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PIO BARRETTO REALTY V CA The petitioner formally denied the said request of the private respondent, but granted

The petitioner formally denied the said request of the private respondent, but granted the latter a grace period of five
Check Payments Due Diligence in Presenting Checks for Payment (5) days from the receipt of the denial to pay the total balance of P124,000.00. The private respondent wrote the
Honor Moslares and Pio Barretto Realty Development Corporation are disputing over the estate of Nicolai Drepin, petitioner requesting an extension of 30 days from said date to fully settle its account but this was still denied.
represented by Atty. Tomas Trinidad. Consequently, Atty. Francisco wrote a letter directly addressed to the petitioner, protesting the alleged refusal of the
To settle the dispute, and while the case was in court, they entered into a Compromise Agreement by which they latter to accept tender of payment made by the former on the last day of the grace period. But the private respondent
agreed to have the estate in dispute be sold; demanded the execution of a deed of absolute sale over the land in question
o that in case Moslares was able to buy the property first, he should pay P3,000,000.00 to Barretto Realty Atty. Fernandez, wrote a reply to the private respondent stating the refusal of his client to execute the deed of
(representing the amount of investments by Barretto Realty in the estate); absolute sale so the petitioner cancelled the contract and considered all previous payments forfeited and the land as
o that should Barretto Realty buy the property first, it should pay P1,000,000.00 to Moslares (representing ipso facto reconveyed.
interest). The compromise agreement was approved by the judge (Judge Perfecto Laguio). From a perusal of the foregoing facts, we find that both the contending parties have conflicting versions on the main
Barretto Realty was able to buy the property first hence it delivered a managers check worth P1,000,000.00 to question of tender of payment.
Moslares but the latter refused to accept the same. According to the trial court: . . . What made Atty. Francisco suddenly decide to pay plaintiffs obligation on tender her
Barretto Realty filed a petition before the trial court to direct Moslares to comply with the Compromise Agreement. payment, when her request to extend the grace period has not yet been acted upon? Atty. Franciscos claim that she
Barretto Realty also consigned the check payment with the court. The judge issued a writ of execution against made a tender of payment is not worthy of credence. The trial court considered as fatal the failure of Atty. Francisco to
Moslares and the sheriff also delivered the check to Moslares which the latter accepted. present in court the certified personal check allegedly tendered as payment or, at least, its xerox copy, or even bank
However, three years later, Moslares filed a motion for reconsideration alleging that the check payment did not records thereof. Not satisfied with the said decision, the private respondent appealed to the IAC. The IAC reversed the
amount to legal tender and that he never even encashed the check. The judge agreed with Moslares. decision of the trial court. The IAC, in finding that the private respondent had sufficient available funds, ipso facto
ISSUE: Whether or not the judge was correct. concluded that the latter had tendered payment.
HELD: No. There was already a final and executory order issued by the same judge three years prior. The same may no ISSUE:
longer be amended regardless of any claim or error or incorrectness (save for clerical errors only). It is true that a check is 1. Whether or not the finding of the IAC that Atty. Francisco had sufficient available funds did tender payment for the
not a legal tender and while delivery of a check produces the effect of payment only when it is encashed, the rule is said obligation.
otherwise if the debtor (Barretto Realty) was prejudiced by the creditors (Moslares) unreasonable delay in presentment. 2. Whether or not an offer of a check is a valid tender of payment of an obligation under a contract which stipulates that
Acceptance of a check implies an undertaking of due diligence in presenting it for payment. If no such presentment the consideration of the sale is in Philippine Currency.
was made, the drawer cannot be held liable irrespective of loss or injury sustained by the payee. Payment will be HELD:
deemed effected and the obligation for which the check was given as conditional payment will be discharged. 1. No. Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as
payment to the obligee for the formers obligation and demanding that the latter accept the same. Thus, tender of payment
EDUQUE V OCAMPO cannot be presumed by a mere inference from surrounding circumstances. At most, sufficiency of available funds is only
On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon, Dona Escolastica delos affirmative of the capacity or ability of the obligor to fulfill his part of the bargain. The respondent court was therefore in
Reyes and Don Jose M. Ocampo, with amount s of P40,000 and P15,000, both payable within 20 years with interest of error.
5% per annum.
Payment of the loans was guaranteed by mortgage on real property. On 6 December 1943, Salvacion F. Vda de Eduque, 2. No. In the case of Philippine Airlines v. Court of Appeals:
as administratrix of the estate of Dr. Jose Eduque, tendered payment by means of a cashiers check representing Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by
Japanese War notes to Jose M. Ocampo, who refused payment. itself, operate as payment. A check, whether a managers check or ordinary check, is not legal tender, and an offer of a check
By reason of such refusal, an action was brought and the cashiers check was deposited in court. After trial, judgment in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. The tender of
was rendered against Ocampo compelling him to accept the amount, to pay the expenses of consignation, etc. Ocampo payment by the private respondent was not valid for failure to comply with the requisite payment in legal tender or
accepted the judgment as to the second loan but appealed as to the first loan. currency stipulated within the grace period
ISSUE: Whether there is a tender of payment by means of a cashiers check representing war notes.
HELD: Japanese military notes were legal tender during the Japanese occupation; and Ocampo impliedly accepted the INCIONG V CA
consignation of the cashiers check when he asked the court that he be paid the amount of the second loan (P15,000). It is a Signature of Makers Guaranty
rule that a cashiers check may constitute a sufficient tender where no objection is made on this ground. In February 1983, Rene Naybe took out a loan from Philippine Bank of Communications (PBC) in the amount of P50k.
For that he executed a promissory note in the same amount.
ROMAN CATHOLIC OF MALOLOS V. IAC Naybe was able to convince Baldomero Inciong, Jr. and Gregorio Pantanosas to co-sign with him as co-makers. The
The property subject matter of the contract consists of a parcel of land in the Province of Bulacan, issued and promissory note went due and it was left unpaid. PBC demanded payment from the three but still no payment was
registered in the name of the petitioner which it sold to the private respondent. made.
On July 7, 1971, the subject contract over the land in question was executed between the petitioner as vendor and the PBC then sue the three but PBC later released Pantanosas from its obligations. Naybe left for Saudi Arabia hence cant
private respondent through its then president, Mr. Carlos F. Robes, as vendee, stipulating for a downpayment of be issued summons and the complaint against him was subsequently dropped. Inciong was left to face the suit. He
P23,930.00 and the balance of P100,000.00 plus 12% interest per annum to be paid within four (4) years from argued that that since the complaint against Naybe was dropped, and that Pantanosas was released from his
execution of the contract. The contract likewise provides for cancellation, forfeiture of previous payments, and obligations, he too should have been released.
reconveyance of the land in question in case the private respondent would fail to complete payment within the said ISSUE: Whether or not Inciong should be held liable.
period. HELD: Yes. Inciong is considering himself as a guarantor in the promissory note. And he was basing his argument based on
After the expiration of the stipulated period for payment, Atty. Adalia Francisco (president of the company who Article 2080 of the Civil Code which provides that guarantors are released from their obligations if the creditors shall
bought land) wrote the petitioner a formal request that her company be allowed to pay the principal amount of release their debtors. It is to be noted however that Inciong did not sign the promissory note as a guarantor. He signed it as
P100,000.00 in three (3) equal installments of six (6) months each with the first installment and the accrued interest a solidary co-maker.
of P24,000.00 to be paid immediately upon approval of the said request. A guarantor who binds himself in solidum with the principal debtor does not become a solidary co-debtor to all intents
and purposes. There is a difference between a solidary co-debtor and a fiador in solidum (surety). The latter, outside of
the liability he assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the
other rights, actions and benefits which pertain to him by reason of the fiansa; while a solidary co-debtor has no other petitioner, as an accommodation party, may seek reimbursement from Antonio Ang Eng Liong, being the party
rights than those bestowed upon him. accommodated.
