nego cases (part 2 of 2)

8/10/2019 Nego Cases (Part 2 of 2)

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Decided Cases on Negotiable Instruments Law based on the outline of Atty. Rene Alexis P. Villarente (PART 2 of 2)

(See outline of Atty. Villarente for notes)

Section 29 (Accomodation Party)

GARDOSE vs. TARROZA GR No. 1!"#! $ay 19% 199&

'SSE What is the relationship of the accommodation party andthe party accommodated?

*E+D The relationship between an accommodation party and theparty accommodated is in effect one of principal and surety.

'SSE What is the difference between a surety and a guaranty?

*E+D (From redit Trans !ecture of Atty. Sagmit since not statedin the case )

GARANTOR SRET,

!iability depends onindependent agreement to paythe principal"s obligation shouldhe fail to do so

#e assumes liability as aregular party to the contract

$bligation is secondary $bligation is primary%nderta&ing is to pay ifprincipal debtor cannot pay

%nderta&ing is to pay ifprincipal debtor does not pay

An insurer of the sol'ency ofthe debtor

nsurer of a debt

ntitled to e*cussion +o e*cussion

'SSE What is an accommodation party?

*E+D An accommodation party is one who has signed theinstrument as ma&er, drawer, indorser, without recei'ing 'aluetherefor and for the purpose of lending his name to some otherperson. Such person is liable on the instrument to a holder for'alue, notwithstanding such holder, at the time of the ta&ing of theinstrument &new him to be only an accommodation party is ineffect a surety for the latter. #e lends his name to enable theaccommodated party to obtain credit or to raise money. #e

recei'es no part of the consideration for the instrument butassumes liability to the other parties thereto because he wants toaccommodate another.

'SSE What is the immediate right of recourse under Section--?

Section --. /ights of holder where bill not accepted 0 When abill is dishonored by non1acceptance, an immediate right of recourse against the drawer and indorsers accrues to the holderand no presentment for payment is necessary.

*E+D %nder Section -- of the +egotiable nstruments !aw,when a bill is dishonored by non1acceptance, an immediate right of recourse against the drawers and indorsers accrues to the holder.The drawer of a negotiable instrument engages that, on duepresentment, the instrument will be accepted or paid, or both, andif dishonored, he will pay the amount thereof to the holder.

'SSE What is the liability of the drawer under Section 2-?

*E+D

Section 2-. !iability of drawer . 0 The drawer by drawing theinstrument admits the e*istence of the payee and his thencapacity to indorse3 and engages that on due presentment theinstrument will be accepted or paid, or both, according to itstenor, and if it be dishonored, and the necessary proceedings ondishonor be duly ta&en, he will pay the amount thereof to theholder, or to any subse4uent indorser who may be compelled topay it. 5ut the drawer may insert in the instrument an e*press

stipulation negati'ing or limiting his own liability to the holder.

AGRO vs. -A GR No. 11#! Dec. 1&% 2!!!

'SSE What is an accommodation ma&er?

*E+D An accommodation party is a person who has signed theinstrument as ma&er, acceptor, or indorser, without recei'ing 'aluetherefor, and for the purpose of lending his name to some otherperson and is liable on the instrument to a holder for 'alue,notwithstanding such holder at the time of ta&ing the instrument&new (the signatory) to be an accommodation party. #e has the

right, after paying the holder, to obtain reimbursement from the partyaccommodated, since the relation between them has in effect becomeone of principal and surety, the accommodation party being the surety.

'SSE What is a surety?

*E+D Suretyship is defined as the relation which e*ists where oneperson has underta&en an obligation and another person is also underthe obligation or other duty to the obligee, who is entitled to but one

performance, and as between the two who are bound, one rather thanthe other should perform. The surety"s liability to the creditor orpromisee of the principal is said to be direct, primary and absolute3 inother words, he is directly and e4ually bound with the principal. Andthe creditor may proceed against any one of the solidary debtors.

$A/EST'- vs. 0ON'A-'O GR No. 1#92! A3ri4 % 2!!2

A-TS 6etitioner entered into a ontract of !ease with 7apanesenationals %oyama and Shibutani (the 8lessees9) for the lease of acondo unit. 5onifacio, the girlfriend of T. Sa&amoto who in turn wasthe friend of the lessees, acti'ely participated in negotiating the termsof the contract of lease because the lessees could hardly spea& nglishor Tagalog. %pon re4uest of the lessees, respondent issued inpetitioner"s fa'or a postdated chec& to guarantee the payment of therentals for last si* months of the lease.

After : months, petitioner"s counsel recei'ed a letter fromrespondent and the lessees that the latter were 'acating thecondominium. /espondent also re4uested that the postdated chec& which she had earlier issued in petitioner"s fa'or be returned to hersince there was no longer any need for the said chec& to be inpetitioner"s possession. 6etitioner refused to return the chec& andinstead deposited the same in its account. The chec& was laterdishonored. 6etitioner filed with a complaint for collection of sum of money.


*E+D

Section ;<. !iability of accommodation party 1 An accommodation

party is one who has signed the instrument as ma&er, drawer,acceptor, or indorser, without recei'ing 'alue therefor, and for thepurpose of lending his name to some other person. Such a personis liable on the instrument to a holder for 'alue, notwithstandingsuch holder at the time of ta&ing the instrument &new him to beonly an accommodation party.

'SSE Why is the accommodation party here not liable?

*E+D /espondent is an accommodation party and may be heldsolidarily liable for the amount of the chec& under Section ;< of the+egotiable nstruments !aw, sub=ect to reimbursement from thelessees. #owe'er, it ruled that the respondent was not under anyobligation to pay the 6-::,>>>.>> corresponding to ad'ance rentalpayments for the months of 7uly to ecember -<<> because the leasecontract did not authori@e the petitioner as lessor to automatically

forfeit the ad'ance rentals for the last si* months of the lease periodshould the lessees terminate the lease before the end of said period.

+'$ vs. SA0AN GR No. 1#2! Dec. 1% 2!!


*E+D An accommodation party as a person who has signed thenegotiable instrument as ma&er, drawer, acceptor or indorser, withoutrecei'ing 'alue therefor, for the purpose of lending his name to someother person. The accommodation party is liable on the instrument toa holder for 'alue e'en though the holder at the time of ta&ing theinstrument &new him or her to be merely an accommodation party.The accommodation party may of course see& reimbursement from theparty accommodated.

'SSE Bi'e the elements for the e*istence of an accommodationparty.

*E+D The accommodation party is one who meets all these threere4uisites, 'i@ C (-) he signed the instrument as ma&er, drawer,acceptor, or indorser3 (;) he did not recei'e 'alue for the signature3and (D) he signed for the purpose of lending his name to some otherperson. n the case at bar, while !im signed as drawer of the chec&sshe did not satisfy the two other remaining re4uisites.

'SSE Was !im an accommodation party to Ebae@?

Prepared by: Norliza Mamukid, Jazzie Sarona & Hanniyah Sevilla (4-Manresa 2008-2009) 1




*E+D +$, !im is not an accommodation party.The absence of the second re4uisite becomes pellucid when it

is noted at the outset that !im issued the chec&s in 4uestion onaccount of her transaction, along with the other purchasers, with

Ebae@ which was a sale and, therefore, a reciprocal contract.Specifically, she drew the chec&s in payment of the balance of thepurchase price of the lot sub=ect of the transaction. And she had topay the agreed purchase price in consideration for the sale of the

lot to her and her co1'endees. n other words, the amounts co'eredby the chec&s form part of the cause or consideration from Ebae@"s end, as 'endor, while the lot represented the cause orconsideration on the side of !im, as 'endee. rgo , !im recei'ed'alue for her signature on the chec&s.

+either is there any indication that !im issued the chec&s forthe purpose of enabling Ebae@, or any other person for thatmatter, to obtain credit or to raise money, thereby totallydebun&ing the presence of the third re4uisite of an accommodationparty.

ANG vs. ASSO-'ATED GR No. 1"11 Se3t. "% 2!!#

A-TS /espondent Associated 5an& (formerly Associated 5an&ingorporation and now &nown as %nited $'erseas 5an& 6hilippines)filed a collection suit against Antonio Ang ng !iong and petitionerTomas Ang for the two (;) promissory notes that they e*ecuted asprincipal debtor and co1ma&er, respecti'ely.

The trial court rendered =udgment against the ban&, dismissingthe complaint for lac& of cause of action. The ourt of Appealsre'ersed and set aside the trial courtGs ruling.

'SSE What is an accommodation party under Section ;< of the+!?

R+'NG Section ;< of the +! defines an accommodation3arty as a person who has signed the instrument as ma&er,drawer, acceptor, or indorser, without recei'ing 'alue therefor, and for the purpose of lending his name to some other person. Asgleaned from the te*t, an accommodation party is one who meetsall the t5ree re67isites, 'i@C (1) 5e m7st 8e a 3arty to t5e

instr7ment% sinin as ma:er% dra;er% acce3tor% orindorser< (2) 5e m7st not receive va47e t5ere=or< and () 5em7st sin =or t5e 37r3ose o= 4endin 5is name or credit tosome ot5er 3erson. An accommodation party lends his name toenable the accommodated party to obtain credit or to raise money3he recei'es no part of the consideration for the instrument butassumes liability to the other partyHies thereto. The accommodationparty is liable on the instrument to a holder for 'alue e'en thoughthe holder, at the time of ta&ing the instrument, &new him or her tobe merely an accommodation party, as if the contract was not foraccommodation.

'SSE Were the promissory notes discharged under Section --<(d) and -;; of the +!?

R+'NG +o. As the 3romissory notes ;ere not disc5ared

or im3aired through any act or omission of the ban&, Sections --<(d) and -;; of the +! as well as Art. -;:< of the i'il ode wouldnecessarily find no application. Again, neither was petitionerGs rightof reimbursement barred nor was the ban&Gs right to proceedagainst Antonio Ang ng !iong e*pressly renounced by the omissionto ser'e notice of appeal and appellantGs brief to a party alreadydeclared in default.

'SSE What is the warranty of an accommodation party?

R+'NG onse4uently, in issuing the two promissory notes,petitioner as accommodatin 3arty ;arranted to t5e 5o4derin d7e co7rse t5at 5e ;o74d 3ay t5e same accordin to itstenor.

'SSE What is the meaning of 8without recei'ing 'alue9 What

about 8recei'ing 'alue9 for lending his name?

R+'NG t is no defense to state on his part that he did notrecei'e any 'alue therefor because the phrase >;it5o7t receivinva47e t5ere=or> used in Sec. ;< of the +! means >;it5o7treceivin va47e 8y virt7e o= t5e instr7ment> and not as it isa33arent4y s733osed to mean% >;it5o7t receivin 3ayment=or 4endin 5is name.> Stated differently, when a third personad'ances the face 'alue of the note to the accommodated party atthe time of its creation, the consideration for the note as regards itsma&er is the money ad'anced to the accommodated party. t isenough that 'alue was gi'en for the note at the time of its creation.

As in the instant case, a sum of money was recei'ed by 'irtue of thenotes, hence % it is immateria4 so far as the ban& is concerned;5et5er one o= t5e siners, particularly petitioner, 5as or 5as notreceived anyt5in in 3ayment o= t5e 7se o= 5is name.

DE+A RA$A -O vs. AD$'RA+ GR No. 1"#! A3ri4 1% 2!!&

A-TS Admiral %nited Sa'ings 5an& (AI/A!) e*tended a loan of Fi'e #undred Thousand 6esos (6>>,>>>.>>) to petitioner #enry ela

/ama o (o), with !eocadio $. sip (sip) as co1ma&er. The loan wase'idenced by 6romissory +ote.

o and sip failed to pay the loan when it became due anddemandable. onse4uently, AI/A! filed a collection case againsto and sip with the /T. /T rendered a ecision dismissing thecomplaint on the ground that the obligation had already been paid orotherwise e*tinguished. The A re'ersed the /T.

o has not denied the authenticity and due e*ecution of thepromissory note. #e, howe'er, asserts that he is not legally bound bysaid document because he merely acted as an accommodation partyfor IT/$ /+T. #e claimed the he signed the note only for thepurpose of lending his name to IT/$ /+T, without recei'ing 'aluetherefore.

'SSE What is the liability of an accommodation party under Section;< of the +!?

R+'NG At any rate, o"s assertion that he merely acted as anaccommodation party for IT/$ /+T cannot release him fromliability under the note. An accommodation 3arty ;5o 4ends 5isname to ena84e t5e accommodated 3arty to o8tain credit orraise money is 4ia84e on t5e instr7ment to a 5o4der =or va47eeven i= 5e receives no 3art o= t5e consideration. #e assumes theobligation to the other party and binds himself to pay the note on itsdue date. 5y signing the note, o thus became liable for the debte'en if he had no direct personal interest in the obligation or did notrecei'e any benefit there from.

'SSE What is a promissory note?

R+'NG A 3romissory note is a so4emn ac:no;4edment o= a

de8t and a =orma4 commitment to re3ay it on t5e date and7nder t5e conditions areed 73on 8y t5e 8orro;er and t5e4ender. A person who signs such an instrument is bound to honor it asa legitimate obligation duly assumed by him through the signature heaffi*es thereto as a to&en of his good faith. f he reneges on hispromise without cause, he forfeits the sympathy and assistance of thisourt and deser'es instead its sharp repudiation.

'SSE Who pro'es payment?

R+'NG 7urisprudence is replete with rulings that in ci'il cases, theparty who alleges a fact has the burden of pro'ing it. 5urden of proof is the duty of a party to present e'idence on the facts in issuenecessary to pro'e the truth of his claim or defense by the amount of e'idence re4uired by law. Thus % a 3arty ;5o 34eads 3ayment as ade=ense 5as t5e 87rden o= 3rovin t5at s7c5 3ayment 5ad% in

=act% 8een made. When the plaintiff alleges nonpayment, still, thegeneral rule is that the burden rests on the defendant to pro'epayment, rather than on the plaintiff to pro'e nonpayment. Verily, ofailed to discharge this burden.

'SSE an stipulated interest rates be e4uitably reduced?

R+'NG We sustain the interest rate of -JK per annum for beingfair and reasonable. #owe'er, e4uity dictates that we reduce theser'ice charge, li4uidated damages and attorney"s fees awarded infa'or of AI/A!.

'SSE What is the basis of such reduction under the i'il ode?

R+'NG ourts are empowered to reduce such penalty if the sameis ini4uitous or unconscionable. Artic4e 1229 o= t5e -ivi4 -odestatesC The =udge shall e4uitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. 'en if there has been no performance, the penalty may also be reduced by the courts if it is ini4uitous or unconscionable.This sentiment is echoed in Artic4e 222# of the same odeC

!i4uidated damages, whether intended as an indemnity or a penalty, shall be e4uitably reduced if they are ini4uitous or unconscionable.

This ourt finds the award of li4uidated damages and attorney"sfees by the A e*orbitant. After all, li4uidated damages and attorney"sfees ser'e the same purpose, that is, as penalty for breach of contract.





handiramani did not appear at the rende@'ous and /anigoallegedly lost the two cashier"s chec&s and the dollar draft boughtby petitioner. t transpired, howe'er, that the chec&s and the dollardraft were not lost, for handiramani was able to get hold of saidinstruments, without deli'ering the e*change considerationconsisting of the 65 manager"s chec& and the #ang Seng 5an& dollar draft.

Some two (;) hours after handiramani and /anigo were tomeet in Ia&ati ity, handiramani deli'ered to respondent

Fernando a'id ; cashier"s chec&s. n e*change, handiramani got%SQD2>,>>>.>> from a'id, which handiramani deposited in thesa'ings account of his wife and his mother.

