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RCBC pay the amount thereof to the holder, or to any subsequent indorser who may
FACTS: be compelled to pay it.
 Gonzales was an employee of RCBC as New Accounts Clerk in the Retail  Under Section 66, the warranties for which Alviar and Gonzales are liable as
Banking Department at its Head Office. general endorsers in favor of subsequent endorsers extend only to the state
 A foreign check in the amount of $7,500 was drawn by Dr. Don Zapanta of the of the instrument at the time of their endorsements, specifically, that the
Ade Medical Group of Los Angeles, California, against the drawee bank instrument is genuine and in all respects what it purports to be; that they
Wilshire Center Bank, N.A., of Los Angeles, California, U.S.A. have good title thereto; that all prior parties had capacity to contract;
o Check payable to Gonzales’ mother, defendant Eva Alviar. Alviar and that the instrument, at the time of their endorsements, is valid and
then endorsed this check. subsisting.
 RCBC gives special accommodations to its employees to receive the check’s  This provision, however, cannot be used by the party which introduced a
value without awaiting the clearing period, Gonzales presented the foreign defect on the instrument, such as respondent RCBC in this case, which
check to Olivia Gomez, the RCBC’s Head of Retail Banking. qualifiedly endorsed the same, to hold prior endorsers liable on the instrument
 After examining this, Olivia Gomez requested Gonzales to endorse it because it results in the absurd situation whereby a subsequent party may
which she did. render an instrument useless and inutile and let innocent parties bear the loss
 Olivia Gomez then acquiesced to the early encashment of the check and while he himself gets away scot-free.
signed the check but indicated thereon her authority of "up to ₱17,500.00  The holder or subsequent endorser who tries to claim under the instrument
only". which had been dishonored for "irregular endorsement" must not be the
 Afterwards, Olivia Gomez directed Gonzales to present the check to RCBC irregular endorser himself who gave cause for the dishonor. Otherwise, a clear
employee Carlos Ramos and procure his signature. After inspecting the injustice results when any subsequent party to the instrument may simply
check, Carlos Ramos also signed it with an "ok" annotation. make the instrument defective and later claim from prior endorsers who have
 After getting the said signatures Gonzales presented the check to Rolando no knowledge or participation in causing or introducing said defect to the
Zornosa, Supervisor of the Remittance section of the Foreign Department of instrument, which thereby caused its dishonor.
the RCBC Head Office, who after scrutinizing the entries and signatures  RCBC, which caused the dishonor of the check upon presentment to the
therein authorized its encashment. Gonzales then received its peso drawee bank, through the qualified endorsement of its employee, Olivia
equivalent of ₱155,270.85. Gomez, cannot hold prior endorsers, Alviar and Gonzales in this case, liable
 RCBC then tried to collect the amount of the check with the drawee bank but on the instrument.
on two occasions dishonored the check because of "END. IRREG" or irregular
indorsement. RCBC again sent the check to the drawee bank, but this time MBTC (formerly Asianbank) v BA Finance
the check was returned due to "account closed".
 Unable to collect, RCBC demanded from Gonzales the payment of the peso Facts:
equivalent of the check that she received. She agreed that payment be done
through salary deduction. – she resigned (only paid for around P12k)  Lamberto Bitanga obtained from resp BA Finance a loan worth Php 329,280.
 RCBC sent a demand letter to Alviar for the payment of her obligation but she To secure this, he mortgaged his car to respondent BA Finance. Said
never responded. mortgage contained the ff. stipulation:
o The MORTGAGOR covenants and agrees that he/it will cause the
ISSUE: W/N RCBC can hold prior endorsers Alviar and Gonzales liable on the
instrument - NO property(ies) hereinabove mortgaged to be insured against loss or
 The check was dishonored because of "End. Irregular," i.e., an irregular damage by accident, theft and fire for a period of one year from
endorsement. It is absolutely undeniable that only the signature of Olivia date hereof with an insurance company or companies acceptable to
Gomez, an RCBC employee, was a qualified endorsement because of the the MORTGAGEE in an amount not less than the outstanding
phrase "up to ₱17,500.00 only." The Court agrees with the petitioner that the balance of mortgage obligations and that he/it will make all loss, if
foreign drawee bank would not have dishonored the check had it not been for any, under such policy or policies, payable to the MORTGAGEE or
this signature of Gomez with the same phrase written by her.
its assigns as its interest may appear .
 A subsequent party which caused the defect in the instrument cannot have
any recourse against any of the prior endorsers in good faith. Eva Alviar’s and  Bitanga thus had the car insured by Malayan Insurance Co., which issued a
the petitioner’s liability to subsequent holders of the foreign check is governed policy containing this stipulation:
by the Negotiable Instruments Law Sec 66. o Loss, if any shall be payable to BA FINANCE CORP. as its interest
 And, in addition, he engages that, on due presentment, it shall be accepted or may appear. It is hereby expressly understood that this policy or
paid, or both, as the case may be, according to its tenor, and that if it be any renewal thereof, shall not be cancelled without prior notification
dishonored and the necessary proceedings on dishonor be duly taken, he will and conformity by BA FINANCE CORPORATION.