Because the promissory note involved in this case expressly states that the three signatories therein are jointly and
severally liable, any one, some or all of them may be proceeded against for the entire obligation. The choice is left to Consequently, in issuing the two promissory notes, petitioner as accommodating party warranted to the holder in due
the solidary creditor (PBC) to determine against whom he will enforce collection. Consequently, the dismissal of the course that he would pay the same according to its tenor. value therefore It is no defense to state on his part that he did not
case against Pontanosas may not be deemed as having discharged Inciong from liability as well. As regards Naybe, receive any because the phrase without receiving value therefor used in Sec. 29 of the NIL means without receiving value
suffice it to say that the court never acquired jurisdiction over him. Inciong, therefore, may only have recourse against by virtue of the instrument and not as it is apparently supposed to mean, without receiving payment for lending his
his co-makers, as provided by law. name. Stated differently, when a third person advances the face value of the note to the accommodated party at the time of
its creation, the consideration for the note as regards its maker is the money advanced to the accommodated party. It is
ANG V. ASSOCIATED BANK enough that value was given for the note at the time of its creation. As in the instant case, a sum of money was received by
On August 28, 1990, respondent Associated Bank (formerly Associated Banking Corporation and now known as United virtue of the notes, hence, it is immaterial so far as the bank is concerned whether one of the signers, particularly
Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng Liong and petitioner Tomas Ang for the two (2) petitioner, has or has not received anything in payment of the use of his name.
promissory notes that they executed as principal debtor and co-maker, respectively. In the Complaint, respondent Bank
alleged that on October 3 and 9, 1978, the defendants obtained a loan of P evidenced by a promissory note bearing PN-No. Furthermore, since the liability of an accommodation party remains not only primary but also unconditional to a holder for
DVO-78-382, and P 50,000, 30,000, evidenced by a promissory note bearing PNNo. DVO-78-390. As agreed, the loan would value, even if the accommodated party receives an extension of the period for payment without the consent of the
be payable, jointly and severally, on January 31, 1979 and December 8, 1978, respectively. In addition, subsequent accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as
amendments to the promissory notes as well as the disclosure statements6 stipulated that the loan would earn 14% far as a holder for value is concerned, he is a solidary co-debtor.
interest rate per annum, 2% service charge per annum, 1% penalty charge per month from due date until fully paid, and With regard the issue of delay, a delay in informing the bank of the forgery, which deprives it of the opportunity to
attorneys fees equivalent to 20% of the outstanding obligation. Despite repeated demands for payment, the latest of which go after the forger, signifies negligence on the part of the drawee bank and will preclude it from claiming
were on September 13, 1988 and September 9, 1986, on Antonio Ang Eng Liong and Tomas Ang, respectively, respondent reimbursement. In this case, PNB wasn't guilty of any negligent delay. Its delay hasn't prejudiced Associated Bank in
Bank claimed that the defendants failed and refused to settle their obligation, resulting in a total indebtedness of P any way because even if there wasn't delay, the fact that there was nothing left of the account of Pangilinan, there
539,638.96 as of July 31, 1990. In his Answer, Antonio Ang Eng Liong only admitted to have secured a loan amounting to P couldn't be anymore reimbursement.
80,000. He pleaded though that the bank be ordered to submit a more reasonable computation considering that there had
been no correct and reasonable statement of account sent to him by the bank, which was allegedly collecting excessive GONZALES V RCBC
interest, penalty charges, and attorneys fees despite knowledge that his business was destroyed by fire, hence, he had no Gonzales, New Accounts Clerk in the Retail Banking Department at RCBC Head Office.
source of income for several years. For his part, petitioner Tomas Ang filed an Answer with Counterclaim and Cross-claim. Dr. Don Zapanta of the Ade Medical Group drew a foreign check of $7,500 against the drawee bank Wilshire Center
He interposed the affirmative defenses that: the bank is not the real party in interest as it is not the holder of the Bank, LA, California payable to Eva Alviar (Alviar), Gonzales mother. Alviar then endorsed this check.
promissory notes, much less a holder for value or a holder in due course; the bank knew that he did not receive any Since RCBC gives special accommodations to its employees to receive the checks value w/o awaiting the clearing
valuable consideration for affixing his signatures on the notes but merely lent his name as an accommodation party; he period, Gonzales presented the foreign check to Olivia Gomez, the RCBCs Head of Retail Banking. Olivia Gomez
accepted the promissory notes in blank, with only the printed provisions and the signature of Antonio Ang Eng Liong requested Gonzales to endorse it which she did. Olivia Gomez then acquiesced to the early encashment of the check
appearing therein. and signed the check but indicated thereon her authority of "up to P17,500.00 only". Carlos Ramos signed it with an
"ok" annotation.
Issue: Whether or not Petitioner is liable to the obligation despite being a mere co-maker and accommodation party. Presented the check to Rolando Zornosa, Supervisor of the Remittance section of the Foreign Department of the RCBC
Head Office, who after scrutinizing the entries and signatures authorized its encashment.
Held: Yes. Notably, Section 29 of the NIL defines an accommodation party as a person who has signed the instrument as Gonzales received its peso equivalent P155,270.85. RCBC tried to collect through its correspondent bank, the First
maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some Interstate Bank of California but it was dishonored the check because: "END. IRREG" or irregular indorsement
other person. As gleaned from the text, an accommodation party is one who meets all the three requisites, viz: (1) he must "account closed"
be a party to the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value therefor; and Unable to collect, RCBC demanded from Gonzales
(3) he must sign for the purpose of lending his name or credit to some other person. An accommodation party lends his November 27, 1987: Through letter Gonzales agreed that the payment be made thru salary deduction. October
name to enable the accommodated party to obtain credit or to raise money; he receives no part of the consideration for the 1987: deductions started
instrument but assumes liability to the other party/ies thereto. The accommodation party is liable on the instrument to a March 7, 1988: RCBC sent a demand letter to Alviar for the payment but she did not respond. June 16, 1988: a letter
holder for value even though the holder, at the time of taking the instrument, knew him or her to be merely an was sent to Gonzales reminding her of her liability as an indorser
accommodation party, as if the contract was not for accommodation. July 1988: Gonzales resigned from RCBC paying only P12,822.20 covering 10 months. RCBC filed a complaint for a
sum of money against Eva Alviar, Melva Theresa Alviar-Gonzales and the latters husband Gino Gonzales
As petitioner acknowledged it to be, the relation between an accommodation party and the accommodated party is one of CA Affirmed RTC: liable Eva Alviar as principal debtor and Melva Theresa Alviar-Gonzales as guarantor
principal and surety the accommodation party being the surety. from the beginning; As such, he is deemed an original ISSUE: W/N Eva Alviar and Melva Theresa Alvia-Gonzales is liable as general endorsers
promisor and debtor he is considered in law as the same party as the debtor in relation to whatever is adjudged touching HELD: NO. CA REVERSED. RCBC reimburse Gonzales
the obligation of the latter since their liabilities are interwoven as to be inseparable. Although a contract of suretyship is in Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all subsequent
essence accessory or collateral to a valid principal obligation, the suretys liability to the creditor is immediate, primary and holders in due course
absolute; he is directly and equally bound with the principal. As an equivalent of a regular party to the undertaking, a
1. The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section;
surety becomes liable to the debt and duty of the principal obligor even without possessing a direct or personal interest in (a) That the instrument is genuine and in all respects what it purports to be
the obligations nor does he receive any benefit therefrom. (b) That he has a good title to it
(c) That all prior parties had capacity to contract
In the instant case, petitioner agreed to be jointly and severally liable under the two promissory notes that he co-signed 2. That the instrument is, at the time of his indorsement, valid and subsisting
with Antonio Ang Eng Liong as the principal debtor. This being so, it is completely immaterial if the bank would opt to
In addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case may be, according to
proceed only against petitioner or Antonio Ang Eng Liong or both of them since the law confers upon the creditor the
its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the
prerogative to choose whether to enforce the entire obligation against any one, some or all of the debtors. Nonetheless,
amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it
Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor of subsequent Held [1]: The CTDs in question meet the requirements of the law for negotiability. Contrary to the lower courts findings,
endorsers extend only to the state of the instrument at the time of their endorsements, the CTDs are negotiable instruments (Section 1). Negotiability or non-negotiability of an instrument is determined from the
This provision cannot be used by the party which introduced a defect on the instrument (RCBC) w/c qualifiedly writing, i.e. from the face of the instrument itself. The documents provided that the amounts deposited shall be repayable to
endorsed it. Had it not been for the qualified endorsement "up to P17,500.00 only" of Olivia Gomez, who is the the depositor. The amounts are to be repayable to the bearer of the documents, i.e. whosoever may be the bearer at the
employee of RCBC, there would have been no reason for the dishonor of the check time of presentment.
The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for "irregular
endorsement" must not be the irregular endorser himself who gave cause for the dishonor. Issue [2]: Whether the CTDs negotiation require delivery only.
Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the instrument Held [2]: Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement
defective and later claim from prior endorsers who have no knowledge or participation in causing or introducing said between it (Caltex) and de la Cruz requires both delivery and indorsement; as the CTDs were delivered to it as security for
defect to the instrument, which thereby caused its dishonor. 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
DE OCAMPO V GATCHALIAN thereof as security for the fuel purchases at most constitutes Caltex as a holder for value by reason of his lien. Accordingly, a
Matilde Gonzales was a patient of the De Ocampo Clinic owned by Vicente De Ocampo. She incurred a debt amounting negotiation for such purpose cannot be effected by mere delivery of the instrument since the terms thereof and the
to P441.75. Her husband, Manuel Gonzales designed a scheme in order to pay off this debt: In 1953, Manuel went to a subsequent disposition of such security, in the event of non-payment of the principal obligation, must be contractually
certain Anita Gatchalian. Manuel purported himself to be selling the car of Vicente De Ocampo. Gatchalian was provided for.
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 ASSOCIATED BANK V CA
may show it to De Ocampo and that Manuel in the meantime will hold it for safekeeping. Gatchalian agreed and gave The Province of Tarlac maintains a current account with the Philippine National Bank (PNB Tarlac Branch) where the
Manuel the check. After that, Manuel never showed himself to Gatchalian. provincial funds are deposited. Portions of the funds were allocated to the Concepcion Emergency Hospital. Checks were
Meanwhile, Manuel gave the check to his wife who in turn gave the check to De Ocampo as payment of her bills with issued to it and were received by the hospitals administrative officer and cashier (Fausto Pangilinan). Pangilinan, through
the clinic. De Ocampo received the check and even gave Matilde her change. On the other hand, since Gatchalian never the help of Associated Bank but after forging the signature of the hospitals chief (Adena Canlas), was able to deposit the
saw Manuel again, she placed a stop-payment on the P600.00 check so De Ocampo was not able to cash on the check. checks in his personal account. All the checks bore the stamp All prior endorsement guaranteed Associated Bank.
