Associated Bank v. CA, G.R. no.
123793, June 29, 1998 No other construction can be given to the unequivocal
1. Sept 16, 1975 – Associated Banking Corp. and
Citizens Bank and Trust Company (CBTC) merged
into one banking corporation known as Associated
Citizens Bank (now known as Associated Bank)
*note* but CBTC later becomes dissolve leaving the
Associated Bank.
2. Sept 7, 1977 – Respondent Sarmiento executed in
favor of CBTC a promissory note to pay the bank
P2,500,000.00, but only paid P250,000.00
3. Sarmiento however failed to pay the remaining
balance despite repeated demands from Associated
Bank.
4. Sarmiento denies in court the allegations in the
complaint against him and states that the bank has no
valid cause of action; that the Associated Bank is not
the proper party since the promissory note was issued
in favor to CBTC.
5. RTC ruled that Sarmiento is in default after his failure
to appear in the pre-trial; that Sarmiento should pay
the bank his remaining balance.
6. CA reverses; that the Associated Bank had no cause
of action against Sarmiento since the said bank was
not privy to the promissory note executed by
Sarmiento in favor to CBTC.
Issue: W/N the Associated Bank, being the surviving
corporation, may enforce the promissory note made by
Sarmiento in favor of CBTC, after the merger agreement had
been signed.
Held: Yes.
Ordinarily, in the merger of two or more existing corporations,
one of the combining corporations survives and continues the
combined business, while the rest are dissolved and all their
rights, properties and liabilities are acquired by the surviving
corporation.
The merger, however, does not become effective upon the
mere agreement of the constituent corporations. The
procedure to be followed is prescribed under the Corporation
Code. It states that the merger shall be effective only upon the
issuance by the SEC of a certificate of merger. The effectivity
date of the merger is crucial for determining when the merged
or absorbed corporation ceases to exist; and when its rights,
privileges, properties as well as liabilities pass on to the
surviving corporation.
The records do not show when the SEC approved the merger.
Private respondent's theory is that it took effect on the date of
the execution of the agreement itself, which was September
16, 1975. Private respondent contends that, since he issued
the promissory note to CBTC on September 7, 1977 — two
years after the merger agreement had been executed — CBTC
could not have conveyed or transferred to petitioner its interest
in the said note, which was not yet in existence at the time of
the merger. Therefore, petitioner, the surviving bank, has no
right to enforce the promissory note on private respondent;
such right properly pertains only to CBTC.
Assuming that the effectivity date of the merger was the date of
its execution, we still cannot agree that petitioner no longer has
any interest in the promissory note. A closer perusal of the
merger agreement leads to a different conclusion.
Thus, the fact that the promissory note was executed after the
effectivity date of the merger does not militate against
petitioner. The agreement itself clearly provides that all
contracts — irrespective of the date of execution —
entered into in the name of CBTC shall be understood as
pertaining to the surviving bank, herein petitioner. Since, in
contrast to the earlier aforequoted provision, the latter clause
no longer specifically refers only to contracts existing at the
time of the merger, no distinction should be made. The clause
must have been deliberately included in the agreement in
order to protect the interests of the combining banks;
specifically, to avoid giving the merger agreement a farcical
interpretation aimed at evading fulfillment of a due obligation.
stipulation. Being clear, plain and free of ambiguity, the
provision must be given its literal
meaning and applied without a convoluted interpretation.
Verba lelegis non est recedendum.
In light of the foregoing, the Court holds that petitioner has a
valid cause of action against private respondent. Clearly, the
failure of private respondent to honor his obligation under the
promissory note constitutes a violation of petitioner's right to
collect the proceeds of the loan it extended to the former.
TRADERS ROYAL BANK vs. COURT OF APPEALS, et. Al.
Petitioner’s claim:
1. Filriters Guaranty Assurance Corporation (Filriters)
executed a "Detached Assignment" whereby Filriters,
as registered owner, sold, transferred, assigned and
delivered unto Philippine Underwriters Finance
Corporation (Philfinance) all its rights and title to
Central Bank Certificates of Indebtedness of PESOS:
FIVE HUNDRED THOUSAND (P500,000) and having
an aggregate value of PESOS: THREE MILLION
FIVE HUNDRED THOUSAND (P3,500,000.00)
2. Filriters then sold and transferred unto Philfrance all
its rights and title to the Central Bank Certificates of
Indebtedness.
3. The Detached Assignment contains an express
authorization executed by the transferor intended to
complete the assignment through the registration of
the transfer in the name of PhilFinance.