Eang re4uested F5T and 4uitable to stop payment on theinstruments she belie'ed to be lost. 5oth ban&s complied with herre4uest, but upon the representation of 65, F5T subse4uentlylifted the stop payment order.

'SSE s a'id a holder in due course?

*E+D ES, he is a holder in due course.'ery holder of anegotiable instrument is deemed prima facie a holder in due course.#owe'er, this presumption arises only in fa'or of a person who is aholder as defined in Section -<- of the +egotiable nstruments !aw,meaning a 8payee or indorsee of a bill or note, who is in possessionof it, or the bearer thereof.9

6etitioner admits that a'id too& the step of as&ing themanager of his ban& to 'erify from F5T and 4uitable as to thegenuineness of the chec&s and only accepted the same after beingassured that there was nothing wrong with said chec&s. At thattime, a'id was not aware of any 8stop payment9 order. %nderthese circumstances, a'id thus had no obligation to ascertain fromhandiramani what the nature of the latter"s title to the chec&s was,if any, or the nature of his possession. Thus, we cannot hold himguilty of gross neglect amounting to legal absence of good faith,absent any showing that there was something amiss abouthandiramani"s ac4uisition or possession of the chec&s.

'SSE an a payee be considered a holder in due course?

*E+D n the present case, it is not disputed that a'id was thepayee of the chec&s in 4uestion. The weight of authority sustains

the 'iew that a payee may be a holder in due course. #ence, thepresumption that he is a prima facie holder in due course applies inhis fa'or. #owe'er, said presumption may be rebutted.

'SSE s a'id a holder for 'alue?

*E+D The law itself creates a presumption in a'id"s fa'or thathe ga'e 'aluable consideration for the chec&s in 4uestion. nalleging otherwise, the petitioner has the onus to pro'e that a'idgot hold of the chec&s absent said consideration. n other words,the petitioner must present con'incing e'idence to o'erthrow thepresumption. $ur scrutiny of the records, howe'er, shows that thepetitioner failed to discharge her burden of proof. The petitioner"sa'erment that a'id did not gi'e 'aluable consideration when hetoo& possession of the chec&s is unsupported, de'oid of anyconcrete proof to sustain it.

'SSE s a'id in good faith when he did not in4uire as to reasonwhy the cashier"s chec& was drawn for him especially that, thesewere crossed chec&s?

*E+D ES, he is in good faith. n this case, the payee did notnegotiate further the chec&s in 4uestion but promptly depositedthem in his ban& account.

The +egotiable nstruments !aw is silent with respect tocrossed chec&s, although the ode of ommerce ma&es referenceto such instruments. +onetheless, this ourt has ta&en =udicialcogni@ance of the practice that a chec& with two parallel lines in theupper left hand corner means that it could only be deposited andnot con'erted into cash. The effects of crossing a chec&, thus,relates to the mode of payment, meaning that the drawer had

intended the chec& for deposit only by the rightful person, i.e ., thepayee named therein.There is no dispute that the crossed chec&s were deli'ered and

duly deposited by a'id, the payee named therein, in his ban& account. n other words, the purpose behind the crossing of thechec&s was satisfied by the payee.

E'TA0+E vs. ONG GR No. 1"2!# Se3t. 1"% 2!!

A-TS Sarande deposited in her account a chec&. %pon in4uiryby on whether the chec& had been cleared, she recei'ed anaffirmati'e answer. /elying on this assurance, she issued ; chec&s

drawn against the proceeds of the said chec&. $ne of these wasissued to $ng. $n the same day, $ng presented re4uested 6 5an& to con'ert the proceeds thereof into a manager"s chec&, which the 65an& obliged.

$ng deposited said manager"s chec& in her account with4uitable 5an&. After D days, she was informed that 6 5an& hadstopped the payment of the said chec& on the ground of irregularissuance. espite se'eral demands made by her to 6 5an& for thepayment of the amount of the manager"s chec&, the same was met

with refusal.#owe'er, according to 6 5an&, it immediately ga'e notice toSarande and $ng about the return of the chec& Sarande deposited andre4uested $ng to return 6 5an& manager"s chec& on the ground thatthe account from which it was drawn had already been closed resultedin a failure or want of consideration.

The trial court ordered 6 5an& to pay $ng. $n appeal, Aaffirmed the decision of the trial court.

'SSE Was there un=ust enrichment for transfer of the 'alue of themaanger"s chec& without consideration?

*E+D There was no the fundamental doctrine of un=ust enrichmentis the transfer of 'alue without =ust cause or consideration. Theelements of this doctrine areC enrichment on the part of the defendant3impo'erishment on the part of the plaintiff3 and lac& of cause. The

main ob=ecti'e is to pre'ent one to enrich himself at the e*pense of another. t is based on the e4uitable postulate that it is un=ust for aperson to retain benefit without paying for it.

t is well to stress that the chec& of Sarande had been cleared bythe 6 5an& for which reason the former issued the chec& to $ng. Achec& which has been cleared and credited to the account of thecreditor shall be e4ui'alent to a deli'ery to the creditor of cash in anamount e4ual to the amount credited to his account. #a'ing clearedthe chec& earlier, 6 5an&, therefore, became liable to $ng and itcannot allege want or failure of consideration between it and Sarande.

'SSE s $ng pri'y to the transaction between $ng ( thin& 65pasabot sa 4uestion ) and Sarande?

*E+D +$, $ng is a stranger as regards the transaction between 65an& and Sarande.

'SSE What is a holder in due course and holder for 'alue?

*E+D

Section ;. What constitutes a holder in due course. 0 A holder indue course is a holder who has ta&en the instrument under thefollowing conditionsC

(a) That it is complete and regular upon its face3(b) That he became the holder of it before it was o'erdue, and

without notice it had been pre'iously dishonored,if such was the fact3

(c) That he too& it in good faith and for 'alue3 (d) That at the time it was negotiated to him, he had no notice

of any infirmity in the instrument or defect in the

title of the person negotiating it.Section ;2 . What constitutes holder for 'alue . 0 Where 'alue has atany time been gi'en for the instrument, the holder is deemed aholder for 'alue in respect to all parties who become such prior tothat time.

'SSE What is the presumption of consideration?

*E+D

Section ;: . 6resumption of consideration . 0 'ery negotiableinstrument is deemed prima facie to ha'e been issued for a 'aluableconsideration3 and e'ery person whose signature appears thereonto ha'e become a party thereto for 'alue.

'SSE What is the effect of want or failure of consideration?

*E+D

Section ;J . ffect of want of consideration . 0 Absence or failure of consideration is a matter of defense as against any person not aholder in due course3 and partial failure of consideration is a defense





pro tanto, whether the failure is an ascertained and li4uidatedamount or otherwise.

'SSE What is the effect of a manager"s chec& and certifiedchec&?

*E+D A manager"s chec& stands on the same footing as acertified chec&. The effect of certification is found in Section -JP,+egotiable nstruments !aw.

Section -JP . ertification of chec&3 effect of. 0 Where a chec& iscertified by the ban& on which it is drawn, the certification ise4ui'alent to an acceptance

A manager"s chec& is one drawn by the ban&"s manager uponthe ban& itself. t is similar to a cashier"s chec& both as to effectand use. A cashier"s chec& is a chec& of the ban&"s cashier on hisown or another chec&. n effect, it is a bill of e*change drawn bythe cashier of a ban& upon the ban& itself, and accepted in ad'anceby the act of its issuance. t is really the ban&"s own chec& andmay be treated as a promissory note with the ban& as a ma&er.The chec& becomes the primary obligation of the ban& which issuesit and constitutes its written promise to pay upon demand. Themere issuance of it is considered an acceptance thereof.

'SSE What is the liability of an acceptor?

*E+D 5y accepting the chec& issued by Sarande to $ng andissuing in turn a manager"s chec& in e*change thereof, 6 5an& assumed the liabilities of an acceptor under Section 2; of the+egotiable nstruments !aw which statesC

Section 2; . !iability of acceptor . 0 The acceptor by accepting theinstruments engages that he will pay it according to the tenor of his acceptance3 and admits 0

(a) The e*istence of the drawer, the genuineness of hissignature, and his capacity and authority to draw theinstrument3 and

(b) The e*istence of the payee and his then capacity toindorse.

'SSE What is the degree of care re4uired of ban&s?

*E+D t is palpable and readily apparent that 6 5an& failed toe*ercise the highest degree of care re4uired of it under the law.

The ban&ing system has become an indispensable institution inthe modern world and plays a 'ital role in the economic life of e'eryci'ili@ed society. Whether as mere passi'e entities for the safe1&eeping and sa'ing of money or as acti'e instruments of businessand commerce, ban&s ha'e attained an ubi4uitous presence amongthe people, who ha'e come to regard them with respect and e'engratitude and, most of all, confidence.

0P' vs. ROFAS GR No. 1"#& Oct. 1"% 2!!#

A-TS /espondent Bregorio . /o*as deli'ered stoc&s of 'egetable oil to spouses /odrigo and Iarissa awili. As paymenttherefor, spouses awili issued a personal chec& in the amount of 6D:J,J>.>. #owe'er, when respondent tried to encash thechec&, it was dishonored by the drawee ban&. Spouses awili thenassured him that they would replace the bounced chec& with acashier"s chec& from the 5an& of the 6hilippine slands (56),petitioner. The same was dishonored.

/espondent filed with the /egional Trial ourt a complaint forsum of money against petitioner. The /T rendered a ecision

=udgment in fa'or of herein respondent /o*as. $n appeal, theourt of Appeals, in its ecision, affirmed the trial court"s =udgment.

'SSE s /o*as a holder in due course?

R+'NG Section "2 o= t5e Neotia84e 'nstr7ments +a;

pro'idesC

Section ;. What constitutes a holder in due course. 0 A holderin due course is a holder who has ta&en the instrument under thefollowing conditionsC

(a)That it is complete and regular upon its face3 (b)That he became the holder of it before it was o'erdue

and without notice that it had been pre'iously dishonored, if suchwas the fact3

(c)That he too& it in good faith and for 'alue3 (d) That at the time it was negotiated to him, he had

no notice of any infirmity in the instrument or defect in the title

of person negotiating it.

As a general rule, under the abo'e pro'ision, e'ery holder ispresumed prima facie to be a holder in due course. $ne who claimsotherwise has the onus probandi to pro'e that one or more of theconditions re4uired to constitute a holder in due course are lac&ing.

n this case, petitioner contends that the element of 8'alue9 is not

present, therefore, respondent could not be a holder in due course.6etitioner"s contention lac&s merit

'SSE What constitutes 'alue?

R+'NG Section ; of the same law statesC

Section ;. Value, what constitutes. 0 Value is any considerationsufficient to support a simple contract. An antecedent or pre1e*istingdebt constitutes 'alue3 and is deemed as such whether the instrumentis payable on demand or at a future time.

a47e @in enera4 terms may 8e some ri5t% interest%3ro=it or 8ene=it to t5e 3arty ;5o ma:es t5e contract or some=or8earance% detriment% 4oan% res3onsi8i4ity% etc. on t5e ot5er

side. #ere, there is no dispute that respondent recei'ed /odrigoawili"s cashier"s chec& as payment for the former"s 'egetable oil.The fact that it was /odrigo who purchased the cashier"s chec& frompetitioner will not affect respondent"s status as a holder for 'alue sincethe chec& was deli'ered to him as payment for the 'egetable oil hesold to spouses awili.

+ia8i4ities o= PartiesSections 1% 2 (1&9)% % "%

0P' vs. -A GR No. 11292 e8. 29% 2!!!

A-TS 6ri'ate respondent deposited in his Foreign urrency eposit%nit (F%) Sa'ings Account a manager"s chec& and duly endorsed bypri'ate respondent on its dorsal side. The chec& belonged to a certain#enry han who went to the office of pri'ate respondent and

re4uested him to deposit the chec& in his dollar account by way of accommodation and for the purpose of clearing the same. 6ri'aterespondent acceded, and agreed to deli'er to han a signed blan& withdrawal slip, with the understanding that as soon as the chec& iscleared, both of them would go to the ban& to withdraw the amount of the chec& upon pri'ate respondent"s presentation to the ban& of hispassboo&.

%sing the blan& withdrawal slip gi'en by pri'ate respondent tohan, one /uben Bayon, 7r. was able to withdraw from the F%.+otably, the withdrawal slip shows that the amount was payable to/amon A. de Bu@man and Agnes . de Bu@man and was duly initialedby the branch assistant manager.

6etitioner recei'ed communication from the Wells Fargo 5an& nternational of +ew Eor& that the said chec& deposited by pri'aterespondent was a counterfeit chec&. onse4uently, the manager of instructed one of its employees, 5en=amin . +api@a V, who is pri'aterespondent"s son, to inform his father that the chec& bounced. /eyeshimself sent a telegram to pri'ate respondent regarding the dishonorof the chec&. n turn, pri'ate respondent"s son wrote to /eyes statingthat the chec& had been assigned for encashment to /amon A. deBu@man andHor Agnes . de Bu@man after it shall ha'e been clearedupon instruction of han. #e also said that upon learning of thedishonor of the chec&, his father immediately tried to contact han butthe latter was out of town.

6ri'ate respondent wrote petitioner"s counsel on April ;>, -<Jstating that he deposited the chec& for clearing purposes only toaccommodate han.

'SSE What is the liability of a general indorser?

*E+D

Section 22. !iability of general indorser. 0 'ery indorser whoindorses without 4ualification, warrants to all subse4uent holders indue course 0

(a ) The matters and things mentioned in subdi'isions (a ), (b ),and (c ) of the ne*t preceding section3 and

(b ) That the instrument is at the time of his indorsement, 'alidand subsisting.

And, in addition, he engages that on due presentment, it shallbe accepted or paid, or both, as the case may be, according to itstenor, and that if it be dishonored, and the necessary proceedingson dishonor be duly ta&en, he will pay the amount thereof to the





*E+D +$, it has no such right. A ban& generally has a right of setoff o'er the deposits

therein for the payment of any withdrawals on the part of adepositor. The right of a collecting ban& to debit a client"s accountfor the 'alue of a dishonored chec& that has pre'iously beencredited has fairly been established by =urisprudence. To beginwith, Article -<J> of the i'il ode pro'ides that 8NfOi*ed, sa'ings,and current deposits of money in ban&s and similar institutions shallbe go'erned by the pro'isions concerning simple loan.9

The relationship between ban&s and depositors has been heldto be that of creditor and debtor. Thus, legal compensation under Article -;PJ of the i'il ode may ta&e place 8when all there4uisites mentioned in Article -;P< are present,9 as followsC(-) That each one of the obligors be bound principally, and that

he be at the same time a principal creditor of the other3(;) That both debts consist in a sum of money, or if the things due

are consumable, they be of the same &ind, and also of thesame 4uality if the latter has been stated3

(D) That the two debts be due3(:) That they be li4uidated and demandable3() That o'er neither of them there be any retention or

contro'ersy, commenced by third persons and communicatedin due time to the debtor.9 'en while the right of setoff is conceded, separate is the

4uestion of whether that remedy has properly been e*ercised.

The determination thereof hinges, in turn, on the ban&"s roleand obligations, first , as respondent"s depositary ban&3 and second ,as collecting agent for the chec& in 4uestion.

'SSE Bi'e the nature of the ban&ing business

*E+D The ban&ing business is impressed with public interest.onse4uently, the highest degree of diligence is e*pected, and highstandards of integrity and performance are e'en re4uired of it. 5ythe nature of its functions, a ban& is under obligation to treat theaccounts of its depositors with meticulous care.

'SSE s chec& a legal tender?

