CAYANAN VS NORTH STAR INTERNATIONAL TRAVEL

10 Oct 2011
GR 172954
Ponente: Villarama, Jr. J.
Petitioner/s: Engr. Jose Cayanan, owner of a recruitment
agency – JEAC Intl Mgmt and Contractor Services
Respondent: North Star International Travel – a travel agency
Sec 24: Presumption of Consideration

FACTS:
North Star extended credit to Cayanan for air tickets of clients -
P510,034.47, and for payment to View Sea Ventures of the
amounts of $60,000 which came from respondent General
Manager’s (Virginia) personal account (ordered by Cayanan),
and another $40,000 by telegraphic transfer with $15,000 from
petitioner.
Cayanan then issued 3 checks drawn from Republic Planters
Bank (RPB) and 2 checks from PCIB. When drawn for payment,
the checks from PCIB amounting to 1.5M and 35,000 were
dishonored for insufficiency of funds while the 3 checks from
RPB were dishonored due to a stop payment by Cayanan. Upon
demand for payment, Cayanan failed to settle.
5 violations of BP 22 were filed by North Star in MeTC. which
found Cayanan Guilty. On Appeal, the RTC acquitted him. The
CA, however, held Cayanan civilly liable.
The Supreme Court held that Cayanan’s defense that there was
no consideration for the issuance of checks could not hold as he
has not presented credible evidence to rebut presumption that
the checks were issued for a valuable consideration.

ISSUE/S:
1. WON checks issued by Cayanan were for valuable
consideration?
2. WON Cayanan is civilly liable to North Star for the value of
the checks?

HELD:
1. Yes, checks were issued for a valuable consideration.

