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NEGOTIABLE INSTRUMENTS LAW

PRELIMINARY CONSIDERATIONS

CASES:

1. Phil. Educ. Co., Inc. vs. Soriano, 39 SCRA 587;

2. i!a"ia, #r. vs. CA, 223 SCRA 1$3;

3. Phili%%in& Airlin&s vs. CA, 181 SCRA 557

Philippine Education Co. Inc. v. So!iano "GR L#$$%&'( )& *une +,-+

/act0 On 18 April 1958 Enrique Montinola sought to purchase from the Manila Post Office 10 money orders of P20000each paya!le to E P Montinola "ith address at #ucena$ %ue&on After the postal teller had made out money ordersnum!ered 12'(85$ 12'(8)*12'(95$ Montinola offered to pay for them "ith a pri+ate chec, As pri+ate chec,s "ere notgenerally accepted in payment of money orders$ the teller ad+ised him to see the -hief of the Money Order .i+ision$ !utinstead of doing so$ Montinola managed to lea+e the !uilding "ith his o"n chec, and the 10 money orders "ithout the,no"ledge of the teller On the same date$ 18 April 1958$ upon disco+ery of the disappearance of the unpaid moneyorders$ an urgent message "as sent to all postmasters$ and the follo"ing day notice "as li,e"ise ser+ed upon all !an,s

instructing them not to pay anyone of the money orders aforesaid if presented for payment /he lan, of America recei+eda copy of said notice days later On 2 April 1958 one of the a!o+e mentioned money orders num!ered 12'(88 "asrecei+ed !y Philippine Education -o as part of its sales receipts /he follo"ing day it deposited the same "ith the an, of

America$ and one day thereafter the latter cleared it "ith the ureau of Posts and recei+ed from the latter its face +alue ofP20000 On 2) eptem!er 19(1$ Mauricio A oriano$ -hief of the Money Order .i+ision of the Manila Post Office$ actingfor and in !ehalf of Post*master Enrico Palomar$ notified the an, of America that money order 12'(88 attached to hisletter had !een found to ha+e !een irregularly issued and that$ in +ie" thereof$ the amount it represented had !eendeducted from the !an,3s clearing account 4or its part$ on August 2 of the same year$ the an, of America de!itedPhilippine Education -o3s account "ith the same amount and ga+e it ad+ice thereof !y means of a de!it memo On 12Octo!er 19(1 Philippine Education -o requested the Postmaster eneral to reconsider the action ta,en !y his officededucting the sum of P20000 from the clearing account of the an, of America$ !ut his request "as denied o "asPhilippine Education -o3s su!sequent request that the matter !e referred to the ecretary of 6ustice for ad+ice/hereafter$ Philippine Education -o ele+ated the matter to the ecretary of Pu!lic 7or,s and -ommunications$ !ut thelatter sustained the actions ta,en !y the postal officers n connection "ith the e+ents set forth a!o+e$ Montinola "ascharged "ith theft in the -ourt of 4irst nstance of Manila -riminal -ase '8((: !ut after trial he "as acquitted on theground of reasona!le dou!t On 8 6anuary 19(2 Philippine Education -o filed an action against oriano$ et al in theMunicipal -ourt of Manila On 1) ;o+em!er 19(2$ after the parties had su!mitted the stipulation of facts$ the municipalcourt rendered <udgment$ ordering oriano$ et al to countermand the notice gi+en to the an, of America on 2)eptem!er 19(1$ deducting from said an,3s clearing account the sum of P20000 representing the amount of postalmoney order 12'(88$ or in the alternati+e$ to indemnify Philippine Education -o in the said sum of P20000 "ith interestthereon at the rate of 8*1=2> per annum from 2) eptem!er 19(1 until fully paid? "ithout any pronouncement as to costsand attorney3s fees@ /he case "as appealed to the -ourt of 4irst nstance of Manila "here$ after the parties hadresu!mitted the same stipulation of facts$ the appealed decision dismissing the complaints "ith costs$ "as renderedPhilippine Education -o appealed

Iue0 7hether the postal money order is a negotia!le instrument

1eld0 Philippine postal statutes "ere patterned after similar statutes in force in the nited tates 4or this reason$Philippine postal statutes are generally construed in accordance "ith the construction gi+en in the nited tates to theiro"n postal statutes$ in the a!sence of any special reason <ustifying a departure from this policy or practice /he "eight ofauthority in the nited tatus is that postal money orders are not negotia!le instruments$ the reason !ehind this rule !eingthat$ in esta!lishing and operating a postal money order system$ the go+ernment is not engaging in commerciatransactions !ut merely eBercises a go+ernmental po"er for the pu!lic !enefit ome of the restrictions imposed uponmoney orders !y postal la"s and regulations are inconsistent "ith the character of negotia!le instruments 4or instance$such la"s and regulations usually pro+ide for not more than one endorsement? payment of money orders may !e "ithheldunder a +ariety of circumstances

1COMMREV- CASES-NEGO- YUMI



Philippine Ai!line v. Cou!t o2 Appeal "GR %,+33( )& *anua!4 +,,&En Banc, Gutierrez Jr. (J): c!ncur, " #i$$ent in $e%arate !%ini!n$ &'ere !ine#

/act0 On 8 ;o+em!er 19()$ Amelia /an$ under the name and style of A!le Printing Press commenced a complaint for damages !efore the -ourt of 4irst nstance -4: of Manila -i+il -ase )10): After trial$ the -4 of Manila$ ranch 1$then presided o+er !y the late 6udge 6esus P Morfe rendered <udgment on 29 6une 19)2$ in fa+or of /an$ orderingPhilippine Airlines$ nc PA#: to pay /an the amount of P)5$00000 as actual damages$ "ith legal interest thereon from/an3s eBtra*<udicial demand made !y the letter of 20 6uly 19()? P18$20000$ representing the unreali&ed profit of 10>included in the contract price of P200$00000 plus legal interest thereon from 20 6uly 19()? P20$00000 as and for moradamages$ "ith legal interest thereon from 20 6uly 19()? P5$00000 damages as and for attorney3s fee? "ith costs againstPA# On 28 6uly 19)2$ PA# filed its appeal "ith the -ourt of Appeals -A*C 510)9*C: On 4e!ruary 19))$ theappellate court rendered its decision$ affirming !ut modifying the -43s decision$ ordering PA# to pay the sum oP25$00000 as damages and P5$00000 as attorney3s fee ;otice of <udgment "as sent !y the -ourt of Appeals to the triacourt and on dates su!sequent thereto$ a motion for reconsideration "as filed !y /an$ duly opposed !y PA# On 2 May19))$ the -ourt of Appeals rendered its resolution denying /an3s motion for reconsideration for lac, of merit ;o furtherappeal ha+ing !een ta,en !y the parties$ the <udgment !ecame final and eBecutory and on 1 May 19))$ <udgment "ascorrespondingly entered in the case

/he case "as remanded to the trial court for eBecution and on 2 eptem!er 19))$ /an filed a motion praying for theissuance of a "rit of eBecution of the <udgment rendered !y the -ourt of Appeals On 11 Octo!er 19))$ the trial court$presided o+er !y 6udge Cicardo . alano$ issued its order of eBecution "ith the corresponding "rit in fa+or of /an /he"rit "as duly referred to .eputy heriff Emilio D Ceyes of ranch 1 of the -ourt of 4irst nstance of Manila for enforcement ' months later$ on 11 4e!ruary 19)8$ /an mo+ed for the issuance of an alias "rit of eBecution stating that

the <udgment rendered !y the lo"er court$ and affirmed "ith modification !y the -ourt of Appeals$ remained unsatisfiedOn 1 March 19)8$ PA# filed an opposition to the motion for the issuance of an alias "rit of eBecution stating that it hadalready fully paid its o!ligation to /an through the deputy sheriff of the court$ Ceyes$ as e+idenced !y cash +ouchersproperly signed and receipted !y said Emilio D Ceyes On March 19)8$ the -ourt of Appeals denied the issuance of thealias "rit for !eing premature$ ordering the eBecuting sheriff Ceyes to appear "ith his return and eBplain the reason for hisfailure to surrender the amounts paid to him !y PA# o"e+er$ the order could not !e ser+ed upon .eputy heriff Ceyes"ho had a!sconded or disappeared On 28 March 19)8$ motion for the issuance of a partial alias "rit of eBecution "asfiled !y /an On 19 April 19)8$ /an filed a motion to "ithdra" @Motion for Partial Alias 7rit of EBecution@ "ith u!stituteMotion for Alias 7rit of EBecution On 1 May 19)8$ the 6udge issued an order granting the motion$ and issuing the alias"rit of eBecution On 18 May 19)8$ PA# recei+ed a copy of the first alias "rit of eBecution issued on the same daydirecting pecial heriff 6aime F del Cosario to le+y on eBecution in the sum of P25$00000 "ith legal interest thereonfrom 20 6uly 19() "hen /an made an eBtra<udicial demand through a letter #e+y "as also ordered for the further sum ofP5$00000 a"arded as attorney3s fees On 2 May 19)8$ PA# filed an urgent motion to quash the alias "rit of eBecution

stating that no return of the "rit had as yet !een made !y .eputy heriff Ceyes and that the <udgment de!t had already!een fully satisfied !y PA# as e+idenced !y the cash +ouchers signed and receipted !y the ser+er of the "rit of eBecution.eputy heriff Ceyes On 2( May 19)8$ pecial heriff del Cosario ser+ed a notice of garnishment on the depository!an, of PA#$ 4ar East an, and /rust -ompany$ Cosario ranch$ inondo$ Manila$ through its manager and garnishedPA#3s deposit in the said !an, in the total amount of P('$'0800 as of 1( May 19)8 PA# filed the petition for certiorari

Iue0 7hether the payment made to the a!sconding sheriff !y chec, in his name operate to satisfy the <udgment de!t

1eld0 nder the initial <udgment$ Amelia /an "as found to ha+e !een "ronged !y PA# he filed her complaint in 19() After 10 years of protracted litigation in the -ourt of 4irst nstance and the -ourt of Appeals$ Ms /an "on her case Almos22 years later$ Ms /an has not seen a centa+o of "hat the courts ha+e solemnly declared as rightfully hers /hrougha!solutely no fault of her o"n$ Ms /an has !een depri+ed of "hat$ technically$ she should ha+e !een paid from the start$!efore 19()$ "ithout need of her going to court to enforce her rights And all !ecause PA# did not issue the chec,sintended for her$ in her name nder the peculiar circumstances of the case$ the payment to the a!sconding sheriff !ychec, in his name did not operate as a satisfaction of the <udgment de!t n general$ a payment$ in order to !e effecti+e todischarge an o!ligation$ must !e made to the proper person Article 12'0 of the -i+il -ode pro+ides that @Payment shall!e made to the person in "hose fa+or the o!ligation has !een constituted$ or his successor in interest$ or any personauthori&ed to recei+e it@ 4urther$ Article 12'9 of the -i+il -ode pro+ides that @/he payment of de!ts in money shall !emade in the currency stipulated$ and if it is not possi!le to deli+er such currency$ then in the currency "hich is legal tenderin the Philippines /he deli+ery of promissory notes paya!le to order$ or !ills of eBchange or other mercantile documentsshall produce the effect of payment only "hen they ha+e !een cashed$ or "hen through the fault of the creditor they ha+e!een impaired n the meantime$ the action deri+ed from the original o!ligation shall !e held in a!eyance@ n the a!senceof an agreement$ either eBpress or implied$ payment means the discharge of a de!t or o!ligation in money and unless theparties so agree$ a de!tor has no rights$ eBcept at his o"n peril$ to su!stitute something in lieu of cash as medium of




payment of his de!t -onsequently$ unless authori&ed to do so !y la" or !y consent of the o!ligee$ a pu!lic officer has noauthority to accept anything other than money in payment of an o!ligation under a <udgment !eing eBecuted trictlyspea,ing$ the acceptance !y the sheriff of PA#3s chec,s does not$ per se$ operate as a discharge of the <udgment de!tince a negotia!le instrument is only a su!stitute for money and not money$ the deli+ery of such an instrument does not$!y itself$ operate as payment A chec,$ "hether a manager3s chec, or ordinary chec,$ is not legal tender$ and an offer of achec, in payment of a de!t is not a +alid tender of payment and may !e refused receipt !y the o!ligee or creditor Meredeli+ery of chec,s does not discharge the o!ligation under a <udgment /he o!ligation is not eBtinguished and remainssuspended until the payment !y commercial document is actually reali&ed

/ORM AN5 INTERPRETATION O/ NEGOTIABLE INSTRUMENTSCASES:

1. Met!opolitan Ban6 7 T!ut Co8pan4 v. CA( /e9. +3( +,,+( +,% SCRA +:,;2. Calte< Phil. v. CA( $+$ SCRA %%33. An= Te6 Lian v. CA( 3- Phil. )3)4. PNB v. Rod!i=ue>( G.R. No. +-&)$'( Septe89e! $:( $&&35. Philippine National Ban6 v. Manila Oil Re2inin= 7 B4#P!oduct Co8pan4( %) Phil %%6. Repu9lic Plante! Ban6 v. CA( $+: SCRA -)3;7. Sp. Evan=elita v. Me!cato! /inance Co!p.( et al( Au=ut $+( $&&);8. Ilano v. 1on. Epanol( G.R. No. +:+-':( +: 5ece89e! $&&'

Met!opolitan Ban6 7 T!ut Co8pan4 v. Cou!t o2 Appeal "GR 333::( +3 /e9!ua!4 +,,+

/act0 /he Metropolitan an, and /rust -o Metroan,: is a commercial !an, "ith !ranches throughout the Philippinesand e+en a!road olden a+ings and #oan Association "as$ at the time these e+ents happened$ operating in -alapan$Mindoro$ "ith #ucia -astillo$ Magno -astillo and loria -astillo as its principal officers n 6anuary 19)9$ a certainEduardo ome& opened an account "ith olden a+ings and deposited o+er a period of 2 months 8 treasury "arrants"ith a total +alue of P1$)55$228) /hey "ere all dra"n !y the Philippine 4ish Mar,eting Authority and purportedly signed!y its eneral Manager and counter*signed !y its Auditor ( of these "ere directly paya!le to ome& "hile the othersappeared to ha+e !een indorsed !y their respecti+e payees$ follo"ed !y ome& as second indorser On +arious dates!et"een 6une 25 and 6uly 1($ 19)9$ all these "arrants "ere su!sequently indorsed !y loria -astillo as -ashier ofolden a+ings and deposited to its a+ings Account 2'98 in the Metro!an, !ranch in -alapan$ Mindoro /hey "ere thensent for clearing !y the !ranch office to the principal office of Metro!an,$ "hich for"arded them to the ureau of /reasuryfor special clearing More than 2 "ee,s after the deposits$ loria -astillo "ent to the -alapan !ranch se+eral times to as,"hether the "arrants had !een cleared he "as told to "ait Accordingly$ ome& "as mean"hile not allo"ed to "ithdra"

from his account #ater$ ho"e+er$ @eBasperated@ o+er loria3s repeated inquiries and also as an accommodation for a@+alued client$@ Metroan, says it finally decided to allo" olden a+ings to "ithdra" from the proceeds of the "arrants/he first "ithdra"al "as made on 9 6uly 19)9$ in the amount of P508$00000$ the second on 1 6uly 19)9$ in the amountof P10$00000$ and the third on 1( 6uly 19)9$ in the amount of P150$00000 /he total "ithdra"al "as P9(8$00000 nturn$ olden a+ings su!sequently allo"ed ome& to ma,e "ithdra"als from his o"n account$ e+entually collecting thetotal amount of P1$1()$50000 from the proceeds of the apparently cleared "arrants /he last "ithdra"al "as made on 1(6uly 19)9 On 21 6uly 19)9$ Metro!an, informed olden a+ings that 2 of the "arrants had !een dishonored !y theureau of /reasury on 19 6uly 19)9$ and demanded the refund !y olden a+ings of the amount it had pre+iously"ithdra"n$ to ma,e up the deficit in its account /he demand "as re<ected Metro!an, then sued olden a+ings in theCegional /rial -ourt of Mindoro After trial$ <udgment "as rendered in fa+or of olden a+ings$ "hich$ ho"e+er$ filed amotion for reconsideration e+en as Metro!an, filed its notice of appeal On ' ;o+em!er 198($ the lo"er court modified itsdecision$ !y dismissing the complaint "ith costs against Metro!an,? !y issol+ing and lifting the "rit of attachment of theproperties of olden a+ings and pouses Magno -astillo and #ucia -astillo? directing Metro!an, to re+erse its action of

de!iting a+ings Account 2'98 of the sum of P1$)5'$08900 and to reinstate and credit to such account such amounteBisting !efore the de!it "as made including the amount of P812$0) in fa+or of olden a+ings and thereafter$ toallo" olden a+ings to "ithdra" the amount outstanding thereon !efore the de!it? !y ordering Metro!an, to pay oldena+ings attorney3s fees and eBpenses of litigation in the amount of P200$00000? and !y ordering Metro!an, to pay thepouses Magno -astillo and #ucia -astillo attorney3s fees and eBpenses of litigation in the amount of P100$00000 Onappeal to the appellate court$ the decision "as affirmed$ prompting Metro!an, to file the petition for re+ie"

Iue0 7hether the treasury "arrants in question are negotia!le instruments

1eld0 -learly stamped on the treasury "arrants3 face is the "ord @non*negotia!le@ Moreo+er$ and this is of equasignificance$ it is indicated that they are paya!le from a particular fund$ to "it$ 4und 501 ection 1 of the ;egotia!le




nstruments #a"$ pro+ides that @An instrument to !e negotia!le must conform to the follo"ing requirementsG a: t must !ein "riting and signed !y the ma,er or dra"er? !: Must contain an unconditional promise or order to pay a sum certain inmoney? c: Must !e paya!le on demand$ or at a fiBed or determina!le future time? d: Must !e paya!le to order or to!earer? and e: 7here the instrument is addressed to a dra"ee$ he must !e named or other"ise indicated therein "ithreasona!le certainty@ ection 7hen promise is unconditional: thereof pro+ides that @An unqualified order or promise topay is unconditional "ithin the meaning of this Act though coupled "ith H a: An indication of a particular fund out of"hich reim!ursement is to !e made or a particular account to !e de!ited "ith the amount? or !: A statement of thetransaction "hich gi+es rise to the instrument ut an order or promise to pay out of a particular fund is not unconditional@/he indication of 4und 501 as the source of the payment to !e made on the treasury "arrants ma,es the order or promiseto pay @not unconditional@ and the "arrants themsel+es non*negotia!le /here should !e no question that the eBception onection of the ;egotia!le nstruments #a" is applica!le in the present case Metro!an, cannot contend that !yindorsing the "arrants in general$ olden a+ings assumed that they "ere @genuine and in all respects "hat they purportto !e$@ in accordance "ith ection (( of the ;egotia!le nstruments #a" /he simple reason is that this la" is notapplica!le to the non*negotia!le treasury "arrants /he indorsement "as made !y loria -astillo not for the purpose ofguaranteeing the genuineness of the "arrants !ut merely to deposit them "ith Metro!an, for clearing t "as in factMetro!an, that made the guarantee "hen it stamped on the !ac, of the "arrantsG @All prior indorsement and=or lac, of endorsements guaranteed$ Metropolitan an, I /rust -o$ -alapan ranch@

Calte< ?Philippine@ v CA$+$ SCRA %%3Au=ut +&( +,,$

/act0

On +arious dates$ defendant$ a commercial !an,ing institution$ through its ucat ranch issued 280 certificates of timedeposit -/.s: in fa+or of one Angel dela -ru& "ho is tas,ed to deposit aggregate amounts

One time Mr dela -ru& deli+ered the -/.s to Calte< Philippines in connection "ith his purchased of fuel products fromthe latter o"e+er$ ometime in March 1982$ he informed Mr /imoteo /iangco$ the ucat ranch Manger$ that he lost allthe certificates of time deposit in dispute Mr /iangco ad+ised said depositor to eBecute and su!mit a notari&ed Affida+it of#oss$ as required !y defendant !an,3s procedure$ if he desired replacement of said lost -/.s

Angel dela -ru& negotiated and o!tained a loan from defendant !an, and eBecuted a notari&ed .eed of Assignment of/ime .eposit$ "hich stated$ among others$ that he surrenders to defendant !an, @full control of the indicated time depositsfrom and after date@ of the assignment and further authori&es said !an, to pre*terminate$ set*off and @apply the said timedeposits to the payment of "hate+er amount or amounts may !e due@ on the loan upon its maturity

n 1982$ Mr Aranas$ -redit Manager of plaintiff Calte< Phil: nc$ "ent to the defendant !an,3s ucat !ranch andpresented for +erification the -/.s declared lost !y Angel dela -ru& alleging that the same "ere deli+ered to hereinplaintiff @as security for purchases made "ith Calte< Philippines$ nc@ !y said depositor

Mr dela -ru& recei+ed a letter from the plaintiff formally informing of its possession of the -/.s in question and of itsdecision to pre*terminate the same ccordingly$ defendant !an, re<ected the plaintiff3s demand and claim for payment ofthe +alue of the -/.s in a letter dated 4e!ruary )$ 198

/he loan of Angel dela -ru& "ith the defendant !an, matured and fell due and on August 5$ 198$ the latter set*off andapplied the time deposits in question to the payment of the matured loan o"e+er$ the plaintiff filed the instant complaint$praying that defendant !an, !e ordered to pay it the aggregate +alue of the certificates of time deposit of P1$120$00000plus accrued interest and compounded interest therein at 1(> per annum$ moral and eBemplary damages as "ell asattorney3s fees

On appeal$ CA affirmed the lo"er court3s dismissal of the complaint$ and ruled 1: that the su!<ect certificates of depositare non*negotia!le despite !eing clearly negotia!le instruments? $: that petitioner did not !ecome a holder in due courseof the said certificates of deposit? and : in disregarding the pertinent pro+isions of the -ode of -ommerce relating to lostinstruments paya!le to !earer

Iue0




a: 7hether certificates of time deposit -/.s: are negotia!le instrumentsJ!: s the depositor also the !earer of the documentJc: 7hether petitioner can rightfully reco+er on the -/.sJ