*E+D +$, it is not legal tender.6etitioner allowed the withdrawal of the face 'alue of the

deposited chec& prior to its clearing. That act certainly disregardedthe clearance re4uirement of the ban&ing system. Such a practiceis unusual, because a chec& is not legal tender or money3 and its'alue can properly be transferred to a depositor"s account only afterthe chec& has been cleared by the drawee ban&.

'SSE What is the relation of payee or holder of a commercialpaper and the collecting ban&?

*E+D The relationship between the payee or holder of acommercial paper and the collecting ban& is that of principal andagent. %nder Article -<>< of the i'il ode, such ban& could beheld liable not only for fraud, but also for negligence.

'SSE Whose negligence was the pro*imate cause of the loss?

*E+D The negligence of the ban& employees was the pro*imatecause of the loss.

A ban& is liable for the wrongful or tortuous acts anddeclarations of its officers or agents within the course and scope of their employment. ue to the 'ery nature of their business, ban&sare e*pected to e*ercise the highest degree of diligence in theselection and super'ision of their employees. The lac& of diligenceof a ser'ant is imputed to the negligence of the employer, when thenegligent or wrongful act of the former pro*imately results in anin=ury to a third person3 in this case, the depositor.

The ban&"s premature authori@ation of the withdrawal byrespondent triggered 11 in rapid succession and in a naturalse4uence 11 the debiting of his account, the fall of his accountbalance to insufficient le'els, and the subse4uent dishonor of hisown chec&s for lac& of funds. t cannot be denied that it was

Npetitioner"sO fault which allowed NrespondentO to withdraw a hugesum which he belie'ed was already his.

'SSE s there a need for the ban& to gi'e notice to Tan?

*E+D Ees, there is a need to gi'e notice.+otice was proper and ought to be e*pected. 5y the ban&

manager"s account, respondent was considered a 8'alued client9 whose chec&s had always been sufficiently funded from -<JP to-<<>, until the $ctober imbroglio. Thus, he deser'ed nothing lessthan an official notice of the precarious condition of his account.

'SSE What is the basis for such notice re4uirement? What is theapplicability of Sections 22 and J< of the +! to this case?

*E+D %nder the pro'isions of the +egotiable nstruments !awregarding the liability of a general indorser and the procedure for anotice of dishonor, it was incumbent on the ban& to gi'e proper noticeto respondent.

A general indorser of a negotiable instrument engages that if theinstrument 0 the chec& in this case 0 is dishonored and the necessary

proceedings for its dishonor are duly ta&en, he will pay the amountthereof to the holder (Sec. 22) +otice of dishonor is necessary tocharge an indorser and that the right of action against him does notaccrue until the notice is gi'en.

Section J<. To whom notice of dishonor must be gi'en. *cept asherein otherwise pro'ided, when a negotiable instrument has beendishonored by non1accpetance or non1payment, notice of dishonormust be gi'en to the drawer and each indorser, and any drawer orindorser to whom such notice is not gi'en is discharged.

SO+'D0ANB vs. SPS ARR'ETA GR No. 1"2#2! e8. 1#% 2!!"

A-TS armen Arrieta is a ban& depositor of Solidban&. She issueda chec& in payment of her purchases from a department store. 5ut

the same was dishonored due to Account losed" despite the fact thatat the time the chec& was presented for payment, armen"s chec&ingaccount was still acti'e and bac&ed up by a deposit of 6-,;P.;>.

The store sent her a demand letter threatening her with criminalprosecution. To a'oid criminal prosecution, armen paid 6DD>.>> incash to the store, plus a surcharge of 6DD.>> for the bouncing chec&

armen filed a complaint against Solidban& orporation fordamages

'SSE s the drawee ban& who did not accept (dishonor a chec&)liable for damages in a suit filed by the drawer?

*E+D ES, it is liable for damages.The fact that another chec& armen had issued was pre'iously

dishonored does not necessarily imply that the dishonor of asucceeding chec& can no longer cause moral in=ury and personal hurt

for which the aggrie'ed party may claim damages. Such prioroccurrence does not pro'e that respondent does not ha'e a goodreputation that can be besmirched. The reasons for and thecircumstances surrounding the pre'ious issuance and e'entual dishonorof hec& +o. >;<D<JD are totally separate. #er in=ury arose from thegross negligence of petitioner in dishonoring her well1funded chec&.

TAZON vs. *E'RS O RA$OS GR No. 1"22 /74y 1% 2!!"

A-TS The present case in'ol'es the collection of a sum of money.Specifically, this case arose from the failure of petitioners to payrespondents" predecessor1in1interest. This fact was shown by the non1encashment of chec&s issued by a third person, but indorsed by herein6etitioner Iaria Tua@on in fa'or of the said predecessor. %nder thesecircumstances, to enable respondents to collect on the indebtedness,the chec& drawer need not be impleaded in the omplaint. Thus, thesuit is directed, not against the drawer, but against the debtor whoindorsed the chec&s in payment of the obligation.

'SSE What is the nature of a contract of agency and does it applyin this case?

*E+D n a contract of agency, one binds oneself to render someser'ice or to do something in representation or on behalf of another,with the latter"s consent or authority. The following are the elementsof agencyC (-) the parties" consent , e*press or implied, to establish therelationship3 (;) the ob=ect, which is the e*ecution of a =uridical act inrelation to a third person3 (D) the representation, by which the onewho acts as an agent does so, not for oneself, but as a representati'e3(:) the limitation that the agent acts within the scope of his or herauthority. As the basis of agency is representation, there must be, onthe part of the principal, an actual intention to appoint, an intentionnaturally inferable from the principal"s words or actions. n the samemanner, there must be an intention on the part of the agent to acceptthe appointment and act upon it. Absent such mutual intent, there isgenerally no agency.

n this case, petitioners were the rice buyers themsel'es3 theywere not mere agents of respondents in their rice dealership. The4uestion of whether a contract is one of sale or of agency depends onthe intention of the parties. The declarations of agents alone aregenerally insufficient to establish the fact or e*tent of their authority.The law ma&es no presumption of agency3 pro'ing its e*istence,nature and e*tent is incumbent upon the person alleging it. n the





present case, petitioners raise the fact of agency as an affirmati'edefense, yet fail to pro'e its e*istence.

6etitioners, on their own behalf, sued 'angeline Santos forcollection of the amounts represented by the bounced chec&s, in aseparate ci'il case that they sought to be consolidated with thecurrent one. f, as they claim, they were mere agents of respondents, petitioners should ha'e brought the suit againstSantos for and on behalf of their alleged principal. Their filing a suitagainst her in their own names negates their claim that they acted

as mere agents in selling the rice obtained from 5artolome /amos.

'SSE s the drawer an indispensable party in a suit instituted bythe holder when chec&s were dishonored?

*E+D +$, the drawer is not an indispensable party. As indorser, 6etitioner Iaria Tua@on warranted that upon due

presentment, the chec&s were to be accepted or paid, or both,according to their tenor3 and that in case they were dishonored, shewould pay the corresponding amount. After an instrument isdishonored by nonpayment, indorsers cease to be merelysecondarily liable3 they become principal debtors whose liabilitybecomes identical to that of the original obligor. The holder of anegotiable instrument need not e'en proceed against the ma&erbefore suing the indorser. learly, 'angeline Santos 11 as thedrawer of the chec&s 11 is not an indispensable party in an action

against Iaria Tua@on, the indorser of the chec&s.

'++ANEA vs. N'TE GR No. 1&211 /74y 2"% 2!!

A-TS /espondent allegedly too& out a loan from petitioner. Tosecure the loan, respondent issued petitioner an Asian 5an& orporation (A5) chec& dated February J, -<<:. The date waslater changed to 7une J, -<<: with the consent and concurrence of petitioner.

The chec& was, howe'er, dishonored due to a material alteration when petitioner deposited the chec& on due date./espondent, through her representati'e, remitted 6;D,>>> topetitioner as partial payment of the loan. The balance of 6-P:, >>>was due on or before ecember J, -<<:.

$n August ;:, -<<:, howe'er, petitioner filed an action for a

sum of money and damages against A5 for the full amount of thedishonored chec&.

'SSE f the drawee ban& dishonors a chec& can payee1holderdue the ban&?

*E+D f a ban& refuses to pay a chec& (notwithstanding thesufficiency of funds), the payee1holder cannot, in 'iew of the citedsections, sue the ban&. The payee should instead sue the drawerwho might in turn sue the ban&. Section -J< is sound law based onlogic and established legal principlesC no pri'ity of contract e*istsbetween the drawee1ban& and the payee. ndeed, in this case,there was no such pri'ity of contract between A5 and petitioner.

6etitioner should not ha'e sued A5. ontracts ta&e effectonly between the parties, their assigns and heirs, e*cept in caseswhere the rights and obligations arising from the contract are not

transmissible by their nature, or by stipulation or by pro'ision of law. +one of the foregoing e*ceptions to the relati'ity of contractsapplies in this case.

'SSE s the drawer an indispensable party in a suit initiated bythe payee1holder against the drawee ban&?

*E+D ES, the drawer is an indispensable party.The contract of loan was between petitioner and respondent.

+o collection suit could prosper without respondent who was anindispensable party .

GONZA+ES vs. R-0- GR No. 1"29 Nov. 29% 2!!

A-TS Bon@ales was an employee of /5 as +ew Accounts ler& in the /etail 5an&ing epartment at its #ead $ffice.

A foreign chec& was drawn by r. on Lapanta against thedrawee ban& Wilshire enter 5an&, +.A., of !os Angeles, alifornia,%.S.A., and payable to Bon@ales" mother, defendant 'a Al'iar.

Al'iar then endorsed this chec&. Since /5 gi'es specialaccommodations to its employees to recei'e the chec&"s 'aluewithout awaiting the clearing period, Bon@ales presented the foreignchec& to $li'ia Bome@, the /5"s #ead of /etail 5an&ing. Bome@re4uested Bon@ales to endorse it which she did. Bome@ thenac4uiesced to the early encashment of the chec& and signed thechec& but indicated thereon her authority of 8up to 6-P,>>.>>only9. Bome@ directed Bon@ales to present the chec& to /5

employee arlos /amos and procure his signature. /amos also signedit with an 8o&9 annotation. After getting the said signatures Bon@alespresented the chec& to /olando Lornosa, Super'isor of the /emittancesection of the Foreign epartment of the /5 #ead $ffice, who afterscrutini@ing the entries and signatures therein authori@ed itsencashment. Bon@ales then recei'ed its peso e4ui'alent.

/5 then tried to collect the amount of the chec& with thedrawee ban& by the latter through its correspondent ban&, the Firstnterstate 5an& of alifornia, on two occasions dishonored the chec&

because of 8+. //B9 or irregular indorsement. nsisting, /5again sent the chec& to the drawee ban&, but this time the chec& wasreturned due to 8account closed9. %nable to collect, /5 demandedfrom Bon@ales the payment of the peso e4ui'alent of the chec& thatshe recei'ed. Bon@ales settled the matter by agreeing that payment bemade thru salary deduction.

The deductions was implemented starting $ctober -<JP. $nIarch P, -<JJ /5 sent a demand letter to Al'iar. A letter was sentto Bon@ales reminding her of her liability as an indorser of the sub=ectchec& and that for her to a'oid litigation she has to fulfill hercommitment to settle her obligation as assured in her said letter. $n7uly -<JJ Bon@ales resigned from /5. What had been deductedfrom her salary was only 6-;,J;;.;> co'ering ten months.

'SSE oes a subse4uent party which caused the defect in theinstrument ha'e any recourse against prior endorsers in good faith?

*E+D A subse4uent party which caused the defect in the instrumentcannot ha'e any recourse against any of the prior endorsers in goodfaith.

The foreign drawee ban& refused to pay the bearer of this dollar1chec& drawn by on Lapanta because of the defect introduced by/5, through its employee, $li'ia Bome@. t is, therefore, a uselesspiece of paper if returned in that state to its original payee, 'a Al'iar.

The warranties for which Al'iar and Bon@ales are liable as generalendorsers in fa'or of subse4uent endorsers e*tend only to the state of the instrument at the time of their endorsements, specifically, that theinstrument is genuine and in all respects what it purports to be3 thatthey ha'e good title thereto3 that a44 3rior parties had capacity tocontract3 and that the instrument, at t5e time o= t5eirendorsements, is 'alid and subsisting. This pro'ision, howe'er,cannot be used by the party which introduced a defect on the

instrument, such as respondent /5 in this case, which 4ualifiedlyendorsed the same, to hold prior endorsers liable on the instrumentbecause it results in the absurd situation whereby a subse4uent partymay render an instrument useless and inutile and let innocent partiesbear the loss while he himself gets away scot1free. t cannot be o'er1stressed that had it not been for the 4ualified endorsement (8up to6-P,>>.>> only9) of $li'ia Bome@, who is the employee of /5,there would ha'e been no reason for the dishonor of the chec&, andfull payment by drawee ban& therefor would ha'e ta&en place as amatter of course.

n this case, /5 should bear the loss. /elati'e to thepetitioner"s counterclaim against /5 for the amount of 6-;,J;;.;>which it admittedly deducted from petitioner"s salary, the ourt mustorder the return thereof to the petitioner, with legal interest.

'+AGAN vs. PEOP+E GR No. 1&# A3ri4 2#% 2!!#S, vs. PEOP+E GR No. 1&!9 A3ri4 2#% 2!!#TAN vs. PEOP+E GR No. 1&" A3ri4 2#% 2!!#

A-TS The accused1petitioners Alberto ordero Sy (Sy) and 7aimeTan (Tan) repaired to 6ri'ate complainant /osita Tan (/osita)residenceHoffice address at 5inondo for the purpose of encashing thesub=ect four (:) post1dated chec&s which had a total amount of 6:<>,D> issued by petitioner Bemma lagan (Bemma) payable to theorder of 7a@shirt Trading, of which petitioner Sy is the registeredowner and petitioner Tan is the general manager.

Agreeing to accommodate petitioners because of their 8promisethat the chec&s will be good on due date and during that time they willha'e money9 and they being her relati'es, /osita as&ed them toreturn. For the purpose of encashing the chec&s, she immediatelyborrowed money from her friend 7uanito Tan after which she ad'ised

petitioner Tan to go bac& to her address.$n their respecti'e dates of maturity, the first three chec&s were,on presentment, dishonored due to 8Account losed.9 The fourthchec& was dishonored due to 8AF9 or 8rawn Against nsufficiencyof Funds.9

As despite se'eral demands, petitioners failed to settle theirobligation, /osita filed the complaint for estafa under Article D-paragraph ; (d). /T con'icted petitioners. $n appeal, the ourt of

Appeals a==irmed the trial court"s decision.

'SSE s there a necessity of &nowledge on the part of indorser(Tan) that Bemma (drawer) has no sufficient funds?





R+'NG Ees. Bi'en the admitted pre'ious :1year period of 8rediscounting9 transactions between /osita and petitioner Tan, if he indeed assured her that the chec&s in 4uestion would besufficiently funded on maturity, the same was unnecessary tocon'ince her to change them with cash. n other words, any suchassurance was not the efficient cause which induced /osita tochange the chec&s with cash. t is in this light that this ourtcredits the disclaimer of petitioner Sy of ha'ing gone with petitioner

Tan to /osita"s house to negotiate the chec&s and assure her thatthey would be sufficiently funded on maturity. At a44 events% t5ere ;as no 3roo= t5at 3etitioner Tan

5ad 7i4ty :no;4ede t5at Ht5eI 3etitioner Gemma% t5eiss7er o= t5e c5ec:s% 5ad no =7nds in t5e 8an: . 6etitioners" ac4uittal of the crime charged is thus in order.

'SSE What is deceit in estafa?