Cayanan has not presented credible evidence to rebut

resumption that checks were issued for a valuable
consideration. Contrary to petitioners claims that North Star did
not give any valuable consideration for the checks since the
US$85,000 was taken from the personal dollar account of
Virginia and not the corporate funds of North Star, the fact that
petitioner himself specifically named North Star as the payee of
the checks is an admission of his liability to North Star and not
to Virginia Balagtas.
Also, his defense that dollars sent to View Sea in Nigeria was
Virginia’s own investment could not hold as she only remitted
such money due to Cayanan’s request/ instructions – this he
never denied. It was him who had business transactions with
View Sea and not Virginia. Transaction between North Star
and Cayanan was actually in the nature of a loan, and
checks were issued as payment of such hence there was no
absence of consideration for the issuance of checks.
2. Yes, Cayanan is liable.
Having failed to fully settle his obligation (loan) under the
checks, the appellate court was correct in holding petitioner
liable to pay the value of the five checks he issued in favor of
North Star.
SC DECISION: Petition Denied. Cayanan liable.
CALTEX (PHILIPPINES), INC. VS COURT OF APPEALS
FACTS:
In 1982, Angel de la Cruz obtained 280certificates of time
deposit (CTDs) from Security Bank and Trust Company for the
former’s deposit with the said bank amounting to P1,120,000.00.
The said CTDs are couched in the following manner:
This is to Certify that B E A R E R has deposited in this Bank the
sum of _______ Pesos, Philippine Currency, repayable to said
depositor _____ days. after date, upon presentation and
surrender of this certificate, with interest at the rate of ___ % per
cent per annum.
Angel de la Cruz subsequently delivered the CTDs to Caltex in
connection with the purchase of fuel products from Caltex.
In March 1982, Angel de la Cruz advised Security Bank that he
lost the CTDs. He executed an affidavit of loss and submitted it
to the bank. The bank then issued another set of CTDs. In the
same month, Angel de la Cruz acquired a loan of P875,000.00
and he used his time deposits as collateral.
In November 1982, a representative from Caltex went to
Security Bank to present the CTDs (delivered by de la Cruz) for
verification. Caltex advised Security Bank that de la Cruz
delivered Caltex the CTDs as security for purchases he made
with the latter. Security Bank refused to accept the CTDs and
instead required Caltex to present documents proving the
agreement made by de la Cruz with Caltex. Caltex however
failed to produce said documents.
In April 1983, de la Cruz’ loan with Security bank matured and
no payment was made by de la Cruz. Security Bank eventually
set-off the time deposit to pay off the loan.
Caltex sued Security Bank to compel the bank to pay off the
CTDs. Security Bank argued that the CTDs are not negotiable
instruments even though the word “bearer” is written on their
face because the word “bearer” contained therein refer to
depositor and only the depositor can encash the CTDs and no
one else.
ISSUE: Whether or not the certificates of time deposit are
negotiable.
HELD: Yes.
The CTDs in question are negotiable instruments as they meet
the requirements of the law for negotiability as provided for in
Section 1 of the Negotiable Instruments Law. The documents
provide that the amounts deposited shall be repayable to the
depositor.
The CTDs indicate that they are payable to the bearer; that
there is an implication that the depositor is the bearer but as to
who the depositor is, no one knows. It does not say on its face
that the depositor is Angel de la Cruz. If it was really the
intention of respondent bank to pay the amount to Angel de la
Cruz only, it could have with facility so expressed that fact in
clear and categorical terms in the documents, instead of having
the word “BEARER” stamped on the space provided for the
name of the depositor in each CTD. On the wordings of the
documents, therefore, the amounts deposited are repayable to
whoever may be the bearer thereof.
Thus, de la Cruz is the depositor “insofar as the bank is
concerned,” but obviously other parties not privy to the
transaction between them would not be in a position to know that
the depositor is not the bearer stated in the CTDs.
However, Caltex may not encash the CTDs because although
the CTDs are bearer instruments, a valid negotiation thereof
for the true purpose and agreement between Caltex and De
la Cruz, requires both delivery and indorsement. As
discerned from the testimony of Caltex’ representative, the
CTDs were delivered to them by de la Cruz merely for guarantee
or security and not as payment.
*The accepted rule is that the negotiability or non-negotiability of
an instrument is determined from the writing, that is, from the
face of the instrument itself.
 The CTDs in question are negotiable instruments as they
meet the requirements of the law for negotiability as
provided for in Section 1 of the Negotiable Instruments
Law. The documents provide that the amounts deposited
shall be repayable to the depositor.
 And according to the document, the depositor is the
