NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANI’S BOOK AND ATTY. MERCADO’S LECTURES

Page 184 of 190

BY: MA. ANGELA LEONOR C. AGUINALDO

ATENEO LAW 2D BATCH 2010

OCTOBER 1OCTOBER 1--6, 20076, 2007

Sec. 187. Certification of check; effect of. - Where a check is

certified by the bank on which it is drawn, the certification is equivalent to an acceptance.

CERTIFICATION OF CHECK ! A certification is an agreement whereby the bank against whom a

check is drawn, undertakes to pay it at any future time when presented for payment

! But a bank is not obligated to the depositor to certify checks ! And the drawee is not liable to the holder for refusal of the bank to

certify the fcheck ! The refusal of the bank doesn’t dispense with the requirement of

presentment for payment since a check is of right presentable only for payment at the bank on which it is drawn

FORM OF CERTIFICATION ! No particular form is required but it must be in writing ! The usual method is by stamping on the check the word “certified” and

underneath it the signature of the cashier, or by writing upon the check the word “good” with the date of certification and signature of the officer of the bank having the express or implied authority to certify checks, has been held to be a sufficient certification

! The letters “OK” with the initials of the cashier of a bank doesn’t constitute a sufficient certification under modern banking practice

EFFECT OF CERTIFICATION

1. Equivalent to acceptance and is the operative act that makes the drawee bank liable

2. It operates as an assignment of the funds of the drawer in the hands of the drawee bank

3. If obtained by the holder, it discharges the persons secondarily liable

CERTIFICATION EQUIVALENT TO ACCEPTANCE ! Certification is equivalent to acceptance in the drawee bank is bound

on the instrument upon certification ! And it is immaterial to such liability in favor of a holder in due course

whether the drawer had funds or not in the bank or the drawer was indebted to the bank for more than the amount of the check

! The certifying bank has all the liabilities of an acceptor under Section 62

IMPLICATION OF CERTIFICATION FURTHER EXPLAINED ! The bank virtually says that the check is good and we have the

mo0ney of the drawer here ready to pay it. We will pay it now if you will receive it. The holder says no, I will not take the money; you may now certify the check and retain the money for me until this check is presented. The law will not permit a check, when due, to be thus presented, and the money to be left with the bank for the accommodation of the holder without discharging the drawer. The money being due and the check presented, it is his fault if the holder declines to receive the payment, and for his own convenience has the money appropriated to that check subject to its future presentment at any time within the statute of limitations.

FUNCTIONS OF CERTIFIED CHECKS ! Although a check doesn’t call for acceptance and the holder can

present it only for payment, the certification of checks is a means in constant and extensive use in the business of banking and its effects and consequences are regulated by the law merchant. Checks drawn against banks, thus marked and certified, enter largely into the commercial and financial transactions of the country; they pass from hand to hand, in the payment of balances from one house and one bank to another. In the great commercial centers, they make up no inconsiderable portion of the circulation and thus perform a useful, valuable and an almost indispensable office

PURPOSE OF PROCURING CHECKS TO BE CERTIFIED ! To impart strength and credit to the paper by acknowledgment from

the certifying bank that the drawer has funds therein sufficient to cover the check and securing the engagement of the bank that the check will be paid upon presentation

! When a check is certified, it ceases to possess the character, or to perform its functions, of a check, and represents so much money on deposit, payable to the holder on demand.

! The check becomes a basis for credit and an easy mode of passing money from hand to hadn and answers the purposes of money

PAYMENT NEITHER INCLUDES NOR IMPLIES ACCEPTANCE ! Acceptance and payment are entirely different. If the drawee accepts

the paper after seeing it, and then permits it to go into circulation as genuine, on all the principles of estoppel, he ought to be prevented from setting up forgery to defeat liability to one who has taken the paper on the faith of the acceptance or certification