4. petitioner entered into a Repurchase Agreement with
PhilFinance.
5. PhilFinance failed to repurchase the CBCI on the
agreed date of maturity when the checks it issued in
favor of petitioner were dishonored for insufficient
funds;
6. Owing to the default of PhilFinance, it executed a
Detached Assignment in favor of the Petitioner to
enable the latter to have its title completed and
registered in the books of the respondent. And by
means of said Detachment, Philfinance transferred
and assigned all, its rights and title in the said CBCI.
7. Petitioner presented the CBCI to the Securities
Servicing Department of the respondent and
requested the latter to effect the transfer of the CBCI
on its books and to issue a new certificate in the
name of petitioner as absolute owner thereof;
8. Respondent failed and refused to register the transfer
as requested.
9. Upon such compliance with the aforesaid
requirements, the ministerial duties of registering a
transfer of ownership over the CBCI and issuing a
new certificate to the transferee devolves upon the
respondent.
Respondent’s defences:
1. The CBCI constitutes part of the reserve investment
against liabilities required of respondent as an
insurance company under the Insurance Code.
2. Alfredo Banaria, then Senior Vice-President-Treasury
of Filriters, without any board resolution, knowledge or
consent of the board of directors of Filriters, and
without any clearance or authorization from the
Insurance Commissioner, executed a detached
assignment purportedly assigning CBCI No. 891 to
Philfinance.
3. Subsequently, Alberto Fabella, Senior Vice-President-
Comptroller are Pilar Jacobe, Vice-President-
Treasury of Filriters (both of whom were holding the
same positions in Philfinance), without any
consideration or benefit redounding to Filriters and to
the grave prejudice of Filriters.
4. The detached assignment is patently void and
inoperative because the assignment is without the
knowledge and consent of directors of Filriter.
5. The provision on transfer of the CBCIs provides that
the Central Bank shall treat the registered owner as
the absolute owner and that the value of the
 registered certificates shall be payable only to the
registered owner.
The Regional Trial Court of Manila found the assignment of
CBCI No. D891 in favor of Philfinance, and the subsequent
assignment of the same CBCI by Philfinance in favor of
Traders Royal Bank null and void and of no force and effect.
The petitioner assailed the decision of the trial court in the
Court of Appeals, but their appeals likewise failed.
In the appellate court, petitioner argued that the subject CBCI
was a negotiable instrument, and having acquired the said
certificate from Philfinance as a holder in due course, its
possession of the same is thus free from any defect of title of
prior parties and from any defense available to prior parties
among themselves, and it may thus, enforce payment of the
instrument for the full amount thereof against all parties liable
thereon. 12
Issue: Whether the CBCI was a negotiable Instrument?
Held: The CBCI is not a negotiable instrument. The
instrument provides for a promise to pay the registered
owner Filriters. Very clearly, the instrument was only
payable to Filriters. It lacked the words of negotiability
which should have served as an expression of the
consent that the instrument may be transferred by
negotiation.
The language of negotiability which characterize a
negotiable paper as a credit instrument is its freedom to
circulate as a substitute for money. Hence, freedom of
negotiability is the touchstone relating to the protection of
holders in due course, and the freedom of negotiability is the
foundation
for the protection, which the law throws around a holder
in due course. This freedom in negotiability is totally
absent in a certificate of indebtedness as it merely
acknowledges to pay a sum of money to a specified
person or entity for a period of time.
The transfer of the instrument from Philfinance to TRB
was merely an assignment, and is not governed by the
negotiable instruments law. The pertinent question then is
—was the transfer of the CBCI from Filriters to
Philfinance and subsequently from Philfinance to TRB, in
accord with
existing law, so as to entitle TRB to have the CBCI registered
in its name with the Central Bank? Clearly shown in the
record is the fact that Philfinance’s title over CBCI is
defective since it acquired the instrument from Filriters
fictitiously. Although the deed of assignment stated that the
transfer was for ‘value received‘, there was really no
consideration involved. What happened was Philfinance
merely borrowed CBCI from Filriters, a sister corporation.
Thus, for lack of any consideration, the
assignment made is a complete nullity. Furthermore, the
transfer wasn't in conformity with the regulations set by the
CB. Giving more credence to rule that there was no valid
transfer or assignment to petitioner.
Philippine National Bank vs. Court of Appeals
Facts: A check with serial number 7-3666-223-3, dated 7
August 1981 in the amount of P97,650.00 was issued by the