 The car was stolen, therefore the insurance company issued a check o Petitioner: Its liability should only be ½ the amount covered by the
payable to the order of BA Finance AND Bitanga drawn against China check as there is no indication that Bitanga and BA Finance are
Banking Corp. It contained a notation For Deposit Account only. solidary creditors to thus make them presumptively joint creditors
 Without the indorsement of BA Finance, Bitanga deposited the check to his under the CC.
account with Asianbank. o SC: NIL and jurisprudence provide definitive justification for
 In the meantime, Bitanga’s loan became past due, and despite demands, he petitioners’ full liability on the value of the check.
failed to settle it. o In this case, petitioner is an indorser. As the collecting bank or last
 BA Finance then found out about the abovementioned events and indorser, it generally suffers the loss because it has the duty to
demanded the payment of the value of the check from Asianbank. Hence, it ascertain the genuineness of all prior indorsements considering that
filed a complaint before the RTC of Makati for sum of money and damages the act of presenting the check for payment to the drawee is an
against Asianbank and Bitanga. assertion that the party making the presentment has done its duty
 RTC: Malayan is not privy to the contract between BA Finance and Bitanga, to ascertain the genuineness of prior indorsements.
and cannot be faulted for issuing the check payable to both BA Finance and o Accordingly, one who credits the proceeds of a check to the
Bitanga. Asianbank was negligent in allowing Bitanga to deposit the check to account of the indorsing payee is liable in conversion to the non-
his account and withdraw the proceeds thereof, without the indorsement of indorsing payee for the entire amount of the check.
the co-payee, BA Finance. o Articles 1207 and 1208 of the Civil Code cannot be applied to the
 CA: Affirmed the RTC decision. Hence,the present petition for review on present case as these are completely irrelevant. The obligation is
certiorari. merely reflected in the instrument and whether the payees would
jointly share in the proceeds or not is beside the point.
Issues and Held: o Moreover, granting petitioners appeal for partial liability would run
counter to the existing principles on the liabilities of parties on
 WoN petitioner was negligent in allowing the deposit of the crossed check- negotiable instruments, particularly on Section 68 of the Negotiable
YES Instruments Law which instructs that joint payees who indorse are
o Sec 41 of the NIL: Where an instrument is payable to the order of deemed to indorse jointly and severally.
two or more payees or indorsees who are not partners, all must  WoN the exemplary damages awarded by the RTC run counter to Art. 2232
indorse unless the one indorsing has authority to indorse for the of the CC- NO.
others. (emphasis and underscoring supplied) o Petitioner: There is no finding that it acted in a wanton, fraudulent,
o Petitioner: It followed normal banking procedure. reckless, oppressive, or malevolent manner.
o SC: The petitioner was negligent in allowing the deposit and o SC: To reiterate, petitioner’s liability is based not on contract or
release of the proceeds of the crossed check despite the absence quasi-contract but on quasi-delict since there is no pre-existing
of authority of Bitangas’ co-payee BA Finance to endorse it on its contractual relation between the parties. Article 2231 of the Civil
behalf. In addition, petitioner dismissed the employee who allowed Code, which provides that in quasi-delict, exemplary damages may
the deposit of the check in Bitangas account. be granted if the defendant acted with gross negligence, thus
o Petitioner: Associated Bank v. CA cannot be applied because there applies.
is no forgery or unauthorized indorsement in the instant case, unlike
in Associated Bank. *However, court lowered the interest from 12% per annum to 6% per annum
o SC: It applies, since the payment of an instrument over a missing computed from the date of extrajudicial demand until finality of judgment. The
indorsement is the equivalent of payment on a forged indorsement obligation in this case did not arise out of a loan or forbearance of money, goods, or
or an unauthorized indorsement in itself in the case of joint payees. credit.
o As has been repeatedly emphasized, the banking business is
imbued with public interest such that the highest degree of diligence
and highest standards of integrity and performance are expected of Affirmed with modification.
banks in order to maintain the trust and confidence of the public in
general in the banking sector.
 WoN petitioner is liable to BA Finance for the full value of the check- YES. PEOPLE V. PUA TIONG TENG | Holder in Due Course, p. 124
o The two had a falling out which resulted in the dissolution of the
partnership. In the haste, Caroline forgot about the 5 pre-signed
Summary: Pua filed a complaint for sum of money against respondent spouses, checks. She only remembered when Lilian’s husband filed a
because several checks issued by the latter as payment for a loan were dishonored complaint for sum of money for the amounts in the checks against
upon presentment. Respondents denied obtaining a loan from Pua. CA ruled in favor her.
of respondents, giving credence to respondents’ defense that the checks were issued o Caroline categorically denied having completed the Asiatrust check,
for other people, not for petitioner Pua. as she had no checkwriter (the check was completed using one) and
always used her own handwriting.
o She could not have loaned the money with her husband since they
had been separated in fact for nearly 10 years. Benito corroborated
The Court ruled that since respondent had not denied the genuineness of these checks, this statement, claiming that he had never met Pua.
