NEGOTIABLE INSTRUMENTS LAW pre-signed and consecutively numbered

CASE DIGESTS - 2C checks on the condition that these checks will

_____________________________________ only be used to cover the costs of the business
operations and in no circumstance will the
I. ISSUANCE amount of the checks exceed PhP 5,000.
However, due to a disagreement, their
1. TING TING PUA v. SPOUSES BENITO LO partnership dissolved. Caroline alleged that
BUN TIONG and CAROLINE SIOK CHING she forgot about the pre-signed checks.
TENG Caroline denied having completed Check A.
October 23, 2013 She contended that the petitioner and her
sister completed the check after its delivery. As
FACTS: ​Petitioner alleged that she lent money for the 17 checks earlier issued, she insisted
to the respondents on the ground that her that they were issued for the benefit of another
sister, Lilian Balboa, vouched the respondents’ person.
ability to pay. The spouses issued 17 ISSUE: ​Whether or not there is a loan
post-dated checks amounting to 1,975,000 transaction.
pesos, which were thereafter dishonored upon RULING: YES. ​The checks issued prove a
presentment to the drawee bank. loan transaction. Sec. 24 of the NIL states that
Consequently, petitioner demanded payment. every negotiable instrument is deemed prima
The spouses pleaded for more time because of facie to have been issued for a valuable
their financial difficulties. Petitioner obliged to consideration; and every person whose
their request. The debt ballooned to 8, 500,000 signature appears thereon to have become a
pesos. Respondents then delivered a party for value. Consequently, the 17 original
check(Check A) to petitioner, bearing the same checks, completed and delivered to petitioner,
amount. In turn, respondents demanded the are sufficient by themselves to prove the
return of the 17 previously dishonored checks. existence of the loan obligation of the
Petitioner refused, stating that she will do so respondents to petitioner. Note that respondent
upon the encashment of the last check(Check Caroline had not denied the genuineness of
A) issued. However, Check A was also these checks. The respondents did not deny
dishonored. Hence, petitioner filed a complaint the genuineness of these checks. Instead,
for collection of money. respondents argue that they were given to
various other persons and petitioner had
For their defense, respondents denied simply collected all these 17 checks from them
obtaining a loan. They alleged that Caroline in order to damage respondents’ reputation.
and petitioner’s sister, Lilian, forged a This account is not only incredible; it runs
partnership that operated a mahjong business. counter to human experience, as enshrined in
Their agreement was for Lilian to serve as the Sec. 16 of the NIL which provides that when an
capitalist while respondent Caroline was to act instrument is no longer in the possession of the
as the cashier. Caroline also agreed to use her person who signed it and it is complete in its
personal checks to pay for the operational terms "a valid and intentional delivery by him is
expenses. As the partners anticipated that presumed until the contrary is proved”.
Caroline will not always be in town to prepare
these checks, she left with Lilian five (5)
2. QUIRINO GONZALES LOGGING June 4, 2014
CONCESSIONAIRE v. CA and REPUBLIC
PLANTERS BANK FACTS: ​The petitioner and the respondent
April 30, 2003 Gutierrez entered into a business venture
under the name of Slam Dunk Corporation, a
FACTS: Petitioner Quirino Gonzales Logging production outfit that produced mini-concerts
Concessionaire (QGLC) applied for credit and shows related to basketball.
accommodation which the Bank approved.
Their obligation was secured by a real estate Patrimonio pre-signed several checks to
mortgage of parcels of land. QGLC executed a answer for the expenses of Slam Dunk.
promissory note, with a face value of 55,000 Although signed, these checks had no payee’s
pesos, in which they defaulted. The Bank name, date or amount. The blank checks were
foreclosed the property and was subsequently entrusted to Gutierrez with the specific
owned by the Bank. The Bank then filed a instruction not to fill them out without previous
complaint for a sum of money in regards to the notification to and approval by the petitioner.
unpaid notes.
Without the petitioner’s knowledge and
The notes were payable 30 days after
consent, Gutierrez went to Marasigan to
date and provided for the solidary liability in
secure a loan in the amount of P200,000.00 on
their non-payment at maturity. Petitioners deny
the excuse that the petitioner needed the
having received the value of the promissory
money for the construction of his house.
notes and they further alleged that petitioners
Quirino and Eufemia Gonzales signed the PN’s Marasigan acceded to Gutierrez’
in blank. request and gave him P200,000.00. Gutierrez
simultaneously delivered to Marasigan one of
the blank checks the petitioner pre-signed with
ISSUE: ​Whether or not the petitioners are Pilipinas Bank with the blank portions filled out
liable. with the words “Cash” “Two Hundred
Thousand Pesos Only”, and the amount of
RULING: “P200,000.00.” Marasigan deposited the check
Yes. The promissory notes were but it was dishonored for the reason
negotiable as they met the requirements of “ACCOUNT CLOSED.” It was later revealed
Sec. 1 of the NIL. The notes are prima facie that petitioner’s account with the bank had
deemed to have been issued for consideration. been closed.
In any case, it is no defense that the
promissory notes were signed in blank as Marasigan sought recovery from
Section 14 ​of the Negotiable Instruments Law Gutierrez, to no avail. He thereafter sent
concedes the ​prima facie authority of the several demand letters to the petitioner asking
person in possession of negotiable for the payment of P200,000.00, but his
instruments, such as the notes herein, to fill in demands likewise went unheeded.
the blanks. Consequently, he filed a criminal case for
violation of B.P. 22 against the petitioner.
3. ALVIN PATRIMONIO v. NAPOLEON
GUTIERREZ ISSUE: ​Whether or not Patrimonio is liable.
RULING: NO. ​Section 14 of the Negotiable However, Marasigan may claim
Instruments Law provides for when blanks may payment from Gutierrez because the latter
be filled. This provision applies to an exceeded his authority.
incomplete but delivered instrument. Under this
rule, if the maker or drawer delivers a 4.) SAMSON CHING, ​Petitioner, vs. ​CLARITA
pre-signed blank paper to another person for NICDAO
the purpose of converting it into a negotiable
instrument, that person is deemed to have
prima facie authority to fill it up. It merely FACTS:
requires that the instrument be in the
possession of a person other than the drawer Petitioner Ching, a Chinese national, instituted
or maker and from such possession, together criminal complaints for eleven (11) counts of
with the fact that the instrument is wanting in a violation of BP 22 against respondent Nicdao
material particular, the law presumes agency to
fill up the blanks. Ching alleges that the said accused did then
and there willfully and unlawfully make or draw
In order however that one who is not a and issue Hermosa Savings & Loan Bank, Inc.
holder in due course can enforce the Check No. [002524] dated October 06, 1997 in
instrument against a party prior to the the amount of [₱20,000,000.00] in payment of
instrument’s completion, two requisites must her obligation with complainant Samson T.Y.
exist: (1) that the blank must be filled strictly in Ching,
accordance with the authority given; and (2) it
must be filled up within a reasonable time. If it Moreover, Ching alleges that the said accused
was proven that the instrument had not been knowing fully well that at the time she issued
filled up strictly in accordance with the authority the said check she did not have sufficient funds
given and within a reasonable time, the maker in or credit with the drawee bank for the
can set this up as a personal defense and payment in full of the said check upon
avoid liability. presentment, which check when presented for
payment within ninety (90) days from the date
Marasigan is not a holder in due course. thereof, was dishonored by the drawee bank
He had notice that there was something wrong for the reason that it was drawn against
about his assignor’s acquisition of title, insufficient funds and notwithstanding receipt
although he did not have notice of the of notice of such dishonor the said accused
particular wrong that was committed. In the failed and refused and still fails and refuses to
present case, Marasigan’s knowledge that the pay the value of the said check in the amount
petitioner is not a party or a privy to the of [P20,000,000.00]
contract of loan, and correspondingly had no
obligation or liability to him, renders him Petitioner Ching averred that the checks were
dishonest, hence, in bad faith. Hence, issued to him by respondent Nicdao as security
Patrimonio cannot be held liable because sec. for the loans that she obtained from him. Their
14 of the NIL is merely a personal defense. transaction began sometime in October 1995
when respondent Nicdao, proprietor/manager
of Vignette Superstore, together with her
husband, approached him to borrow money in
order for them to settle their financial the cigarette wrappers that she gave to
obligations. They agreed that respondent respondent Nicdao.
Nicdao would leave the checks undated and
that she would pay the loans within one year. With respect to the ₱20,000,000.00 check,
However, when petitioner Ching went to see respondent Nicdao admitted that the signature
her after the lapse of one year to ask for thereon was hers but denied that she issued
payment, respondent Nicdao allegedly said the same to petitioner Ching. Anent the other
that she had no cash. ten (10) checks, she likewise admitted that the
signatures thereon were hers while the
Petitioner Ching reiterated that after the lapse amounts and payee thereon were written by
of one (1) year from the time respondent either Jocelyn Nicdao or Melanie Tolentino,
Nicdao issued the checks to him, he went to who were employees of Vignette Superstore
her several times to collect payment. In all and authorized by her to do so.
these instances, she said that she had no
cash. Finally, in September 1997, respondent Respondent Nicdao clarified that, except for
Nicdao allegedly went to his house and told the ₱20,000,000.00 check, the other ten (10)
him that Janette was only willing to pay him checks were handed to Nuguid on different
between ₱3,000,000.00 and ₱5,000,000.00 occasions. Nuguid came to the grocery store
because, as far as her daughter was everyday to collect the interest payments.
concerned, that was the only amount borrowed Respondent Nicdao said that she purposely left
from petitioner Ching. the checks undated because she would still
have to notify Nuguid if she already had the
Respondent Nicdao stated that she only dealt money to fund the checks.
with Nuguid. She vehemently denied the
allegation that she had borrowed money from Respondent Nicdao alleges that what actually
both petitioner Ching and Nuguid in the total transpired was that when she already had the
amount of ₱22,950,000.00. Respondent Nicdao money to pay them, she went to them to
admitted, however, that she had obtained a retrieve her checks. However, petitioner Ching
loan from Nuguid but only for ₱2,100,000.00 and Nuguid refused to return the checks
and the same was already fully paid. As proof claiming that she still owed them money. She
of such payment, she presented a Planters demanded that they show her the checks in
Bank demand draft. The annotation at the back order that she would know the exact amount of
of the said demand draft showed that it was her debt, but they refused. It was at this point
endorsed and negotiated to the account of that she got angry and dared them to go to
petitioner Ching. court.

In addition, respondent Nicdao also presented After the said incident, respondent Nicdao was
and identified several cigarette wrappers​18 at surprised to be notified by HSLB that her check
the back of which appeared computations. She in the amount of ₱20,000,000.00 was just
explained that Nuguid went to the grocery store presented to the bank for payment. She
everyday to collect interest payments. The claimed that it was only then that she
principal loan was ₱2,100,000.00 with 12% remembered that sometime in 1995, she was
interest per day. Nuguid allegedly wrote the informed by her employee that one of her
payments for the daily interests at the back of
checks was missing. At that time, she did not upon instruction of Nuguid who said that she
let it bother her thinking that it would use the checks to pay someone else.

would eventually surface when presented to On cross-examination,​20 respondent Nicdao

the bank. explained that Josie Nicdao and Melanie
Tolentino were caretakers of the grocery store
Respondent Nicdao could not explain how the and that they manned it when she was not
said check came into petitioner Ching’s there. She likewise confirmed that she
possession. She explained that she kept her authorized them to write the amounts on the
checks in an ordinary cash box together with a checks after she had affixed her signature
stapler and the cigarette wrappers that thereon. She stressed, however, that the
contained Nuguid’s computations. Her ₱20,000,000.00 check was the one that was
saleslady had access to this box. Respondent reported to her as lost or missing by her
Nicdao averred that it was Nuguid who offered saleslady sometime in 1995.
to give her a loan as she would allegedly need
money to manage Vignette Superstore. Nuguid Again, respondent Nicdao identified the
used to run the said store before respondent cigarette wrappers which indicated the daily
Nicdao’s daughter bought it from Nuguid’s payments she had made to Nuguid. The latter
family, its previous owner. According to allegedly went to the grocery store everyday to
respondent Nicdao, it was Nuguid who collect the interest payments. Further, the
regularly delivered the cash to respondent figures at the back of the cigarette wrappers
Nicdao or, if she was not at the grocery store, were written by Nuguid. Respondent Nicdao
to her saleslady. Respondent Nicdao denied asserted that she recognized her handwriting
any knowledge that the money loaned to her because Nuguid sometimes wrote them in her
by Nuguid belonged to petitioner Ching. presence.

Respondent Nicdao said that she never dealt Respondent Nicdao maintained that she had
with petitioner Ching because it was Nuguid already paid Nuguid the amount of
who went to the grocery store everyday to ₱1,200,000.00 as evidenced by the Planters
collect the interest payments. When shown the Bank demand draft which she gave to the latter
₱20,000,000.00 check, respondent Nicdao and which was subsequently negotiated and
admitted that the signature thereon was hers deposited in petitioner Ching’s account. In
but she denied issuing it as a blank check to connection thereto, respondent Nicdao refuted
petitioner Ching. the prosecution’s allegation that the demand
draft was payment for a previous transaction
On the other hand, with respect to the other ten that she had with petitioner Ching. She clarified
(10) checks, she also admitted that the that the payments that Nuguid collected from
signatures thereon were hers and that the her everyday were only for the interests due.
amounts thereon were written by either Josie She did not ask Nuguid to make written
Nicdao or Melanie Tolentino, her employees acknowledgements of her payments.
whom she authorized to do so. With respect to
the payee, it was purposely left blank allegedly The MCTC ruled in favor of Ching. It explained
that the crime of violation of BP 22 has the
following elements: (a) the making, drawing
and issuance of any check to apply to account said store. However, since petitioner could not
or for value; (b) the knowledge of the maker, always be at the Vignette Superstore to keep
drawer or issuer that at the time of issue he shop, she entrusted to her salesladies, Melanie
does not have sufficient funds in or credit with Tolentino and Jocelyn Nicdao, pre-signed
the drawee bank for the payment of such checks, which were left blank as to amount and
check in full upon its presentment; and (c) the payee, to cover for any delivery of
subsequent dishonor of the check by the merchandise sold at the store. The blank and
drawee bank for insufficiency of funds or credit personal checks were placed in a cash box at
or dishonor for the same reason had not the Vignette Superstore and were filled up by said
drawer, without any valid cause, ordered the salesladies upon instruction of petitioner as to
bank to stop payment. amount, payee and date.

According to the MCTC, all the foregoing Soon thereafter, Emma Nuguid befriended
elements are present in the case of respondent petitioner and offered to lend money to the
Nicdao’s issuance of the checks. latter which could be used in running her newly
acquired store. Nuguid represented to
petitioner that as former manager of the
Vignette Superstore, she knew that petitioner
ISSUE:
would be in need of credit to meet the daily
expenses of running the business, particularly
in the daily purchases of merchandise to be
1.) Whether or not Nicdao is guilty of violating sold at the store. After Emma Nuguid
BP 22 succeeded in befriending petitioner, Nuguid
was able to gain access to the Vignette
Superstore where petitioner’s blank and
pre-signed checks were kept.​29
2.) Whether or not respondent remains civilly
liable to petitioner despite her acquittal. CA found that respondent Nicdao borrowed
money from Nuguid in the total amount of
₱2,100,000.00 secured by twenty-four (24)
HELD: checks drawn against respondent Nicdao’s
account with HSLB. Upon Nuguid’s instruction,
No. the checks given by respondent Nicdao as
security for the loans were left blank as to the
The CA reversed the decision of the trial court, payee and the date. The loans totaled
thus acquitting Nicdao. In acquitting ₱2,100,000.00 and they were transacted
respondent Nicdao in CA-G.R. CR No. 23055, between respondent Nicdao and Nuguid only.
the CA made the following factual findings: Respondent Nicdao never dealt with petitioner
Ching.
Nuguid used to own a grocery store now
known as the Vignette Superstore. She sold Against the foregoing factual findings, the CA
this grocery store, which was about to be declared that, based on the evidence,
foreclosed, to petitioner’s daughter, Janette respondent Nicdao had already fully paid the
Boyd. Since then, petitioner began managing loans. In particular, the CA referred to the
Planters Bank demand draft in the amount of made or drawn and issued to apply on account
₱1,200,000.00 which, by his own admission, or for value. According to the CA, the word
petitioner Ching had received. "account" refers to a pre-existing obligation,
while "for value" means an obligation incurred
Apart from the demand draft, the CA also simultaneously with the issuance of the check.
stated that respondent Nicdao made interest In the case of respondent Nicdao’s checks, the
payments on a daily basis to Nuguid as pre-existing obligations secured by them were
evidenced by the computations written at the already extinguished after full payment had
back of the cigarette wrappers. Based on these been made by respondent Nicdao to Nuguid.
computations, as of July 21, 1997, respondent Obligations are extinguished by, among others,
Nicdao had made a total of ₱5,780,000.00 payment.​30 The CA believed that when
payments to Nuguid for the interests alone. petitioner Ching and Nuguid refused to return
Adding up this amount and that of the respondent Nicdao’s checks despite her total
Planters Bank demand draft, the CA placed payment of ₱6,980,000.00 for the loans
the payments made by respondent Nicdao secured by the checks, petitioner Ching and
to Nuguid as already amounting to Nuguid were using BP 22 to coerce respondent
₱6,980,000.00 for the principal loan amount Nicdao to pay a debt which she no longer
of only ₱2,100,000.00. owed them.

The CA gave credence to the testimony of Moreover, the CA characterized as incredible

respondent Nicdao that when she had fully and contrary to human experience that
paid her loans to Nuguid, she tried to petitioner Ching would, as he claimed, deliver a
retrieve her checks. Nuguid, however, total sum of ₱20,000,000.00 to respondent
refused to return the checks to respondent Nicdao without any documentary proof thereof,
Nicdao. Instead, Nuguid and petitioner Ching e.g., written acknowledgment that she received
filled up the said checks to make it appear that: the same. On the other hand, it found plausible
(a) petitioner Ching was the payee in five respondent Nicdao’s version of the story that
checks; (b) the six checks were payable to the ₱20,000,000.00 check was the same one
cash; (c) Nuguid was the payee in fourteen that was missing way back in 1995. The CA
(14) checks. Petitioner Ching and Nuguid then opined that this missing check surfaced in the
put the date October 6, 1997 on all these hands of petitioner Ching who, in cahoots with
checks and deposited them the following day. Nuguid, wrote the amount ₱20,000,000.00
On October 8, 1997, through a joint demand thereon and deposited it in his account. To the
letter, they informed respondent Nicdao that mind of the CA, the inference that the check
her checks were dishonored by HSLB and was stolen was anchored on competent
gave her three days to settle her indebtedness circumstantial evidence. Specifically, Nuguid,
or else face prosecution for violation of BP 22. as previous manager/owner of the grocery
store, had access thereto. Likewise applicable,
With the finding that respondent Nicdao had
according to the CA, was the presumption that
fully paid her loan obligations to Nuguid, the
the person in possession of the stolen article
CA declared that she could no longer be held
was presumed to be guilty of taking the stolen
liable for violation of BP 22. It was explained
article.​31
that to be held liable under BP 22, it must be
established, inter alia, that the check was
The CA emphasized that the ₱20,000,000.00 5.) ​LORETO D. DE LA VICTORIA, as City
check was never delivered by respondent Fiscal of Mandaue City and in his personal
Nicdao to petitioner Ching. As such, the said capacity as garnishee, ​petitioner,
check without the details as to the date,
amount and payee, was an incomplete and vs.
undelivered instrument when it was stolen and HON. JOSE P. BURGOS, Presiding Judge,
ended up in petitioner Ching’s hands. On this RTC, Br. XVII, Cebu City, and RAUL H.
point, the CA applied Sections 15 and 16 of the SESBREÑO, ​respondents.
Negotiable Instruments Law:
FACTS:
The CA held that the ₱20,000,000.00 check
was filled up by petitioner Ching without A notice of garnishment was served on
respondent Nicdao’s authority. Further, it was petitioner Loreto D. de la Victoria as City Fiscal
incomplete and undelivered. Hence, petitioner of Mandaue City where defendant Mabanto,
Ching did not acquire any right or interest Jr., was then detailed. The notice directed
therein and could not assert any cause of petitioner not to disburse, transfer, release or
action founded on thestolen checks. Under convey to any other person except to the
these circumstances, the CA concluded that deputy sheriff concerned the salary checks or
respondent could not be held liable for violation other checks, monies, or cash due or
of BP 22. belonging to Mabanto, Jr.