R+'NG eceit and damage are the essential elements of estafa.Deceit to constit7te esta=a under Article D- ;(d) of the /e'ised6enal ode must be the efficient cause of the defraudation. Theremust be concomitanceC t5e iss7ance o= t5e c5ec: s5o74d 8et5e means to o8tain money or 3ro3erty =rom t5e 3ayer.

Notice o= Dis5onor

Section &9% 11

+'$ +AO vs. -A GR No. 1191#& /7ne 2!% 199#

'SSE What are the elements of 56 ;;?

*E+D This ourt listed the elements of the offense penali@edunder 5.6. ;;, as followsC (-) the ma&ing, drawing and issuance of any chec& to apply to account or for 'alue3 (;) the &nowledge of the ma&er, drawer or issuer that at the time of issue he does notha'e sufficient funds in or credit with the drawee ban& for thepayment of such chec& in full upon its presentment3 and (D)subse4uent dishonor of the chec& by the drawee ban& forinsufficiency of funds or credit or dishonor for the same reason hadnot the drawer, without any 'alid cause, ordered the ban& to stop

payment.7ustice !uis 5. /eyes, an eminent authority in criminal law,also enumerated the elements of the offense defined in the firstparagraph of Section - of 5.6. ;;, thusC-. That a person ma&es or draws and issues any chec&.;. That the chec& is made or drawn and issued to apply on

account or for 'alue .D. That the person who ma&es or draws and issues the chec&

&nows at the time of issue that he does not ha'e sufficientfunds in or credit with the drawee ban& for the payment ofsuch chec& in full upon its presentment.

:. That the chec& is subse4uently dishonored by the drawee ban& for insufficiency of funds or credit, or would ha'e beendishonored for the same reason had not the drawer, withoutany 'alid reason , ordered the ban& to stop payment.

'SSE What constitutes &nowledge of insufficiency of funds?*E+D Mnowledge of insufficiency of funds or credit in the draweeban& for the payment of a chec& upon its presentment is anessential element of the offense. There is a prima facie presumptionof the e*istence of this element from the fact of drawing, issuing orma&ing a chec&, the payment of which was subse4uently refusedfor insufficiency of funds. t is important to stress, howe'er, thatthis is not a conclusi'e presumption that forecloses or precludes thepresentation of e'idence to the contrary.

n the present case, the fact alone that petitioner was asignatory to the chec&s that were subse4uently dishonored merelyengenders the prima facie presumption that she &new of theinsufficiency of funds, but it does not render her automaticallyguilty under 5.6. ;;. The prosecution has a duty to pro'e all theelements of the crime, including the acts that gi'e rise to the prima

facie presumption3 petitioner, on the other hand, has a right torebut the prima facie presumption. Therefore, if such &nowledge of insufficiency of funds is pro'en to be actually absent or non1e*istent, the accused should not be held liable for the offensedefined under the first paragraph of Section - of 5.6. ;;. Althoughthe offense charged is a malum prohibitum , the prosecution is notthereby e*cused from its responsibility of pro'ing beyondreasonable doubt all the elements of the offense, one of which is&nowledge of the insufficiency of funds.

6etitioner !ina !im !ao did not ha'e actual &nowledge of theinsufficiency of funds in the corporate accounts at the time sheaffi*ed her signature to the chec&s in'ol'ed in this case, at the time

the same were issued, and e'en at the time the chec&s weresubse4uently dishonored by the drawee ban&.

'SSE What is the need for notice of dishonor? To whom mustnotice be gi'en?

*E+D There can be no prima facie e'idence of &nowledge of insufficiency of funds in the instant case because no notice of dishonorwas actually sent to or recei'ed by the petitioner.

The notice of dishonor may be sent by the offended party or thedrawee ban&. The trial court itself found absent a personal notice of dishonor to 6etitioner !ina !im !ao by the drawee ban& based on theunrebutted testimony of $campo (t)hat the chec&s bounced whenpresented with the drawee ban& but she did not inform anymore the5inondo branch and !ina !im !ao as there was no need to inform themas the corporation was in distress. The ourt of Appeals affirmed thisfactual finding. 6ursuant to pre'ailing =urisprudence, this finding isbinding on this ourt.

The records show that the notice of dishonor was addressed to6remiere Financing orporation and sent to its main office in ubao,ue@on ity. Furthermore, the same had not been transmitted to6remiereGs 5inondo $ffice where petitioner had been holding office.

!i&ewise no notice of dishonor from the offended party wasactually sent to or recei'ed by 6etitioner !ao.

5ecause no notice of dishonor was actually sent to and recei'ed

by the petitioner, the prima facie presumption that she &new about theinsufficiency of funds cannot apply. Section ; of 5.6. ;; clearlypro'ides that this presumption arises not from the mere fact of drawing, ma&ing and issuing a bum chec&3 there must also be ashowing that, within fi'e ban&ing days from receipt of the notice of dishonor , such ma&er or drawer failed to pay the holder of the chec& the amount due thereon or to ma&e arrangement for its payment infull by the drawee of such chec&.

The absence of a notice of dishonor necessarily depri'es anaccused an opportunity to preclude a criminal prosecution.

Accordingly, procedural due process clearly en=oins that a notice of dishonor be actually ser'ed on petitioner. 6etitioner has a right todemand and the basic postulates of fairness re4uire that the notice of dishonor be actually sent to and recei'ed by her to afford her theopportunity to a'ert prosecution under 5.6. ;;.

6remiere has no obligation to forward the notice addressed to it

to the employee concerned, especially because the corporation itself incurs no criminal liability under 5.6. ;; for the issuance of a bouncingchec&. /esponsibility under 5.6. ;; is personal to the accused3 hence,personal &nowledge of the notice of dishonor is necessary.onse4uently, constructi'e notice to the corporation is not enough tosatisfy due process. Ioreo'er, it is petitioner, as an officer of thecorporation, who is the latterGs agent for purposes of recei'ing noticesand other documents, and not the other way around. t is buta*iomatic that notice to the corporation, which has a personalitydistinct and separate from the petitioner, does not constitute notice tothe latter.

B'NG vs. PEOP+E GR No. 11"! Dec. 2% 1999

A-TS 6etitioner maintains that she merely signed the 4uestioned

chec&s without indicating therein the date and the amount in'ol'ed.She adds that they were improperly filled up by ileen [email protected], she concludes, she did not issue the dishonored chec&s in theconte*t of the +egotiable nstruments !aw, which defines issue asthe first deli'ery of the instrument complete in form to a person whota&es it as a holder.

'SSE What is the meaning of the term 8issue9?

*E+D 6etitionerGs contentions are not meritorious. The 4uestionedchec&s contained the date of issue and the amount in'ol'ed. n fact,petitioner e'en admitted that she signed those chec&s. $n the otherhand, no proof was adduced to show that petitioner merely signedthem in blan&, or that complainant filled them up in 'iolation of theformerGs instructions or their pre'ious agreement. The e'idence onrecord is clear that petitioner issued ele'en chec&s, all of which were

duly filled up and signed by her.

'SSE What is the reason of the need for notice of dishonor in 56;;?

*E+D The absence of a notice of dishonor necessarily depri'es anaccused an opportunity to preclude a criminal prosecution.

Accordingly, procedural due process clearly en=oins that a notice of dishonor be actually ser'ed on petitioner.

GREAT AS'AN vs. -A GR No. 1!"## A3ri4 2"% 2!!2





'SSE What is the nature of a deed of assignment with recourse?

*E+D 5y e*press pro'ision in the eeds of Assignment, Breat Asian unconditionally obligated itself to pay 5ancasia the full 'alueof the dishonored chec&s. n short, Breat Asian sold the postdatedchec&s on with recourse basis against itself. This is an obligationthat Breat Asian is bound to faithfully comply because it has theforce of law as between Breat Asian and 5ancasia. Article --< of

the i'il ode further pro'ides that 1$bligations arising from contracts ha'e the force of lawbetween the contracting parties and should be compliedwith in good faith.Breat Asian and 5ancasia agreed on this specific with recourse

stipulation, despite the fact that the recei'ables were negotiableinstruments with the endorsement of Arsenio. The contractingparties had the right to adopt the with recourse stipulation which isseparate and distinct from the warranties of an endorser under the+egotiable nstruments !aw. Article -D>2 of the i'il ode pro'idesthatC

The contracting parties may establish suchstipulations, clauses, terms and conditions as they maydeem con'enient, pro'ided they are not contrary to law,morals, good customs, public order, or public policy.The e*plicit with recourse stipulation against Breat Asian

effecti'ely enlarges, by agreement of the parties, the liability of Breat Asian beyond that of a mere endorser of a negotiableinstrument. Thus, whether or not 5ancasia gi'es notice of dishonorto Breat Asian, the latter remains liable to 5ancasia because of thewith recourse stipulation which is independent of the warranties of an endorser under the +egotiable nstruments !aw.

There is nothing in the +egotiable nstruments !aw or in theFinancing ompany Act (old or new), that prohibits Breat Asian and5ancasia parties from adopting the with recourse stipulationuniformly found in the eeds of Assignment. nstead of beingnegotiated, a negotiable instrument may be assigned. Assignmentof a negotiable instrument is actually the principal mode of con'eying accounts recei'able under the Financing ompany Act.Since in discounting of recei'ables the assignee is subrogated ascreditor of the recei'able, the endorsement of the negotiableinstrument becomes necessary to enable the assignee to collect

from the drawer. This is particularly true with chec&s becausecollecting ban&s will not accept chec&s unless endorsed by thepayee. The purpose of the endorsement is merely to facilitatecollection of the proceeds of the chec&s.

'SSE n such case, what is the purpose of an indorsement?

*E+D The purpose of the endorsement is not to ma&e theassignee finance company a holder in due course because policyconsiderations militate against according finance companies therights of a holder in due course. $therwise, consumers whopurchase appliances on installment, gi'ing their promissory notes orchec&s to the seller, will ha'e no defense against the financecompany should the appliances later turn out to be defecti'e. Thus,the endorsement does not operate to ma&e the finance company aholder in due course. For its own protection, therefore, the financecompany usually re4uires the assignor, in a separate and distinctcontract, to pay the finance company in the e'ent of dishonor of the notes or chec&s.

'SSE What is the effect of absence of notice of dishonor? Whennotice of dishonor need not be gi'en (Section --:)?

Section --:. When notice need not be gi'en to drawer. 0 +oticeof dishonor is not re4uired to be gi'en to the drawer in either of the following casesC(a) Where the drawer and the drawee are the same person.(b) When the drawee is fictitious person or a person not ha'ing

capacity to contract.(c) When the drawer is the person to whom the instrument is

presented for payment.

(d) Where the drawer has no right to e*pect or re4uire that thedrawee or acceptor will honor the instrument.(e) Where the drawer has countermanded payment.

*E+D The e*ercise by 5ancasia of its option to sue for breach of contract under the i'il ode will not lea'e Breat Asian holding anempty bag. Breat Asian, after paying 5ancasia, is subrogated bac& as creditor of the recei'ables. Breat Asian can then proceed againstthe drawers who issued the chec&s. 'en if 5ancasia failed to gi'etimely notice of dishonor, still there would be no pre=udice whate'erto Breat Asian. %nder the +egotiable nstruments !aw, notice of dishonor is not re4uired if the drawer has no right to e*pect or

re4uire the ban& to honor the chec&, or if the drawer hascountermanded payment. n the instant case, all the chec&s weredishonored for any of the following reasonsC account closed,account under garnishment, insufficiency of funds, or paymentstopped. n the first three instances, the drawers had no right toe*pect or re4uire the ban& to honor the chec&s, and in the lastinstance, the drawers had countermanded payment.

'SSE What is the effect of delay in gi'ing notice of dishonor? What

law applies on matters not co'ered by the +! (Section -<2)?

*E+D elay in notice of dishonor, where such notice is re4uired,discharges the drawer only to the e*tent of the loss caused by thedelay. This rule finds application in this =urisdiction pursuant to Section-<2 of the +egotiable nstruments !aw which states, Any case notpro'ided for in this Act shall be go'erned by the pro'isions of e*istinglegislation, or in default thereof, by the rules of the !aw Ierchant.

'SSE What does delay in Section -J2 of the +! refer to?

*E+D %nder Section -J2 of the +egotiable nstruments !aw, delay inthe presentment of chec&s discharges the drawer. #owe'er, Section-J2 refers only to delay in presentment of chec&s but is silent on delayin gi'ing notice of dishonor. onse4uently, the common law or !awIerchant can supply this gap in accordance with Section -<2 of the

+egotiable nstruments !aw.

'SSE What is the difference between rediscounting and loanaccommodation?

*E+D There is indeed a fine distinction between a discounting lineand a loan accommodation. f the accounts recei'able, li&e postdatedchec&s, are sold for a consideration less than their face 'alue, thetransaction is one of discounting, and is sub=ect to the pro'isions of the Financing ompany Act. The assignee is immediately subrogatedas creditor of the accounts recei'able. #owe'er, if the accountsrecei'able are merely used as collateral for the loan, the transaction isonly a simple loan, and the lender is not subrogated as creditor untilthere is a default and the collateral is foreclosed.

S'A vs. PEOP+E GR No. 199" A3ri4 2&% 2!!

'SSE What is the prima facie presumption of 8&nowledge9 of insufficiency of funds?

*E+D Section ; of 5.6. 5lg. ;; created a prima facie presumption of &nowledge on the part of the drawer or ma&er of the chec& of theinsufficiency of his fund in the drawee ban&, thusC

S. ;. 'idence of &nowledge of insufficient funds.1Thema&ing, drawing and issuance of a chec& payment of whichis refused by the drawee because of insufficient funds in orcredit with such ban&, when presented within ninety (<>)days from the date of the chec&, shall be prima faciee'idence of &nowledge of such insufficiency of funds orcredit unless such ma&er or drawer pays the holder thereof the amount due thereon, or ma&es arrangements for

payment in full by the drawee of such chec& within fi'e ()ban&ing days after recei'ing notice that such chec& has notbeen paid by the drawee.#owe'er, for the presumption to arise, the prosecution must

adduce e'idence to pro'e the factual basis for its onset, namely, (a)the chec& is presented within ninety (<>) days from the date of thechec&3 (b) the drawer or ma&er of the chec& recei'es notice that suchchec& has not been paid by the drawer3 and, (c) the drawer or ma&erof the chec& fails to pay the holder of the chec& the amount duethereon, or ma&es arrangements for payment in full within fi'e ()ban&ing days after recei'ing notice that such chec& has not been paidby the drawer. With the onset of the presumption, the burden of e'idence is shifted on the drawerHma&er of the chec& to pro'e that,when he issued the sub=ect chec&, he had no &nowledge that he hadinsufficient funds in the drawee ban& to answer for the amount due.The notice of dishonor may be sent to the drawer or ma&er by the

drawee ban&, the holder of the chec&, or the offended party, either bypersonal deli'ery or by registered mail. The drawer or ma&er of achec& has a right, under the law, to demand that a written notice of dishonor be sent to and recei'ed by him to enable him to a'oidindictment for 'iolation of 5.6. 5lg. ;;.

'SSE Iust the notice of dishonor be in writing?

*E+D The notice of dishonor of a chec& to the ma&er must be in ;ritin . A mere oral notice to the drawer or ma&er of the dishonor of his chec& is not enough





'SSE What is the element of 8&nowledge of insufficient fund9 in56 ;;?

R+'NG %nless the following elements are shown to ha'e beenpro'en by the prosecution, an accused will not be con'icted for'iolation of 5.6. 5lg. ;;C-. The accused ma&es, draws or issues any chec& to apply to

account or for 'alue3;. T5e acc7sed :no;s at t5e time o= t5e iss7ance t5at 5e or

s5e does not 5ave s7==icient =7nds in% or credit ;it5% t5edra;ee 8an: =or t5e 3ayment o= t5e c5ec: in =744 73on its3resentment< andD. The chec& is subse4uently dishonored by the drawee ban& forinsufficiency of funds or credit, or it would ha'e been dishonored forthe same reason had not the drawer, without any 'alid reason,ordered the ban& to stop payment.

