CASE DOCTRINES

Philippine Education Co. vs. Soriano

Postal money orders are not negotiable instruments, the reason being that in
establishing and operating a postal money order system, the government is not
engaged in commercial transactions but merely exercises a governmental power for
the public benefit. Moreover, 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.

Caltex Phil. vs. Court of Appeals

Under the Negotiable Instrument Law, an instrument is negotiated when it is

transferred from one person to another in such a manner as to constitute the
transferee the holder thereof and a holder may be the payee or indorsee of a bill or
note, who is in possession of it, or the bearer thereof. The delivery as security only
could at the most constitute petitioner only as a holder for value by reason of his lien.

Where the holder has a lien on the instrument arising from contract, he is deemed a
holder for value to the extent of his lien.

Metrobank vs. Court of Appeals

The treasury warrants are not negotiable instruments. Clearly stamped on their face
is the word: non negotiable. Moreover, and this is equal significance, it is indicated
that they are payable from a particular fund, Fund 501. An instrument to be negotiable
instrument must contain an unconditional promise or orders to pay a sum certain in
money. As provided by Sec 3 of NIL an unqualified order or promise to pay is
unconditional though coupled with: 1st, 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 2nd, a statement of the transaction which give rise to the instrument. But an order
to promise to pay out of 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 conditional and the warrants
themselves non-negotiable. There should be no question that the exception on Section
3 of NIL is applicable in the case at bar.

Sesbreno vs. Court of Appeals

Only an instrument qualifying as a negotiable instrument under the relevant statute

may be negotiated either by indorsement thereof coupled with delivery, or by delivery
alone if it is in bearer form.

The non-negotiability of the instrument doesnt mean that it is non-assignable

or transferable. It may still be assigned or transferred in whole or in part, even without
the consent of the promissory note, since consent is not necessary for the validity of
the assignment. The legal consequences of negotiation and assignment of the
instrument are different. A negotiable instrument may not be negotiated but may be
 assigned or transferred, absent an express prohibition against assignment or transfer
written in the face of the instrument.

Firestone Tire & rubber Co. vs. Court of Appeals

Withdrawal slips are non negotiable instruments. Thus, the bank was under no
obligation to give immediate notice that it wouldn't
make payment on the subject withdrawal slips. The essence of negotiability which
characterizes a negotiable paper as a credit instrument lies in its freedom to circulate
freely as a substitute for money. The withdrawal slips lacked this character.

Ang Tek Lian vs. Court of Appeals

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 drawers
indorsement. However, if the bank is not sure of the bearers identity or financial
solvency, it has the right to demand identification or assurance against possible
complication. But where the bank is satisfied of the identity or 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.

Development Bank of the Phils. vs. Sima Wei

A negotiable instrument, of which a check is, is not only a written evidence of a contract
right but is also a species of property. Just as a deed to a piece of land must be
delivered in order to convey title to the grantee, so
must a negotiable instrument be delivered to the payee in order to
evidence its existence as a binding contract.

Section 16 provides that every contract on a negotiable instrument is incomplete

and revocable until delivery of the instrument for the purpose of giving effect
thereto. Thus, the payee of the negotiable instrument acquires no interest wit
h respect thereto until its delivery to him. Delivery of an instrument from the drawer
to the payee, there can be no liability on the instrument. Moreover, such delivery
must be intended to give effect to the instrument.

Philippine Bank of Commerce vs. Aruego

Section 20 of the NIL which provides that when a person adds to his signature words
indicating that he signs for or on behalf of a principal or in a representative capacity,
he is not liable on the instrument if he was duly authorized; but the mere addition of
words describing him as an agent or as filing a representative character, without
disclosing his principal, does not exempt him from personal liability.
Francisco vs. Court of Appeals

The negotiable Instruments Law provides that when a person is under obligation to
indorse in a representative capacity, he may indorse in such terms as to negative
personal liability. An agent, when so signing, should indicate that he is merely signing
as an agent in behalf of the principal and must disclose the name of his principal.
Otherwise, he will be held liable personally

Jail-Alai vs. Bank of the Philippine Islands

A forged signature in a negotiable instrument is wholly inoperative and no right to

discharge it or enforce its payment can be acquired through or under the forged
signature except against a party who cannot invoke the forgery. The collecting bank
which indorsed the checks to the drawee-banks for clearing, should be liable to the
latter for reimbursement.

In legal contemplation, the payments made by the drawee-banks to the respondent

on account of the said checks were ineffective; and, such being the case, the
relationship of creditor and debtor between the petitioner and the respondent had not
been validly effected, the checks not having been properly and legitimately converted
into cash.

Republic Bank vs. Ebreda

Where a check is drawn payable to the order of one person and is presented to a bank
by another and purports upon its face to have been duly indorsed by the payee of the
check, it is the duty of the bank to know that the check was duly indorsed by the
original payee, and where the bank pays the amount of the check to a third person,
who has forged the signature of the payee, the loss falls upon the bank who cashed
the check, and its only remedy is against the person to whom it paid the money.

MWSS vs. Court of Appeals

It is basic that whoever alleges forgery must prove such fact. Forgery cannot be
presumed, it must be established by clear, positive and convincing evidence.

The drawee bank cannot be at fault for not having detected the fraudulent encashment
of the checks because the printing of the petitioner's personalized checks was not done
under the supervision and control of the Bank. There is no evidence on record
indicating that because of this private printing the petitioner furnished the respondent
Bank with samples of checks, pens, and inks or took other precautionary measures
with the PNB to safeguard its interests.

