POSTAL MONEY ORDERS ARE NON-NEGOTIABLE

Philippine Education Co., Inc. v. Soriano, G.R. No. L-22405, [June 30, 1971]
FACTS:
• This is an appeal from a decision of the Court of First Instance of Manila dismissing the complaint filed by the Philippine Education
Co., Inc. against Mauricio A. Soriano, Enrico Palomar and Rafael Contreras.|||
• Enrique Montinola sought to purchase from the Manila Post Office 10 money orders of P200.00 each payable to E. P. Montinola.
After the postal teller had made out money orders numbered 124685, 124687-124695, Montinola offered to pay for them with a
private check. As private checks were not generally accepted in payment of money orders, the teller advised him to see the
Chief of the Money Order Division, but instead of doing so, Montinola managed to leave the building with his own check and the
10 money orders without the knowledge of the teller.
• Upon discovery of the disappearance of the unpaid money orders, an urgent message was sent to all postmasters and all banks
instructing them not to pay anyone of the money orders aforesaid if presented for payment. The Blank of America received a
copy of said notice three days later.
• One of the above mentioned money orders was received by appellant (Phil Educ) as part of its sales receipts. The following day it
deposited the same with the Bank of America, and one day thereafter the Bank of America cleared it with the Bureau of Posts
and received from the latter its face value of P200.00.
• appellee Mauricio A. Soriano, Chief of the Money Order Division of the Manila Post Office, acting for and in behalf of his co-
appellee, Post-master Enrico Palomar, notified the Bank of America that money order attached to his letter had been found to
have been irregularly issued and that, in view thereof, the amount it represented had been deducted from the bank's clearing
account.
• For its part, the Bank of America debited appellant's (Phil Educ) account with the same amount and gave it advice thereof by
means of a debit memo.
• appellant (Phil Educ) requested the Postmaster General to reconsider the action taken by his office deducting the sum of P200.00
from the clearing account of the Bank of America, but his request was denied. So was appellant's subsequent request that the
matter be referred to the Secretary of Justice for advice. Thereafter, appellant elevated the matter to the Secretary of Public
Works and Communications, but the latter sustained the actions taken by the postal officers.
• Montinola was charged with theft in the Court of First Instance of Manila but after trial he was acquitted on the ground of
reasonable doubt.
• appellant filed an action against appellees in the Municipal Court of Manila, and the court ruled in their favor, ordering the
defendants to countermand the notice given to the Bank of America, deducting from said Bank's clearing account the sum of
P200.00 representing the amount of postal money
• The case was appealed to CFI Manila but was then dismissed.

ISSUE: WON the postal money order in question is a negotiable instrument

- that its nature as such is not in anyway affected by the letter dated October 26, 1948 signed by the Director of Posts and
addressed to all banks with a clearing account with the Post Office, and that, money orders, once issued, create a contractual
relationship of debtor and creditor, respectively, between the government, on the one hand, and the remitters payees or
endorsees, on the other
HELD:
• It is not disputed that our postal statutes were patterned after similar statutes in force in the United States.
• For this reason, ours are generally construed in accordance with the construction given in the United States to their own postal
statutes, in the absence of any special reason justifying a departure from this policy or practice.
• The weight of authority in the United Status is that postal money orders are not negotiable instruments, the reason behind this rule
being that, in establishing and operating a postal money order system, the government is not engaging in commercial
transactions but merely exercises a governmental power for the public benefit.
• It is to be noted in this connection that some of the restrictions imposed upon money orders by postal laws and regulations are
inconsistent with the character of negotiable instruments.
• For instance, such laws and regulations usually provide for not more than one endorsement; payment of money orders may be
withheld under a variety of circumstances

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ELECTRONIC MESSAGES ARE NON NEGOTIABLE INSTRUMENTS
Hongkong & Shanghai Banking Corp. Ltd.-Phil. Branch v. Commissioner of Internal Revenue, G.R. No. 166018 & 167728, [June 4, 2014]
FACTS:
• As a custodian bank, HSBC serves as the collection/payment agent with respect to dividends and other income derived from its
investor-clients' passive investments
• HSBC's investor-clients maintain Philippine peso and/or foreign currency accounts, which are managed by HSBC through
instructions given through electronic messages. The said instructions are standard forms known in the banking industry as SWIFT, or
"Society for Worldwide Interbank Financial Telecommunication."
• In purchasing shares of stock and other investment in securities, the investor-clients would send electronic messages from abroad
instructing HSBC to debit their local or foreign currency accounts and to pay the purchase price therefor upon receipt of the
securities.
• Pursuant to the electronic messages of its investor-clients, HSBC purchased and paid Documentary Stamp Tax (DST) from 1997 to
1998
• BIR, thru its then Commissioner, Beethoven Rualo, issued BIR Ruling No. 132-99 to the effect that instructions or advises from abroad
on the management of funds located in the Philippines which do not involve transfer of funds from abroad are not subject to DST
• A letter reply was issued by the BIR Commissioner regarding the clarifications of HSBC:
o Under the foregoing provision, the documentary stamp tax shall be levied on the instrument, i.e., a bill of exchange or order
for the payment of money, which purports to draw money from a foreign country but payable in the Philippines.
o Under the Documentary Stamp Tax Law, the mere withdrawal of money from a bank deposit, local or foreign currency
account, is not subject to DST, unless the account so maintained is a current or checking account, in which case, the
issuance of the check or bank drafts is subject to the documentary stamp tax imposed under Section 179 of the 1997 Tax
Code.
o In the instant case, and subject to the physical impossibility on the part of the payor to be present and prepare and sign an
instrument purporting to pay a certain obligation, the withdrawal and payment shall be made in cash. In this light, the
withdrawal shall not be subject to documentary stamp tax. The case is parallel to an automatic bank transfer of local funds
from a savings account to a checking account maintained by a depositor in one bank
o In the light of the foregoing, this Office hereby holds that the instruction made through an electronic message by non-
resident payor-client to debit his local or foreign currency account maintained in the Philippines and to pay a certain named
recipient also residing in the Philippines is not the transaction contemplated under Section 181 of the 1997 Tax Code. Such
being the case, such electronic instruction purporting to draw funds from a local account intended to be paid to a named
recipient in the Philippines is not subject to documentary stamp tax imposed under the foregoing Section
• With the above BIR Ruling as its basis, HSBC an administrative claim for the refund allegedly representing erroneously paid DST to
the BIR for the period covering September to December 1997.
o HSBC filed another administrative claim for the refund allegedly representing erroneously paid DST to the BIR for the
period covering January to December 1998. TacSAE
• As its claims for refund were not acted upon by the BIR, HSBC subsequently brought the matter to the CTA
• The CTA Decisions favored HSBC. Respondent Commissioner of Internal Revenue was ordered to refund or issue a tax credit
certificate in favor of HSBC
• However, the Court of Appeals reversed both decisions of the CTA and ruled that the electronic messages of HSBC's investor-
clients are subject to DST
• Hence, these petitions.|||
o HSBC asserts that the Court of Appeals committed grave error when it disregarded the factual and legal conclusions of
the CTA. HSBC further argues that the CIR had already settled the issue on the taxability of electronic messages involved
in these cases
o The Commissioner of Internal Revenue, on the other hand, claims that Section 181 of the 1997 Tax Code imposes DST on
the acceptance or payment of a bill of exchange or order for the payment of money. The DST under Section 18 of
the 1997 Tax Code is levied on HSBC's exercise of a privilege which is specifically taxed by law.