/especting the second element of the crime, the prosecutionmust pro'e that the accused &new, at the time of issuance, that hedoes not ha'e sufficient funds or credit for the full payment of thechec& upon its presentment.

The element of 8&nowledge9 in'ol'es a state of mind thatob'iously would be difficult to establish, hence, the statute createsa prima facie presumption of &nowledge on the insufficiency of funds or credit coincidental with the attendance of the two otherelements.

'SSE #ow does the 56 ;; create the presumption of &nowledge?

R+'NG'idence of &nowledge of insufficient funds .0 The ma&ing,drawing and issuance of a chec& payment of which isrefused by the drawee because of insufficient funds in orcredit with such ban&, when presented within ninety (<>)days from the date of the chec&, shall be 3rima =acie evidence o= :no;4ede o= s7c5 ins7==iciency o= =7nds or credit 7n4ess s7c5 ma:er or dra;er 3ayst5e 5o4der t5ereo= t5e amo7nt d7e t5ereon% orma:es arranements =or 3ayment in =744 8y t5edra;ee o= s7c5 c5ec: ;it5in =ive (") 8an:in daysa=ter receivin notice t5at s7c5 c5ec: 5as not 8een

3aid 8y t5e dra;ee.n order to create such presumption, it m7st 8e s5o;n t5at

t5e dra;er or ma:er received a notice o= dis5onor and%;it5in =ive 8an:in days t5erea=ter% =ai4ed to satis=y t5eamo7nt o= t5e c5ec: or arrane =or its 3ayment . The abo'e14uoted pro'ision creates a presumption =uris tantum that thesecond element prima facie e*ists when the first and third elementsof the offense are present.

'SSE What is the remedy for the person liable to escapeliability?

R+'NG The presumption is not conclusi'e, howe'er, as it maybe rebutted by full payment.I '= t5e ma:er or dra;er 3ays% orma:es arranement ;it5 t5e dra;ee 8an: =or t5e 3aymento= t5e amo7nt d7e ;it5in t5e =iveCday 3eriod =rom notice o= t5e dis5onor% 5e or s5e may no 4oner 8e indicted =or s7c5vio4ation. t is a complete defense that would lie regardless of thestrength of the e'idence presented by the prosecution. n essence,the law affords the drawer or ma&er the opportunity to a'ertprosecution by performing some acts that would operate topreempt the criminal action, which opportunity ser'es to mitigatethe harshness of the law in its application.

t is a general rule that only a full payment at t5e time o= its 3resentment or d7rin t5e =iveCday race 3eriod coulde*onerate one from criminal liability under 5.6. 5lg. ;; and thatsubse4uent payments can only affect the ci'il, but not the criminal,liability.

'SSE Was payment made when the buses were surrendered?oes payment obliterate criminal liability?

R+'NG

n the present case, 65 already e*acted its pro'erbialpound of flesh by recei'ing and &eeping in possession the fourbuses1trust properties surrendered by petitioner in about mid -<<-and Iarch -<<; pursuant to Section P of the Trust /eceipts !aw. tthus appears that the tota4 amo7nt o= t5e dis5onored c5ec:s,the undisputed claim of petitioner of a mista&en agreement to paythe e*change differential (which the same chec&s represented)aside, was more than fully satisfied 3rior to t5e transmitta4 andrecei3t o= t5e 4etter o= demand. n &eeping with =urisprudence,the ourt then considers such 3ayment o= t5e dis5onoredc5ec:s to 5ave o84iterated t5e crimina4 4ia8i4ity o= 3etitioner.

$ateria4 A4teration (Sections 12 and 12")

PN0 vs. -A GR No. 1!#"!& A3ri4 2"% 199

A-TS The serial number in the chec& was altered. The chec& wasreturned the reason being that there was a material alteration of thechec& number.

'SSE What is an alteration under Section -;?

*E+D

Sec. -;. What constitutes a material alteration . Any alterationwhich changesC(a) The date3(b) The sum payable, either for principal or interest3(c) The time or place of payment3(d) The number or the relations of the parties3(e) The medium or currency in which payment is to be made3(f) $r which adds a place of payment where no place of payment isspecified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.

'SSE What is the meaning of Section -; (f)? What is the relationof Section -; to Section -?

*E+D Section -; does not refer to any change that alters the effectof the instrument is a material alteration.

An alteration is said to be material if it alters the effect of theinstrument. t means an unauthori@ed change in an instrument thatpurports to modify in any respect the obligation of a party or anunauthori@ed addition of words or numbers or other change to anincomplete instrument relating to the obligation of a party. n otherwords, a material alteration is one which changes the items which arere4uired to be stated under Section - of the +egotiable nstruments!aw.

Sec. -. Form of negotiable instruments . An instrument to benegotiable must conform to the following re4uirementsC

(a) t must be in writing and signed by the ma&er or drawer3(b) Iust contain an unconditional promise or order to pay a sumcertain in money3(c) Iust be payable on demand, or at a fi*ed or determinable futuretime3(d) Iust be payable to order or to bearer3 and(e) Where the instrument is addressed to a drawee, he must benamed or otherwise indicated therein with reasonable certainty.

/eproduced hereunder are some e*amples of material and immaterialalterationsC

A. Iaterial Alterations C(-) Substituting the words or bearer for order.(;) Writing protest wai'ed abo'e blan& indorsements.(D) A change in the date from which interest is to run.(:) A chec& was originally drawn as followsC ron ounty 5an&, rystalFalls, Iich. Aug. , -<>-. 6ay to B.!. or order Q< fifty cents T/ Theinsertion of the figure before the figure <, the instrument beingotherwise unchanged.() Adding the words with interest with or without a fi*ed rate.(2) An alteration in the maturity of a note, whether the time forpayment is thereby curtailed or e*tended.(P) An instrument was payable First +atGl 5an& the plaintiff added theword Iarion.(J) 6laintiff, without consent of the defendant, struc& out the name of the defendant as payee and inserted the name of the ma&er of theoriginal note.(<) Stri&ing out the name of the payee and substituting that of theperson who actually discounted the note.(->) Substituting the address of the ma&er for the name of a co1ma&er.

5. mmaterial Alterations C(-) hanging promise to pay to We promise to pay, where thereare two ma&ers.(;) Adding the word annual after the interest clause.(D) Adding the date of maturity as a marginal notation.(:) Filling in the date of actual deli'ery where the ma&ers of a notega'e it with the date in blan&, 7uly UUUU.() An alteration of the marginal figures of a note where the sumstated in words in the body remained unchanged.(2) The insertion of the legal rate of interest where the note had apro'ision for interest at UUUUUUU per cent.





(P) A printed form of promissory note had on the margin theprinted words, *tended to UUUUUUUU. The holder on or aftermaturity wrote in the blan& space the words Iay -, -<-D, as areference memorandum of a promise made by him to the principalma&er at the time the words were written to e*tend the time of payment.(J) Where there was a blan& for the place of payment, filling in theblan& with the place desired.(<) Adding to an indorseeGs name the abbre'iation ash when it

had been agreed that the draft should be discounted by the trustcompany of which the indorsee was cashier.(->) The indorsement of a note by a stranger after its deli'ery tothe payee at the time the note was negotiated to the plaintiff.(--) An e*tension of time gi'en by the holder of a note to theprincipal ma&er, without the consent of a surety co1ma&er.

'SSE What is spoliation?

*E+D Spoliation is an alterationsdone by a stranger and will nota'oid the instrument, but the holder may enforce it only accordingto its original tenor.

'SSE s the change in the serial number material alteration?

*E+D +$, it is not a material alteration.

The case at bench is uni4ue in the sense that what wasaltered is the serial number of the chec& in 4uestion, an item which,it can readily be obser'ed, is not an essential re4uisite fornegotiability under Section - of the +egotiable nstruments !aw.The aforementioned alteration did not change the relations betweenthe parties. The name of the drawer and the drawee were notaltered. The intended payee was the same. The sum of money dueto the payee remained the same.

The chec&Gs serial number is not the sole indication of itsorigin. The name of the go'ernment agency which issued thesub=ect chec& was prominently printed therein. The chec&Gs issuerwas therefore sufficiently identified, rendering the referral to theserial number redundant and inconse4uential.

6etitioner, thus cannot refuse to accept the chec& in 4uestionon the ground that the serial number was altered, the same beingan immaterial or innocent one.

'NTK+ -ORP 0ANB vs. -A GR No. 122991! Se3t. "% 2!!

A-TS The Iinistry of ducation and ulture issued - chec&sdrawn against respondent which petitioner accepted for deposit on'arious dates. After ;: hours from submission of the chec&s torespondent for clearing, petitioner paid the 'alue of the chec&s andallowed the withdrawals of the deposits. #owe'er, on -: $ctober-<J-, respondent returned all the chec&s to petitioner withoutclearing them on the ground that they were materially altered.Thus, petitioner instituted an action for collection of sums of moneyagainst respondent to reco'er the 'alue of the chec&s.

The alterations in the chec&s were made on their serialnumbers.

'SSE What is material alteration and whether or not the chec&swere materially altered?

*E+D An alteration is said to be material if it alters the effect of the instrument. t means an unauthori@ed change in an instrumentthat purports to modify in any respect the obligation of a party oran unauthori@ed addition of words or numbers or other change toan incomplete instrument relating to the obligation of a party. nother words, a material alteration is one which changes the itemswhich are re4uired to be stated under Section - of the +egotiablenstrumentNsO !aw.

6etitioner, thus cannot refuse to accept the chec& in 4uestionon the ground that the serial number was altered, the same beingan immaterial or innocent one.

n the present case the alterations of the serial numbers donot constitute material alterations on the chec&s.

$ETRO0ANB vs. -A0'+ZO GR No. 1"9 Dec. % 2!!

A-TS /espondent /enato abil@o issued a Ietroban& hec& payable to 8AS#9 and postdated on ;: +o'ember -<<: in theamount of One T5o7sand Pesos (P1%!!!.!!). The chec& wasdrawn against abil@o"s Account with Ietroban& and was paid byabil@o to a certain Ir. Iar4ue@, as his sales commission.

Subse4uently, the chec& was presented to Westmont 5an& forpayment. Westmont 5an&, in turn, indorsed the chec& toIetroban& for appropriate clearing. After the entries thereon weree*amined, including the a'ailability of funds and the authenticity of

the signature of the drawer, Ietroban& cleared the chec& forencashment in accordance with the 6hilippine learing #ouseorporation (6#) /ules.

%pon receipt of the chec&, abil@o disco'ered that Ietroban& hec& which he issued on -; +o'ember -<<: in the amount of P1%!!!.!! was altered to P91%!!!.!! and the date 2 Novem8er199 was changed to 1 Novem8er 199.

abil@o, thru counsel, sent a letter1demand to Ietroban& for thepayment of 6<>,>>>.>>, after deducting the original 'alue of the chec&

in the amount of 6-,>>>.>>. Such written demand notwithstanding,Ietroban& still failed or refused to comply with its obligation.onse4uently, abil@o instituted a ci'il action for damages against

Ietroban&. /T rendered a ecision in fa'or of abil@o. The ourt of Appeals affirmed with modification the ecision of the court a 4uo.

'SSE What is material alteration?

R+'NGC An alteration is said to be material if it changes the effect of the instrument. t means that an unauthori@ed change in aninstrument that purports to modify in any respect the obligation of aparty or an unauthori@ed addition of words or numbers or otherchange to an incomplete instrument relating to the obligation of aparty. n other words, a material alteration is one which changes theitems which are re4uired to be stated under Section - of the+egotiable nstruments !aw.

n the case at bar, the chec& was altered so that the amount wasincreased from P1%!!!.!! to P91%!!!.!! and the date waschanged from 2 Novem8er 199 to 1 Novem8er 199.

Apparently, since the entries altered were among those enumeratedunder Section - and -;, namely, the sum of money payable and thedate of the chec&, the instant contro'ersy therefore s4uarely fallswithin the pur'iew of material alteration.

'SSE What is the effect of payment made under a material alteredinstrument?

R+'NG

Section -;:. Alteration of instrument3 effect of. 0 Where anegotiable instrument is materially altered without the assent of allparties liable thereon, it is avoided% e*cept as against a party whohas himself made% a7t5oriJed% and assented to t5e a4terationand s78se67ent indorsers.

5ut when the instrument has been materially altered and is inthe hands of a holder in due course not a party to the alteration, hemay enforce the payment thereof according to its original tenor.

The ban& on which the chec& is drawn, &nown as the draweeban&, is under strict liability to pay to the order of the payee inaccordance with the drawer"s instructions as reflected on the face andby the terms of the chec&. Payment made 7nder materia44ya4tered instr7ment is not 3ayment done in accordance ;it5t5e instr7ction o= t5e dra;er.

When the drawee ban& pays a materially altered chec&, it 'iolatesthe terms of the chec&, as well as its duty to charge its client"s accountonly for bona fide disbursements he had made. Since t5e dra;ee

8an:% in t5e instant case% did not 3ay accordin to t5e oriina4tenor o= t5e instr7ment% as directed 8y t5e dra;er% t5en it 5asno ri5t to c4aim reim87rsement =rom t5e dra;er% m7c5 4ess%t5e ri5t to ded7ct t5e erroneo7s 3ayment it made =rom t5edra;erKs acco7nt ;5ic5 it ;as e3ected to treat ;it5 7tmost=ide4ity.

'SSE What is the doctrine of e4uitable estoppel?

R+'NG Verily, Ietroban& cannot lightly impute that abil@o wasnegligent and is therefore pre'ented from asserting his rights underthe doctrine of e4uitable estoppel when the facts on record are bare of e'idence to support such conclusion. T5e doctrine o= e67ita84eesto33e4 states t5at ;5en one o= t5e t;o innocent 3ersons%eac5 7i4t4ess o= any intentiona4 or mora4 ;ron% m7st s7==er a4oss% it m7st 8e 8orne 8y t5e one ;5ose erroneo7s cond7ct%

eit5er 8y omission or commission% ;as t5e ca7se o= in?7ry.Ietroban&"s reliance on this dictum , is misplaced. For one,Ietroban&"s representation that it is an innocent party is flimsy ande'idently, misleading. At the same time, Ietroban& cannot asse'eratethat abil@o was negligent and this negligence was the pro*imatecause of the loss in the absence of e'en a scintilla proof to buttresssuch claim. +egligence is not presumed but must be pro'en by theone who alleges it.

'SSE What is the degree of diligence re4uired of a ban&?





R+'NG The point is that as a business affected with publicinterest and because of the nature of its functions, the ban& isunder obligation to treat the accounts of its depositors withmeticulous care, always ha'ing in mind the fiduciary nature of theirrelationship. T5e a33ro3riate deree o= di4ience re67ired o= a 8an: m7st 8e a 5i5 deree o= di4ience , if not the utmostdiligence.

The reliance made by Ietroban& on Westmont 5an&"sindorsement is clearly inconsistent, if not totally offensi'e to the

dictum that being impressed with public interest, 8an:s s5o74deercise t5e 5i5est deree o= di4ience% i= not 7tmostdi4ience in dea4in ;it5 t5e acco7nts o= its o;n c4ients. towes the highest degree fidelity to its clients and should nottherefore lightly rely on the =udgment of other ban&s on occasionswhere its clients money were in'ol'e, no matter how small orsubstantial the amount at sta&e.

Protest (Section 1"2)

A++'ED vs. -A GR No. 12"&"1 /74y 11% 2!!