2.) Yes. Private respondent filed a motion before the

trial court for examination of the
Notwithstanding respondent Nicdao’s acquittal, garnishees.Thereafter, the trial court, finding
petitioner Ching is entitled to appeal the civil no more legal obstacle to act on the motion for
aspect of the case within the reglementary examination of the garnishees, directed
period. petitioner to submit his report showing the
amount of the garnished salaries of Mabanto,
What gives rise to the civil liability is really the
Jr.
obligation of everyone to repair or to make
whole the damage caused to another by Petitioner moved to quash the notice of
reason of his act or omission, whether done garnishment claiming that he was not in
intentionally or negligently and whether or not possession of any money, funds, credit,
punishable by law. property or anything of value belonging to
Mabanto, Jr., except his salary and RATA
Extinction of penal action does not carry with it
checks, but that said checks were not yet
the eradication of civil liability, unless the
properties of Mabanto, Jr., until delivered to
extinction proceeds from a declaration in the
him.
final judgment that the fact from which the civil
liability might arise did not exist. He further claimed that, as such, they were still
public funds which could not be subject to
garnishment.
ISSUE: to transfer title to the payee and recognize him
as the holder thereof.
(1) whether a check still in the hands of the
maker or its duly authorized representative is The salary check of a government officer or
owned by the payee before physical delivery to employee such as a teacher does not belong
the latter: and, to him before it is physically delivered to him.
Until that time the check belongs to the
(2) whether the salary check of a government government. Accordingly, before there is actual
official or employee funded with public funds delivery of the check, the payee has no power
can be subject to garnishment. over it; he cannot assign it without the consent
of the Government.
HELD:
2.) NO.
1. NO.
As a necessary consequence of being public
Salary checks were not owned by Mabanto,
fund, the checks may not be garnished to
Jr., because they were not yet delivered to him,
satisfy the judgment. The functions and public
and that petitioner as garnishee has no legal
services rendered by the State cannot be
obligation to hold and deliver them to the trial
allowed to be paralyzed or disrupted by the
court to be applied to Mabanto, Jr.'s judgment
diversion of public funds from their legitimate
debt. The salary checks still formed part of
and specific objects, as appropriated by law.
public funds and therefore beyond the reach of
garnishment proceedings. 6.)​ SAN MIGUEL CORPORATION,​ Petitioner,

Garnishment is considered as a species of vs.

attachment for reaching credits belonging to
the judgment debtor owing to him from a BARTOLOME PUZON, JR.,​ Respondent.
stranger to the litigation. Emphasis is laid on
the phrase ​"belonging to the judgment FACTS:
debtor" since it is the focal point in resolving
Respondent Bartolome V. Puzon, Jr., (Puzon)
the issues raised.
owner of Bartenmyk Enterprises, was a dealer
As Assistant City Fiscal, the source of the of beer products of petitioner San Miguel
salary of Mabanto, Jr., is public funds. He Corporation (SMC) for Parañaque City. Puzon
receives his compensation in the form of purchased SMC products on credit. To ensure
checks from the Department of Justice. Under payment and as a business practice, SMC
Sec. 16 of the Negotiable Instruments Law, required him to issue postdated checks
every contract on a negotiable instrument is equivalent to the value of the products
​ f the
incomplete and revocable until ​delivery o purchased on credit before the same were
instrument for the purpose of giving effect released to him. Said checks were returned to
thereto. As ordinarily understood, delivery Puzon when the transactions covered by these
means the transfer of the possession of the checks were paid or settled in full.
instrument by the maker or drawer ​with intent
Puzon purchased products on credit amounting On this point the Negotiable Instruments Law
to ₱11,820,327 for which he issued, and gave provides:
to SMC, checks to cover the said transaction.
Sec. 12. Antedated and postdated – The
Puzon, together with his accountant, visited the instrument is not invalid for the reason only that
SMC Sales Office in Parañaque City to it is antedated or postdated, provided this is not
reconcile his account with SMC. During that done for an illegal or fraudulent purpose. The
visit Puzon allegedly requested to see BPI person to whom an instrument so dated is
Check No. 17657. However, when he got hold delivered acquires the title thereto as of the
of BPI Check No. 27903 which was attached to date of delivery. (Underscoring supplied.)
a bond paper together with BPI Check No.
17657 he allegedly immediately left the office Note however that delivery as the term is used
with his accountant, bringing the checks with in the aforementioned provision means that the
them. party delivering did so for the purpose of giving
effect thereto. Otherwise, it cannot be said that
SMC sent a letter to Puzon demanding the there has been delivery of the negotiable
return of the said checks. Puzon ignored the instrument. Once there is delivery, the person
demand hence SMC filed a complaint against to whom the instrument is delivered gets the
him for theft. title to the instrument completely and
irrevocably.
ISSUE:
If the subject check was given by Puzon to
1. Whether or not Puzon is liable for Theft SMC in payment of the obligation, the purpose
of giving effect to the instrument is evident thus
HELD:
title to or ownership of the check was
1. NO. transferred upon delivery. However, if the
check was not given as payment, there being
The essential elements of the crime of theft are no intent to give effect to the instrument, then
the following: (1) that there be a taking of ownership of the check was not transferred to
personal property; (2) that said property SMC.
belongs to another; (3) that the taking be done
with intent to gain; (4) that the taking be done The evidence of SMC failed to establish that
without the consent of the owner; and (5) that the check was given in payment of the
the taking be accomplished without the use of obligation of Puzon. There was no provisional
violence or intimidation against persons or receipt or official receipt issued for the amount
force upon things." of the check.

Considering that the second element is that the Furthermore, the petitioner's demand letter
thing taken ​belongs to another,​ it is relevant to sent to respondent states "As per company
determine whether ownership of the subject policies on receivables, all issuances are to be
check was transferred to petitioner. covered by post-dated checks. However, you
have deviated from this policy by forcibly taking
away the check you have issued to us to cover
the December issuance."​14 Notably, the term
"payment" was not used instead the terms and the DOJ were correct in finding no
"covered" and "cover" were used. probable cause for theft.

Although the petitioner's witness states that the 7. TRAVEL-ON INC. vs. Court of Appeals
check was given in payment of the obligation of
Puzon, the same is contradicted by his
statements where he states that "As a standard Facts:
company operating procedure, all beer Petitioner Travel-On Inc. is a travel agency
purchases by dealers on credit shall be from which Arturo Miranda procured tickets on
covered b​ y postdated checks equivalent to the behalf of airline passengers and derived
value of the beer products purchased"; in commissions therefrom. Miranda was sued by
paragraph 9 where he states that "the petitioner to collect on the six postdated checks
transaction ​covered by the said check had not he issued which were all dishonored by the
yet been paid for," and in paragraph 8 which drawee banks. Miranda, however, claimed that
clearly shows that partial payment is expected he had already fully paid and even overpaid his
to be made by the return of beer empties, and obligations and that refunds were in fact due to
not by the deposit or encashment of the him. He argued that he had issued the
check.1avvphi1 ​Clearly the term "cover" was postdated checks not for the purpose of
not meant to be used interchangeably with encashment to pay his indebtedness but for
"payment." purposes of accommodation, as he had in the
past accorded similar favors to petitioner.
When taken in conjunction with the Petitioner however urges that the postdated
counter-affidavit of Puzon – where he states checks are ​per se ​evidence of liability on the
that "As the [liquid beer] contents are paid for, part of private respondent and further argues
SMC return[s] to me the corresponding PDCs that even assuming that the checks were for
or request[s] me to replace them with whatever accommodation, private respondent is still
was the unpaid balance."​15 – it becomes clear liable thereunder considering that petitioner is
that both parties did not intend for the check to a holder for value.
pay for the beer products. The evidence proves ISSUE:
that the check was accepted, not as payment, Whether Miranda is liable on the postdated
but in accordance with the long-standing policy checks he issued even assuming that said
of SMC to require its dealers to issue checks were issued for accommodation only.
postdated checks to cover its receivables. The HELD:
check was only meant to ​cover the transaction There was no accommodation transaction in
and in the meantime Puzon was to pay for the the case at bar. In accommodation
transaction by some other means other than transactions recognized by the Negotiable
the check. This being so, title to the check did Instruments Law, an accommodating party
not transfer to SMC; it remained with Puzon. lends his credit to the accommodated party, by
The second element of the felony of theft was issuing or indorsing a check which is held by a
therefore not established. Petitioner was not payee or indorsee as a holder in due course,
able to show that Puzon took a check that who gave full value therefor to the
belonged to another​. Hence, the prosecutor accommodated party. The latter, in other
words, receives or realizes full value which the
accommodated party then must repay to the
accommodating party. But the accommodating it is unnecessary to aver or prove
party is bound on the check to the holder in consideration, for consideration is imported
due course who is necessarily a third party and and presumed from the fact that it is a
is not the accommodated party. In the case at negotiable instrument. The presumption exists
bar, Travel-On was payee of all six (6) checks, whether the words "value received" appear on
it presented these checks for payment at the the instrument or not.
drawee bank but the checks bounced.
Travel-On obviously was not an 9. Lee et. al. vs Court of Appeals
accommodated party; it realized no value on Facts
the checks which bounced. Miranda must be The Board of Directors of MICO Metals
held liable on the checks involved as petitioner Corporation in a resolution authorized
is entitled to the benefit of the statutory petitioners Lee and Sio to negotiate and secure
presumption that it was a holder in due course the approable of commercial loans and other
and that the checks were supported by banking facilities and accommodations from
valuable consideration. respondent bank. MICO availed of several
loands whcih were credited to its current
8. REMIGIO ONG vs. PEOPLE checking account. In addition, MICO also
Facts applied for domestic and foreign letters of
Remigio Ong approached Marcial De Jesus credit, which were negotiated and accepted by
and requested to be accommodated a loan of MICO as evidenced by corresponding bank
P130,000.00 which he needed to pay the 13th drafts issued and trust receipts executed.
month pay of his employees. De Jesus obliged
by issuing Ong a check payable to Ong’s Issue
business and required Mr. Ong to issue a Whether or not letters of credit and trust
post-dated check for the same amount. Mr. receipts are negotiable instruments.
Ong obliges and he encashed the check given
Held
to him by De Jesus. However, the check
NO. Negotiable Instruments which are menat
issued by Ong bounced and despite repeated
to be substitutes for money, must conform to
demands by De Jesus, Mr. Ong failed to make
the requisites stated in Sec 1. of the NIL. While
good of the checks.
the presumption found under the Negotiable
ISSUE
Instruments Law may not necessarily be
Whether or not the issuance of the subject
applicable to trust receipts and letters of credit,
check is a violation, even if its not considered
the presumption that the drafts drawn in
drawn and issued "to apply on account or for
connection with the letters of credit have
value"
sufficient consideration.
HELD
11. Cayanan Vs North Star
Yes, The SC held that what is being punished
by BP22 is the mere issuance of a bouncing FACTS:
check, not the purpose for which it was issued North Star extended credit to Cayanan
nor the terms and conditions relating to its for air tickets of clients - P510,034.47, and for
issuance, The mere act of issuing a worthless payment to View Sea Ventures of the amounts
check is malum prohibitum.
In actions based upon a negotiable instrument,
of $60,000 which came from respondent not hold as she only remitted such money due
General Manager’s (Virginia) personal to Cayanan’s request/ instructions – this he
account (ordered by Cayanan), and another never denied. It was him who had business
$40,000 by telegraphic transfer with $15,000 transactions with View Sea and not Virginia.
from petitioner. Cayanan then issued 3 checks Transaction between North Star and Cayanan
drawn from Republic Planters Bank (RPB) and was actually in the nature of a loan, and
2 checks from PCIB. checks were issued as payment of such; hence
When drawn for payment, the checks there was no absence of consideration for the
from PCIB amounting to 1.5M and 35,000 were issuance of checks.
dishonored for insufficiency of funds while the 2. Yes, Cayanan is liable. Having failed to fully
3 checks from RPB were dishonored due to a settle his obligation (loan) under the checks,
stop payment by Cayanan. Upon demand for the appellate court was correct in holding
payment, Cayanan failed to settle.5 violations petitioner liable to pay the value of the five
of BP 22 were filed by North Star in MeTC. checks he issued in favor of North Star.
which found Cayanan Guilty. On Appeal, the
RTC acquitted him. The CA, however, held
Cayanan civilly liable. II. NEGOTIATION (Gab)
.
ISSUE/S: 1. SESBRENO v. CA

1. WON checks issued by Cayanan were for FACTS: ​Raul Sesbreno made a money market
valuable consideration? placement in the amount of PHP300,000 with
2. WON Cayanan is civilly liable to North Star PhilFinance to mature after 32 days.
for the value of the checks? PhilFinance issued to Sesbreno the Certificate
of Confirmation of Sale of a Delta Motor
HELD: Corporation ​Promissory Note 2731​, the
Certificate of Securities Delivery Receipt
1. ​Yes​, checks were issued for a valuable indicating the sale of the note with notation that
consideration. said security was in the custody of Pilipinas
Cayanan has not presented credible evidence Bank, and post-dated checks drawn against
to rebut resumption that checks were issued the Insular Bank of Asia and America for
for a valuable consideration. Contrary to PHP304,533.33. Upon maturity, petitioner
petitioners claims that North Star did not give sought to encash the said checks but were
any valuable unfortunately dishonored for having insufficient
consideration for the checks since the funds. Petitioner then issued a demand letter to
US$85,000 was taken from the personal dollar private respondent Pilipinas Bank, but the note
account of Virginia and not the corporate funds was never released nor any instrument related
of North Star, the fact that petitioner himself thereto. Petitioner also made a written demand
specifically named North Star as the payee of upon private respondent Delta as maker for the
the checks is an admission of his liability to partial satisfaction of ​DMC PN No. 2731​,
North Star and not to Virginia Balagtas. Also, explaining that PhilFinance, as a payee
his defense that dollars sent to View Sea in thereof, had ​assigned to him said PN. Delta,
Nigeria was Virginia’s own investment could however, denied any liability to petitioner on
the promissory note. Petitioner learned that the FACTS: ​Ang Tek Lian, knowing that he had no
instrument was stamped “non-negotiable” on funds therefor, drew a check upon China
its face. As he was unable to collect his invest Banking Corporation payable to the order of
and and interest thereon, he filed an action for “cash”. He delivered tit to Lee Hua Hong in
damages against Delta Motors and Pilipinas exchange for money. The check was
Bank. presented by Lee Hua hong to the drawee
bank for payment, but it was dishonored for
ISSUE: WON the PN marked as insufficiency of funds. An information for the
non-negotiable may be assigned crime of estafa was filed against Ang Tek Lian.
Petitioner however argues that he is not guilty
RULING: YES. ​Only an instrument qualifying of the offense charged because he did not
as a negotiable instrument under the relevant endorse the check which was made payable to
statute may be negotiated either by "cash".
indorsement thereof coupled with delivery, or
by delivery alone where the negotiable ISSUE: WON a check payable to "cash"
instrument is in bearer form. A negotiable requires an indorsement by the drawer for it
instrument may, however, instead of being to be encashed.
negotiated, also be assigned or transferred.
The legal consequences of negotiation as RULING: NO. ​Under Sec. 9 of NIL a check
distinguished from assignment of a negotiable drawn payable to the order of “cash” is a check
instrument are, of course, different. A payable to bearer and the bank may pay it to
non-negotiable instrument may, obviously, not the person presenting it for payment without
be negotiated; but it may be assigned or the drawer’s indorsement. However, if the bank
transferred, absent an express prohibition is not sure of the bearer’s identity or financial
against assignment or transfer written in the solvency, it has the right to demand
face of the instrument. The words “not identification or assurance against possible
negotiable,” stamped on the face of the bill of complication, such as forgery of drawer’s
lading, did not destroy its assignability, but the signature, loss of the check by the rightful
sole effect was to exempt the bill from the owner, raising of the amount payable, etc. But
statutory provisions relative thereto, and a bill, where the bank is satisfied of the identity or
though not negotiable, may be transferred by economic standing of the bearer who tenders
assignment; the assignee taking subject to the the check for collection, it will pay the
equities between the original parties. instrument without further question; and it
would incur no liability to the drawer in thus
In this case, DMC PN No. 2731, while marked acting.
“non-negotiable,” was not at the same time
stamped “non-transferable” or 3. PEOPLE v. GILBERT REYES WAGAS
“non-assignable.” It contained no stipulation
which prohibited Philfinance from assigning or FACTS: ​Gilbert Wagas ordered from Alberto
transferring, in whole or in part, that Note. Ligaray 200 bags of rice over the telephone. As
payment, Wagas issued a check in favor of
2. ANG TEK LIAN v. CA Ligaray. When the check was deposited it was
dishonored due to insufficiency of funds.
Ligaray notified Wagas and demanded of one Mr. Angel dela Cruz who deposited with
payment from the latter but Wagas refused and the bank P1.12 million. Dela Cruz delivered the
failed to pay the amount, Ligaray filed a CTDs to Caltex in connection with his purchase
complaint for estafa before the RTC. RTC of fuel products from the latter. Subsequently,
convicted Wagas of estafa because the RTC dela Cruz informed the bank that he lost all the
believed that the prosecution had proved that it CTDs, and thus executed an affidavit of loss to
was Wagas who issued the dishonored check, facilitate the issuance of the replacement
despite the fact that Ligaray had never met CTDs. When Caltex presented said CTDs for
Wagas in person. Hence, this direct appeal. verification with the bank and formally informed
the bank of its decision to preterminate the
ISSUE: WON Wagas is guilty of Estafa same, the bank rejected Caltex’ claim and
demand as Caltex failed to furnish copies of
RULING: NO. ​His guilt cannot be established certain requested documents. In 1983, dela
beyond reasonable doubt. The check delivered Cruz’ loan matured and the bank set-off and
to Ligaray was made payable to cash. Under applied the time deposits as payment for the
the Negotiable Instruments Law, this type of loan. Caltex filed a complaint which was
check was payable to the bearer and could be dismissed on the ground that the subject
negotiated by mere delivery without the need certificates of deposit are non-negotiable.
of an indorsement. This rendered it highly
probable that Wagas had issued the check not ISSUE: ​WON the Certificates of Time Deposit
to Ligaray, but to somebody else like Cañada, (CTDs) are negotiable instruments.
his brother-in-law, who then negotiated it to
Ligaray. Relevantly, Ligaray confirmed that he RULING: ​The CTDs in question are negotiable
did not himself see or meet Wagas at the time instruments as they meet the requirements of
of the transaction and thereafter, and expressly the law for negotiability as provided for in
stated that the person who signed for and Section 1 of the Negotiable Instruments Law.
received the stocks of rice was Cañada. It The documents provide that the amounts
bears stressing that the accused, to be guilty of deposited shall be repayable to the depositor.
estafa as charged, must have used the check And according to the document, the depositor
in order to defraud the complainant. What the is the "bearer." The documents do not say that
law punishes is the fraud or deceit, not the the depositor is Angel de la Cruz and that the
mere issuance of the worthless check. Wagas amounts deposited are repayable specifically
could not be held guilty of estafa simply to him. Rather, the amounts are to be
because he had issued the check used to repayable to the bearer of the documents or,
defraud Ligaray. The proof of guilt must still for that matter, whosoever may be the bearer
clearly show that it had been Wagas as the at the time of presentment. However, petitioner
drawer who had defrauded Ligaray by means cannot recover on the CTDs. Although the
of the check. CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and
4. CALTEX v. SBTC agreement between it and dela Cruz, as
ultimately ascertained, requires both delivery
FACTS: ​Security Bank and Trust Co. issued and indorsement. In this case, there was no
280 certificates of time deposit (CTD) in favor indorsement as the CTDs were delivered not
as payment but only as a security for dela
Cruz' fuel purchases. The presumption of good faith did not apply to
plaintiff because the defect was apparent on
III. INDORSEMENT (First two cases, the instruments face – it was not payable to
Mark) defendant or bearer.

1. Vicente R. De Ocampo vs. Anita 2. Juanita Salas vs. Hon. Court of Appeals
Gatchalian [G.R. No. L-15126, November and First Finance & Leasing Corporation
30,1961] [G.R. No. 76788, January 22, 1980]
En Banc, Labrador (J) Third Division, Fernan (CJ)