ISSUE: WON the electronic messages are negotiable bill of exchange, and thus, subject to DST Law

HELD: NO
• The Court agrees with the CTA that the DST under Section 181 of the Tax Code is levied on the acceptance or payment of "a bill
of exchange purporting to be drawn in a foreign country but payable in the Philippines" and that "a bill of exchange is an
unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it
is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer."
• The Court further agrees with the CTA that the electronic messages of HSBC's investor-clients containing instructions to debit their
respective local or foreign currency accounts in the Philippines and pay a certain named recipient also residing in the Philippines
is not the transaction contemplated under Section 181 of the Tax Code as such instructions are "parallel to an automatic bank
transfer of local funds from a savings account to a checking account maintained by a depositor in one bank."
• The Court favorably adopts the finding of the CTA that the electronic messages "cannot be considered negotiable instruments as
they lack the feature of negotiability, which, is the ability to be transferred" and that the said electronic messages are "mere
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 memoranda" of the transaction consisting of the "actual debiting of the [investor-client-]payor's local or foreign currency account
in the Philippines" and "entered as such in the books of account of the local bank," HSBC
• More fundamentally, the instructions given through electronic messages that are subjected to DST in these cases are not
negotiable instruments as they do not comply with the requisites of negotiability under Section 1 of the Negotiable Instruments
Law, which provides:

Sec. 1. Form of negotiable instruments. — An instrument to be negotiable must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.

1. The electronic messages are not signed by the investor-clients as supposed drawers of a bill of exchange;
2. they do not contain an unconditional order to pay a sum certain in money as the payment is supposed to come from a specific
fund or account of the investor-clients;
3. and, they are not payable to order or bearer but to a specifically designated third party.
• Thus, the electronic messages are not bills of exchange. As there was no bill of exchange or order for the payment drawn abroad
and made payable here in the Philippines, there could have been no acceptance or payment that will trigger the imposition of
the DST under Section 181 of the Tax Code.

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CHECKS ARE NOT LEGAL TENDER AND PAYMENT OF WHICH MAY BE REFUSED BY THE CREDITOR
Tibajia, Jr. v. Court of Appeals, G.R. No. 100290, [June 4, 1993]
FACTS:
• Case No. 54863 was a suit for collection of a sum of money filed by Eden Tan against the Tibajia spouses. A writ of attachment was
issued by the trial court, the Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses in the RTC of Kalookan
City in the amount of P442,750.00 in another case, had been garnished by him.
• RTC Pasig rendered its decision in Civil Case No. 54863 in favor of the plaintiff Eden Tan, ordering the Tibajia spouses to pay her an
amount in excess of P300,000.00.
• The decision having become final, Eden Tan filed the corresponding motion for execution and thereafter, the garnished funds
which by then were on deposit with the cashier of RTC Pasig were levied upon.
• the Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment in the following form:
o Cashier's Check P262,750.00
Cash 135,733.70
Total P398,483.70
• Private respondent, Eden Tan, refused to accept the payment made by the Tibajia spouses
• defendant spouses (petitioners) filed a motion to lift the writ of execution on the ground that the judgment debt had already
been paid.
• the motion was denied by the trial court on the ground that payment in cashier's check is not payment in legal tender and that
payment was made by a third party other than the defendant. MR was also denied.
• The appellate court also affirmed the dismissal.

ISSUE: Whether or not payment by means of check (even by cashier's check) is considered payment in legal tender as required by the Civil
Code, Republic Act No. 529, and the Central Bank Act.

HELD: NO

• It is contended by the petitioners that the check, which was a cashier's check of the Bank of the Philippine Islands, undoubtedly a
bank of good standing and reputation, and which was a crossed check marked "For Payee's Account Only" and payable to
private respondent Eden Tan, is considered legal tender, payment with which operates to discharge their monetary obligation.
• Petitioners, to support their contention, cite the case of New Pacific Timber and Supply Co., Inc. v. Seneris where this Court held
through Mr. Justice Hermogenes Concepcion, Jr. that "It is a well-known and accepted practice in the business sector that a
cashier's check is deemed as cash"
• In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals and Roman Catholic Bishop of Malolos, Inc. vs. Intermediate
Appellate Court, this Court held that.

"A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a
debt is not a valid tender of payment and may be refused receipt by the obligee or creditor."

