;
(b) that he has a good title to it;
(c) that all prior parties had capacity to contract;
(d) that he has no knowledge of any fact which
would impair the validity of the instrument or
render it valueless.
Issue: Whether Sambok is a qualified indorser of the subject
promissory note.
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. However,
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.
Sambok, 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, Metropol can go
after Sambok. 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. 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 all waived. The words added by Sambok do not limit
his liability, but rather confirm his obligation as a general
indorser. Further, after an instrument is dishonored by non-
payment, the person secondarily liable thereon ceases to be
such and becomes a principal debtor. His liability becomes
the same as that of the original obligor. Consequently, the
holder need not even proceed against the maker before suing
the indorser.
Maralit vs Imperial
G.R. No. 130756. January 21, 1999
DOCTRINE: 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.
FACTS:
Ester Maralit is the assistant manager of the Naga City
branch of the Philippine National Bank (PNB). On two
seaprate occassion, Jesusa Imperial deposited in her savings
account at the PNB, 3 United States treasury warrants and
on the same days withdrew their peso equivalent
of P59,216.86,P130,743.60, and P130,326.00. The
treasury warrants were subsequently returned one after the
other by the United States Treasury, through the Makati
branch of the Citibank, 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.On her part, Imperial
alleged that she merely helped a relative, Aida Abengoza,
encash the treasury warrants and she did not know that the
amounts on the treasury warrants had been altered nor did
she represent to petitioner that the treasury warrants were
genuine. Three estafa cases were filed against Imperial.
MTC Naga City acquitted Imperial but stated that she is
civilly liable as indorser of the checks which are the subject
matter of the criminal action. The decision became final and
executory In a petition for certiorari, RTC Naga held that the
decision of the MTC did not really find Imperial liable
because in fact it was Maralit who was found responsible for
making the defraudation possible.
ISSUE: Whether or not Imperial is civilly liable?
HELD: Yes. The MTC stated the following in its decision
that it is the established procedure of banks that US Treasury
Warrants should first be cleared before the same is to be
paid. More so if the holder is a second indorser. But
because Maralit knew Imperial is working in the same
building and a depositor, she took the risk of approving the
withdrawal of the peso equivalent, without the check being
cleared and if the same is dishonored she should be
responsible. She took the risk therefore she should be
responsible for the outcome of the risk she has taken. The
Court is of the opinion that there was negligence on both
Maralit and Ismael but greater responsibility should be borne
by the Maralit. The accused could not have encashed and
deposited the checks without her approval. If the
complainant was not remiss in her duty in imposing the
banking rules strictly, then these things could not have
happened. This portion of the decision of the MTC, however,
only and actually refers to respondents criminal liability and
not her civil liability. For Imperials civil liability, the MTC
held that ...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) Thus, while the MTC found petitioner
partly responsible for the encashment of the altered checks,
it found respondent civilly liable because of her
indorsements of the treasury warrants. To find therefore that
there is no declaration of civil liability of respondent would
be to disregard the judgment of the MTC.
Sapiera vs CA
FACTS:
On several occasions petitioner Remedios Nota Sapiera, a
sari-sari store owner, purchased from Monrico Mart certain
grocery items, mostly cigarettes, and paid for them with
checks issued by one Arturo de Guzman. When presented
for payment the checks were dishonored because the
drawer's account was already closed. Private respondent
Ramon Sua informed Arturo de Guzman and petitioner
about the dishonor but both failed to pay the value of the
checks. Hence, four (4) charges of estafa were filed against
petitioner
the court a quo acquitted petitioner of all the charges of
estafa but rendered her liable on the civil aspect ordering
petitioner to pay private respondent P335,000.00
representing the aggregate face value of the four (4) checks
indorsed by petitioner plus legal interest from the notice of
dishonor.
ISSUE:
Whether petitioner is liable for the value of the checks even
if she signed the subject checks only for the identification of
the signature of Arturo de Guzman.
RULING:
Petitioner is liable for the value of the checks. As she
(petitioner) signed the subject checks on the reverse side
without any indication as to how she should be bound
thereby, she is deemed to be an unqualified indorser
thereof. Every indorser who indorses without qualification,
warrants to all subsequent holders in due course that, on due
presentment, it shall be accepted or paid or both, according
to its tenor, and that if it be dishonored and the necessary
proceedings on dishonor be duly taken, he will pay the
amount thereof to the holder or to any subsequent indorser
who may be compelled to pay it.

BPI vs CA

FACTS:
A certain Henry Chan owned a Continental Bank Managers
Check payable to "cash" in the amount of Two Thousand
Five Hundred Dollars ($2,500.00). Chan went to the office
of Benjamin Napiza and requested him to deposit the check
in his dollar account by way of accommodation and for the
purpose of clearing the same. Private respondent acceded,
and agreed to deliver to Chan a signed blank withdrawal slip,
with the understanding that as soon as the check is cleared,
both of them would go to the bank to withdraw the amount
of the check upon private respondents presentation to the
bank of his passbook. Napiza thus endorsed the check and
deposited it in a Foreign Currency Deposit Unit (FCDU)
Savings Account he maintained with BPI. Using the blank
withdrawal slip given by private respondent to Chan, one
Ruben Gayon, Jr. was able to withdraw the amount of
$2,541.67 from Napiza's FCDU account. It turned out that
said check deposited by private respondent was a counterfeit
check.

*When BPI demanded the return of $2,500.00, private

respondent claimed that he deposited the check "for clearing
purposes" only to accommodate Chan.

**Petitioner claims that private respondent, having affixed

his signature at the dorsal side of the check, should be liable
for the amount stated therein in accordance with the
provision of the Negotiable Instruments Law on the liability
of a general indorser (Sec. 66).

ISSUE:**
Whether or not respondent Napiza is liable under his
warranties as a general indorser.

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.