1eld0

/he -/.s in question are not negotia!le instruments ection 1 Act ;o 201$ other"ise ,no"n as the ;egotia!lenstruments #a"$ enumerates the requisites for an instrument to !ecome negotia!le$ +i&Ga: t must !e in "riting and signed !y the ma,er or dra"er?!: Must contain an unconditional promise or order to pay a sum certain in money?c: Must !e paya!le on demand$ or at a fiBed or determina!le future time?d: Must !e paya!le to order or to !earer? ande: 7here the instrument is addressed to a dra"ee$ he must !e named or other"ise indicated therein "ith reasona!lecertainty

/he accepted rule is that the negotia!ility or non*negotia!ility of an instrument is determined from the "riting$ that is$ fromthe face of the instrument itself n the construction of a !ill or note$ the intention of the parties is to control$ if it can !elegally ascertained 7hile the "riting may !e read in the light of surrounding circumstances in order to more perfectlyunderstand the intent and meaning of the parties$ yet as they ha+e constituted the "riting to !e the only out"ard and+isi!le eBpression of their meaning$ no other "ords are to !e added to it or su!stituted in its stead /he duty of the court insuch case is to ascertain$ not "hat the parties may ha+e secretly intended as contradistinguished from "hat their "ordseBpress$ !ut "hat is the meaning of the "ords they ha+e used 7hat the parties meant must !e determined !y "hat they

said

Petitioner3s insistence that the -/.s "ere negotiated to it !egs the question nder the ;egotia!le nstruments #a"$ aninstrument is negotiated "hen it is transferred from one person to another in such a manner as to constitute the transfereethe holder thereof$ and a holder may !e the payee or indorsee of a !ill or note$ "ho is in possession of it$ or the !earerthereof n the present case$ ho"e+er$ there "as no negotiation in the sense of a transfer of the legal title to the -/.s infa+or of petitioner in "hich situation$ for o!+ious reasons$ mere deli+ery of the !earer -/.s "ould ha+e sufficed ere$ thedeli+ery thereof only as security for the purchases of Angel de la -ru& and "e e+en disregard the fact that the amountin+ol+ed "as not disclosed: could at the most constitute petitioner only as a holder for +alue !y reason of his lien

Accordingly$ a negotiation for such purpose cannot !e effected !y mere deli+ery of the instrument since$ necessarily$ theterms thereof and the su!sequent disposition of such security$ in the e+ent of non*payment of the principal o!ligation$must !e contractually pro+ided for

An= Te6 Lian v. Cou!t o2 Appeal "GR L#$'+:( $' Septe89e! +,'&

/act0 Fno"ing he had no funds therefor$ Ang /e, #ian dre" on aturday$ 1( ;o+em!er 19'($ a chec, upon the -hinaan,ing -orporation for the sum of P'$000$ paya!le to the order of @cash@ e deli+ered it to #ee ua ong in eBchangefor money "hich the latter handed in the act On 18 ;o+em!er 19'($ the neBt !usiness day$ the chec, "as presented !y#ee ua ong to the dra"ee !an, for payment$ !ut it "as dishonored for insufficiency of funds$ the !alance of the depositof Ang /e, #ian on !oth dates !eing P5 only Ang /e, #ian "as charged and "as con+icted of estafa in the -ourt of4irst nstance of Manila /he -ourt of Appeals affirmed the +erdict

Iue0 7hether indorsement is necessary for the presentation of a !earer instrument for payment

1eld0 nder ection 9d: of the ;egotia!le nstruments #a"$ a chec, dra"n paya!le to the order of @cash@ is a chec,paya!le to !earer$ and the !an, may pay it to the person presenting it for payment "ithout the dra"er3s indorsement A

chec, paya!le to the order of cash is a !earer instrument 7here a chec, is made paya!le to the order of Kcash$L the "ordKcash Kdoes not purport to !e the name of any person$ and hence the instrument is paya!le to !earer /he dra"ee !an,need not o!tain any indorsement of the chec,$ !ut may pay it to the person presenting it "ithout any indorsement@ Ofcourse$ if the !an, is not sure of the !earer3s identity or financial sol+ency$ it has the right to demand identification and=orassurance against possi!le complications$ H for instance$ a: forgery of dra"er3s signature$ !: loss of the chec, !y therightful o"ner$ c: raising of the amount paya!le$ etc /he !an, may therefore require$ for its protection$ that theindorsement of the dra"er H or of some other person ,no"n to it H !e o!tained ut "here the an, is satisfied of theidentity and=or the economic standing of the !earer "ho tenders the chec, for collection$ it "ill pay the instrument "ithoutfurther question? and it "ould incur no lia!ility to the dra"er in thus acting A chec, paya!le to !earer is authority forpayment to the holder 7here a chec, is in the ordinary form$ and is paya!le to !earer$ so that no indorsement is required$a !an,$ to "hich it is presented for payment$ need not ha+e the holder identified$ and is not negligent in failing to do so




-onsequently$ a dra"ee !an, to "hich a !earer chec, is presented for payment need not necessarily ha+e the holderidentified and ordinarily may not !e charged "ith negligence in failing to do so f the !an, has no reasona!le cause forsuspecting any irregularity$ it "ill !e protected in paying a !earer chec,$ Kno matter "hat facts un,no"n to it may ha+eoccurred prior to the presentmentL Although a !an, is entitled to pay the amount of a !earer chec, "ithout further inquiryit is entirely reasona!le for the !an, to insist that the holder gi+e satisfactory proof of his identity erein any"ay$ it issignificant$ and conclusi+e$ that the form of the chec, "as totally unconnected "ith its dishonor t "as returnedunsatisfied !ecause the dra"er had insufficient funds H not !ecause the dra"er3s indorsement "as lac,ing

Repu9lic Plante! Ban6 v. Cou!t o2 Appeal "GR ,)&-)( $+ 5ece89e! +,,$

/act0 ho&o amaguchi and 4ermin -anlas "ere President=-hief Operating Officer and /reasurer respecti+ely$ of7orld"ide arment Manufacturing$ nc y +irtue of oard Cesolution 1 dated 1 August 19)9$ ho&o amaguchi and4ermin -anlas "ere authori&ed to apply for credit facilities "ith the petitioner Cepu!lic Planters an, CP: in the formsof eBport ad+ances and letters of credit=trust receipts accommodations Cepu!lic Planters an, issued nine promissorynotes$ each of "hich "ere uniformly "orded in the follo"ing mannerG @NNNNNNNNNNN$ after date$ for +alue recei+ed$ ="e$

<ointly and se+eraly promise to pay to the OC.EC of the CEP#- P#A;/EC A;F$ at its office in ManilaPhilippines$ the sum of NNNNNNNNNNN PEO: Philippine -urrency@ On the right !ottom margin of the promissorynotes appeared the signatures of ho&o amaguchi and 4ermin -anlas a!o+e their printed names "ith the phrase @andin: his personal capacity@ type"ritten !elo" At the !ottom of the promissory notes appearedG @Please credit proceeds ofthis note toG @NNNNNNNN a+ings Account NNNNNN -urrent@$ @Account ;o 1)2*0025)*(@$ and @of 7OC#.7.EACME;/ M4 -OCP@ /hese entries "ere separated from the teBt of the notes "ith a !old line "hich ran hori&ontallyacross the pages n three promissory notes$ the name 7orld"ide arment Manufacturing$ nc "as apparently ru!!erstamped a!o+e the signatures of amaguchi and -anlas On 20 .ecem!er 1982$ 7orld"ide arment Manufacturing$ nc7M: noted to change its corporate name to Pinch Manufacturing -orporation PM-: On 5 4e!ruary 1982$ CP filed acomplaint for the reco+ery of sums of money co+ered among others$ !y the nine promissory notes "ith interest thereon$plus attorney3s fees and penalty charges /he complainant "as originally !rought against 7M inter alia$ !ut it "as lateramended to drop 7M as defendant and su!stitute PM- it its place PM- and ho&o amaguchi did not file an

Amended Ans"er and failed to appear at the scheduled pre*trial conference despite due notice Only -anlas filed an Amended Ans"er "herein he$ denied ha+ing issued the promissory notes in question since according to him$ he "as notan officer of PM-$ !ut instead of 7M$ and that "hen he issued said promissory notes in !ehalf of 7M$ the same"ere in !lan,$ the type"ritten entries not appearing therein prior to the time he affiBed his signature On 20 6une 1985$/he Cegional /rial -ourt rendered a decision in fa+or of CP$ ordering PM- formerly 7M:$amaguchi and -anlas topay$ <ointly and se+erally$ CP the follo"ing sums "ith interest thereon at 1(> per annum under ) promissory notes$ thesum of P00$00000 "ith interest from 29 6anuary 1981 until fully paid? P'0$00000 "ith interest from 2) ;o+em!er 1980?P1(($'((00 "hich interest from 29 6anuary 1981? P8($101 "ith interest from 29 6anuary 1981? P12$)0)0 "ithinterest from 2) ;o+em!er 1980? P281$8)591 "ith interest from 29 6anuary 1981? and P200$00000 "ith interest from 29

6anuary 1981 PM- and amaguchi "ere also ordered to pay <ointly and se+erally$ CP the sum of P()$00000 "ithinterest of 1(> per annum from 29 6anuary 1980 under another promissory note PM- "as ordered to pay PC the sumof P1'0$00000 "ith interest at 1(> per annum from 2) ;o+em!er 1980 until fully paid$ under another promissory note? topay the sum of P21$12081 "ith interest at 12> per annum from 1 6uly 1981$ until fully paid and the sum of P1$8)09)"ith interest from 28 March 1981$ until fully paid /he court also ordered PM-$ amaguchi$ and -anlas to pay$ <ointly andse+erally$ CP the sum of P100$00000 as and for reasona!le attorney3s fee and the further sum equi+alent to > perannum of the respecti+e principal sums from the dates a!o+e stated as penalty charge until fully paid$ plus 1> of theprincipal sums as ser+ice charge? "ith costs against PM-$ et al 4rom the a!o+e decision only -anlas appealed to thethen ntermediate -ourt no" the -ourt Appeals: is contention "as that inasmuch as he signed the promissory notes inhis capacity as officer of the defunct 7M$ he should not !e held personally lia!le for such authori&ed corporate acts thathe performed /he appellate court affirmed the decision of trial court eBcept that it completely a!sol+ed -anlas fromlia!ility under the promissory notes and reduced the a"ard for damages and attorney3s fees CP appealed !y a "ay of apetition for re+ie" on certiorari t is the contention of CP that ha+ing unconditionally signed the 9 promissory notes "ith

amaguchi$ <ointly and se+erally$ -anlas is solidarity lia!le "ith amaguchi on each of the nine notes

Iue "+0 7hether 4ermin -anlas is solidarily lia!le on each of the promissory notes !earing his signature

1eld "+0 4ermin -anlas is solidarily lia!le on each of the promissory notes !earing his signature /he promissory motes

are negotia!le instruments and must !e go+erned !y the ;egotia!le nstruments #a" nder the ;egotia!le lnstruments

#a"$ persons "ho "rite their names on the face of promissory notes are ma,ers and are lia!le as such y signing the

notes$ the ma,er promises to pay to the order of the payee or any holder according to the tenor thereof ased on the

a!o+e pro+isions of la"$ there is no denying that -anlas is one of the co*ma,ers of the promissory notes As such$ he

cannot escape lia!ility arising therefrom 7here an instrument containing the "ords @ promise to pay@ is signed !y t"o or




more persons$ they are deemed to !e <ointly and se+erally lia!le thereon An instrument "hich !egins@ "ith @@ $7e@ $ or

@Either of us@ promise to$ pay$ "hen signed !y t"o or more persons$ ma,es them solidarily lia!le /he fact that the

singular pronoun is used indicates that the promise is indi+idual as to each other? meaning that each of the co*signers is

deemed to ha+e made an independent singular promise to pay the notes in full erein$ the solidary lia!ility of -anlas is

made clearer and certain$ "ithout reason for am!iguity$ !y the presence of the phrase @<oint and se+eral@ as descri!ing the

unconditional promise to pay to the order of CP A <oint and se+eral note is one in "hich the ma,ers !ind themsel+es

!oth <ointly and indi+idually to the payee so that all may !e sued together for its enforcement$ or the creditor may select

one or more as the o!<ect of the suit A <oint and se+eral o!ligation in common la" corresponds to a ci+il la" solidary

o!ligation? that is$ one of se+eral de!tors !ound in such "ise that each is lia!le for the entire amount$ and not merely forhis proportionate share y ma,ing a <oint and se+eral promise to pay to the order of CP$ -anlas assumed the solidary

lia!ility of a de!tor and the payee may choose to enforce the notes against him alone or <ointly "ith amaguchi and PM-

as solidary de!tors As to "hether the interpolation of the phrase @and in: his personal capacity@ !elo" the signatures of

the ma,ers in the notes "ill affect the lia!ility of the ma,ers$ it is immaterial and "ill not affect to the lia!ility of -anlas as a

<oint and se+eral de!tor of the notes 7ith or "ithout the presence of said phrase$ -anlas is primarily lia!le as a co*ma,er

of each of the notes and his lia!ility is that of a solidary de!tor

Evan=elita v. Me!cato! /inance Co!p. "GR +%33:%( $+ Au=ut $&&)

/act0 pouses Eduardo E+angelista and Epifania - E+angelista filed a complaint for annulment of titles againstMercator 4inance -orp #ydia P ala&ar$ #amecs Cealty and .e+elopment -orporation$ and the Cegister of .eeds ofulacan /he spouses E+angelista claimed !eing the registered o"ners of 5 parcels of land contained in the Ceal EstateMortgage eBecuted !y them and Em!assy 4arms$ nc /hey alleged that they eBecuted the Ceal Estate Mortgage in fa+orof Mercator only as officers of Em!assy 4arms /hey did not recei+e the proceeds of the loan e+idenced !y a promissorynote$ as all of it "ent to Em!assy 4arms /hus$ they contended that the mortgage "as "ithout any consideration as tothem since they did not personally o!tain any loan or credit accommodations /here !eing no principal o!ligation on "hichthe mortgage rests$ the real estate mortgage is +oid 7ith the +oid mortgage$ they assailed the +alidity of the foreclosureproceedings conducted !y Mercator$ the sale to it as the highest !idder in the pu!lic auction$ the issuance of the transfercertificates of title to it$ the su!sequent sale of the same parcels of land to #ydia P ala&ar$ and the transfer of the titles toher name$ and lastly$ the sale and transfer of the properties to respondent #amecs Cealty I .e+elopment -orporationMercator admitted that the spouses E+angelista "ere the o"ners of the su!<ect parcels of land t$ ho"e+er$ contendedthat on 1( 4e!ruary 1982$ the spouses eBecuted a Mortgage in fa+or of Mercator for and in consideration of certain loans$and=or other forms of credit accommodations o!tained from the Mortgagee Mercator: amounting to P8''$(25)8 and to

secure the payment of the same and those others that the Mortgagee may eBtend to the mortgagor t contended thatsince the spouses and Em!assy 4arms signed the promissory note as co*ma,ers$ aside from the -ontinuing uretyship

Agreement su!sequently eBecuted to guarantee the inde!tedness of Em!assy 4arms$ and the succeeding promissorynotes8Q restructuring the loan$ then the spouses are <ointly and se+erally lia!le "ith Em!assy 4arms .ue to their failureto pay the o!ligation$ the foreclosure and su!sequent sale of the mortgaged properties are +alid ala&ar and #amecsasserted that they are innocent purchasers for +alue and in good faith$ relying on the +alidity of the title of Mercator#amecs admitted the prior o"nership of the spouses of the su!<ect parcels of land$ !ut alleged that they are the presentregistered o"ner ala&ar and #amecs li,e"ise assailed the long silence and inaction !y the spouses as it "as only aftera lapse of almost 10 years from the foreclosure of the property and the su!sequent sales that they made their claim /husala&ar and #amecs a+erred that petitioners are in estoppel and guilty of laches After pre*trial$ Mercator mo+ed forsummary <udgment on the ground that eBcept as to the amount of damages$ there is no factual issue to !e litigatedMercator argued that petitioners had admitted in their pre*trial !rief the eBistence of the promissory note$ the continuingsuretyship agreement and the su!sequent promissory notes restructuring the loan$ hence$ there is no genuine issue

regarding their lia!ility /he mortgage$ foreclosure proceedings and the su!sequent sales are +alid and the complaint must!e dismissed /he spouses opposed the motion for summary <udgment claiming that !ecause their personal lia!ility toMercator is at issue$ there is a need for a full*!lo"n trial /he C/- granted the motion for summary <udgment anddismissed the complaint /he spousesR motion for reconsideration "as denied for lac, of merit /hus$ the spouses "ent upto the -ourt of Appeals$ !ut again "ere unsuccessful A motion for reconsideration !y the spouses "as li,e"ise deniedfor lac, of merit /he spouses filed the Petition for Ce+ie" on -ertiorari /he spouses allege$ inter alia$ that there is anam!iguity in the "ording of the promissory note and claim that since it "as Mercator "ho pro+ided the form$ then theam!iguity should !e resol+ed against it

Iue0 7hether the spouses are solidarily lia!le "ith Em!assy 4arms$ in light of the promissory note signed !y them




1eld0 /he promissory note and the -ontinuing uretyship Agreement pro+e that the spouses are solidary o!ligors "ithEm!assy 4arms /he promissory notes su!sequently eBecuted !y the spouses and Em!assy 4arms$ restructuring theirloan$ li,e"ise pro+e that the spouses are solidarily lia!le "ith Em!assy 4arms /he spouses allege that there is anam!iguity in the "ording of the promissory note and claim that since it "as Mercator "ho pro+ided the form$ then theam!iguity should !e resol+ed against it -ourts can interpret a contract only if there is dou!t in its letter ut$ aneBamination of the promissory note sho"s no such am!iguity esides$ assuming arguendo that there is an am!iguityection 1) of the ;egotia!le nstruments #a" states that @7here the language of the instrument is am!iguous or thereare omissions therein$ the follo"ing rules of construction applyG g: 7here an instrument containing the "ord 3 promise topay3 is signed !y t"o or more persons$ they are deemed to !e <ointly and se+erally lia!le thereon@ 4urther$ e+en if thespouses intended to sign the note merely as officers of Em!assy 4arms$ still this does not erase the fact that theysu!sequently eBecuted a continuing suretyship agreement A surety is one "ho is solidarily lia!le "ith the principal /hespouses cannot claim that they did not personally recei+e any consideration for the contract for "ell*entrenched is the rulethat the consideration necessary to support a surety o!ligation need not pass directly to the surety$ a considerationmo+ing to the principal alone !eing sufficient A surety is !ound !y the same consideration that ma,es the contracteffecti+e !et"een the principal parties thereto a+ing eBecuted the suretyship agreement$ there can !e no dispute on thepersonal lia!ility of the spouses

ICTORIA *. ILANO !ep!eented 94 he! Atto!ne4#in#2act( MILO ANTONIO C. ILANO S 1ON. 5OLORES L.ESPAOL( in he! capacit4 a E<ecutive *ud=e( RTC o2 I8u( Cavite( B!. ,&( and( AMELIA ALONO( E5IT1CALILAP( 5ANILO CAMACLANG( ESTELA CAMACLANG( ALLAN CAMACLANG( LENIA REDES( E5WIN REDES(*ANE BACAREL( C1ERRD CAMACLANG( /LORA CABRERA( ESTELITA LEGASPI( CARMENCITA GONALES(NEMIA CASTRO( GLORIA 5OMINGUE( ANNILDN C. SABALE and eve!al *O1N 5OES

4A-/G.efendant AME#A O A#O;DO$ is a trusted employee of petitionerQ he has !een "ith them for se+eral years

already$ and through the years$ defendant A#O;DO "as a!le to gain the trust and confidence of petitionerQ and herfamily? /hat due to these trust and confidence reposed upon defendant A#O;DO !y petitionerQ$ there "ere occasions"hen defendant A#O;DO "as entrusted "ith petitionerRsQ ME/COA;F -hec, oo, containing either signed orunsigned !lan, chec,s$ especially in those times "hen petitionerQ left for the nited tates for medical chec,*up?.efendant Alon&o "as a!le to succeed in inducing the petitioner to sign P; through fraud and deceit? defendant A#O;DOin collusion "ith her co*defendants$ E/E#A -AMA-#A;$ A##A; -AMA-#A; and E/E#/A #EAP li,e"ise aa9le to induce plainti22 to i=n eve!al undated 9lan6 chec6( among "hich areG

/he named defendants*herein respondents filed their respecti+e Ans"ers in+o,ing$ among other grounds fordismissal$ lac, of cause of action$ for "hile the chec,s su!<ect of the complaint had !een issued on account and for +alue$

some had !een dishonored due to KA--O;/ -#OE.?L and the allegations in the complaint are !are and general

/he trial court dismissed petitionerRs complaint for failure Kto allege the ultimate factsL*!ases of petitioners claim that herright "as +iolated and that she suffered damages there!y /he -ourt of Appeals affirmed the trial courtRs decision and heldthat the elements of a cause of action are a!sent in the case and petitioner did not deny the genuineness or authenticityof her signature on the su!<ect promissory notes and the allegedly signed !lan, EG n issue then is "hether petitionerRs complaint failed to state a cause of action

As reflected in the a!o+e*quoted allegations in petitionerRs complaint$ petitioner is see,ing t"in reliefs$ one forre+ocation=cancellation of promissory notes and chec,s$ and the other for damages 7hile some of the allegations may lac, particulars$ and are in the form of conclusions of la"$ the elements of acause of action are present 4or e+en if some are not stated "ith particularity$ petitioner alleged 1: her legal right not to !e

!ound !y the instruments "hich "ere !ereft of consideration and to "hich her consent "as +itiated? 2: the correlati+eo!ligation on the part of the defendants*respondents to respect said right? and : the act of the defendants*respondents inprocuring her signature on the instruments through Kdeceit$L Ka!use of confidenceL Kmachination$L Kfraud$LKfalsification$L Kforgery$L Kdefraudation$L and K!ad faith$L and K"ith malice$ male+olence and selfish intentL

7here the allegations of a complaint are +ague$ indefinite$ or in the form of conclusions$ its dismissal is not properfor the defendant may as, for more particulars