A-TS 6etitioner Allied 5an&, Ianila (A!!) purchased *port5ill from respondent B.B. Sportswear Ifg. orporation (BBS). Thebill, drawn under a letter of credit co'ered Ien"s Val'oline TrainingSuit that was in transit to West Bermany (%niger 'ia /otterdam).The e*port bill was issued by he&iang First 5an& !td., #ong&ong

/espondents +ari Bidwani and Alcron nternational !td.(Alcron) e*ecuted their respecti'e !etters of Buaranty, holdingthemsel'es liable on the e*port bill if it should be dishonored orretired by the drawee for any reason.

Subse4uently, the spouses !eon and !eticia de Villa and +ariBidwani also e*ecuted a ontinuing BuarantyHomprehensi'eSurety (surety, for bre'ity), guaranteeing payment of any and allsuch credit accommodations which A!! may e*tend to BBS.When A!! negotiated the e*port bill to he&iang, payment wasrefused due to some material discrepancies in the documentssubmitted by BBS relati'e to the e*portation co'ered by the letterof credit. onse4uently, A!! demanded payment from all therespondents based on the !etters of Buaranty and Surety e*ecutedin fa'or of A!!. #owe'er, respondents refused to pay,

prompting A!! to file an action for a sum of money.The trial court dismissed the complaint. $n appeal, the ourtof Appeals modified the ruling of the trial court holding respondentBBS liable to reimburse petitioner A!! the peso e4ui'alent of the e*port bill, but it e*onerated the guarantors from their liabilitiesunder the !etters of Buaranty.

'SSE an respondents, in their capacity as guarantors andsurety, be held =ointly and se'erally liable under the !etters of Buaranty and Surety, in the absence of protest on the bill inaccordance with Section -; of the +!?

R+'NG Ees. n this case, the !etters of Buaranty and Suretyclearly show that respondents undertoo& and bound themsel'es asguarantors and surety to pay the full amount of the e*port bill.

Section -; of the +egotiable nstruments !aw pertaining to

indorsers, relied on by respondents, is not pertinent to this case.There are well1defined distinctions between the contract of anindorser and that of a guarantorHsurety of a commercial paper,which is what is in'ol'ed in this case. The contract o= indorsement is primarily that of transfer, while the contract o= 7aranty is that of personal security. The liability of aguarantorHsurety is broader than that of an indorser. %nless the billis promptly presented for payment at maturity and due notice of dishonor gi'en to the indorser within a reasonable time, he will bedischarged from liability thereon. $n the other hand, e*cept wherere4uired by the pro'isions of the contract o= s7retys5i3, ademand or notice of default is not re4uired to fi* the surety"sliability. #e cannot complain that the creditor has not notified himin the absence of a special agreement to that effect in the contractof suretyship. T5ere=ore% no 3rotest on t5e e3ort 8i44 isnecessary to c5are a44 t5e res3ondents ?oint4y and

severa44y 4ia84e ;it5 G.G. S3orts;ear since t5e res3ondents5e4d t5emse4ves 4ia84e 73on demand in case t5e instr7ment;as dis5onored and on t5e s7rety% t5ey even ;aived noticeo= dis5onor as sti374ated in t5eir +etters o= G7arantee.

Promissory Notes and -5ec:sSections 1&% 1&"% 19 1&9

P-'0 vs. -A GR No. 1211 /an7ary 29% 2!!1ORD P*'+ vs. -A GR No. 121#9 /an7ary 29% 2!!1

ORD P*'+ vs. -'T'0ANB GR No. 12&! /an7ary 29% 2!!1

onsolidated casesC

i. GR 1211 and 121#9)

A-TSC F drew and issued a itiban& cross chec& in fa'or of 5/. Thechec& was deposited with 65an& and was subse4uently cleared byentral 5an&. %pon presentment with itiban&, the proceeds was paid

to 65an& as collecting or depository 5an&. nstead of remitting theproceeds to the 5/, 65an& prepared two of its IanagerGs chec&,allegedly on the instructions of one Ir. /i'era, and therefore enabledsyndicates to encash the same. The proceeds howe'er was ne'er paidnor recei'ed by 5/

'SSESC-. What is the relationship of the payee1holder and the collectingban&?;. What is a crossed chec& and the corresponding duty of thecollecting ban&?D. What is the re4uirement of ban&ing business on the one who firstcashes or negotiates a chec&?

*E+DC

-. Since the 4uestioned crossed chec& was deposited with 5AA Nnow65an&O, which claimed to be a depositoryHcollecting ban& of the 5/,it has the responsibility to ma&e sure that the chec& in 4uestion isdeposited in 6ayeeGs account only. As agent of the 5/ (the payee of the chec&), defendant 5AA should recei'e instructions only from itsprincipal 5/ and not from any other person especially so when thatperson is not &nown to the defendant.

't is a ;e44Csett4ed r74e t5at t5e re4ations5i3 8et;een t5e3ayee or 5o4der o= commercia4 3a3er and t5e 8an: to ;5ic5 itis sent =or co44ection is% in t5e a8sence o= an areement to t5econtrary% t5at o= 3rinci3a4 and aent. A 8an: ;5ic5 receivess7c5 3a3er =or co44ection is t5e aent o= t5e 3ayee or 5o4der.

;. The crossing of the chec& with the phrase 6ayeeGs Account $nly, is

a warning that the chec& should be deposited only in the account of the / Thus, it is the duty of the collecting ban& 65an& to ascertainthat the chec& be deposited in payeeGs account only. Therefore, it isthe collecting ban& (65an&) which is bound to scrutini@e the chec& and to &now its depositors before it could ma&e the clearingindorsement all prior indorsements andHor lac& of indorsementguaranteed.

D. !astly, ban&ing business re4uires that the one who first cashes andnegotiates the chec& must ta&e some precautions to learn whether ornot it is genuine. And if the one cashing the chec& through indifferenceor other circumstance assists the forger in committing the fraud, heshould not be permitted to retain the proceeds of the chec& from thedrawee whose sole fault was that it did not disco'er the forgery or thedefect in the title of the person negotiating the instrument beforepaying the chec&. For this reason, a ban& which cashes a chec& drawn

upon another ban&, without re4uiring proof as to the identity of persons presenting it, or ma&ing in4uiries with regard to them, cannothold the proceeds against the drawee when the proceeds of thechec&s were afterwards di'erted to the hands of a third party. n suchcases the drawee ban& has a right to belie'e that the cashing ban& (orthe collecting ban&) had, by the usual proper in'estigation, satisfieditself of the authenticity of the negotiation of the chec&s. Thus, onewho encashed a chec& which had been forged or di'erted and in turnrecei'ed payment thereon from the drawee, is guilty of negligencewhich pro*imately contributed to the success of the fraud practiced onthe drawee ban&. The latter may reco'er from the holder the moneypaid on the chec&.

ii. G.R. 12&!

A-TSC F drew two itiban& crossed chec&s in payment of its ta*obligations. The proceeds of both chec&s were ne'er recei'ed by thepayee. t appeared that A, an employee of F, drew the chec&. nsteadof deli'ering the chec& to the payee, A passed the chec& to 5,managerof 65an&. 5 thereafter opened a chec&ing account with afictitious name with the help of , also another employee of 65an&.5 then would deposit a worthless chec& in e*actly the same amount asthat drawn by F. While the worthless chec& was coursed through65Gs main office for clearing, other conspirators would replace this





worthless chec& with FGs chec& thereby crediting the fictitiousaccount with the proceeds of the chec&.

'SSESC-. What is the liability of 65 relati'e to the acts of its ees?;. s the doctrine of contributory negligence applicable?D. What is the liability of the drawer to the drawee?:. What is the nature of the ban&ing functions?. What is comparati'e negligence?

+ote that in these cases, the chec&s were drawn against the drawee ban&, but the title of the person negotiating the same was allegedly defecti'e because the instrument was obtained by fraud and unlawful means, and the proceeds of the chec&s were not remitted to the payee. t was established that instead of paying the chec&s to the /, for the settlement of the appropriate 4uarterly percentage ta*es of Ford, the chec&s were di'erted and encashed for the e'entual distribution among the members of the syndicate.

As to the unlawful negotiation of the chec& the applicable law is Section of the +egotiable nstruments !aw (+!), which pro'idesC

When title defecti'e The title of a person who negotiates an instrument is defecti'e within the meaning of this Act when he obtained the instrument, or any signature thereto, by fraud, duress,

or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith or under such circumstances as amount to a fraud.

6ursuant to this pro'ision, it is 'ital to show that the negotiation is made by the perpetrator in breach of faith amounting to fraud. The person negotiating the chec&s must ha'e gone beyond the authority gi'en by his principal. f the principal could pro'e that there was no negligence in the performance of his duties, he may set up the personal defense to escape liability and reco'er from other parties who, through their own negligence, allowed the commission of the crime.

#!?C

-. n this case, there was no e'idence presented confirming the

conscious participation of 65an& in the embe@@lement. As a general rule, howe'er, a ban&ing corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. A ban& will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. t may be liable for the tortuous acts of its officers e'en as regards that species of tort of which malice is an essential element. n this case, we find a situation where the 65an& appears also to be the 'ictim of the scheme hatched by a syndicate in which its own management employees had participated.

A ban& holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds these officers or agents were enabled to perpetrate in the apparent course of their employment3 nor will it be permitted to shir& its responsibility for such frauds, e'en though no benefit may accrue to the ban& therefrom. For the general rule is that a ban& is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or authority. And if an officer or employee of a ban&, in his official capacity, recei'es money to satisfy an e'idence of indebtedness lodged with his ban& for collection, the ban& is liable for his misappropriation of such sum.

5ut in this case, responsibility for negligence does not lie on 65an&Gs shoulders alone.

;. itiban& must li&ewise answer for the damages incurred by Ford on itiban& hec&s +umbers S+ -><P and -2>J, because of the contractual relationship e*isting between the two. itiban&, as the

drawee ban& breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter. $n this score, we agree with the respondent courtGs ruling.(See Sec. 2;)

The fact that the drawee ban& did not disco'er the irregularity seasonably, in our 'iew, constitutes negligence in carrying out the ban&Gs duty to its depositors. The point is that as a business affected with public interest and because of the nature of its functions, the ban& is under obligation to treat the accounts of its depositors with meticulous care, always ha'ing in mind the fiduciary nature of their relationship.

D. Thus, in'o&ing the doctrine of comparati'e negligence, we are of the 'iew that both 65an& and itiban& failed in their respecti'e obligations and both were negligent in the selection and super'ision of their employees resulting in the encashment of itiban& hec& +os. S+ -><P and -2>J. Thus, we are constrained to hold them e4ually liable for the loss of the proceeds of said chec&s issued by Ford in fa'or of the /.

, O* vs. -A GR No. 12"29# /7ne % 2!!

A-TSC A purchased se'eral pcs of =ewelry from 5. Failing to pay thepurchase price, the two entered into a compromise agreementswherein A would issue << postdated chec&s for 6>,>>> each datede'ery -th and D>th of the month. A issued -> postdated chec&sdrawn against her 5 account. Said chec&s were dishonored upondeposit by 5 for the reason of account closed.

'SSEC-. What is the scope of the tem insufficient fund as ground fordishonor in 56 ;;?;.What is the meaning of chec& under 56 ;; especially so that here,the chec& is not payable on demand as defined by Sec. -J?D.s the re4uirement of notice of dishonor in 56 ;; mandatory?

*E+DC

-. The gra'amen of the offense punished by 5.6. 5lg. ;; is the act of ma&ing and issuing a worthless chec& or a chec& that is dishonoredupon its presentation for payment .The thrust of the law is to prohibit,under pain of penal sanctions, the ma&ing or worthless chec&s andputting them in circulation. 5ecause of its deleterious effects on thepublic interest, the practice is proscribed by law. The law punished theact not as an offense against property, but an offense against publicorder.

n /ecuerdo 's. 6eople, this ourt also held that the terms andconditions surrounding the issuance of the chec&s are irrele'ant sinceits primordial intention is to ensure the stability and commercial 'alueof chec&s as being 'irtual substitutes for currency.

6etitionerGs claim that cases of closed accounts are not included inthe co'erage of 5.6. 5lg. ;; has no merit considering the clear intentof the law, which is to discourage the issuance of worthless chec&s dueto its harmful effect to the public. This ourt, in !o@ano 's. Iartine@,was e*plicit in ruling that the language of 5.6. 5lg. ;; is broad enoughto co'er all &inds of chec&s, whether present dated or postdated, orwhether issued in payment of pre1e*isting obligations or gi'en inmutual or simultaneous e*change for something of 'alue.

;. 5.6. 5lg. ;; does not distinguish but merely pro'ides that NaOnyperson who ma&es or draws and issues any chec& &nowing at the timeof issue that he does not ha'e sufficient funds in or credit with thedrawee ban& which chec& is subse4uently dishonored shall bepunished by imprisonment . %bi le* non distinguit nec nos distingueredebemus.

5ut e'en if We retrace the enactment of the 5ouncing hec& !aw todetermine the parameters of the concept of chec&, we can easilyglean that the members of the then 5atasang 6ambansa intended it tobe comprehensi'e as to include all chec&s drawn against ban&s.

n this light, it is easy to see that the claim of petitioner that 5.6. 5lg.;; does not include Gpostdated chec&sG and cases of Gclosed accountsGhas no leg to stand on. The term closed accounts is within themeaning of the phrase does not ha'e sufficient funds in or credit withthe drawee ban&.

D. To be con'icted under 56 ;;, the ff. elements must be pro'edC

-.The accused ma&es, draws or issues any chec& to apply to accountor for 'alue3;.The accused &nows at the time of the issuance that he or she does

not ha'e sufficient funds in, or credit with, the drawee ban& for thepayment of the chec& in full upon its presentment3 andD.The chec& is subse4uently dishonored by the drawee ban& forinsufficiency of funds or credit or it would ha'e been dishonored forthe same reason had not the drawer, without any 'alid reason,ordered the ban& to stop payment.

Since the second element in'ol'es a state of mind which is difficult toestablish, Section ; of 5.6. 5lg. ;; created a prima facie presumptionof such &nowledge. 5ased on this section, the presumption that theissuer had &nowledge of the insufficiency of funds is brought intoe*istence only after it is pro'ed that the issuer had recei'ed a notice of





dishonor and that within fi'e days from receipt thereof, he failed topay the amount of the chec& or to ma&e arrangement for itspayment. The presumption or prima facie e'idence as pro'ided in this section cannot arise, if such notice of non1payment by the drawee ban& is not sent to the ma&er or drawer, or if there is no proof as to when such notice was recei'ed by the drawer, since there would simply be no way of rec&oning the crucial 1day period .Thus, n cases for 'iolation of 5.6. 5lg. ;;, it is necessary that theprosecution pro'e that the issuer had recei'ed a notice of dishonor.

*S0- vs. -ATA+AN GR No. 1"9"9! Oct. 1&% 2!!*S0- vs. -ATA+AN GR No. 1"9"91 Oct. 1&% 2!!*S0- vs. -ATA+AN GR No. 1"9"9! A3ri4 2"% 2!!"

A-TSC A filed a case against #S5 for refusing to pay the chec&sissued by 5. #S5 returned the chec&s deposited for the reason of payment stopped pending confirmation. 5 then called #S5confirming the chec&s he issued and re4uesting its clearance.#owe'er, #S5 still did not pay prompting A to institute a suitbased on Art. -< of the

'SSESC-. What is the effect that this suit is under Art. -< of the ?;. What about Sec. -J< and -:P of the +!

