(1) GSIS vs.

CA

(2) Ubas, Sr. vs. Chan

G.R. No. 215910, February 6, 2017

Topic: Presumption of consideration; Privity of contracts

Doctrine: Unless otherwise rebutted, every negotiable instrument is deemed to have been issued for a valuable
consideration.

Wilson Chan under the name and style of UNIMASTERS entered into a loan agreement with Manuel Ubas for an
amount of P 1, 500, 000.00 representing the price of boulders, sand, gravel, and other construction materials
allegedly purchased by Wilson Chan from Manuel Ubas for the construction of the Macagtas Dam in Macagtas,
Catarman, Northern Samar. Wilson Chan issued three (3) bank checks, payable to “CASH” in the amount of
₱500,000.00 each but when Manuel Ubas presented the subject checks for encashment, the same were dishonored
due to a stop payment order.

Manuel Ubas filed a collection case against Wilson Chan. Wilson Chan filed a Motion to Dismiss on the ground that
Manuel Ubas has no cause of action against him considering that Manuel Ubas failed to present any documentary
proof that he or his firm delivered construction materials for the Macagtas Dam project and that the checks does not
belong to him but to UNIMASTERS.

A. Can Chan successfully invoke the defense of lack of consideration?

No, Wilson Chan cannot successfully invoke the defense of lack of consideration.

Section 24 of the Negotiable Instrument Law provides that every negotiable instrument is deemed prima facie to
have been issued for a valuable consideration; and every person whose signature appears thereon to have become
a party thereto for value.

In this case, Manuel Ubas had presented in evidence the three (3) dishonored checks which were undeniably signed
by respondent. The respondent even admitted that he signed the checks. Hence, it is presumed that the subject
checks were issued for a valid consideration, which therefore, dispensed with the necessity of any documentary
evidence to support petitioner's monetary claim. Unless otherwise rebutted, the legal presumption of consideration
under Section 24 of the NIL stands.

B. Can Manuel Ubas collect from Wilson Chan despite the fact that the checks issued were under the name
of UNIMASTERS?

Yes, Manuel Ubas may collect from Wilson Chan.

Jurisprudence provides that the manner or mode of payment does not alter the nature of the obligation.

The source of obligation, as claimed by Manuel Ubas in this case, stems from his contract with Wilson Chan. When
they agreed upon the purchase of the construction materials on credit for the amount of P1,500,000,00, the contract
between them was perfected. Therefore, even if corporate checks were issued for the payment of the obligation, the
fact remains that the juridical tie between the two (2) parties was already established during the contract's perfection
stage and, thus, does not preclude the creditor from proceeding against the debtor during the contract's
consummation stage.

(3) Metropolitan Bank and Trust Company vs. Chiok

G.R. No. 172652, Nov. 26, 2014

Topic: Manager’s/Cashier’s Check

Doctrine: It is a well-known and accepted practice in the business sector that a Manager’s/Cashier’s Check is
deemed as cash.

Respondent Wilfred N. Chiok (Chiok) had been engaged in dollar trading for several years. He usually buys dollars
from Gonzalo B. Nuguid (Nuguid) at the exchange rate prevailing on the date of the sale. Chiok pays Nuguid either
in cash or manager’s check, to be picked up by the latter or deposited in the latter’s bank account. Nuguid delivers
the dollars either on the same day or on a later date as may be agreed upon between them, up to a week later. Chiok
then deposited the three checks (Asian Bank MC Nos. 025935 and 025939, and Metrobank CC No. 003380), with
an aggregate value of P26,068,350.00 in Nuguid’s account with Far East Bank & Trust Company (FEBTC), the
predecessor-in-interest of petitioner Bank of the Philippine Islands (BPI). Nuguid was supposed to deliver
US$1,022,288.50,4 the dollar equivalent of the three checks as agreed upon, in the afternoon of the same day.
Nuguid, however, failed to do so, prompting Chiok to request that payment on the three checks be stopped. Chiok
was allegedly advised to secure a court order within the 24-hour clearing period. On the following day, July 6, 1995,
Chiok filed a Complaint for damages with application for ex parte restraining order and/or preliminary injunction with
the Regional Trial Court (RTC) of Quezon City against the spouses Gonzalo and Marinella Nuguid, and the
depositary banks, Asian Bank and Metrobank.

A. Is the payment of manager’s and cashier’s checks subject to the condition that the payee thereof should
comply with his obligations to the purchaser of the checks?