• The ruling in these two (2) cases merely applies the statutory provisions which lay down the rule that a check is not legal
tender and that a creditor may validly refuse payment by check, whether it be a manager's, cashier's or personal check.

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PAYMENT THROUGH CHECK IN THE NAME OF THE SHERIFF WILL NOT EXTINGUISH THE OBLIGATION
Philippine Airlines, Inc. v. Court of Appeals, G.R. No. L-49188

FACTS:

• respondent Amelia Tan, under the name and style of Able Printing Press commenced a complaint for damages before CFI
Manila against PAL.
o After trial, the court ruled in favor of private respondent Amelia Tan and against petitioner Philippine Airlines, Inc. (PAL)
o No further appeal having been taken by the parties, the judgment became final and executory and, judgment was
correspondingly entered in the case.
o The case was remanded to the trial court for execution and on, respondent Amelia Tan filed a motion praying for the
issuance of a writ of execution of the judgment rendered by the Court of Appeals.
o the trial court, presided over by Judge Galano, issued its order of execution with the corresponding writ in favor of the
respondent.
o The writ was duly referred to Deputy Sheriff Emilio Z. Reyes of CFI Manila for enforcement.
o Four months later, respondent Amelia Tan moved for the issuance of an alias writ of execution stating that the
judgment remained unsatisfied.
o the petitioner filed an opposition to the motion for the issuance of an alias writ of execution stating that it had already
fully paid its obligation to plaintiff through the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced by
cash vouchers properly signed and receipted by said Emilio Z. Reyes.
o respondent Amelia Tan filed a motion to withdraw "Motion for Partial Alias Writ of Execution" with Substitute Motion for
Alias Writ of Execution
o the respondent Sheriff Jaime K. del Rosario served a notice of garnishment on the depository bank of petitioner, Far
East Bank and Trust Company, Rosario Branch, Binondo, Manila, through its manager and garnished the petitioner's
deposit in the said bank in the total amount of P64,408.00 as of May 16, 1978. Hence, this petition for certiorari filed by
the Philippine Airlines

ISSUE: Did the payment made to the absconding sheriff by check in his name operate to satisfy the judgment debt?

HELD: NO, the payment to the absconding sheriff by check in his name did not operate as a satisfaction of the judgment debt.

• In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Article 1240 of
the Civil Code provides: "Payment shall be made to the person in whose favor the obligation has been constituted, or his
successor in interest, or any person authorized to receive it." (Emphasis supplied)
• Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the
particular payment
• The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so
authorized is deemed payment to the creditor?
o Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the sheriff should be valid
payment to extinguish the judgment debt. cdrep
o There are circumstances in this case, however, which compel a different conclusion.
• The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were
not payable to Amelia Tan or Able Printing Press but to the absconding sheriff.
• Did such payments extinguish the judgment debt? NO
• In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money and
unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of
payment of his debt.
• Consequently, unless authorized to do so by law or by consent of the obligee, a public officer has no authority to accept
anything other than money in payment of an obligation under a judgment being executed.
• Strictly speaking, the acceptance by the sheriff of the petitioner's checks, in the case at bar, does not, per se, operate as a
discharge of the judgment debt.
• Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by
itself, operate as payment. A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check
in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of
checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the
payment by commercial document is actually realized
• It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another. The issuance
of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn. Having
failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss had but itself to
blame.|||

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TREASURY WARRANTS ARE NOT NEGOTIABLE INSTRUMENTS; AN INDICATION OF A PARTICULAR FUND IS NOT AN UNCONDITIONAL PROMISE TO
PAY
Metropolitan Bank & Trust Co. v. Court of Appeals, G.R. No. 88866, [February 18, 1991], 271 PHIL 994-1006

FACTS:
• a certain Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months 38 treasury
warrants with a total value of P1.7M. They were all drawn by the Philippine Fish Marketing Authority.
• On various dates, all these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to
its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro.
• They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of
Treasury for special clearing.
• More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether the warrants
had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not allowed to withdraw from his account.
• Later, however, "exasperated" over Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner
says it finally decided to allow Golden Savings to withdraw from the proceeds of the warrants. There were 4 withdrawals in total.
• In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually collecting the total
amount of P1,167,500.00 from the proceeds of the apparently cleared warrants.
• Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury, and demanded the
refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account.
• The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of Mindoro. After trial, judgment was
rendered in favor of Golden Savings
• On appeal to the respondent court, the decision was affirmed, prompting Metrobank to file this petition for review on the ground
that: Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings, the latter should bear
the loss. And that Respondent Court of Appeals erred in holding that the treasury warrants involved in this case are not negotiable
instruments

ISSUES:

1) WHO between Metrobank and Golden Savings, should bear the loss

2) WON treasury warrants involved in this case are negotiable instruments

HELD:

1) METROBANK should bear the loss

• Metrobank exhibited extraordinary carelessness. The amount involved was not trifling — more than one and a half million pesos
(and this was 1979). There was no reason why it should not have waited until the treasury warrants had been cleared; it would not
have lost a single centavo by waiting. Yet, despite the lack of such clearance — and notwithstanding that it had not received a
single centavo from the proceeds of the treasury warrants, as it now repeatedly stresses — it allowed Golden Savings to withdraw
— not once, not twice, but thrice — from the uncleared treasury warrants in the total amount of P968,000.00. LexLib
• Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and it also wanted to
"accommodate" a valued client. It "presumed" that the warrants had been cleared simply because of "the lapse of one week." 8
For a bank with its long experience, this explanation is unbelievably naïve.

2) The treasury warrants are not negotiable instruments

• Clearly stamped on their face is the word "non-negotiable." Moreover, and this is of equal significance, it is indicated that they are
payable from a particular fund, to wit, Fund 501
• The following sections of the Negotiable Instruments Law, especially the underscored parts, are pertinent:

SECTION 1. — Form of negotiable instruments. — An instrument to be negotiable must conform to the following
requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable
certainty.

xxx xxx xxx

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 SEC. 3. When promise is unconditional. — An unqualified order or promise to pay is unconditional within the meaning
of this Act though coupled with —

(a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited
with the amount; or

(b) A statement of the transaction which gives rise to the instrument.