Banco de Oro vs. Equitable Banking Corporation

The collecting bank or last endorser generally suffers the loss because it has the duty
to ascertain the genuineness of all prior endorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the party making
the presentment has done its duty to ascertain the genuineness of the endorsements.

Where a check is accepted or certified by the bank on which it is drawn, the bank is
estopped to deny the genuineness of the drawers signature and his capacity to issue
the instrument. If a drawee bank pays a forged check which was previously accepted
 or certified by the said bank, it can not recover from a holder who did not participate
in the forgery and did not have actual notice thereof.

While the drawer generally owes no duty of diligence to the collecting bank, the law
imposes a duty of diligence on the collecting bank to scrutinize checks deposited with
it for the purpose of determining their genuineness and regularity. The collecting bank
being primarily engaged in banking holds itself out to the public as the expert and the
law holds it to a high standard of conduct.

Gempesaw vs. Court of Appeals

While there is no duty resting on the depositor to look for forged indorsements on his
cancelled checks in contrast to a duty imposed upon him to look for forgeries of his
own name, a depositor is under a duty to set up an accounting system and a business
procedure as are reasonably calculated to prevent or render difficult the forgery of
indorsements, particularly by the depositor's own employees. And if the drawer
(depositor) learns that a check drawn by him has been paid under a forged
indorsement, the drawer is under duty promptly to report such fact to the drawee
bank.5For his negligence or failure either to discover or to report promptly the fact of
such forgery to the drawee, the drawer loses his right against the drawee who has
debited his account under a forged indorsement.6 In other words, he is precluded from
using forgery as a basis for his claim for re-crediting of his account.

Associated Bank vs. Court of Appeals

In cases involving checks with forged indorsements, such as the present petition, the
chain of liability does not end with the drawee bank. The drawee bank may not debit
the account of the drawer but may generally pass liability back through the collection
chain to the party who took from the forger and, of course, to the forger himself, if
available. In other words, the drawee bank can seek reimbursement or a return of the
amount it paid from the presentor bank or person.

Theoretically, the latter can demand reimbursement from the person who indorsed the
check to it and so on. The loss falls on the party who took the check from the forger,
or on the forger himself. Since a forged indorsement is inoperative, the collecting bank
had no right to be paid by the drawee bank. The former must necessarily return the
money paid by the latter because it was paid wrongfully.

Metrobank vs. First National City Bank

The drawee bank receiving the check for clearing from the Central Bank Clearing House
must return the check to the collecting bank within the 24-hour period if the check is
defective for any reason. A delay in informing the collecting bank of the forgery, which
deprives it of the opportunity to go after the forger, signifies negligence on the part of
the drawee bank (and will preclude it from claiming reimbursement.

The validity of the 24-hour clearing house regulation has been upheld by this Court in
Republic vs. Equitable Banking Corporatio. As held therein, since both parties are part
of the banking system, and both are subject to the regulations of the Central Bank,
they are bound by the 24-hour clearing house rule of the Central Bank
Republic Bank vs. Court of Appeals

The 24-hour clearing house rule is valid rule applicable to commercial banks. As
general rule, the collecting bank or last endorser bears the loss when the indorsement
was forged. But the unqualified endorsement of the collecting bank on the check should
be read together with the 24-hour regulation on the clearing house operation. Thus,
when the drawee bank fails to return a forged or altered check to the collecting bank
is absolved from liability. Unless an alteration is attributable to the fault or negligence
of the drawer himself, the remedy of the drawee bank that negligently clears a forged
and/or honor altered check for payment is against the party responsible for the forgery
or alteration, otherwise, it bears the loss.

Philippine Commercial International Bank vs. Court of Appeals

The services being offered by a banking institution like petitioner are imbued with
public interest. The use of telegraphic transfers have now become commonplace
among businessmen because it facilitates commercial transactions. Any attempt to
completely exempt one of the contracting parties from any liability in case of loss
notwithstanding its bad faith, fault or negligence, as in the instant case, cannot be
sanctioned for being inimical to public interest and therefore contrary to public policy.

Ramon Illusorio vs. Court of Appeals

The collecting bank or last endorser generally suffers the loss because it has the duty
to ascertain the genuineness of all prior indorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the party making
the presentment has done its duty to ascertain the genuineness of the indorsements.
As between the drawer and the drawee bank, the drawee bank should bear the loss.
The drawee bank shall have recourse against the collecting bank because such
collecting bank guarantees that all prior endorsements are genuine. The collecting
bank then can go against the forger. In cases involving a forged check, where the
drawers is forged, drawer can recover from the drawee bank. No drawee bank has a
right to pay a forged check. If it does, it shall have to recredit the amount of check to
the account of the drawer. The liability chain ends with drawee bank whose
responsibility it is to know the drawers signature since the latter is its customer.

Samsung Construction Co. Phils, Inc vs. FEBTC and CA

The justification for the distinction between forgery of the signature of the drawer and
forgery of an indorsement is that the drawee is in a position to verify the drawers
signature by comparison with one in his hands, but has ordinarily no opportunity to
verify an indorsement.

Thus, a drawee bank is generally liable to its depositor in paying a check which bears
either a forgery of the drawers signature or a forged indorsement. But the bank may,
as a general rule, recover back the money which it has paid on a check bearing a
forged indorsement, whereas it has not this right to the same extent with reference to
a check bearing a forgery of the drawers signature.