7ith respect to a!o+e*said -hec, ;o 008'0)8$ ho"e+er$ "hich "as dra"n against another account of petitioner$al!eit the date of issue !ears only the year S 1999$ its +alidity and negotia!le character at the time the complaint "as filedon March 28$ 2000 "as not affected 4or ection ( of the ;egotia!le nstruments #a" pro+idesG




ection ( Omission? seal? particular money T The validit4 and ne=otia9le cha!acte! o2 an int!u8ent

a!e not a22ected 94 the 2act that F?a@ It i not dated? or !: .oes not specify the +alue gi+en$ or that any +alue had !een gi+en therefor? or c: .oes notspecify the place "here it is dra"n or the place "here it is paya!le? or d: ears a seal? or e: .esignates a particular,ind of current money in "hich payment is to !e made

o"e+er$ e+en if the holder of -hec, ;o 008'0)8 "ould ha+e filled up the month and day of issue thereon to !eK.ecem!erL and K1$L respecti+ely$ it "ould ha+e$ as it did$ !ecome stale siB (: months or 180 days thereafter$ follo"ingcurrent !an,ing practice t is$ ho"e+er$ "ith respect to the questioned promissory notes that the present petitionassumes merit 4or$ petitionerRs allegations in the complaint relati+e thereto$ e+en if lac,ing particularity$ does not aspriorly stated call for the dismissal of the complaint

NEGOTIATIONCASES:

1. Cead againG Se9!eo v. CA( $$$ SCRA %::;2. Conolidated Pl4ood Inc. v. I/C Leain= +%, SCRA %%33. 5e la icto!ia v. 1on. Bu!=o( $%' SCRA )-%;4. 5evelop8ent Ban6 o2 Ri>al v. Si8a Wei( $+, SCRA -):5. Met!opol ?Bacolod@ /inancin= v. Sa89o6 Moto! Co.( et al.( +$& SCRA 3:%

5e la icto!ia v. Bu!=o "GR ++++,&( $- *une +,,'

/act0 Caul es!reno filed a complaint for damages against Assistant -ity 4iscal ien+enido ; Ma!anto$ 6r$ et al!efore the Cegional /rial -ourt of -e!u -ity After trial 6udgment "as rendered ordering Ma!anto$ et al to pay P11$00000to es!reno /he decision ha+ing !ecome final and eBecutory$ on motion of the latter$ the trial court ordered its eBecution/his order "as questioned !y Ma!anto$ et al !efore the -ourt of Appeals o"e+er$ on 15 6anuary 1992 a "rit ofeBecution "as issued On ' 4e!ruary 1992 a notice of garnishment "as ser+ed on #oreto . de la Uictoria as -ity 4iscaof Mandaue -ity "here Ma!anto$ 6r$ "as then detailed /he ;otice directed .e la Uictoria not to dis!urse$ transfer$release or con+ey to any other person eBcept to the deputy sheriff concerned the salary chec,s$ monies$ or cash due or!elonging to Ma!anto$ 6r$ under penalty of la" On 10 March 1992 es!reno filed a motion !efore the trial court for

eBamination of the garnishees On 25 May 1992 the petition pending !efore the -ourt of Appeals "as dismissed /hus thetrial court$ finding no more legal o!stacle to act on the motion for eBamination of the garnishees$ directed .e la Uictoria on' ;o+em!er 1992 to su!mit his report sho"ing the amount of the garnished salaries of Ma!anto$ 6r$ "ithin 15 days fromreceipt ta,ing into consideration the pro+isions of ec 12$ pars f: and i:$ Cule 9 of the Cules of -ourt On 2';o+em!er 1992 es!reno filed a motion to require .e la Uictoria to eBplain "hy he should not !e cited in contempt ofcourt for failing to comply "ith the order of ' ;o+em!er 1992 On the other hand$ on 19 6anuary 199 .e la Uictoriamo+ed to quash the notice of garnishment claiming that he "as not in possession of any money$ funds$ credit$ property oranything of +alue !elonging to Ma!anto$ 6r$ until deli+ered to him e further claimed that$ as such$ they "ere still pu!licfunds "hich could not !e su!<ect to garnishment On 9 March 199 the trial court denied !oth motions and ordered .e laUictoria to immediately comply "ith its order of ' ;o+em!er 1992 t opined that the chec,s of Ma!anto$ 6r$ had already!een released through .e la Uictoria !y the .epartment of 6ustice duly signed !y the officer concerned? that upon ser+iceof the "rit of garnishment$ .e la Uictoria as custodian of the chec,s "as under o!ligation to hold them for the <udgmentcreditor? that .e la Uictoria !ecame a +irtual party to$ or a forced inter+enor in$ the case and the trial court here!y

acquired <urisdiction to !ind him to its orders and processes "ith a +ie" to the complete satisfaction of the <udgment? andthat additionally there "as no sufficient reason for .e la Uictoria to hold the chec,s !ecause they "ere no longergo+ernment funds and presuma!ly deli+ered to the payee$ conforma!ly "ith the last sentence of ection 1( of the;egotia!le nstruments #a" 7ith regard to the contempt charge$ the trial court "as not morally con+inced of .e laUictoria3s guilt On 20 April 199 the motion for reconsideration "as denied .e la Uictoria filed the petition

Iue0 7hether a chec, still in the hands of the ma,er or its duly authori&ed representati+e is o"ned !y the payee !eforephysical deli+ery to the latter

1eld0 arnishment is considered as a species of attachment for reaching credits !elonging to the 6udgment de!tor o"ingto him from a stranger to the litigation As Assistant -ity 4iscal$ the source of the salary of Ma!anto$ 6r$ is pu!lic funds e




recei+es his compensation in the form of chec,s from the .epartment of 6ustice through .e la Uictoria as -ity 4iscal ofMandaue -ity and head of office nder ection 1( of the ;egotia!le nstruments #a"$ e+ery contract on a negotia!leinstrument is incomplete and re+oca!le until deli+ery of the instrument for the purpose of gi+ing effect thereto As ordinarilyunderstood$ deli+ery means the transfer of the possession of the instrument !y the ma,er or the dra"er "ith intent totransfer title to the payee and recogni&e him as the holder thereof nasmuch as said chec,s had not yet !een deli+eredto Ma!anto$ 6r$ they did not !elong to him and still had the character of pu!lic funds As held in /iro + ontanosas$ @thesalary chec, of a go+ernment officer or employee such a s a teacher does not !elong to him !efore it is physicallydeli+ered to him ntil that time the chec, !elongs to the go+ernment Accordingly$ !efore there is actual deli+ery of thechec,$ the payee has no po"er o+er it? he cannot assign it "ithout the consent of the o+ernment@ As a necessaryconsequence of !eing pu!lic fund$ the chec,s may not !e garnished to satisfy the <udgment /he rationale !ehind thisdoctrine is o!+ious consideration of pu!lic policy /he -ourt succinctly stated in -ommissioner of Pu!lic igh"ays + an.iego that @the functions and pu!lic ser+ices rendered !y the tate cannot !e allo"ed to !e paraly&ed or disrupted !y thedi+ersion of pu!lic funds from their legitimate and specific o!<ects$ as appropriated !y la"@ /he trial court eBceeded its

<urisdiction in issuing the notice of garnishment concerning the salary chec,s of Ma!anto$ 6r$ in the possession of .e laUictoria

5evelop8ent Ban6 o2 Ri>al v. Si8a Wei "GR 3'%+,( , Ma!ch +,,)

/act0 n consideration for a loan eBtended !y the .e+elopment an, of Ci&al .C: to ima 7ei$ the latter eBecuted anddeli+ered to the former a promissory note$ engaging to pay .C or order the amount of P1$820$00000 on or !efore 2'6une 198 "ith interest at 2> per annum ima 7ei made partial payments on the note$ lea+ing a !alance ofP1$02$'5002 On 18 ;o+em!er 198$ ima 7ei issued t"o crossed chec,s paya!le to .C dra"n against -hinaan,ing -orporation$ !earing respecti+ely the serial num!ers 8'9'$ for the amount of P550$00000 and 8'95$ for theamount of P500$00000 /he said chec,s "ere allegedly issued in full settlement of the dra"er3s account e+idenced !y thepromissory note /hese t"o chec,s "ere not deli+ered to .C or to any of its authori&ed representati+es 4or reasons notsho"n$ these chec,s came into the possession of #ee Fian uat$ "ho deposited the chec,s "ithout .C3s indorsementforged or other"ise: to the account of the Asian ndustrial Plastic -orporation$ at the alinta"a, !ranch$ -aloocan -ity$ ofthe Producers an, -heng y$ ranch Manager of the alinta"a, ranch of Producers an,$ relying on the assuranceof amson /ung$ President of Plastic -orporation$ that the transaction "as legal and regular$ instructed the cashier ofProducers an, to accept the chec,s for deposit and to credit them to the account of said Plastic -orporation$ inspite ofthe fact that the chec,s "ere crossed and paya!le to .C and !ore no indorsement of the latter On 5 6uly 198($ .Cfiled the complaint for a sum of money against ima 7ei and=or #ee Fian uat$ Mary -heng y$ amson /ung$ Asianndustrial Plastic -orporation and the Producers an, of the Philippines$ on t"o causes of action# 1: /o enforce paymentof the !alance of P1$02$'5002 on a promissory note eBecuted !y ima 7ei on 9 6une 198? and 2: /o enforce paymentof t"o chec,s eBecuted !y ima 7ei$ paya!le to .C$ and dra"n against the -hina an,ing -orporation$ to pay the!alance due on the promissory note EBcept for #ee Fian uat$ ima 7ei$ et al filed their separate Motions to .ismiss

alleging a common ground that the complaint states no cause of action /he trial court granted the Motions to .ismiss/he -ourt of Appeals affirmed the decision$ to "hich .C$ represented !y its #egal #iquidator$ filed the Petition for Ce+ie"!y -ertiorari

Iue0 7hether .C$ as the intended payee of the instrument$ has a cause of action against any or all of the defendantsin the alternati+e or other"ise

1eld0 /he normal parties to a chec, are the dra"er$ the payee and the dra"ee !an, -ourts ha+e long recogni&ed the!usiness custom of using printed chec,s "here !lan,s are pro+ided for the date of issuance$ the name of the payee$ theamount paya!le and the dra"er3s signature All the dra"er has to do "hen he "ishes to issue a chec, is to properly fill upthe !lan,s and sign it o"e+er$ the mere fact that he has done these does not gi+e rise to any lia!ility on his part$ untiland unless the chec, is deli+ered to the payee or his representati+e A negotia!le instrument$ of "hich a chec, is$ is notonly a "ritten e+idence of a contract right !ut is also a species of property 6ust as a deed to a piece of land must !e

deli+ered in order to con+ey title to the grantee$ so must a negotia!le instrument !e deli+ered to the payee in order toe+idence its eBistence as a !inding contract ection 1( of the ;egotia!le nstruments #a"$ "hich go+erns chec,spro+ides in part that @E+ery contract on a negotia!le instrument is incomplete and re+oca!le until deli+ery of theinstrument for the purpose of gi+ing effect thereto@ /hus$ the payee of a negotia!le instrument acquires no interest "ithrespect thereto until its deli+ery to him .eli+ery of an instrument means transfer of possession$ actual or constructi+e$from one person to another 7ithout the initial deli+ery of the instrument from the dra"er to the payee$ there can !e nolia!ility on the instrument Moreo+er$ such deli+ery must !e intended to gi+e effect to the instrument erein$ the t"o 2:-hina an, chec,s$ num!ered 8'9' and 8'95$ "ere not deli+ered to the payee$ .C 7ithout the deli+ery of saidchec,s to .C$ the former did not acquire any right or interest therein and cannot therefore assert any cause of action$founded on said chec,s$ "hether against the dra"er ima 7ei or against the Producers an, or any of the otherrespondents ince .C ne+er recei+ed the chec,s on "hich it !ased its action against said respondents$ it ne+er o"ned




them the chec,s: nor did it acquire any interest therein /hus$ anything "hich the respondents may ha+e done "ithrespect to said chec,s could not ha+e pre<udiced .C t had no right or interest in the chec,s "hich could ha+e !een+iolated !y said respondents .C has therefore no cause of action against said respondents$ in the alternati+e orother"ise f at all$ it is ima 7ei$ the dra"er$ "ho "ould ha+e a cause of action against her co*respondents$ if theallegations in the complaint are found to !e true

Met!opol ?Bacolod@ /inancin= 7 Invet8ent Co!po!ation v. Sa89o6 Moto! Co. "GR L#),:%+( $3 /e9!ua!4 +,3)

/act0 On 15 April 19(9 .r 6a+ier Uillaruel eBecuted a promissory note in fa+or of ;g am!o, ons Motors -o$ #td$ inthe amount of P15$9900 paya!le in 12 equal monthly installments$ !eginning 18 May 19(9$ "ith interest at the rate of1> per month t is further pro+ided that in case on non*payment of any of the installments$ the total principal sum thenremaining unpaid shall !ecome due and paya!le "ith an additional interest equal to 25> of the total amount due On thesame date$ am!o, Motors -ompany$ a sister company of ;g am!o, ons Motors -o$ #td$ and under the samemanagement as the former$ negotiated and indorsed the note in fa+or of Metropol 4inancing I n+estment -orporation"ith the follo"ing indorsementG @Pay to the order of Metropol acolod 4inancing I n+estment -orporation "ith recourse;otice of .emand? .ishonor? Protest? and Presentment are here!y "ai+ed AMOF MO/OC -O A-O#O.: yGCO.O#4O ;O;##O$ Asst eneral Manager@ /he ma,er$ .r Uillaruel defaulted in the payment of his installments"hen they !ecame due$ so on 0 Octo!er 19(9$ Metropol formally presented the promissory note for payment to thema,er .r Uillaruel failed to pay the promissory note as demanded$ hence Metropol notified am!o, as indorsee of saidnote of the fact that the same has !een dishonored and demanded payment am!o, failed to pay$ so on 2( ;o+em!er19(9 Metropol filed a complaint for collection of a sum of money !efore the -ourt of 4irst nstance of loilo$ ranch am!o, did not deny its lia!ility !ut contended that it could not !e o!liged to pay until after its co*defendant .r Uillaruel$has !een declared insol+ent .uring the pendency of the case in the trial court$ .r Uillaruel died$ hence$ on 2' Octo!er19)2 the lo"er court$ on motion$ dismissed the case against .r Uillaruel pursuant to ection 21$ Cule of the Cules of-ourt On Metropol3s motion for summary <udgment$ the trial court rendered its decision dated 12 eptem!er 19)ordering am!o, to pay to Metropol the sum of P15$9900 plus the legal rate of interest from 0 Octo!er 19(9? the sumequi+alent to 25> of P15$9900 plus interest thereon until fully paid? and to pay the cost of suit ;ot satisfied "ith thedecision$ am!oc appealed am!o, argue that !y adding the "ords @"ith recourse@ in the indorsement of the note$ it!ecomes a qualified indorser? that !eing a qualified indorser$ it does not "arrant that if said note is dishonored !y thema,er on presentment$ it "ill pay the amount to the holder? that it only "arrants the follo"ing pursuant to ection (5 of the;egotia!le nstruments #a"G a: that the instrument is genuine and in all respects "hat it purports to !e? !: that he has agood title to it? c: that all prior parties had capacity to contract? d: that he has no ,no"ledge of any fact "hich "ouldimpair the +alidity of the instrument or render it +alueless

Iue0 7hether am!o, is a qualified indorser of the su!<ect promissory note

1eld0 A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument t may !e made !yadding to the indorser3s signature the "ords @"ithout recourse@ or any "ords of similar import uch an indorsementrelie+es the indorser of the general o!ligation to pay if the instrument is dishonored !ut not of the lia!ility arising from"arranties on the instrument as pro+ided in ection (5 of the ;egotia!le nstruments #a" o"e+er$ am!o, indorsed thenote @"ith recourse@ and e+en "ai+ed the notice of demand$ dishonor$ protest and presentment @Cecourse@ means resortto a person "ho is secondarily lia!le after the default of the person "ho is primarily lia!le am!o,$ !y indorsing the note@"ith recourse@ does not ma,e itself a qualified indorser !ut a general indorser "ho is secondarily lia!le$ !ecause !y suchindorsement$ it agreed that if .r Uillaruel fails to pay the note$ Metropol can go after am!o, /he effect of suchindorsement is that the note "as indorsed "ithout qualification A person "ho indorses "ithout qualification engages thaton due presentment$ the note shall !e accepted or paid$ or !oth as the case may !e$ and that if it !e dishonored$ he "ilpay the amount thereof to the holder am!o,3s intention of indorsing the note "ithout qualification is made e+en more

apparent !y the fact that the notice of demand$ dishonor$ protest and presentment "ere all "ai+ed /he "ords added !yam!o, do not limit his lia!ility$ !ut rather confirm his o!ligation as a general indorser 4urther$ after an instrument isdishonored !y non*payment$ the person secondarily lia!le thereon ceases to !e such and !ecomes a principal de!tor islia!ility !ecomes the same as that of the original o!ligor -onsequently$ the holder need not e+en proceed against thema,er !efore suing the indorser




O#.EC

1. 5e Oca8po v. Gatchalian( &) SCRA ',:;2. Dan= v. CA( G.R. No. +)3&-%( Au=ut +'( $&&);3. Meina v. IAC( +%' SCRA %,-

5e Oca8po v. Gatchalian "GR L#+'+$:( )& Nove89e! +,:+

/act0 On or a!out 8 eptem!er 195$ in the e+ening$ Anita - atchalian "ho "as then interested in loo,ing for a car forthe use of her hus!and and the family$ "as sho"n and offered a car !y Manuel on&ales "ho "as accompanied !y Emil4a<ardo$ the latter !eing personally ,no"n to atchalian on&ales represented to atchalian that he "as duly authori&ed!y the o"ner of the car$ Ocampo -linic$ to loo, for a !uyer of said car and to negotiate for and accomplish said saleatchalian$ finding the price of the car quoted !y on&ales to her satisfaction$ requested on&ales to !ring the car theday follo"ing together "ith the certificate of registration of the car$ so that her hus!and "ould !e a!le to see same Onthis request of atchalian$ on&ales ad+ised her that the o"ner of the car "ill not !e "illing to gi+e the certificate of registration unless there is a sho"ing that the party interested in the purchase of said car is ready and "illing to ma,esuch purchase and that for this purpose on&ales requested atchalian to gi+e him a chec, "hich "ill !e sho"n to theo"ner as e+idence of !uyer3s good faith in the intention to purchase the said car$ the said chec, to !e for safe,eeping only

of on&ales and to !e returned to atchalian the follo"ing day "hen on&ales !rings the car and the certificate ofregistration Celying on these representations of on&ales and "ith this assurance that said chec, "ill !e only forsafe,eeping and "hich "ill !e returned to atchalian the follo"ing day "hen the car and its certificate of registration "ill!e !rought !y on&ales to atchalian$ atchalian dre" and issued a chec, that on&ales eBecuted and issued a receiptfor said chec, On the failure of on&ales to appear the day follo"ing and on his failure to !ring the car and its certificateof registration and to return the chec, on the follo"ing day as pre+iously agreed upon$ atchalian issued a @top PaymentOrder@ on the chec, "ith the dra"ee !an, 7hen on&ales recei+ed the chec, from atchalian under the representationsand conditions a!o+e specified$ he deli+ered the same to the Ocampo -linic$ in payment of the fees and eBpenses arisingfrom the hospitali&ation of his "ife Uicente C .e Ocampo I -o for and in consideration of fees and eBpenses ofhospitali&ation and the release of the "ife of on&ales from its hospital$ accepted said chec,$ applying P''1)5 thereof topayment of said fees and eBpenses and deli+ering to on&ales the amount of P15825 representing the !alance on theamount of the said chec, /he acts of acceptance of the chec, and application of its proceeds in the manner specified"ere made "ithout pre+ious inquiry !y .e Ocampo from atchalian .e Ocampo filed "ith the Office of the -ity 4iscal ofManila$ a complaint for estafa against on&ales !ased on and arising from the acts of on&ales in paying his o!ligations"ith .e Ocampo and recei+ing the cash !alance of the chec, and that said complaint "as su!sequently dropped

.e Ocampo su!sequently filed an action for the reco+ery of the +alue of a chec, for P(00 paya!le to .e Ocampo anddra"n !y atchalian /he -ourt of 4irst nstance of Manila$ through on -onrado M Uasque&$ presiding$ sentencedatchalian and on&ales to pay .e Ocampo the sum of P(00$ "ith legal interest from 10 eptem!er 195 until paid$ andto pay the costs atchalian$ et al appealed

Iue "+0 7hether .e Ocampo is a holder in due course

1eld "+0 ;O ection 52$ ;egotia!le nstruments #a"$ defines holder in due course as @A holder in due course is a holder"ho has ta,en the instrument under the follo"ing conditionsG a: /hat it is complete and regular upon its face? !: /hat he!ecame the holder of it !efore it "as o+erdue$ and "ithout notice that it had !een pre+iously dishonored$ if such "as thefact? c: /hat he too, it in good faith and for +alue? d: /hat at the time it "as negotiated to him he had no notice of any

infirmity in the instrument or defect in the title of the person negotiating it@ Although .e Ocampo "as not a"are of thecircumstances under "hich the chec, "as deli+ered to on&ales$ the circumstances ** such as the fact that atchalianhad no o!ligation or lia!ility to the Ocampo -linic$ that the amount of the chec, did not correspond eBactly "ith theo!ligation of Matilde on&ales to .r U C de Ocampo? and that the chec, had t"o parallel lines in the upper left handcorner$ "hich practice means that the chec, could only !e deposited !ut may not !e con+erted into cash H* should ha+eput .e Ocampo to inquiry as to the "hy and "herefore of the possession of the chec, !y on&ales$ and "hy he used it topay Matilde3s account t "as payee3s duty to ascertain from the holder on&ales "hat the nature of the latter3s title to thechec, "as or the nature of his possession a+ing failed in this respect$ .e Ocampo "as guilty of gross neglect in notfinding out the nature of the title and possession of on&ales$ amounting to legal a!sence of good faith$ and it may not !econsidered as a holder of the chec, in good faith




Iue "$0 7hether the rule that a possessor of the instrument is prima facie a holder in due course applies