Eventually, the issue reached the courts and the trial court ordered Gatchalian to pay De Ocampo the amount of the Through post-audit, the province discovered that the hospital did not receive several allotted checks, and sought the
check. restoration of the debited amounts from PNB. In turn, PNB demanded reimbursement from Associated Bank. Both banks
Gatchalian argued that De Ocampo is not entitled to payment because there was no valid indorsement. De Ocampo resisted payment. Hence, the present action. ISSUE: Who shall bear the loss resulting from the forged checks.
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: PNB is not negligent as it is not required to return the check to the collecting bank within 24 hours as the banks
HELD: No. Section 52 of the Negotiable Instruments Law, defines holder in due course, thus: A holder in due course is a involved are covered by Central Bank Circular 580 and not the rules of the Philippine Clearing House. Associated Bank, and
holder who has taken the instrument under the following conditions: not PNB, is the one duty-bound to warrant the instrument as genuine, valid and subsisting at the time of indorsement
(a) That it is complete and regular upon its face; pursuant to Section 66 of the Negotiable Instruments Law. The stamp guaranteeing prior indorsement is not an empty
(b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if rubric; the collecting bank is held accountable for checks deposited by its customers. However, due to the fact that the
such was the fact; Province of Tarlac is equally negligent in permitting Pangilinan to collect the checks when he was no longer connected with
(c) That he took it in good faith and for value; the hospital, it shares the burden of loss from the checks bearing a forged indorsement. Therefore, the Province can only
(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 recover 50% of the amount from the drawee bank (PNB), and the collecting bank (Associated Bank) is liable to PNB for
person negotiating it. 50% of the same amount.
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 PNB V RODRIGUEZ
course for his lack of good faith. De Ocampo should have inquired as to the legal title of Manuel to the said check. The Fictitious Persons
fact that Gatchalian has no obligation to De Ocampo and yet hes named as the payee in the check hould have apprised Spouses Erlando and Norma Rodriguez were engaged in the informal lending business and had
De Ocampo; that the check did not correspond to Matilde Gonzales obligation with the clinic because of the fact that it a discounting arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association
was for P600.00 more than the indebtedness; that why was Manuel in possession of the check all these gave De of PNB employees. The association maintained current and savings accounts with Philippine National Bank (PNB).
Ocampo the duty to ascertain from the holder Manuel Gonzales what the nature of the latters title to the check was or PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to
the nature of his possession 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
CALTEX V CA members. It was PEMSLAs policy not to approve applications for loans of members with outstanding debts. To
On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued 280 certificates of time subvert this policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan
deposit (CTD) in favor of one Angel dela Cruz who deposited with the bank the aggregate amount of P1.12 million. accounts.
Anger de la Cruz delivered the CTDs to Caltex in connection with his purchase of fuel products from the latter. They took out loans in the names of unknowing members, without the knowledge or consent of the latter. The officers
Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate carried this out by forging the indorsement of the named payees in the checks
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 Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named
executed a notarized Deed of Assignment of Time Deposit in favor of the bank. Thereafter, Caltex presented for payees.
verification the CTDs (which were declared lost by de la Cruz) with the bank. This was an irregular procedure made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA
Caltex formally informed the bank of its possession of the CTDs and its decision to preterminate the same. The bank and bank teller in the PNB Branch. This became the usual practice for the parties.
rejected Caltex claim and demand, after Caltex failed to furnish copy of the requested documents evidencing the November 1998-February 1999: spouses issued 69 checks totalling to P2,345,804. These were payable to 47
guarantee agreement, etc. In 1983, de la Cruz loan matured and the bank set-off and applied the time deposits as individual payees who were all members of PEMSLA. PNB eventually found out about these fraudulent acts. To put a
payment for the loan. Caltex filed the complaint, but which was dismissed. stop to this scheme, PNB closed the current account of PEMSLA.
Issue [1]: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason Account The non-negotiability of the instrument doesnt mean that it is non-assignable or transferable. It may still be assigned
Closed. The amounts were duly debited from the Rodriguez account or transferred in whole or in part, even without the consent of the promissory note, since consent is not necessary for the
Spouses filed a civil complaint for damages against PEMSLA, the Multi-Purpose Cooperative of Philnabankers (MCP), validity of the assignment.
and PNB. PNB credited the checks to the PEMSLA account even without indorsements = PNB violated its contractual
obligation to them as depositors - so PNB should bear the losses In assignment, the assignee is merely placed in the position of the
RTC: favored Rodriguez. Makers, actually did not intend for the named payees to receive the proceeds of the checks assignors and acquires the instrument subject to all the defenses that
= fictitious payees (under the Negotiable Instruments Law) = negotiable by mere delivery might have been set up against the original payee. Only an instrument qualifying as a negotiable instrument under the
CA: Affirmed - checks were obviously meant by the spouses to be really paid to PEMSLA = payable to order relevant statute may be negotiated either by indorsement thereof coupled with delivery or by delivery alone where the
ISSUE: W/N the 69 checks are payable to order for not being issued to fictitious persons thereby dismissing PNB from negotiable instrument is in bearer form. A negotiable instrument may, however, instead of being negotiated, also
liability be assigned or transferred. The legal consequences of negotiation as distinguished from assignment of a negotiable
instrument are, of course, different. A non-negotiable instrument may, obviously, not be negotiated; but it may be assigned
HELD: NO. CA Affirmed or transferred, absent an express prohibition against assignment or transfer written in the face of the instrument. In this
GR: when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as a bearer case, while the promissory note was marked "non-negotiable," it was not at the same time stamped "non-transferable" or
instrument (Sections 8 and 9 of the NIL) "non-assignable." Hence, there is no stipulation which prohibited the promissory notes assigning or transferring, in whole
EX: However, there is a commercial bad faith exception to the fictitious-payee rule. A showing of commercial bad faith on or in part.
the part of the drawee bank, or any transferee of the check for that matter, will work to strip it of this defense. The
exception will cause it to bear the loss. NEW PACIFIC TIMBER & SUPPLY CO, INC VS SENERIS
The distinction between bearer and order instruments lies in their manner of negotiation Doctrines:
order instrument - requires an indorsement from the payee or holder before it may be validly negotiated 1. Cashiers check deemed as cash.
bearer instrument - mere delivery 2. Certification of check by drawee bank equivalent to acceptance.
FACTS: In a complaint for a collection of sum of money, petitioner failed to comply with his judgment obligation in an
US jurisprudence: fictitious if the maker of the check did not intend for the payee to in fact receive the proceeds of the amicable settlement with the respondent. Hence, a writ of execution was issued for the amount of P63, 140.00 pursuant to
check. In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the loss. When faced which, petitioners properties were levied and was set for an auction sale. Prior to the set date for the auction sale,
with a check payable to a fictitious payee, it is treated as a bearer instrument that can be negotiated by delivery petitioner deposited with the Clerk of Court, CFI, in his capacity as Ex-Officio Sheriff, the sum of P63, 130.00 for payment of
the judgment obligation, consisting of P50, 000.00 Cashiers Check and P13,130.00 in cash.
Underlying theory: one cannot expect a fictitious payee to negotiate the check by placing his indorsement thereon. Lack of Private respondent refused to accept the check as well as the cash deposit and requested the scheduled auction sale.
knowledge on the part of the payees, however, was not tantamount to a lack of intention on the part of respondents- Respondent judge uphold private respondents claim that he has the right to refuse payment by means of a check and cited
spouses that the payees would not receive the checks proceeds. PNB did not obey the instructions of the drawers when it Section 63 of the Central Bank Act:
accepted absent indorsement, forged or otherwise. It was negligent in the selection and supervision of its employees Sec 63. Legal Character Checks representing deposit money do not have legal tender power and their acceptance in
payment of debts, both public and private, is at the option of the creditor. Provided, however, that a check which has been
SEBREO V. COURT OF APPEALS cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount
Petitioner Sesbreno made a money market placement in the amount of P300,000 with the Philippine Underwriters Finance equal to the amount credited to his account.
Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of And Article 1249 of the New Civil Code which provides for payment of debts in money shall be made in the currency
a Delta Motor Corporation Promissory Note, the Certificate of Securities Delivery Receipt indicating the sale of the note stipulated or the currency that is legal tender in the Philippines.
with notation that said security was in the custody of Pilipinas Bank, and post-dated checks drawn against the Insular Bank Likewise, respondent judge sustained the contention of the private respondent that he has a right to refuse payment of the
of Asia and America for P304,533.33 payable on March 13, 1981. The checks were dishonored for having been drawn amount of P13, 130 in cash because the said amount is less than the judgment obligation, which is a partial payment as
against insufficient funds. Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno; but provided in Article 1248 of the New Civil Code.