But an order or promise to pay out of a particular fund is not unconditional.

• The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay
"not unconditional" and the warrants themselves non-negotiable. There should be no question that the exception on Section 3 of
the Negotiable Instruments Law is applicable in the case at bar.
• Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were "genuine and in all
respects what they purport to be," in accordance with Section 66 of the Negotiable Instruments Law.
o The simple reason is that this law is not applicable to the non-negotiable treasury warrants.
o The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but
merely to deposit them with Metrobank for clearing.
o It was in fact Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior indorsement
and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch." LL

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A CHECK DRAWN PAYABLE TO THE ORDER OF "CASH" IS A CHECK PAYABLE TO BEARER
Ang Tek Lian v. Court of Appeals, G.R. No. L-2516, [September 25, 1950]

FACTS:

• It appears that, knowing he had no funds therefor, Ang Tek Lian drew on Saturday, November 16, 1946, the check upon the
China Banking Corporation for the sum of P4,000, payable to the order of "cash".
• He delivered it to Lee Hua Hong in exchange for money which the latter handed in the act.
• On the next business day, the check was presented by Lee Hua Hong to the drawee bank for payment, but it was dishonored
for insufficiency of funds, the balance of the deposit of Ang Tek Lian on both dates being P335 only.
• The Court of Appeals believed the version of Lee Huan Hong who testified that " appellant went to his office, and asked him to
exchange Exhibit A — which he (appellant) then brought with him — with cash alleging that he needed badly the sum of
P4,000 represented by the check, but could not withdraw it from the bank, it being then already closed; that in view of this
request and relying upon appellant's assurance that he had sufficient funds in the bank to meet Exhibit A, said complainant
delivered to him, on the same date, the sum of P4,000 in cash; that despite repeated efforts to notify him that the check had
been dishonored by the bank, appellant could not be located any-where, until he was summoned in the City Fiscal's Office in
view of the complaint for estafa filed in connection therewith; and that appellant has not paid as yet the amount of the check,
or any part thereof."

ISSUE: WON indorsement is necessary for the presentation of a bearer instrument for payment (connection: Estafa, as argued, will not be
committed if there is no indorsement)

HELD: No, indorsement is not necessary for the presentation of a bearer instrument for payment

• Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the order of "cash" is a check payable to bearer, and
the bank may pay it to the person presenting it for payment without the drawer's indorsement.
o "A check payable to the order of cash is a bearer instrument.
o "Where a check is made payable to the order of 'cash', the word cash 'does not purport to be the name of any person', and
hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but may pay it
to the person presenting it without any indorsement. . . ."
• Of course, if the bank is not sure of the bearer's identity or financial solvency, it has the right to demand identification and/or
assurance against possible complications, — for instance, (a) forgery of drawer's signature, (b) loss of the check by the rightful owner,
(c) raising of the amount payable, etc. The bank may therefore require, for its protection, that the indorsement of the drawer — or of
some other person known to it — be obtained. But where the Bank is satisfied of the identity and/or the economic standing of the
bearer who tenders the check for collection, it will pay the instrument without further question; and it would incur no liability to the
drawer in thus acting.
o "A check payable to bearer is authority for payment to the holder. Where a check is in the ordinary form, and is payable to
bearer, so that no indorsement is required, a bank, to which it is presented for payment, need not have the holder identified,
and is not negligent in failing to do so||

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COMMERCIAL BAD FAITH AS AN EXCEPTION TO FICTITIOUS PAYEE DEFENSE
Philippine National Bank v. Spouses Rodriguez, G.R. No. 170325, [September 26, 2008]

FACTS:

• Respondents-Spouses Erlando and Norma Rodriguez were clients of PNB, Amelia Avenue Branch, Cebu City. They maintained
savings and demand/checking accounts.
• The spouses were engaged in the informal lending business. In line with their business, they had a discounting arrangement with
the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employees.
o Naturally, PEMSLA was likewise a client of PNB Amelia Avenue Branch. The association maintained current and savings
accounts with petitioner bank.
• PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to members
whenever the association was short of funds. As was customary, the spouses would replace the postdated checks with their
own checks issued in the name of the members.
• It was PEMSLA's policy not to approve applications for loans of members with outstanding debts. To subvert this policy, some
PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan accounts. They took out loans in
the names of unknowing members, without the knowledge or consent of the latter.
• The PEMSLA checks issued for these loans were then given to the spouses for rediscounting. The officers carried this out by
forging the indorsement of the named payees in the checks.
• In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and delivered the checks to
an officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the spouses to their account.
• Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the
named payees. This was an irregular procedure made possible through the facilitation of Edmundo Palermo, Jr., treasurer of
PEMSLA and bank teller in the PNB Branch. It appears that this became the usual practice for the parties.
• For the period November 1998 to February 1999, the spouses issued (69) checks, in the total amount of P2,3M.These were
payable to (47) individual payees who were all members of PEMSLA.
• Petitioner PNB eventually found out about these fraudulent acts. To put a stop to this scheme, PNB closed the current account
of PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason "Account
Closed". The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings account. The amounts
were duly debited from the Rodriguez account. Thus, because the PEMSLA checks given as payment were returned, spouses
Rodriguez incurred losses from the rediscounting transactions.
• Alarmed over the unexpected turn of events, the spouses Rodriguez filed a civil complaint for damages against PEMSLA,
the Multi-Purpose Cooperative of Philnabankers (MCP), and petitioner PNB
o The spouses contended that because PNB credited the checks to the PEMSLA account even without
indorsements, PNB violated its contractual obligation to them as depositors. PNB paid the wrong payees,
hence, it should bear the loss|||
• The bank contended that spouses Rodriguez, the makers, actually did not intend for the named payees to receive the
proceeds of the checks. Consequently, the payees were considered as "fictitious payees" as defined under the
Negotiable Instruments Law (NIL). Being checks made to fictitious payees which are bearer instruments, the checks were
negotiable by mere delivery.|||
• RTC rendered judgment in favor of spouses Rodriguez (plaintiffs).
• The CA found that the checks were bearer instruments, thus they do not require indorsement for negotiation; The payees
in the checks were "fictitious payees" because they were not the intended payees at all
• CA reversed itself via an Amended Decision. The CA ruled that the checks were payable to order
• Hence, the present recourse under Rule 45