1eld "$0 /he rule that a possessor of the instrument is prima facie a holder in due course does not apply !ecause there"as a defect in the title of the holder Manuel on&ales:$ !ecause the instrument is not paya!le to him or to !earer Onthe other hand$ the stipulation of facts ** li,e the fact that the dra"er had no account "ith the payee? that the holder did notsho" or tell the payee "hy he had the chec, in his possession and "hy he "as using it for the payment of his o"npersonal account H* sho" that holder3s title "as defecti+e or suspicious$ to say the least As holder3s title "as defecti+e orsuspicious$ it cannot !e stated that the payee acquired the chec, "ithout ,no"ledge of said defect in holder3s title$ and forthis reason the presumption that it is a holder in due course or that it acquired the instrument in good faith does not eBist

And ha+ing presented no e+idence that it acquired the chec, in good faith$ it payee: cannot !e considered as a holder indue course n other "ords$ under the circumstances of the case$ instead of the presumption that payee "as a holder ingood faith$ the fact is that it acquired possession of the instrument under circumstances that should ha+e put it to inquiryas to the title of the holder "ho negotiated the chec, to it /he !urden "as$ therefore$ placed upon it to sho" thatnot"ithstanding the suspicious circumstances$ it acquired the chec, in actual good faith

Dan= v. Cou!t o2 Appeal "GR +)3&-%( +' Au=ut $&&)

4actsG .ecem!er 22$ 198)G -ely ang and Prem -handiramani entered into an agreement "here!y ang "as to gi+e2 P208)M P- managers chec, in the amount of P'2 million !oth paya!le to the order of 4ernando .a+id ang and-handiramani agreed that the difference of P2(F in the eBchange "ould !e their profit to !e di+ided equally !et"eenthem ang and -handiramani also further agreed that the ang "ould secure from 4E/- a dollar draft in the amount ofV200F$ paya!le to P- 4-. Account ;o '195*011(5*2$ "hich -handiramani "ould eBchange for another dollardraft in the same amount to !e issued !y ang eng an, #td of ong Fong .ecem!er 22$ 198)$ ang procured the ffGa: Equita!le -ashiers -hec, ;o --P 1'*009'() in the sum of P2$08)$00000$ dated .ecem!er 22$ 198)$ paya!le tothe order of 4ernando .a+id?!: 4E/- -ashiers -hec, ;o 28)0)8$ in the amount of P2$08)$00000$ dated .ecem!er 22$ 198)$ li,e"ise paya!le tothe order of 4ernando .a+id? andc: 4E/- .ollar .raft ;o '))1$ dra"n on -hemical an,$ ;e" or,$ in the amount of V200$00000$ dated .ecem!er22$ 198)$ paya!le to P- 4-. Account ;o '195*011(5*2.ecem!er 22$ 198) 1 pmG ang ga+e the cashiers chec,s and dollar drafts to her !usiness associate$ Al!ert #iong$ to !edeli+ered to -handiramani !y #iongs messenger$ .anilo CanigoCanigo "as to meet -handiramani at 2 pm at Philippine /rust an,$ Ayala A+enue$ Ma,ati "here he "ould turn o+erangs cashiers chec,s and dollar draft to -handiramani "ho$ in turn$ "ould deli+er to Canigo a P- managers chec, inthe sum of P'2 million and a ang eng an, dollar draft for V200F in eBchange !ut -handiramani did not appear.ecem!er 22$ 198) ' pmG Canigo reported the alleged loss of the chec,s and the dollar draft to #iong #iong$ in turninformed ang$ and the loss "as then reported to the police

-handiramani "as a!le to get hold of the instruments-handiramani deli+ered the 2 cashiers chec,s to 4ernando .a+id at -hina an,ing -orporation !ranch in an 4ernando-ity$ Pampangan eBchange$ he got V(0F from .a+id$ "hich he deposited in the sa+ings account of his "ife$ Pushpa? and his motherCani Ceynandas$ "ho held 4-. Account ;o 12' "ith the nited -oconut Planters an, !ranch in reenhillse also deposited 4E/- .ollar .raft ;o '))1$ dated .ecem!er 22$ 198)$ dra"n upon the -hemical an,$ ;e" or,for V200F in P- 4-. Account ;o '195*011(5*2 on the same dateang requested 4E/- and Equita!le to stop payment on the instruments she !elie+ed to !e lostoth !an,s complied "ith her requestang filed against .a+id and -handiramani-A affirms C/-G in fa+or of .a+id

Iue0 7hether .a+id "as a holder in due course

1eld0 E+ery holder of a negotia!le instrument is deemed prima facie a holder in due course o"e+er$ this presumption

arises only in fa+or of a person "ho is a holder as defined in ection 191 of the ;egotia!le nstruments #a"$ meaning a@payee or indorsee of a !ill or note$ "ho is in possession of it$ or the !earer thereof@ erein$ it is not disputed that .a+id"as the payee of the chec,s in question /he "eight of authority sustains the +ie" that a payee may !e a holder in duecourse ence$ the presumption that he is a prima facie holder in due course applies in his fa+or o"e+er$ saidpresumption may !e re!utted ence$ "hat is +ital to the resolution of this issue is "hether .a+id too, possession of thechec,s under the conditions pro+ided for in ection 52 of the ;egotia!le nstruments #a" All the requisites pro+ided for inection 52 must concur in .a+id3s case$ other"ise he cannot !e deemed a holder in due course ang3s challenge to.a+id3s status as a holder in due course hinges on t"o argumentsG 1: the lac, of proof to sho" that .a+id tendered any+alua!le consideration for the disputed chec,s? and 2: .a+id3s failure to inquire from -handiramani as to ho" the latteracquired possession of the chec,s$ thus resulting in .a+id3s intentional ignorance tantamount to !ad faith n sum$ ang




posits that the last t"o requisites of ection 52 are missing$ there!y pre+enting .a+id from !eing considered a holder indue course nfortunately for ang$ her arguments on this score are less than meritorious and far from persuasi+e

MESINA . IAC +%' SCRA %,-

4A-/G 6ose o purchased from Associate an, a -ashierRs -hec,$ "hich he left on top of the managerRs des,"hen left the !an, /he !an, manager then had it ,ept for safe,eeping !y one of its employees /heemployee "as then in conference "ith one AleBander #im e left the chec, in his des,

and upon his return$ #im and the chec, "ere gone 7hen o inquired a!out his chec,$ the same couldn3t !efound and o "as ad+ised to request for the stoppage of payment "hich he did e eBecuted also an affida+it of loss as"ell as reported it to the police

/he !an, then recei+ed the chec, t"ice for clearing 4or these t"o times$ they dishonored the payment !y saying thatpayment has !een stopped After the second time$ a la"yer contacted it demanding payment e refused todisclose the name of his client and threatened to sue #ater$ thename of Mesina "as re+ealed 7hen as,ed !y the police on ho" he possessed the chec,$ he said it "as paidto him #im An information for theft "as then filed against #im

A case of interpleader "as filed !y the !an, and o mo+ed to participate as inter+enor in the complaint fordamages Mesina mo+ed for the dismissal of the case !ut "as denied /he trial court ruled in the interpleadercase ordering the!an, to replace the cashierRs chec, in fa+or of o

E#.G Petitioner cannot raise as arguments that a cashierRs chec, cannot !e countermanded from the hands ofa holder in due course and that a cashierRs chec, is a chec, dra"n !y the !an, against itself Petitioner failedto su!stantiate that he "as a holder in due course ponquestioning$ he admitted that he got the chec, from #im "ho stole the chec, e refused to disclose ho" and "hyit has passed to him t simply means that he has notice of the defect of his title o+er the chec, from the start /heholder of a cashierRs chec, "ho is not a holder in due coursecannot enforce payment against the issuing !an, "hich dishonors the same f a payee of a cashierRs chec,o!tained it from the issuing !an, !y fraud$ or if there is some other reason "hy the payee is not entitled to collectthe chec,$ the !an, "ould of course ha+e the right to refusepayment of the chec, "hen presented !y payee$ since the !an, "as a"are of the facts surrounding the loss of the chec,in question.

LIABILITD O/ PARTIESCASES:

*. C!iolo=o#*oe v. CA( Sept. +'( +,3,;+. Sada4a v. Sevilla( +, SCRA ,$%;". T!avel#On v. CA( $+& SCRA )'$;. A=!o#Con=lo8e!ate Inc. v. CA( )%3 SCRA )'&;. Gon>ale v. RCBC( $, Nove89e! $&&:;. An= v. Aociated Ban6( &' Septe89e! $&&-;. /a! Eat v. Gold Palace *eel!4( G.R. No. +:3$-%( Au=ut $&( $&&3

C!iolo=o#*oe v. Cou!t o2 Appeal "GR 3&',,( +' Septe89e! +,3,

/act0 n 1980$ Cicardo antos$ 6r "as the +ice*president of Mo+er Enterprises$ nc in*charge of mar,eting and salesand the president of the said corporation "as Atty Oscar D enares On 0 April 1980$ Atty enares$ in accommodationof his clients$ the spouses 6aime and -larita Ong$ issued -hec, 0955 dra"n against /raders Coyal an,$ dated 1'6une 1980$ in the amount of P'5$00000 paya!le to Ernestina -risologo*6ose ince the chec, "as under the account ofMo+er Enterprises$ nc$ the same "as to !e signed !y its president$ Atty Oscar D enares$ and the treasurer of the saidcorporation o"e+er$ since at that time$ the treasurer of Mo+er Enterprises "as not a+aila!le$ Atty enares pre+ailedupon antos to sign the aforesaid chec, as an alternate signatory antos did sign the chec, /he chec, "as issued to-risologo*6ose in consideration of the "ai+er or quitclaim !y -risologo*6ose o+er a certain property "hich theo+ernment er+ice nsurance ystem : agreed to sell to the clients of Atty enares$ the spouses Ong$ "ith the




understanding that upon appro+al !y the of the compromise agreement "ith the spouses Ong$ the chec, "ill !eencashed accordingly o"e+er$ since the compromise agreement "as not appro+ed "ithin the eBpected period of time$the aforesaid chec, for P'5$00000 "as replaced !y Atty enares "ith another /raders Coyal an, chec, !earing)9299 dated 10 August 1980$ in the same amount of P'5$00000$ also paya!le to -risologo*6ose /his replacementchec, "as also signed !y Atty enares and !y antos 7hen -risologo*6ose deposited this replacement chec, "ith heraccount at 4amily a+ings an,$ Mayon ranch$ it "as dishonored for insufficiency of funds A su!sequent redepositing ofthe said chec, "as li,e"ise dishonored !y the !an, for the same reason ence$ -risologo*6ose through counsel "asconstrained to file a criminal complaint for +iolation of atas Pam!ansa 22 P22: "ith the %ue&on -ity 4iscal3s Officeagainst Atty enares and antos /he in+estigating Assistant -ity 4iscal$ Alfonso #lamas$ accordingly filed an amendedinformation "ith the court charging !oth enares and antos for +iolation of P 22 -riminal -ase %*1'8(): of then -ourtof 4irst nstance of Ci&al$ %ue&on -ity

Mean"hile$ during the preliminary in+estigation of the criminal charge against enares and antos$ !efore Assistant -ity4iscal #lamas$ antos tendered cashier3s chec, -- 1(0152 for P'5$00000 dated 10 April 1981 to -risologo*6ose$ thecomplainant in that criminal case -risologo*6ose refused to recei+e the cashier3s chec, in payment of the dishonoredchec, in the amount of P'5$00000 ence$ antos encashed the aforesaid cashier3s chec, and su!sequently depositedsaid amount of P'5$00000 "ith the -ler, of -ourt on 1' August 1981 ncidentally$ the cashier3s chec, ad+erted to a!o+e"as purchased !y Atty enares and gi+en to antos to !e applied in payment of the dishonored chec, After trial$ thecourt a quo$ holding that it "as @not persuaded to !elie+e that consignation referred to in Article 125( of the -i+il -ode isapplica!le to this case$@ rendered <udgment dismissing antos3 complaint for consignation and -risologo*6ose3scounterclaim On appeal and on 8 eptem!er 198)$ the appellate court re+ersed and set aside said <udgment ofdismissal and re+i+ed the complaint for consignation$ directing the trial court to gi+e due course thereto -risologo*6osefiled the petition

Iue "+0 7hether antos$ as an accommodation party$ is lia!le thereon under the ;egotia!le nstruments #a"

1eld "+0 ection 29 #ia!ility of accommodation party: of the ;egotia!le nstruments #a" pro+ides that @Anaccommodation party is one "ho has signed the instrument as ma,er$ dra"er$ acceptor$ or indorser$ "ithout recei+ing+alue therefor$ and for the purpose of lending his name to some other person uch a person is lia!le on the instrument toa holder for +alue$ not"ithstanding such holder$ at the time of ta,ing the instrument$ ,ne" him to !e only anaccommodation party@ -onsequently$ to !e considered an accommodation party$ a person must 1: !e a party to theinstrument$ signing as ma,er$ dra"er$ acceptor$ or indorser$ 2: not recei+e +alue therefor$ and : sign for the purpose oflending his name for the credit of some other person ased on the foregoing requisites$ it is not a +alid defense that theaccommodation party did not recei+e any +alua!le consideration "hen he eBecuted the instrument 4rom the standpointof contract la"$ he differs from the ordinary concept of a de!tor therein in the sense that he has not recei+ed any +alua!leconsideration for the instrument he signs ;e+ertheless$ he is lia!le to a holder for +alue as if the contract "as not for

accommodation$ in "hate+er capacity such accommodation party signed the instrument$ "hether primarily or secondarily/hus$ it has !een held that in lending his name to the accommodated party$ the accommodation party is in effect a suretyfor the latter

Sada4a v. Sevilla( +, SCRA ,$%

/ACTS0adaya$ e+illa and Uarona signed solidarily a promissory note in fa+or of the !an, Uarona "as the only one "horecei+ed the proceeds of the note adaya and e+illa !oth signed as co*ma,ers to accommodate Uarona/hereafter$ the !an, collected from adaya Uarona failed to reim!urse

-onsequently$ e+illa died and intestate estate proceedings "ere esta!lished adaya filed a creditorRs claim onhis estate for the payment he made on the note /he administrator resisted the claim on the ground that e+illa didn3trecei+e any proceeds of the loan /he trial court admitted the claim of adaya though tis "as re+ersed !y the -A

E#.Gadaya could ha+e sought reim!ursement from Uarona$ "hich is right and <ust as the latter "as the only one "horecei+ed +alue for the note eBecuted /here is an implied contract of indemnity !et"een adaya and Uarona upon theformerRs payment of the o!ligation to the !an,

urely enough$ the o!ligations of Uarona and e+illa to adaya cannot !e <oint and se+eral 4or indeed$ had payment!een made !y Uarona$ Uarona couldn3t had reason to see, reim!ursement from either adaya or e+illa After all$ theproceeds of the loan "ent to Uarona alone




On principle$ a solidary accommodation ma,erH"ho made paymentHhas the right to contri!ution$ from his co*accomodation ma,er$ in the a!sence of agreement to the contrary !et"een them$ su!<ect to conditions imposed !y la"/his right springs from an implied promise to share equally the!urdens they may ensue from their ha+ing consented to stamp their signatures on the promissory note

/he follo"ing are the rulesG1 A <oint and se+eral accommodation ma,er of a negotia!le promissory note may demand from theprincipal de!tor reim!ursement for the amount that he paid to the payee2 A <oint and se+eral accommodation ma,er "ho pays on the said promissory note may directly demandreim!ursement from his co*accommodation ma,er "ithout first directing his action against theprincipal de!tor pro+ided thata e made the payment !y +irtue of a <udicial demand! A principal de!tor is insol+entt "as ne+er sho"n that there "as a <udicial demand on adaya to pay the o!ligation and also$ it "as ne+er pro+en thatUarona "as insol+ent /hus$ adaya cannot proceed against e+illa for reim!ursement

TRAEL ON . CA $+& SCRA )'+

4A-/G Petitioner "as a tra+el agency in+ol+ed in tic,et sales on a commission !asis for and on !ehalf ofdifferent airline companies Miranda has a re+ol+ing credit line "ith the company e procured tic,ets on!ehalf of others and deri+ed commissions from it Petitioner filed a collection suit against Miranda for the unpaidamount of siB chec,s Petitioner alleged that Miranda procured tic,ets from them "hich he paid "ith cash andchec,s !ut the chec,s "ere dishonored upon presentment to the !an, /his "as !eing refuted !y Miranda !ysaying that he actually paid for his o!ligations$ e+en in the eBcess e argued that the chec,s "ere foraccommodation purposes only /he company needed to sho" to its oard of .irectors that its accounts recei+a!le"as in good standing /he C/- and -A held Miranda not to !e lia!le

E#.G Celiance !y the lo"er and appellate court on the companyRs financial statements "ere "rong$ to see ifMiranda "as lia!le or not /his financial statements "ere actually not updated to sho" that there "as inde!tedness onthe part of Miranda /he !est e+idence that the courts should ha+e loo,ed at "ere the chec,s itself /here is aprima facie presumption that a chec, "as issued for +alua!le consideration and the pro+ision puts the !urden uponthe dra"er to dispro+e this presumption Miranda "as una!le to relie+e himself of this !urden Only clear and con+incinge+idence and not mere self*ser+ing e+idence of dra"er can re!ut this presumption /he company "as entitled tothe !enefit conferred !y the statutory pro+ision Miranda failed to sho" that the chec,s "erenRt issued for any+alua!le consideration /he chec,s "ere clear !y stating that the company "as the payee and not a mereaccommodated party And also$ notice "as gi+en to the fact that the chec,s "ere issued after a "rittendemand !y the company regarding MirandaRs unpaid lia!ilities

TOMAS ANG( petitione!( v. ASSOCIATE5 BANH AN5 ANTONIO ANG ENG LIONG( !epondent.

4A-/G

On August 28$ 1990$ respondent Associated an, formerly Associated an,ing -orporation and no" ,no"n as nitedO+erseas an, Philippines: filed a collection suit against Antonio Ang Eng #iong and petitioner /omas Ang for the t"o 2:promissory notes that they eBecuted as principal de!tor and co*ma,er$ respecti+ely .espite repeated demands forpayment$ the latest of "hich "ere on eptem!er 1$ 1988 and eptem!er 9$ 198($ on Antonio Ang Eng #iong and /omas

Ang$ respecti+ely$ respondent an, claimed that the defendants failed and refused to settle their o!ligation$ resulting in atotal inde!tedness of P59$(89( as of 6uly 1$ 1990

Petitioner /omas Ang filed an Ans"er "ith -ounterclaim and -ross*claim8 e interposed the affirmati+e defenses thatGthe !an, is not the real party in interest as it is not the holder of the promissory notes$ much less a holder for +alue or aholder in due course? the !an, ,ne" that he did not recei+e any +alua!le consideration for affiBing his signatures on thenotes !ut merely lent his name as an accommodation party? he accepted the promissory notes in !lan,$ "ith only the


http://www.lawphil.net/judjuris/juri2007/sep2007/gr_146511_2007.html#fnt8




printed pro+isions and the signature of Antonio Ang Eng #iong appearing therein? it "as the !an, "hich completed thenotes upon the orders$ instructions$ or representations of his co*defendant?

n its Ceply$9 respondent an, countered that it is the real party in interest and is the holder of the notes since the Associated an,ing -orporation and Associated -iti&ens an, are its predecessors*in*interest /he fact that /omas Angne+er recei+ed any moneys in consideration of the t"o 2: loans and that such "as ,no"n to the !an, are immaterial!ecause$ as an accommodation ma,er$ he is considered as a solidary de!tor "ho is primarily lia!le for the payment of thepromissory notes -iting ection 29 of the ;egotia!le nstruments #a" ;#:$ the !an, posited that a!sence or failure ofconsideration is not a matter of defense? neither is the fact that the holder ,ne" him to !e only an accommodation party

/he trial court rendered against defendant Antonio Ang Eng #iong and in fa+or of plaintiff$ ordering the former to pay thelatterG

/he decision !ecame final and eBecutory as no appeal "as ta,en therefrom pon the !an,3s e-%arte motion$ the courtaccordingly issued a "rit of eBecution on April 5$ 19911)

/hereafter$ on 6une $ 1991$ the court set the pre*trial conference !et"een the !an, and /omas Ang$18 "ho$ in turn$ filed aMotion to .ismiss19 on the ground of lac, of <urisdiction o+er the case in +ie" of the alleged finality of the 4e!ruary 21$1991 .ecision e contended that ec '$ Cule 18 of the old Cules sanctions only one <udgment in case of se+eraldefendants$ one of "hom is declared in default Moreo+er$ in his upplemental Motion to .ismiss$20 /omas Angmaintained that he is released from his o!ligation as a solidary guarantor and accommodation party !ecause$ !y the!an,3s actions$ he is no" precluded from asserting his cross*claim against Antonio Ang Eng #iong$ upon "hom a final and

eBecutory <udgment had already !een issued

/rial then ensued !et"een the !an, and /omas Ang pon the latter3s motion during the pre*trial conference$ Antonio AngEng #iong "as again declared in default for his failure to ans"er the cross*claim "ithin the reglementary period2'

After the trial$ /omas Ang offered in e+idence se+eral documents$ "hich included a copy of the /rust Agreement !et"eenthe Cepu!lic of the Philippines and the Asset Pri+ati&ation /rust$ as certified !y the notary pu!lic$ and ne"s clippings fromthe Manila ulletin dated May 18$ 199' and May 0$ 199'1 All the documentary eBhi!its "ere admitted for failure of the!an, to su!mit its comment to the formal offer2 /hereafter$ /omas Ang elected to "ithdra" his petition in -A C P ;o'8'0 !efore the -ourt of Appeals$ "hich "as then granted

On 6anuary 5$ 199($ the trial court rendered <udgment against the !an,$ dismissing the complaint for lac, of cause ofaction