Sesbreno learned that the security which was issued on April 10, 1980, maturing on 6 April 1981, has a face value of Petitioner filed an ex-parte motion for issuance of certificate of satisfaction of judgment after his levied properties were all
P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was stamped non-negotiable on its face. As sold during the auction sale. Petitioner question the order of the judge for denial of the said motion alleging that said judge
Sesbreno was unable to collect his investment and interest thereon, he filed an action for damages against Delta Motors and capriciously and whimsically abused his discretion on the ground that there was already a full satisfaction of the judgment
Pilipinas Bank. Delta Motors contents that said promissory note was not intended to be negotiated or otherwise before the auction sale was conducted. ISSUE: WON there was a valid refusal to accept the payment of the judgment
transferred by Philfinance as manifested by the word "non-negotiable" stamped across the face of the Note. obligation made by the petitioner consisting of P50, 000.00 in Cashiers Check and P13, 130.00 in cash.

ISSUE: Whether the non-negotiability of a promissory note prevents its assignment. Held: No. A cashiers check of the Equitable Bank Corporation is not an ordinary check. It is a well-known and accepted
practice in the business sector that a Cashiers Check is deemed as cash.
RULING: 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 non-negotiable instrument may not be negotiated but may Where a check is certified by the bank on which it is drawn, the certification is equivalent to acceptance. By the certification
be assigned or transferred, absent an express prohibition against assignment or transfer written in the face of the of drawee bank, the funds represented by the check are transferred from the credit of the maker to that of the payee or
instrument. The subject promissory note, while marked "non-negotiable," was not at the same time stamped "non- holder, and for all intents and purposes, the latter becomes the depositor of the drawee bank. Said certification implies that
transferable" or "non-assignable." It contained no stipulation which prohibited Philfinance from assigning or transferring the check is drawn upon sufficient funds in the hands of the drawee that they have been set apart for its satisfaction, that
such note, in whole or in part. they shall be so applied whenever the check is presented for payment. The object of certifying a check, as regards to both
parties, is to enable the holder to use it as money. When the holder procures the check to be certified, the check operates as
**A non-negotiable instrument may not be negotiated but may be assigned or transferred, absent an express prohibition an assignment of a part of the funds to the creditors. Certification of a check is an exception to the rule enunciated under
against assignment or transfer written on the face of the instrument. Sec 63 of the CB Act.
Considering that the whole amount deposited by the petitioner consisting of Cashiers Check of P50, 000.00 and P13,
130.00 in cash covers the judgment obligation of P63,000.00 as mentioned in the writ of execution, then, we see no valid OTHER NOTES:
reason for the private respondent to have refused acceptance of the payment of the obligation in his favor. The mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities. The CBCI
TRADERS ROYAL BANK V CA G.R. No. 93397 March 3, 1997 is not a negotiable instrument.
Filriters registered owner of Central Bank Certificate of Indebtedness (CBCI). Filriters transferred it to Philfinance by one of The instrument provides for a promise to pay the registered owner Filriters. Very clearly, the instrument was only
its officers without authorization from the company. Subsequently, Philfinance transferred same CBCI to Traders Royal payable to Filriters.
Bank (TRB) under a repurchase agreement. When Philfinance failed to do so, The TRB tried to register in its name in the It lacked the words of negotiability which should have served as an expression of the consent that the
CBCI. The Central Bank did not want to recognize the transfer. instrument may be transferred by negotiation.
The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to
Docketed as Civil Case No. 83-17966 in the Regional Trial Court of Manila, Branch 32, the action was originally filed as a circulate as a substitute for money.
Petition for Mandamus 5 under Rule 65 of the Rules of Court, to compel the Central Bank of the Philippines to register the Hence, freedom of negotiability is the touchstone relating to the protection of holders in due course, and the freedom
transfer of the subject CBCI to petitioner Traders Royal Bank (TRB). of negotiability is the foundation for the protection, which the law throws around a holder in due course. This
freedom in negotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a
DECISION OF LOWER COURTS: * RTC: transfer is null and void. * CA: The appellate court ruled that the subject CBCI is not a sum of money to a specified person or entity for a period of time.
negotiable instrument. Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to The transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the
Traders Royal Bank and which the latter can register with the Central Bank. Thus, the transfer of the instrument from negotiable instruments law. The pertinent question then iswas the transfer of the CBCI from Filriters to
Philfinance to TRB was merely an assignment, and is not governed by the negotiable instruments law. Philfinance and subsequently from Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the
CBCI registered in its name with the Central Bank? Clearly shown in the record is the fact that Philfinances title
APPLICABLE LAWS: over CBCI is defective since it acquired the instrument from Filriters fictitiously. Although the deed of assignment
stated that the transfer was for value received, there was really no consideration involved. What happened was
Under section 1 of Act no. 2031 an instrument to be negotiable must conform to the following requirements: (a) It must be Philfinance merely borrowed CBCI from Filriters, a sister corporation. Thus, for lack of any consideration, the
in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in assignment made is a complete nullity. Furthermore, the transfer wasn't in conformity with the regulations set by
money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; the CB. Giving more credence to rule that there was no valid transfer or assignment to petitioner.
and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable
Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting P3M w/ interest and secured
Under section 3, Article V of Rules and Regulations Governing Central Bank Certificates of Indebtedness states that the by 3 promissory notes:
assignment of registered certificates shall not be valid unless made at the office where the same have been issued and o December 14, 1981: P600,000.0
registered or at the Securities Servicing Department, Central Bank of the Philippines, and by the registered owner thereof, o December 14, 1981: P400,000.00
in person or by his representative, duly authorized in writing. For this purpose, the transferee may be designated as the o August 27, 1981: P2,000,000.00
representative of the registered owner. ISSUES & RULING: 1. Whether the CBCI is negotiable instrument or not. Roxas signed twice the promissory notes as President of Astro in his personal capacity. Roxas also signed a
Continuing Surety ship Agreement in favor of Philtrust Bank, as President of Astro and as surety. Philguarantee, with
The pertinent portions of the subject CBCI read: The Central Bank of the Philippines (the Bank) for value received, hereby the consent of Astro, guaranteed in favor of Philtrust the payment of 70% of Astros loan, subject to the condition that
promises to pay bearer, of if this Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE upon payment by Philguanrantee, it shall be proportionally subrogated to the rights of Philtrust against Astro
CORPORATION, the registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND PESOS. Upon Astros failure to pay, Philguarantee paid 70% of the guaranteed loan to Philtrust. Subsequently, Philguarantee
filed against Astro and Roxas a complaint for sum of money with the RTC
NO. The CBCI is not a negotiable instrument, since the instrument clearly stated that it was payable to Filriters, and the
Roxas: alleged that he merely signed the same in blank and the phrases in his personal capacity and in his official
certificate lacked the words of negotiability which serve as an expression of consent that the instrument may be
capacity were fraudulently inserted without his knowledge
transferred by negotiation.
RTC: favored Philguarantee holding Astro and Roxas jointly and severally liable. If Roxas really intended to sign the
instruments merely in his capacity as President of Astro, then he should have signed only once. CA affirmed RTC
Before the instruments become negotiable instruments, the instrument must conform to the requirements under the
ISSUE: W/N Roxas should be jointly and severally liable with Astro
Negotiable Instrument Law. Otherwise instrument shall not bind the parties.
HELD: YES. CA affirmed
Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are makers,
2. Whether the Assignment of registered certificate is valid or null and void.
promising that they will pay to the order of the payee or any holder according to its tenor.
IT'S NULL AND VOID. Obviously the Assignment of certificate from Filriters to Philfinance was null and void. One of officers Even without the phrase personal capacity, Roxas will still be primarily liable as a joint and several debtor under the
who signed the deed of assignment in behalf of Filriters did not have the necessary written authorization from the Board of notes considering that his intention to be liable as such is manifested by the fact that he affixed his signature on each
Directors of Filriters. For lack of such authority the assignment is considered null and void. of the promissory notes twice which necessarily would imply that he is undertaking the obligation in 2 different
Clearly shown in the record is the fact that capacities, official and personal.
Philfinance's title over CBCI is defective since it acquired the instrument from Filriters fictitiously. Under 1409 of the 3 promissory notes uniformly provide: FOR VALUE RECEIVED, I/We jointly, severally and solidarily, promise to pay
Civil Code those contracts which are absolutely simulated or fictitious are considered void and inexistent from the to PHILTRUST BANK or order...
beginning. begins with I, We, or Either of us promise to pay, when signed by two or more persons = solidarily liable
Subrogation is the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights
Petitioner knew that Philfinance is not registered owner of the CBCI No. D891. The fact that a non-owner was disposing of Philguarantee has all the right to proceed against petitioner, it is subrogated to the rights of Philtrust to demand for
the registered CBCI owned by another entity was a good reason for petitioner to verify of inquire as to the title Philfinance and collect payment from both Roxas and Astro since it already paid the value of 70% of roxas and Astro Electronics
to dispose to the CBCI. Corp.s loan obligation
Roxas acquiescence is not necessary for subrogation to take place because the instant case is one of the legal
subrogation that occurs by operation of law, and without need of the debtors knowledge RULING: No. A negotiable instrument must be delivered to the payee in order to evidence its existence as a binding
Philguarantee, as guarantor, became the transferee of all the rights of Philtrust as against Roxas and Astro because the contract. Section 16 of the NIL provides that every contract on a negotiable instrument is incomplete and revocable until
guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor delivery of the instrument for the purpose of giving effect thereto. Thus, the payee of a negotiable instrument acquires no
interest with respect thereto until its delivery to him. Without the initial delivery of the instrument from the drawer to the
DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL. payee, there can be no liability on the instrument. Petitioner however has a right of action against Sima Wei for the balance
Complete undelivered due on the promissory note.