Facts: ​Anita Gatchalian was interested in Facts: ​Juanita Salas (Petitioner) bought a
buying a car. Manuel Gonzales offered to her a motor vehicle from the Violago Motor Sales
car owned by plaintiff. Gonzales claimed that Corporation (VMS) for as evidenced by a
he was authorized by the plaintiff to sell the promissory note. This note was subsequently
car. Gonzales order defendant to issue a endorsed to Filinvest Finance & Leasing
cross-check to comply on showing interest in Corporation (private respondent) which
buying the car. Gonzales promised to return financed the purchase.
the check the next day. Petitioner defaulted in her installments
allegedly due to a discrepancy in the engine
When Gonzales never appeared after, and chassis numbers of the vehicle delivered
defendant issue a stop payment order on the to her and those indicated in the sales invoice,
check. She found out that Gonzales used the certificate of registration and deed of chattel
check as payment to plaintiff's clinic for his mortgage, which fact she discovered when the
wife's fees. Plaintiff now demands defendant vehicle figured in an accident.
for payment of the check, in which defendant
refused citing that plaintiff is a not a holder in This failure to pay prompted private respondent
due course. to initiate an action for a sum of money against
petitioner before the Regional Trial Court.
The lower court held that defendant should pay
plaintiff. Issue: ​WON private respondent is a holder in
due course?
Issue: ​Whether or not De Ocampo is a holder
in due course. Ruling: YES. The PN was negotiated by
indorsement in writing on the instrument itself
Ruling: ​The SC held that plaintiff is a not a payable to the Order of Filinvest Finance and
holder in due course. There were obvious Leasing Corporation and it is an indorsement
instances to show that the check was of the entire instrument.
negligently acquired like plaintiff having no
liability with defendant and that the check was Under the circumstances, there appears to be
crossed. Plaintiff failed to exercise prudence no question that Filinvest is a holder in due
and caution. Plaintiff should have asked
questions to further inquire upon suspicion.
course, having taken the instrument under the On April 4, 1981, RYL gave to Armstrong
following conditions: Industries — described by STELCO as its
"sister corporation" and "manufacturing arm" —
[a] it is complete and regular upon its face; a check drawn against Metrobank in the
[b] it became the holder thereof before it was amount of P126,129.86, numbered 765380
overdue, and without notice that it had and dated 4 April 1981. That check was a
previously been dishonored; company check of another corporation,
[c] it took the same in good faith and for value; Steelweld Corporation of the Philippines,
and signed by its President, Peter Rafael Limson,
[d] when it was negotiated to Filinvest, the and its Vice-President, Artemio Torres. The
latter had no notice of any infirmity in the check was issued by Limson at the behest of
instrument or defect in the title of VMS his friend, Romeo Y. Lim, President of RYL.
Corporation. Romeo Lim had asked Limson for financial
assistance, and the latter had agreed to give
Accordingly, respondent corporation holds the Lim a check only by way of accommodation,
instrument free from any defect of title of prior "only as guaranty but not to pay for anything."
parties, and free from defenses available to Why the check was made out in the amount of
prior parties among themselves, and may P126,129.86 is not explained. The check was
enforce payment of the instrument for the full actually issued in said amount ofP126,129.86,
amount thereof. This being so, petitioner and as already stated, was given by R.Y. Lim
cannot set up against respondent the defense to Armstrong, Industries, in payment of an
of nullity of the contract of sale between her obligation. When the latter deposited the check
and VMS. at its bank, it was dishonored because "drawn
against insufficient funds." When so deposited,
3. Stelco Marketing Corp. vs. Court of the check bore two (2) indorsements, that of
Appeals [GR 96160, 17 June 1992] "RYL Construction," followed by that of
Second Division, Narvasa (J) "Armstrong Industries." On account of the
dishonor of Metrobank Check 765380, and on
Facts: ​Stelco Marketing Corporation is complaint of Armstrong Industries (through a
engaged in the distribution and sale to the Mr. Young), Rafael Limson and Artemio Torres
public of structural steel bars. On 7 different were charged in the Regional Trial Court of
occasions in September and October 1980, it Manila with a violation of Batas Pambansa
sold to RYL Construction, Inc. quantities of Bilang 22. They were acquitted in a decision
steel bars of various sizes and rolls of G.I. wire. rendered on 28 June 1984 "on the ground that
These bars and wire were delivered at different the check in question was not issued by the
places at the indication of RYL Construction, drawer 'to apply on account for value,' it being
Inc. The aggregate price for the purchases was merely for accommodation purposes." That
P126,859.61. Although the corresponding judgment however conditioned the acquittal
invoices issued by STELCO stipulated that with the pronouncement that "this is not
RYL would pay "COD" (cash on delivery), the however to release Steelweld Corporation from
latter made no payments for the construction its liability under Sec. 29 of the Negotiable
materials thus ordered and delivered despite Instruments Law for having issued it for the
insistent demands for payment by the former. accommodation of Romeo Lim."
 defect in the title of the persons negotiating it."
Eleven months later — and some 4 years after As regards an accommodation party (such as
issuance of the check — in May, 1985, STEELWELD), the fourth condition, i.e., lack of
STELCO filed with the Regional Trial Court of notice of any infirmity in the instrument or
Caloocan City a civil complaint against both defect in title of the persons negotiating it, has
RYL and STEELWELD for the recovery of the no application. This is because Section 29 of
value of the steel bars and wire sold to and the law above quoted preserves the right of
delivered to RYL in the amount of recourse of a "holder for value" against the
P126,129.86, plus 18% interest from 20 August accommodation party notwithstanding that
1980 and 25% of the total amount sought to be "such holder, at the time of taking the
recovered as and by way of attorney's fees. A instrument, knew him to be only an
preliminary attachment was issued by the trial accommodation party."
court on the basis of the averments of the
complaint but was shortly dissolved upon the Issue [2]: Whether STELCO ever became a
filing of a counter-bond by STEELWELD. RYL holder in due course of Check 765380, a
could no longer be located and could not be bearer instrument within the contemplation of
served with summons. It never appeared. Only the Negotiable Instruments Law.
STEELWELD filed an answer, under date of 16
July 1985. Judgment was rendered on 26 June Held [2]: NO. It never did. There is no evidence
1986. The judgment sentenced Steelweld to whatever that STELCO's possession of Check
pay to Stelco the amount of P126,129.86 with 765380 ever dated back to any time before the
legal rate of interest from 9 May 1985, when instrument's presentment and dishonor. There
the case was instituted until fully paid, plus is no evidence whatsoever that the check was
another sum equivalent to 25% of the total ever given to it, or indorsed to it in any manner
amount due as and for attorney's fees. or form in payment of an obligation or
STELCO's motion for reconsideration was assecurity for an obligation, or for any other
denied by the Appellate Tribunal's resolution purpose before it was presented for payment.
dated 13 November 1990. STELCO appealed. On the contrary, STELCO never became a
holder for value and that "(n)owhere in the
Issue [1]: Whether the fourth condition, i.e. as check itself does the name of Stelco Marketing
to notice, for a holder in due course is appear as payee, indorsee or depositor
applicable to an accommodation party. thereof." What the record shows is that: (1) the
STEELWELD company check in question was
Held [1]: "A holder in due course," says the given by its president to R.Y. Lim; (2) it was
law, "is a holder who has taken the instrument given only by way of accommodation, to be
under the following conditions: (a) That it is "used as collateral for another obligation;" (3) in
complete and regular upon its face; (b) That he breach of the agreement, however, R.Y. Lim
became the holder of it before it was overdue, indorsed the check to Armstrong in payment of
and without notice that it had been previously an obligation; (4) Armstrong deposited the
dishonored, if such was the fact; (c) That he check to its account, after indorsing it; (5) the
took it in good faith and for value; (d) That at check was dishonored. The record does not
the time it was negotiated to him, he had no show any intervention or participation by
notice of any infirmity in the instrument or STELCO in any manner or form whatsoever in
these transactions, or any communication of Facts​: Bataan Cigar & Cigarette Factory, Inc.
any sort between STEELWELD and STELCO, (BCCFI), a corporation involved in the
or between either of them and Armstrong manufacturing of cigarettes, engaged one of its
Industries, at any time before the dishonor of suppliers, King Tim Pua George (George
the check. The record does show that after the King), to deliver 2,000 bales of tobacco leaf
check had been deposited and dishonored, starting October 1978. In consideration thereof,
STELCO came into possession of it in some BCCFI, on 13 July 1978 issued crossed checks
way, and was able, several years after the post dated sometime in March 1979 in the total
dishonor of the check, to give it in evidence at amount of P820,000.00. Relying on the
the trial of the civil case it had instituted against supplier's representation that he would
the drawers of the check (Limson and Torres) complete delivery within three months from 5
and RYL. Possession of a negotiable December 1978, BCCFI agreed to purchase
instrument after presentment and dishonor, or additional 2,500 bales of tobacco leaves,
payment, is utterly inconsequential; it does not despite the supplier's failure to deliver in
make the possessor a holder for value within accordance with their earlier agreement. Again
the meaning of the law; it gives rise to no BCCFI issued postdated crossed checks in the
liability on the part of the maker or drawer and total amount of P1,100,000.00, payable
indorsers. It is clear from the relevant sometime in September 1979. During these
circumstances that STELCO cannot be times, George King was simultaneously
deemed a holder of the check for value. It does dealing with State Investment House, Inc.
not meet two of the essential requisites (SIHI) On 19 July 1978, he sold at a discount
prescribed by the statute. It did not become check TCBT 551826 bearing an amount of
"the holder of it before it was overdue, and P164,000.00, post dated 31 March 1979,
without notice that it had been previously drawn by BCCFI, naming George King as
dishonored," and it did not take the check "in payee to SIHI. On December 19 and 26, 1978,
good faith and for value." Neither is there any he again sold to SIHI checks TCBT 608967 &
evidence whatever that Armstrong Industries, 608968, both in the amount of P100,000.00,
to whom R.Y. Lim negotiated the check, post dated September 15 & 30, 1979
accepted the instrument and attempted to respectively, drawn by BCCFI in favor of
encash it in behalf, and as agent of STELCO. George King. In as much as George King failed
On the contrary, the indications are that to deliver the bales of tobacco leaf as agreed
Armstrong was really the intended payee of the despite BCCFI's demand, BCCFI issued on 30
check and was the party actually injured by its March 1979, a stop payment order on all
dishonor; it was after all its representative (a checks payable to George King, including
Mr. Young) who instituted the criminal check TCBT 551826. Subsequently, stop
prosecution of the drawers, Limson and Torres, payment was also ordered on checks TCBTs
albeit unsuccessfully. 608967 & 608968 on September 14 & 28,
1979, respectively, due to George King's failure
4. Bataan Cigar and Cigarette Factory vs. to deliver the tobacco leaves. Efforts of SIHI to
Court of Appeals [GR 93048, 3 March 1994] collect from BCCFI having failed, it instituted
Second Division, Nocon (J) the case for collection on three unpaid checks,
naming only BCCFI as party defendant. The
trial court pronounced SIHI as having a valid
claim being a holder in due course. It further to George King. Because, really, the checks
said that the non-inclusion of King Tim Pua were issued with the intention that George King
George as party defendant is immaterial in the would supply BCCFI with the bales of tobacco
case, since he, as payee, is not an leaf. There being failure of consideration, SIHI
indispensable party. The Court of Appeals is not a holder in due course. Consequently,
affirmed the decision of the trial court. BCCFI BCCFI cannot be obliged to pay the checks.
filed the petition for review.

Issue​: Whether SIHI, a second indorser, a 5. Atrium Management Corporation v. Court

holder of crossed checks, is a holder in due of Appeals, G.R. No. 109491, February 28,
course, to be able to from the drawer, BCCFI. 2001.
Facts:
Held​: The Negotiable Instruments Law states Hi-Cement Corporation through its corporate
what constitutes a holder in due course, i.e. "A signatories, petitioner Lourdes M. de Leon,
holder in due course is a holder who has taken treasurer, and the late Antonio de las Alas,
the instrument under the following conditions: Chairman, issued checks in favor of E.T. Henry
(a) That it is complete and regular upon its and Co. Inc., as payee. E.T. Henry and Co.,
face; (b) That he became the holder of it before Inc., in turn, endorsed the four checks to
it was overdue, and without notice that it had Atrium for valuable consideration. Enrique Tan
been previously dishonored, if such was the of E.T. Henry approached Atrium for financial
fact; (c) That he took it in good faith and for assistance, offering to discount four RCBC
value; (d) That at the time it was negotiated to checks in the total amount of P2 million, issued
him he had no notice of any infirmity in the by Hi-Cement in favor of E.T. Henry. Atrium
instrument or defect in the title of the person agreed to discount the checks, provided it be
negotiating it." Section 59 of the NIL further allowed to confirm with Hi-Cement the fact that
states that every holder is deemed prima facie the checks represented payment for petroleum
a holder in due course. However, when it is products which E.T. Henry delivered to
shown that the title of any person who has Hi-Cement. Upon presentment for payment,
negotiated the instrument was defective, the the drawee bank dishonored all four checks for
burden is on the holder to prove that he or the common reason “payment stopped”. As a
some person under whom he claims, acquired result thereof, Atrium filed an action for
the title as holder in due course. Crossing of collection of the proceeds of 4 PDC in the total
checks should put the holder on inquiry and amount of 2M with RTC Manila. Judgment was
upon him devolves the duty to ascertain the rendered in favor of Atrium ordering Lourdes
indorser's title to the check or the nature of his and Rafael de Leon, E.T. Henry and Co., and
possession. Failing in this respect, the holder is Hi-Cement to pay Atrium the said amount plus
declared guilty of gross negligence amounting interest and attorneys fees. CA absolved
to legal absence of good faith, contrary to Sec. Hi-cement Corporation from liability. It also
52(c) of the Negotiable Instruments Law, and ruled that since Lourdes was not authorized to
as such the consensus of authority is to the issue the subjects checks in favor of E.T.
effect that the holder of the check is not a Henry Inc., the said act was ultra vires.
holder in due course. Herein, BCCFI's defense Issue​: Whether the issuance of the questioned
in stopping payment is as good to SIHI as it is checks was an ​ultra vires​ act;
Ruling​: Yes. is more, the confirmation letter contained a
An ​ultra vires act is one committed outside the clause that was not true, that is, “that the
object for which a corporation is created as checks issued to E.T. Henry were in payment
defined by the law of its organization and of Hydro oil bought by Hi-Cement from E.T.
therefore beyond the power conferred upon it Henry”. Her negligence resulted in damage to
by law. The term ​“ultra vires” is “distinguished the corporation. Hence, Ms. de Leon may be
from an illegal act for the former is merely held personally liable therefor.
voidable which may be enforced by
performance, ratification, or estoppel, while the 6​. ​Atrium Management Corporation v. Court
latter is void and cannot be validated. of Appeals, G.R. No. 109491, February 28,
Personal liability of a corporate director, trustee 2001. ​(diba Cely Yang dapat to?)
or officer along (although not necessarily) with Facts:
the corporation may so validly attach, as a rule, Hi-Cement Corporation through its corporate
only when: signatories, petitioner Lourdes M. de Leon,
1. He assents (a) to a patently unlawful act treasurer, and the late Antonio de las Alas,
of the corporation, or (b) for bad faith or Chairman, issued checks in favor of E.T. Henry
gross negligence in directing its affairs, and Co. Inc., as payee. E.T. Henry and Co.,
or (c) for conflict of interest, resulting in Inc., in turn, endorsed the four checks to
damages to the corporation, its Atrium for valuable consideration. Enrique Tan
stockholders or other persons; of E.T. Henry approached Atrium for financial
2. He consents to the issuance of watered assistance, offering to discount four RCBC
down stocks or who, having knowledge checks in the total amount of P2 million, issued
thereof, does not forthwith file with the by Hi-Cement in favor of E.T. Henry. Atrium
corporate secretary his written objection agreed to discount the checks, provided it be
thereto; allowed to confirm with Hi-Cement the fact that
3. He agrees to hold himself personally the checks represented payment for petroleum
and solidarily liable with the corporation; products which E.T. Henry delivered to
or Hi-Cement. Upon presentment for payment,
4. He is made, by a specific provision of the drawee bank dishonored all four checks for
law, to personally answer for his the common reason “payment stopped”. As a
corporate action. result thereof, Atrium filed an action for
collection of the proceeds of 4 PDC in the total
In the case at bar, Lourdes M. de Leon and amount of 2M with RTC Manila. Judgment was
Antonio de las Alas as treasurer and Chairman rendered in favor of Atrium ordering Lourdes
of Hi-Cement were authorized to issue the and Rafael de Leon, E.T. Henry and Co., and
checks. However, Ms. de Leon was negligent Hi-Cement to pay Atrium the said amount plus
when she signed the confirmation letter interest and attorneys fees. CA absolved
requested by Mr. Yap of Atrium and Mr. Henry Hi-cement Corporation from liability. It also
of E.T. Henry for the rediscounting of the ruled that since Lourdes was not authorized to
crossed checks issued in favor of E.T. Henry. issue the subjects checks in favor of E.T.
She was aware that the checks were strictly Henry Inc., the said act was ultra vires.
endorsed for deposit only to the payee’s Issue​: Whether the issuance of the questioned
account and not to be further negotiated. What checks was an ​ultra vires​ act;
Ruling​: Yes. is more, the confirmation letter contained a
An ​ultra vires act is one committed outside the clause that was not true, that is, “that the
object for which a corporation is created as checks issued to E.T. Henry were in payment
defined by the law of its organization and of Hydro oil bought by Hi-Cement from E.T.
therefore beyond the power conferred upon it Henry”. Her negligence resulted in damage to
by law. The term ​“ultra vires” is “distinguished the corporation. Hence, Ms. de Leon may be
from an illegal act for the former is merely held personally liable therefor.
voidable which may be enforced by
performance, ratification, or estoppel, while the 7. Republic Planters Bank V. CA G.R.
latter is void and cannot be validated. No. 93073 December 21, 1992
Personal liability of a corporate director, trustee FACTS:
or officer along (although not necessarily) with Shozo Yamaguchi (President/Chief Operating
the corporation may so validly attach, as a rule, Officer) and Fermin Canlas (Treasurer) by
only when: virtue of Board Resolution of Worldwide
1. He assents (a) to a patently unlawful act Garment Manufacturing, Inc were authorized
of the corporation, or (b) for bad faith or to apply for credit facilities with the Republic
gross negligence in directing its affairs, Planters Bank in the forms of export advances
or (c) for conflict of interest, resulting in and letters of credit/trust receipts
damages to the corporation, its accommodations.
stockholders or other persons; 9 promissory notes with Worldwide Garment
2. He consents to the issuance of watered Manufacturing, Inc. was apparently rubber
down stocks or who, having knowledge stamped above the signatures of Yamaguchi
thereof, does not forthwith file with the and Canlas were issued to Republic Planters
corporate secretary his written objection Bank.
thereto; December 20, 1982: Worldwide Garment
3. He agrees to hold himself personally Manufacturing, Inc. changed its corporate
and solidarily liable with the corporation; name to Pinch Manufacturing Corporation
or February 5, 1982: Republic Planters filed a
4. He is made, by a specific provision of complaint for the recovery of sums of money
law, to personally answer for his Shozo Yamaguchi did not file an Amended
corporate action. Answer and failed to appear at the scheduled
pre-trial conference despite due notice
In the case at bar, Lourdes M. de Leon and Fermin Canlas denied having issued the
Antonio de las Alas as treasurer and Chairman promissory notes as an officer of Pinch
of Hi-Cement were authorized to issue the Manufacturing Corporation and when he
checks. However, Ms. de Leon was negligent issued said promissory notes in behalf of
when she signed the confirmation letter Worldwide Garment Manufacturing, Inc., it was
requested by Mr. Yap of Atrium and Mr. Henry in blank (typewritten entries not appearing
of E.T. Henry for the rediscounting of the when he signed)
crossed checks issued in favor of E.T. Henry. ISSUE: W/N Fermin Canlas is solidarily liable
She was aware that the checks were strictly with the other defendants, namely Pinch
endorsed for deposit only to the payee’s Manufacturing Corporation and Shozo
account and not to be further negotiated. What Yamaguchi on the 9 promissory notes because
they are negotiable and ruled by the by officers of the corporation, if duly
Negotiable Instruments Law authorized. Inasmuch as such officers acted in
HELD: their capacity as agent of the old corporation
CA absolving Fermin Canlas is REVERSED and the change of name meant only the
and SET ASIDE. Judgement is hereby continuation of the old juridical entity, the
rendered declaring private respondent Fermin corporation bearing the same name is still
Canlas jointly and severally liable on ​all ​9 bound by the acts of its agents if authorized by
promissory notes with the following sums and the Board.
at 16% interest per annum Where the agent signs his name but nowhere
Under the Negotiable instruments Law, a in the instrument has he disclosed the fact that
persons who write their names on the face of he is acting in a representative capacity or the
promissory notes are makers and are liable as name of the third party for whom he might have
such. acted as agent, the agent is personally liable to
Fermin Canlas, one of the co-makers of the take holder of the instrument and cannot be
promissory notes, cannot escape liability permitted to prove that he was merely acting
arising therefrom. It was made clearer and as agent of another and parol or extrinsic
certain, without reason for ambiguity, by the evidence is not admissible to avoid the agent's
presence of the phrase "joint and several" as personal liability.
describing the unconditional promise to pay to incomplete stereotype printed form of
the order of Republic Planters Bank Severally promissory notes generally used by
and jointly or solidarily liable. commercial banking institutions to be signed by
"I promise to pay" is signed by 2 or more their clients in obtaining loans.
persons, "I" ,We" , or "Either of us" promise to, blank spaces to be filled up on material
pay, when signed by two or more persons, particulars such as payee's name, amount of
"and (in) his personal capacity" below the the loan, rate of interest, date of issue and the
signatures of the makers - immaterial and will maturity date.
not affect to the liability of Fermin Canlas as a An incomplete instrument which has been
joint and several debtor of the notes. delivered to the borrower for his signature is
With or without it, he is primarily liable as a governed by Section 14 of the Negotiable
co-maker of each of the notes and his liability Instruments Law:
is that of a solidary debtor. Sec. 14. ​Blanks: when may be filled.​ — Where
A change in the corporate name does not the instrument is wanting in any material
make a new corporation, and whether affected particular, the person in possesion thereof has
by special act or under a general law, has no a ​prima facie ​authority to complete it by filling
effect on the identity of the corporation, or on up the blanks therein. ... In order, however, that
its property, rights, or ​liabilities any such instrument when completed may be
The corporation continues, as before, enforced against any person who became a
responsible in its new name for all debts or party thereto prior to its completion, it must be
other liabilities which it had previously filled up strictly in accordance with the authority
contracted or incurred. given and within a reasonable time...
As a general rule, officers or directors under The notes were not incomplete instruments;
the old corporate name bear no personal neither were they given to private respondent
liability for acts done or contracts entered into Fermin Canlas in blank as he claims. Thus,
Section 14 of the NegotiabIe Instruments Law otherwise if the debtor is prejudiced by the
is not applicable. delay in presentment. In this case, it is an
undisputed fact that respondents Valencia and
8. Papa v. Valencia Pearroyo had given petitioner Myron C. Papa
G.R. No. 105188 January 23, 1998 the amounts of Five Thousand Pesos
(P5,000.00) in cash and Forty Thousand Pesos
FACTS: ​On June 15 a parcel of land was (P40,000.00) in check, in payment of the
allegedly sold to private respondent Pearroyo purchase price of the subject lot. Granting that
by petitioner acting as attorney-in-fact of Anne petitioner never encashed the check, his failure
Butte. The purchaser, through Valencia, made to do so for more than ten (10) years
a check payment in the amount of P40,000 and undoubtedly resulted in the impairment of the
in cash, P5,000. Both were accepted by check through his unreasonable and
petitioner as evidenced by various receipts. unexplained delay. Check acceptance implied
Prior to the alleged sale, the said property, an undertaking of due diligence in presenting it
together with other properties of Butte, had for payment. If the person who receives it
been mortgaged by her to the Associated sustains loss by want of this diligence, this will
Banking Corporation. Butte passed away after operate as actual payment of the debt or
the sale but before the release of the obligation for which the check was given. The
properties which prompted the private debtor cannot now be held liable if
respondent Penarroyo to demand that the title non-presentment of the check was through the
to the property be conveyed to him, however fault of the creditor. The payee of a check
the bank refused. Upon release of the would be a creditor if its non-payment is
properties, petitioner refused and failed to caused by his negligence, payment will be
deliver the title to the property. Hence, private deemed effected and the obligation for which
respondents filed a suit for specific the check was given as conditional payment
performance against the petitioner. The lower will be discharged.
court ruled in favor of the private respondents
and ordered herein petitioner the conveyance 9. BPI v. Suarez
or the property or if not, its payment. The G.R. No. 167750, March 15, 2010
petitioner appealed the lower court's decision
alleging that the sale was not consummated as Facts: ​Reynaldo Suarez, a lawyer, used to
he never encashed the check given as part of maintain both savings and current account with
the purchase price. The Court of Appeals petitioner in its Ermita branch. Sometime in
affirmed with modifications the lower court's 1997, respondent had a client who wanted to
decision that there was a consummated sale of buy several parcels of land in Tagaytay but the
the subject property. latter did not want to deal directly with the
owners of said land. In accordance with his
ISSUE: ​Whether or not the check is a valid client’s instruction, Suarez transacted with the
tender of payment owners of the Tagaytay properties, making it
appear that he was the buyer of the lots. As
HELD: Yes​. While it is true that the delivery of regards the payment of the purchase money,
check produces payment only when encashed Suarez and his client made an arrangement
(pursuant to Art. 1249, Civil Code), the rule is such that Suarez’s client would deposit the
money in Suarez’s BPI account and then, conclusively confirmed the same-day crediting
Suarez would issue checks to the sellers. of the amount of the check to Suarez account.
Suarez’s client deposited a Rizal Commercial While BPI has the discretion to disregard the
Banking Corporation (RCBC) check with a face 3-day clearing policy, Suarez failed to prove his
value of ₱19,129,100, representing the total entitlement to such privilege. Considering that
consideration of the sales, in BPI Pasong there was no binding representation on BPI’s
Tamo Branch to be credited to Suarez’s part as regards the same-day crediting of the
current account in BPI Ermita Branch. Aware RCBC check, no negligence can be ascribed to
that a check has 3-days clearing time, Suarez' BPI’s dishonor of the checks precisely because
assistant called the bank which confirmed that BPI was justified in dishonoring the checks for
the said amount had been credited to his lack of available funds in Suarez’s account.
account on that same day. Relying on this However, BPI mistakenly marked the
confirmation, Suarez issued five (5) checks in dishonored checks with "drawn against
the name of the sellers. Unfortunately, all insufficient funds (DAIF), " instead of "drawn
checks were dishonored due to insufficient against uncollected deposit (DAUD). Still, the
funds. A penalty amounting P57,000 was also award of actual damages is without basis since
debited from his account. The checks were BPI is justified in dishonoring the checks for
dishonored despite the assurance by RCBC, being drawn against uncollected deposit,
the drawee bank that the amount has been hence BPI can rightfully impose the said
debited from the account of the drawee. On top penalty charges against Suarez' account. The
of this, the bank noted on the checks 'DAIF' award of moral damages has no basis because
(drawn against insufficient fund) and not Suarez failed to prove that his claimed injury
'DAUD'' (drawn against uncollected deposit). was proximately caused by the erroneous
The bank offered to reverse the penalty but marking of the 'DAIF' on the checks. Suarez is
denied Suarez claim for damages. Suarez however entitled to nominal damages due to
rejected this offer hence the case filed for BPI's failure to exercise the diligence required
damages. The lower court ruled in favor of as the bank's business is deemed to be
Suarez and awarded actual, moral, and affected with public interest. The bank must at
exemplary damages. BPI appealed but the all times maintain a high level of
Court of Appeals affirmed the lower court meticulousness and should guard against
ruling. The CA ruled that the bank was injury attributable to negligence or bad faith on
negligent in handling the accounts of the its part. Suarez therefore has the right to
respondent hence the latter's entitlement to expect a high level of care and and diligence
damages. from BPI.