Ministry of Education Culture (now Department of Education,
Culture and Sports [DECS]) payable to F. Abante Marketing.
This check was drawn against Philippine National Bank (PNB).
On 11 August 1981, Abante Marketing, a client of Capitol City
Development Bank (Capitol), deposited the questioned check
in its savings account with said bank. In turn, Capitol deposited
the same in its account with the Philippine Bank of
Communications (PBCom) which, in turn, sent the check to
PNB for clearing. PNB cleared the check as good and
thereafter, PBCom credited Capitol's account for the amount
stated in the check. However, on 19 October 1981, PNB
returned the check to PBCom and debited PBCom's account
for the amount covered by the check, the reason being that
there was a "material alteration" of the check number. PBCom,
as collecting agent of Capitol, then proceeded to debit the
latter's account for the same amount, and subsequently, sent
the check back to petitioner. PNB, however, returned the check
to PBCom. On the other hand, Capitol could not in turn, debit
Abante Marketing's account since the latter had already
withdrawn the amount of the check as of 15 October 1981.
Capitol sought clarification from PBCom and demanded the re-
crediting of the amount. PBCom followed suit by requesting an
explanation and re-crediting from PNB. Since the demands of
Capitol were not heeded, it filed a civil suit with the Regional
trial Court of Manila against PBCom which in turn, filed a third-
party complaint against PNB for reimbursement/indemnity with
respect to the claims of Capitol. PNB, on its part, filed a fourth-
party complaint against Abante Marketing. On 3 October 1989;
the Regional Trial Court rendered its decision, ordering
PBCom to re-credit or reimburse Capitol the amount of
P97,650.00, plus interest of 12% thereto from 19 October 1981
until the amount is fully paid; PNB to reimburse and indemnify
PBCom for whatever amount PBCom pays to Capitol; F.
Abante Marketing to reimburse and indemnify PNB for
whatever amount PNB pays to PBCom. On attorney's fees, the
trial court ordered PBCom to pay Capitol attorney's fees in the
amount of P10,000.00; but that PBCom is entitled to
reimburse/indemnify from PNB; and PNB to be, in turn,
reimbursed or indemnified by F. Abante Marketing for the
same amount. The court dismissed the counterclaims of
PBCom and PNB; without pronouncement as to costs. An
appeal was interposed before the Court of Appeals which
rendered its decision on 29 April 1992, which modified the
appealed judgment by exempting PBCom from liability to
Capitol for attorney's fees and ordering PNB to honor the
check for P97,650.00, with interest as declared by the trial
court, and pay Capitol attorney's fees of P10,000.00. After the
check shall have been honored by PNB, the court ordered
PBCom to re-credit Capitol's account with it the amount;
without pronouncement as to costs. A motion for
reconsideration of the decision was denied by the appellate
Court in its resolution dated 16 September 1992 for lack of
merit. PNB filed the petition for review on certiorari.
Issue: Whether the change in the serial number of the check
may be considered a change that alters the effect of the
instrument, and thus is a material alteration.
Held: The present case is unique in the sense that what was
altered is the serial number of the check in question, an item
which, it can readily be observed, is not an essential requisite
for negotiability under Section 1 of the Negotiable Instruments
Law. The aforementioned alteration did not change the
relations between the parties. The name of the drawer and the
drawee were not altered. The intended payee was the same.
The sum of money due to the payee remained the same. The
check's serial number is not the sole indication of its origin. The
name of the government agency which issued the subject
check was prominently printed therein. The check's issuer was
therefore insufficiently identified, rendering the referral to the
serial number redundant and inconsequential. If the purpose of
the serial number is merely to identify the issuing government
office or agency, its alteration had no material effect
whatsoever on the integrity of the check. The identity of the
issuing government office or agency was not changed thereby
and the amount of the check was not charged against the
account of the another government office or agency which had
no liability under the check. The owner issuer of the check is
boldly and clearly printed on its face, second line from the top:
"MINISTRY OF EDUCATION AND CULTURE," and below the
name of the payee are the rubber-stamped words: "Ministry of
Educ. & Culture." These words are not alleged to have been
falsely or fraudulently intercalated into the check. The
ownership of the check is established without the necessity of
recourse to the serial number. Neither is there any proof that
the amount of the check was erroneously charged against the
account of a government office or agency other than the
Ministry of Education and Culture. Hence, the alteration in the
number of the check did not affect or change the liability of the