In consideration for a loan extended by the Development Bank of Rizal (DBR) to Sima Wei, the latter executed and
delivered to the former a promissory note, engaging to pay DBR or order the amount of P1,820,000.00 on or before 24 SAN MIGUEL v. PUZON, JR.
June 1983 with interest at 32% per annum. Sima Wei made partial payments on the note, leaving a balance of FACTS: Puzon was a dealer of San Miguel Corporation (SMC). Puzon purchased SMC products on credit. SMC requires him
P1,032,450.02. to issue postdated checks equivalent to the value of the products purchased to ensure payment. The checks are to be return
On 18 November 1983, Sima Wei issued two crossed checks payable to DBR drawn against China Banking to Puzon once he settles his credit. In one instance, Puzon went to SMC Sales Office and allegedly requested to see
Corporation, bearing respectively the serial numbers 384934, for the amount of P550,000.00 and 384935, for the particular checks that he gave to SMC. When he got hold of them, he allegedly immediately left the office with the checks.
amount of P500,000.00. The said checks were allegedly issued in full settlement of the drawers account evidenced by SMC demanded for the return of the checks which Puzon ignored. As such, SMC filed a complaint against him for theft. The
the promissory note. prosecutor however found no probable cause for theft because of SMC and Puzons relationship as one of creditor-debtor
These two checks were not delivered to DBR or to any of its authorized representatives. For reasons not shown, these and recommended dismissal. Hence, this petition. ISSUE: 1. Was there probable cause for theft?
checks came into the possession of Lee Kian Huat, who deposited the checks without DBRs indorsement (forged or
otherwise) to the account of the Asian Industrial Plastic Corporation, at the Balintawak branch, Caloocan City, of the HELD: 1. None. One of the essential elements of theft is the taking of a personal property belonging to another. A such, it is
Producers Bank. Cheng Uy, Branch Manager of the Balintawak Branch of Producers Bank, relying on the assurance of necessary to ascertain whether the ownership of the checks were transferred to SMC. If SMC owns the checks, then there is
Samson Tung, President of Plastic Corporation, that the transaction was legal and regular, instructed the cashier of probable cause for theft, otherwise, there is none. According to the Sec. 12 of the NIL, the person to whom an instrument is
Producers Bank to accept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite delivered acquires the title to it. The delivery mentioned in Sec. 12 must be read in conjunction with Sec. 16 of the NIL which
of the fact that the checks were crossed and payable to DBR and bore no indorsement of the latter. says that the delivery must be for the purpose of giving effect to the instrument. Since the checks were given merely as
On 5 July 1986, DBR filed the complaint for a sum of money against Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, security and not as payment for the credit, then the checks were not delivered so as to give effect to them. As such,
Samson Tung, Asian Industrial Plastic Corporation and the Producers Bank of the Philippines, on two causes of action: ownership was not transferred to SMC. Hence, the checks that Puzon allegedly took were not properties belonging to
(1) To enforce payment of the balance of P1,032,450.02 on a promissory note executed by Sima Wei on 9 June 1983; another. Consequently, there is no probable cause for theft.
and (2) To enforce payment of two checks executed by Sima Wei, payable to DBR, and drawn against the China
Banking Corporation, to pay the balance due on the promissory note. Except for Lee Kian Huat, Sima Wei, et al. filed REPUBLIC PLANTERS BANK V CA
their separate Motions to Dismiss alleging a common ground that the complaint states no cause of action. Incomplete instruments to rules of construction
The trial court granted the Motions to Dismiss. The Court of Appeals affirmed the decision, to which DBR, represented Shozo Yamaguchi (President/Chief Operating Officer) and Fermin Canlas (Treasurer) by virtue of Board Resolution
by its Legal Liquidator, filed the Petition for Review by Certiorari. ISSUE: Whether DBR, as the intended payee of the of Worldwide Garment Manufacturing, Inc were authorized to apply for credit facilities with the Republic Planters
instrument, has a cause of action against any or all of the defendants, in the alternative or otherwise. Bank in the forms of export advances and letters of credit/trust receipts accommodations.
9 promissory notes with Worldwide Garment Manufacturing, Inc. was apparently rubber stamped above the
HELD: The normal parties to a check are the drawer, the payee and the drawee bank. Courts have long recognized the signatures of Yamaguchi and Canlas were issued to Republic Planters Bank
business custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the Each promissory note was uniformly written in the following manner:
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 ___________, after date, for value received, I/we, jointly and severally promise
unless the check is delivered to the payee or his representative. to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in
Manila, Philippines, the sum of ___________ PESOS(.) Philippine Currency
A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of Please credit proceeds of this note to:
property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a negotiable ________ Savings Account ______XX Current Account
instrument be delivered to the payee in order to evidence its existence as a binding contract. Section 16 of the Negotiable No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP.
Instruments Law, which governs checks, provides in part that Every contract on a negotiable instrument is incomplete and Sgd. Shozo Yamaguchi
revocable until delivery of the instrument for the purpose of giving effect thereto. Thus, the payee of a negotiable instrument Sgd. Fermin Canlas
acquires no interest with respect thereto until its delivery to him. Delivery of an instrument means transfer of possession, December 20, 1982: Worldwide Garment Manufacturing, Inc. changed its corporate name to Pinch Manufacturing
actual or constructive, from one person to another. Without the initial delivery of the instrument from the drawer to the Corporation
payee, there can be no liability on the instrument. Moreover, such delivery must be intended to give effect to the February 5, 1982: Republic Planters filed a complaint for the recovery of sums of money
instrument. Herein, the two (2) China Bank checks, numbered 384934 and 384935, were not delivered to the payee, DBR. Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite
Without the delivery of said checks to DBR, the former did not acquire any right or interest therein and cannot therefore due notice
assert any cause of action, founded on said checks, whether against the drawer Sima Wei or against the Producers Bank or Fermin Canlas denied having issued the promissory notes as an officer of Pinch Manufacturing Corporation and when
any of the other respondents. Since DBR never received the checks on which it based its action against said respondents, it he issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., it was in blank (typewritten
never owned them (the checks) nor did it acquire any interest therein. Thus, anything which the respondents may have entries not appearing when he signed)
done with respect to said checks could not have prejudiced DBR. It had no right or interest in the checks which could have ISSUE: W/N Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and
been violated by said respondents. DBR has therefore no cause of action against said respondents, in the alternative or Shozo Yamaguchi on the 9 promissory notes because they are negotiable and ruled by the Negotiable Instruments Law
otherwise. If at all, it is Sima Wei, the drawer, who would have a cause of action against her co-respondents, if the
allegations in the complaint are found to be true. HELD: CA absolving Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered declaring private
respondent Fermin Canlas jointly and severally liable on all 9 promissory notes with the following sums and at 16%
ISSUE: Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks. interest per annum
Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and DOCTRINE OF DESIRABLE SHORT CUTplaintiff uses one action to reach, by desirable short cut, the person who ought
are liable as such. to be ultimately liable as among the innocent persons involved in the transaction. In other words, the payee ought to be
Fermin Canlas one of the co-makers of the promissory notes cannot escape liability arising therefrom made clearer allowed to recover directly from the collecting bank, regardless of whether the check was delivered to the payee or not.
and certain, without reason for ambiguity, by the presence of the phrase "joint and several" as describing the
unconditional promise to pay to the order of Republic Planters Bank Severally and jointly or solidarily liable On the issue of laches, Ong didn't sit on his rights. He immediately sought the intervention of Tamlincos family to collect
"I promise to pay" is signed by 2 or more persons the sum of money, and later the Central Bank. Only after exhausting all the measures to settle the issue amicably did
"I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons he file the action.
