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NEGOTIABLE INSTRUMENTS LAW CASES2NDSEMESTER AY 2014-2015

State Investment !"se In#$ vs$ CA

%a#ts&Nora Moulic issued to Corazon Victoriano, as security for

pieces of jewellery to be sold on commission, two postdated checksin the amount of fty thousand each. Thereafter, Victorianoneotiated the checks to !tate "n#estment $ouse, "nc. %hen Moulicfailed to sell the jewellry, she returned it to Victoriano before thematurity of the checks. $owe#er, the checks cannot be retrie#ed asthey ha#e been neotiated. &efore the maturity date Moulicwithdrew her funds from the bank contestin that she incurred noobliation on the checks because the jewellery was ne#er sold andthe checks are neotiated without her knowlede and consent.'pon presentment of for payment, the checks were dishonoured forinsu(ciency of funds.

Iss"es&). %hether or not !tate "n#estment $ouse inc. was a holder of thecheck in due course*. %hether or not Moulic can set up aainst the petitioner thedefense that there was failure or absence of consideration

e'(&

+es, !ection * of the N"- pro#ides what constitutes a holder in duecourse. The e#idence shows that on the faces of the post datedchecks were complete and reular/ that !tate "n#estment $ouse"nc. bouht the checks from Victoriano before the due dates/ that it

was taken in ood faith and for #alue/ and there was no knowledewith reard that the checks were issued as security and not for#alue. 0 prima facie presumption e1ists that a holder of a

neotiable instrument is a holder in due course. Moulic failed topro#e the contrary.No, Moulic can only in#oke this defense aainst the petitioner if itwas a pri#y to the purpose for which they were issued and thereforeis not a holder in due course.

No, !ection ))2 of N"- pro#ides how an instruments be dischared.Moulic can only in#oke pararaphs c and d as possible rounds forthe dischare of the instruments. !ince Moulic failed to et back thepossession of the checks as pro#ided by pararaph c, intentionalcancellation of instrument is impossible. 0s pro#ided by pararaphd, the acts which will dischare a simple contract of payment ofmoney will dischare the instrument. Correlatin 0rticle )*3) of theCi#il Code which enumerates the modes of e1tinuishin obliation,none of those modes outlined therein is applicable in the instantcase. Thus, Moulic may not unilaterally dischare herself from herliability by mere e1pediency of withdrawin her funds from thedrawee bank. !he is thus liable as she has no leal basis to e1cuseherself from liability on her check to a holder in due course.Moreo#er, the fact that the petitioner failed to i#e notice ofdishonor is of no moment. The need for such notice is not absolute/there are e1ceptions pro#ided by !ec ))4 of N"-.

T)a(e)s R!*a' Ban+ vs$ CA

5ilriters throuh a 6etached 0reement transferred ownership to7hilnance a Central &ank Certicate of "ndebtedness. "t was onlythrouh one of its o(cers by which the C&C" was con#eyed withoutauthorization from the company. 7etitioner and 7hilnancelater entered into a 8epurchase areement, on whichpetitioner bouht the C&C" from 7hilnance. The latter areedto repurchase the C&C" but failed to do so. %hen the petitioner tried

to ha#e it reistered in its name in the C&, the latter didn9t want toreconize the transfer.

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ELD&

The C&C" is not a neotiable instrument. The instrumentpro#ides for a promise to pay the reistered owner 5ilriters. Veryclearly, the instrument was only payable to 5ilriters. "t lackedthe words of neotiability which should ha#e ser#ed as ane1pression of the consent that the instrument may be

transferred by neotiation.

The lanuae of neotiability which characterize a neotiablepaper as a credit instrument is its freedom to circulate as asubstitute for money. $ence, freedom of neotiabil ity is thetouchstone relatin to the protection of holders in due course, andthe freedom of neotiability is the foundation for the protection,which the law throws around a holder in due course. Thisfreedom in neotiability is totally absent in a certicate ofindebtedness as it merely acknowledes to pay a sum ofmoney to a specied person or entity for a period of time.

The transfer of the instrument from 7hilnance to T8& was

merely an assinment, and is not o#erned by the neotiableinstruments law. The pertinent :uestion then is;was thetransfer of the C&C" from 5ilriters to 7hilnance andsubse:uently from 7hilnance to T8&, in accord with e1istinlaw, so as to entitle T8& to ha#e the C&C" reistered in its namewith the Central &ank< Clearly shown in the record is thefact that 7hilnance=s title o#er C&C" is defecti#e since itac:uired the instrument from 5ilriters ctitiously. 0lthouh thedeed of assinment stated that the transfer was for >#aluerecei#ed>, there was really no consideration in#ol#ed. %hathappened was 7hilnance merely borrowed C&C" from 5ilriters,a sister corporation. Thus, for lack of any consideration, theassinment made is a complete nullity. 5urthermore, the transferwasn9t in conformity with the reulations set by the C&. ?i#inmore credence to rule that there was no #alid transfer orassinment to petitioner.