Ministry of Education and Culture under the check and,
therefore, is immaterial. The genuineness of the amount and
the signatures therein of then Deputy Minister of Education
Hermenegildo C. Dumlao and of the resident Auditor, Penomio
C. Alvarez are not challenged. Neither is the authenticity of the
different codes appearing therein questioned. PNB, thus
cannot refuse to accept the check in question on the ground
that the serial number was altered, the same being an
immaterial or innocent one.
 CALTEX (PHILIPPINES), INC. VS. COURT OF APPEALS
G.R. No. 97753 | August 10, 1992
FACTS: On various dates, Security Bank and Trust Co.
(SEBTC), through its Sucat branch, issued 280 certificates of
time deposit (CTD) in favor of one Angel dela Cruz who
deposited with the bank the aggregate amount of P1.12 million.
Anger de la Cruz delivered the CTDs to Caltex in connection
with his purchase of fuel products from the latter.
Subsequently, dela Cruz informed the bank that he lost all the
CTDs, and thus executed an affidavit of loss to facilitate the
issuance of the replacement CTDs. De la Cruz was able to
obtain a loan of P875,000 from the bank, and in turn, he
executed a notarized Deed of Assignment of Time Deposit in
favor of the bank. Thereafter, Caltex presented for verification
the CTDs (which were declared lost by de la Cruz) with the
bank. Caltex formally informed the bank of its possession of
the CTDs and its decision to preterminate the same. The bank
rejected Caltex’ claim and demand, after Caltex failed to
furnish copy of the requested documents evidencing the
guarantee agreement, etc. In 1983, de la Cruz’ loan matured
and the bank set-off and applied the time deposits as payment
for the loan. Caltex filed the complaint, but which was
dismissed.
ISSUES: (1) Whether the Certificates of Time Deposit (CTDs)
are negotiable instruments; (2) Whether the CTDs’ negotiation
require delivery only.
HELD: The CTDs in question meet the requirements of the law
for negotiability. Contrary to the lower court’s findings, the
CTDs are negotiable instruments (Section 1). Negotiability or
non-negotiability of an instrument is determined from the
writing, i.e. from the face of the instrument itself. The
documents provided that the amounts deposited shall be
repayable to the depositor. The amounts are to be repayable to
the bearer of the documents, i.e. whosoever may be the bearer
at the time of presentment.
Although the CTDs are bearer instruments, a valid negotiation
thereof for the true purpose and agreement between it (Caltex)
and de la Cruz requires both delivery and indorsement; as the
CTDs were delivered to it as security for dela Cruz’ purchases
of its fuel products, and not for payment. Herein, there was no
negotiation in the sense of a transfer of title, or legal title, to the
CTDs in which situation mere delivery of the bearer CTDs
would have sufficed. The delivery thereof as security for the
fuel purchases at most constitutes Caltex as a holder for value
by reason of his lien. Accordingly, a negotiation for such
purpose cannot be effected by mere delivery of the instrument
since the terms thereof and the subsequent disposition of such
security, in the event of non-payment of the principal
obligation, must be contractually provided for.
-oo0oo-
METROPOLITAN BANK & TRUST COMPANY V CA
(GOLDEN SAVINGS & LOAN ASSOC., INC.)
G.R. No. 88866 | February 28, 1991
FACTS
-Metropolitan Bank and Trust Co. (Metrobank) is a commercial
bank, while Golden Savings and Loan Association (Golden
Savings) was at that time operating in Calapan, Mindoro.
-Jan. 1979: Eduardo Gomez opened an account with Golden
Savings and deposited over a period of 2 months 38 treasury
warrants totaling P1.755M. All were drawn by the Philippine
Fish Marketing Authority and signed by its General Manager.
Six were directly payable to Gomez while the others appeared
to have been indorsed by their respective payees, with Gomez
as second indorser.
-On various dates between June 25 and July 16, 1979, all the
warrants were subsequently indorsed by Gloria Castillo as
Cashier of Golden Savings and deposited to its Savings
Account in the Metrobank branch in Calapan. They were 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, Castillo went to the
Calapan branch several times to ask whether the warrants had
been cleared. She was told to wait, and Gomez was not
allowed to withdraw from his account.
-Exasperated over Castillo’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.
-Withdrawals were made three times, totaling P968,000.00.
-In turn, Golden savings subsequently allowed Gomez to make
withdrawals from his own account, totaling P1.168M from the
proceeds of the apparently cleared warrants.
-Jul. 21, 1979: Metrobank informed Golden Savings that 32 of
the warrants had been dishonored by the Bureau on Jul. 19,
1979, and demanded Golden Savings to refund the amount
previously withdrawn. Golden Savings refused, forcing
Metrobank to sue (after trial trial court ruled in favor of Golden
Savings).
ISSUES: (1) WON Metrobank should be allowed to charge
back any amount erroneously credited; (2) WON CA erred in