ISSUE: whether the subject checks are payable to order or to bearer and who bears the loss? (WHEN the payee of the check is not
intended to be the true recipient of its proceeds, is it payable to order or bearer? What is the fictitious-payee rule and who is liable
under it? Is there any exception?)

HELD: PAYABLE TO ORDER; PNB IS LIABLE

• The distinction between bearer and order instruments lies in their manner of negotiation. Under Section 30 of the NIL, an order
instrument requires an indorsement from the payee or holder before it may be validly negotiated. A bearer instrument, on the
other hand, does not require an indorsement to be validly negotiated. It is negotiable by mere delivery
• A check that is payable to a specified payee is an order instrument. However, under Section 9 (c) of the NIL, a check payable to
a specified payee may nevertheless be considered as a bearer instrument if it is payable to the order of a fictitious or non-existing
person, and such fact is known to the person making it so payable.
• Thus, checks issued to "Prinsipe Abante" or "Si Malakas at si Maganda", who are well-known characters in Philippine mythology,
are bearer instruments because the named payees are fictitious and non-existent
• A review of US jurisprudence yields that an actual, existing, and living payee may also be "fictitious" if the maker of the check did
not intend for the payee to in fact receive the proceeds of the check

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 o Thus, a check made expressly payable to a non-fictitious and existing person is not necessarily an order instrument. If
the payee is not the intended recipient of the proceeds of the check, the payee is considered a "fictitious" payee and
the check is a bearer instrument. aTcESI
• In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the loss. When faced with a
check payable to a fictitious payee, it is treated as a bearer instrument that can be negotiated by delivery. The underlying
theory is that one cannot expect a fictitious payee to negotiate the check by placing his indorsement thereon. And since the
maker knew this limitation, he must have intended for the instrument to be negotiated by mere delivery. Thus, in case of
controversy, the drawer of the check will bear the loss
• However, there is a commercial bad faith exception to the fictitious-payee rule. A showing of commercial bad faith on 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. Commercial bad faith is present if the transferee of the check acts dishonestly, and is a party to the fraudulent
scheme.|||
• For the fictitious-payee rule to be available as a defense, PNB must show that the makers did not intend for the named payees to
be part of the transaction involving the checks.
o At most, the bank's thesis shows that the payees did not have knowledge of the existence of the checks. This lack of
knowledge on the part of the payees, however, was not tantamount to a lack of intention on the part of respondents-
spouses that the payees would not receive the checks' proceeds.
o Considering that respondents-spouses were transacting with PEMSLA and not the individual payees, it is understandable
that they relied on the information given by the officers of PEMSLA that the payees would be receiving the checks.
• Verily, the subject checks are presumed order instruments. This is because, as found by both lower courts, PNB failed to present
sufficient evidence to defeat the claim of respondents-spouses that the named payees were the intended recipients of the
checks' proceeds.
• The bank failed to satisfy a requisite condition of a fictitious-payee situation — that the maker of the check intended for the
payee to have no interest in the transaction. cTCADI
• Because of a failureto show that the payees were "fictitious" in its broader sense, the fictitious-payee rule does not apply. Thus,
the checks are to be deemed payable to order. Consequently, the drawee bank bears the Loss
• PNB was remiss in its duty as the drawee bank. It does not dispute the fact that its teller or tellers accepted the 69 checks for
deposit to the PEMSLA account even without any indorsement from the named payees. It bears stressing that order instruments
can only be negotiated with a valid indorsement.
• A bank that regularly processes checks that are neither payable to the customer nor duly indorsed by the payee is apparently
grossly negligent in its operations

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A HOLDER IN DUE COURSE, HOLDS THE INSTRUMENT FREE FROM ANY DEFECT OF TITLE OF PRIOR PARTIES AND FROM DEFENSES AVAILABLE TO
PRIOR PARTIES AMONG THEMSELVES, AND MAY ENFORCE PAYMENT OF THE INSTRUMENT FOR THE FULL AMOUNT THEREOF.
Spouses Violago v. BA Finance Corp., G.R. No. 158262, [July 21, 2008]