%,)est!ne T,)e an( R"e) C!m.an* !/ te ,',..,nes vs$ Caan( L"!n Deve'!.ment Ban+

5acts

5orjas@0rca Anterprise Company is maintainin a specialsa#ins account with -uzon 6e#elopment &ank, the latter

authorized and allowed withdrawals of funds thouh the medium ofspecial withdrawal slips. These are supplied by 5ojas@0rca. 5ojas@0rca purchased on credit with 5irestoneTireB 8ubber Company, inpayment 5ojas@0rca deli#ered a special withdrawal slips. "n turn,these were deposited by the 5irsestone to its bank account inCitibank. %ith this, relyin on such condence and belief 5irestonee1tended to 5ojas@0rca other purchase on credit of its products butse#eral withdrawal slips were dishonored and not paid. 0s aconse:uence, Citibank debited the plaintiD=s account representinthe areate amount of the two dishonored special withdrawalslips. 5ojas@0rca a#erred that the pecuniary losses it suDered are acaused by and directly attributes to defendant=s ross nelienceas a result 5ojas@0rca led a complaint.

"ssue

%hether or not the acceptance and payment of the specialwithdrawal slips without the presentation of the depositor=spassbook thereby i#in the impression that it is a neotiableinstrument like a check.

$eld

No. %ithdrawal slips in :uestion were non neotiableinstrument. $ence, the rules o#ernin the i#in immediate noticeof dishonor of neotiable instrument do not apply. The essence ofneotiability which characterizes a neotiable paper as a credit

instrument lies in its freedom to circulate freely as a substitute formoney. The withdrawal slips in :uestion lacked this character.

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Ca'te3 ,',..,nes v$ C!")t !/ A..ea's

%a#ts&

En #arious dates, defendant, a commercial bankin institution,throuh its !ucat &ranch issued *FG certicates of time depositHCT6sI in fa#or of one 0nel dela Cruz who is tasked to depositareate amounts.

Ene time Mr. dela Cruz deli#ered the CT6s to Calte1 7hilippines inconnection with his purchased of fuel products from the latter.$owe#er, !ometime in March )2F*, he informed Mr. TimoteoTianco, the !ucat &ranch Maner, that he lost all the certicates oftime deposit in dispute. Mr. Tianco ad#ised said depositor toe1ecute and submit a notarized 0(da#it of -oss, as re:uired bydefendant bank9s procedure, if he desired replacement of said lostCT6s.

0nel dela Cruz neotiated and obtained a loan from defendantbank and e1ecuted a notarized 6eed of 0ssinment of Time6eposit, which stated, amon others, that he surrenders todefendant bank Jfull control of the indicated time deposits from andafter dateJ of the assinment and further authorizes said bank topre@terminate, set@oD and Japply the said time deposits to thepayment of whate#er amount or amounts may be dueJ on the loanupon its maturity.

"n )2F*, Mr. 0ranas, Credit Manaer of plaintiD Calte1 H7hils.I "nc.,went to the defendant bank9s !ucat branch and presented for#erication the CT6s declared lost by 0nel dela Cruz allein thatthe same were deli#ered to herein plaintiD Jas security forpurchases made with Calte1 7hilippines, "nc.J by said depositor.

Mr dela Cruz recei#ed a letter from the plaintiD formally informinof its possession of the CT6s in :uestion and of its decision to pre@terminate the same. ccordinly, defendant bank rejected the

plaintiD9s demand and claim for payment of the #alue of the CT6sin a letter dated 5ebruary K, )2F3.

The loan of 0nel dela Cruz with the defendant bank matured andfell due and on 0uust , )2F3, the latter set@oD and applied thetime deposits in :uestion to the payment of the matured loan.$owe#er, the plaintiD led the instant complaint, prayin that

defendant bank be ordered to pay it the areate #alue of thecerticates of time deposit of 7),)*G,GGG.GG plus accrued interestand compounded interest therein at )L per annum, moral ande1emplary damaes as well as attorney9s fees.

En appeal, C0 a(rmed the lower court9s dismissal of the complaint,and ruled H)I that the subject certicates of deposit are non@neotiable despite bein clearly neotiable instruments/ H*I thatpetitioner did not become a holder in due course of the saidcerticates of deposit/ and H3I in disreardin the pertinentpro#isions of the Code of Commerce relatin to lost instrumentspayable to bearer.

Iss"es&

aI %hether certicates of time deposit HCT6sI are neotiableinstruments