Issue: Whether or not petitioner bank is 10. FEBTC vs ​GOLD PALACE JEWELLERY
liable for its negligence in handling the CO
respondent's account
FACTS:
Held: No​. BPI was not negligent because it On June 1998, Samuel Tagoe, a foreigner,
was justified in dishonoring the checks for lack purchased from Gold Palace Jewellery Co.'s
of sufficient funds in Suarez account. There (Gold Palace's) store at SM-North EDSA
was no sufficient evidence to prove that BPI several pieces of jewelry valued at P258,000
paid with Foreign Draft issued by the United
Overseas Bank (Malaysia) to Land Bank of the ISSUE: WON Gold Palace should be liable for
Philippines, Manila (LBP) for P380,000. Teller the altered Foreign Draft
of Far East Bank, respondent’s next door
tenant, informed Julie Yang-Go (manager of HELD: NO. Act No. 2031, or the Negotiable
Gold Palace) that a foreign draft has similar Instruments Law (NIL), explicitly provides that
nature to a manager's check, but advised her the acceptor, by accepting the instrument,
not to release the pieces of jewelry until the engages that he will pay it ​according to the
draft had been cleared. Yang issued Cash tenor of his acceptance.​ This provision applies
Invoice so the jewelries can be released. Yang with equal force in case the drawee pays a bill
issued Cash Invoice to the foreigner, asked without having previously accepted it. LBP
him to come back, and informed him that the was liable on its payment of the check
pieces of jewelry would be released when the according to the tenor of the check at the time
draft had already been cleared. ​Respondent of payment, which was the raised amount.
Julie Yang-Go, the manager of Gold Palace, Gold Palace was not a participant in the
consequently deposited the draft in the alteration of the draft, was not negligent, and
company's account with the aforementioned was a holder in due course. LBP, having the
Far East branch on June 2, 1998. most convenient means to correspond with
Subsequently, it was cleared hence, the UOB, did not first verify the amount of the draft
foreigner eventually returned to claim the before it cleared and paid the same. Gold
purchased goods. Yang released the pieces of Palace had no facility to ascertain with the
jewelry and gave him his change -- a Far East drawer, UOB Malaysia, the true amount in the
Check of P122,000 paid by the bank. On June draft. It was left with no option but to rely on the
26, 1998, LBP informed Far East that the representations of LBP that the draft was good.
Foreign Draft had been materially altered from Gold Palace is protected by Section 62 of the
P300 to P300,000 and that it was returning the NIL, its collecting agent, Far East, should not
same. Far East refunded the amount to LBP have debited the money paid by the drawee
and debit only P168,053.36 of the amount left bank from respondent company's account.
in Gold Palace' account without prior written When Gold Palace deposited the check with
notice to the account holder. Far East only Far East, it, under the terms of the deposit and
notified by phone the representatives of the the provisions of the NIL, became an agent of
Gold Palace. Far East demanded from Gold the Gold Palace for the collection of the
Palace the payment of balance and upon amount in the draft. The subsequent payment
refusal an action for sum of money in the RTC. by the drawee bank and the collection of the
The trial court ruled in favor of Far East on the amount by the collecting bank closed the
basis that Gold Palace was liable under the transaction insofar as the drawee and the
liabilities of a general indorser. CA, however, holder of the check or his agent are concerned,
reversed RTC’s ruling since Far East failed to converted the check into a mere voucher, and,
undergo the proceedings on the protest of the as already discussed, foreclosed the recovery
foreign draft or to notify Gold Palace of the by the drawee of the amount paid. As the
draft's dishonor; thus, Far East could not transaction in this case had been closed and
charge Gold Palace on its secondary liability as the principal-agent relationship between the
an indorser. payee and the collecting bank had already
ceased, the latter in returning the amount to that the Bank honor the check but were refused and
the drawee bank was already acting on its own closed one of the accounts of the petitioners and
and should now be responsible for its own retained the Saving Account where a certain of
actions. money was transferred to the latter.
Due to the alleged groundless dishonoring of
11. Cesar V. Areza and Lolita B. Areza vs. checks, the petitioners filed a suit against the Bank.
Express Savings Bank, Inc. and Michael
Potenciano ISSUE:
G.R. No. 176697 WON the Bank have the right to debit
September 10, 2014 P1.8M from the bank of the petitioners when the
Perez, J. drawee dishonored the checks issued by the
depositary bank of ESB on the ground of material
FACTS: alterations.
Petitioners maintained two bank deposits
with Express Savings Bank (ESB). In the course of RULING:
their business, Gerry Mambuhay paid them No​, Express Savings Bank cannot debit the
Philippine Veterans Affairs Office (PVAO) checks, savings account of petitioners.
drawn against Philippine Veterans Bank (drawee) When the drawee bank pays a materially altered
amounting to 1,800,000.00 pesos. check, it violates the terms of the check, as well as
Consequently, petitioners deposited the its duty to charge its client’s account only for bona
checks in their savings account. ESB, in turn, fide disbursements he had made. If the drawee did
deposited the checks with its depository bank, not pay according to the original tenor of the
Equitable-PCI Bank, which honored the checks. instrument, as directed by the drawer, then it has no
Sometime in July 2000, the checks were returned by right to claim reimbursement from the drawer,
PVAO to the drawee on the ground that the amount much less, the right to deduct the erroneous
on the face of the checks was altered. The drawee payment it made from the drawer’s account which it
returned the checks to Equitable-PCI Bank. was expected to treat with utmost fidelity. The
Equitable-PCI Bank then informed ESB that the drawee, however, still has recourse to recover its
drawee dishonored the checks on the ground of loss. It may pass the liability back to the collecting
material alterations. When the material alteration bank which is what the drawee bank exactly did in
was discovered, the checks were already cleared by this case. It debited the account of Equitable-PCI
the drawee. Three months had lapsed before the Bank for the altered amount of the checks.
drawee dishonored the checks and returned them to In check transactions, the
Equitable-PCI. Equitable-PCI initially files a protest depositary/collecting bank or last endorser generally
with the Philippine Clearing House where the latter suffers the loss because it has the duty to ascertain
ruled in favor of the drawee. Upon such resolution, the genuineness of all prior endorsements
Equitable-PCI Bank debited the aggregate sum of considering that the act of presenting the check for
the checks to the deposit accounts of the petitioners. payment to the drawee is an assertion that the party
The petitioners then issued a check in the amount of making the presentment has done its duty to
P500,000.00 but it was dishonored by the Bank for ascertain the genuineness of the endorsements. If
the reason “Deposit Under Hold”. Petitioners any of the warranties made by the
contend that the Bank unilaterally and unlawfully depositary/collecting bank turns out to be false, then
put their account on hold. The petitioners requested
the drawee bank may recover from it up to the the Negotiable Instruments Law, yet "liable on the
amount of the check. instrument to a holder for value, notwithstanding
As collecting banks, the Bank and Equitable-PCI that such holder at the time of taking the instrument
Bank are both liable for the amount of the knew him to be only an accommodation party." The
materially altered checks. Since Equitable-PCI accommodation party is liable to a holder for value
Bank is not a party to this case and the Bank as if the contract was not for accommodation. It is
allowed its account with Equitable-PCI Bank to be not a valid defense that the accommodation party
debited, it has the option to seek recourse against did not receive any valuable consideration when he
the latter in another forum. executed the instrument. Nor is it correct to say that
the holder for value is not a holder in due course
merely because at the time he acquired the
12. Ang Tiong vs. Lorenzo Ting instrument he knew that the indorser was only an
G.R. No. L-26767 accommodation party.
February 22, 1968 That Felipe Ang, again assuming him to be an
Castro, J. accommodation indorser, may obtain security from
the maker to protect himself against the danger of
FACTS: insolvency of the latter, cannot in any manner affect
In 1960, Lorenzo Ting issued Philippine Bank of his liability to Ang Tiong, as the said remedy is a
Communications check payable to "cash or bearer". matter of concern exclusively between
With Felipe Ang's signature at the back thereof, the accommodation indorser and accommodated party.
instrument was received by Ang Tiong who So that the fact that Felipe Ang stands only as a
thereafter presented it to the drawee bank for surety in relation to the maker, granting this to be
payment. The bank dishonored it. Ang Tiong then true for the sake of argument, is immaterial to the
made written demands on both Lorenzo Ting and claim of Ang Tiong, and does not a whit diminish
Felipe Ang that they make good the amount nor defeat the rights of the latter who is a holder for
represented by the check. These demands went value. The liability of Felipe Ang remains primary
unheeded which prompted petitioner to file a suit and unconditional. To sanction Felipe Ang's theory
for collection. The trial court ruled in favor of is to give unwarranted legal recognition to the
petitioner. Felipe Ang then elevated the case to the patent absurdity of a situation where an indorser,
Court of Appeals contending that he is a mere when sued on an instrument by a holder in due
accommodation party. course and for value, can escape liability on his
indorsement by the convenient expedient of
ISSUE: interposing the defense that he is a mere
WON Felipe is an accommodation party. accommodation indorser.

RULING:
No. ​Felipe Ang is a general indorser as
provided under Section 63 of the NIL, in the
absence of any indication by appropriate words his 13. MARIA TUAZON v. HEIRS OF
intention to be bound in some other capacity. BARTOLOME RAMOS
Even on the assumption that Felipe Ang is a mere G.R. No. 156262, July 14, 2005, Panganiban,
accommodation party, as he professes to be, he is J.
nevertheless, by the clear mandate of section 29 of
FACTS: the rice. The trial court held that Petitioner
Maria Tuazon had indorsed the questioned
Respondent alleged that between the period of checks in favor of respondents, in accordance
May 2, 1988 and June 5, 1988, spouses with Sections 31 and 63 of the Negotiable
Leonila and Maria Tuazon purchased a total of Instruments Law. That Santos was the drawer
8, 326 cavans of rice from Ramos. Only 4,437 of the checks is thus immaterial to the
cavans have paid for so far, leaving unpaid 3, respondents' cause of action.
889 cavans valued at P1, 211,919.00. In the
payment therefor, the spouses Tuazon issued As indorser, Petitioner Maria Tuazon warranted
Traders Royal Bank checks. But when these that upon due presentment, the checks were to
checks were encashed, all of the checks be accepted or paid, or both, according to their
bounced due to insufficiency of funds. tenor; and that in case they were dishonored,
Defendant denied having purchased rice from she would pay the corresponding amount. After
Ramos. They alleged that it was Magdalena an instrument is dishonored by nonpayment,
Ramos, wife of Bartolome Ramos, who owned indorsers cease to be merely secondarily
and traded the merchandise and Maria Tuazon liable; they become principal debtors whose
was merely her agent. They argued that it was liability becomes identical to that of the original
Evangeline Santos who was the buyer of the obligor. The holder of a negotiable instrument
rice and issued the checks to Maria Tuazon as need not even proceed against the maker
payment therefor. ​In good faith, the checks before suing the indorser​.
were received by petitioner from Evangeline
Santos and turned over to Ramos without
knowing that these were not funded. They 14. ALLIED BANKING CORPORATION vs.
assert that they were merely agents and BPI
should not be held answerable. G.R. No. 188363, February 27, 2013,
Villarama Jr. J.
The corresponding civil and criminal cases
were filed by respondents against Spouses FACTS:
Tuazon.
A check in the amount of P1M payable to
The RTC ruled against Santos. The CA held MMGI was presented for deposit and accepted
that inasmuch as all the checks had been at petitioner’s Kawit Branch. The check,
indorsed by Maria Tuazon, who thereby post-dated “Oct. 9, 2003,” was drawn against
became liable to subsequent holders for the the account of Silva with respondent BPI
amounts stated in those checks, there was no Bel-Air Branch. The check was cleared by
need to implead Santos. respondent and petitioner credit the account of
MMGI with P1M. MMGI’s account was closed
ISSUE: Whether or not Tuazon is liable as an and all the funds therein were withdrawn. A
indorser month later, Silva discovered the debit of P1M
from his account. In response to Silva’s
RULING: ​NO. The court held that respondents' complaint, respondent credit his account with
cause of action is clearly founded on the aforesaid sum.
petitioner’s failure to pay the purchase price of
On March 21, 2003, respondent returned a RULING: YES. The doctrine of last clear
photocopy of the check to petitioner for the chance is that the negligence of the plaintiff
reason: “Postdated.” Petitioner, however, does not preclude a recovery for the
refused to accept and sent back to respondent negligence of the defendant where it appears
a photocopy of the check. The check was that the defendant, by exercising reasonable
tossed several times from petitioner to care and prudence, might have avoided
respondent. PCHC directed the respondent to injurious consequences to the plaintiff
deliver the original check and informed it of notwithstanding the plaintiff’s negligence. In
PCHC’s authority under Clearing House this case, the evidence clearly shows that the
Operating Memo (CHOM) No. 279 dated to proximate cause of the unwarranted
split 50/50 the amount of the check subject of a encashment of the subject check was the
“Ping-pong” controversy which shall be negligence of respondent who cleared a
implement thru the issuance of Debit post-dated check sent to it thru the PCHC
Adjustment Tickets against the outward clearing facility without observing its own
demands of the banks involved. verification procedure.
Respondent could have then promptly returned
However, it was petitioner who filed a the check and with the check thus dishonored,
complaint before the Arbitration Committee, petitioner would have not credited the amount
asserting that respondent should solely bear thereof to the payee’s account. Thus,
the entire face value of the check due to its notwithstanding the antecedent negligence of
negligence in failing to return the check to the petitioner in accepting the post-dated check
petitioner. for deposit, it can seek reimbursement from
respondent the amount credited to the payee’s
The Arbitration Committee rendered its account covering the check. ​Admittedly,
Decision in favor of petitioner and against the petitioner’s acceptance of the subject check for
respondent. Finding both parties negligent in deposit despite the one year postdate written
the performance of their duties, the Committee on its face was a clear violation of established
applied the doctrine of “Last Clear Chance” banking regulations and practices. In such
and ruled that the loss should be shouldered instances, payment should be refused by the
by respondent alone​. The RTC affirmed. ​The drawee bank and returned through the PCHC
CA set aside the RTC judgment and ruled for a within the 24-hour reglementary period. As
60-40 sharing of the loss as it found petitioner aptly observed by the CA, petitioner’s failure to
guilty of contributory negligence in accepting comply with this basic policy regarding
what is clearly a post-dated check. The CA post-dated checks was “a telling sign of its lack
found that petitioner’s failure to notice the of due diligence in handling checks coursed
irregularity on the face of the check was a through it.
breach of its duty to the public and a telling
sign of its lack of due diligence in handling (Actually, di ko alam bakit to naging under ng
checks coursed through it. indorsement)

ISSUE: Whether or not the doctrine of “Last 15. MELVA THERESA ALVIAR GONZALES
Clear Chance” apply in this case vs. RIZAL COMMERCIAL BANKING
CORPORATION
 G.R. No. 156294, November 29, 2006,
Garcia, J. RULING: ​NO. While the foreign drawee bank
FACTS: did not specifically state which among the four
signatures found on the dorsal portion of the
Gonzales was an employee of RCBC as check made the check irregularly endorsed, it
New Accounts Clerk. A foreign check in the is absolutely undeniable that only the signature
amount of $7,500 was drawn by Dr. Don of Olivia Gomez, an RCBC employee, was a
Zapanta against the drawee bank Wilshire qualified endorsement because of the phrase
Center Bank payable to Gonzales’ mother, "up to ₱17,500.00 only." This Court definitely
Alviar. Alviar then endorsed the check. agrees with the petitioner that the foreign
Gonzales presented the foreign check to Olivia drawee bank would not have dishonored the
Gomez, the RCBC’s Head of Retail Banking. check had it not been for this signature of
Gomez requested Gonzales to endorse it Gomez with the same phrase written by her.
which she did. Olivia Gomez then acquiesced
to the early encashment of the check and Under Section 66, the warranties for which
signed the check but indicated thereon her Alviar and Gonzales are liable as general
authority of up to P17,500.00 only. Gomez endorsers in favor of subsequent endorsers
directed Gonzales to present the check to extend only to the state of the instrument at the
RCBC employee Ramos and procure his time of their endorsements, specifically, that
signature and then presented the same to the instrument is genuine and in all respects
Zornosa, Supervisor of the Remittance section, what it purports to be; that they have good title
who after scrutinizing the entries and signature thereto; that all prior parties had capacity to
therein authorized its encashment. Gonzales contract; and that the instrument, at the time of
then received its peso equivalent of their endorsements, is valid and subsisting.
P155,270.85. RCBC then tried to collect the This provision, however, cannot be used by the
amount of the check with the drawee bank and party which introduced a defect on the
were dishonored because of irregular instrument, such as respondent RCBC in this
indorsement. RCBC sent the check to the case, which qualifiedly endorsed the same, to
drawee bank, but this time the check was hold prior endorsers liable on the instrument
returned due to “account closed.” Unable to because it results in the absurd situation
collect, RCBC demanded from Gonzales the whereby a subsequent party may render an
payment of the peso equivalent of the check instrument useless and inutile and let innocent
that she received. RCBC then filed a complaint parties bear the loss while he himself gets
for a sum of money against Eva Alviar, Melva away scot-free.
Theresa Alviar-Gonzales and the latter’s
husband Gino Gonzales. RTC ruled in favor of RCBC, which caused the dishonor of the check
the plaintiff and against defendant Alviar as upon presentment to the drawee bank, through
principal debtor and Gonzales as guarantor. the qualified endorsement of its employee,
On appeal, CA affirmed. Olivia Gomez, cannot hold prior endorsers,
Alviar and Gonzales in this case, liable on the
ISSUE: Whether or not Eva Alviar and Melva instrument. Moreover, it is a well-established
Theresa Alvia-Gonzales are liable as general principle in law that as between two parties, he
endorsers who, by his acts, caused the loss shall bear the
same. RCBC, in this instance, should therefore Issues:
bear the loss. a. ​WON Ong has a cause of action against
Westmont Bank
b. ​WON Ong is barred to recover money from
IV. FORGERY Westmont Bank due to laces
Ruling:
1. ​WESTMONT BANK (FORMERLY a. YES. Pursuant to Section 23 of the NIL,
ASSOCIATED BANKING CORP.), since the signature of the payee (Ong)
PETITIONER, VS. EUGENE ONG, was forged, such signature should be
RESPONDENT. deemed as inoperative and ineffectual.
[ G.R. No. 132560, January 30, 2002 ] As a general rule, a bank or corporation
Facts: ​Eugene Ong maintained a current who has obtained possession of a check
account with Associated Banking Corporation, upon an unauthorized or forged
now known as Westmont Bank. He sold certain indorsement of the payee’s signature and
shares of stocks through Island Securities who collects the amount of the check from
Corporation. To pay Ong, Island Securities the drawee, is liable for the proceeds
purchased two (2) Pacific Banking Corporation thereof to the payee or other owner,
manager’s checks issued in the name of notwithstanding that the amount has been
Eugene Ong as payee. Before Ong could get paid to the person from whom the check
hold of the checks, his friend, Paciano was obtained. The position of the bank
Tanlimco, got hold of the checks and deposited taking the check on the forged or
it in his own account in Westmont Bank by unauthorized indorsement is the same as if
forging Ong’s signature. Even though Ong’s it had taken the check and collected the
specimen signature was on file, petitioner money without indorsement at all and the
accepted and credited both checks to the act of the bank amounts to conversion of
account of Tanlimco, without verifying the the check.
‘signature indorsements’ appearing at the back Furthermore, even if the absence of
thereof. Tanlimco then immediately withdrew delivery is considered, such consideration
the money and absconded. Instead of going is not material. The rationale for this view is
straight to the bank to stop or question the that in previous cases the plaintiff uses one
payment, Ong first sought the help of action to reach, by a desirable short cut, the
Tanlimco’s family to recover the amount. person who ought in any event to be
Later, he reported the incident to the Central ultimately liable as among the innocent
Bank, which like the first effort, unfortunately persons involved in the transaction. In
proved futile. other words, the payee ought to be allowed
As a result, Ong filed a complaint against to recover directly from the collecting bank,
Westmont to collect the value of the checks on regardless of whether the check was
the ground of the negligence of the bank. The delivered to the payee or not.
bank argued that Ong never received the Banks are engaged in a business
checks and thus, he did not acquired impressed with public interest, and it is their
ownership of these checks. The RTC ruled in duty to protect in return their many clients
favor of Ong. The CA affirmed in toto the and depositors who transact business with
decision of the RTC. them. However, Westmont Bank apparently
 failed to a verification or, what is worse did When she went to these companies to collect
so but, chose to disregard the obvious on what she thought were still unpaid
dissimilarity of the signatures. The first accounts, she was informed of the issuance of
omission makes it guilty of gross the 6 crossed checks. Further inquiry revealed
negligence; the second of bad faith. In that the said checks had been deposited with
either case, defendant is liable to plaintiff the Associated Bank and subsequently paid by
for the proceeds of the checks in question. it to one Rafael Sayson, one of its "trusted
b. NO. It cannot be said that respondent depositors," in the words of its branch manager
sat on his rights. He immediately acted and co-petitioner, Conrado Cruz, Sayson had
after knowing of the forgery by not been authorized by the private respondent
proceeding to seek help from the to deposit and encash the said checks.
Tanlimco family and later the Central Thus, Reyes sued Associated Bank. The RTC
Bank, to remedy the situation and ruled in favor of Reyes. The Bank appealed the
recover his money from the forger, decision of the RTC on the ground that Reyes
Paciano Tanlimco. Only after he had had no cause of action. The CA affirmed the
exhausted possibilities of settling the decision of the RTC.
matter amicably with the family of Issue: ​WON Reyes has a cause of action
Tanlimco and through the CB, about five against the bank
months after the unlawful transaction Ruling: ​YES. The effects of crossing a check
took place, did he resort to making the are: (1) that the check may not be encashed
demand upon the petitioner and but only deposited in the bank; (2) that the
eventually before the court for recovery check may be negotiated only once –– to one
of the money value of the two checks. who has an account with a bank; and (3) that
These acts cannot be construed as the act of crossing the check serves as a
undue delay in or abandonment of the warning to the holder that the check has been
assertion of his rights. issued for a definite purpose so that he must
inquire if he has received the check pursuant to
2. ASSOCIATED BANK and CONRADO
​ that purpose."
CRUZ v. HON. COURT OF APPEALS, The effects therefore of crossing a check relate
and MERLE V. REYES, doing to the mode of its presentment for payment.
business under the name and style Under Sec. 72 of the Negotiable Instruments
"Melissa's RTW” Law, presentment for payment, to be sufficient,
G.R. No. 89802 May 7, 1992 must be made by the holder or by some person
Facts: ​Merle Reyes is engaged in the business authorized to receive payment on his behalf.
of ready-to-wear garments under the firm name Who the holder or authorized person is
“Melissa’s RTW.” Some of her customers depends on the instruction stated on the face
include Robinson's Department Store, Payless of the check.
Department Store, Rempson Department The six checks in the case at bar had been
Store, and the Corona Bazaar. These crossed and issued "for payee's account only."
companies issued in payment of their This could only signify that the drawers had
respective accounts 6 crossed checks payable intended the same for deposit only by the
to Melissa's RTW. person indicated, to wit, Melissa's RTW.
The subject checks were accepted for deposit Between the dates September 5, 1980 and
by the Bank for the account of Rafael Sayson January 23, 1981, Eugenio was able to encash
although they were crossed checks and the and deposit to her personal account about
payee was not Sayson but Melissa's RTW. The seventeen (17) checks drawn against the
Bank stamped thereon its guarantee that "all account of the petitioner at the respondent
prior endorsements and/or lack of bank, with an aggregate amount of
endorsements (were) guaranteed." By such P119,634.34. Ilusorio did not bother to check
deliberate and positive act, the Bank had for all his statement of account until a business
legal intents and purposes treated the said partner apprised him that he saw Eugenio use
checks as negotiable instruments and, his credit cards. Ilusorio fired Eugenio
accordingly, assumed the warranty of the immediately, and instituted a criminal action
endorser. against her for estafa thru falsification. On the
The bank was negligent when they permitted other hand, the bank, through an affidavit
the encashment of the checks by Sayson. The executed by its employee, Razaon, also lodged
Bank should have first verified his right to a complaint for estafa through falsification of
endorse the crossed checks, of which he was commercial documents against Eugenio on the
not the payee, and to deposit the proceeds of basis that Ilusorio’s signatures were forged.
the checks to his own account. The Bank was Ilusorio then requested the respondent bank to
by reason of the nature of the checks put upon credit back and restore to its account the value
notice that they were issued for deposit only to of the checks which were wrongfully encashed
the private respondent's account. Its failure to but respondent bank refused. Hence, petitioner
inquire into Sayson's authority was a breach of filed the instant case.
a duty it owed to the private respondent. . The Manila Bank sought the expertise of the
failure of the Bank to make this inquiry was a National Bureau of Investigation (NBI) in
breach of duty that made it liable to the private determining the genuineness of the signatures
respondent for the amount of the checks. appearing on the checks. However, the NBI
3. ​RAMON K. ILUSORIO, PETITIONER, informed the trial court that they could not
VS. HON. COURT OF APPEALS, AND conduct the desired examination for the reason
THE MANILA BANKING that the standard specimens submitted were
CORPORATION, RESPONDENTS. not sufficient for purposes of rendering a
[ G.R. No. 139130, November 27, 2002 ] definitive opinion. The NBI then suggested that
Facts: ​Ilusorio was a prominent businessman petitioner be asked to submit seven (7) or more
who is running several corporations and was additional standard signatures executed before
depositor in good standing of respondent bank, or about, and immediately after the dates of the
Manila Banking Corporation. As he was then questioned checks. Ilusorio, however, failed to
running about 20 corporations, and was going comply with this request.
out of the country a number of times, petitioner The RTC ruled in favor of the bank. The CA
entrusted to his secretary, Katherine E. affirmed the decision of the RTC.
Eugenio, his credit cards and his checkbook Issues:
with blank checks. It was also Eugenio who a. ​WON Ilusorio has a cause of action