FACTS

• Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a car to the spouses Pedro and Florencia
Violago, Avelino explained that he needed to sell a vehicle to increase the sales quota of VMSC, and that the spouses would just
have to pay a down payment of PhP60,500 while the balance would be financed by respondent BA Finance. Under these terms, the
spouses then agreed to purchase a Toyota Cressida Model 1983 from VMSC.
• the spouses and Avelino signed a promissory note under which they bound themselves to pay jointly and severally to the order of
VMSC the amount of PhP209,601 in 36 monthly installments of PhP5,822.25 a month, the first installment to be due and payable on
September 16, 1983.
• VMSC then issued a sales invoice in favor of the spouses with a detailed description of the Toyota Cressida car. In turn, the spouses
executed a chattel mortgage over the car in favor of VMSC as security for the amount of PhP209,601.
• VMSC, through Avelino, endorsed the promissory note to BA Finance without recourse.
• After receiving the amount of PhP209,601, VMSC executed a Deed of Assignment of its rights and interests under the promissory note
and chattel mortgage in favor of BA Finance.
• Meanwhile, the spouses remitted the amount of PhP60,500 to VMSC through Avelino.
• The spouses were unaware that the same car had already been sold in 1982 to Esmeraldo Violago, another cousin of Avelino, and
registered in Esmeraldo's name by the LTO-San Rafael Branch.
• Despite the spouses' demand for the car and Avelino's repeated assurances, there was no delivery of the vehicle. Since VMSC failed
to deliver the car, Pedro did not pay any monthly amortization to BA Finance.
• BA Finance filed with RTC Pasay City a complaint for Replevin with Damages against the spouses.
• the spouses filed their Answer before the RTC, alleging the following: they never received the vehicle from VMSC; the vehicle was
previously sold to Esmeraldo; BA Finance was not a holder in due course under Section 59 of the Negotiable Instruments Law (NIL);
and the recourse of BA Finance should be against VMSC. the Violago spouses, with prior leave of court, filed a Third Party Complaint
against Avelino praying that he be held liable to them in the event that they be held liable to BA Finance, as well as for damages.
VMSC was not impleaded as third party defendant.
• The RTC rendered a Decision finding for BA Finance but against the Violago spouses. The RTC, however, declared that they are
entitled to be indemnified by Avelino.
• On appeal, the CA ruled that the promissory note was a negotiable instrument and that BA Finance was a holder in due
course, applying Secs. 8, 24, and 52 of the NIL

ISSUES: whether BA Finance is a holder in due course of the promissory note, AND whether the note is a negotiable instrument and,
hence, covered by the NIL

HELD: BA Finance is a holder in due course, the note is negotiable

• The promissory note clearly satisfies the requirements of a negotiable instrument under the NIL.
1) It is in writing; signed by the Violago spouses;
2) has an unconditional promise to pay a certain amount, i.e., PhP209,601, on specific dates in the future which could be
determined from the terms of the note;
3) made payable to the order of VMSC; and
4) names the drawees with certainty.
5) The indorsement by VMSC to BA Finance appears likewise to be valid and regular.
• The more important issue now is whether or not BA Finance is a holder in due course. The resolution of this issue will determine
whether petitioners' defense of fraud and nullity of the sale could validly be raised against respondent corporation.
• The law presumes that a holder of a negotiable instrument is a holder thereof in due course.
• In this case, the CA is correct in finding that BA Finance meets all the foregoing requisites:
In the present recourse, on its face,
(a) the "Promissory Note", Exhibit "A", is complete and regular;
(b) the "Promissory Note" was endorsed by the VMSC in favor of the Appellee;
(c) the Appellee, when it accepted the Note, acted in good faith and for value;
(d) the Appellee was never informed, before and at the time the "Promissory Note" was endorsed to the
Appellee, that the vehicle sold to the Defendants-Appellants was not delivered to the latter and that
VMSC had already previously sold the vehicle to Esmeraldo Violago.
Hence, Appellee was a holder in due course.
• In the hands of one other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-
negotiable.
• A holder in due course, however, holds the instrument free from any defect of title of prior parties and from defenses available to
prior parties among themselves, and may enforce payment of the instrument for the full amount thereof.
• Since BA Finance is a holder in due course, petitioners cannot raise the defense of non-delivery of the object and nullity of the sale
against the corporation.
• The NIL considers every negotiable instrument prima facie to have been issued for a valuable consideration.
• In Salas, we held that a party holding an instrument may enforce payment of the instrument for the full amount thereof. As such, the
maker cannot set up the defense of nullity of the contract of sale.
• Thus, petitioners are liable to respondent corporation for the payment of the amount stated in the instrument

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PAYEE ACQUIRED POSSESSION OF THE INSTRUMENT UNDER CIRCUMSTANCES THAT SHOULD HAVE PUT IT TO INQUIRY AS TO THE TITLE OF THE
HOLDER WHO NEGOTIATED THE CHECK TO IT
Vicente R. De Ocampo & Co. v. Gatchalian, G.R. No. L-15126, [November 30, 1961]

FACTS

• An action, for the recovery of the value of the check drawn by Anita Gatchalian and payable to
• De Ocampo for the formers indebtedness, was filed. Gatchalian was interested in looking for a car. Manuel Gonzales offered her a
car. Gonzales alleged that the owner of the car, Ocampo Clinic, authorized him to sell the car. Gatchalian requested to bring the car
and the certificate of registration. Gonzales advised them that the owner of the car will not be willing to give the certificate of
registration unless there is a showing that the party interested in the purchase of said car is ready and willing to make such purchase.
Gonzales requested for a check to show their intention of purchasing the car. The check would be for the safekeeping of Gonzales
and will be returned to Gatchalian. Gonzales and the car did not appear on the day they agreed upon.
• on the failure of Manuel Gonzales to appear the day following and on his failure to bring the car and its certificate of registration and
to return the check, Anita C. Gatchalian issued a 'Stop Payment Order' on the check with the drawee ban
• Manuel Gonzales having received the check from defendant Anita C. Gatchalian delivered the same to the Ocampo Clinic, in
payment of the fees and expenses arising from the hospitalization of his wife;
• Ocampo Clinic accepted said check and delivered to Manuel Gonzales the amount of P158.25 representing the balance on the
amount of the said check
• but because of the stop payment order by Gatchalian, Ocampo was not able to encash the check.
• Defendant was ordered by CFI Manila to pay plaintiff.
• In their appeal defendants-appellants contend that the check is not a negotiable instrument, under the facts and circumstances
stated in the stipulation of facts, and that plaintiff is not a holder in due course.
o because under the circumstances stated in the stipulation of facts there were circumstances that brought suspicion about
Gonzales' possession and negotiation, which circumstances should have placed the plaintiff-appellee under the duty to
inquire into the title of the holder.