/he appellate court disregarded the !an,3s first assigned error for !eing @irrele+ant in the final determination of the case@and found its second assigned error as @not meritorious@ nstead$ it posed for resolution the issue of "hether the trialcourt erred in dismissing the complaint for collection of sum of money for lac, of cause of action as the !an, "as said to!e not the @holder@ of the notes at the time the collection case "as filed

n ans"ering the lone issue$ the -ourt of Appeals held that the !an, is a @holder@ under ec 191 of the ;# t concludedthat despite the eBecution of the .eeds of /ransfer and /rust Agreement$ the Asset Pri+ati&ation /rust cannot !e declaredas the @holder@ of the su!<ect promissory notes for the reason that it is neither the payee or indorsee of the notes inpossession thereof nor is it the !earer of said notes /he -ourt of Appeals o!ser+ed that the !an,$ as the payee$ did notindorse the notes to the Asset Pri+ati&ation /rust despite the eBecution of the .eeds of /ransfer and /rust Agreement andthat the notes continued to remain "ith the !an, until the institution of the collection suit

7ith the !an, as the @holder@ of the promissory notes$ the -ourt of Appeals held that /omas Ang is accounta!le therefor inhis capacity as an accommodation party -iting ec 29 of the ;#$ he is lia!le to the !an, in spite of the latter3s,no"ledge$ at the time of ta,ing the notes$ that he is only an accommodation party Moreo+er$ as a co*ma,er "ho agreedto !e <ointly and se+erally lia!le on the promissory notes$ /omas Ang cannot +alidly set up the defense that he did notrecei+e any consideration therefor as the fact that the loan "as granted to the principal de!tor already constitutes asufficient consideration

4urther$ the -ourt of Appeals agreed "ith the !an, that the eBperience of /omas Ang in !usiness rendered it implausi!lethat he "ould <ust sign the promissory notes as a co*ma,er "ithout e+en chec,ing the real amount of the de!t to !eincurred$ or that he merely acted on the !elief that the first loan application "as cancelled According to the appellate


























court$ it is apparent that he "as negligent in falling for the ali!i of Antonio Ang Eng #iong and such fact "ould not ser+e toeBonerate him from his responsi!ility under the notes

;onetheless$ the -ourt of Appeals denied the claims of the !an, for ser+ice$ penalty and o+erdue charges as "ell asattorney3s fees on the ground that the promissory notes made no mention of such charges=fees

EG "ho is the real party in interest at the time of the institution of the complaint$ is it the !an, or the AssetPri+ati&ation /rustJ

ased on the a!o+e !ac,drop$ respondent an, does not appear to !e the real party in interest "hen it instituted thecollection suit on August 28$ 1990 against Antonio Ang Eng #iong and petitioner /omas Ang At the time the complaint "asfiled in the trial court$ it "as the Asset Pri+ati&ation /rust "hich had the authority to enforce its claims against !oth de!torsn fact$ during the pre*trial conference$ Atty Coderic, Orallo$ counsel for the !an,$ openly admitted that it "as under thetrusteeship of the Asset Pri+ati&ation /rust5) /he Asset Pri+ati&ation /rust$ "hich should ha+e !een represented !y theOffice of the o+ernment -orporate -ounsel$ had the authority to file and prosecute the case

/he foregoing not"ithstanding$ this -ourt can not$ at present$ readily su!scri!e to petitioner3s insistence that the casemust !e dismissed ignificantly$ it stands "ithout refute$ !oth in the pleadings as "ell as in the e+idence presented duringthe trial and up to the time this case reached the -ourt$ that the issue had !een rendered moot "ith the occurrence of asuper+ening e+ent T the @!uy*!ac,@ of the !an, !y its former o"ner$ #eonardo /y$ sometime in Octo!er 199 y such re*acquisition from the Asset Pri+ati&ation /rust "hen the case "as still pending in the lo"er court$ the !an, reclaimed itsreal and actual interest o+er the unpaid promissory notes? hence$ it could rightfully qualify as a @holder@58 thereof under the

;#

;ota!ly$ ection 29 of the ;# defines an accommodation party as a person @"ho has signed the instrument as ma,er$dra"er$ acceptor$ or indorser$ "ithout recei+ing +alue therefor$ and for the purpose of lending his name to some otherperson@ As gleaned from the teBt$ an accommodation party is one "ho meets all the three requisites$ +i&G 1: he must !e aparty to the instrument$ signing as ma,er$ dra"er$ acceptor$ or indorser? 2: he must not recei+e +alue therefor? and : hemust sign for the purpose of lending his name or credit to some other person59 An accommodation party lends his nameto ena!le the accommodated party to o!tain credit or to raise money? he recei+es no part of the consideration for theinstrument !ut assumes lia!ility to the other party=ies thereto(0 /he accommodation party is lia!le on the instrument to aholder for +alue e+en though the holder$ at the time of ta,ing the instrument$ ,ne" him or her to !e merely anaccommodation party$ as if the contract "as not for accommodation(1

As petitioner ac,no"ledged it to !e$ the relation !et"een an accommodation party and the accommodated party is one of

principal and surety T the accommodation party !eing the surety(2 As such$ he is deemed an original promisor and de!torfrom the !eginning?( he is considered in la" as the same party as the de!tor in relation to "hate+er is ad<udged touchingthe o!ligation of the latter since their lia!ilities are inter"o+en as to !e insepara!le(' Although a contract of suretyship is inessence accessory or collateral to a +alid principal o!ligation$ the surety3s lia!ility to the creditor is i//e#iate$ %ri/ar0 anda1$!2ute? he is #irect20 and e3ua220 !ound "ith the principal(5 As an equi+alent of a regular party to the underta,ing$ asurety !ecomes lia!le to the de!t and duty of the principal o!ligor e+en "ithout possessing a direct or personal interest inthe o!ligations nor does he recei+e any !enefit therefrom((

-onsequently$ in issuing the t"o promissory notes$ petitioner as accommodating party "arranted to the holder in duecourse that he "ould pay the same according to its tenor80 t is no defense to state on his part that he did not recei+e any+alue therefor 81 !ecause the phrase 4&it'!ut recei5in6 5a2ue t'ere7!r4 used in ec 29 of the ;# means @"ithout recei+ing+alue !y +irtue of the instrument@ and not as it is apparently supposed to mean$ @"ithout recei+ing payment for lending hisname@82 tated differently$ "hen a third person ad+ances the face +alue of the note to the accommodated party at the

time of its creation$ the consideration for the note as regards its ma,er is the money ad+anced to the accommodatedparty t is enough that +alue "as gi+en for the note at the time of its creation8 As in the instant case$ a sum of money"as recei+ed !y +irtue of the notes$ hence$ it is immaterial so far as the !an, is concerned "hether one of the signers$particularly petitioner$ has or has not recei+ed anything in payment of the use of his name 8'

nder the la"$ upon the maturity of the note$ a surety may pay the de!t$ demand the collateral security$ if there !e any$and dispose of it to his !enefit$ or$ if applica!le$ su!rogate himself in the place of the creditor "ith the right to enforce theguaranty against the other signers of the note for the reim!ursement of "hat he is entitled to reco+er from them85 Cegretta!ly$ none of these "ere prudently done !y petitioner 7hen he "as first notified !y the !an, sometime in 1982regarding his accounta!ilities under the promissory notes$ he lac,adaisically relied on Antonio Ang Eng #iong$ "horepresented that he "ould ta,e care of the matter$ instead of directly communicating "ith the !an, for its settlement8(














































/hus$ petitioner cannot no" claim that he "as pre<udiced !y the supposed @eBtension of time@ gi+en !y the !an, to his co*de!tor

4urthermore$ since the lia!ility of an accommodation party remains not only %ri/ar0 !ut also unc!n#iti!na2 to a holder for+alue$ e+en if the accommodated party recei+es an eBtension of the period for payment "ithout the consent of theaccommodation party$ the latter is still lia!le for the "hole o!ligation and such eBtension does not release him !ecause asfar as a holder for +alue is concerned$ he is a solidary co*de!tor8) n C2ar8 5. Se22ner $88 this -ourt heldG

B B B /he mere delay of the creditor in enforcing the guaranty has not !y any means impaired his action against

the defendant t should not !e lost sight of that the defendant3s signature on the note is an assurance to thecreditor that the collateral guaranty "ill remain good$ and that other"ise$ he$ the defendant$ "ill !e personallyresponsi!le for the payment

/rue$ that if the creditor had done any act "here!y the guaranty "as impaired in its +alue$ or discharged$ such anact "ould ha+e "holly or partially released the surety? !ut it must !e !orn in mind that it is a recogni&ed doctrine inthe matter of suretyship that "ith respect to the surety$ the creditor is under no o!ligation to display any diligencein the enforcement of his rights as a creditor is mere inaction indulgence$ passi+eness$ or delay in proceedingagainst the principal de!tor$ or the fact that he did not enforce the guaranty or apply on the payment of such fundsas "ere a+aila!le$ constitute no defense at all for the surety$ unless the contract eBpressly requires diligence andpromptness on the part of the creditor$ "hich is not the case in the present action /here is in some decisions atendency to"ard holding that the creditor3s laches may discharge the surety$ meaning !y laches a negligentfor!earance /his theory$ ho"e+er$ is not generally accepted and the courts almost uni+ersally consider it

essentially inconsistent "ith the relation of the parties to the note 21 C-#$ 102*10':89

;either can petitioner !enefit from the alleged @insol+ency@ of Antonio Ang Eng #iong for "ant of clear and con+incinge+idence pro+ing the same Assuming it to !e true$ he also did not eBercise diligence in demanding security to protecthimself from the danger thereof in the e+ent that he petitioner: "ould e+entually !e sued !y the !an, 4urther$ "hetherpetitioner may or may not o!tain security from Antonio Ang Eng #iong cannot in any manner affect his lia!ility to the !an,?the said remedy is a matter of concern eBclusi+ely !et"een themsel+es as accommodation party and accommodatedparty /he fact that petitioner stands only as a surety in relation to Antonio Ang Eng #iong is immaterial to the claim of the!an, and does not a "hit diminish nor defeat the rights of the latter as a holder for +alue /o sanction his theory is to gi+eun"arranted legal recognition to the patent a!surdity of a situation "here a co*ma,er$ "hen sued on an instrument !y aholder in due course and for +alue$ can escape lia!ility !y the con+enient eBpedient of interposing the defense that he is amerely an accommodation party90

n sum$ as regards the other issues and errors alleged in this petition$ the -ourt notes that these "ere the +ery samequestions of fact raised on appeal !efore the -ourt of Appeals$ although at times couched in different terms and eBplainedmore lengthily in the petition uffice it to say that the same$ !eing factual$ ha+e !een satisfactorily passed upon andconsidered !oth !y the trial and appellate courts t is doctrinal that only errors of la" and not of fact are re+ie"a!le !y this-ourt in petitions for re+ie" on certi!rari under Cule '5 of the Cules of -ourt a+e for the most cogent and compellingreason$ it is not our function under the rule to eBamine$ e+aluate or "eigh the pro!ati+e +alue of the e+idence presented!y the parties all o+er again91

W1ERE/ORE$ the Octo!er 9$ 2000 .ecision and .ecem!er 2($ 2000 Cesolution of the -ourt of Appeals in -A*C -U;o 5'1 are A//IRME5 /he petition is 5ENIE5 for lac, of merit
















5E/ENSESCASES:

1. Sala v. CA( *anua!4 $$( +,,&;2. Philippine National Ban6 v. CA( $': SCRA %,+;3. Inte!national Co!po!ate Ban6 v. CA( &' Septe89e! $&&:;4. Aociated Ban6 v. CA( *anua!4 )+( +,,:;5. *ai#Alai v. BPI( :: SCRA $,;6. Repu9lic v. E9!ada( *ul4 )+( +,-';7. Philippine National Ban6 v. ui8po( Ma!ch +%( +,33;8. Ge8pea v. CA( /e9!ua!4 ,( +,,);9. Philippine Co88e!cial Inte!national Ban6 v. Cou!t o2 Appeal( )'& SCRA %%:;10. MWSS v. CA( +%) SCRA $&;11. Iluo!io v. CA( ),) SCRA 3,;12. Sa8un= Cont!uction v. /a! Eat Ban6( +' Au=ut $&&%;13. Met!o9an6 v. Ca9il>o( &: 5ece89e! $&&:;14. Ban6 o2 A8e!ica v. Philippine Racin= Clu9( G.R. No. +'&$$3( *ul4 $&( $&&,;15. Met!o9an6 v. BA /inance( % 5ece89e! $&&,

Philippine National Ban6 v. CA( $': SCRA %,+

/ACTS0.E- issued a chec, in fa+or of A!ante Mar,eting containing a specific serial num!er$ dra"n against P; /hechec, "as deposited !y A!ante in its account "ith -apitol and the latter consequently deposited the same "ith itsaccount "ith P-OM "hich later deposited it "ith petitioner for clearing /he chec, "as thereafter cleared o"e+er$ on a rele+ant date$ petitioner P; returned the chec, onaccount that there had !een a material alteration on it u!sequent de!its "ere made !ut -apitol cannot de!it theaccount of A!ante any longer for the latter had "ithdra"n all the money already from the account /his prompted-apitol to see, reclarification from P-OM and demanded the recrediting of its account P-OM follo"ed suit !ydoing the same against P; .emands unheeded$it filed an action against P-OM and the latter filed a third*party complaint against petitioner

1EL50 An alteration is said to !e material if it alters the effect of the instrument t means an unauthori&ed change in theinstrument that purports to modify in any respect the o!ligation of a party or an unauthori&ed addition of "ords or

num!ers or other change to an incomplete instrument relating to the o!ligation of the party n other "ords$ amaterial alteration is one "hich changes the items "hich are required to !e stated under ection 1 of the ;#

n this case$ the alleged material alteration "as the alteration of the serial num!er of the chec, in issueH"hich is notan essential element of a negotia!le instrument under ection 1 P; alleges that the alteration "as material since itis an accepted concept that a /-AA chec, !y its +erynature is the medium of eBchange of go+ernments$ instrumentalities and agencies As a safety measure$ e+erygo+ernment office or agency is assigned chec,s !earing different serial num!ers

ut this contention has to fail /he chec,Rs serial num!er is not the sole indicia of its origin /he name of the go+ernmentagency issuing the chec, is clearly stated therein /hus$ the chec,Rs dra"er is sufficiently identified$ rendering redundantthe referral to its serial num!er

/herefore$ there !eing no material alteration in the chec, committed$ P; could not return the chec, to P-OM tshould pay the same

Aociated Ban6 v. Cou!t o2 Appeal "GR +&-)3$( )+ *anua!4 +,,:; alo Philippine National Ban6 v. Cou!t o2Appeal "GR +&-:+$




/act0 /he Pro+ince of /arlac maintains a current account "ith the Philippine ;ational an, P;: /arlac ranch "herethe pro+incial funds are deposited -hec,s issued !y the Pro+ince are signed !y the Pro+incial /reasurer andcountersigned !y the Pro+incial Auditor or the ecretary of the angguniang ayan A portion of the funds of the pro+inceis allocated to the -oncepcion Emergency ospital /he allotment chec,s for said go+ernment hospital are dra"n to theorder of @-oncepcion Emergency ospital$ -oncepcion$ /arlac@ or @/he -hief$ -oncepcion Emergency ospital-oncepcion$ /arlac@ /he chec,s are released !y the Office of the Pro+incial /reasurer and recei+ed for the hospital !y itsadministrati+e officer and cashier n 6anuary 1981$ the !oo,s of account of the Pro+incial /reasurer "ere post*audited !ythe Pro+incial Auditor t "as then disco+ered that the hospital did not recei+e se+eral allotment chec,s dra"n !y thePro+ince On 19 4e!ruary 1981$ the Pro+incial /reasurer requested the manager of the P; to return all of its clearedchec,s "hich "ere issued from 19)) to 1980 in order to +erify the regularity of their encashment After the chec,s "ereeBamined$ the Pro+incial /reasurer learned that 0 chec,s amounting to P20$0000 "ere encashed !y one 4austoPangilinan$ "ith the Associated an, acting as collecting !an, t turned out that 4austo Pangilinan$ "ho "as theadministrati+e officer and cashier of payee hospital until his retirement on 28 4e!ruary 19)8$ collected the chec,s from theoffice of the Pro+incial /reasurer e claimed to !e assisting or helping the hospital follo" up the release of the chec,sand had official receipts Pangilinan sought to encash the first chec, "ith Associated an, o"e+er$ the manager of

Associated an, refused and suggested that Pangilinan deposit the chec, in his personal sa+ings account "ith the same!an, Pangilinan "as a!le to "ithdra" the money "hen the chec, "as cleared and paid !y the dra"ee !an,$ P; Afterforging the signature of .r Adena -anlas "ho "as chief of the payee hospital$ Pangilinan follo"ed the same procedurefor the second chec,$ in the amount of P5$00000 and dated 20 April 19)8$ as "ell as for 28 other chec,s of +ariousamounts and on +arious dates /he last chec, negotiated !y Pangilinan "as for P8$00000 and dated 10 4e!ruary 1981

All the chec,s !ore the stamp of Associated an, "hich reads @All prior endorsements guaranteed Associated an,@6esus .a+id$ the manager of Associated an,$ alleged that Pangilinan made it appear that the chec,s "ere paid to himfor certain pro<ects "ith the hospital e did not find as irregular the fact that the chec,s "ere not paya!le to Pangilinan

!ut to the -oncepcion Emergency ospital 7hile he admitted that his "ife and Pangilinan3s "ife are first cousins$ themanager denied ha+ing gi+en Pangilinan preferential treatment on this account On 2( 4e!ruary 1981$ the Pro+incia/reasurer "rote the manager of the P; see,ing the restoration of the +arious amounts de!ited from the current accountof the Pro+ince n turn$ the P; manager demanded reim!ursement from the Associated an, on 15 May 1981 As !oth!an,s resisted payment$ the Pro+ince !rought suit against P; "hich$ in turn$ impleaded Associated an, as third*partydefendant /he latter then filed a fourth*party complaint against Adena -anlas and 4austo Pangilinan After trial on themerits$ the lo"er court rendered its decision on 21 March 1988$ on the !asic complaint$ in fa+or of the Pro+ince andagainst P;$ ordering the latter to pay to the former$ the sum of P20$0000 "ith legal interest thereon from 20 March1981 until fully paid? on the third*party complaint$ in fa+or of P; and against Associated an, ordering the latter toreim!urse to the former the amount of P20$0000 "ith legal interests thereon from 20 March 1981 until fully paid? on thefourth*party complaint$ the same "as ordered dismissed for lac, of cause of action as against Adena -anlas and lac, of

<urisdiction o+er the person of 4austo Pangilinan as against the latter /he court also dismissed the counterclaims on thecomplaint$ third*party complaint and fourth*party complaint$ for lac, of merit P; and Associated an, appealed to the

-ourt of Appeals /he appellate court affirmed the trial court3s decision in toto on 0 eptem!er 1992 ence theconsolidated petitions "hich see, a re+ersal of the appellate court3s decision

Iue0 7hether P; "as at fault and should solely !ear the loss !ecause it cleared and paid the forged chec,s

1eld0 /he present case concerns chec,s paya!le to the order of -oncepcion Emergency ospital or its -hief /hey "ereproperly issued and !ear the genuine signatures of the dra"er$ the Pro+ince of /arlac /he infirmity in the questionedchec,s lies in the payee3s -oncepcion Emergency ospital: indorsements "hich are forgeries At the time of theirindorsement$ the chec,s "ere order instruments -hec,s ha+ing forged indorsements should !e differentiated from forgedchec,s or chec,s !earing the forged signature of the dra"er 7here the instrument is paya!le to order at the time of theforgery$ such as the chec,s in the case$ the signature of its rightful holder here$ the payee hospital: is essential to transfertitle to the same instrument 7hen the holder3s indorsement is forged$ all parties prior to the forgery may raise the readefense of forgery against all parties su!sequent thereto An indorser of an order instrument "arrants @that the instrumentis genuine and in all respects "hat it purports to !e? that he has a good title to it? that all prior parties had capacity tocontract? and that the instrument is at the time of his indorsement +alid and su!sisting@ e cannot interpose the defensethat signatures prior to him are forged A collecting !an, "here a chec, is deposited and "hich indorses the chec, uponpresentment "ith the dra"ee !an,$ is such an indorser o e+en if the indorsement on the chec, deposited !y the !an,s3client is forged$ the collecting !an, is !ound !y his "arranties as an indorser and cannot set up the defense of forgery asagainst the dra"ee !an, /he !an, on "hich a chec, is dra"n$ ,no"n as the dra"ee !an,$ is under strict lia!ility to paythe chec, to the order of the payee /he dra"ee !an, is not similarly situated as the collecting !an, !ecause the formerma,es no "arranty as to the genuineness of any indorsement /he dra"ee !an,3s duty is !ut to +erify the genuineness ofthe dra"er3s signature and not of the indorsement !ecause the dra"er is its client Moreo+er$ the collecting !an, is madelia!le !ecause it is pri+y to the depositor "ho negotiated the chec, /he !an, ,no"s him$ his address and history !ecausehe is a client t has ta,en a ris, on his deposit /he !an, is also in a !etter position to detect forgery$ fraud or irregularity




in the indorsement ence$ the dra"ee !an, can reco+er the amount paid on the chec, !earing a forged indorsementfrom the collecting !an, o"e+er$ a dra"ee !an, has the duty to promptly inform the presentor of the forgery upondisco+ery f the dra"ee !an, delays in informing the presentor of the forgery$ there!y depri+ing said presentor of the rightto reco+er from the forger$ the former is deemed negligent and can no longer reco+er from the presentor erein$ P;$ thedra"ee !an,$ cannot de!it the current account of the Pro+ince of /arlac !ecause it paid chec,s "hich !ore forgedindorsements o"e+er$ if the Pro+ince of /arlac as dra"er "as negligent to the point of su!stantially contri!uting to theloss$ then the dra"ee !an, P; can charge its account f !oth dra"ee !an,*P; and dra"er*Pro+ince of /arlac "erenegligent$ the loss should !e properly apportioned !et"een them /he loss incurred !y dra"ee !an,*P; can !e passedon to the collecting !an,*Associated an, "hich presented and indorsed the chec,s to it Associated an, can$ in turn$hold the forger$ 4austo Pangilinan$ lia!le f P; negligently delayed in informing Associated an, of the forgery$ thusdepri+ing the latter of the opportunity to reco+er from the forger$ it forfeits its right to reim!ursement and "ill !e made to!ear the loss /he -ourt finds that the Pro+ince of /arlac "as equally negligent and should$ therefore$ share the !urden ofloss from the chec,s !earing a forged indorsement /he Pro+ince of /arlac permitted 4austo Pangilinan to collect thechec,s "hen the latter$ ha+ing already retired from go+ernment ser+ice$ "as no longer connected "ith the hospital 7iththe eBception of the first chec, dated 1) 6anuary 19)8:$ all the chec,s "ere issued and released after Pangilinan3sretirement on 28 4e!ruary 19)8 After nearly three years$ the /reasurer3s office "as still releasing the chec,s to the retiredcashier n addition$ some of the aid allotment chec,s "ere released to Pangilinan and the others to Eli&a!eth 6uco$ thene" cashier /he fact that there "ere no" t"o persons collecting the chec,s for the hospital is an unmista,a!le sign of anirregularity "hich should ha+e alerted employees in the /reasurer3s office of the fraud !eing committed /here is alsoe+idence indicating that the pro+incial employees "ere a"are of Pangilinan3s retirement and consequent dissociation fromthe hospital ence$ due to the negligence of the Pro+ince of /arlac in releasing the chec,s to an unauthori&ed person4austo Pangilinan:$ in allo"ing the retired hospital cashier to recei+e the chec,s for the payee hospital for a period closeto three years and in not properly ascertaining "hy the retired hospital cashier "as collecting chec,s for the payee

hospital in addition to the hospital3s real cashier$ the Pro+ince contri!uted to the loss amounting to P20$0000 and shal!e lia!le to the P; for 50> thereof n effect$ the Pro+ince of /arlac can only reco+er 50> of P20$0000 from P;/he collecting !an,$ Associated an,$ shall !e lia!le to P; for 50> of P20$0000 t is lia!le on its "arranties asindorser of the chec,s "hich "ere deposited !y 4austo Pangilinan$ ha+ing guaranteed the genuineness of all priorindorsements$ including that of the chief of the payee hospital$ .r Adena -anlas Associated an, "as also remiss in itsduty to ascertain the genuineness of the payee3s indorsement