verified and reconciled the statements of said against the bank

checking account. b. ​WON the filing of Manila Bank of a case
for estafa against Eugenio would estop
 it from asserting the fact that forgery has without which the result would not have
not been establihed occurred.​[21] In the instant case, the bank
Ruling: was not shown to be remiss in its duty of
a. NO. To be entitled to damages, sending monthly bank statements to
petitioner has the burden of proving petitioner so that any error or discrepancy
negligence on the part of the bank for in the entries therein could be brought to
failure to detect the discrepancy in the the bank’s attention at the earliest
signatures on the checks. It is opportunity. But, petitioner failed to
incumbent upon petitioner to establish examine these bank statements not
the fact of forgery, ​i.e.​, by submitting his because he was prevented by some cause
specimen signatures and comparing in not doing so, but because he did not pay
them with those on the questioned sufficient attention to the matter. In view of
checks. Curiously though, petitioner Article 2179 of the New Civil Code when
failed to submit additional specimen the plaintiff’s own negligence was the
signatures as requested by the National immediate and proximate cause of his
Bureau of Investigation from which to injury, no recovery could be had for
draw a conclusive finding regarding damages.
forgery.
b. NO. Ilusorio cannot hold the bank in
​

Furthermore, consistently, the CA and the estoppel for the bank is not the actual
RTC found that Manila Bank employees party in the criminal action. In a criminal
exercised due diligence in cashing the action, the State is the plaintiff, for the
checks. The bank’s employees in the commission of a felony is an offense
present case did not have a hint as to against the State.
Eugenio’s ​modus operandi because she
was a regular customer of the bank, having 4. BANK OF THE PHILIPPINE ISLANDS,
been designated by petitioner himself to PETITIONER, VS. CASA
transact in his behalf. MONTESSORI INTERNATIONALE
AND LEONARDO T. YABUT,
It was Ilusorio and not the bank who was RESPONDENTS.
negligent. He accorded is secretary unusual
degree of trust and unrestricted access to [ G.R. No. 149454 and G.R. No. 149507,
his credit cards, passbooks, check books, May 28, 2004 ]
bank statements including custody and Facts: ​Casa Montessori opened a current
possession of cancelled checks and account with the petitioner, BPI with Ms.
especially, reconciliation of his accounts. Lebron, Casa’s president as one of its
authorized signatories. After conducting an
Petitioner’s failure to examine his bank investigation, the Casa discovered Sonny D.
statements appears as the proximate cause Santos encashed 9 of its checks. It turned out
of his own damage. Proximate cause is that that Sonny D. Santos was a fictitious name of
cause, which, in natural and continuous Leonardo T. Yabut who worked as an external
sequence, unbroken by any efficient editor of the Casa. He admitted that he forged
intervening cause, produces the injury, and the signature of Ms. Lebron and encashed the
checks. The PNP Crime Laboratory conducted situation, secondary evidence like microfilm
an examination of the nine (9) checks and copies may be introduced in court.
concluded that the handwritings thereon The drawer’s signatures on the microfilm
compared to the standard signature of Ms. copies were compared with the standard
Lebron were not written by the latter. As a signature. PNP Document Examiner II
result, the Casa filed a complaint for the Josefina de la Cruz testified on
collection of the amount of the checks with cross-examination that two different
interest and damages against BPI. persons had written them. The Court
The RTC ruled in favor of the Casa. On one affirmed the RTC’s reliance on the PNP
hand, the CA apportioned the loss between Examiner’s report because RTC explained
BPI and CASA. The appellate court took into that although the Report was inconclusive,
account CASA’s contributory negligence that no conclusive report could have been given
resulted in the undetected forgery. It then by the PNP, anyway, in the absence of the
ordered Leonardo T. Yabut to reimburse BPI original checks. This explanation is valid;
half the total amount claimed; and CASA, the otherwise, no such report can ever be relied
other half. It also disallowed attorney’s fees upon in court.
and moral and exemplary damages. Furthermore, the testimony of Lebron is
Issues: also admissible. She testified many times
a.​ ​WON there is forgery that she had never signed those checks.
b.​ ​WON BPI is liable to the CASA Her testimonial evidence is admissible; the
c. ​WON the Casa is entitled of moral checks have not been actually executed.
damages, exemplary damages, The genuineness of her handwriting is
attorney’s fees, and interest proved, not only through the court’s
Ruling: comparison of the questioned handwritings
a.​ ​YES. and admittedly genuine specimens thereof,
Forgery “cannot be presumed. It must be but above all by her.
established by clear, positive and b.​ ​YES.
convincing evidence. Under the best Having established the forgery of the
evidence rule as applied to documentary drawer’s signature, BPI -- the drawee
evidence like the checks in question, no --erred in making payments by virtue
secondary or substitutionary evidence may thereof. The forged signatures are wholly
inceptively be introduced, as the original inoperative, and CASA -- the drawer whose
writing itself must be produced in court. But authorized signatures do not appear on the
when, without bad faith on the part of the negotiable instruments --cannot be held
offeror, the original checks have already liable thereon. Neither is the latter
been destroyed or cannot be produced in precluded from setting up forgery as a real
court, secondary evidence may be defense.
produced. Without bad faith on its part,
CASA proved the loss or destruction of the BPI failed to detect the eight instances of
original checks through the Affidavit of the forgery. Its negligence consisted in the
one person who knew of that fact ​-- Yabut. omission of that degree of diligence
He clearly admitted to discarding the paid required of a bank. It cannot now feign
checks to cover up his misdeed. In such a ignorance, for very early on we have
already ruled that a bank is “bound to know checks and those on the signature card.
the signatures of its customers; and if it Third, despite the examination procedures it
pays a forged check, it must be considered conducted, the Central Verification Unit of
as making the payment out of its own the bank even passed off these evidently
funds, and cannot ordinarily charge the different signatures as genuine.
amount so paid to the account of the
depositor whose name was forged. On the other hand, the Casa was not
negligent. Being Casa’s independent
The monthly statements issued by BPI to its auditor Yabut had access to all relevant
clients contain a notice worded as follows: documents and checkbooks. It was Yabut’s
“If no error is reported in ten (10) days, task to make the bank reconciliations.
account will be correct.” ​Such notice cannot CASA had every right to rely solely upon
be considered a waiver, even if CASA failed his output -- based on the terms of the audit
to report the error. Neither is it estopped engagement -- and could thus be
from questioning the mistake after the lapse unwittingly duped into believing that
of the ten-day period. everything was in order. Besides, “[g]ood
faith is always presumed and it is the
For allowing payment on the checks to a burden of the party claiming otherwise to
wrongful and fictitious payee, BPI -- the adduce clear and convincing evidence to
drawee bank --becomes liable to its the contrary.”
depositor-drawer. Since the encashing
bank is one of its branches,​[101] BPI can Clearly then, Yabut was able to perpetrate
easily go after it and hold it liable for the wrongful act through no fault of CASA.
reimbursement. It “may not debit the If auditors may be held liable for breach of
drawer’s account and is not entitled to contract and negligence with all the more
indemnification from the drawer.” In both reason may they be charged with the
law and equity, when one of two innocent perpetration of fraud upon an unsuspecting
persons “must suffer by the wrongful act of client. CASA had the discretion to pursue
a third person, the loss must be borne by BPI alone under the NIL, by reason of
the one whose negligence was the expediency or munificence or both. Money
proximate cause of the loss or who put it paid under a mistake may rightfully be
into the power of the third person to recovered and under such terms as the
perpetrate the wrong. injured party may choose.