Sec. 16 of the NIL applies: when an instrument is no longer in the possession of the o Also, that the 17 checks previously dishonored were intended for
person who signed it and it is complete in its terms, a valid and intentional delivery by different people. The complaint is designed to allow Lillian to recover
him is presumed until the contrary is proven. her losses in the foreign exchange business she had with Caroline in
the 1980s.
 RTC ruled in favor of the petitioner: The possession by respondent of the
checks signed by Caroline, under the NIL, raises the presumption that they
Facts: were issued and delivered for a valuable consideration. Asked the
respondents to pay the principal amount only since the interest was not
 Pua filed a complaint for a sum of money against respondent spouses Benito
expressly stipulated.
Lo Bon Tiong and Caroline Siok Ching Teng. He asked for the amount of Php
 CA set aside the RTC decision: Asiatrust check was an incomplete delivered
8.5M covered by a check.
instrument and that petitioner failed to prove the existence of respondents’
o The check was given by respondents to pay the loans they obtained
from her under a compounded interest agreement on various dates
in 1988.  Hence, the petition for review on certiorari filed by Pua.
o Since petitioner’s sister Lilian vouched for the spouses’ ability to pay,
she immediately acceded and lent money without requiring any Issues and Held:
collateral except post-dated checks bearing the borrowed amounts.
o In all, respondent spouses issued 17 checks for Php 1,975,000.  WoN the CA erred in dismissing the petition- YES.
These were all dishonored upon presentment to the drawee bank. o CA: Petitioner failed to prove the respondents’ indebtedness.
o When petitioner demanded payment, respondents asked for more o SC: In a suit for recovery of sum of money, the creditor has the
time because of their financial difficulties. Pua obliged, but reminded burden of proof to show that defendant had not paid her the amount
respondent to pay from time to time. of the contracted loan. However, where the creditor possesses and
o When they were ready to pay, they asked for a computation of their submits in evidence an instrument showing the indebtedness, a
total indebtedness. Pua found that it totaled Php 13,218,544.20. presumption that the credit has not been satisfied arises in her favor.
Respondents asked for a reduction, and Pua obliged, wanting to be Thus, the defendant is, required to overcome the said presumption
paid as soon as possible. She reduced it to Php 8.5M. and present evidence to prove the fact of payment so that no
o Respondents delivered an Asiatrust check bearing the reduced judgment will be entered against him.
amount with the assurance that the check was good. They asked that o As per Pacheco v CA, Lozano v Martinez, Lim v Mindanao Wines
the 17 dishonored checks be returned. Petitioner refused, saying that and Liquour Galleria: a check constitutes an evidence of
she will only return them after the encashment of the Asiatrust check. indebtedness and is a veritable proof of an obligation.
However, it was also dishonored. o CA: Gave credence to Caroline’s testimony that the 17 original
 Respondents’ defense: checks were for various other persons and petitioner had simply
o Denied obtaining a loan from petitioner. They actually forged a collected them to damage her reputation. Found that petitioner failed
partnership that operated a mahjong business with petitioner’s sister to establish for whose accounts they were deposited to.
Lilian, with her to serve as capitalist and Caroline to act as the o SC: Caroline had not denied the genuineness of these checks.
cashier. Hence, Sec. 16 of the NIL applies: when an instrument is no longer
o Caroline agreed to use her personal checks to pay for the operational in the possession of the person who signed it and it is complete in its
expenses. Since she was not always around, she left Lilian with 5 terms, a valid and intentional delivery by him is presumed until the
pre-signed and consecutively numbered checks on the condition that contrary is proven. Further, it was shown that the return slips were
they will only be used for the business and in no circumstance will deposited either in petitioner’s account or in the account of her
the amount of the checks exceed Php 5,000. brother, Ricardo Yulo.
o CA: Gave credence to respondents’ accounts with respect to the
Asiatrust check, saying that it is buttressed by their defense in the
civil case filed by Lilian’s husband, where they were ultimately
o SC: While they were exculpated, the SC sustained the factual
findings of the appellate court in the civil case finding respondents
civilly liable to pay the amount of the checks. The decision also
categorically debunked the same defense.


 Respondents ordered jointly and solidarily to pay the principal amount.

o Jointly and solidarily: Without any evidence to the contrary, it is
presumed that the proceeds of the loan redounded to the benefit of
the family.
o Principal amount: Interest was not stipulated in writing.