Repu9lic Ban6 v. E9!ada "GR L#%&-,:( )+ *ul4 +,-'

/act0 On or a!out 2) 4e!ruary 19($ Mauricia / E!rada$ encashed ac, Pay -hec, 5080(0 dated 15 6anuary 19( forP1$2'(08 at the main office of the Cepu!lic an, at Escolta$ Manila /he chec, "as issued !y the ureau of /reasuryCepu!lic an, "as later ad+ised !y the said !ureau that the alleged indorsement on the re+erse side of the aforesaid

chec, !y the payee$ @Martin #oren&o@ "as a forgery since the latter had allegedly died as of 1' 6uly 1952 Cepu!lic an,"as then requested !y the ureau of /reasury to refund the amount of P1$2'(08 /o reco+er "hat it had refunded to theureau of /reasury$ Cepu!lic an, made +er!al and formal demands upon E!rada to account for the sum of P1$2'(08$!ut E!rada refused to do so o Cepu!lic an, sued E!rada !efore the -ity -ourt of Manila On 11 6uly 19(($ E!radafiled her ans"er denying the material allegations of the complaint and as affirmati+e defenses alleged that she "as aholder in due course of the chec, in question$ or at the +ery least$ has acquired her rights from a holder in due course andtherefore entitled to the proceeds thereof he also alleged that the Cepu!lic an, has no cause of action against her?that it is in estoppel$ or so negligent as not to !e entitled to reco+er anything from her On the same date$ E!rada filed a/hird*Party complaint against Adelaida .omingue& "ho$ in turn$ filed on 1' eptem!er 19(( a 4ourth*Party complaintagainst 6ustina /inio On 21 March 19()$ the -ity -ourt of Manila rendered <udgment for the Cepu!lic an, againstE!rada? for E!rada against .omingue&$ and for .omingue& against /inio 4rom the <udgment of the -ity -ourt$ E!radatoo, an appeal to the -ourt of 4irst nstance of Manila$ "here a partial stipulation of facts "as su!mitted ased on thestipulation of facts and the documentary e+idence presented$ the trial court rendered a decision$ ordering E!rada to pay

Cepu!lic an, the amount of P1$2'(08$ "ith interest as the legal rate from the filing of the complaint on 1( 6une 19(($until fully paid$ plus the costs in !oth instances against E!rada? reser+ing therein the right of E!rada to file "hate+er claimshe may ha+e against .omingue& in connection "ith the case$ as "ell as the right of the estate of .omingue& to file thefourth*party complaint against /inio E!rada appealed

Iue "+0 7hether the eBistence of one forged signature in a negotia!le instrument "ill render +oid all the othernegotiations of the chec, "ith respect to the other parties "hose signature are genuine

1eld "+0 n the case of eam +s 4arrel$ 15 o"a ()0$ 11 ;7 590$ "here a chec, has se+eral indorsements on it$ it"as held that it is only the negotiation !ased on the forged or unauthori&ed signature "hich is inoperati+e Applying thisprinciple to the case$ it can !e safely concluded that it is only the negotiation predicated on the forged indorsement that




should !e declared inoperati+e /his means that the negotiation of the chec, in question from Martin #oren&o$ the originapayee$ to Camon C #oren&o$ the second indorser$ should !e declared of no effect$ !ut the negotiation of the aforesaidchec, from Camon C #oren&o to Adelaida .omingue&$ the third indorser$ and from Adelaida .omingue& to E!rada "hodid not ,no" of the forgery$ should !e considered +alid and enforcea!le$ !arring any claim of forgery

Ge8pea v. Cou!t o2 Appeal "GR ,$$%%. , /e9!ua!4 +,,)

/ACTS0empensa" "as the o"ner of many grocery stores he paid her suppliers through the issuance of chec,s dra"nagainst her chec,ing account "ith respondent !an, /he chec,s "ere prepared !y her !oo,,eeper alang nthe signing of the chec,s prepared !y alang$ empensa" didn3t !other herself in +erifying to "hom the chec,s"ere !eing paid and if the issuances "ere necessary he didn3t e+en +erify the returned chec,s of the !an,"hen the latter notifies her of the same .uring her t"o years in !usiness$ there "ere incidents sho"n that theamounts paid for "ere in eBcess of "hat should ha+e !een paid t "as also sho"n that e+en if the chec,s "erecrossed$ the intended payees didn3t recei+e the amount of the chec,s /his prompted empensa" to demand the!an, to credit her account for the amount of the forged chec,s /he !an, refused to do so and this prompted her to filethe case against the !an,

1EL504orgery is a real defense !y the party "hose signature "as forged A party "hose signature "as forged "as ne+er a

party and ne+er ga+e his consent to the instrument ince his signature doesnRt appear in the instrument$ thesame cannot !e enforced against him e+en !y a holder in due course /he dra"ee !an, cannot charge the account of thedra"er "hose signature "as forged !ecause he ne+er ga+e the !an, the order to pay

n the case at !ar the chec,s "ere filled up !y petitionerRs employee alang and "ere later gi+en to her forsignature er signing the chec,s made the negotia!le instruments complete Prior to signing of the chec,s$ there "asno +alid contract yet Petitioner completed the chec,s !y signing them and thereafter authori&ed alang to deli+erthe same to their respecti+e payees /he chec,s "ere then indorsed$ forged indorsements thereon

As a rule$ a dra"ee !an, "ho has paid a chec, on "hich an indorsement has !een forged cannot de!it the accountof a dra"er for the amount of said chec, An eBception to this rule is "hen the dra"er is guilty of negligence"hich causes the !an, to honor such chec,s Petitioner in this case has relied solely on the honesty and loyalty ofher !oo,,eeper and ne+er !othered to +erify the accuracy of the amounts of the chec,s she signed the

in+oices attached thereto And though she recei+ed her !an, statements$ she didn3t carefully eBamine the sameto dou!le*chec, her payments Petitioner didn3t eBercise reasona!le diligence "hich e+entually led to the fruition of her!oo,,eeperRs fraudulent schemes

Iluo!io v. CA Ra8on Iluo!io( petitione! v. Manila Ban6in= Co!po!ation( CA( !epondent

4actsG

Petitioner is a prominent !usinessman "ho$ at the time material to this case$ "as the Managing .irector of Multinationaln+estment ancorporation and the -hairman and=or President of se+eral other corporations e "as a depositor in goodstanding of respondent !an,$ the Manila an,ing -orporation As he "as then running a!out 20 corporations$ and "asgoing out of the country a num!er of times$ petitioner entrusted to his secretary$ Fatherine E Eugenio$ his credit cardsand his chec,!oo, "ith !lan, chec,s t "as also Eugenio "ho +erified and reconciled the statements of said chec,ingaccount et"een the dates eptem!er 5$ 1980 and 6anuary 2$ 1981$ Eugenio "as a!le to encash and deposit to herpersonal account a!out se+enteen 1): chec,s dra"n against the account of the petitioner at the respondent !an,$ "ithan aggregate amount of P119$('' Petitioner did not !other to chec, his statement of account until a !usiness partnerapprised him that he sa" Eugenio use his credit cards Petitioner fired Eugenio immediately$ and instituted a criminalaction against her for estafa thru falsification !efore the Office of the Pro+incial 4iscal of Ci&al Pri+ate respondent$ throughan affida+it eBecuted !y its employee$ Mr .ante Ca&on$ also lodged a complaint for estafa thru falsification of commercialdocuments against Eugenio on the !asis of petitionerRs statement that his signatures in the chec,s "ere forged Petitionerthen requested the respondent !an, to credit !ac, and restore to its account the +alue of the chec,s "hich "ere




"rongfully encashed !ut respondent refusedndent refused 4inding no sufficient !asis for plaintiff3s cause againstdefendant !an,$ the trial court .ME. the case Aggrie+ed$ petitioner ele+ated the case to the -ourt of Appeals !y"ay of a petition for re+ie" !ut "ithout success /he appellate court held that petitionerRs o"n negligence "as theproBimate cause of his loss

issueG 2: "hether or not pri+ate respondent$ in filing an estafa case against petitionerRs secretary$ is !arred from raising thedefense that the fact of forgery "as not esta!lished

eldG

On the $ec!n# i$$ue$ the fact that Manila an, had filed a case for estafa against Eugenio "ould not estop it fromasserting the fact that forgery has not !een clearly esta!lished Petitioner cannot hold pri+ate respondent in estoppel forthe latter is not the actual party to the criminal action

Sa8un= Cont!uction v. /a! Eat Ban6( +' Au=ut $&&%

/ACTS0 Plaintiff amsung -onstruction -ompany Philippines$ nc Kamsung -onstructionL:$ maintained a currentaccount "ith defendant 4ar East an, and /rust -ompany K4E/-L: at the latterRs el*Air$ Ma,ati !ranch /he solesignatory to amsung -onstructionRs account "as 6ong Fyu #ee K6ongL:$ its Pro<ect Manager$ "hile the chec,s remainedin the custody of the companyRs accountant$ Fyu ong #ee KFyuL: On 19 March 1992$ a certain Co!erto on&agapresented for payment 4E/- -hec, ;o '2100 to the !an,Rs !ranch in el*Air$ Ma,ati /he chec,$ paya!le to cashand dra"n against amsung -onstructionRs current account$ "as in the amount of ;ine undred ;inety ;ine /housand4i+e undred Pesos P999$50000: /he !an, teller$ -leofe eBercise the !an, procedure in encashment using chec, hethen as,ed on&aga to su!mit proof of his identity$ and the latter presented three : identification cards/he !an, officeryfu also noticed 6ose empio KempioL:$ the assistant accountant of amsung -onstruction $ "ho supported theclaim of on&aga yfu sho"ed the chec, to empio$ "ho +ouched for the genuineness of 6ongRs signature -onfirmingthe identity of on&aga$ empio said that the chec, "as for the purchase of equipment for amsung -onstructionatisfied "ith the genuineness of the signature of 6ong$ yfu authori&ed the !an,Rs encashment of the chec, to on&aga/he follo"ing day Fyu$ disco+ered that a chec, in the amount of ;ine undred ;inety ;ine /housand 4i+e undredPesos P999$50000: had !een encashed Fyu perused the chec,!oo, and found that the last !lan, chec, "as missing

e reported the matter to 6ong$ "ho then proceeded to the !an, 6ong learned of the encashment of the chec,$ andreali&ed that his signature had !een forged /he an, Manager reputedly told 6ong that he "ould !e reim!ursed for theamount of the chec, 6ong proceeded to the police station and consulted "ith his la"yers u!sequently$ a criminal casefor qualified theft "as filed against empio !efore the #aguna court 4E/- on the other hand$ said that it "as stillconducting an in+estigation on the matter nsatisfied$ amsung -onstruction filed a-omplaint on 10 6une 1992 for+iolation of ection 2 of the ;egotia!le nstruments #a"$ !efore the Cegional /rial -ourt KC/-L: of Manila $ ranch 9.uring the trial$ !oth sides presented their respecti+e eBpert "itnesses to testify on the claim that 6ongRs signature "asforged amsung -orporation$ "hich had referred the chec, for in+estigation to the ;$ presented enior ; .ocumentEBaminer Coda 4lores he testified that !ased on her eBamination$ she concluded that 6ongRs signature had !eenforged on the chec, On the other hand$ 4E/-$ "hich had sought the assistance of the Philippine ;ational Police P;P:presented Cosario - Pere&$ a document eBaminer from the P;P -rime #a!oratory he testified that her findings sho"edthat 6ongRs signature on the chec, "as genuineEG 7hether or not the signature of 6ong in the su!<ect chec, "as forgedJ

C#; pon eBamination of the record$ and !ased on the applica!le la"s and <urisprudence$ "e re+erse the -ourt of Appeals decision ndeed there "as forgery in this caseection 2 of the ;egotia!le nstruments #a" statesG 7hen a signature is forged or made "ithout the authority of theperson "hose signature it purports to !e$ it is "holly inoperati+e$ and no right to retain the instrument$ or to gi+e adischarge therefor$ or to enforce payment thereof against any party thereto$ can !e acquired through or under suchsignature$ unless the party against "hom it is sought to enforce such right is precluded from setting up the forgery or "antof authority Emphasis supplied:/he crucial fact in question is "hether or not the chec, "as forged$ not "hether the !an, could ha+e detected the forgery/he latter issue !ecomes rele+ant only if there is need to "eigh the comparati+e negligence !et"een the !an, and theparty "hose signature "as forged n this case$ indeed there "as forgery




A !an, is lia!le$ irrespecti+e of its good faith$ in paying a forged chec, 7ECE4OCE$ the Petition is CA;/E. /he.ecision of the -ourt of Appeals dated 28 ;o+em!er 199( is CEUECE.$ and the .ecision of the Cegional /rial -ourt ofManila$ ranch 9$ dated 25 April 199' is CE;/A/E. -osts against respondent O OC.ECE.

Met!o9an6 v. Ca9il>o( &: 5ece89e! $&&:

4A-/G

• ;o+em!er 12$199'G Cenato . -a!il&o -a!il&o: issued a Metro!an, -hec, paya!le to @-A@ and postdated on

;o+em!er 2'$ 199' in the amount of P1$000 dra"n against his Metro!an, account to Mr Marque&$ as his salescommission

• chec, "as presented to 7estmont an, for payment "ho indorsed it to Metro!an, for appropriate clearing

• After the entries thereon "ere eBamined$ including the a+aila!ility of funds and the authenticity of the signature ofthe dra"er$ Metro!an, cleared the chec, for encashment in accordance "ith the Philippine -learing ouse-orporation P--: Cules

• ;o+em!er 1($ 199'G -a!il&oRs representati+e "as at Metro!an, "hen he "as as,ed !y a !an, personnel if-a!il&o had issued a chec, in the amount of P91F to "hich he replied in negati+e

•

/hat afternoonG -a!il&o called Metro!an, to reiterate that he did not issue the chec,

o e later disco+ered that the chec, of P1F "as altered to P91F and date "as changed from ;o+ 2' to;o+ 1'

o -a!il&o demanded that Metro!an, re*credit the amount of P91$00000 to his account

• 6une 0$ 1995G /hrough counsel sent a letter*demand for the amount of P90F

• -A affirmed C/-G 4a+ored -a!li&o

EG 7=; -a!li&o can reco+er from Metro!an,

E#.G E -A Affirmed

• n the case at !ar$ the chec, "as altered so that the amount "as increased from P1$00000 to P91$00000 and thedate "as changed from 2' ;o+em!er 199' to 1' ;o+em!er 199'

• ection 12' Alteration of instrument? effect of T 7here a negotia!le instrument is materially altered "ithout theassent of all parties lia!le thereon$ it is a+oided$ eBcept as against a party "ho hashimself made$ authori&ed$and assented to the alteration and su!sequent indorsers

ut "hen the instrument has !een materially altered and is in the hands of a holder in due course not a party tothe alteration$ he may enforce the payment thereof according to its original tenor

• -a!il&o "as not the one "ho made nor authori&ed the alteration ;either did he assent to the alteration !y hiseBpress or implied acts

o /here is no sho"ing that he failed to eBercise such reasona!le degree of diligence required of a prudentman "hich could ha+e other"ise pre+ented the loss

• !an, must !e a high degree of diligence$ if not the utmost diligence




o urprisingly$ ho"e+er$ Metro!an, failed to detect the a!o+e alterations "hich could not escape theattention of e+en an ordinary person

@;;E/@ is also typed differently and "ith a lighter in,

only 2 asteris,s "ere placed !efore the amount in figures$ "hile asteris,s "ere placed aftersuch amount

@;;E/@ are li,e"ise a little !igger "hen compared "ith the letters of the "ords @O;E

/OA;. PEO O;#@

• 7hen the dra"ee !an, pays a materially altered chec,$ it +iolates the terms of the chec,$ as "ell as its duty tocharge its clientRs account only for !ona fide dis!ursements he had made

• /he corollary lia!ility of 7estmont an3s indorsement$ if any$ is separate and independent from the lia!ility ofMetro!an, to -a!il&o

Met!o9an6 v. BA /inance( % 5ece89e! $&&,

4A-/G#am!erto itanga itanga: o!tained from respondent A 4inance -orporation A 4inance: a P29$280 loan to secure"hich$ he mortgaged his car to respondent A 4inance /he car "as stolen On itangaRs claim$ Malayan nsurancissued a chec, paya!le to the order of KA 4inance -orporation and #am!erto itangaL for P22'$500$ dra"n agains-hina an,ing -orporation -hina an,: /he chec, "as crossed "ith the notation K4or .eposit PayeesR Account Only7ithout the indorsement or authority of his co*payee A 4inance$ itanga deposited the chec, to his account "ith the

Asian!an, -orporation Asian!an,:$ no" merged "ith herein petitioner Metropolitan an, and /rust -ompanMetro!an,: itanga su!sequently "ithdre" the entire proceeds of the chec,

n the meantime$ itangaRs loan !ecame past due$ !ut despite demands$ he failed to settle it

A 4inance e+entually learned of the loss of the car and of Malayan nsuranceRs issuance of a crossed chec,paya!le to it and itanga$ and of itangaRs depositing it in his account at Asian!an, and "ithdra"ing the entire proceedsthereof

A 4inance thereupon demanded the payment of the +alue of the chec, from Asian!an, !ut to no a+ail$ promptinit to file a complaint !efore the Cegional /rial -ourt C/-: of Ma,ati for sum of money and damages against Asian!anand itanga$ alleging that$ inter a2ia$ it is entitled to the entire proceeds of the chec,

ranch 1) of the Ma,ati C/-$ finding that Malayan nsurance "as not pri+y to the contract !et"een A 4inanceand itanga$ and noting the claim of Malayan nsurance that it is its policy to issue chec,s to !oth the insured and thefinancing company$ held that Malayan nsurance cannot !e faulted for negligence for issuing the chec, paya!le to !oth A4inance and itanga

/he trial court$ holding that Asian!an, "as negligent in allo"ing itanga to deposit the chec, to his account and to

"ithdra" the proceeds thereof$ "ithout his co*payee A 4inance ha+ing either indorsed it or authori&ed him to indorse it iits !ehalf$ found Asian!an, and itanga <ointly and se+erally lia!le to A 4inance follo"ing ection '1 of the Ne6!tia12In$tru/ent$ 9a& and A$$!ciate# Ban8 5. C!urt !7 A%%ea2$

/he appellate court$ Ksummari&ingL the errors attri!uted to the trial court !y Asian!an, to !e K"hetherWA4inance has a cause of action against itQ e+en if the su!<ect chec, had not !een deli+ered toWA 4inance !y the issueritself$L held in the affirmati+e and accordingly affirmed the trial courtRs decision !ut deleted the a"ard of P20$000 as actuadamages




EG /he petition fails ection '1 of the Ne6!tia12e In$tru/ent$ 9a& pro+idesG 7here an instrument is paya!le tothe order of t"o or more payees or indorsees "ho are not partners$ all 8ut indo!e unless the one indorsinghas authority to indorse for the others emphasis and underscoring supplied:

itanga alone endorsed the crossed chec,$ and petitioner allo"ed the deposit and release of the proceedthereof$ despite the a!sence of authority of itangaRs co*payee A 4inance to endorse it on its !ehalf /he payment of an instrument o+er a missing indorsement is the equi+alent of payment on a forged indorsement or aunauthori&ed indorsement in itself in the case of <oint payees

-learly$ petitioner$ through its employee$ "as negligent "hen it allo"ed the deposit of the crossed chec,$ despitethe lone endorsement of itanga$ ostensi!ly ignoring the fact that the chec, did not$ it !ears repeating$ carry theindorsement of A 4inance

As has !een repeatedly emphasi&ed$ the !an,ing !usiness is im!ued "ith pu!lic interest such that the highestdegree of diligence and highest standards of integrity and performance are eBpected of !an,s in order to maintain thetrust and confidence of the pu!lic in general in the !an,ing sector ndou!tedly$ A 4inance has a cause of actionagainst petitioner

s petitioner lia!le to A 4inance for the 7u22 +alue of the chec,J

PetitionerRs argument is fla"ed

/he pro+isions of the ;egotia!le nstruments #a" and underlying <urisprudential teachings on the !lac,*letter la"pro+ide definiti+e <ustification for petitionerRs 7u22 lia!ility on the +alue of the chec,

/o !e sure$ a collecting !an,$ Asian!an, in this case$ "here a chec, is deposited and "hich indorses the chec,upon presentment "ith the dra"ee !an,$ is an indorser /his is !ecause in indorsing a chec, to the dra"ee !an,$ acollecting !an, stamps the !ac, of the chec, "ith the phrase Kall prior endorsements and=or lac, of endorsementguaranteedL and$ for all intents and purposes$ treats the chec, as a negotia!le instrument$ hence$ assumes the "arrantyof an indorser 7ithout Asian!an,Rs "arranty$ the dra"ee !an, -hina an, in this case: "ould not ha+e paid the +alue ofthe su!<ect chec,

Petitioner$ as the collecting !an, or last indorser$ generally suffers the loss !ecause it has the duty to ascertainthe genuineness of all prior indorsements considering that the act of presenting the chec, for payment to the dra"ee is an

assertion that the party ma,ing the presentment has done its duty to ascertain the genuineness of prior indorsements

Accordingly$ one "ho credits the proceeds of a chec, to the account of the indorsing payee is lia!le in con+ersionto the non*indorsing payee for the entire amount of the chec,

EN/ORCEMENT O/ LIABILITDCASES:

+. /a! Eat Realt4 Invet8ent( Inc. v. CA( +:: SCRA $':;$. Won= v. CA( /e9!ua!4 $( $&&+;). Inte!national Co!po!ate Ban6 v. Sp. Gueco( /e9!ua!4 +$( $&&+;%. /a! Eat Realt4 v. CA( Octo9e! '( +,33;'. State Invet8ent 1oue v. CA( $+- SCRA )$;:. Aia Ban6in= Co!po!ation v. *avie!( %% Phil ---;-. N4co Sale Co!po!ation v. BA /inance Co!po!ation( $&& SCRA :)-;3. A!ceo( *!. v. People o2 the Philippine( G.R. No. +%$:%+( +- *ul4 $&&:;,. Allied Ban6in= v. CA( GG Spo!tea!( ++ *ul4 $&&:




C ;o 11)85) 4e!ruary 2$ 2001Q

LUIS S. WONG( petitioner, vs. COURT O/ APPEALS and PEOPLE O/ T1E P1ILIPPINES( respondents.