BPI is negligence on the following grounds: c.​ ​Moral damages – NO

First, Yabut was able to open a bank CASA was unable to identify the particular
account in one of its branches without instance -- enumerated in the Civil Code --
privity; ​that is, without the proper verification upon which its claim for moral damages is
of his corresponding identification papers predicated. As a general rule, a corporation
(note of the fictitious name: Sonny Santos). -- being an artificial person without feelings,
Second, BPI was unable to discover early emotions and senses, and having existence
on not only this irregularity, but also the only in legal contemplation -- is not entitled
marked differences in the signatures on the to moral damages, because it cannot
 experience physical suffering and mental Samsung Construction’s current account, was
anguish. in the amount of P999,500. The bank teller,
Cleofe Justiani, first checked the balance of
Exemplary damages – NO Samsung Construction’s account. After
Imposed by way of correction for the public ascertaining there were enough funds to cover
good exemplary damages cannot be the check, ​she compared the signature
recovered as a matter of right. There is no appearing on the check with the specimen
bad faith on the part of BPI for paying the signature of Jong as contained in the specimen
checks of CASA upon forged signatures. signature card with the bank. After comparing
the two signatures, Justiani was satisfied as to
Attorney’s fees – NO the authenticity of the signature appearing on
BPI persistently denied the claim of CASA the check. She then asked Gonzaga to submit
under the NIL to recredit the latter’s account proof of his identity, and the latter presented
for the value of the forged checks. This three (3) identification cards. At the same time,
denial constrained CASA to incur expenses Justiani forwarded the check to the branch
and exert effort for more than ten years in Senior Assistant Cashier Gemma Velez, as it
order to protect its corporate interest in its was bank policy that two bank branch officers
bank account. approve checks exceeding P100,000, for
payment or encashment. Velez likewise
Interests – YES counterchecked the signature on the check as
For the failure of BPI to pay CASA upon against that on the signature card. He too
demand and for compelling the latter to concluded that the check was indeed signed by
resort to the courts to obtain payment, legal Jong. Velez then forwarded the check and
interest may be adjudicated at the signature card to Shirley Syfu, another bank
discretion of the Court. officer, for approval. Syfu then noticed that
Jose Sempio III, the assistant accountant of
5. SAMSUNG CONSTRUCTION Samsung Construction, was also in the bank.
COMPANY PHILIPPINES, INC., Sempio was well-known to Syfu and the other
PETITIONER, VS. FAR EAST BANK bank officers, he being the assistant
AND TRUST COMPANY AND COURT accountant of Samsung Construction. Syfu
OF APPEALS, RESPONDENTS. showed the check to Sempio, who vouched for
[ G.R. No. 129015, August 13, 2004 ] the genuineness of Jong’s signature.
Facts: ​Samsung Construction maintained a Confirming the identity of Gonzaga, Sempio
current account with Far East Bank and Trust said that the check was for the purchase of
Company (FEBTC). The sole signatory to equipment for Samsung Construction. Satisfied
Samsung Construction’s account was Jong with the genuineness of the signature of Jong,
Kyu Lee, its Project Manager while the checks Syfu authorized the bank’s encashment of the
remained in the custody of the company’s check to Gonzaga.
accountant, Kyu Yong Lee. The following day, Kyu examined the balance
On 19 March 1992, a certain Roberto Gonzaga of Samsung’s bank account and found out that
presented for payment FEBTC Check No. a check with an amount of P999,500 has been
432100 to the bank’s branch in Bel-Air, Makati. encashed. He learned that the last blank check
The check, payable to cash and drawn against was missing in the checkbook and reported the
matter to Jong. Jong went to the bank and the fifteen years, she had been promoted to the
bank’s manager promised to return the amount rank of Senior Document Examiner with the
to Samsung Construction. NBI, and had held that rank for twelve years
Later, Samsung Construction demanded prior to her testimony. In analyzing the
FEBTC for the amount but FEBTC responded signatures, NBI Examiner Flores utilized the
that the matter was still under investigation. As scientific comparative examination method
a result, Samsung Construction filed a consisting of analysis, recognition, comparison
complaint against FEBTC for the violation of and evaluation of the writing habits with the
Sec. 23 of the NIL. use of instruments such as a magnifying lense,
During trial, Samsung presented Senior NBI a stereoscopic microscope, and varied lighting
Document Examiner Roda B. Flores. She substances. She also prepared enlarged
testified that based on her examination, she photographs of the signatures in order to
concluded that Jong’s signature had been facilitate the necessary comparisons.
forged on the check. . On the other hand,
FEBTC, which had sought the assistance of The RTC was sufficiently convinced by the NBI
the Philippine National Police (PNP),​[14] examiner’s testimony, and explained her
presented Rosario C. Perez, a document reasons in its ​Decisions.​ While the Court of
examiner from the PNP Crime Laboratory. She Appeals disagreed and upheld the findings of
testified that her findings showed that Jong’s the PNP, it failed to convincingly demonstrate
signature on the check was genuine. why such findings were more credible than
Confronted with conflicting expert testimony, those of the NBI expert. Now, that there is a
the RTC chose to believe the findings of the finding of forgery, the next question to be
NBI expert and ruled in favor of Samsung. The resolved is whether Samsung Construction
CA reversed the RTC and chose to believe the was precluded from setting up the defense of
findings of the PNP expert. forgery under Section 23.
Issues: ​WON FEBTC is liable to Samsung Samsung Construction is not precluded from
Construction under Section 23 of the NIL setting up the defense of forgery. Section 23 of
Ruling: ​YES. A document formally presented the Negotiable Instruments Law bars a party
is presumed to be genuine until it is proved to from setting up the defense of forgery if it is
be fraudulent. In a forgery trial, this guilty of negligence.
presumption must be overcome but this can In the case at bar, the forgery appears to have
only be done by convincing testimony and been made possible through the acts of one
effective illustrations. Jose Sempio III, an assistant accountant
The PNP examiner downplayed the employed by the plaintiff Samsung. The bare
uniqueness of the final stroke in the questioned fact that the forgery was committed by an
signature as a mere variation the same excuse employee of the party whose signature was
she proffered for the other marked differences forged cannot necessarily imply that such
noted by the Court and the counsel for party’s negligence was the cause for the
petitioner. There is no reason to doubt why the forgery.
RTC gave credence to the testimony of the NBI Admittedly, the record does not clearly
examiner, and not the PNP expert’s. The NBI establish what measures Samsung
expert, Rhoda Flores, clearly qualifies as an Construction employed to safeguard its blank
expert witness. A document examiner for checks. In the absence of evidence to the
contrary, we can conclude that there was no stranger to FEBTC, was not even an employee
negligence on Samsung Construction’s part. of Samsung Construction. Given the shadiness
The presumption remains that every person attending Gonzaga’s presentment of the check,
takes ordinary care of his concerns and that it was not sufficient for FEBTC to have merely
the ordinary course of business has been complied with its internal procedures, but
followed. Negligence is not presumed, but mandatory that all earnest efforts be
must be proven by him who alleges it. undertaken to ensure the validity of the check,
Furthermore, the general rule remains that the and of the authority of Gonzaga to collect
drawee who has paid upon the forged payment therefor.
signature bears the loss. The exception to this Still, even if the bank performed with utmost
rule arises only when negligence can be traced diligence, the drawer whose signature was
on the part of the drawer whose signature was forged may still recover from the bank as long
forged, and the need arises to weigh the as he or she is not precluded from setting up
comparative negligence between the drawer the defense of forgery. After all, Section 23 of
and the drawee to determine who should bear the Negotiable Instruments Law plainly states
the burden of loss. that no right to enforce the payment of a check
In this case, FEBTC failed to exercise the level can arise out of a forged signature. Since the
of diligence that is expected of a bank. The fact drawer, Samsung Construction, is not
that the check was made out in the amount of precluded by negligence from setting up the
nearly one million pesos is unusual enough to forgery, the general rule should apply.
require a higher degree of caution on the part Consequently, if a bank pays a forged check, it
of the bank. Indeed, FEBTC confirms this must be considered as paying out of its funds
through its own internal procedures. Checks and cannot charge the amount so paid to the
below twenty-five thousand pesos require only account of the depositor. A bank is liable,
the approval of the teller; those between irrespective of its good faith, in paying a forged
twenty-five thousand to one hundred thousand check.
pesos necessitate the approval of one bank
officer; and should the amount exceed one 6. PHILIPPINE NATIONAL BANK vs. F.F.
hundred thousand pesos, the concurrence of CRUZ and CO., INC.
two bank officers is required. In this case, not G.R. No. 173259 July 25, 2011
only did the amount in the check nearly total DEL CASTILLO, ​J.
one million pesos, it was also payable to cash. FACTS: ​F.F. Cruz & Co., Inc. (FFCCI) opened
That latter circumstance should have aroused savings/current or so-called combo account
the suspicion of the bank, as it is not ordinary No. 0219-830-146 and dollar savings account
business practice for a check for such large No. 0219-0502-458-6 with Philippine National
amount to be made payable to cash or to Bank (PNB) at its Timog Avenue Branch. Its
bearer, instead of to the order of a specified President Felipe Cruz and Secretary-Treasurer
person. Moreover, the check was presented for Angelita A. Cruz were the named signatories
payment by one Roberto Gonzaga, who was for the said accounts.
not designated as the payee of the check, and The said signatories left for and returned from
who did not carry with him any written proof the Unites States of America. While they were
that he was authorized by Samsung thus out of the country, applications for
Construction to encash the check. Gonzaga, a cashier’s and manager’s bearing Felipe’s
signature were presented to and both trustworthiness expected of their officials and
approved by the PNB. The first was for employees is far greater than those of ordinary
₱9,950,000.00 payable to a certain Gene B. officers and employees in other enterprises. In
Sangalang and the other one was for the case at bar, PNB failed to meet the high
₱3,260,500.31 payable to one Paul Bautista. standard of diligence required by the
The amounts of these checks were then circumstances to prevent the fraud. Where the
debited by the PNB against the combo account bank’s negligence is the proximate cause of
of FFCCI. the loss and the depositor is guilty of
When Angelita returned to the country, she contributory negligence, the allocated damages
examineD the PNB statements of account of between the bank and the depositor is on a
FFCCI she noticed the deductions. Claiming 60-40 ratio. This is applied in the present case.
that these were unauthorized and fraudulently As shown, PNB’s negligence is the proximate
made, FFCCI requested PNB to credit back cause of the loss while the issue as to FFCCI’s
and restore to its account the value of the contributory negligence has been settled with
checks. PNB refused, and thus FFCCI filed the finality in G.R. No. 173278. Thus, the appellate
instant suit for damages against the PNB and court properly adjudged PNB to bear the
its own accountant Aurea Caparas. PNB greater part of the loss consistent with these
alleged that it exercised due diligence in rulings.
handling the account of FFCCI. The 7. NATIVIDAD GEMPESAW vs. THE
applications for manager’s check have passed HONORABLE COURT OF APPEALS and
through the standard bank procedures and it PHILIPPINE BANK OF COMMUNICATIONS
was only after finding no infirmity that these G.R. No. 92244 February 9, 1993
were given due course. In fact, it was no less CAMPOS, JR., ​J.
than Caparas, the accountant of FFCCI, who FACTS: ​Natividad O. Gempesaw owns and
confirmed the regularity of the transaction. operates four grocery stores located at Rizal
ISSUE: ​Whether or not PNB is guilty of Avenue Extension and at Second Avenue,
negligence. Caloocan City. Petitioner maintains a checking
HELD: ​Yes. PNB is guilty of negligence. PNB account numbered 13-00038-1 with
contends that it was not negligent in verifying respondent drawee Bank. To facilitate payment
the genuineness of the signatures appearing of debts to her suppliers, petitioner draws
on the subject applications for manager’s checks against her checking account with the
check. However, the Court find no reversible respondent bank as drawee. Her customary
error in the findings of the appellate court that practice of issuing checks is that the checks
PNB was negligent in the handling of FFCCI’s were prepared and filled up as to all material
combo account, specifically, with respect to particulars by her trusted bookkeeper, Alicia
PNB’s failure to detect the forgeries in the Galang, an employee for more than eight
subject applications for manager’s check which years. After the preparation, the completed
could have prevented the loss. The banking checks were submitted to the petitioner for her
business is impressed with public trust. A signature, together with the corresponding
higher degree of diligence is imposed on banks invoice receipts which indicate the correct
relative to the handling of their affairs than that obligations due and payable to her suppliers.
of an ordinary business enterprise. Thus, the Petitioner signed each and every check without
degree of responsibility, care and bothering to verify the accuracy of the checks
against the corresponding invoices because In the case at bar, the petitioner relied implicitly
she reposed full and implicit trust and upon the honesty and loyalty of her
confidence on her bookkeeper. The issuance bookkeeper, and did not even verify the
and delivery of the checks to the payees accuracy of amounts of the checks she signed
named therein were left to the bookkeeper. against the invoices attached thereto.
Petitioner admitted that she did not make any Furthermore, although she regularly received
verification as to whether or not the checks her bank statements, she apparently did not
were delivered to their respective payees. carefully examine the same nor the check
Although the respondent drawee Bank notified stubs and the returned checks, and did not
her of all checks presented to and paid by the compare them with the same invoices.
bank, petitioner did not verify the correctness Otherwise, she could have easily discovered
of the returned checks, much less check if the the discrepancies between the checks and the
payees actually received the checks in documents serving as bases for the checks.
payment for the supplies she received. With such discovery, the subsequent forgeries
Petitioner filed a Complaint against Philippine would not have been accomplished. It was not
Bank of Communications for recovery of the until two years after the bookkeeper
money value of eighty-two (82) checks charged commenced her fraudulent scheme that
against the petitioner's account with the petitioner discovered that eighty-two (82)
respondent drawee Bank on the ground that checks were wrongfully charged to her
the payees' indorsements were forgeries. account, at which she notified the respondent
Practically, all the checks issued and honored drawee bank.
by the respondent drawee bank were crossed the petitioner failed to examine her records
checks. All the eighty-two checks were brought with reasonable diligence whether before she
to Ernest L. Boon, Chief Accountant of signed the checks or after receiving her bank
respondent drawee Bank who, without statements. Thus, petitioner's negligence was
authority therefor, accepted them all for deposit the proximate cause of her loss.
to credit the accounts. However, under Article 1170 of the same Code
ISSUE: ​Whether or not the petitioner can the respondent drawee Bank may be held
recover from the drawee bank who pays a liable for damages. The fact that petitioner's
check with a forged indorsement of the payee, negligence was found to be the proximate
debiting the same against the drawer's cause of her loss does not preclude her from
account. recovering damages. In the performance of its
HELD: ​No. As a rule, a drawee bank who has obligation, the drawee bank is bound by its
paid a check on which an indorsement has internal banking rules and regulations which
been forged cannot charge the drawer's form part of any contract it enters into with any
account for the amount of said check. An of its depositors. When it violated its internal
exception to this rule is where the drawer is rules that second endorsements are not to be
guilty of such negligence which causes the accepted without the approval of its branch
bank to honor such a check or checks. The managers and it did accept the same upon the
negligence of a depositor which will prevent mere approval of Boon, a chief accountant, it
recovery of an unauthorized payment is based contravened the tenor of its obligation at the
on failure of the depositor to act as a prudent very least, if it were not actually guilty of fraud
businessman would under the circumstances. or negligence. We hold that banking business
is so impressed with public interest where the actually privy to the fraud perpetrated by
trust and confidence of the public in general is Balmaceda.
of paramount importance such that the ISSUES:
appropriate standard of diligence must be a a. Whether or not Ramos can be held
high degree of diligence, if not the utmost liable for the fraudulent scheme.
diligence. b. Whether or not PCIB is at fault.
c. Whether or not PCIB can recover
8. PHILIPPINE COMMERCIAL form Ramos based on unjust
INTERNATIONAL BANK vs. enrichment.
ANTONIO B. BALMACEDA and ROLANDO d. Whether or not PCIB can unilaterally
N. RAMOS freeze the account of Ramos.
G.R. No. 158143 September 21, HELD:
2011 a. No. The mere fact that Balmaceda
BRION, ​J. made Ramos the payee on some of
FACTS: ​PCIB alleged that between 1991 and the Manager’s checks is not enough
1993, Balmaceda, by taking advantage of his basis to conclude that Ramos was
position as branch manager, fraudulently complicit in Balmaceda’s fraud; a
obtained and encashed 31 Manager’s checks number of other people were made
in the total amount of ₱10,782,150.00. PCIB payees on the other Manager’s
moved to be allowed to file an amended checks yet PCIB never alleged them
complaint to implead Rolando Ramos as one to be liable, nor did the Bank adduce
of the recipients of a portion of the proceeds any other evidence pointing to
from Balmaceda’s alleged fraud. PCIB also Ramos’ participation that would
increased the number of fraudulently obtained justify his separate treatment from
and encashed Manager’s checks to 34, in the the others. Also, while Ramos is
total amount of ₱11,937,150.00. Ramos filed Balmaceda’s brother-in-law, their
an Answer denying any knowledge of relationship is not sufficient, by itself,
Balmaceda’s scheme. According to Ramos, he to render Ramos liable, absent
is a reputable businessman engaged in the concrete proof of his actual
business of buying and selling fighting cocks, participation in the fraudulent
and Balmaceda was one of his clients. Ramos scheme.
admitted receiving money from Balmaceda as Moreover, the evidence on record
payment for the fighting cocks that he sold to clearly shows that Balmaceda acted on
Balmaceda, but maintained that he had no his own when he applied for the
knowledge of the source of Balmaceda’s Manager’s checks against the bank
money. PCIB maintains that it had the right to account of one of PCIB’s clients, as well
freeze and debit the amount of ₱251,910.96 as when he encashed the fraudulently
from Ramos’ bank account, even without his acquired Manager’s checks. The Court
consent, since legal compensation had taken found no reason to doubt Ramos’ claim
place between them by operation of law. PCIB that Balmaceda deposited these large
debited Ramos’ bank account, believing in sums of money into his bank account as
good faith that Ramos was not entitled to the payment for the fighting cocks that
proceeds of the Manager’s checks and was Balmaceda purchased from him. Given
that PCIB failed to establish Ramos’ serves as a warning to the holder
participation in Balmaceda’s scheme, it that the check has been issued for a
was not even necessary for Ramos to definite purpose and he must inquire
provide an explanation for the money he if he received the check pursuant to
received from Balmaceda. Even if the this purpose; otherwise, he is not a
evidence adduced by the plaintiff holder in due course. In complete
appears stronger than that presented by disregard of this duty, PCIB’s
the defendant, a judgment cannot be systems allowed Balmaceda to
entered in the plaintiff’s favor if his encash 26 Manager’s checks which
evidence still does not suffice to sustain were all crossed checks, or checks
his cause of action; a preponderance of payable to the "payee’s account
evidence must be established to only."
achieve this result.
b. Yes. PCIB itself at fault as employer. c. No. Unjust enrichment claims do not
The banking business is impressed lie simply because one party benefits
with public interest. Of paramount from the efforts or obligations of
importance is the trust and others, but instead it must be shown
confidence of the public in general in that a party was unjustly enriched in
the banking industry. Consequently, the sense that the term unjustly
the diligence required of banks is could mean illegally or unlawfully.
more than that of a Roman ​pater Ramos cannot be held liable to PCIB
familias or a good father of a family. on account of unjust enrichment
The highest degree of diligence is simply because he received
expected. It cannot be ignored that payments out of money secured by
Balmaceda managed to carry out his fraud from PCIB. To hold Ramos
fraudulent scheme primarily because accountable, it is necessary to prove
other PCIB employees failed to carry that he received the money from
out their assigned tasks – flaws Balmaceda, knowing that he
imputable to PCIB itself as the (Ramos) was not entitled to it. PCIB
employer. PCIB’s own employees must also prove that Ramos, at the
were unwitting accomplices in time that he received the money
Balmaceda’s fraud. Another telling from Balmaceda, knew that the
indicator of PCIB’s negligence is the money was acquired through fraud.
fact that it allowed Balmaceda to Knowledge of the fraud is the link
encash the Manager’s checks that between Ramos and PCIB that
were plainly crossed checks. The would obligate Ramos to return the
crossing of a check has the following money based on the principle of
effects: (a) the check may not be unjust enrichment. However, as the
encashed but only deposited in the evidence on record indicates, Ramos
bank; (b) the check may be accepted the deposits that
negotiated only once — to the one Balmaceda made directly into his
who has an account with the bank; bank account, believing that these
and (c) the act of crossing the check deposits were payments for the
 fighting cocks that Balmaceda had During the months of March, April and May
purchased. Significantly, PCIB has 1969, twenty-three (23) checks were prepared,
not presented any evidence proving processed, issued and released by NWSA, all
that Ramos participated in, or that he of which were paid and cleared by PNB and
even knew of, the fraudulent sources debited by PNB against NWSA Account No. 6.
of Balmaceda’s funds. During the same months of March, April and
May 1969, twenty-three (23) checks bearing
d. No. PCIB acted illegally in freezing the same numbers as the former NWSA
and debiting Ramos’ bank account. checks were likewise paid and cleared by PNB
The court cautioned against the and debited against NWSA Account No. 6. The
unilateral freezing of bank accounts foregoing checks were deposited by the
by banks. They do not have a payees Raul Dizon, Arturo Sison and Antonio
unilateral right to freeze the accounts Mendoza in their respective current accounts
of depositors based on its mere with the Philippine Commercial and Industrial
suspicion. It would open the Bank (PCIB) and Philippine Bank of Commerce
floodgates of public distrust in the (PBC) in the same months. These checks were
banking industry. presented for payment by PBC and PCIB to
the defendant PNB, and paid, also in the same
months. At the time of their presentation to
9. METROPOLITAN WATERWORKS AND PNB these checks bear the standard
SEWERAGE SYSTEM vs. indorsement which reads 'all prior indorsement
COURT OF APPEALS (Now INTERMEDIATE and/or lack of endorsement guaranteed.'
APPELLATE COURT) and THE PHILIPPINE Subsequent investigation however, conducted
NATIONAL BANK by the NBI showed that Raul Dizon, Arturo
G.R. No. L-62943 July 14, 1986 Sison and Antonio Mendoza were all fictitious
GUTIERREZ, JR., ​J. persons. NWSA addressed a letter to PNB
requesting the immediate restoration to its
FACTS: ​The Philippine National Bank (PNB) is Account No. 6, of the total sum of
the depository bank of Metropolitan P3,457,903.00 corresponding to the total
Waterworks and Sewerage System (MWSS) amount of these twenty-three (23) checks
and its predecessor-in-interest NWSA. Among claimed by NWSA to be forged and/or spurious
the several accounts of NWSA with PNB is checks.
NWSA Account No. 6. The authorized PNB contended among others, that the checks
signature for said Account No. 6 were those of in question were regular on its face in all
MWSS treasurer Jose Sanchez, its auditor respects, including the genuineness of the
Pedro Aguilar, and its acting General Manager signatures of authorized NWSA signing officers
Victor L. Recio. Their respective specimen and there was nothing on its face that could
signatures were submitted by the MWSS to have aroused any suspicion as to its
and on file with the PNB. By special genuineness and due execution and; that
arrangement with the PNB, the MWSS used NWSA was guilty of negligence which was the
personalized checks in drawing from this proximate cause of the loss.
account. ISSUE: ​Whether or not there was forgery.
HELD: ​No. The findings of the National Bureau be faulted as the records show that the
of Investigation in its Report show that the respondent drawee bank, had taken the
MWSS fraud was an "inside job" and that the necessary measures in the detection of forged
petitioner's delay in the reconciliation of bank checks and the prevention of their fraudulent
statements and the laxity and loose records encashment. We cannot fault the respondent
control in the printing of its personalized drawee Bank for not having detected the
checks facilitated the fraud. The National fraudulent encashment of the checks because
Bureau of Investigation likewise does not the printing of the petitioner's personalized
declare or prove that the signatures appearing checks was not done under the supervision
on the questioned checks are forgeries. The and control of the Bank. There is no evidence
report merely mentions the alleged differences on record indicating that because of this private
in the type face, checkwriting, and printing printing the petitioner furnished the respondent
characteristics appearing in the standard or Bank with samples of checks, pens, and inks
submitted models and the questioned or took other precautionary measures with the
typewritings. The NBI Chemistry Report No. PNB to safeguard its interests.
C-74-891 merely describes the inks and pens
used in writing the alleged forged signatures. It 10. ASSOCIATED BANK vs. HON. COURT
is clear that these NBI Reports relied upon by OF APPEALS, PROVINCE OF TARLAC and
the petitioner are inadequate to sustain its PHILIPPINE NATIONAL BANK
allegations of forgery. These reports did not G.R. No. 107382/G.R. No. 107612 January
touch on the inherent qualities of the 31, 1996
signatures which are indispensable in the ROMERO, ​J.​
determination of the existence of forgery. FACTS: ​The Province of Tarlac maintains a
There must be conclusive findings that there is current account with the Philippine National
a variance in the inherent characteristics of the Bank (PNB) Tarlac Branch where the provincial
signatures and that they were written by two or funds are deposited. Checks issued by the
more different persons. Forgery cannot be Province are signed by the Provincial
presumed. It must be established by clear, Treasurer and countersigned by the Provincial
positive, and convincing evidence. This was Auditor or the Secretary of the Sangguniang
not done in the present case. Bayan.
Moreover, the petitioner is barred from setting A portion of the funds of the province is
up the defense of forgery because it was guilty allocated to the Concepcion Emergency
of negligence not only before the questioned Hospital. The checks are released by the
checks were negotiated but even after the Office of the Provincial Treasurer and received
same had already been negotiated. The for the hospital by its administrative officer and
records show that at the time the twenty-three cashier. In January 1981, the books of account
(23) checks were prepared, negotiated, and were post-audited. It was then discovered that
encashed, the petitioner was using its own the hospital did not receive several allotment
personalized checks, instead of the official checks drawn by the Province. The Provincial
PNB Commercial blank checks. In the exercise Treasurer requested the manager of the PNB
of this special privilege, however, the petitioner to return all of its cleared checks which were
failed to provide the needed security issued from 1977 to 1980 in order to verify the
measures. Furthermore, drawee bank cannot regularity of their encashment. After the checks
were examined, the Provincial Treasurer The drawee bank may not debit the account of
learned that 30 checks amounting to the drawer but may generally pass liability back
P203,300.00 were encashed by one Fausto through the collection chain to the party who
Pangilinan, with the Associated Bank acting as took from the forger and, of course, to the
collecting bank. forger himself, if available. In other words, the
It turned out that Fausto Pangilinan, who was drawee bank can seek reimbursement or a
the administrative officer and cashier of payee return of the amount it paid from the presentor
hospital until his retirement, collected the bank or person. Theoretically, the latter can
questioned checks from the office of the demand reimbursement from the person who
Provincial Treasurer. indorsed the check to it and so on. The loss
After forging the signature of Dr. Adena Canlas falls on the party who took the check from the
who was chief of the payee hospital, forger, or on the forger himself.
Pangilinan was able to withdraw the money In this case, the checks were indorsed by the
when the check was cleared and paid by the collecting bank (Associated Bank) to the
drawee bank, PNB. All the checks bore the drawee bank (PNB). The former will
stamp of Associated Bank which reads "All necessarily be liable to the latter for the checks
prior endorsements guaranteed ASSOCIATED bearing forged indorsements. If the forgery is
BANK." The Provincial Treasurer wrote the that of the payee's or holder's indorsement, the
manager of the PNB seeking the restoration of collecting bank is held liable, without prejudice
the various amounts debited from the current to the latter proceeding against the forger.
account of the Province. In turn, the PNB Since a forged indorsement is inoperative, the
manager demanded reimbursement from the collecting bank had no right to be paid by the
Associated Bank on May 15, 1981. drawee bank. The former must necessarily
As both banks resisted payment, the Province return the money paid by the latter because it
of Tarlac brought suit against PNB which, in was paid wrongfully. The loss incurred by
turn, impleaded Associated Bank as third-party drawee bank-PNB can be passed on to the
defendant. The latter then filed a fourth-party collecting bank-Associated Bank which
complaint against Adena Canlas and Fausto presented and indorsed the checks to it.
Pangilinan. Associated Bank can, in turn, hold the forger,
ISSUE: ​Whether or not Associated Bank is Fausto Pangilinan, liable.
liable to PNB. After careful examination of the records, the
HELD: ​Yes. The checks involved in this case Court finds that the Province of Tarlac was
are order instruments. Where the instrument is equally negligent and should, therefore, share
payable to order at the time of the forgery, the burden of loss from the checks bearing a
such as the checks in this case, the signature forged indorsement. The Province of Tarlac
of its rightful holder is essential to transfer title permitted Fausto Pangilinan to collect the
to the same instrument. When the holder's checks when the latter, having already retired
indorsement is forged, all parties prior to the from government service, was no longer
forgery may raise the real defense of forgery connected with the hospital.
against all parties subsequent thereto. In cases
involving checks with forged indorsements, 11. LAND BANK OF THE PHILIPPINES ​v.
such as the present petition, the chain of NARCISO L. KHO
liability does not end with the drawee bank. G.R. No. 205840
MA. LORENA FLORES AND ALEXANDER the check purchased by Kho. Thus, Land Bank
CRUZ, ​Petitioners​, ​v.​ NARCISO L. KHO, confirmed the deposited check.
G.R. No. 205839
July 07, 2016 Kho claimed that he never negotiated the
BRION, ​J. check because the deal did not materialize.
FACTS: ​The respondent Narciso Kho is the More importantly, ​the actual check was still in
sole proprietor of United Oil Petroleum, a his possession.​ They discovered that what was
business engaged in trading diesel fuel. He deposited and encashed with BPI was a
entered into a verbal agreement to purchase spurious manager's check. Kho demanded the
lubricants from Red Orange International cancellation of his manager's check and the
Trading (​Red Orange)​ , represented by one release of the remaining money in his account
Rudy Medel. Red Orange insisted that it would (then P995,207.27). Kho filed a ​Complaint for
only accept a Land Bank manager's check as Specific Performance and Damages against
payment. Kho, accompanied by Rudy Medel, Land Bank.
opened Savings Account No. 0681-0681-80 in
Land Bank of the Philippines (​Land Bank)​ . His ISSUE: ​Whether or not Landbank is liable.
initial P25,993,537.37 deposit consisted of the
three manager's checks. Kho also purchased HELD: ​Yes. The business of banking is
Land Bank Manager's Check No. 07410 imbued with public interest; it is an industry
leveraged by his newly opened savings where the general public's trust and confidence
account. The check was postdated to January in the system is of paramount importance.
2, 2006, and scheduled for actual delivery on Consequently, banks are expected to exert the
the same date after the three checks were highest degree of, if not the ​utmost​, diligence.
expected to have been cleared. It was valued They are obligated to treat their depositors'
at P25,000,000.00 and made payable to Red accounts with meticulous care, always keeping
Orange. On January 2, 2006, Kho returned to in mind the fiduciary nature of their
the bank and picked up check No. 07410. relationship.
Accordingly, P25,000,000.00 was debited from
his savings account. Unfortunately, his deal Banks hold themselves out to the public as
with Red Orange did not push through. experts in determining the genuineness of
checks and corresponding signatures thereon.
On January 3, 2006, an employee of the Bank Stemming from their primordial duty of
of the Philippine Islands (​BPI)​ called Land diligence, one of a bank's prime duties is to
Bank, Araneta Branch, to inform them that Red ascertain the genuineness of the drawer's
Orange had deposited check No. 07410 for signature on check being encashed. ​This holds
payment. Flores confirmed with BPI that Land especially true for manager's checks.
Bank had issued the check to Kho. The Central
Clearing Department (​CCD)​ of the Land Bank A manager's check is a bill of exchange drawn
Head Office faxed a copy of the deposited by a bank upon itself, and is accepted by its
check to the Araneta branch for payment. The issuance. It is an order of the bank to pay,
officers of the Araneta branch ​examined the drawn upon itself, committing in effect its total
fax copy and thought that the details matched resources, integrity, and honor behind its
issuance. The check is signed by the manager
(or some other authorized officer) for the bank. Philippine Bank of Communications (PBCom)
In this case, the signatories were Macarandan which, in turn, sent the check to PNB for
and Benitez. clearing. PNB cleared the check as good and
thereafter, PBCom credited Capitol's account
The genuine check No. 07410 remained in for the amount stated in the check. However,
Kho's possession the entire time and Land PNB returned the check to PBCom and debited
Bank admits that the check it cleared was a PBCom's account for the amount covered by
fake. When Land Bank's CCD forwarded the the check, the reason being that there was a
deposited check to its Araneta branch for "material alteration" of the check number.
inspection, its officers had every opportunity to PBCom, as collecting agent of Capitol, then
recognize the forgery of their signatures or the proceeded to debit the Capitol’s account for the
falsity of the check. Whether by error or same amount, and subsequently, sent the
neglect, the bank failed to do so, which led to check back to PNB. PNB, however, returned
the withdrawal and eventual loss of the the check to PBCom. On the other hand,
P25,000,000.00. Capitol could not in turn, debit Abante
Marketing's account since the latter had
This is the proximate cause of the loss. Land already withdrawn the amount of the check.
Bank breached its duty of diligence and Capitol sought clarification from PBCom and
assumed the risk of incurring a loss on account demanded the re-crediting of the amount.
of a forged or counterfeit check. Hence, it PBCom followed suit by requesting an
should suffer the resulting damage. explanation and re-crediting from PNB. Since
the demands of Capitol were not heeded, they
filed a civil suit against PBCom which in turn,
V. MATERIAL ALTERATION filed a third-party complaint against PNB for
reimbursement/indemnity with respect to the
1. PHILIPPINE NATIONAL BANK, petitioner, claims of Capitol. PNB, on its part, filed a
vs. fourth-party complaint against Abante
COURT OF APPEALS, CAPITOL CITY Marketing.
DEVELOPMENT BANK, PHILIPPINE BANK The Trial Court rendered its decision,
OF COMMUNICATIONS, and F. ABANTE ordering PBCom to re-credit or reimburse; PNB
MARKETING, respondents. to reimburse and indemnify PBCom for
G.R. No. 107508 April 25, 1996 whatever amount PBCom pays to Capitol;
KAPUNAN, ​J.: Abante Marketing to reimburse and indemnify
PNB for whatever amount PNB pays to
FACTS: PBCom. The court dismissed the
Ministry of Education Culture issued a counterclaims of PBCom and PNB. The
check payable to Abante Marketing and drawn appellate court modified the appealed
against Philippine National Bank (PNB) dated judgment by ordering PNB to honor the check.
August 7, 1981, amounting to P97,650.00. After the check shall have been honored by
Abante Marketing, deposited the questioned PNB, the court ordered PBCom to re-credit
check in its savings account with Capitol City Capitol's account with it the amount. PNB filed
Development Bank (CAPITOL). Capitol then the petition for review on certiorari averring that
deposited the same in its account with the under Section 125 of the NIL, any change that
alters the effect of the instrument is a material The intended payee was the same. The sum of
alteration. Hence, petitioner filed the instant money due to the payee remained the same.
petition. The check's serial number is not the sole
indication of its origin. As succinctly found by
ISSUE: the Court of Appeals, the name of the
Whether or not an alteration of the serial government agency which issued the subject
number of a check is a material alteration check was prominently printed therein. The
under the negotiable instruments law. check's issuer was therefore sufficiently
RULING: identified, rendering the referral to the serial
NO. ​An alteration is said to be material if number redundant and inconsequential.
it alters the effect of the instrument. ​It means
an unauthorized change in an instrument that
purports to modify in any respect the obligation 2. THE INTERNATIONAL CORPORATE
of a party or an unauthorized addition of words BANK, INC., petitioner,
or numbers or other change to an incomplete vs.
instrument relating to the obligation of a party. COURT OF APPEALS and PHILIPPINE
In other words, a material alteration is one NATIONAL BANK, respondents.
which changes the items which are required to G.R. No. 129910 September 5, 2006
be stated under Section 1 of the Negotiable CARPIO, ​J​.:
Instruments Law. FACTS:
Sec. 1. — Form of negotiable The Ministry of Education and Culture
instruments. An instrument to be negotiable issued 15 checks drawn against PNB which
must conform to the following requirements: International Corp. Bank accepted for deposit
(a) It must be in writing and signed by the on various dates. After 24 hours from
maker or drawer; submission of the checks to International Corp.
(b) Must contain an unconditional promise or Bank for clearing, it paid the value of the
order to pay a sum certain in money; checks and allowed the withdrawals of the
(c) Must be payable on demand, or at a fixed deposits. However, on October 14, 1981, PNB
or determinable future time; returned all the checks to International Corp.
(d) Must be payable to order or to bearer; and Bank without clearing them on the ground that
(e) Where the instrument is addressed to a they were materially altered which led to the
drawee, he must be named or otherwise institution of an action for collection of sums of
indicated therein with reasonable certainty. money against PNB to recover the value of the
checks. RTC dismissed the case on the ground
The case at bench is unique in the that respondent is expected to use reasonable
sense that what was altered is the serial business practices in accepting and paying the
number of the check in question, an item checks presented to it, thus, respondent
which, it can readily be observed, is not an cannot be faulted for the delay in clearing the
essential requisite for negotiability under checks considering the ingenuity in which the
Section 1 of the Negotiable Instruments Law. alterations were effected. According to the trial
The aforementioned alteration did not change court, petitioner, as collecting bank, could have
the relations between the parties. The name of inquired by telephone from respondent, as
the drawer and the drawee were not altered. drawee bank, about the status of the checks
before paying their value. Since the immediate The question on whether an alteration of the
cause of petitioner’s loss was the lack of serial number of a check a material alteration
caution of its personnel, the trial court held that under the Negotiable Instruments Law is
petitioner is not entitled to recover the value of already a settled matter. In Philippine National
the checks from respondent. Court of Appeals Bank v. Court of Appeals, this Court ruled that
reversed the RTC’s decision and applied the alteration on the serial number of a check
Section 4(c) of Central Bank Circular No. 580, is not a material alteration. A material alteration
series of 1977 and held that checks that have is one which changes the items which are
been materially altered shall be returned within required to be stated under Section 1 of the
24 hours after discovery of the alteration. Negotiable Instruments Law.
However, the Court of Appeals ruled that even The case at the bench is unique in the sense
if the drawee bank returns a check with that what was altered is the serial number of
material alterations after discovery of the the check in question, an item which, it can
alteration, the return would not relieve the readily be observed, is not an essential
drawee bank from any liability for its failure to requisite for negotiability under Section 1 of the
return the checks within the 24-hour clearing Negotiable Instruments Law. The
period. Petitioner moved for the aforementioned alteration did not change the
reconsideration of the Amended Decision to relations between the parties. The name of the
which the CA denied for lack of merit.Hence, drawer and the drawee were not altered. The
the recourse to SC. intended payee was the same. The sum of
money due to the payee remained the same.
ISSUE:
Whether or not an alteration of the serial 3. METROPOLITAN BANK AND TRUST
number of a check is a material alteration COMPANY, petitioners,
under the negotiable instruments law. vs.
RENATO D. CABILZO, respondent.
RULING: G.R. No. 154469 December 6, 2006
CHICO-NAZARIO, ​J.​
NO. ​The alterations in the checks were
made on their serial numbers, thus, it is not FACTS:
material. Renato Cabilzo issued a Metrobank
Section 125 of Act No. 2031, otherwise known Check payable to "CASH" and postdated on
as the Negotiable Instruments Law, provides: November 24, 1994 in the amount of
What constitutes a material alteration. ― any P1,000.00. The check was drawn against
alteration which changes: Cabilzo’s Account with Metropolitan Bank
(a) The date; (Metrobank) and was paid by Cabilzo to a
(b) The sum payable, either for principal or certain Mr. Marquez, as his sales commission.
interest; Subsequently, the check was presented to
(c) The time or place of payment; Westmont Bank for payment. Westmont Bank,
(d) The number or the relations of the parties; in turn, indorsed the check to Metrobank for
(e) The medium or currency in which payment appropriate clearing. After the entries thereon
is to be made; were examined, including the availability of
funds and the authenticity of the signature of
the drawer, Metrobank cleared the check for the Court of Appeals, there are material
encashment in accordance with the Philippine alterations on the check that are visible to the
Clearing House Corporation (PCHC) Rules. naked eye. The check was altered so that the
Cabilzo discovered that Metrobank Check No. amount was increased from P1,000.00 to
985988 which he issued on 12 November 1994 P91,000.00 and the date was changed from 24
in the amount of P1,000.00 was altered to November 1994 to 14 November 1994.
P91,000.00 and the date 24 November 1994 Apparently, since the entries altered were
was changed to 14 November 1994. Cabilzo among those enumerated under Section 1 and
demanded that Metrobank re-credit the amount 125, namely, the sum of money payable and
of P91,000.00 to his account. A third-party the date of the check, the instant controversy
complaint was then filed by Westmont bank therefore squarely falls within the purview of
because another case involving the same material alteration.
cause of action was pending before a different Indubitably, Cabilzo was not the one
court. The trial court granted the motion to who made nor authorized the alteration neither
dismiss the third-party complaint on the ground did he assent to the alteration by his express or
of litis pendentia. On September 4, 1998, the implied acts. There is no showing that he failed
RTC rendered a Decision in favor of Cabilzo to exercise such reasonable degree of
and thereby ordered Metrobank to pay the sum diligence required of a prudent man which
of P90,000.00, the amount of the check. The could have otherwise prevented the loss. As
Court of Appeals affirmed the RTC’s decision. correctly ruled by the appellate court, Cabilzo
Hence this petition. was never remiss in the preparation and
issuance of the check, and there were no
ISSUE: indicia of evidence that would prove otherwise.
Whether or not Metrobank is liable for Indeed, Cabilzo placed asterisks before and
the alterations on the subject check bearing the after the amount in words and figures in order
forged signature of the drawer to forewarn the subsequent holders that
nothing follows before and after the amount
RULING: indicated other than the one specified between
the asterisks.
YES. ​An alteration is said to be material The degree of diligence required of a
if it changes the effect of the instrument. It reasonable man in the exercise of his tasks
means that an unauthorized change in an and the performance of his duties has been
instrument that purports to modify in any faithfully complied with by Cabilzo. In fact, he
respect the obligation of a party or an was wary enough that he filled with asterisks
unauthorized addition of words or numbers or the spaces between and after the amounts, not
other change to an incomplete instrument only those stated in words, but also those in
relating to the obligation of a party. In other numerical figures, in order to prevent any
words, a material alteration is one which fraudulent insertion, but unfortunately, the
changes the items which are required to be check was still successfully altered, indorsed
stated under Section 1 of the Negotiable by the collecting bank, and cleared by the
Instruments Law. In the present case, it is drawee bank, and encashed by the perpetrator
obvious that Metrobank was remiss in that duty of the fraud, to the damage and prejudice of
and violated that relationship. As observed by Cabilzo.
 Metrobank cannot lightly impute that VI. ACCEPTANCE
Cabilzo was negligent and is therefore
prevented from asserting his rights under the G.R. No. 74886 December 8, 1992
doctrine of equitable estoppel when the facts PRUDENTIAL BANK, petitioner,
on record are bare of evidence to support such vs.
conclusion. The doctrine of equitable estoppel INTERMEDIATE APPELLATE COURT,
states that when one of the two innocent PHILIPPINE RAYON MILLS, INC. and
persons, each guiltless of any intentional or ANACLETO R. CHI, respondents.
moral wrong, must suffer a loss, it must be
borne by the one whose erroneous conduct, Facts:
either by omission or commission, was the
cause of injury. Metrobank’s reliance on this On August 8, 1962, defendant-appellant
dictum​, is misplaced. For one, Metrobank’s Philippine Rayon Mills, Inc. entered into a
representation that it is an innocent party is contract with Nissho Co., Ltd. of Japan for the
flimsy and evidently, misleading. At the same importation of textile machineries under a
time, Metrobank cannot asseverate that five-year deferred payment plan. To effect
Cabilzo was negligent and this negligence was payment for said machineries, the
the proximate cause of the loss in the absence defendant-appellant applied for a commercial
of even a scintilla proof to buttress such claim. letter of credit with the Prudential for
Negligence is not presumed but must be $128,548.78. Against this letter of credit, drafts
proven by the one who alleges it. Surprisingly, were drawn and issued by Nissho which were
however, Metrobank failed to detect the above all paid by the Prudential Bank through its
alterations which could not escape the correspondent in Japan, the Bank of Tokyo,
attention of even an ordinary person. This Ltd. As indicated on their faces, two of these
negligence was exacerbated by the fact that, drafts were accepted by the
as found by the trial court, the check in defendant-appellant through its president,
question was examined by the cash custodian Anacleto R. Chi, ​while the others were not.
whose functions do not include the
examinations of checks indorsed for payment Upon the arrival of the machineries, the
against drawer’s accounts. Obviously, the Prudential Bank indorsed the shipping
employee allowed by Metrobank to examine documents to the defendant-appellant which
the check was not verse and competent to accepted delivery of the same. To enable
handle such duty. delivery a trust receipt which was signed by
Undoubtedly, Cabilzo was an innocent party in Anacleto R. Chi in his capacity as President of
this instant controversy. He was just an defendant-appellant company was executed.
ordinary businessman who, in order to facilitate
his business transactions, entrusted his money At the back of the trust receipt is a printed form
with a bank, not knowing that the latter would to be accomplished by two sureties who were
yield a substantial amount of his deposit to to be jointly and severally liable to the
fraud, for which Cabilzo can never be faulted. Prudential Bank should the
defendant-appellant fail to pay the total amount
or any portion of the drafts issued by Nissho
and paid for by Prudential Bank.
Sometime in 1967, the defendant-appellant import loom and textile machinery from Nissho
ceased business operation. On December 29, Company, Ltd. of Japan under a five-year
1969, defendant-appellant's factory was leased deferred payment plan.
by Yupangco Cotton Mills for an annual rental
of P200,000.00. On January 5, 1974, all the A letter of credit is defined as an engagement
textile machineries in the defendant-appellant's by a bank or other person made at the request
factory were sold to AIC Development of a customer that the issuer will honor drafts
Corporation for P300,000.00. or other demands for payment upon
compliance with the conditions specified in the
The obligation of the defendant-appellant credit. ​Through a letter of credit, the bank
arising from the letter of credit and the trust merely substitutes its own promise to pay for
receipt remained unpaid and unliquidated. one of its customers who in return promises to
Repeated formal demands for the payment of pay the bank the amount of funds mentioned in
the said trust receipt yielded no result Hence, the letter of credit plus credit or commitment
the present action for the collection of the fees mutually agreed upon​.
principal amount of P956,384.95 was filed on
October 3, 1974 against the In the instant case then, the drawee was
defendant-appellant and Anacleto R. Chi. ​In necessarily the herein petitioner. It was to the
their respective answers, the defendants latter that the drafts were presented for
interposed identical special defenses, viz., the payment. In fact, there was no need for
complaint states no cause of action; if there is, acceptance as the issued drafts are sight
the same has prescribed; and the plaintiff is drafts. Presentment for acceptance is
guilty of laches​. necessary only in the cases expressly provided
for in Section 143 of the Negotiable
Issue/s: Instruments Law (NIL).
1. Whether presentment for acceptance of
the drafts was indispensable to make Sec. 143. When presentment for
Philippine Rayon liable thereon; - ​MAIN ISSUE acceptance must be made. — Presentment for
acceptance must be made:
2. Whether Philippine Rayon is liable on the (a) Where the bill is payable after sight, or in
basis of the trust receipt; any other case, where presentment for
acceptance is necessary in order to fix the
3. Whether private respondent Chi is jointly maturity of the instrument; or
and severally liable with Philippine Rayon for (b) Where the bill expressly stipulates that it
the obligation sought to be enforced and if not, shall be presented for acceptance; or
whether he may be considered a guarantor. (c) Where the bill is drawn payable elsewhere
than at the residence or place of business of
Ruling: the drawee.
#1. No. The transaction in the case at bar In no other case is presentment for acceptance
stemmed from Philippine Rayon's application necessary in order to render any party to the
for a commercial letter of credit with the bill liable.
petitioner in the amount of $128,548.78 to
cover the former's contract to purchase and
Obviously then, sight drafts do not require the principle upon which commercial letters of
presentment for acceptance. credit are founded because in such a case,
both the beneficiary and the issuer, Nissho
The acceptance of a bill is the signification by Company Ltd. and the petitioner, respectively,
the drawee of his assent to the order of the would be placed at the mercy of Philippine
drawer; 14 this may be done in writing by the Rayon even if the latter had already received
drawee in the bill itself, or in a separate the imported machinery and the petitioner had
instrument. fully paid for it.