ISSUE: WON Ocampo is a holder in due course

HELD: NO

• The stipulation of facts expressly states that plaintiff-appellee was not aware of the circumstances under which the
check was delivered to Manuel Gonzales, but we agree with the defendants-appellants that the circumstances
indicated by them in their briefs, such as:
o the fact that appellants had no obligation or liability to the Ocampo Clinic;
o that the amount of the check did not correspond exactly with the obligation of Matilde Gonzales to Dr. V. R. de
Ocampo; and
o that the check had two parallel lines in the upper left hand corner, which practice means that the check could
only be deposited but may not be converted into cash
o — all these circumstances should have put the plaintiff-appellee to inquiry as to the why and wherefore of the
possession of the check by Manuel Gonzales, and why he used it to pay Matilde's account. It was payee's duty
to ascertain from the holder Manuel Gonzales what the nature of the latter's title to the check was or the nature
of his possession. Having failed in this respect, we must declare that plaintiff-appellee was guilty of gross
neglect in not finding out the nature of the title and possession of Manuel Gonzales, amounting to legal
absence of good faith, and it may not be considered as a holder of the check in good faith, to such effect is
the consensus of authority
• the rule that a possessor of the instrument is prima facie a holder in due course does not apply because there was a
defect in the title of the holder (Manuel Gonzales), because the instrument is not payable to him or to bearer.
• On the other hand, the stipulation of facts indicated by the appellants in their brief, like the fact that the drawer had no
account with the payee; that the holder did not show or tell the payee why he had the check in his possession and why
he was using it for the payment of his own personal account — show that holder's title was defective or suspicious, to say
the least.
• As holder's title was defective or suspicious, it cannot be stated that the payee acquired the check without knowledge
of said defect in holder's title, and for this reason the presumption that it is a holder in due course or that it acquired the
instrument in good faith does not exist.
• And having presented no evidence that it acquired the check in good faith, it (payee) cannot be considered as a
holder in due course. In other words, under the circumstances of the case, instead of the presumption that payee was a
holder in good faith, the fact is that it acquired possession of the instrument under circumstances that should have put it
to inquiry as to the title of the holder who negotiated the check to it.
• the burden was, therefore, placed upon it to show that notwithstanding the suspicious circumstances, it acquired the
check in actual good faith

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ISSUING BANK COULD VALIDLY REFUSE PAYMENT OF A MANAGER’S CHECK IF THE HOLDER IS NOT A HOLDER IN DUE COURSE
RCBC Savings Bank v. Odrada, G.R. No. 219037, [October 19, 2016]

FACTS:

• respondent Noel M. Odrada (Odrada) sold a second-hand Mitsubishi Montero (Montero) to Teodoro L. Lim (Lim) for P1,510,000. Of
the total consideration, P610,000 was initially paid by Lim and the balance of P900,000 was financed by petitioner RCBC through a
car loan obtained by Lim.
• RCBC issued a letter that the balance of the loan would be delivered to Odrada upon submission of the OR and CR. Following the
letter and initial down payment, Odrada executed a Deed of Absolute Sale in favor of Lim and the latter took possession of the
Montero.
• When RCBC received the documents, RCBC issued two manager's checks dated 12 April 2002 payable to Odrada for (P900,000)
and (P13,500).
• After the issuance of the manager's checks and their turnover to Odrada but prior to the checks' presentation, Lim notified Odrada
in a letter dated that there was an issue regarding the roadworthiness of the Montero with a request not to encash the manager's
check[s] issued to by RCBC until he have clarified and satisfied Lim’s complaints.|||
• Odrada did not go to the stated meeting and instead deposited the manager's checks with International Exchange Bank (Ibank)
and redeposited them but the checks were dishonored both times apparently upon Lim's instruction to RCBC.
• Consequently, Odrada filed a collection suit against Lim and RCBC in the Regional Trial Court of Makati.
• The trial court held that Odrada was the proper party to ask for rescission.|||
• The trial court ruled that the defective condition of the Montero was not a supervening event that would justify the dishonor of the
manager's checks. The trial court reasoned that a manager's check is equivalent to cash and is really the bank's own check. It may
be treated as a promissory note with the bank as maker. Hence, the check becomes the primary obligation of the bank which
issued it and constitutes a written promise to pay on demand.
o Being the party primarily liable, the trial court ruled that RCBC was liable to Odrada for the value of the manager's checks
• The CA dismissed the appeal and affirmed the decision of the RTC
• RCBC alone filed this petition before the Court. Thus, the decision of the Court of Appeals became final and executory as to Lim

ISSUE: whether or not the drawee bank of a manager's check has the option of refusing payment by interposing a personal defense of
the purchaser of the manager's check who delivered the check to a third party

HELD: YES

• Jurisprudence defines a manager's check as a check drawn by the bank's manager upon the bank itself and accepted in
advance by the bank by the act of its issuance.
o It is really the bank's own check and may be treated as a promissory note with the bank as its maker.
o Consequently, upon its purchase, the check becomes the primary obligation of the bank and constitutes its written
promise to pay the holder upon demand.
• As a general rule, the drawee bank is not liable until it accepts.
o Prior to a bill's acceptance, no contractual relation exists between the holder and the drawee.
o Acceptance, therefore, creates a privity of contract between the holder and the drawee so much so that the latter,
once it accepts, becomes the party primarily liable on the instrument.
o Accordingly, acceptance is the act which triggers the operation of the liabilities of the drawee (acceptor) under
Section 62 of the NIL
• As can be gleaned in a long line of cases decided by this Court, a manager's check is accepted by the bank upon its
issuance.
o As compared to an ordinary bill of exchange where acceptance occurs after the bill is presented to the drawee, the
distinct feature of a manager's check is that it is accepted in advance.
o Notably, the mere issuance of a manager's check creates a privity of contract between the holder and the drawee
bank, the latter primarily binding itself to pay according to the tenor of its acceptance.
• The drawee bank, as a result, has the unconditional obligation to pay a manager's check to a holder in due course irrespective
of any available personal defenses. However, while this Court has consistently held that a manager's check is automatically
accepted, a holder other than a holder in due course is still subject to defenses.
• We now address the main legal question: if the holder of a manager's check is not a holder in due course, can the drawee
bank interpose a personal defense of the purchaser?|||yes yes yes
• In Mesina v. IAC, This Court ruled that the issuing bank could validly refuse payment because Mesina was not a holder in due
course. Unequivocally, the Court declared: "the holder of a cashier's check who is not a holder in due course cannot enforce
such check against the issuing bank which dishonors the same.|||
• To be a holder in due course, the law requires that a party must have acquired the instrument in good faith and for value.
• Good faith means that the person taking the instrument has acted with due honesty with regard to the rights of the parties
liable on the instrument and that at the time he took the instrument, the holder has no knowledge of any defect or infirmity of
the instrument.