No. While indeed, it cannot be said that manager’s and cashier’s checks are pre-cleared, clearing should not be
confused with acceptance. Manager’s and cashier’s checks are still the subject of clearing to ensure that the same
have not been materially altered or otherwise completely counterfeited. However, manager’s and cashier’s checks
are pre-accepted by the mere issuance thereof by the bank, which is both its drawer and drawee. Thus, while
manager’s and cashier’s checks are still subject to clearing, they cannot be countermanded for being drawn against
a closed account, for being drawn against insufficient funds, or for similar reasons such as a condition not appearing
on the face of the check. Long-standing and accepted banking practices do not countenance the countermanding of
manager’s and cashier’s checks on the basis of a mere allegation of failure of the payee to comply with its obligations
towards the purchaser. On the contrary, the accepted banking practice is that such checks are as good as cash.

Thus, in New Pacific Timber & Supply Company, Inc. v. Hon. Seneris, we held: It is a well-known and accepted
practice in the business sector that a Cashier’s Check is deemed as cash. It is an understanding that the check is
good then, and shall continue good, and this agreement is as binding on the bank as its notes in circulation, a
certificate of deposit payable to the order of the depositor, or any other obligation it can assume. The object of
certifying a check, as regards both parties, is to enable the holder to use it as money.”

B. Does the purchaser of manager’s and cashier’s checks have the right to have the checks cancelled by
filing an action for rescission of its contract with the payee?

No. Metrobank and Global Bank are not parties to the contract to buy foreign currency between Chiok and Nuguid.
Therefore, they are not bound by such contract and cannot be prejudiced by the failure of Nuguid to comply with the
terms thereof. Neither could Chiok be validly granted a writ of injunction against Metrobank and Global Bank to enjoin
said banks from honoring the subject manager’s and cashier’s checks. Chiok could have and should have proceeded
directly against Nuguid to claim damages for breach of contract and to have the very account where he deposited
the subject checks garnished. Evidently, it was the utmost trust and confidence reposed by Chiok to Nuguid that
caused this entire debacle, dragging three banks into the controversy, and having their resources threatened
because of an alleged default in a contract they were not privy to.

(4) Toune & City Development Corp. vs. CA

(5) Fortunado vs. CA

(6) Caltex (Philippines), Inc. vs. CA

(7) The Hongkong and Shanghai Banking Corporation Limited-Philippine Branches vs. CIR
G.R. No. 166018, June 4, 2014

Topic: Requisites of Negotiability; Presentment for Payment; Presentment for Acceptance

Doctrine: The Documentary Stamp Tax 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.” The instructions
given through electronic messages that are subjected to DST are not negotiable instruments as they do not comply
with the requisites of negotiability under Section 1 of the Negotiable Instruments Law.
HSBC is a custodian bank. 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). Subsequently, HSBC filed an administrative claim for the refund of the erroneously paid DST to the BIR
pursuant to 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. Are electronic messages negotiable instruments as to make it proper subjects of DST?

No, the instructions given through electronic messages are not negotiable instruments as they do not comply with
the requisites of negotiability under Section 1 of the Negotiable Instruments Law (NIL).

Applying the requisites under Section 1 of the NIL, the electronic messages are not signed by the investor-clients as
supposed drawers of a bill of exchange; 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; 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.

Therefore, 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 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.

B. Do the electronic messages received by HSBC from its investor-clients abroad, instructing the former to
debit the latter's local and foreign currency accounts and to pay the purchase price of shares of stock or
investment in securities, properly qualify as either presentment for acceptance or presentment for payment?

No, there is neither presentment for acceptance nor presentment for payment.

Acceptance applies only to bills of exchange. Under Section 132 of the NIL, what is accepted is a bill of exchange,
and the acceptance of a bill of exchange is both the manifestation of the drawee’s consent to the drawer’s order to
pay money and the expression of the drawee’s promise to pay.

In the case at bar, there was no bill of exchange or order for the payment drawn abroad and made payable here in
the Philippines. Thus, there was no acceptance as the electronic messages did not constitute the written and signed
manifestation of HSBC to a drawer's order to pay money. As HSBC could not have been an acceptor, then it could
not have made any payment of a bill of exchange or order for the payment of money drawn abroad but payable here
in the Philippines.

Therefore, HSBC erroneously paid DST on the said electronic messages for which it is entitled to a tax refund.