holding that the treasury warrants involved in this case are not
negotiable instruments.
HELD
1. NO
-Golden Savings had no clearing facilities of its own. It relied
on Metrobank to determine the validity of the warrants through
its own services. The proceeds of the warrants were withheld
from Gomez until Metrobank allowed Golden Savings itself to
withdraw them from its own deposit. It was only when
Metrobank gave the go-signal that Gomez was finally allowed
to withdraw.
-Metrobank exhibited extraordinary carelessness for allowing
three withdrawals without waiting for clearance. It was indeed
negligent in giving Golden Savings the impression that the
treasury warrants had been cleared and that, consequently, it
was safe to allow Gomez to withdraw the proceeds thereof
from his account with it.
-Without such assurance, Golden Savings would not have
allowed the withdrawals; with such assurance, there was no
reason not to allow the withdrawal. Golden Savings might even
have incurred liability for its refusal to return the money that to
all appearances belonged to the depositor, who could therefore
withdraw it any time.
-The argument that Golden Savings should have exercised
more care in checking the circumstances does not hold water.
It was Gomez who was entrusting the warrants, not Golden
Savings that was extending him a loan. There was no question
of Gomez’s identity or of the genuineness of his signature.
2. NO. Clearly stamped on the face of the treasury warrants is
the word “non-negotiable;” it is indicated that they are
payable from a particular fund, Fund 501.
Reasoning
SECTION 1.—Form of negotiable instruments.—An instrument
to be negotiable must conform to the following requirements:
xxx (b) Must contain an unconditional promise or order to pay
a sum of money.
SECTION 2.—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 xxx
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
Sec 3 of the NIL is applicable in the case.
-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
Sec. 66 of the NIL. This law is not applicable to non-negotiable
treasury warrants.
-Golden Savings never represented that the warrants were
negotiable but signed them only for the purpose of depositing
them for clearance.
DISPOSITION: The challenged decision is affirmed. The
amount Gomez withdrew must be charged not to Golden
Savings but to Metrobank, which must bear the consequences
of its own negligence. But the balance of P586,589.00 should
be debited to Golden Savings, as obviously Gomez can no
longer be permitted to withdraw this amount from his deposit
because of the dishonor of the warrants.
| Mark Bagsic
METROPOLITAN BANK & TRUST COMPANY, Petitioner, vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN
ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO
and GLORIA CASTILLO, Respondents.
FACTS: The Metropolitan Bank and Trust Co. is a commercial
bank with branches throughout the Philippines and even
abroad. Golden Savings and Loan Association was, operating
in Calapan, Mindoro, with the other private respondents as its
principal officers.chanroblesvirtualawlibrary chanrobles virtual
law library
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 P1,755,228.37. They
were all drawn by the Philippine Fish Marketing Authority and
purportedly signed by its General Manager and countersigned
by its Auditor. Six of these were directly payable to Gomez
while the others appeared to have been indorsed by their
respective payees, followed by Gomez as second indorser. 1
chanrobles virtual law library
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.
Gloria Castillo went to the Calapan branch several times to ask
whether the warrants had been cleared. Gomez was
meanwhile not allowed to withdraw from his account.
"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. The petitioner withdrawn the proceeds thrice, total
withdrawal was P968.000.00.
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. The last withdrawal was made on
July 16, 1979.
On July 21, 1979, Metrobank informed Golden Savings that 32
of the warrants had been dishonored by the Bureau of
Treasury on July 19, 1979, 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. 5 After trial,
judgment was rendered in favor of Golden Savings
On appeal to the respondent court, 6 the decision was affirmed,
prompting Metrobank to file this petition for review .
ISSUE: W/N Respondent Court of Appeals erred in
disregarding and failing to apply the clear contractual terms
and conditions on the deposit slips allowing Metrobank to
charge back any amount erroneously credited.
HELD: The petition has no merit.
Metrobank was indeed negligent in giving Golden Savings the
impression that the treasury warrants had been cleared and
that, consequently, it was safe to allow Gomez to withdraw the
proceeds thereof from his account with it.
And now, to gloss over its carelessness, Metrobank would
invoke the conditions printed on the dorsal side of the deposit
slips through which the treasury warrants were deposited by
Golden Savings with its Calapan branch. The conditions read
as follows:
Kindly note that in receiving items on
deposit, the bank obligates itself only as the
depositor's collecting agent, assuming no
responsibility beyond care in selecting
correspondents, and until such time as
actual payment shall have come into
possession of this bank, the right is reserved
to charge back to the depositor's account
any amount previously credited, whether or
not such item is returned. This also applies
to checks drawn on local banks and bankers
and their branches as well as on this bank,
which are unpaid due to insufficiency of
funds, forgery, unauthorized overdraft or any
other reason. (Emphasis supplied.)
According to Metrobank, the said conditions clearly show that it
was acting only as a collecting agent for Golden Savings and
give it the right to "charge back to the depositor's account any
amount previously credited, whether or not such item is
returned. This also applies to checks ". . . which are unpaid
due to insufficiency of funds, forgery, unauthorized overdraft of
any other reason." It is claimed that the said conditions are in
the nature of contractual stipulations and became binding on
Golden Savings when Gloria Castillo, as its Cashier, signed
the deposit slips.
The belated notification aggravated the petitioner's earlier
negligence in giving express or at least implied clearance to
the treasury warrants and allowing payments therefrom to
Golden Savings. But that is not all. On top of this, the
supposed reason for the dishonor, to wit, the forgery of the
signatures of the general manager and the auditor of the
drawer corporation, has not been established. 9 This was the
finding of the lower courts which we see no reason to disturb.
And as we said in MWSS v. Court of Appeals: 10
A no less important consideration is the circumstance that the
treasury warrants in question 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 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. The simple
reason is that this law is not applicable to the non-negotiable
treasury warrants. 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. 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." chanrobles
virtual law library
WHEREFORE, the challenged decision is AFFIRMED.
JOSE L. PONCE DE LEON vs. REHABILITATION
FINANCE CORPORATION
FACTS: On August 14, 1945, herein plaintiff Jose L. Ponce
de Leon and Francisco Soriano, obtained a loan for
P10,000.00 from the Philippine National Bank (PNB), Manila,
mortgaging a parcel of land in the name of Francisco
Soriano, married to Tomasa Rodriguez, as security for the
loan.
On May 4, 1951, Jose L. Ponce de Leon filed with the
Rehabilitation Finance Corporation (RFC for short) Manila,
his loan application, for an industrial loan, for putting up a
sawmill, in the amount of P800,000.00 offering as security
certain parcels of land, among which, was the parcel which
Ponce de Leon and Soriano mortgaged to the PNB. The
application stated that the properties offered for security for
the RFC loan are encumbered to the PNB, Bacolod, and to
Cu Unjieng Bros.
The application was approved for P495,000.00 and the
mortgage contract was executed on October 8, 1951 by
Jose L. Ponce de Leon, his wife Carmelina Russel, and
Francisco Soriano. The same parties signed a promissory
note (Exhibit A) for P495,000.00, with interest at 6% per
annum, payable on installments every month for
P28,831.64 in connection with the mortgage deed. The
mortgage deed specifically stipulated that the proceeds
thereof shall be used exclusively for the purchase of
machinery and equipment, construction of buildings and
the payment of obligations and that the release of the
amounts loaned shall be at the discretion of the RFC. None
of the amortization and interests which had become due
was paid and, the RFC took steps for the extra-judicial
foreclosure of the mortgaged properties consisting of real
estates and the sawmill and its equipments of Ponce de
Leon situated in two places in Samar. The RFC was the
purchaser of all the mortgaged properties in the ensuing
sheriff's sales, with the exception of two parcels of land
situated in Bacolod City which were purchased by private
individuals. Many items of the mortgaged machineries and
equipments could not be found.
The Sheriff sold the land covered by original certificate of
Title No. 8094 in the name of Francisco Soriano, married to
Tomasa Rodriguez, on June 15, 1954 and the deed of sale,
dated April 19, 1955 was executed by the sheriff in favor of
the purchaser thereof, the RFC, including all the other
properties sold
Jose L. Ponce de Leon did not offer to redeem the
mortgaged properties sold at anytime before the expiration
of the period of redemption. The RFC scheduled a public
sale of the lot registered in the name of Francisco Soriano
and of the other lots which the RFC acquired in the Sheriff's
sale for February 20, 1956 in view of the inability of Ponce
de Leon or Soriano to legally redeem the properties sold by
the Sheriff within the one year period after the sale.
On February 18, 1956, Jose L. Ponce de Leon instituted
the present action alleging that the typhoon in October and