*E+DC

#S5A+M claims that atalan has no cause of action because underSection -J< of the +egotiable nstruments !aw, a chec& of itself does not operate as an assignment of any part of the funds to thecredit of the drawer with the ban&, and the ban& is not liable to theholder unless and until it accepts or certifies it. #owe'er, #S5A+M is not being sued on the 'alue of the chec& itself but for how itacted in relation to atalanGs claim for payment despite therepeated directi'es of the drawer Thomson to recogni@e the chec& the latter issued. atalan may ha'e prayed that she be paid the'alue of the chec&s but it is a*iomatic that what determines thenature of an action, as well as which court has =urisdiction o'er it,are the allegations of the complaint, irrespecti'e of whether or notthe plaintiff is entitled to reco'er upon all or some of the claims

asserted therein.n this instance, after carefully e*amining the amended complaint,we are con'inced that the allegations therein are in the nature of an action based on tort under Article -< of the i'il ode.

+ZON DEKT vs. -ON'++A GR No. 1& Se3t. 21%2!!"

'SSESC-. What is a promissory note?;. s a promissory note proof of identity of parties?

*E+DC ES

/espondents argue that there is no identity of parties between the

First ase and the Third ase. The party in the First ase wasolumbia ollege, nc., represented by Feliciano S. on4uilla3N whilethe parties in the Third ase were Feliciano S. on4uilla, 5enedicto. on4uilla, ornelio . on4uilla, and orotea . $rcine. Theparties in the latter case were the registered owners of themortgaged properties.

t is a*iomatic that to in'o&e res =udicata, absolute identity of parties is not re4uired. A substantial identity of parties is sufficient.There is substantial identity of parties when there is a community of interest between a party in the first case and that in the secondone, e'en if the latter party was not impleaded in the first case.N

n the instant contro'ersy, the omplaint alleged that olumbiaollege, nc., was the only debtor. 5ut the A found that the6romissory +ote gi'en to petitioner contained the signatures of all

the four registered owners, without any 4ualification. A 6romissory+ote is defined as 8an unconditional promise in writing made byone person to another, signed by the ma&er, engaging to pay ondemand, or at a fi*ed or determinable future time, a sum certain inmoney to order or to bearer.9 This definition shows that the ma&ersor signatories of a promissory note ha'e the duty to pay theamount stated on it.

Therefore, it is only logical that the present respondents weredebtors, together with olumbia ollege, nc. This fact e*plains whythey are also claiming the balance of the loan, instead of merely

as&ing for the nullification of the foreclosure of their property.Together with olumbia ollege, nc., they are interested in annullingthe contracted loan and in pre'enting the foreclosure of the properties.

Ioreo'er, we find that olumbia ollege, nc. claimed that it hadmortgaged its properties to petitioner ban& and e*ecuted the6romissory +ote. /econciling this fact with the finding of the A thatrespondents were the mortgagors,N we can only come to theconclusion that they and olumbia ollege were not only common

debtors3 all of them were also mortgagors.

Therefore, they were all parties to the same ontract, protecting thesame interests, and see&ing the same relief. learly, the actions wereinstituted for the protection of the common interest of respondents inthe loan and the mortgage. They shared an identity of interest fromwhich flowed an identity of relief sought3 that is, to ha'e theforeclosure nullified. Their identity of interest in the loan and themortgaged property is enough to hold them pri'y1in1law3 this factmeets the substanti'e re4uisite of identity of parties.

'+ANO vs. ESPALO+ GR No. 11#" Dec. 1% 2!!"

'SSESC-. What is the effect as to the negotiability of the chec& drawn againsta closed account?;. What will happen to the chec&s that are not dated?D. What is a stale chec&?:. what is the ban&ing practice on stale chec&s

*E+DC

Anne* 81J9 of the complaint, a photocopy of hec& +o. >>J-D:,shows that it was dishonored on 7anuary -;, ;>>> due to 8A$%+T!$S.9 When petitioner then filed her complaint on Iarch ;J,;>>>, all the chec&s sub=ect hereof which were drawn against thesame closed account were already rendered 'alueless or non1negotiable, hence, petitioner had, with respect to them, no cause of action.

With respect to abo'e1said hec& +o. >>J:>PJ, howe'er, which was

drawn against another account of petitioner, albeit the date of issuebears only the year 1 -<<<, its 'alidity and negotiable character at thetime the complaint was filed on Iarch ;J, ;>>> was not affected. ForSection 2 of the +egotiable nstruments !aw pro'idesC Section 2. $mission3 seal3 particular money. 0 The 'alidity andnegotiable character of an instrument are not affected by the fact that

0(a) t is not dated3 or(b) oes not specify the 'alue gi'en, or that any 'alue had been gi'entherefor3 or(c) oes not specify the place where it is drawn or the place where itis payable3 or(d) 5ears a seal3 or(e) esignates a particular &ind of current money in which payment isto be made.

#owe'er, e'en if the holder of hec& +o. >>J:>PJ would ha'e filledup the month and day of issue thereon to be 8ecember9 and

8D-,9respecti'ely, it would ha'e, as it did, become stale si* (2) monthsor -J> days thereafter, following current ban&ing practice

+ORES vs. A+-OTE+O A$ No PC!"C2!& /an7ary 2"% 2!!

'SSE #eldC/espondent e*plains that the pre'ailing party in the ci'il case initiallysought to ha'e the chec& made payable to i'ina /emollino, presidentof plaintiff 6olilio Shipping !ines. #owe'er, since the notice of garnishment did not specify to whom it shall be issued, the ban& didnot directly issue a chec& in the name of said pre'ailing party andinstead issued a chec& to the order of /T 5r. ;P2 Iuntinlupa thruFeli* Falcotelo, Sheriff V.

While such e*planation may dispel any ill moti'e on the part of thesheriff, still, his act cannot be allowed to go unpunished for he failed tostrictly obser'e the rules in implementing money =udgments.

/espondent allowed a chec& to be made payable through him despitethe clear intent of the rules proscribing sheriffs from ha'ing chec&smade payable to them. #e li&ewise attempted to deposit the chec& inhis personal account despite the clear mandate of the rules directingsheriffs to deli'er sums of money intended for =udgment creditors tothe cler&s of court or deposit the same to a fiduciary account.





n case where the =udgment obligor 'oluntarily pays in cash orcertified chec& the =udgment debt and the =udgment obligee is notpresent, Section < of /ule D< re4uires the sheriff to recei'e thepayment. #owe'er, the sheriff must turn o'er the amount withinthe same day to the cler& of court. f it is not practicable to deli'erthe amount to the cler& of court within the same day, the sheriff shall deposit the amount in a fiduciary account with the nearestgo'ernment depository ban&. The cler& of court then deli'ers the

amount to the =udgment obligee in satisfaction of the =udgment.

ndeed, issuing chec&s in the name of sheriffs is fraught withdanger. n 6hilippine Airlines, nc. 's. ourt of Appeals,where the

=udgment debtor issued a chec& in the name of the sheriff who laterabsconded with the money, the ourt e*plained why chec&s shouldnot be made payable through sheriffsC

t is, indeed, out of the ordinary that chec&s intended for aparticular payee are made out in the name of another. Ia&ing thechec&s payable to the =udgment creditor would ha'e pre'ented theencashment or the ta&ing of undue ad'antage by the sheriff, or anyperson into whose hands the chec&s may ha'e fallen, whetherwrongfully or in behalf of the creditor. The issuance of the chec&s inthe name of the sheriff clearly made possible the misappropriationof the funds that were withdrawn.

The pernicious effects of issuing chec&s in the name of a personother than the intended payee, without the latterGs agreement orconsent, are as many as the ways that an artful mind could concoctto get around the safeguards pro'ided by the law on negotiableinstruments.

+oteC There was no mention as to what the safeguards pro'ided by +! were 'iolated

$'RANDA vs. PD'- GR No. 19 Se3t. &% 2!!

A-TSC 6etitioner !eticia B. Iiranda was a depositor of 6rimeSa'ings 5an&, Santiago ity 5ranch. $n 7une D, -<<<, shewithdrew substantial amounts from her account, but instead of cash

she opted to be issued a crossed cashier"s chec&. She was thusissued cashier"s chec& no. >>>>>>>-J in the sum of 6;,>>,>>>.>>and cashier"s chec& no. >>>>>>>-: in the amount of 6D,>>;,>>>.>>.

6etitioner deposited the two chec&s into her account in anotherban& on the same day, howe'er, 5ang&o Sentral ng 6ilipinas (5S6)suspended the clearing pri'ileges of 6rime Sa'ings 5an& effecti'e;C>> p.m. of 7une D, -<<<. The two chec&s of petitioner werereturned to her unpaid.

$n 7une :, -<<<, 6rime Sa'ings 5an& declared a ban& holiday. $n7anuary P, ;>>>, the 5S6 placed 6rime Sa'ings 5an& under therecei'ership of the 6hilippine eposit nsurance orporation (6).

6etitioner filed a ci'il action for sum of money in the /egional Trial

ourt of Santiago ity, sabela to reco'er the funds from her unpaidchec&s against 6rime Sa'ings 5an&, 6 and the 5S6.

'SSESC-. o chec&s operate as an assignment of funds in the hands of Iiranda?;. Was the claim of Iiranda a disputed claim under Sec. D> of /AP2D and thus under the =urisdiction of the li4uidation court?D. Are the respondents solidarily liable to Iiranda?

*E+DC-. Anent the first issue, the two cashier"s chec&s issued by 6rimeSa'ings 5an& do not constitute an assignment of funds in the handsof the petitioner as there were no funds to spea& of in the first

place. The ban& was financially insol'ent for sometime, e'enbefore the issuance of the chec&s on 7une D, -<<<. As the ourt of Appeals correctly ruled, the issuance of the cashier"s chec&sto petitioner did not constitute an assignment of funds, of which there was practically none at the time these were issued, asthe ban& was in dire financial straits for some time.

;. As regards the second issue, the claim lodged by the petitioner4ualifies as a disputed claim sub=ect to the =urisdiction of theli4uidation court. /egular courts do not ha'e =urisdiction o'eractions filed by claimants against an insol'ent ban&, unless there isa clear showing that the action ta&en by the 5S6, through the

Ionetary 5oard in the closure of financial institutions was in e*cess of =urisdiction, or with gra'e abuse of discretion.

The power and authority of the Ionetary 5oard to close ban&s andli4uidate them thereafter when public interest so re4uires is ane*ercise of the police power of the State. 6olice power, howe'er, issub=ect to =udicial in4uiry. t may not be e*ercised arbitrarily orunreasonably and could be set aside if it is either capricious,discriminatory, whimsical, arbitrary, un=ust, or is tantamount to a

denial of due process and e4ual protection clauses of the onstitution.

8isputed claims9 refer to all claims, whether they be against theassets of the insol'ent ban&, for specific performance, breach of contract, damages, or whate'er.N 6etitioner"s claim which in'ol'ed thepayment of the two cashier"s chec&s that were not honored by 6rimeSa'ings 5an& due to its closure falls within the ambit of a claim againstthe assets of the insol'ent ban&. The issuance of the cashier"s chec&sby 6rime Sa'ings 5an& to the petitioner created a debtorHcreditorrelationship between them. This disputed claim should therefore belodged in the li4uidation proceedings by the petitioner as creditor,since the closure of 6rime Sa'ings 5an& has rendered all claimssubsisting at that time moot which can best be threshed out by theli4uidation court and not the regular courts.

D. /egarding the third issue, it is only 6rime Sa'ings 5an& that is liable

to pay for the amount of the two cashier"s chec&s. Solidary liabilitycannot attach to the 5S6, in its capacity as go'ernment regulator of ban&s, and the 6 as statutory recei'er under /.A. +o. P2D,because they are the principal go'ernment agencies mandated by lawto determine the financial 'iability of ban&s and 4uasi1ban&s, andfacilitate recei'ership and li4uidation of closed financial institutions,upon a factual determination of the latter"s insol'ency.

As correctly pointed out by the ourt of Appeals, the 5S6 should notbe held liable on the crossed cashier"s chec&s for it was not a party tothe issuance of the same3 nor can it be held liable for imposing thesanctions on 6rime Sa'ings 5an& which indirectly affected Iiranda,since it is mandated under Sec. DP of /.A. +o. P2D to act accordingly.

n the absence of fraud, the purchase of a cashier"s chec&, li&e thepurchase of a draft on a correspondent ban&, creates the relation of

creditor and debtor, not that of principal and agent, with the resultthat the purchaser or holder thereof is not entitled to a preferenceo'er general creditors in the assets of the ban& issuing the chec&,when it fails before payment of the chec&. #owe'er, in a situationin'ol'ing the element of fraud, where a cashier"s chec& is purchasedfrom a ban& at a time when it is insol'ent, as its officers &now or arebound to &now by the e*ercise of reasonable diligence, it has beenheld that the purchase is entitled to a preference in the assets of theban& on its li4uidation before the chec& is paid.

-'T'0ANB vs. SA0EN'ANO GR No. 1"12 Oct. 1% 2!!

'SSESC-. Are managerGs chec&s proof of receipt of loan proceeds?;. What is the significance of 56Gs clearance indorsement?

D. What is a crossed chec&?:. What is the liability of the indorser?. s a collecting ban& an indorser?2. Are chec&s legal tender?

A-TSC /espondent was a client of petitioners. She had se'eraldeposits and mar&et placements with petitioners, among which wereher sa'ings account with the local branch of petitioner itiban& (itiban&1Ianila )3 money mar&et placements with petitioner F+5Finance3 and dollar accounts with the Bene'a branch of petitioneritiban& (itiban&1Bene'a). At the same time, respondent hadoutstanding loans with petitioner itiban&, incurred at itiban&1Ianila,the principal amounts aggregating to 6-,<;>,>>>.>>, all of which hadbecome due and demandable by Iay -<P<. espite repeated demandsby petitioner itiban&, respondent failed to pay her outstanding loans.Thus, petitioner itiban& used respondentGs deposits and money

mar&et placements to off1set and li4uidate her outstanding obligations.

*E+DC-. IGs may be proof of receipt of loan proceeds. The second set of 6+s is a mere renewal of the prior loans originally co'ered by the firstset of 6+s, e*cept for 6+ +o. D:D:. The first set of 6+s is supported,in turn, by the e*istence of the Is that represent the proceedsthereof recei'ed by the respondent.

t bears to emphasi@e that the proceeds of the loans were paid torespondent in Is, with the respondent specifically named as payee.Is chec&s are drawn by the ban&Gs manager upon the ban& itself and





regarded to be as good as the money it represents. Ioreo'er, theIs were crossed chec&s, with the words 6ayeeGs Account $nly.

;. n general, a crossed chec& cannot be presented to the draweeban& for payment in cash. nstead, the chec& can only be depositedwith the payeeGs ban& which, in turn, must present it for paymentagainst the drawee ban& in the course of normal ban&ing hours.The crossed chec& cannot be presented for payment, but it can onlybe deposited and the drawee ban& may only pay to another ban& in

the payeeGs or indorserGs account. The effect of crossing a chec&CNTOhe crossing of a chec& with the phrase 6ayeeGs Account $nly isa warning that the chec& should be deposited in the account of thepayee. Thus, it is the duty of the collecting ban& 6 5an& toascertain that the chec& be deposited in payeeGs account only. t isbound to scrutini@e the chec& and to &now its depositors before itcan ma&e the clearing indorsement all prior indorsements andHorlac& of indorsement guaranteed.

The crossed Is presented by petitioner 5an& were indeeddeposited in se'eral different ban& accounts and cleared by thelearing $ffice of the entral 5an& of the 6hilippines, as e'idencedby the stamp mar&s and notations on the said chec&s. The crossedIs are already in the possession of petitioner itiban&, the draweeban&, which was ultimately responsible for the payment of theamount stated in the chec&s. Bi'en that a chec& is more than =ust

an instrument of credit used in commercial transactions for it alsoser'es as a receipt or e'idence for the drawee ban& of thecancellation of the said chec& due to payment,J; then, thepossession by petitioner itiban& of the said Is, duly stamped6aid gi'es rise to the presumption that the said Is were alreadypaid out to the intended payee, who was in this case, therespondent.