"bearer." The documents do not say that the depositor is
Angel de la Cruz and that the amounts deposited are
repayable specifically to him. Rather, the amounts are to be
repayable to the bearer of the documents or, for that matter,
whosoever may be the bearer at the time of presentment.
EULALIO PRUDENCIO and ELISA T.
PRUDENCIO, petitioners,
vs. THE HONORABLE COURT OF APPEALS, THE
PHILIPPINE NATIONAL BANK, RAMON C. CONCEPCION
and MANUEL M. TAMAYO, partners of the defunct
partnership Concepcion & Tamayo Construction Company,
JOSE TORIBIO, Atty-in-Fact of Concepcion & Tamayo
Construction Company, and THE DISTRICT ENGINEER,
Puerto Princesa, Palawan, respondents.
Prudencio V. CA (1986)
G.R. No. L-34539 July 14, 1986
Lessons Applicable: Consideration and Accomodation Party;
Holder in Due Course (Negotiable Instruments)
FACTS:
 Oct 7 1954: Eulalio and Elisa Prudencios, registered
owners of a parcel of land mortgaged to Philippine National
Bank (PNB) to guarantee a loan of P1,000.00 extended to
Domingo Prudencio
 1955: Concepcion & Tamayo Construction Company
(Concepcion) had a pending contract with the Bureau of
Public Works (Bureau) for the construction of the municipal
building in Puerto Princess, Palawan amounting to
P36,800.00
 In need of funds, Jose Toribio, Concepcions' relative, and
attorney-in-fact of the Company, approached PNB to
mortgage their property to secure the loan of P10,000.00 w/
PNB.
 The terms and conditions of the original mortgage for
Pl,000.00 were made integral part of the new mortgage for
P10,000.00 and both documents were registered with the
Register of Deed
 Dec 23 1955: promissory note covering the loan of
P10,000.00 dated Dec 29 1955, maturing on Apr 27 1956,
was signed by Jose Toribio, as attorney-in-fact of the
Company, and by the Prudencios' Deed of Assignment
assigning all payments to be made by the Bureau to the Co.
on account of the contract for the construction in favor of
the PNB.
 PNB approved the Bureau's release of 3 payments directly
to Concepcion for material and labor instead of paying the
same to the Bank on account of the contract price totalling
P11,234.40 without the knowledge of the Prudencios'
 PNB did not apply the initial and subsequent payments to
the Prudencios' debt as provided for in the deed of
assignment
 Jun 30 1956: Concepcion abandoned their work so Bureau
rescinded the construction contract and assumed the work
of completing
 Jun 27 1959: Concepcion filed to cancelled their mortgage
complaint was amended to exclude the Company as
defendant, it having been shown that its life as a partnership
had already expired and, in lieu thereof, Ramon
Concepcion and Manuel M. Tamayo, partners of the
defunct Company, were impleaded in their private capacity
as defendants
 CA affirmed RTC: Denied no stipulation in the deed making
it obligatory on the part of the PNB to notify the petitioners
everytime it authorizes payment to the Company
 Prudencios' contend that as accommodation makers, the
nature of their liability is only that of mere sureties instead
of solidary co-debtors such that "a material alteration in the
principal contract, effected by the creditor without the
knowledge and consent of the sureties, completely
discharges the sureties from all liability on the contract of
suretyship.
ISSUE:
(1) W/N the Prudencios' as accomodating party are liable as
solidary debtors so real estate mortgage executed by them
CANNOT be cancelled
(2) W/N PNB was a holder in due course
HELD: Petition is Granted. CA reversed.
1. YES
Section 29 of the Negotiable Instrument Law
Liability of accommodation party. —An accommodation party is
one who has signed the instrument as maker, drawer, acceptor,
or indorser, without receiving value therefor, and for the purpose
of lending his name to some other person. 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.
Philippine Bank of Commerce v. Aruego: liability of the
accommodation party remains not only primary but also
unconditional to a holder for value remedy is a matter of concern
exclusively between accommodation indorser and
accommodated party
2. NO
payee PNB is an immediate party and, therefore, is NOT a
holder in due course and stands on no better footing than a mere
assignee
holder in due course - payee either acquired the note from
another holder or has not directly dealt with the maker thereof
PNB, in effect, waived payments of the first three releases
PNB can not be regarded as having acted in good faith which is
also one of the requisites of a holder in due course under Section
52 of the Negotiable Instruments Law
It was only when the deed of assignment was shown to the
spouses that they consented to the mortgage and signed the
promissory note in the Bank's favor.
BPI v. CA
G.R. No. 136202
January 25, 2007
Related topic: Sec. 49, NIL (Delivery without endorsement of an
order instrument)
FACTS:
 Salazar had in her possession three crossed checks with
an aggregate amount of P267, 692.50. These checks were
payable to the order of JRT Construction and Trading which
was the name of Templonuevo’s business. Despite lack of
knowledge and endorsement of Templonuevo,
 Salazar was able to deposit the checks in her personal
savings account with BPI and encash the same.