"and (in) his personal capacity" below the signatures of the makers - immaterial and will not affect to the liability of
Fermin Canlas as a joint and several debtor of the notes. REPUBLIC V EBRADA
With or without it, he is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor Forgery
A change in the corporate name does not make a new corporation, and whether effected by special act or under a February 27, 1963: Mauricia T. Ebrada, encashed Back Pay Check dated January 15, 1963 for P1,246.08 at Republic
general law, has no affect on the identity of the corporation, or on its property, rights, or liabilities. The corporation Bank . Check was issued by the Bureau of Treasury. Bureau advised Republic Bank that the indorsement on the
continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or reverse side of the check by the payee, "Martin Lorenzo" was a forgery because he died as of July 14, 1952 and
incurred. requested a refund
GR: officers or directors under the old corporate name bear no personal liability for acts done or contracts entered July 11, 1966: Ebrada filed a Third-Party complaint against Adelaida Dominguez who, in turn, filed on September 14,
into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the 1966 a Fourth-Party complaint against Justina Tinio.
old corporation and the change of name meant only the continuation of the old juridical entity, the corporation March 21, 1967: City Court of Manila favored Republic against Ebrada, for Third-Party plaintiff against Adelaida
bearing the same name is still bound by the acts of its agents if authorized by the Board. Dominguez, and for Fourth-Party plaintiff against Justina Tinio
EX: Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for as CA: reversed Mauricia T. Ebrada claim against Adelaida Dominguez and Domiguez against Justina Tinio
follows: Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person adds to W/N: Ebrada should be held liable.
his signature words indicating that he signs for or on behalf of a principal , or in a representative capacity, he is not HELD: YES. Affirmed in toto.
liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as Under Section 65 of the Negotiable Instruments Law: Every person negotiating an instrument by delivery or by
filling a representative character, without disclosing his principal, does not exempt him from personal liability. qualified indorsement, warrants:
Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a (a) That the instrument is genuine and in all respects what it purports to be.
representative capacity or the name of the third party for whom he might have acted as agent, the agent is personally (b) That she has good title to it.
liable to take holder of the instrument and cannot be permitted to prove that he was merely acting as agent of another xxx xxx xxx
and parol or extrinsic evidence is not admissible to avoid the agent's personal liability. Every indorser who indorses without qualification warrants to all subsequent holders in due course:
Incomplete stereotype printed form of promissory notes generally used by commercial banking institutions to be (a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding sections;
signed by their clients in obtaining loans. (b) That the instrument is at the time of his indorsement valid and subsisting.
Blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest, date of Under action 23 of the Negotiable Instruments Law (Act 2031): When a signature is forged or made without the
issue and the maturity date. authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the
An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the instruments, or to give a discharge thereof against any party thereto, can be acquired through or under such signature
Negotiable Instruments Law: Sec. 14. Blanks: when may be filled. Where the instrument is wanting in any material unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of
particular, the person in possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... authority.
In order, however, that any such instrument when completed may be enforced against any person who became a Martin Lorenzo (forged as original payee) > Ramon R. Lorenzo (2nd indorser) = NO EFFECT
party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a Ramon R. Lorenzo(2nd indorser)> Adelaida Dominguez (third indorser)>Adelaida Dominguez to Ebrada who did not
reasonable time... know of the forgery = valid and enforceable barring any claim of forgery
The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas in blank as Drawee of a check can recover from the holder the money paid to him on a forged instrument; not its duty to ascertain
he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable. whether the signatures of the payee or indorsers are genuine or not
Indorser is supposed to warrant to the drawee that the signatures of the payee and previous indorsers (NOT only
WESTMONTBANK V ONG holders in due course) are genuine
Ong was supposed to be the payee of the checks issued by Island Securities. Ong has a current account with RATIONALE: . indorsers own credulity or recklessness, or misplaced confidence was the sole cause of the loss. Why
petitioner bank. He opted to sell his shares of stock through Island Securities. The company in turn issued checks in should he be permitted to shift the loss due to his own fault in assuming the risk, upon the drawee, simply because of
favor of Ong but unfortunately, the latter wasn't able to receive any. His signatures were forged by Tamlinco and the the accidental circumstance that the drawee afterwards failed to detect the forgery when the check was presented
checks were deposited in his own account with petitioner. Ong then sought to collect the money from the family of Ebrada , upon receiving the check in question from Adelaida Dominguez, was duty-bound to ascertain whether the
Tamlinco first before filing a complaint with the Central Bank. As his efforts were futile to recover his money, he filed an check in question was genuine before presenting it to plaintiff Bank for payment
action against the petitioner. The trial and appellate court decided in favor of Ong. Based on the doctrine from Great Eastern Life Ins. Co. v. Hongkong Shanghai Bank (1922) , bank should suffer the loss
when it paid the amount of the check in question to Ebrada, but it has the remedy to recover from the Ebrada the
HELD: Since the signature of the payee was forged, such signature should be deemed inoperative and ineffectual. amount it paid
Petitioner, as the collecting bank, grossly erred in making payment by virtue of said forged signature. The payee, herein Ebrada immediately turning over to Adelaida Dominguez (Third-Party defendant and the Fourth-Party plaintiff) who
respondent, should therefore be allowed to collect from the collecting bank. It should be liable for the loss because it is its in turn handed the amount to Justina Tinio on the same date would not exempt her from liability because by doing so,
legal duty to ascertain that the payees endorsement was genuine before cashing the check. As a general rule, a bank she acted as an accommodation party in the check for which she is also liable under Section 29 of the Negotiable
or corporation who has obtained possession of a check with an unauthorized or forged indorsement of the payees Instruments Law (Act 2031): An accommodation party is one who has signed the instrument as maker, drawer,
signature and who collects the amount of the check other from the drawee, is liable for the proceeds thereof to the payee or acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.
the other owner, notwithstanding that the amount has been paid to the person from whom the check was obtained. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the
instrument knew him to be only an accommodation party.
HELD: NO. Affirmed
ISSUE: Whether or not Republic Bank may recover from Ebrada. PCIB stamped on the back of the check: "All prior indorsements and/or Lack of Endorsement Guaranteed, Philippine
HELD: Yes. Ebrada, being the last indorser, warranted the genuineness of the signatures of the payee and the previous Commercial and Industrial Bank," Padre Faura Branch, Manila
indorsers. The drawee bank is not duty bound to ascertain whether or not the signatures of the payee and the indorsers are indorsements falsified is immaterial to the PNB's liability as a drawee, or to its right to recover from the PCIB, for, as
genuine. One who purchases a check or draft is bound to satisfy himself that the paper is genuine and that by indorsing it or against the drawee, the indorsement of an intermediate bank does not guarantee the signature of the drawer, since
presenting it for payment or putting it into circulation before presentation he impliedly asserts that he has performed his the forgery of the indorsement is not the cause of the loss.
duty and the drawee (in this case Republic Bank) who has paid the forged check, without actual negligence on his part, may Guaranteed not the authenticity of the signatures of the officers of the GSIS who signed because the GSIS is not an
recover the money paid from such negligent purchasers. indorser of the check, but its drawer
warranty is irrelevant to the PNB's alleged right to recover from the PCIB
But Ebrada did not profit from this because she, upon receiving the encashment, gave the same to Dominguez? in general, "acceptance" is not required for checks since they are payable on demand acceptance promise to perform
She is still liable because she is considered as an accommodation party pursuant to Section 29 of the Negotiable an act - the acceptance of a bill is the signification by the drawee of his assent to the order of the drawer payment
Instruments Law. An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, actual performance compliance with obligation
without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on PNB had been guilty of a greater degree of negligence, because it had a previous and formal notice from the GSIS that
the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only the check had been lost, with the request that payment thereof be stopped
an accommodation party. PNB's negligence was the main or proximate cause for the corresponding loss. PNB did not return the check
when 1 of 2 innocent persons must suffer by the wrongful act of a third person, the loss must be borne by the one
BPI VS. CASA MONTESSORI INTERNATIONAL whose negligence was the proximate cause of the loss or who put it into the power of the third person to perpetrate
FACTS: On November 8, 1982, CASA Montessori International opened Current Account with BPI with CASAs President the wrong
Lebron as one of its authorized signatories. In 1991, after conducting an investigation, plaintiff discovered that nine of its where the collecting (PCIB) and the drawee (PNB) banks are equally at fault, the court will leave the parties where it
checks had been encashed by a certain Sonny D. Santos since 1990 in the total amount of P782,000.00. It turned out that finds them. applies in the case of a drawee who pays a bill without having previously accepted it
Santos with account at BPI Greenbelt Branch was a fictitious name used by third party defendant Leonardo T. Yabut who
Section 62 of Act No. 2031 provides The acceptor by accepting the instrument engages that he will pay it according to
worked as external auditor of CASA. Third party defendant voluntarily admitted that he forged the signature of Lebron and
the tenor of his acceptance; and admits:
encashed the checks. In 1991, plaintiff filed Complaint for Collection with Damages against defendant bank praying that the
(a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the
latter be ordered to reinstate the amount of P782,500.00 with interest. RTC rendered decision in favor of the plaintiff. CA
instrument; and
modified decision holding CASA as contributory negligent hence ordered Yabut to reimburse BPI half the total amount
(b) The existence of the payee and his then capacity to indorse.
claimed and CASA, the other half. It also disallowed attorneys fees and moral and exemplary damages. ISSUE: W/N moral
and exemplary damages and attorneys fees should be awarded.
The Ministry of Education and Culture issued 15 checks drawn against PNB which International Corp. Bank (Int'l)
RULING: Moral and exemplary damages denied but atty.s fees granted.
accepted for deposit on various dates.