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 • To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom
it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking
the instrument would amount to bad faith.
• Value, on the other hand, is defined as any consideration sufficient to support a simple contract.
• In the present case, Odrada attempted to deposit the manager's checks a day after Lim had informed him that there was a
serious problem with the Montero. Instead of addressing the issue, Odrada decided to deposit the manager's checks. Odrada's
actions do not amount to good faith.
o Clearly, Odrada failed to make an inquiry even when the circumstances strongly indicated that there arose, at the
very least, a partial failure of consideration due to the hidden defects of the Montero. Odrada's action in depositing
the manager's checks despite knowledge of the Montero's defects amounted to bad faith. Moreover, when Odrada
redeposited the manager's checks he was already formally notified by RCBC the previous day of the cancellation of
Lim's auto loan transaction.
• Following UCPB, RCBC may refuse payment by interposing a personal defense of Lim — that the title of Odrada had become
defective when there arose a partial failure or lack of consideration.

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PAYMENT IN CHECKS WILL NOT DISCHARGE THE OBLIGATION TO PAY
Halley v. Printwell, Inc., G.R. No. 157549, [May 30, 2011]

FACTS:

• The petitioner was an incorporator and original director of Business Media Philippines, Inc. (BMPI)
• Printwell engaged in commercial and industrial printing. BMPI commissioned Printwell for the printing of the
magazine Philippines, Inc that BMPI published and sold. For that purpose, Printwell extended 30-day credit accommodations to
BMPI. BMPI placed with Printwell several orders on credit, evidenced by invoices and delivery receipts totaling P316,342.76.
Considering that BMPI paid only P25,000.00, Printwell sued BMPI on January 26, 1990 for the collection of the unpaid balance of
P291,342.76 in the RTC.
• Printwell amended the complaint in order to implead as defendants all the original stockholders and incorporators to recover
on their unpaid subscriptions
• |||The RTC rendered a decision in favor of Printwell, rejecting the allegation of payment in full of the subscriptions in view of an
irregularity in the issuance of the ORs and observing that the defendants had used BMPI's corporate personality to evade
payment and create injustice
• Applying the trust fund doctrine, the RTC declared the defendant stockholders liable to Printwell pro rata
• on appeal, the CA concurred with the RTC
• Only Donnina Halley has come to the Court to seek a further review|||

ISSUE: WON petitioner, through the payment of checks, has fully paid her subscriptions to the capital stock of BMPI, thus, the trust fund
doctrine should be inapplicable to her

HELD: NO, petitioner, through the payment of checks, has NOT fully paid her subscriptions to the capital stock of BMPI, thus, the trust fund
doctrine should be applicable to her

• The petitioner argues, that the trust fund doctrine was inapplicable because she had already fully paid her subscriptions to the
capital stock of BMPI. She thus insists that both lower courts erred in disregarding the evidence on the complete payment of the
subscription, like receipts, income tax returns, and relevant financial statements.
• The petitioner's argument is devoid of substance.
• The trust fund doctrine enunciates a —. . . rule that the property of a corporation is a trust fund for the payment of creditors, but
such property can be called a trust fund 'only by way of analogy or metaphor.' As between the corporation itself and its
creditors it is a simple debtor, and as between its creditors and stockholders its assets are in equity a fund for the payment of its
debts.
• We clarify that the trust fund doctrine is not limited to reaching the stockholder's unpaid subscriptions. All assets and property
belonging to the corporation held in trust for the benefit of creditors that were distributed or in the possession of the
stockholders, regardless of full payment of their subscriptions, may be reached by the creditor in satisfaction of its claim.
• To make out a prima facie case in a suit against stockholders of an insolvent corporation to compel them to contribute to the
payment of its debts by making good unpaid balances upon their subscriptions, it is only necessary to establish that the
stockholders have not in good faith paid the par value of the stocks of the corporation.
• The petitioner posits that the finding of irregularity attending the issuance of the receipts (ORs) issued to the other
stockholders/subscribers should not affect her because her receipt did not suffer similar irregularity.
• Notwithstanding that the RTC and the CA did not find any irregularity in the OR issued in her favor, we still cannot sustain the
petitioner's defense of full payment of her subscription.
• In civil cases, the debtor bears the burden of showing with legal certainty that the obligation has been discharged by payment.
• Apparently, the petitioner failed to discharge her burden.
• Although a receipt is the best evidence of the fact of payment, it is not conclusive, but merely presumptive; nor is it exclusive
evidence, considering that parole evidence may also establish the fact of payment.
• The petitioner's OR No. 227, presented to prove the payment of the balance of her subscription, indicated that her supposed
payment had been made by means of a check.
• Payment is defined as the delivery of money. Yet, because a check is not money and only substitutes for money, the delivery
of a check does not operate as payment and does not discharge the obligation under a judgment. The delivery of a bill of
exchange only produces the fact of payment when the bill has been encashed.
• Ostensibly, therefore, the petitioner's mere submission of the receipt issued in exchange of the check did not satisfactorily
establish her allegation of full payment of her subscription.
• To reiterate, the petitioner was liable pursuant to the trust fund doctrine for the corporate obligation of BMPI by virtue of her
subscription being still unpaid. Printwell, as BMPI's creditor, had a right to reach her unpaid subscription in satisfaction of its
claim.|||

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