 The three checks were deposited in three different
occasions over the span of eight months.
 A year after the last encashment, Templonuevo protested
the purportedly unauthorized encashments and demanded
from BPI the aggregate amount of the checks.
 BPI complied with Templonuevo’s demand. Since the
money could no longer be debited from the account of
Salazar where she deposited the checks, they froze her
other account with them. Later on, BPI issued a cashier’s
check in favor of Templonuevo for the aggregate amount
and debited P267, 707.70 from Salazar’s account
representing the aggregate amount and the bank charges
for the cashier’s check.
 Salazar filed a complaint against BPI. Trial court ruled in
favor of her which was affirmed by CA.
Hence, this petition.
ISSUE/S:
1. Did BPI have the authority to unilaterally withdraw from
Salazar’s account the amount it has
previously paid upon certain unendorsed order instrument?
2. Did BPI act judiciously in debiting Salazar’s account?
HELD:
1. Yes.
 Records show that no prior arrangement existed between
Salazar and Templonuevo regarding the transfer of
ownership of the checks. This fact is crucial as Salazar’s
entitlement to the value of the instruments is based on the
assumption that she is a transferee within the contemplation
of Section 49 of the NIL.
 Section 49 of the NIL contemplates a situation where
the payee or endorsee delivers a negotiable instrument
for value without endorsing it. The underlying premise of
this provision, however, is that a valid transfer of ownership
of the negotiable instrument in question has taken place.
- Transferees in this situation do not enjoy the
presumption of ownership in favor of holders since they
are neither payees nor endorsees of such instruments.
Mere possession of a negotiable instrument does not
in itself conclusively establish either the right of the
possessor to receive payment, or of the right of one
who has made payment to be discharged from liability.
- Something more than mere possession is necessary to
authorize payment to such possessor.
 The one-year delay of Templonuevo in asserting ownership
over the checks is not enough to prove that there has a valid
transfer of ownership has taken place. Salazar failed to
discharge the burden of presumption of ownership in
Templonuevo’s favor as the designated payee. Thus, the
return of the check proceeds to Templonuevo was therefore
warranted.
 It is immaterial that the account debited by BPI was different
from the original account to which the proceeds of the check
were credited because both belonged to Salazar anyway.
2. No.
 Solely upon the prompting of Templonuevo, BPI debited the
account of Salazar without even serving due notice upon
her. Consequently, this caused damage to Salazar such as
having checks she issued dishonored because she was not
given prior notice of the deduction from her account.
 As such, the award of damages must be sustained.
EN BANC
[G.R. No. L-26767. February 22, 1968.]
ANG TIONG, Plaintiff-Appellee, v. LORENZO TING, doing
business under the name & style of PRUNES PRESERVES
MFG., & FELIPE ANG, Defendants, FELIPE
ANG, Defendant-Appellant.
1. NEGOTIABLE INSTRUMENTS LAW; CHECKS; GENERAL
INDORSER, DEFINED. — A bank check is indisputably a
negotiable instrument and should be governed solely by the
Negotiable Instruments Law (see secs. 1 and 15). Section 63 of
the Negotiable Instruments Law makes "a person placing his
signature upon an instrument otherwise than as maker, drawer
or acceptor" a general indorser "unless he clearly indicates by
appropriate words his intention to be bound in some other
capacity." Section 66 of the same law ordains that "every
indorser who indorses without qualification, warrants to all
subsequent holders in due course" (a) that the instrument is
genuine and in all respects what it purports to be; (b) that he has
a good title to it; (c) that all prior parties have capacity to contract;
and (d) that the instrument is at the time of his indorsement valid
and subsisting. In addition "he engages that on due
presentment, it shall be accepted or paid or both, as the case
may be, and if it be dishonored, he will pay the amount thereof
to the holder."cralaw virtua1aw library
LIABILITIES OF AN ACCOMMODATION PARTY. — Section
29 of the Negotiable Instruments Law by clear mandate makes
the accomodation party "liable on the instrument to a holder for
value, notwithstanding that such holder at the time of taking the
instrument knew him to be only an accommodation party." It is
not a valid defense that the accommodation party did not receive
any valuable consideration when he executed the instrument. It
is not correct to say that the holder for value is not a holder in
due course merely because at the time he acquired the
instrument, he knew that the indorser was only an
accommodation party.
FACTS:
 On August 15, 1960 Lorenzo Ting issued Philippine Bank
of Communications check K-81618, for the sum of P4,000,
payable to "cash or bearer."
 With Felipe Ang’s signature (indorsement in blank) at the
back thereof, the instrument was received by the plaintiff
Ang Tiong who thereafter presented it to the drawee bank
for payment. The bank dishonored it.