November, 1952 had caused destructions to his sawmills
and hampered his operations for which reason, he asks, in
his complaint, that the amortizations on his obligations
which became due since October, 1952 be declared
extinguished and that the sheriff's sales be declared null
and void because said sales were not conducted in
accordance with law. De Leon asked for the issuance of a
writ of preliminary injunction to restrain the RFC from
carrying out its contemplated public sale. The Court set the
petition for injunction for hearing but no one appeared for
the RFC at the hearing thereof so that the Court had to
issue the preliminary injunction prayed for. De Leon caused
notice of lis pendens to be recorded in relation with this
case.chanroblesvirtualawlibrary chanrobles virtual law
library
In due course, the lower court renders judgment dismissing
plaintiff's complaint with costs against plaintiff; ordering
plaintiff Jose Ponce de Leon to pay the defendant RFC.
Hence, this appeal.
ISSUES: Plaintiff's Appeal (DE LEON)
W/N the lower court has erred:
(1) in not setting aside the foreclosure sales on the
mortgage contract dated October 8, 1951
(2) in not granting Ponce de Leon's claim for
adjustment and not "giving him a reasonable time to pay
whatever obligations he may have.
HELD: It should be noted that, the total sum of P495,000
involved therein shall be satisfied in quarterly installments
of P28,831.64 each - representing interest and amortization
- and that, although the date of maturity of the first
installment was left blank, the promissory note states that
the "date of maturity (was) to be fixed as of the date of the
last release," completing the delivery to the plaintiff of the
sum of P495,000 lent to him by the RFC. He now says that
this sum of P495,000 has not, as yet, been fully released
by the RFC. But this is contrary to the facts of record, for,
during the trial, his counsel, Atty. Jose Orozco, admitted
that RFC paid de Leon’s creditors out of the proceeds of
P495,000.00.
At this juncture, it is noteworthy that plaintiff claims the right
to a suspension of payment or an extension of the period to
pay the RFC owing to the typhoons that had lashed his
sawmill in October and November 1952, thus indicating
clearly that the amount of the loan extended to him and
Francisco Soriano had then been fully released by the RFC
three (3) months before October 1952 and that the first
installment under the promissory note Exhibit A was due
that month, as claimed by the RFC.
At any rate, Annex A, in effect, authorized the RFC to fix
the date of maturity of the installments therein stipulated,
which is allowed by the Negotiable Instruments Law 11 and
when a promissory note expresses "no time for payment," it
is deemed "payable on demand."
With this modification and that of other pertinent parts of
the decision appealed from, the same is hereby affirmed in
all other respects, with the costs of this instance against
plaintiff, Jose L. Ponce de Leon and third-party plaintiffs,
Rosalina Soriano, Teofila Soriano del Rosario and Father
Eugenio Soriano. It is so ordered.
JOSEPH REICH vs. EDMUND SCHWESINGER, CA
Facts:
This is an appeal by certiorari from the decision rendered by
the Court of Appeals affirming the decision of the Court of First
Instance.
Defendant Joseph Reich-an alien debtor, borrowed from the
plaintiff Edmund Schwesinger-Filipino creditor, 10,000 shares
of stock of the Nielson and Company but due to his failure or
inability to return these shares, Reich executed on February 1,
1937 the promissory note in favor of Schwesinger for the sum
of P4,500.
Two promissory notes were issued, that which he executed in
favor of Schwesinger on October 1, 1937 for borrowed amount
of P4,000 in 1936 and the above mentioned amount executed
on February 1, 1937.
The two notes do not state the dates of their respective
maturity; they must therefore be deemed payable on demand.
Evidence for the plaintiff shows conclusively that he has made
repeated demands upon the defendant for the payment, with
interest, of the amount covered by the two notes.
Affirming the decision of the lower court, however, the Court of
Appeals ruled that:
As the two promissory notes in question were payable
on demand, they were due immediately after delivery,
and period of prescription started to run from the date
of such delivery. As a consequence said court held
that, as the promissory note, matured on February 1,
1937, and the second matured on October 1, 1937,
the causes of action of respondent Schwesinger were
supposed to prescribe on February 1, 1947 and
October 1, 1947, respectively. But applying the
Moratorium Law which was in force from May 1945 to
May 1953, the running of the prescriptive period of 10
years was interrupted. Moreover, the said period was
also interrupted on December 8, 1941, upon the
outbreak of World War II as well as by the written
demands made by the appellee upon the appellant. It
is therefore clear that the ten-year period of
prescription for bringing action on the two promissory
notes had not yet elapsed when the present action
was commenced on June 21, 1955.
 HELD:

Issue: It is to be emphasized in this connection that the check

Whether or not the cause of action had already prescribed
even before the present action has commenced.
Ruling:
Our statutes of limitations do not apply to an alien who,
because he was interned during the war, was not in a position
to invoke the aid of the courts. Otherwise stated, our statutes
of limitations were suspended upon the outbreak of the Second
World War in this country on December 8, 1941, as far as
interned aliens were concerned.
But petitioner contends that the above will apply only to an
interned alien creditor, and that it should not apply to the
present case where the creditor is a Filipino citizen who was
free to sue his debtor— an interned alien. This argument loses
sight of the fact that Instruction No. 28 issued by the Japanese
Military Administration decreed the suspension of court actions
affecting enemy aliens, without limiting the suspension to
the case of an enemy alien who had a right to enforce
through the courts.
These considerations apply with equal if not greater force to
the case of a Filipino creditor — like Schwesinger — whose
debtor was an interned alien, whose properties must have
been confiscated by the enemy.
deposited by the petitioner in the amount of P50.000.00 is not
an ordinary check but a Cashier's Check of the Equitable
Banking Corporation, a bank of good standing and
reputation. Where a check is certified by the bank on which it
is drawn, the certification is equivalent to acceptance. The
object of certifying a check, as regards both parties, is to
enable the holder to use it as money. When the holder
procures the check to be certified, "the check operates as an
assignment of a part of the funds to the creditors". The
exception to the rule enunciated under Section 63 of the
Central Bank Act to the effect "that a check which has been
cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor in cash in an amount
equal to the amount credited to his account" shall apply in this
case.
Petition was granted ordering the private respondent to accept
the sum of P63,130.00 under deposit as payment of the
judgment obligation in his favor. “We see no valid reason for
the private respondent to have refused acceptance of the
payment of the obligation in his favor”.

It is clear that the period of prescription, as far as respondent

Schwesinger's cause of action based on the promissory note
was concerned, was suspended on December 8, 1941, after
four (4) years and ten (10) months of the said period had been
consumed; that it remained so suspended after the war by
reason of the Moratorium Law, and began to run anew only in
the month of May, 1953 when said law was declared void. As
the present action was commenced on June 21, 1955, it
appears abundantly clear that it was filed very well within the
prescriptive period of ten years.

New Pacific Timber & Supply Co., Inc vs. Seneris

[No. L-41764. December19, 1980.]

FACTS: Herein petitioner was the defendant in a complaint for

collection of a sum of money filed by the private respondent.
On July 19, 1974, a compromise judgment was rendered by
the respondent Judge in accordance with an amicable
settlement entered into by the parties. For failure of the
petitioner to comply with his judgment obligation, the
respondent Judge, issued an order for the issuance of a writ of
execution for the amount of P63,130.00 pursuant to which, the
Ex Officio Sheriff levied upon the following personal properties
of the petitioner and set the auction sale thereof on January
15, 1975. Prior to January 15, 1975, petitioner deposited with
the Clerk of CFI the sum of P63,130.00 for the payment of the
judgment obligation, consisting of the following.

(1) P50,000.00 in Cashier's Checks No. S314361 dated

January 3, 1975 of the Equitable Banking Corporation; and

(2) P13,130.00 in cash.

The private respondent refused to accept the check as well as

the cash deposit. The respondent judge upheld private
respondent's claim that he has the right to refuse payment by
means of a check.

ISSUE: Whether or not the private respondent can validly

refuse acceptance of the payment of the judgment obligation
made by the petitioner consisting of P50,000.00 in Cashier's
Check and P13,130.00 in cash which it deposited with the Ex-
Officio Sheriff before the date of the scheduled auction sale.