(8) Rivera vs. Spouses Chua

G.R. No. 184458, January 14, 2015

Topic: Promissory Note; When demand is not necessary

Doctrine: A negotiable promissory note is an unconditional promise in writing made by one person to another, signed
by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order
or to bearer. Where a note is drawn to the maker’s own order, it is not complete until indorsed by him.

Rivera and Chua were kumpadres. On 24 February 1995, Rivera obtained a loan from the Spouses Chua in the
amount of Php120,000.00. Rivera then made a promise to pay the spouses Chua on 31 December 1995. He also
stipulated that in the event of failure on his part, he agrees to pay the sum equivalent to 5% interest monthly from
the date of default until the entire obligation is fully paid for. Almost three years from the date of payment stipulated
in the promissory note, Rivera, as partial payment for the loan, issued and delivered to the spouses Chua, as payee,
a check, dated 30 December 1998, drawn against Rivera’s current account with PCIB in the amount of ₱25,000.00.
On 21 December 1998, Spouses Chua received another check presumably issued by Rivera, likewise drawn against
Rivera’s PCIB current account, duly signed and dated, but blank as to payee and amount. Ostensibly, as per
understanding by the parties, PCIB Check was issued in the amount of ₱133,454.00 with "cash" as payee.
Purportedly, both checks were simply partial payment for Rivera’s loan in the principal amount of ₱120,000.00. Upon
presentment for payment, the two checks were dishonored for the reason "account closed." As of 31 May 1999, the
amount due the Spouses Chua was pegged at ₱366,000.00 covering the principal of ₱120,000.00 plus 5% interest
per month from 1 January 1996 to 31 May 1999. The Spouses Chua alleged that they have repeatedly demanded
payment from Rivera to no avail.

A. Is the promissory note a negotiable instrument?

No, the promissory note is not a negotiable instrument.

The negotiable instruments law provides that a negotiable promissory note is an unconditional promise in writing
made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable
future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker’s own order, it is not
complete until indorsed by him. In this case, the promissory note is made out specifically to spouses Chua as payees.
Thus, the promissory note made by Rivera is not a negotiable instrument.

B. Is demand necessary?

No, demand is not necessary.

In this case, the Negotiable Instruments Law does not apply. What is applicable is the New Civil Code which provides
that demand is not necessary for delay to exist when the law or obligation expressly so declare. The promissory note
herein is not a negotiable instrument since it was made out specifically to spouses Chua as payees. Further, the
promissory note is unequivocal when the obligation becomes due and demandable which is on 31 December 1995.
Thus, demand is not necessary.

(9) People vs. Wagas

G.R. No. 157943, September 04, 2013

Topic: Checks payable to bearer

Doctrine: A check payable to cash is payable to the bearer and could be negotiated by mere delivery without the
need of an indorsement.

Gilbert R. Wagas was accused for estafa when, through a telephone, he placed an order with Alberto Ligaray for
200 bags of rice with the proposed payment by a postdated check. Ligaray released the goods to Wagas on April
30, 1997 and at the same time received a check for P200,000.00 payable to cash and postdated May 8, 1997.
Ligaray deposited the check with his depository bank, but the check was dishonored due to insufficiency of funds,
and despite repeated demands, Wagas did not pay Ligaray.

Wagas testified and said that he issued the Check to Cañada, his brother-in-law, and that it was Cañada who had
transacted with Ligaray. He explained that the check was intended as payment for a portion of Cañada’s property
that he wanted to buy, but when the sale did not push through, he did not anymore fund the check. It was Cañada
who had negotiated the check to Ligaray

Can it be established beyond reasonable doubt that it was Wagas who defrauded Ligaray by issuing the
check?

No, the check delivered to Ligaray was made payable to cash. Under the Negotiable Instruments Law, this type of
check was payable to the bearer and could be negotiated by mere delivery without the need of an indorsement. This
rendered it highly probable that Wagas had issued the check not to Ligaray, but to somebody else like Cañada, his
brother-in-law, who then negotiated it to Ligaray. Relevantly, Ligaray confirmed that he did not himself see or meet
Wagas at the time of the transaction and thereafter, and expressly stated that the person who signed for and received
the stocks of rice was Cañada. The accused, to be guilty of estafa, must have used the check in order to defraud the
complainant. Wagas could not be held guilty of estafa simply because he had issued the check used to defraud
Ligaray. The proof of guilt must still clearly show that it had been Wagas as the drawer who had defrauded Ligaray
by means of the check.