 The plaintiff then made written demands on both Lorenzo
Ting and Felipe Ang that they make good the amount
represented by the check. These demands went unheeded;
so he filed in the municipal court of Manila an action for
collection of the sum of P4,000, plus P500 attorney’s fees.
On March 6, 1962 the municipal court adjudged for the
plaintiff against the two defendants.
 Only Felipe Ang appealed to the CFI of Manila (civil case
50018), which rendered judgment on July 31, 1962,
amended by an order dated August 9, 1962, directing him
to pay to the plaintiff "the sum of P4,000, with interest at the
legal rate from the date of the filing of the complaint, a
further sum of P400 as attorney’s fees, and costs."cralaw
virtua1aw library
 Felipe Ang then elevated the case to the Court of Appeals,
which certified it to this Court because the issues raised are
purely of law.
The appellant imputes to the court a quo three errors,
namely,
(1) that it refused to apply article 2071 of the new Civil Code to
the case at bar;
(2) that it adjudged him a general indorser under the Negotiable
Instruments Law (Act 2031); and
(3) that it held that he "cannot obtain his release from the
contract of suretyship or obtain security to protect himself
against any proceedings on the part of the creditor and
against the danger of insolvency of the principal debtor,"
because he is "jointly and severally liable on the
instrument."
RULING: This appeal is absolutely without merit.
1. The genuineness and due execution of the instrument are
not controverted. That the appellee is a holder thereof for
value is admitted.
Having arisen from a bank check which is indisputably a
negotiable instrument, the present case is, therefore, in so far
as the indorsee is concerned vis-a-vis the indorser, governed
solely by the Negotiable Instruments Law (see secs. 1 and 185).
Article 2071 of the new Civil Code, invoked by the appellant, the
pertinent portion of which states, "The guarantor, even before
having paid, may proceed against the principal debtor: (1) when
he is sued for the payment; . . . the action of the guarantor is to
obtain release from the guaranty, to demand a security that shall
protect him from any proceedings by the creditor . . .," is here
completely irrelevant and can have no application whatsoever.
We are in agreement with the trial judge that nothing in the check
in question indicates that the appellant is not a general indorser
within the purview of section 63 of the Negotiable Instruments
Law which makes "a person placing his signature upon an
instrument otherwise than as maker, drawer or acceptor" a
general indorser, — "unless he clearly indicates by appropriate
words his intention to be bound in some other capacity," which
he did not do. And section 66 ordains that "every indorser who
indorses without qualifications, warrants to all subsequent
holders in due course" (a) that the instrument is genuine and in
all respects what it purports to be; (b) that he has a good title to
it; (c) that all prior parties have capacity to contract; and (d) that
the instrument is at the time of his indorsement valid and
subsisting. In addition, "he engages that on due presentment, it
shall be accepted or paid, or both, as the case may be, and that
if it be dishonored, he will pay the amount thereof to the holder."
2. Even on the assumption that the appellant is a mere
accommodation party, as he professes to be, he is nevertheless,
by the clear mandate of section 29 of the Negotiable
Instruments Law, yet "liable on the instrument to a holder
for value, notwithstanding that such holder at the time of
taking the instrument knew him to be only an
accommodation party." To paraphrase, the accommodation
party is liable to a holder for value as if the contract was not for
accommodation. It is not a valid defense that the
accommodation party did not receive any valuable consideration
when he executed the instrument. Nor is it correct to say that the
holder for value is not a holder in due course merely because at
the time he acquired the instrument he knew that the indorser
was only an accommodation party. 2

3. That the appellant, again assuming him to be an

accommodation indorser, may obtain security from the maker to
protect himself against the danger of insolvency of the latter,
cannot in any manner affect his liability to the appellee, as the
said remedy is a matter of concern exclusively between
accommodation indorser and accommodated party. So that the
fact that the appellant stands only as a surety in relation to the
maker, granting this to be true for the sake of argument, is
immaterial to the claim of the appellee, and does not a whit
diminish nor defeat the rights of the latter who is a holder for
value. The liability of the appellant remains primary and
unconditional. To sanction the appellant’s theory is to give
unwarranted legal recognition to the patent absurdity of a
situation where an indorser, when sued on an instrument by a
holder in due course and for value, can escape liability on his
indorsement by the convenient expedient of interposing the
defense that he is a mere accommodation indorser.

Accordingly, the judgment a quo is affirmed in toto, at appellant’s

cost.