In the absence of a wrongful act or omission, or of fraud or bad faith, moral damages cannot be awarded. The adverse result
After 24 hours from submission of the checks to Int'l for clearing, it paid the value of the checks and allowed the
of an action does not per se make the action wrongful, or the party liable for it.CASA was unable to identify the particular
withdrawals of the deposits
instance upon which its claim for moral damages is predicated. Neither bad faith nor negligence so gross that it amounts to
malice can be imputed to BPI. October 14, 1981, PNB returned all the checks to Int'l without clearing them on the ground that they were materially
Imposed by way of correction for the public good, exemplary damages cannot be recovered as a matter of right. There is no altered. Int'l instituted an action for collection of sums of money against respondent to recover the value of the
bad faith on the part of BPI for paying the checks of CASA upon forged signatures. Therefore, the former cannot be said to checks. RTC: dismissed
have acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The latter, having no right to moral damages, CA: Reversed. materially altered shall be returned within 24 hours after discovery of the alteration.
cannot demand exemplary damages. C.B. Circular does not provide the drawee bank the license to be grossly negligent on the one hand nor does it
When the act or omission of the defendant has compelled the plaintiff to incur expenses to protect the latters interest, or preclude the collecting bank from raising available defenses even if the check is properly returned within the 24-hour
where the court deems it just and equitable, attorneys fees may be recovered. In the present case, BPI persistently denied period after discovery of the material alteration
the claim of CASA under the NIL to recredit the latters account for the value of the forged checks. This denial constrained ISSUES: W/N PNB should be liable for not returning the check with material alteration w/in the 24-hour period
CASA to incur expenses and exert effort for more than ten years in order to protect its corporate interest in its bank account. HELD: NO. CA set aside.
Alteration of Serial Number Not Material - The Court will not rule on the proper application of Central Bank Circular No. 580
PNB V CA in this case since there were no material alterations on the checks, PNB as drawee bank has no right to dishonor them and
January 15, 1962: Augusto Lim deposited in his current account with the PCIB branch at Padre Faura, Manila a GSIS return them to petitioner, the collecting bank
Check of P57,415.00 drawn against the PNB
PCIB stamped the following on the back of the check: "All prior indorsements and/or Lack of Endorsement METROPOLITAN BANK AND TRUST CO. V. CABLIZO
Guaranteed, Philippine Commercial and Industrial Bank," Padre Faura Branch, Manila Cablizo maintained an account with petitioner. It drew a check payable to cash payable to a certain Marquez, for the
latters sales commission. The check was subsequently deposited in Westmont bank and the latter submitted it with
Same date: following an established banking practice in the Philippines, the check was forwarded for clearing through
Metrobank for clearing. The check was cleared.
the Central Bank to the PNB did not return said check the next day, or at any other time, but retained it and paid its
amount to the PCIB, as well as debited it against the account of the GSIS in the PNB. PNB received a formal notice from
Thereafter, the banks representative asked Cablizo if he issued a check for P91,000. The answer was in the negative. This
the GSIS that the check had been lost, with the request that payment thereof be stopped
prompted Cablizo to call Metrobank and ask for the recrediting of P90,000 but petitioner failed to recredit the
January 31, 1962: Upon demand from the GSIS, the P57,415.00 was re-credited to them bec. the signatures of its
amount prompting Cablizo to file an action against it.
officers on the check were forged signatures of the General Manager and the Auditor of the GSIS on the check, as
drawer, are forged payee Mariano D. Pulido indorsed it to Manuel Go and then indorsed by Manuel Go to Augusto Lim
HELD: An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in the
February 2, 1962: PNB demanded from the PCIB the refund PNB filed against the PCIB CA affirmed CFI: dismissed
instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or
ISSUE: W/N PCIB as indorser is liable despite the fact that the check is forged when PNB is also negligent
numbers or other change to an incomplete instrument relating to the obligation of the party. In other words, a Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same
material alteration is one which changes the items which are required to be stated under Section 1 of the NIL. for a consideration or for value. Thus, the law itself creates a presumption in Davids favor that he gave valuable
consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of
The check in issue was materially altered when its amount was increased from P1000 to P91000. Cablizo was not the one the checks absent said consideration. However, petitioner failed to discharge her burden of proof. The petitioners
who authorized or made such increase. There is no showing that he was negligent in exercising what was due in a averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of
prudent man which could have otherwise prevented the any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the
loss. Cablizo was never remiss in the preparation and issuance of the check. checks gratis, but instead gave Chandiramani US$ 360,000 as consideration for the said instruments.

The doctrine of equitable estoppel is inapplicable against Cablizo. This doctrine states that when one of the two VILLANUEVA V NITE Liabilities of Parties (Negotiable Instruments Law)
innocent person, each guiltiness of an intentional or moral wrong, must suffer a loss, it must be borne by the one whose Nite loaned from Villanueva P409,000 as a sceurity he issued an Asian Bank Corporation (ABC) check
erroneous conduct, either by omission or commission, was the cause of the injury. Negligence is never presumed. of P325,500 dated February 8, 1994 it was consented to be changed to June 8, 1994 . Check was dishonored due to
a material alteration
Metrobank was actually the one remiss in its duties. The CA took into consideration that the alterations were August 24, 1994: Nite while abroad partially paid P235K through her representative Emily P. Abojada
actually visible in the eye and yet the bank allowed someone not acquainted with the examination of checks to do the The balance of P174K was due on or before December 8, 1994.
same. Furthermore, it cannot rely on the indorsement of Westmont Bank of the check. It should have exercised August 24, 1994: Villanueva filed an action for a sum of money and damages against ABC for the full amount of the
meticulous care in handling the affairs of its clients especially if the clients dishonored check (despite the loan not being due and Nite away). RTC: favored Villanueva
June 30, 1997: Nite went to ABC to withdraw but she was not able to because of the RTC order
CELY YANG VS. COURT OF APPEALS, ET, AL. - GR NO. 138074 CASE DIGEST August 25, 1997: ABC remitted to the sheriff a managers check amounting to P325,500 drawn on Nite's account
Petitioner Cely Yang agreed with private respondent Prem Chandiramani to procure from Equitable Banking Corp. and Far CA: favored Nite's appeal
East Bank and Trust Company (FEBTC) two cashiers checks in the amount of P2.087 million each, payable to Fernando ISSUE: W/N ABC should be liable to Villanueva
david and FEBTC dollar draft in the amount of US$200,000.00 payable to PCIB FCDU account No. 4195-01165-2. Yang gave
the checks and the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to meet Chandiramani to turn over HELD: NO. DENIED.
the checks and the dollar draft, and the latter would in turn deliver to the former Phil. The contract of loan was between Villanueva and Nite. No collection suit could prosper without Nite who was
an indispensable party
Commercial International Bank (PCIB) managers check in the sum of P4.2 million and the dollar draft in the same amount The SC ruled in favor of Nite and that Villanueva was fraudulent. The SC pointed out Villanueva's action of having to
to be issued by Hang Seng Bank Ltd. of HongKong. But Chandiramani did not appear at the rendezvous and Ranigo allegedly file his complaint against the bank days after he received the P235,000 payment. By filing a complaint against the
lost the two cashiers checks and the dollar draft. bank and Nite not impleaded within, it show his intent to prevent her from opposing his action.
Still, the RTC decision was to be annulled becasue as the NIL provides, the drawee cannot be held liable unless he
The loss was then reported to the police. It transpired, however that the checks and the dollar draft were never lost, for
accepts the check. There was no privity between ABC and Villanueva.
Chandiramani was able to get hold of them without delivering the exchange consideration consisting of PCIB Managers
Invoking Sections 185 and 189 of the Negotiable Instruments Law, if a bank refuses to pay a check, the payee-holder
checks. Two hours after Chandiramani was able to meet Ranigo, the former delivered to David the two cashiers checks of
cannot sue the bank. the payee should instead sue the holder who might in turn sue the bank. there is no privity of
Yang and, in exchange, got US $360,000 from David, who in turn deposited them. Chandiramani also deposited the dollar
contract that exists between the drawee-bank and the payee.
draft in PCIG FCDU No. 4194-0165-2. Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments
SEC. 185. Check, defined. A check is a bill of exchange drawn on a bank payable on demand. Except as herein
she believed to be lost. Both Banks complied with her request, but upon the representation of PCIB, FEBTC subsequently
otherwise provided, the provisions of this Act applicable to a bill of exchange payable on demand apply to a check
lifted the stop payment order on FEBTC Dollar Draft No. 4771, thus, enabling the holder PCIB FCDU Account No. 4194-
0165-2 to received the amount of US $ 200, 000. SEC. 189. When check operates as an assignment. A check of itself does not operate as an assignment of any part of
the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts
(1) Whether or not David may be considered a holder in due course. or certifies the check
Rule 3, Sec. 7 of the Rules of Court states: Sec. 7. Compulsory joinder of indispensable parties. Parties in
(2) Whether or not the presumption that every party to an instrument acquired the same for a consideration is applicable interest without whom no final determination can be had of an action shall be joined either as plaintiffs or
in this case. defendants.


The Bank is under strict liability, based on the contract between the bank and its customer (drawer), to pay the check
(1) Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only to the payee or the payees order. The drawers instructions are reflected on the face and by the terms of the
only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a payee or check. When the drawee bank pays a person other than the payee named on the check, it does not comply with the
indorsee of a bill or note, who is in possession of it, or the bearer thereof. terms of the check and violates its duty to charge the drawers account only for properly payable items.