D. 56 further stamped its guarantee on the bac& of the chec&s tothe effect that, All prior endorsement andHor !ac& of endorsementguaranteed. Thus, 56 became the indorser of the Is, andassumed all the warranties of an indorser, specifically, that thechec&s were genuine and in all respects what they purported to be3that it had a good title to the chec&s3 that all prior parties hadcapacity to contract3 and that the chec&s were, at the time of theirindorsement, 'alid and subsisting.<; So e'en if the Is deposited

by 56Gs client, whether it be by respondent herself or some otherperson, lac&ed the necessary indorsement, 56, as the collectingban&, is bound by its warranties as an indorser and cannot set upthe defense of lac& of indorsement as against petitioner itiban&,the drawee ban&.

:. A chec&, whether an I or an ordinary chec&, is not legal tenderand, therefore, cannot constitute 'alid tender of payment. n6hilippine Airlines, nc. '. ourt of Appeals, ->> this ourtelucidated that Since a negotiable instrument is only a substitute formoney and not money, the deli'ery of such an instrument does not,by itself, operate as payment . A chec&, whether a managerGs chec& or ordinary chec&, is not legal tender, and an offer of a chec& inpayment of a debt is not a 'alid tender of payment and may berefused receipt by the obligee or creditor. Iere deli'ery of chec&sdoes not discharge the obligation under a =udgment. The obligationis not e*tinguished and remains suspended until the payment bycommercial document is actually reali@ed.

*'C-E$ENT vs. 'NS+AR GR No. 12! Se3t. 2&% 2!!#ET *ENR, vs. 'NS+AR GR No. 1219 Se3t. 2&% 2!!#

A-TS /espondent nsular 5an& of Asia and America (later 65and now 4uitable 615an&) granted .T. #enry a credit facility&nown as 86urchase of Short Term /ecei'ables.9 Through thisarrangement, .T. #enry was able to encash, with pre1deducted

interest, the postdated chec&s of its clients. n other words, .T.#enry and respondent were into 8re1discounting9 of chec&s. For e'ery transaction, respondent re4uired .T. #enry toe*ecute a promissory note and a deed of assignment bearing theconformity of the client to the re1discounting.

;> chec&s of #i1ement (which were crossed and which borethe restriction 8deposit to payee"s account only9) were dishonored.So were the chec&s of /i'erside and Manebo.

/espondent filed a complaint for sum of money in the thenourt of First nstance of /i@al against herein petitioners. The trialcourt rendered a decision in fa'or of respondent. $nly petitionersappealed the decision to the A which affirmed it in toto.

'SSE What are crossed chec&s and how will these chec&s affectholders in due course?

R+'NG T5e 5o4der o= crossed c5ec:s ;as not a 5o4der in d7eco7rse. n order to preser'e the credit worthiness of chec&s,

=urisprudence has pronounced that crossin o= a c5ec: s5o74d5ave t5e =o44o;in e==ects (a) the chec& may not be encashedbut only deposited in the ban&3 (8) the chec& may be negotiated on4y

once 0 to one who has an account with a ban& NandO3 (c) the act of crossing the chec&s ser'es as ;arnin to the holder that the chec& has been issued =or a de=inite 37r3ose so that he must in4uire if hehas recei'ed the chec& pursuant to that purpose, otherwise, he is nota 5o4der in d7e co7rse.

'SSE Are crossed chec&s similar to restricti'e indorsements?

R+'NG /espondent was all too aware that s78?ect c5ec:s ;erecrossed and 8ore restrictions t5at t5ey ;ere =or de3osit to3ayeeMs acco7nt on4y< 5ence% t5ey co74d not 8e =7rt5erneotiated to it. The records li&ewise re'eal that respondentcompletely disregarded a telling sign of irregularity in the re1discounting of the chec&s when the general manager did not ac4uiesceto it as only the treasurerGs signature appeared on the deed of assignment. As a ban&ing institution, it behoo'ed respondent to act

with e*traordinary diligence in e'ery transaction. ts business isimpressed with public interest, thus, it was not e*pected to be carelessand negligent, specially so where the chec&s it dealt with werecrossed.

'SSE Are holders (16) re4uired to ascertain indorser"s title oncrossed chec&s?

R+'NG Ees. 't is t5en sett4ed t5at crossin o= c5ec:s s5o74d37t t5e 5o4der on in67iry and 73on 5im devo4ves t5e d7ty toascertain t5e indorserKs tit4e to t5e c5ec: or t5e nat7re o= 5is3ossession. ai4in in t5is res3ect% t5e 5o4der is dec4ared 7i4tyo= ross ne4ience amo7ntin to 4ea4 a8sence o= ood =ait5Xand as suchN,O the consensus of authority is to the effect that theholder of the chec& is not a holder in due course

'SSE What is solidary liability and relati'ity of contracts (Section-P, Articles -;>P and -;>J of the i'il ode)?

R+'NG #i1ement could not also be made solidarily liable with/i'erside and Manebo for the face 'alue of their chec&s. #i1ementhad nothing to do with the chec&s of these two corporations.

Furthermore, so4idary 4ia8i4ity cannot 8e 3res7med 87tm7st 8e esta84is5ed 8y 4a; or contract. +either is present here.

Articles -;>P and -;>J of the i'il ode pro'ideC

Art. 12!#. The concurrence of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the presentation. T5ere is so4idary 4ia8i4ity on4y ;5en t5e o84iation eD3ress4y so states% or ;5en t5e o84iation re67ires so4idarity.

Art. 12!&. f from the law, or the nature of the wording of the obligations to which the preceding article refers to the contrary does not appear, the credit or debt shall be presumed to be di'ided into as many e4ual shares as there are creditors or debtors, the credits or debts being considered distinct from one another, sub=ect to the /ules go'erning the multiplicity of suits.

At any rate, the issue has become moot in 'iew of our ruling that#i1ement is not liable for the chec&s.

$ETRO0ANB vs. P0-O$ GR No. 11!& Oct. 1&% 2!!#SO+'D 0ANB vs. '+'P'NAS GR No. 1129 Oct. 1&% 2!!#

A-TS %nder the chec& discounting agreement between 6ipe Iaster

and Filipinas $rient, Eu Mio (6resident of 6ipe Iaster) sold to Filipinas$rient four Ietropolitan 5an& and Trust ompany (Ietro 5an&)chec&s. n e*change for the four Ietro 5an& chec&s, Filipinas $rientissued to Eu Mio four 6hilippine 5an& of ommunications (65om)crossed c5ec:s, payable to 6ipe Iaster with the statement 8forpayee"s account only.9

%pon his receipt of the four 65om chec&s, Eu Mio indorsed anddeposited in the Ietro 5an&, in his personal account, three of thechec&s. As to the remaining chec&, he deposited it in the Solid 5an& orporation (Solid 5an&), also in his personal account. 'entually,65om paid Ietro 5an& and Solid 5an& the amounts of the chec&s. n





turn, Ietro 5an& and Solid 5an& credited the 'alue of the chec&s tothe personal accounts of Eu Mio.

Subse4uently, when Filipinas $rient presented the four Ietro5an& chec&s it recei'ed from Eu Mio, they were dishonored by thedrawee ban&. 6ipe Iaster, the drawer, refused to pay the amountsof the chec&s, claiming that it ne'er recei'ed the proceeds of the65om chec&s as they were deli'ered and paid to the wrong party,

Eu Mio, who was not the named payee.Filipinas $rient then demanded that 65om restore to its

(Filipinas $rient"s) account the 'alue of the 65om chec&s. n turn,65om sought reimbursement from Ietro 5an& and Solid 5an&,being the collecting ban&s, but they refused.

Filipinas $rient filed with the /egional Trial ourt (/T), acomplaint for a sum of money against 6ipe Iaster, Tan 7uan !ianandHor 65om. The /T rendered a ecision against Ietro 5an& and Solid 5an&. $n appeal, the appellate court affirmed in toto theecision of the trial court.

'SSE Whether or not Ietro 5an& and Solid 5an& are liable torespondent Filipinas $rient for accepting the 65om crossed chec&spayable to 6ipe Iaster

R+'NG Ees. As what transpired in this case, petitioner ban&saccommodated Eu Mio, being a 'alued client and the president of 6ipe Iaster, and accepted the crossed chec&s. They stamped at

the bac& thereof that 8all prior indorsements andHor lac& of indorsements are guaranteed.9 n so doing, they became generalendorsers. %nder Section o= t5e Neotia84e 'nstr7ments+a;% an endorser warrants 8that the instrument is genuine and inall respects what it purports to be3 that he has a good title to it3that all prior parties had capacity to contract3 and that theinstrument is at the time of his indorsement 'alid and subsisting.9 -4ear4y% 3etitioner 8an:s% 8ein endorsers% cannot deny4ia8i4ity.

'SSE What are crossed chec&s?

R+'NG A c5ec: is defined by law as a bill of e*change drawnon a ban& payable on demand. The +egotiable nstruments !aw issilent with respect to crossed chec&s. +onetheless, this ourt hasta&en =udicial cogni@ance of the practice that a c5ec: ;it5 t;o

3ara44e4 4ines on t5e 733er 4e=t 5and corner means t5at itco74d on4y 8e de3osited and not converted into cas5. Thecrossin o= a c5ec: ;it5 t5e 35rase @PayeeKs Acco7nt On4y is a ;arnin t5at t5e c5ec: s5o74d 8e de3osited in t5eacco7nt o= t5e 3ayee.

'SSE What are liabilities of the collecting ban&?

R+'NG The collecting ban& or last endorser generally suffers theloss 8eca7se it 5as t5e d7ty to ascertain t5e en7ineness o= a44 3rior indorsements and is 3rivy to t5e de3ositor ;5oneotiated t5e c5ec:.

'SSE What is a clearing indorsement?

R+'NG t is the collecting ban& which is bound to scrutini@e thechec& and to &now its depositors before it can ma&e the c4earinindorsement% @a44 3rior indorsements andor 4ac: o= indorsement 7aranteed.

Ot5er Re4ated To3ics

+'$ vs. PEOP+E GR No. 192# Se3t. 2#% 2!!2

A-TS The constitutionality of 6 J-J, a decree which amended Article D- of the /e'ised 6enal ode by increasing the penaltiesfor estafa committed by means of bouncing chec&s, is beingchallenged in this petition for certiorari, for being 'iolati'e of the

due process clause, the right to bail and the pro'ision against cruel,degrading or inhuman punishment enshrined under theonstitution.

'SSE WH+ 6 J-J is constitutional

*E+D ES.learly, the increase in the penalty, far from being cruel and

degrading, was moti'ated by a laudable purpose, namely, toeffectuate the repression of an e'il that undermines the countryGscommercial and economic growth, and to ser'e as a necessaryprecaution to deter people from issuing bouncing chec&s. The fact

that 6 J-J did not increase the amounts corresponding to the newpenalties only pro'es that the amount is immaterial andinconse4uential. What the law sought to a'ert was the proliferation of estafa cases committed by means of bouncing chec&s. Ta&ing intoaccount the salutary purpose for which said law was decreed, weconclude that 6 J-J does not 'iolate Section -< of Article of theonstitution.

REP0+'- vs. EGEN'O GR No. 1#29 e8. 1% 2!!&

A-TS The Anti1Ioney !aundering ouncil (AI!) issued/esolution, whereby the ouncil resol'ed to authori@e the *ecuti'eirector of the AI! 8to sign and 'erify an application to in4uire intoandHor e*amine the NdepositsO or in'estments of pri'ate respondents6antaleon Al'are@, Wilfredo Trinidad, Alfredo !iongson, and heng

Eong, and their related web of accounts where'er these may be foundand to authori@e the AI! Secretariat 8to conduct an in4uiry intosub=ect accounts once the /egional Trial ourt grants the applicationto in4uire into andHor e*amine the ban& accounts9 of those fourindi'iduals.

%nder the authority granted by the /esolution, the AI! filed anapplication to in4uire into or e*amine the deposits or in'estments of pri'ate respondents before the /T. The Ia&ati /T rendered an$rder granting the AI! the authority to in4uire and e*amine thesub=ect ban& accounts of pri'ate respondents.

6ri'ate respondent Al'are@ sought that the AI! be immediatelyordered to refrain from enforcing the Ianila /T ban& in4uiry order.The Ianila /T, acting on Al'are@"s latest motion, issued an $rderdirecting the AI! 8to refrain from enforcing the order.

6ri'ate /espondent !ilia heng filed with the ourt of Appeals a6etition for ertiorari, 6rohibition and Iandamus with Application forT/$ andHor Writ of 6reliminary n=unction directed against the/epublic of the 6hilippines through the AI!, Ianila /T 7udge andIa&ati /T 7udge. ourt of Appeals, acting on !ilia heng"s petition,issued a Temporary /estraining $rder.

'SSE Are chec&s confidential communications (especially in thelight of %.S 's. Iiller)?

R+'NG $ne might assume that the constitutional dimension of theright to pri'acy, as applied to ban& deposits, warrants our presentin4uiry. We decline to do so. Admittedly, that 4uestion has pro'edcontro'ersial in American =urisprudence. +otably, the %nited StatesSupreme ourt in %.S. '. Iiller held that t5ere ;as no 4eitimatee3ectation o= 3rivacy as to t5e 8an: records o= a de3ositor.Ioreo'er, the te*t of our onstitution has not bothered with thetri'iality of allocating specific rights peculiar to ban& deposits.

'SSE Are ban& deposits co'ered by the right of pri'acy? f so, whatis the basis of such pri'acy in the 6hilippine setting?

R+'NG Ees. We can assert t5ere is a ri5t to 3rivacyovernin 8an: acco7nts in t5e P5i4i33ines% and that such rightfinds application to the case at bar. The source of such right isstatutory, e*pressed as it is in /.A. +o. -:> otherwise &nown as the

5an& Secrecy Act of -<. The right to pri'acy is enshrined in Section; of that law, to witC

ST$+ ;. A44 de3osits o= ;5atever nat7re ;it5 8an:s or 8an:in instit7tions in t5e P5i4i33ines inc47din investments in 8onds iss7ed 8y t5e Government o= t5e P5i4i33ines% its 3o4itica4 s78divisions and its instr7menta4ities% are 5ere8y considered as o= an a8so47te4y con=identia4 nat7re and may not be e*amined, in4uired or loo&ed into by any person, go'ernment official, bureau or office, e*cept upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or in'ested is the sub=ect matter of the litigation.

0eca7se o= t5e 0an: Secrecy Act% t5e con=identia4ity o=

8an: de3osits remains a 8asic state 3o4icy in t5e P5i4i33ines.Subse4uent laws, including the AI!A, may ha'e added e*ceptions tothe 5an& Secrecy Act, yet the secrecy of ban& deposits still lies as thegeneral rule. t falls within the @ones of pri'acy recogni@ed by ourlaws. The framers of the -<JP onstitution li&ewise recogni@ed thatban& accounts are not co'ered by either the right to information underSection P, Article or under the re4uirement of full publicdisclosure under Section ;J, Article . %nless the 5an& Secrecy Actis repealed or amended, t5e 4ea4 order is o84ied to conservet5e a8so47te4y con=identia4 nat7re o= P5i4i33ine 8an: de3osits.





I've learned that you shouldn't go through life with a

catcher's mitt on both hands; you need to be able to

throw something back.

- Maya Angelou

Prepared by: Norliza Mamukid Jazzie Sarona & Hanniyah Sevilla (4 Manresa 2008 2009) 20

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