4A-/G

Petitioner 7ong "as an agent of #imtong Press nc #P:$ a manufacturer of calendars #P "ould print sample calendarsthen gi+e them to agents to present to customers /he agents "ould get the purchase orders of customers and for"ardthem to #P After printing the calendars$ #P "ould ship the calendars directly to the customers /hereafter$ the agents

"ould come around to collect the payments Petitioner$ ho"e+er$ had a history of unremitted collections$ "hich he dulyac,no"ledged in a confirmation receipt he co*signed "ith his "ife ence$ petitionerRs customers "ere required to issuepostdated chec,s !efore #P "ould accept their purchase orders

n early .ecem!er 1985$ 7ong issued siB (: postdated chec,s totaling P18$02500$ all dated .ecem!er 0$ 1985 anddra"n paya!le to the order of #P/hese chec,s "ere initially intended to guarantee the calendar orders of customers "hofailed to issue post*dated chec,s o"e+er$ follo"ing company policy$ #P refused to accept the chec,s as guaranteesnstead$ the parties agreed to apply the chec,s to the payment of petitionerRs unremitted collections for 198' amounting toP18$0))0) #P "ai+ed the P520) difference

efore the maturity of the chec,s$ petitioner pre+ailed upon #P not to deposit the chec,s and promised to replace them"ithin 0 days o"e+er$ petitioner reneged on his promise ence$ on 6une 5$ 198($ #P deposited the chec,s "ithCi&al -ommercial an,ing -orporation C--: /he chec,s "ere returned for the reason Kaccount closedL /he dishonor

of the chec,s "as e+idenced !y the C-- return slip

On 6une 20$ 198($ complainant through counsel notified the petitioner of the dishonor Petitioner failed to ma,earrangements for payment "ithin fi+e 5: !an,ing days

On ;o+em!er ($ 198)$ petitioner "as charged "ith three : counts of +iolation of P lg 22 under three separatenformations for the three chec,s amounting to P5$50000$ P$)500$ and P($'1000

pon arraignment$ 7ong pleaded not guilty /rial ensued

On August 0$ 1990$ the trial court finds the accused #uis 7ong #/ !eyond reasona!le dou!t of the offense ofUiolations of ection 1 of atas Pam!ansa ilang 22 /he appellate court affirmed the the trial courtRs decision in t!t!

EG "hether or not the prosecution "as a!le to esta!lish !eyond reasona!le dou!t all the elements of the offensepenali&ed under P lg 22

/here are t"o 2: "ays of +iolating P lg 22G 1: !y ma,ing or dra"ing and issuing a chec, to apply on account or for+alue ,no"ing at the time of issue that the chec, is not sufficiently funded? and 2: !y ha+ing sufficient funds in or credit"ith the dra"ee !an, at the time of issue !ut failing to ,eep sufficient funds therein or credit "ith said !an, to co+er thefull amount of the chec, "hen presented to the dra"ee !an, "ithin a period of ninety 90: days

for the same reason had not the dra"er$ "ithout any +alid cause$ ordered the !an, to stop paymentL

Petitioner contends that the first element does not eBist !ecause the chec,s "ere not issued to apply for account or for+alue e attempts to distinguish his situation from the usual Kcut*and*driedL P 22 case !y claiming that the chec,s "ereissued as guarantee and the o!ligations they "ere supposed to guarantee "ere already paid /his fla"ed argument hasno factual !asis$ the C/- and -A ha+ing !oth ruled that the chec,s "ere in payment for unremitted collections$ and not asguarantee #i,e"ise$ the argument has no legal !asis$ for "hat P lg 22 punishes is the issuance of a !ouncing chec,and not the purpose for "hich it "as issued nor the terms and conditions relating to its issuance

As to the second element$ P lg 22 creates a presumption uri$ tantu/ that the second element %ri/a 7acie eBists"hen the first and third elements of the offense are present /hus$ the ma,erRs ,no"ledge is presumed from the dishonorof the chec, for insufficiency of funds




Petitioner a+ers that since the complainant deposited the chec,s on 6une 5$ 198($ or 15) days after the .ecem!er 0$1985 maturity date$ the presumption of ,no"ledge of lac, of funds under ection 2 of P lg 22 should not apply tohim e further claims that he should not !e eBpected to ,eep his !an, account acti+e and funded !eyond the ninety*dayperiod

ection 2 of P lg 22 pro+idesG

E5i#ence !7 8n!&2e#6e !7 in$u77icient 7un#$. -- /he ma,ing$ dra"ing and issuance of a chec, payment of "hich is refused!y the dra"ee !ecause of insufficient funds in or credit "ith such !an,$ "hen presented "ithin ninety 90: days from the

date of the chec,$ shall !e %ri/a 7acie e+idence of ,no"ledge of such insufficiency of funds or credit unless such ma,er ordra"er pays the holder thereof the amount due thereon$ or ma,es arrangements for payment in full !y the dra"ee of suchchec, "ithin fi+e 5: !an,ing days after recei+ing notice that such chec, has not !een paid !y the dra"ee

An essential element of the offense is K,no"ledgeL on the part of the ma,er or dra"er of the chec, of the insufficiency ofhis funds in or credit "ith the !an, to co+er the chec, upon its presentment ince this in+ol+es a state of mind difficult toesta!lish$ the statute itself creates a %ri/a 7acie presumption of such ,no"ledge "here payment of the chec, Kis refused!y the dra"ee !ecause of insufficient funds in or credit "ith such !an, "hen presented "ithin ninety 90: days from thedate of the chec,L /o mitigate the harshness of the la" in its application$ the statute pro+ides that such presumption shallnot arise if "ithin fi+e 5: !an,ing days from receipt of the notice of dishonor$ the ma,er or dra"er ma,es arrangementsfor payment of the chec, !y the !an, or pays the holder the amount of the chec,

-ontrary to petitionerRs assertions$ no"here in said pro+ision does the la" require a ma,er to maintain funds in his !an,

account for only 90 days Cather$ the clear import of the la" is to esta!lish a %ri/a 7acie presumption of ,no"ledge ofsuch insufficiency of funds under the follo"ing conditions 1: presentment "ithin 90 days from date of the chec,$ and 2:the dishonor of the chec, and failure of the ma,er to ma,e arrangements for payment in full "ithin 5 !an,ing days afternotice thereof /hat the chec, must !e deposited "ithin ninety 90: days is simply one of the conditions for the %ri/a 7aciepresumption of ,no"ledge of lac, of funds to arise t is not an element of the offense ;either does it discharge petitionerfrom his duty to maintain sufficient funds in the account "ithin a reasona!le time thereof nder ection 18( of the;egotia!le nstruments #a"$ Ka chec, must !e presented for payment "ithin a reasona!le time after its issue or thedra"er "ill !e discharged from lia!ility thereon to the eBtent of the loss caused !y the delayL y current !an,ing practice$a chec, !ecomes stale after more than siB (: months$ or 180 days Pri+ate respondent herein deposited the chec,s 15)days after the date of the chec, ence said chec,s cannot !e considered stale Only the presumption of ,no"ledge ofinsufficiency of funds "as lost$ !ut such ,no"ledge could still !e pro+en !y direct or circumstantial e+idence As found !ythe trial court$ pri+ate respondent did not deposit the chec,s !ecause of the reassurance of petitioner that he "ould issuene" chec,s pon his failure to do so$ #P "as constrained to deposit the said chec,s After the chec,s "ere dishonored$

petitioner "as duly notified of such fact !ut failed to ma,e arrangements for full payment "ithin fi+e 5: !an,ing daysthereof /here is$ on record$ sufficient e+idence that petitioner had ,no"ledge of the insufficiency of his funds in or credit"ith the dra"ee !an, at the time of issuance of the chec,s And despite petitionerRs insistent plea of innocence$ "e find noerror in the respondent courtRs affirmance of his con+iction !y the trial court for +iolations of the ouncing -hec,s #a"

o"e+er$ pursuant to the policy guidelines in A#/ini$trati5e Circu2ar N!. *+-+ $ "hich too, effect on ;o+em!er 21$2000$ the penalty imposed on petitioner should no" !e modified to a fine of not less than !ut not more than dou!le theamount of the chec,s that "ere dishonored

The Inte!national Co!po!ate Ban6 ?no Union Bna6 o2 the Philippine@ v. Spoue GuecoGR +%+,:3( +$ /e9!ua!4 $&&+

/act0 pouses 4rancis ueco and Ma #u& E ueco o!tained a loan from petitioner nternational -orporate an,no" nion an, of the Philippines: to purchase a car H a ;issan entra 1(00 '.C$ 1989 Model n considerationthereof$ the pouses eBecuted promissory notes "hich "ere paya!le in monthly installments and chattel mortgage o+erthe car to ser+e as security for the notes /he pouses defaulted in payment of installments -onsequently$ the an, filedon ) August 1995 a ci+il action -i+il -ase (58*95: for @um of Money "ith Prayer for a 7rit of Ceple+in@ !efore theMetropolitan /rial -ourt of Pasay -ity$ ranch '5 On 25 August 1995$ .r 4rancis ueco "as ser+ed summons and "asfetched !y the sheriff and representati+e of the !an, for a meeting in the !an, premises .esi /omas$ the an,3s AssistanUice President demanded payment of the amount of P18'$00000 "hich represents the unpaid !alance for the car loan

After some negotiations and computation$ the amount "as lo"ered to P15'$00000$ o"e+er$ as a result of the non*payment of the reduced amount on that date$ the car "as detained inside the !an,3s compound On 28 August 1995$ .rueco "ent to the !an, and tal,ed "ith its Administrati+e upport Auto #oans=-redit -ard -ollection ead$ 6efferson




Ci+era /he negotiations resulted in the further reduction of the outstanding loan to P150$00000 On 29 August 1995$ .rueco deli+ered a manager3s chec, in the amount of P150$00000 !ut the car "as not released !ecause of his refusal tosign the 6oint Motion to .ismiss t is the contention of the ueco spouses and their counsel that .r ueco need not signthe motion for <oint dismissal considering that they had not yet filed their Ans"er the an,$ ho"e+er$ insisted that the <ointmotion to dismiss is standard operating procedure in their !an, to effect a compromise and to preclude future filing ofclaims$ counterclaims or suits for damages After se+eral demand letters and meetings "ith !an, representati+es$ theueco spouses initiated a ci+il action for damages !efore the Metropolitan /rial -ourt of %ue&on -ity$ ranch /heMetropolitan /rial -ourt dismissed the complaint for lac, of merit On appeal to the Cegional /rial -ourt$ ranch 22) of%ue&on -ity$ the decision of the Metropolitan /rial -ourt "as re+ersed n its decision$ the C/- held that there "as ameeting of the minds !et"een the parties as to the reduction of the amount of inde!tedness and the release of the car !utsaid agreement did not include the signing of the <oint motion to dismiss as a condition sine qua non for the effecti+ity ofthe compromise /he court further ordered the !an, to return immediately the su!<ect car to the spouses in good "or,ingcondition? and to pay the spouses the sum of P50$00000 as moral damages? P25$00000 as eBemplary damages$ andP25$00000 as attorney3s fees$ and to pay the cost of suit n other respect$ the court affirmed the decision of theMetropolitan /rial -ourt ranch /he case "as ele+ated to the -ourt of Appeals$ "hich on 1) 4e!ruary 2000$ issuedthe decision$ denying the petition for re+ie" on certiorari and affirming the .ecision of the C/- of %ue&on -ity$ ranch22)$ in -i+il -ase %*9)*11)($ in toto? "ith costs against the !an, /he !an, filed the petition for re+ie" on certiorari "iththe upreme -ourt

Sho!t 2act0 n the meeting of 29 August 1995$ .r ueco deli+ered a manager3s chec, representing the reducedamount of P150$00000 aid chec, "as gi+en to Mr Ci+era$ a representati+e of the !an, o"e+er$ since .rueco refused to sign the <oint motion to dismiss$ he "as made to eBecute a statement to the effect that he "as"ithholding the payment of the chec, u!sequently$ in a letter addressed to Ms .esi /omas$ +ice president of

the !an,$ dated ' eptem!er 1995$ .r ueco instructed the !an, to disregard the @hold order@ letter anddemanded the immediate release of his car$ to "hich the former replied that the condition of signing the <ointmotion to dismiss must !e satisfied and that they had ,ept the chec, "hich could !e claimed !y .r uecoanytime 7hile there is contro+ersy as to "hether the document e+idencing the order to hold payment of thechec, "as formally offered as e+idence !y the !an,$ it appears from the pleadings that said chec, has not !eenencashed:

Iue0 7hether the !an, "as negligent in opting not to deposit or use the managerRs chec,

1eld0 ;O A stale chec, is one "hich has not !een presented for payment "ithin a reasona!le time after its issue t is+alueless and$ therefore$ should not !e paid nder the negotia!le instruments la"$ an instrument not paya!le on demandmust !e presented for payment on the day it falls due 7hen the instrument is paya!le on demand$ presentment must !emade "ithin a reasona!le time after its issue n the case of a !ill of eBchange$ presentment is sufficient if made "ithin areasona!le time after the last negotiation thereof A chec, must !e presented for payment "ithin a reasona!le time afterits issue$ and in determining "hat is a @reasona!le time$@ regard is to !e had to the nature of the instrument$ the usage oftrade or !usiness "ith respect to such instruments$ and the facts of the particular case /he test is "hether the payeeemployed such diligence as a prudent man eBercises in his o"n affairs /his is !ecause the nature and theory !ehind theuse of a chec, points to its immediate use and paya!ility n a case$ a chec, paya!le on demand "hich "as long o+erdue!y a!out t"o and a half 2*1=2: years "as considered a stale chec, 4ailure of a payee to encash a chec, for more than10 years undou!tedly resulted in the chec, !ecoming stale /hus$ e+en a delay of 1 "ee, or t"o 2: days$ under thespecific circumstances of the certain cases constituted unreasona!le time as a matter of la" erein$ the chec, in+ol+ed isnot an ordinary !ill of eBchange !ut a manager3s chec, A manager3s chec, is one dra"n !y the !an,3s manager upon the!an, itself t is similar to a cashier3s chec, !oth as to effect and use A cashier3s chec, is a chec, of the !an,3s cashier onhis o"n or another chec, n effect$ it is a !ill of eBchange dra"n !y the cashier of a !an, upon the !an, itself$ andaccepted in ad+ance !y the act of its issuance t is really the !an,3s o"n chec, and may !e treated as a promissory note"ith the !an, as a ma,er /he chec, !ecomes the primary o!ligation of the !an, "hich issues it and constitutes its "ritten

promise to pay upon demand /he mere issuance of it is considered an acceptance thereof f treated as promissory notethe dra"er "ould !e the ma,er and in "hich case the holder need not pro+e presentment for payment or present the !illto the dra"ee for acceptance E+en assuming that presentment is needed$ failure to present for payment "ithin areasona!le time "ill result to the discharge of the dra"er only to the eBtent of the loss caused !y the delay 4ailure topresent on time$ thus$ does not totally "ipe out all lia!ility n fact$ the legal situation amounts to an ac,no"ledgment of lia!ility in the sum stated in the chec, n this case$ the ueco spouses ha+e not alleged$ much less sho"n that they orthe !an, "hich issued the manager3s chec, has suffered damage or loss caused !y the delay or non*presentment.efinitely$ the original o!ligation to pay certainly has not !een erased t has !een held that$ if the chec, had !ecomestale$ it !ecomes imperati+e that the circumstances that caused its non*presentment !e determined erein$ the !an, heldon the chec, and refused to encash the same !ecause of the contro+ersy surrounding the signing of the <oint motion todismiss /he -ourt sa" no !ad faith or negligence in this position ta,en !y the an,




State Invet8ent 1oue v. CA( $+- SCRA )$

/act0 ;ora Moulic issued to -ora&on Uictoriano$ as security for pieces of <e"elry to !e sold on commission$ 2 post*dated Equita!le an,ing -orporation chec,s in the amount of P50$000 each$ one dated 0 August 19)9 and the other$ 0eptem!er 19)9 /hereafter$ the payee negotiated the chec,s to the tate n+estment ouse nc : Moulic failed tosell the pieces of <e"elry$ so she returned them to the payee !efore maturity of the chec,s /he chec,s$ ho"e+er$ could nolonger !e retrie+ed as they had already !een negotiated -onsequently$ !efore their maturity dates$ Moulic "ithdre" herfunds from the dra"ee !an,pon presentment for payment$ the chec,s "ere dishonored for insufficiency of funds On 20

.ecem!er 19)9$ allegedly notified Moulic of the dishonor of the chec,s and requested that it !e paid in cash instead$although Moulic a+ers that no such notice "as gi+en her On ( Octo!er 198$ sued to reco+er the +alue of thechec,s plus attorney3s fees and eBpenses of litigation n her Ans"er$ Moulic contends that she incurred no o!ligation onthe chec,s !ecause the <e"elry "as ne+er sold and the chec,s "ere negotiated "ithout her ,no"ledge and consent healso instituted a /hird*Party -omplaint against -ora&on Uictoriano$ "ho later assumed full responsi!ility for the chec,sOn 2( May 1988$ the trial court dismissed the -omplaint as "ell as the /hird*Party -omplaint$ and ordered to payMoulic P$00000 for attorney3s fees ele+ated the order of dismissal to the -ourt of Appeals$ !ut the appellate courtaffirmed the trial court on the ground that the ;otice of .ishonor to Moulic "as made !eyond the period prescri!ed !y the;egotia!le nstruments #a" and that e+en if did ser+e such notice on Moulic "ithin the reglementary period it "ould!e of no consequence as the chec,s should ne+er ha+e !een presented for payment filed the petition for re+ie"

Iue "+0 7hether the alleged issuance of the post*dated chec,s as security is a ground for the discharge of theinstrument as against a holder in due course

1eld "+0 ection 119 of the ;egotia!le nstrument #a" outlined the grounds in "hich an instrument is discharged /hepro+ision states that @A negotia!le instrument is dischargedG a: y payment in due course !y or on !ehalf of theprinci7hether the post*dated chec,s$ issued as security$ is a ground for the discharge of the instrument as against aholder in due course pal de!tor? !: y payment in due course !y the party accommodated$ "here the instrument is madeor accepted for his accommodation? c: y the intentional cancellation thereof !y the holder? d: y any other act "hich"ill discharge a simple contract for the payment of money? e: 7hen the principal de!tor !ecomes the holder of theinstrument at or after maturity in his o"n right@ O!+iously$ MO#- may only in+o,e paragraphs c: and d: as possi!legrounds for the discharge of the instrument ut$ the intentional cancellation contemplated under paragraph c: is thatcancellation effected !y destroying the instrument either !y tearing it up$ !urning it$ or "riting the "ord @cancelled@ on theinstrument /he act of destroying the instrument must also !e made !y the holder of the instrument intentionally inceMO#- failed to get !ac, possession of the post*dated chec,s$ the intentional cancellation of the said chec,s isaltogether impossi!le On the other hand$ the acts "hich "ill discharge a simple contract for the payment of money underparagraph d: are determined !y other eBisting legislations since ection 119 does not specify "hat these acts are$ eg$

Art 121 of the -i+il -ode "hich enumerates the modes of eBtinguishing o!ligations Again$ none of the modes outlinedtherein is applica!le in the instant case as ection 119 contemplates of a situation "here the holder of the instrument isthe creditor "hile its dra"er is the de!tor erein$ the payee$ -ora&on Uictoriano$ "as no longer MO#-3s creditor at thetime the <e"elry "as returned -orrespondingly$ MO#- may not unilaterally discharge herself from her lia!ility !y themere eBpediency of "ithdra"ing her funds from the dra"ee !an, he is thus lia!le as she has no legal !asis to eBcuseherself from lia!ility on her chec,s to a holder in due course

Iue "$0 7hether the requirement that should gi+e ;otice of .ishonor to MO#- is indispensa!le