Corollarily, they are, pursuant to Section 7 of #2. Yes. Under P.D. No. 115, otherwise known
the NIL, payable on demand. Section 7 an the Trust Receipts Law, a trust receipt
provides: transaction is defined as "any transaction by
Sec. 7. When payable on demand. — An and between a person referred to in this
instrument is payable on demand — Decree as the entruster, and another person
(a) ​When so it is expressed to be payable on referred to in this Decree as the entrustee,
demand, or at sight, or on presentation; or whereby the entruster, who owns or holds
(b) ​In which no time for payment in absolute title or security interests' over certain
expressed. specified goods, documents or instruments,
releases the same to the possession of the
Where an instrument is issued, accepted, or entrustee upon the latter's execution and
indorsed when overdue, it is, as regards the delivery to the entruster of a signed document
person so issuing, accepting, or indorsing it, called the "trust receipt" wherein the entrustee
payable on demand. binds himself to hold the designated goods,
documents or instruments in trust for the
Acceptance, however, was not even necessary entruster and to sell or otherwise dispose of
in the first place because the drafts which were the goods, documents or instruments with the
eventually issued were sight drafts And even if obligation to turn over to the entruster the
these were not sight drafts, thereby proceeds thereof to the extent of the amount
necessitating acceptance, it would be the owing to the entruster or as appears in the trust
petitioner — and not Philippine Rayon — which receipt or the goods, instruments themselves if
had to accept the same for the latter was not they are unsold or not otherwise disposed of, in
the drawee. Presentment for acceptance is accordance with the terms and conditions
defined an the production of a bill of exchange specified in the trusts receipt, or for other
to a drawee for acceptance. The trial court and purposes substantially equivalent to any one of
the public respondent, therefore, erred in ruling the following: . . ."
that presentment for acceptance was an
indispensable requisite for Philippine Rayon's It is alleged in the complaint that private
liability on the drafts to attach. Contrary to both respondents "not only have presumably put
courts' pronouncements, Philippine Rayon said machinery to good use and have profited
immediately became liable thereon upon by its operation and/or disposition but very
petitioner's payment thereof. Such is the recent information that reached plaintiff bank
essence of the letter of credit issued by the that defendants already sold the machinery
petitioner. A different conclusion would violate covered by the trust receipt to Yupangco
Cotton Mills," and that "as trustees of the #3. No. We also conclude that private
property covered by the trust receipt, . . . and respondent Chi's signature in the dorsal portion
therefore acting in fiduciary capacity, of the trust receipt did not bind him solidarily
defendants have willfully violated their duty to with Philippine Rayon.
account for the whereabouts of the machinery Our own reading of the questioned solidary
covered by the trust receipt or for the proceeds guaranty clause yields no other conclusion
of any lease, sale or other disposition of the than that the obligation of Chi is only that of ​a
same that they may have made, guarantor.
notwithstanding demands therefor; defendants
have fraudulently misapplied or converted to Furthermore, any doubt as to the import, or
their own use any money realized from the true intent of the solidary guaranty clause
lease, sale, and other disposition of said should be resolved against the petitioner. The
machinery." While there is no specific prayer trust receipt, together with the questioned
for the delivery to the petitioner by Philippine solidary guaranty clause, is on a form drafted
Rayon of the proceeds of the sale of the and prepared solely by the petitioner; Chi's
machinery covered by the trust receipt, such participation therein is limited to the affixing of
relief is covered by the general prayer for "such his signature thereon. It is, therefore, a contract
further and other relief as may be just and of adhesion; as such, it must be strictly
equitable on the premises." And although it is construed against the party responsible for its
true that the petitioner commenced a criminal preparation.
action for the violation of the Trust Receipts
Law, no legal obstacle prevented it from G.R. No. L-26001 October 29, 1968
enforcing the civil liability arising out of the PHILIPPINE NATIONAL BANK, petitioner,
trust, receipt in a separate civil action. Under vs.
Section 13 of the Trust Receipts Law, the THE COURT OF APPEALS and PHILIPPINE
failure of an entrustee to turn over the COMMERCIAL AND INDUSTRIAL BANK,
proceeds of the sale of goods, documents or respondents.
instruments covered by a trust receipt to the
extent of the amount owing to the entruster or Facts:
as appear in the trust receipt or to return said
goods, documents or instruments if they were On January 15, 1962, Augusto Lim deposited
not sold or disposed of in accordance with the in his current account with the PCIB branch at
terms of the trust receipt shall constitute the Padre Faura, Manila, GSIS Check in the sum
crime of estafa, punishable under the of P57,415.00, drawn against the PNB; that,
provisions of Article 315, paragraph 1(b) of the following an established banking practice in the
Revised Penal Code. Under Article 33 of the Philippines, the check was, on the same date,
Civil Code, a civil action for damages, entirely forwarded, for clearing, through the Central
separate and distinct from the criminal action, Bank, to the PNB, which did not return said
may be brought by the injured party in cases of check the next day, or at any other time, but
defamation, fraud and physical injuries. Estafa retained it and paid its amount to the PCIB, as
falls ​under fraud​. well as debited it against the account of the
GSIS in the PNB; that, subsequently, or on
January 31, 1962, upon demand from the
GSIS, said sum of P57,415.00 was re-credited words of the Law, "the acceptance of a bill is
to the latter's account, for the reason that the the signification by the drawee of his assent to
signatures of its officers on the check were the order of the drawer," which, in the case of
forged; and that, thereupon, or on February 2, checks, is the payment, on demand, of a given
1962, the PNB demanded from the PCIB the sum of money. Upon the other hand, actual
refund of said sum, which the PCIB refused to payment of the amount of a check implies not
do. Hence, the present action against the only an assent to said order of the drawer and
PCIB, which was dismissed by the Court of a recognition of the drawer's obligation to pay
First Instance of Manila, whose decision was, the aforementioned sum, but, also, a
in turn, affirmed by the Court of Appeals. compliance with such obligation.

Issue: Finally, PCIB had been guilty of negligence in

not discovering that the check was forged.
Whether or not PCIB as indorser is liable Assuming that there had been such negligence
despite the fact that the check is forged when on the part of the PCIB, it is undeniable,
PNB is also negligent. however, that the PNB has, also, been
negligent, with the particularity that the PNB
Ruling: had been guilty of a ​greater degree of
negligence, because ​it had a previous and
No. It should be noted that the PCIB thereby formal notice from the GSIS that the check had
guaranteed "all prior indorsements," ​not the been lost,​ with the request that payment
authenticity of the signatures of the officers of thereof be stopped. Just as important, if not
the GSIS who signed on its behalf​, because more important and decisive, is the fact that
the GSIS is not an indorser of the check, but its the PNB's negligence was the main or
drawer. Said warranty is irrelevant, therefore, proximate cause for the corresponding loss.
to the PNB's alleged right to recover from the
PCIB. It could have been availed of by a It is a well-settled maxim of law and equity that
subsequent indorsee or a holder in due course when one of two (2) innocent persons must
subsequent to the PCIB, but, the PNB is suffer by the wrongful act of a third person, the
neither. Indeed, upon payment by the PNB, as loss must be borne by the one whose
drawee, the check ceased to be a negotiable negligence was the proximate cause of the
instrument, and became a mere voucher or loss or who put it into the power of the third
proof of payment. person to perpetrate the wrong.

Further, we must bear in mind that, in general, Then, again, it has, likewise, been held that,
"acceptance", in the sense in which this term is where the collecting (PCIB) and the drawee
used in the Negotiable Instruments Law is not (PNB) banks are equally at fault, the court will
required for checks, for the same are payable leave the parties where it finds them.
on demand. Indeed, "acceptance" and
"payment" are, within the purview of said Law, Lastly, Section 62 of Act No. 2031 provides:
essentially different things, for the former is "a The acceptor by accepting the instrument
promise to perform an act," whereas the latter engages that he will pay it according to the
is the "actual performance" thereof. In the tenor of his acceptance; and admits:
(a) The existence of the drawer, the properties were sold for P50,000.00 to the
genuineness of his signature, and his capacity highest bidder with a deficiency of P13,130.00.
and authority to draw the instrument; and Subsequently, petitioner filed an ex-parte
(b) The existence of the payee and his then motion for issuance of certificate of satisfaction
capacity to indorse. of judgment which was denied by the
respondent Judge.
G.R. No. L-41764 December 19, 1980
NEW PACIFIC TIMBER & SUPPLY Issue:
COMPANY, INC., petitioner,
vs. Whether or not the private respondent can
HON. ALBERTO V. SENERIS, RICARDO A. validly refuse acceptance of the payment of the
TONG and ​EX-OFFICIO SHERIFF HAKIM S. judgment obligation made by the petitioner
ABDULWAHID, respondents. consisting of P50,000.00 in Cashier's Check
and P13,130.00 in cash which it deposited with
Facts: the Ex-Officio Sheriff before the date of the
scheduled auction sale.
Herein petitioner is the defendant in a
complaint for collection of a sum of money filed Ruling:
by the private respondent. A compromise
judgment was rendered by the respondent No. In upholding private respondent's claim
Judge in accordance with an amicable that he has the right to refuse payment by
settlement entered into by the parties the means of a check, the respondent Judge cited
defendant will pay to the plaintiff the amount of the following:
P54,500.00 at 6% interest per annum; and that
defendant will pay to the plaintiff the amount of Section 63 of the Central Bank Act – ‘Legal
P6,000.00 as attorney's fees for which Character. — Checks representing deposit
P5,000.00 had been acknowledged received money do not have legal tender power and
by the plaintiff leaving a balance of P1,000.00. their acceptance in payment of debts, both
public and private, is at the option of the
Upon failure of the petitioner to pay the creditor, …’
judgment obligation, a writ of execution worth
P63,130.00 was issued levied on the personal Article 1249 of the New Civil Code — ‘…….
properties of the petitioner. Before the auction The delivery of promissory notes payable to
sale petitioner deposited with the Clerk of order, or bills of exchange or other mercantile
Court the sum of P63,130.00 for the payment documents shall produce the effect of payment
of the judgment obligation, consisting of the only when they have been cashed, or when
following: (1) P50.000.00 in Cashier's Check; through the fault of the creditor they have been
and (2) P13,130.00 in cash. impaired.