Facts: BA-Finance Corporation (BA Finance) and Miller Offset Press, Inc. (Miller) entered into a credit line facility
In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains agreement whereby Miller can discount and assign its trade receivables with the BA Finance. At the same time, Uy Kiat
the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course Chung, Ching Uy Seng, and Uy Chung Guan Seng, acting for Miller, executed a Continuing Suretyship Agreement with BA-
applies in his favor. Finance. Under the agreement, they jointly and severally guaranteed the full and prompt payment of any and all
indebtedness which Miller may incur with BA-Finance.
(2) The presumption is that every party to an instrument acquired the same for a consideration. However, said
presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the Miller discounted and assigned several trade receivables to BA-Finance by executing Deeds of Assignment in favor of the
checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in latter. In consideration thereof, BA-Finance issued four checks payable to the order of Miller with the notation For Payees
Section 52 must concur in Davids case, otherwise he cannot be deemed a holder in due course. Account Only. These checks were drawn against Bank of America. The four checks were deposited by Ching Uy Seng in
Associated Citizens Bank with his joint account with Uy Chung Seng. Associated Bank stamped the checks and guaranteed
all prior endorsements and/or lack of endorsements and sent them through clearing. Later, Bank of America as drawee ISSUE: W/N Gold Palace should be liable for the altered Foreign Draft
bank honored the checks and paid the proceeds to Associated Bank as the collecting bank. When Miller failed to deliver to
BA-Finance the proceeds of the assigned trade receivables, BA-Finance filed a collection suit against Miller and impleaded HELD: NO. AFFIRMED WITH THE MODIFICATION that the award of exemplary damages and attorney's fees is DELETED
the three representative of the latter. Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides that the acceptor, by accepting the instrument,
Bank of America filed a third party complaint against Associated Bank. In its answer to the third party complaint, engages that he will pay it according to the tenor of his acceptance.
Associated Bank admitted having received the four checks for deposit in the joint account of Ching Uy Seng and Uy Chung This provision applies with equal force in case the drawee pays a bill without having previously accepted it. Actual
Guan Seng, but alleged that Ching Uy Seng, being one of the corporate officers of Miller, was duly authorized to act for and payment by the drawee is greater than his acceptance, which is merely a promise in writing to pay. The payment of a
on behalf of Miller. check includes its acceptance. The tenor of the acceptance is determined by the terms of the bill as it is when the
drawee accepts.
Issues: [1] Whether or not Bank of America is liable to pay BA-Finance and [2] whether or not Associated Bank should LBP was liable on its payment of the check according to the tenor of the check at the time of payment, which was the
reimburse Bank of America the amount of the four checks. raised amount. Gold Palace was not a participant in the alteration of the draft, was not negligent, and was a holder in
Held [1]: The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract due course.
between the bank and its customer (drawer), to pay the check only to the payee or the payees order. The drawers LBP, having the most convenient means to correspond with UOB, did not first verify the amount of the draft before it
instructions are reflected on the face and by the terms of the check. When the drawee bank pays a person other than the cleared and paid the same. Gold Palace had no facility to ascertain with the drawer, UOB Malaysia, the true amount in
payee named on the check, it does not comply with the terms of the check and violates its duty to charge the drawers the draft. It was left with no option but to rely on the representations of LBP that the draft was good
account only for properly payable items. On the part of Associated Bank, the law imposes a duty of diligence on the Principle that the drawee bank, having paid to an innocent holder the amount of an uncertified, altered check in good
collecting bank to scrutinize checks deposited with it for the purpose of determining their genuineness and regularity. The faith and without negligence which contributed to the loss, could recover from the person to whom payment was made as
collecting bank being primarily engaged in banking holds itself out to the public as the expert and the law holds it to a high for money paid by mistake - NOT applicable
standard of conduct. In presenting the checks for clearing and for payment, the defendant [collecting bank] made an The Court is also aware that under the Uniform Commercial Code in the United States of America, if an unaccepted
express guarantee on the validity of all prior endorsements. Thus, stamped at the back of the checks are the defendants draft is presented to a drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining
clear warranty. As the warranty has proven to be false and inaccurate, Associated Bank is liable for any damage arising out payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer,
of the falsity of its representation. warrant to the drawee making payment or accepting the draft in good faith that the draft has not been altered - absent
any similar provision in our law, cannot extend the same preferential treatment to the paying bank
Held[2]: A bank that regularly processes checks that are neither payable to the customer nor duly indorsed by the payee Gold Palace is protected by Section 62 of the NIL, its collecting agent, Far East, should not have debited the money
is apparently grossly negligent in its operations. This Court has recognized the unique public interest possessed by the paid by the drawee bank from respondent company's account. When Gold Palace deposited the check with Far East, it,
banking industry and the need for the people to have full trust and confidence in their banks. For this reason, banks are under the terms of the deposit and the provisions of the NIL, became an agent of the Gold Palace for the collection of
minded to treat their customers accounts with utmost care, confidence, and honesty. In a checking transaction, the drawee the amount in the draft
bank has the duty to verify the genuineness of the signature of the drawer and to pay the check strictly in accordance with The subsequent payment by the drawee bank and the collection of the amount by the collecting bank closed the
the drawers instructions, i.e., to the named payee in the check. It should charge to the drawers accounts only the payables transaction insofar as the drawee and the holder of the check or his agent are concerned, converted the check into a
authorized by the latter. Otherwise, the drawee will be violating the instructions of the drawer and it shall be liable for the mere voucher, and, as already discussed, foreclosed the recovery by the drawee of the amount paid. This closure of
amount charged to the drawers account. Rodriguez checks are payable to order since the bank failed to prove that the the transaction is a matter of course; otherwise, uncertainty in commercial transactions, delay and annoyance will
named payees therein are fictitious. arise if a bank at some future time will call on the payee for the return of the money paid to him on the check
Hence, the fictitious-payee rule which will make the instrument payable to bearer does not apply. PNB accepted the 69 As the transaction in this case had been closed and the principal-agent relationship between the payee and the
checks for deposit to the PEMSLA account even without any indorsement from the named payees. It bears stressing that collecting bank had already ceased, the latter in returning the amount to the drawee bank was already acting on its
order instruments can only be negotiated with a valid indorsement. own and should now be responsible for its own actions. Neither can petitioner be considered to have acted as the
representative of the drawee bank when it debited respondent's account, because, as already explained, the drawee
FAR EAST BANK AND TRUST CO. V. GOLD PALACE JEWELLERY CO. bank had no right to recover what it paid. Likewise, Far East cannot invoke the warranty of the payee/depositor who
June 1998: Samuel Tagoe, a foreigner, purchased from Gold Palace Jewellery Co.'s (Gold Palace's) store at SM-North indorsed the instrument for collection to shift the burden it brought upon itself. This is precisely because the said
EDSA several pieces of jewelry valued at P258,000 paid w/ Foreign Draft issued by the United Overseas Bank indorsement is only for purposes of collection which, under Section 36 of the NIL, is a restrictive indorsement. It did
(Malaysia) to Land Bank of the Philippines, Manila (LBP) for P380,000 not in any way transfer the title of the instrument to the collecting bank. Far East did not own the draft, it merely
Teller of Far East Bank, next door tenant, informed Julie Yang-Go (manager of Gold Palace) that a foreign draft has presented it for payment. Considering that the warranties of a general indorser as provided in Section 66 of the NIL
similar nature to a manager's check, but advised her not to release the pieces of jewelry until the draft had been are based upon a transfer of title and are available only to holders in due course, these warranties did not attach to
cleared the indorsement for deposit and collection made by Gold Palace to Far East. Without any legal right to do so, the
Yang issued Cash Invoice so the jewelries can be released. Yang deposited the draft in the company's account with the collecting bank, therefore, could not debit respondent's account for the amount it refunded to the drawee bank.
Far East on June 2, 1998
When Far East, the collecting bank, presented the draft for clearing to LBP, the drawee bank, cleared the it and Gold In the 2008 case of Bank of Philippine Islands v. Royeca, the Court held that since a negotiable instrument is only a
Palace's account with Far East was credited substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere
June 6, 1998: The foreigner eventually returned to claim the purchased goods. After ascertaining that the draft had delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains
been cleared, Yang released the pieces of jewelry and his change, Far East Check of P122,000 paid by the bank suspended until the payment by commercial document is actually realized.
June 26, 1998: LBP informed Far East that the Foreign Draft had been materially altered from P300 to P300,000and
that it was returning the same
Far East refunded the amount to LBP and debit only P168,053.36 of the amount left in Gold Palace' account without a
prior written notice to the account holder. Far East only notified by phone the representatives of the Gold Palace
August 12, 1998: Far East demanded from Gold Palace the payment of balance and upon refusal filed in the RTC.
RTC: in favor of Far East on the basis that Gold Palace was liable under the liabilities of a general indorser CA:
reversed since Far East failed to undergo the proceedings on the protest of the foreign draft or to notify Gold Palace of
the draft's dishonor; thus, Far East could not charge Gold Palace on its secondary liability as an indorser