1eld "$0 /he need for notice is not a!solute? there are eBceptions under ection 11' of the ;egotia!le nstruments #a"ection 11' 7hen notice need not !e gi+en to dra"er: pro+ides that @;otice of dishonor is not required to !e gi+en to thedra"er in the follo"ing casesG a: 7here the dra"er and the dra"ee are the same person? !: 7hen the dra"ee is afictitious person or a person not ha+ing capacity to contract? c: 7hen the dra"er is the person to "hom the instrument is

presented for payment? d: 7here the dra"er has no right to eBpect or require that the dra"ee or acceptor "ill honor theinstrument? e: 7here the dra"er had countermanded payment@ ndeed$ MO#-3 actuations lea+e much to !e desiredhe did not retrie+e the chec,s "hen she returned the <e"elry he simply "ithdre" her funds from her dra"ee !an, andtransferred them to another to protect herself After "ithdra"ing her funds$ she could not ha+e eBpected her chec,s to !ehonored n other "ords$ she "as responsi!le for the dishonor of her chec,s$ hence$ there "as no need to ser+e her;otice of .ishonor$ "hich is simply !ringing to the ,no"ledge of the dra"er or indorser of the instrument$ either +er!ally or!y "riting$ the fact that a specified instrument$ upon proper proceedings ta,en$ has not !een accepted or has not !eenpaid$ and that the party notified is eBpected to pay it n addition$ the ;egotia!le nstruments #a" "as enacted for thepurpose of facilitating$ not hindering or hampering transactions in commercial paper /hus$ the said statute should not !etampered "ith hapha&ardly or lightly ;or should it !e !rushed aside in order to meet the necessities in a single case /heholder "ho ta,es the negotiated paper ma,es a contract "ith the parties on the face of the instrument /here is an implied




representation that funds or credit are a+aila!le for the payment of the instrument in the !an, upon "hich it is dra"n-onsequently$ the "ithdra"al of the money from the dra"ee !an, to a+oid lia!ility on the chec,s cannot pre<udice therights of holders in due course erein$ such "ithdra"al renders the dra"er$ Moulic$ lia!le to $ a holder in due courseof the chec,s could not eBpect payment as MO#- left no funds "ith the dra"ee !an, to meet her o!ligation on thechec,s$ so that ;otice of .ishonor "ould !e futile

PACI/ICO B. ARCEO( *R( *!. v. People o2 the Philippine( G.R. No. +%$:%+( +- *ul4 $&&:

4A-/G

On March 1'$ 1991$ petitionerQ$ o!tained a loan from pri+ate complainant 6osefino -eni&al in the amount of P100$00000e+eral "ee,s thereafter$ petitionerQ o!tained an additional loan of P50$00000 from -eni&alQ PetitionerQ then issued infa+or of -eni&al$ an, of the Philippine slands P:Q -hec, ;o 1(255$ postdated August '$ 1991$ for P150$00000$ at-eni&alRs house located at )0 Panay A+enue$ %ue&on -ity 7hen August '$ 1991 came$ -eni&alQ did not deposit thechec, immediately !ecause petitionerQ promised Q that he "ould replace the chec, "ith cash uch promise "as made+er!ally se+en ): times 7hen his patience ran out$ -eni&alQ !rought the chec, to the !an, for encashment /he headoffice of the an, of the Philippine slands through a letter dated .ecem!er 5$ 1991$ informed -eni&alQ that the chec,!ounced !ecause of insufficient funds

/hereafter$ -eni&alQ "ent to the house of petitionerQ to inform him of the dishonor of the chec, !ut -eni&alQfound out that petitionerQ had left the place o$ -eni&alQ referred the matter to a la"yer "ho "rote a letter gi+ingpetitionerQ three days from receipt thereof to pay the amount of the chec, PetitionerQ still failed to ma,e good theamount of the chec, As a consequence$ -eni&alQ eBecuted on 6anuary 20$ 1992 !efore the office of the -ity Prosecutorof %ue&on -ity his affida+it and su!mitted documents in support of his complaint for eQstafa and +Qiolation of P 22Qagainst petitionerQ After due in+estigation$ this case for +Qiolation of P 22Q "as filed against petitionerQ on March 2)$1992 /he chec, in question and the return slip "ere ho"e+er lost !y -eni&alQ as a result of a fire that occurred near hisresidence on eptem!er 1($ 1992 -eni&alQ eBecuted an Affida+it of #oss regarding the loss of the chec, in question andthe return slip /he trial$ petitioner "as found guilty as charged$ the appellate court affirmed the trial courtRs decision int!t! EG 7O; petitioner is held lia!le for the dishonor of the chec, !ecause it "as presented !eyond the 90*day period

pro+ided under the la"

E#.G/he -ourt ruled that the 90*day period pro+ided in the la" is not an element of the offense ;either does it discharge

petitioner from his duty to maintain sufficient funds in the account "ithin a reasona!le time from the date indicated in thechec, According to current !an,ing practice$ the reasona!le period "ithin "hich to present a chec, to the dra"ee !an,

is siB months /hereafter$ the chec, !ecomes stale and the dra"er is discharged from lia!ility thereon to the eBtent of theloss caused !y the delay

/hus$ -eni&alRs presentment of the chec, to the dra"ee !an, 120 days four months: after its issue "as still "ithinthe allo"a!le period Petitioner "as freed neither from the o!ligation to ,eep sufficient funds in his account nor fromlia!ility resulting from the dishonor of the chec,

/he gra+amen of the offense is the act of dra"ing and issuing a "orthless chec, ence$ the su!<ect of the inquiry isthe fact of issuance or eBecution of the chec,$ not its content ere$ the due eBecution and eBistence of the chec, "ere sufficiently esta!lished -eni&al testified that he presented theoriginals of the chec,$ the return slip and other pertinent documents !efore the Office of the -ity Prosecutor of %ue&on-ity "hen he eBecuted his complaint*affida+it during the preliminary in+estigation /he -ity Prosecutor found a %ri/a

7acie case against petitioner for +iolation of P 22 and filed the corresponding information !ased on the documents Although the chec, and the return slip "ere among the documents lost !y -eni&al in a fire that occurred near hisresidence on eptem!er 1($ 1992$ he "as ne+ertheless a!le to adequately esta!lish the due eBecution$ eBistence andloss of the chec, and the return slip in an affida+it of loss as "ell as in his testimony during the trial of the case

Moreo+er$ petitioner himself admitted that he issued the chec, e ne+er denied that the chec, "as presented forpayment to the dra"ee !an, and "as dishonored for ha+ing !een dra"n against insufficient funds

Allied Ban6in= v. CA( GG Spo!tea!( ++ *ul4 $&&:




4A-/G

On 6anuary ($ 1981$ petitioner Allied an,$ Manila A##E.: purchased EBport ill ;o .O*81*002 in the amount of V20$08500 from respondent ports"ear Mfg -orporation : /he !ill$ dra"n under a letter of credit ;o('05'9 co+ered MenRs Ual+oline /raining uit that "as in transit to 7est ermany niger +ia Cotterdam: under -ontX)=0299 /he eBport !ill "as issued !y -he,iang 4irst an, #td$ ong,ong 7ith the purchase of the !ill$ A##E.credited the peso equi+alent of the aforementioned !ill amounting to P151$')'52 and the receipt of "hich "asac,no"ledged !y the latter in its letter dated 6une 22$ 1981On the same date$ respondents ;ari id"ani and Alcron nternational #td Alcron: eBecuted their respecti+e #etters ofuaranty$ holding themsel+es lia!le on the eBport !ill if it should !e dishonored or retired !y the dra"ee for any reasonu!sequently$ the spouses #eon and #eticia de Uilla and ;ari id"ani also eBecuted a -ontinuinguaranty=-omprehensi+e urety surety$ for !re+ity:$ guaranteeing payment of any and all such credit accommodations"hich A##E. may eBtend to 7hen A##E. negotiated the eBport !ill to -he,iang$ payment "as refused due tosome material discrepancies in the documents su!mitted !y relati+e to the eBportation co+ered !y the letter of credit-onsequently$ A##E. demanded payment from all the respondents !ased on the #etters of uaranty and uretyeBecuted in fa+or of A##E. o"e+er$ respondents refused to pay$ prompting A##E. to file an action for a sum ofmoneyCespondent $ as the !eneficiary of the eBport !ill$ instead of going to -he,iang 4irst an, #td issuing !an,:$ "ent topetitioner A##E.$ to ha+e the eBport !ill purchased or discounted efore A##E. agreed to purchase the su!<ect eBport!ill$ it required respondents ;ari id"ani and Alcron to eBecute #etters of uaranty$ holding them lia!le on demand$ incase the su!<ect eBport !ill "as dishonored or retired for any reason8Q

#i,e"ise$ respondents ;ari id"ani and spouses #eon and #eticia de Uilla eBecuted -ontinuing

uaranty=-omprehensi+e urety$ holding themsel+es <ointly and se+erally lia!le on any and all credit accommodations$instruments$ loans$ ad+ances$ credits and=or other o!ligation that may !e granted !y the petitioner A##E. to respondent9Q /he surety also contained a clause "here!y said sureties "ai+e protest and notice of dishonor of any and alsuch instruments$ loans$ ad+ances$ credits and=or o!ligations10Q /hese letters of guaranty and surety are no" the !asisof the petitionerRs action

EG 7hether or not respondents ;ari$ .e Uilla and Alcron are lia!le under the #etters of uaranty and the -ontinuinguaranty= comprehensi+e urety not"ithstanding the fact that no protest "as made after the !ill$ a foreign !ill ofeBchange$ "as dishonored

E#.Gection 152 of the ;egotia!le nstruments #a" pertaining to indorsers$ relied on !y respondents$ is not pertinent to thiscase /here are "ell*defined distinctions !et"een the contract of an indorser and that of a guarantor=surety of a

commercial paper$ "hich is "hat is in+ol+ed in this case /he contract of indorsement is primarily that of transfer$ "hilethe contract of guaranty is that of personal security1'Q /he lia!ility of a guarantor=surety is !roader than that of anindorser nless the !ill is promptly presented for payment at maturity and due notice of dishonor gi+en to the indorser"ithin a reasona!le time$ he "ill !e discharged from lia!ility thereon15Q On the other hand$ eBcept "here required !y thepro+isions of the contract of suretyship$ a demand or notice of default is not required to fiB the suretyRs lia!ility1(Q ecannot complain that the creditor has not notified him in the a!sence of a special agreement to that effect in the contractof suretyship1)Q /herefore$ no protest on the eBport !ill is necessary to charge all the respondents <ointly and se+erallylia!le "ith ports"ear since the respondents held themsel+es lia!le upon demand in case the instrument "asdishonored and on the surety$ they e+en "ai+ed notice of dishonor as stipulated in their #etters of uarantee

5ISC1ARGE O/ INSTRUMENTS

CASES:

+. Ne Paci2ic Ti89e! v. 1on. Sene!i( 5ece89e! +,( +,3&;$. PNB v. National Cit4 Ban6 o2 Ne Do!6( :) Phil -++;). Bataan Ci=a! v. CA( $)& SCRA :%3;%. Stelco Ma!6etin= Co!po!ation v. CA( *une +-( +,,$;'. State Invet8ent 1oue v. CA( +-' SCRA )++;:. Papa v. A.U. alencia( $3% SCRA :%);-. illanueva v. Nite( G.R. No. +%3$++( $' *ul4 $&&:;3. EJuita9le PCI v. On=( +' Septe89e! $&&:;,. Secu!it4 Ban6 7 T!ut Co8pan4 v. RCBC( G.R. No. +-&,3% 7 +-&,3-( *anua!4 )&( $&&,;




+&. Sala>a! v. *D B!othe!( $& Octo9e! $&+&

Bataan Ci=a! v. CA( $)& SCRA :%3

4actsG ataan -igar I -igarette 4actory$ nc --4:$ a corporation in+ol+ed in the manufacturing of cigarettes$ engagedone of its suppliers$ Fing /im Pua eorge eorge Fing:$ to deli+er 2$000 !ales of to!acco leaf starting Octo!er 19)8 n

consideration thereof$ --4$ on 1 6uly 19)8 issued crossed chec,s post dated sometime in March 19)9 in the totaamount of P820$00000 Celying on the supplier3s representation that he "ould complete deli+ery "ithin three months from5 .ecem!er 19)8$ --4 agreed to purchase additional 2$500 !ales of to!acco lea+es$ despite the supplier3s failure todeli+er in accordance "ith their earlier agreement Again --4 issued postdated crossed chec,s in the total amount ofP1$100$00000$ paya!le sometime in eptem!er 19)9 .uring these times$ eorge Fing "as simultaneously dealing "ithtate n+estment ouse$ nc : On 19 6uly 19)8$ he sold at a discount chec, /-/ 55182( !earing an amount ofP1('$00000$ post dated 1 March 19)9$ dra"n !y --4$ naming eorge Fing as payee to On .ecem!er 19 and2($ 19)8$ he again sold to chec,s /-/ (089() I (089(8$ !oth in the amount of P100$00000$ post datedeptem!er 15 I 0$ 19)9 respecti+ely$ dra"n !y --4 in fa+or of eorge Fing n as much as eorge Fing failed todeli+er the !ales of to!acco leaf as agreed despite --43s demand$ --4 issued on 0 March 19)9$ a stop paymentorder on all chec,s paya!le to eorge Fing$ including chec, /-/ 55182( u!sequently$ stop payment "as alsoordered on chec,s /-/s (089() I (089(8 on eptem!er 1' I 28$ 19)9$ respecti+ely$ due to eorge Fing3s failure todeli+er the to!acco lea+es Efforts of to collect from --4 ha+ing failed$ it instituted the case for collection on threeunpaid chec,s$ naming only --4 as party defendant /he trial court pronounced as ha+ing a +alid claim !eing aholder in due course t further said that the non*inclusion of Fing /im Pua eorge as party defendant is immaterial in thecase$ since he$ as payee$ is not an indispensa!le party /he -ourt of Appeals affirmed the decision of the trial court--4 filed the petition for re+ie"

ssueG 7hether $ a second indorser$ a holder of crossed chec,s$ is a holder in due course$ to !e a!le to collect fromthe dra"er$ --4

eldG /he ;egotia!le nstruments #a" states "hat constitutes a holder in due course$ ie @A holder in due course is aholder "ho has ta,en the instrument under the follo"ing conditionsG a: /hat it is complete and regular upon its face? !:/hat he !ecame the holder of it !efore it "as o+erdue$ and "ithout notice that it had !een pre+iously dishonored$ if such"as the fact? c: /hat he too, it in good faith and for +alue? d: /hat at the time it "as negotiated to him he had no notice ofany infirmity in the instrument or defect in the title of the person negotiating it@ ection 59 of the ;# further states thate+ery holder is deemed prima facie a holder in due course o"e+er$ "hen it is sho"n that the title of any person "ho has

negotiated the instrument "as defecti+e$ the !urden is on the holder to pro+e that he or some person under "hom heclaims$ acquired the title as holder in due course -rossing of chec,s should put the holder on inquiry and upon himde+ol+es the duty to ascertain the indorser3s title to the chec, or the nature of his possession 4ailing in this respect$ theholder is declared guilty of gross negligence amounting to legal a!sence of good faith$ contrary to ec 52c: of the;egotia!le nstruments #a"$ and as such the consensus of authority is to the effect that the holder of the chec, is not aholder in due course erein$ --43s defense in stopping payment is as good to as it is to eorge Fing ecausereally$ the chec,s "ere issued "ith the intention that eorge Fing "ould supply --4 "ith the !ales of to!acco leaf/here !eing failure of consideration$ is not a holder in due course -onsequently$ --4 cannot !e o!liged to pay thechec,s

;oteG t does not mean$ ho"e+er$ that could not reco+er from the chec,s /he only disad+antage of a holder "ho isnot a holder in due course is that the instrument is su!<ect to defenses as if it "ere non*negotia!le ence$ cancollect from the immediate indorser$ eorge Fing:

State Invet8ent 1oue v. CA( +-' SCRA )++

Facts: Shortly before 5 September 1980, New Sikatuna oo! "n!u#trie#, "n$% &NS""' re(ue#te! for a loan from )arri# *hua% +he

latter aree! to rant the #ame #ub-e$t to the $on!ition that the former #houl! wait until .e$ember 1980 when he woul! ha/e the

money% "n /iew of thi# areement, nita ena *hua &)arri# *hua# wife' i##ue! 3 $ro##e! $he$k# payable to NS"" all po#t!ate! 22.e$ember 1980% +he total /alue of the po#t!ate! $he$k# amounte! to 299,450%00% Sub#e(uently, NS"" entere! into an areement

with State "n/e#tment )ou#e, "n$% &S")"' whereby for an! in $on#i!eration of the #um of l,047,402%91 un!er a !ee! of #ale, the

former a##ine! an! !i#$ounte! with S")" 11 po#t!ate! $he$k# in$lu!in the 3 po#t!ate! $he$k# i##ue! by ea *hua to NS""

hen the three $he$k# i##ue! by ena *hua were allee!ly !epo#ite! by S")", the#e $he$k# were !i#honore! by rea#on ofin#uffi$ient fun!#, #top payment an! a$$ount $lo#e!, re#pe$ti/ely% S")" $laime! that !e#pite !eman!# on ea *hua to make




oo! #ai! $he$k#, the latter faile! to pay the #ame ne$e##itatin the former to file an a$tion for $olle$tion aain#t the latter an! her

hu#ban! before the eional +rial *ourt of anila, ran$h "" &*i/il *a#e 82:10547'% +he #pou#e# *hua file! a thir! party

$omplaint aain#t NS"" for reimbur#ement an! in!emnifi$ation in the e/ent that they be hel! liable to S")"% ;or failure of NS"" toan#wer the thir! party $omplaint !e#pite !ue #er/i$e of #ummon#, the latter wa# !e$lare! in !efault% <n 30 pril 1984, the lower $our

ren!ere! -u!ment aain#t the #pou#e#, or!erin them to pay -ointly an! #e/erally to S")" 229,450%00 with intere#t at the rate of

12= per annum from 24 ;ebruary 1981 until fully pai!> 29,945%00 a# an! for attorney# fee#> an! the $o#t# of #uit% <n the thir! party

$omplaint, NS"" wa# or!ere! to pay the #pou#e# all amount# #ai! #pou#e# may pay to S")" on a$$ount of the $a#e% <n appeal file! by the #pou#e# &*:? * 04523', the "nterme!iate ppellate *ourt &now *ourt of ppeal#' re/er#e! the lower $ourt# -u!ment in

it# !e$i#ion, !i#mi##in the $omplaint, with $o#t# aain#t S")"% S")" file! the petition for re/iew%

Issue [1]: hether S")" i# a hol!er in !ue $our#e a# to entitle it to pro$ee! aain#t the #pou#e# *hua for the amount #tate! in the!i#honore! $ro## $he$k#%

Held [1]: N<% Se$tion 52&$' of the Neotiable "n#trument# @aw !efine# a hol!er in !ue $our#e a# one who take# the in#trument in

oo! faith an! for /alue% <n the other han!, Se$tion 52&!' pro/i!e# that in or!er that one may be a hol!er in !ue $our#e, it i#ne$e##ary that at the time the in#trument wa# neotiate! to him he ha! no noti$e of any !efe$t in the title of the per#on neotiatin it%

)owe/er, un!er Se$tion 59 e/ery hol!er i# !eeme! prima fa$ie to be a hol!er in !ue $our#e% !mitte!ly, the Neotiable "n#trument#

@aw reulatin the i##uan$e of neotiable $he$k# a# well a# the liht# an! liabilitie# ari#in therefrom, !oe# not mention $ro##e!

$he$k#% ut the *ourt ha# taken $oniAan$e of the pra$ti$e that a $he$k with two parallel line# in the upper left han! $orner mean#that it $oul! only be !epo#ite! an! may not be $on/erte! into $a#h% *on#e(uently, #u$h $ir$um#tan$e #houl! put the payee on in(uiry

an! upon him !e/ol/e# the !uty to a#$ertain the hol!er# title to the $he$k or the nature of hi# po##e##ion% ;ailin in thi# re#pe$t, the

payee i# !e$lare! uilty of ro## nelien$e amountin to leal ab#en$e of oo! faith an! a# #u$h the $on#en#u# of authority i# to the

effe$t that the hol!er of the $he$k i# not a hol!er in oo! faith% elyin on the rulin in <$ampo /% ?at$halian &? @:15126, 30

No/ember 1961', the "nterme!iate ppellate *ourt &now *ourt of ppeal#', $orre$tly elu$i!ate! that the effe$t# of $ro##in a $he$kareB the $he$k may not be en$a#he! but only !epo#ite! in the bank> the $he$k may be neotiate! only on$e to one who ha# an a$$ount

with a bank> an! the a$t of $ro##in the $he$k #er/e# a# a warnin to the hol!er that the $he$k ha# been i##ue! for a !efinite purpo#e #o

that he mu#t in(uire if he ha# re$ei/e! the $he$k pur#uant to that purpo#e, otherwi#e he i# not a hol!er in !ue $our#e% ;urther, theappellate $ourt #ai! that when S")" re!i#$ounte! the $he$k knowin that it wa# a $ro##e! $he$k he wa# knowinly /iolatin the

a/owe! intention of $ro##in the $he$k> that hi# failure to in(uire from the hol!er, NS"", the purpo#e for whi$h the three $he$k#

were $ro## !e#pite the warnin of the $ro##in, pre/ent# him from bein $on#i!ere! in oo! faith an! thu# he i# not a hol!er in !ue

$our#e> that bein not a hol!er in !ue $our#e, S")" wa# #ub-e$t to per#onal !efen#e#, #u$h a# la$k of $on#i!eration between the #pou#e#an! NS"" &no !epo#it# were ma!e, hen$e no loan wa# ma!e, hen$e the three $he$k# are without $on#i!eration a# per Se$tion 28,

N"@'> that NS"" neotiate! the three $he$k# in brea$h of faith in /iolation of Se$tion 55, Neotiable "n#trument# @aw, whi$h i# a

per#onal !efen#e a/ailable to the !rawer of the $he$k> that #u$h in#trument# are mentione! in Se$tion 541 of the *o!e of *ommer$e

an! that t+he payment ma!e to a per#on other than the banker or in#titution #hall not eCempt the per#on on whom it i# !rawn, if the payment wa# not $orre$tly ma!e% +he Supreme *ourt aree! with the appellate $ourt%

illanueva v. Nite( G.R. No. +%3$++( $' *ul4 $&&:

EJuita9le PCI v. On=( +' Septe89e! $&&:

Sala>a! v. *D B!othe!( $& Octo9e! $&+&

bunch of digests

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