Private respondent refused to accept the check Art. 1248. Unless there is an express
as well as the cash deposit and requested the stipulation to that effect, the creditor cannot be
scheduled auction sale to proceed if the compelled partially to receive the presentations
petitioner cannot produce the cash. Hence, the in which the obligation consists. Neither may
the debtor be required to make partial certiorari is the proper remedy in this case, and
payment…… that since the period to appeal from the
decision of the respondent Judge has already
It is to be emphasized that the check deposited expired, then, the present petition has been
by the petitioner is not an ordinary check but a filed out of time. The contention is untenable.
Cashier's Check of the Equitable Banking The subject of the petition at bar as having
Corporation, a bank of good standing and been issued in grave abuse of discretion of the
reputation​. It is a well-known and accepted respondent Judge which was merely issued in
practice in the business sector that a ​Cashier's execution of the said decision. Thus, even
Check is deemed as cash​. Moreover, since the granting that appeal is open to the petitioner,
said check had been certified by the drawee the same is not an adequate and speedy
bank, it implies that the check is drawn upon remedy for the respondent Judge had already
sufficient funds in the hands of the drawee, that issued a writ of execution.
they have been set apart for its satisfaction,
and that they shall be so applied whenever the G.R. No. 219037, October 19, 2016
check is presented for payment. The object of RCBC SAVINGS BANK, ​Petitioner​, ​v. NOEL
certifying a check, as regards both parties, is to M. ODRADA, ​Respondent​.
enable the holder to use it as money." When
the holder procures the check to be certified, Facts:
"the check operates as an assignment of a part
of the funds to the creditors." ​Hence, the In April 2002, respondent Noel M. Odrada
exception to the rule enunciated under Section (Odrada) sold a second​hand Mitsubishi
63 of the Central Bank ​Act to the effect "that a Montero (Montero) to Teodoro L. Lim (Lim) for
check which has been cleared and credited to P1,510,000 Of the total consideration,
the account of the creditor shall be equivalent P610,000 was initially paid by Lim and the
to a delivery to the creditor in cash in an balance of P900,000 was financed by
amount equal to the amount credited to his petitioner RCBC Savings Bank (RCBC)
account" shall apply in this case. through a car loan obtained by Lim.

We see no valid reason for the private After the issuance of the manager's checks
respondent to have refused acceptance of the and their turnover to Odrada but prior to the
payment of the obligation in his favor. checks' presentation, Lim notified Odrada in a
Furthermore, it appears that the Cashier's letter that there was an issue regarding the
Check was even withdrawn by the petitioner roadworthiness of the Montero and Odrada to
and replaced with cash in the corresponding addressed the issue and meet him at the
amount of P50,000.00 However, the private specified place indicated in the letter.
respondent still refused to receive the same.
Obviously, the private respondent is more Odrada did not go to the slated meeting and
interested in the levied properties than in the instead deposited the manager's checks with
mere satisfaction of the judgment obligation. International Exchange Bank (Ibank) and
redeposited them but the checks were
It is also contended by the private respondent dishonored both times apparently upon Lim's
that Appeal and not a special civil action for instruction to RCBC. Consequently, Odrada
filed a collection suit against Lim and RCBC in As a general rule, the drawee bank is not liable
the Regional Trial Court. until it accepts. Acceptance, therefore, creates
a privity of contract between the holder and the
Lim alleged that the cancellation of the loan drawee so much so that the latter, once it
was at his instance, upon discovery of the accepts, becomes the party primarily liable on
misrepresentations by Odrada about the the instrument. Accordingly, acceptance is the
Montero's roadworthiness. Lim claimed that the act which triggers the operation of the liabilities
cancellation was not done ex parte but through of the drawee (acceptor) under Section 62 of
a letter. He further alleged that the letter was the Negotiable Instruments Law. Thus, once he
delivered to Odrada prior to the presentation of accepts, the drawee admits the following: (a)
the manager's checks to RCBC. existence of the drawer; (b) genuineness of the
drawer's signature; (c) capacity and authority of
RCBC contended that the manager's checks the drawer to draw the instrument; and (d)
were dishonored because Lim had cancelled existence of the payee and his then capacity to
the loan. RCBC claimed that the cancellation of endorse.
the loan was prior to the presentation of the
manager's checks. Moreover, RCBC alleged As can be gleaned in a long line of cases
that despite notice of the defective condition of decided by this Court, a manager's check is
the Montero, which constituted a failure of accepted by the bank upon its issuance.
consideration, Odrada still proceeded with Notably, the mere issuance of a manager's
presenting the manager's checks. check creates a privity of contract between the
holder and the drawee bank, the latter primarily
Issue: binding itself to pay according to the tenor of its
acceptance.
Whether or not drawee bank has the option to
deny payment of a manager’s check by The drawee bank, as a result, has the
interposing Personal Defense of Lim that a unconditional obligation to pay a manager's
defective Montero was sold to Lim. check to a ​holder in due course irrespective of
any available personal defenses. However,
Ruling: while this Court has consistently held that a
manager's check is automatically accepted, ​a
Yes. Under Article 1547 of the Civil Code holder other than a holder in due course is still
states: "In a contract of sale, unless a contrary subject to defenses.
intention appears, there is an implied warranty
that the thing shall be free from any hidden To be a holder in due course, the law requires
faults or defects." that a party must have acquired the instrument
Article 1566 of the Civil Code provides that "the in good faith and for value. Odrada is in bad
vendor is responsible to the vendee for any faith for he intended to deposit the checks w/o
hidden faults or defects in the thing sold, even addressing the issue made to him.
though he was not aware thereof." As a Section 58 of the Negotiable Instruments Law
consequence, the law fixes the liability of the provides: "In the hands of any holder other
vendor for hidden defects whether known or than a holder in due course, a negotiable
unknown to him at the time of the sale. instrument is subject to the same defenses as
if it were non-negotiable, x x x." Since Odrada against the former accountant, Bankcom (
was not a holder in due course, the instrument collecting bank) and Metrobank (drawee bank)
becomes subject to personal defenses under
the Negotiable Instruments Law. Hence, RCBC ISSUE: Which bank should be held liable?
may legally act on a countermand by Lim, the
purchaser of the manager's checks. HELD: The banks should be held to be
sequentially liable for the entire amount of the
checks. The instant case involves the
VII. OTHER POINTS OF CONSIDERATION unauthorized payment of valid checks.
Thendrawee bank becomes liable to the
1. METROPOLITAN BANK VS drawer for the amount of checks but the
JUNNEL’S MARKETING drawee bank in turn can seek reimbursement
CORPORATION from the collecting bank. Hence, metrobank
being the drawee baki is liable to return to JMC
FACTS: the subject amount of the checks.
Junnel’s Marketing Corporation which has a
current account with Metrobank draws checks In turn, Bankcom is liable to metrobank.
to pay differenr suppliers. The suppliers are Bankcom had assumed the warranties of an
Jardine Wines and Spirits and premiere wines. indorser when it forwarded the subject checks
had been deposited with it to an account that
11 checks were issued and were found to be has good title to the same. This guaranty,
anomalous and that the subject checks had however is a complete falsity because the
already been charged against JMC’s current subject checks were in truth deposited to an
account but were not covered by any official account that neither belongs to the payees of
receipt from Jardine or Premiere. the subject check nor to their indorsers.

They were all crossed checks amounting to Hence, because the subject checks were paid
almost 1.481 M and they were allegedly under Bankcom’s false guaranty, the latter, as
deposited with Bankcom Dau Branch. Until collecting bank is liablento return to metrobank
inquiring with Jardine and Premiere however, ro return the said checks.
JMC was able to contirm that neither of the
suppliers owns Bankcom account number. In sequence, Bankcom then can actually
revover from the persons who caused the
The former accountant ofJMC executed a checks to be deposited and received the
handwritten note and confessed that she, unauthorized payments.
Bituin and an uknown bank manager colluded
to cause the deosit and encashing of the stolen 2. BDO Unibank Inc Vs Engr Selwyn Lao et al
checks and shared in the proceeds thereof.
FACTS:
JMC surmised that the subject checks are
among the stolen by the secretary hence, JMC Engineer Selwyn Lao filed before the RTC a
(drawer) filed a complain for sum of money complaint for collection of money against
Equitable banking corp, BDO, Everlink and No. 275345 for ₱l,000,000 and the other one is
George Wu. China Banking Corporation Check No. BDO
8159110 for ₱500,000. There were also
Lao entered into a transaction with everlink, vouchers of Screenex that were signed by the
through its authorized representative Wu, accused evidencing that he received the 2
which everlink would supply him with HCG checks in acceptance of the loan granted to
sanitary wares and that for the down payment him. As security for the payment of the loan,
he issued two equitable crossed checks Evangelista gave two (2) open-dated checks:
payable to ever link and when the checks were UCPB Check Nos. 616656 and 616657, both
dishonored, he contacted everlink for the pay to the order of Screenex, Inc. These
delivery of the sanitary wares but there was a checks weee issued by Evangelista in the year
failure for everink to comply or 1991. From the time the checks were
issued by evangelista they were held in safe
ISSUES : whether or not a collecting bank keeping together with the other documents and
assumes responsibility for a crossed check as papers of the company by Philip Gotuaco, Sr.,
a general indorsee in accordance with Section father-in-law of respondent Alexander Yu, until
66 of the NIL? the former's death on 19 November 2004.

RULING: Before the checks were deposited, there was a

personal demand from the family for
Then general rule is the collecting bank suffers [Evangelista] to settle the loan and likewise a
the loss because it has the duty to ascertain demand letter sent by the family lawyer. On 25
the genuiness and due execution of ALL prior August 2005, petitioner was charged with
indorsements. The exception is if the violation of Batas Pambansa (BP) Blg. 22 in
warranties made by collecting bank are false, Criminal Case Nos. 343615-16 filed with the
then the drawee bank may recover from it up to Metropolitan Trial Court (MeTC) of Makati City
the amount of the check. because at the time of the issue thereof, said
accused did not have sufficient funds in or
In the given case, Lao (drawer) has a right of credit with the drawee bank for the payment in
action against BDO for its failure to comply with full of the face amount of such check upon its
its duty as DRAWEE bank. Hence, BDO has a presentment which check when presented for
right of action against Union bank (collecting payment within ninety (90) days from the date
bank) because of falsity of warranties as the thereof, was subsequently dishonored by the
collecting bank. However, BDO cannot be held drawee bank for the reason "ACCOUNT
liable because it was not made a party to the CLOSED" and despite receipt of notice of such
appeal. Hence, Lao should reciver from union dishonor, the said accused failed to pay said
bank. payee the face amount of said checks or to
make arrangement for full payment thereof
3. BENJAMIN EVANGELISTA vs SCREENEX within five (5) banking days after receiving
notice.
FACTS: ​Evangelista obtained a loan from
Screenex Inc, which issues two checks to
Evangelista. The first check was UCPB Check
Issue: whether or not petitioner is liable for the In this case, the civil action deemed instituted
1.5 million in the two checks even if he was with the criminal action is treated as an
acquitted of the criminal charges? "independent civil liability based on contract."
By definition, a check is a bill of exchange
(Short version of the ruling) Held: No. The drawn on a bank 'payable on demand. It is a
petitioner is not liable. negotiable instrument - written and signed by a
drawer containing an unconditional order to
In the given case, the instrument in question is pay on demand a sum certain in money. It is
a bill of exchange, which is a check and is an undertaking that the drawer will pay the
payable on demand. However, Section 119 of amount indicated thereon. Section 119 of the
the NIL states how an instrument should be NIL, however, states that a negotiable
discharged but Section 119 should be read in instrument like a check may be discharged by
consonance with the rules on prescription any other act which will discharge a simple
under the Civil Code and under the rules, the contract for the payment of money, to wit:
precriptive period is only 10 years which should
be reckoned from the time of issuance Sec. 119. Instrument; how discharged. - A
because what were issued were open dated negotiable instrument is discharged:
checks and Section 17 of the Negotiable (a) By payment in due course by or on behalf
Instruments Law instructs that an undated of the principal debtor;
check is presumed dated as of the time of its (b) By payment in due course by the party
issuance. accommodated, where the instrument is made
or accepted for his accommodation;
The action is barred by prescription because (c) By the intentional cancellation thereof by
even if Yu had the authority to put a date on the holder;
the open dated checks. He did so only after 10 (d) By any other act which will discharge a
years, and such changes were not made within simple contract for the payment of money;
a reasonable time. Further, Section 186 of the (e) When the principal debtor becomes the
NIL provides that a check must be paid within a holder of the instrument at or after maturity in
reasonable time the delivery of the checks, his own right.
despite the subsequent failure to encash them
within a period of 10 years or more, had the A check therefore is subject to prescription of
effect of payment because there was actions upon a written contract. Article 1144 of
negligence on the part of the creditor to effect the Civil Code provides:
payment of the debtor, and it would prejudice
the debtor already. Article 1144. The following actions must be
brought within ten years from the time the right
Longer version with legal basis of the of action accrues:
Ruling: 1) Upon a written contract;
2) Upon an obligation created by law;
A check is discharged by any other act which 3) Upon a judgment. (Emphasis supplied)
will discharge a simple contract for the Barring any extrajudicial or judicial demand
payment of money. that may toll the 10-year prescription period
and any evidence which may indicate any
other time when the obligation to pay is due, likewise an established tenet that a negotiable
the cause of action based on a check is instrument is only a substitute for money and
reckoned from the date indicated on the check. not money, and the delivery of such an
instrument does not, by itself, operate as
If the check is undated, however, as in the payment. Thus, in BPI v. Spouses Royeca, we
present petition, the cause of action is ruled that despite the lapse of three years from
reckoned from the date of the issuance of the the time the checks were issued, the obligation
check. This is so because regardless of the still subsisted and was merely suspended until
omission of the date indicated on the check, the payment by commercial document could
Section 17 of the Negotiable Instruments Law actually be realized.
instructs that an undated check is presumed
dated as of the time of its issuance. However, payment is deemed effected and the
obligation for which the check was given as
While the space for the date on a check may conditional payment is treated discharged, if a
also be filled, it must, however, be filled up period of 10 years or more has elapsed from
strictly in accordance with the authority given the date indicated on the check until the date of
and within a reasonable time. Assuming that encashment or presentment for payment. The
Yu had authority to insert the dates in the failure to encash the checks within a
checks, the fact that he did so after a lapse of reasonable time after issue, or more than 10
more than 10 years from their issuance years in this instance, not only results in the
certainly cannot qualify as changes made checks becoming stale but also in the
within a reasonable time. obligation to pay being deemed fulfilled by
operation of law.
Given the foregoing, the cause of action on the Art. 1249 of the Civil Code specifically provides
checks has become stale, hence, time-barred. that checks should be presented for payment
No written extrajudicial or judicial demand was within a reasonable period after their issuance,
shown to have been made within 10 years to wit:
which could have tolled the period. Prescription
has indeed set in. The failure to encash the Art. 1249. The payment of debts in money shall
checks within a reasonable time after issue, or be made in the currency stipulated, and if it is
more than 10 years in this instance, not only not possible to deliver such currency, then in
results in the checks becoming stale but also in the currency which is legal tender in the
the obligation to pay being deemed fulfilled by Philippines.
operation of law. The delivery of promissory notes payable to
order, or bills of exchange or other mercantile
documents shall produce the effect of payment
The delivery of the check produces the effect only when they have been cashed, or when
of payment when through the fault of the through the fault of the creditor they have been
creditor they have been impaired impaired.

It is a settled rule that the creditor's possession In the meantime, the action derived from the
of the evidence of debt is proof that the debt original obligation shall be held in the
has not been discharged by payment. It is abeyance.
 Code under which payment by way of check or
This rule is similarly stated in the Negotiable other negotiable instrument is conditioned on
Instruments Law as follows: its being cashed, except when through the fault
of the creditor, the instrument is impaired. The
Sec. 186. Within what time a check must be payee of a check would be a creditor under this
presented. - A check must be presented for provision and if its no-payment is caused by his
payment within a reasonable time after its negligence, payment will be deemed effected
issue or the drawer will be discharged from and the obligation for which the check was
liability thereon to the extent of the loss caused given as conditional payment will be
by the delay. discharged.

These provisions were the very same ones we Similarly in this case, we find that the delivery
cited when we discharged a check by reason of the checks, despite the subsequent failure to
of the creditor's unreasonable or unexplained encash them within a period of 10 years or
delay in encashing it. In Papa v. Valencia, the more, had the effect of payment. Petitioner is
respondents supposedly paid the petitioner the considered discharged from his obligation to
purchase price of the lots in cash and in check. pay and can no longer be pronounced civilly
The latter disputed this claim and argued that liable for the amounts indicated thereon.
he had never encashed the checks, and that
he could no longer recall the transaction that
happened 10 years earlier. This Court ruled:
Granting that petitioner had never encashed
the check, his failure to do so for more than ten G.R no. 221058, July 5, 2017
(10) years undoubtedly resulted in the WESTMONT INVESTMENT CORP VS
impairment of the check through his ALEJANDRO NG WEE
unreasonable and unexplained delay.
Facts:
While it is true that the delivery of a check
produces the effect of payment only when it is Respondent Alejandro Ng Wee was a valued
cashed, pursuant to Art. 1249 of the Civil client of Westmont Bank, he was enticed by
Code, the rule is otherwise if the debtor is the branch manager to make money
prejudiced by the creditor's unreasonable delay placements or investments with petitioner
in presentment. The acceptance of a check WINCORP, a domestic corporation engaged in
implies an undertaking of due diligence in the business and licensed to operate as an
presenting it for payment, and if he from whom investment house. Lured by representations
it is received sustains loss by want of such that such transactions are safe, stable and
diligence, it will be held to operate as actual involve little to no risk, respondent made
payment of the debt or obligation for which it placements totalling P210,595,991.62 with
was given. It has, likewise, been held that if no wincorp.
presentment is made at all, the drawer cannot
be held liable irrespective of loss or injury The investments of respondent were matched
unless presentment is otherwise excused. This with POWERMERGE CORPORATION
is in harmony with Article 1249 of the Civil (borrower) and its credit facility originated from
the loan of Hottick Holdings, Inc. Powermerge the PN engages that he will pay it accordingly
Corp. issued promissory notes in favor of to its tenor. It is very clear that powermerge
petitioner Wincorp for each drawn from its obligated itself to pay wincorp and those who
credit line amounting to P 2,183,755,253 invested through its values stated in the PN.
billion. Powermerge Corp. then defaulted in its
obligation. On the record, it reveals that powermerge
actually received proceeds from the credit line
Respondent Alejandro Ng Wee allege that agreement. Even if powermerge corp, through
there was gross negligence on the part of hottick holdings, is a mere accommodation
petitioner Wincorp for approving Powermerge parry under the PN’s, liability would still attach
Corporation’s credit line application to them in favor of the instrument for value as a
surety.
Petitioner Wincorp alleged that under the
corporation code, they shall not be liable GR NO. 199455, June 27, 2018
because the approval of the said credit line FEDERAL EXPRESS CORPORATION VS
was done in good faith and relied on the vetting LUWALHATI ANTONIO AND ELIZA
done by the departments of the company. ANTONIO

Issue: Facts:

Whether or not respondent was able to Respondent were in the Philippines and
establish his cause of action against Wincorp decided to send 2 checks to Veronica Sison,
and Powermerge Corp. who was based in New York through FedEx.
Such checks were sent for the payment of real
Ruling: estate taxes.

Yes, Wincorp is liable for fraud and However, it was not received by Sison,
Powermerge is liable based on the contract. resulting to non-payment of obligation of the
respondents.
Respondent was deceived into believing that
powermerge corporation is financially capable Sison then contacted FedEx to inquire about
of paying the returns of his investments. the non-delivery. She was informed that the
Petitioner wincorp accredited powermerge package was delivered to her neighbor but
corporation as a borrower and was given a there was no signed receipt.
credit line in the maximum amount of P 2.5
Billion regardless of signs which cause doubts Respondent, demanded payment of damages
on its ability to perform its obligation. Wincorp due to non-delivery of the package.
also executed two side agreements that the
investors could not have been aware of. FedEx claimed that respondent has no cause
of action against it because the respondent
Powermerge corporation is liable to respondent shipped a prohibited items under AIRWAY
under its Promissory Note. Under sec. 60 of BILL prohibiting the transportation of money.
the Negotiable Instruments Law, the maker of
Issue: Pursuant to the electronic messages of its
investor-clients, HSBC purchased and paid
Whether or not petitioner FedEx corporation Documentary Stamp Tax from September to
may be held liable for damages on its failure to December 1997 and also from January to
deliver checks shipped by respondents December 1998.

Ruling: The BIR issued a Ruling to the effect that

instructions or advises from abroad on the
Yes, because what is prohibited under the management of funds located in the
terms of the air waybill is the transportation of Philippines which do not involve transfer of
money. Money, is the generally acceptable in funds from abroad are not subject to DST.
exchange for goods and under RA 7653, “New HSBC filed an administrative claim for the
central bank act” defines legal tender as “all refund of the amount allegedly representing
notes and coins issued by the Bangko Sentral erroneously paid DST to the BIR. The claims
ng Pilipinas shall be legal tender in the were not acted upon, promted HSBC to
Philippines. subsequently brought the matter to the CTA.
CTA favaroed HSBC and order CIR to refund
It is settled in jurisprudence that checks, being or issue a tax credit in favor of HSBC and ruled
only negotiable instruments are only substitute that HSBC is entitled to a tax refund or tax
for money and are not legal tender. There is no credit because Sections 180 and 181 of the
question that checks, whether payable to order 1997 Tax Code do not apply to electronic
or to bearer, so long as they comply with the message instructions transmitted by HSBC’s
essential requirements under sec. 1 of the non-resident investor-clients. CA reversed the
Negotiable Instruments Law are, are decision of CIR and ruled that the electronic
negotiable instruments message instructions are subject to DST. The
CIR maintains that Tax Code imposes DST on
GR NO. 166018, June 4, 2014 the acceptance or payment of a bill of
HONGKONG AND SHANGHAI BANKING exchange or order for the payment of money
CORP LIMITED PHIL. BRANCHES VS
COMMISSIONER OF INTERNAL REVENUE Issue:

Facts: Whether or not The electronic message

instructions are considered as negotiable
HSBC performs as a custodial bank which instrument subject to DST.
serves as the payment agent with respect to
dividends and other income derived from its Ruling:
investor-clients’ passive investments. In
purchasing shares of stock and other No. A bill of exchange is an unconditional order
investment in securities, the investor-clients in writing addressed by one person to another,
would send electronic messages from abroad signed by the person giving it, requiring the
instructing HSBC to debit their local or foreign person to whom it is addressed to pay on
currency accounts and to pay the purchase demand or at a fixed or determinable future
price therefor upon receipt of the securities. time a sum certain in money to order or to
bearer. 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 payor’s local or foreign currency account in
the Philippines” and “entered as such in the
books of account of the local bank,” HSBC.