Intestate of Luther Young and Pacita Young, spouses. PACIFICA JIMENEZ vs. !.

J"#E
$%C"Y
&.!. No. L'()**( Fe+ruar, *-, (./-
In this intestate of Luther Young and Pacita Young 0ho died in (./1 and (./*
respective2,, Pacifica Ji3ene4 presented for pa,3ent four pro3issor, notes signed +,
Pacita for different a3ounts tota22ing t0ent,'one thousand pesos 5P*(,)))6
Ac7no02edging receipt +, Pacita during the Japanese occupation, in the currenc, then
prevai2ing, the ad3inistrator 3anifested 0i22ingness to pa, provided ad8ust3ent of the
su3s +e 3ade in 2ine 0ith the $a22ant,ne schedu2e
9he c2ai3ant o+8ected to the ad8ust3ent insisting on fu22 pa,3ent in accordance 0ith the
notes
9he notes 0ere couched in the ff. ter3s : !eceived fro3 Miss Pacifica Ji3ene4 the tota2
a3ount of ;;;;;;; pesos pa,a+2e si; 3onths after the 0ar, 0ithout interest.
$uco, : notes contained no e;press pro3ise to pa, a specified a3ount
ISSUE: <=N the docu3ents are to +e considered as pro3issor, notes
HELD: An ac7no02edg3ent 3a, +eco3e a pro3ise +, the addition of 0ords +, 0hich a
pro3ise of pa,3ent is natura22, i3p2ied, such as, >pa,a+2e,> >pa,a+2e> on a given da,, >pa,a+2e
on de3and,> >paid . . . 0hen ca22ed for?
9o constitute a good pro3issor, note, no precise 0ords of contract are necessar,,
provided the, a3ount, in 2ega2 effect, to a pro3ise to pa,. In other 0ords, if over and
a+ove the 3ere ac7no02edg3ent of the de+t there 3a, +e co22ected fro3 the 0ords
used a pro3ise to pa, it, the instru3ent 3a, +e regarded as a pro3issor, note.
E2i4a2de Co3pan, vs $i@an 9ransportation Co3pan,
5Fro3 JJ 9ranscript on NIL6
$i@an 9ransportation Co3pan, +ought t0o 3otor vehic2es. 9he, signed a pro3issor, note and
to secure pa,3ent, the, 3ortgaged the 3otor vehic2es. 9he pro3issor, notes 0ere negotiated
and 0ere not paid. #o E2i4a2de 0ho 0as ho2ding the pro3issor, note sued. $i@anAs defense
0as that the pro3issor, note 0as not negotia+2e +ecause it 0as 3entioned that it 0as su+8ect
to chatte2 3ortgage.
ISSUE: <hether the note 0as negotia+2e.
HELD: Yes. For reference to 3ortgage to destro, negotia+i2it,, the pro3ise to pa, 3ust
+e +urdened 0ith the ter3s and conditions of the chatte2 3ortgage. #ince the reference to the
chatte2 3ortgage did not 3a7e the pro3ise to pa, +urdened 0ith the ter3s and conditions of the
chatte2 3ortgage, the pro3issor, note 0as sti22 negotia+2e.
ME9!"P"LI9AN $ANB C 9!%#9 C"MPANY vs. C"%!9 "F APPEAL#, &"LEN #ADIN&#
C L"AN A##"CIA9I"N, INC., L%CIA CA#9ILL", MA&N" CA#9ILL" and &L"!IA CA#9ILL"
&.!. No. ---EE Fe+ruar, (-, (..(
Eduardo &o3e4 opened an account 0ith &o2den #avings and deposited over a period of
t0o 3onths F- treasur, 0arrants a22 dra0n +, the Phi2ippine Fish Mar7eting Authorit,
and purported2, signed +, its &enera2 Manager and countersigned +, its Auditor. #i; of
these 0ere direct2, pa,a+2e to &o3e4 0hi2e the others appeared to have +een indorsed
+, their respective pa,ees, fo22o0ed +, &o3e4 as second indorser
A22 these 0arrants 0ere su+seGuent2, indorsed +, &2oria Casti22o as Cashier of &o2den
#avings and deposited to its #avings Account in Metro+an7 +ranch in Ca2apan, Mindoro.
More than t0o 0ee7s after the deposits, &2oria Casti22o 0ent to the Ca2apan +ranch
severa2 ti3es to as7 0hether the 0arrants had +een c2eared. #he 0as to2d to 0ait.
According2,, &o3e4 0as 3ean0hi2e not a22o0ed to 0ithdra0 fro3 his account. Later,
ho0ever, >e;asperated> over &2oriaHs repeated inGuiries and a2so as an acco33odation
for a >va2ued c2ient,> Metro+an7 sa,s it fina22, decided to a22o0 &o2den #avings to
0ithdra0 fro3 the proceeds of the 0arrants.
In turn, &o2den #avings su+seGuent2, a22o0ed &o3e4 to 3a7e 0ithdra0a2s fro3 his o0n
account, eventua22, co22ecting the tota2 a3ount of the proceeds of the apparent2, c2eared
0arrants
Metro+an7 then infor3ed &o2den #avings that F* of the 0arrants had +een dishonored
+, the $ureau of 9reasur, and de3anded the refund +, &o2den #avings of the a3ount it
had previous2, 0ithdra0n, to 3a7e up the deficit in its account. 9he de3and 0as
re8ected. Metro+an7 then sued &o2den #avings
Metro+an7 : #ignatures forged
ISSUE: <=N &o2den #avings assu3ed the genuiness of the 0arrants, hence, 2ia+2e to
Metro+an7 for the a3ounts stated in the 0arrants
HELD: treasury warrants in question are not negotiable instruments. Clearly stamped on
their fae is the word !non"negotiable.! #oreo$er% and this is of equal signifiane% it is
indiated that they are payable from a partiular fund
For one thing, the docu3ent +earing on its face the 0ords >pa,a+2e fro3 the
appropriation for food ad3inistration, is actua22, an "rder for pa,3ent out of >a particu2ar
fund,> and is not unconditiona2 and does not fu2fi22 one of the essentia2 reGuire3ents of a
negotia+2e instru3ent
Metro+an7 cannot contend that +, indorsing the 0arrants in genera2, &o2den #avings
assu3ed that the, 0ere >genuine and in a22 respects 0hat the, purport to +e,> in
accordance 0ith #ection EE of the Negotia+2e Instru3ents La0. 9he si3p2e reason is
that this 2a0 is not app2ica+2e to the non'negotia+2e treasur, 0arrants. 9he indorse3ent
0as 3ade +, &2oria Casti22o not for the purpose of guaranteeing the genuineness of the
0arrants +ut 3ere2, to deposit the3 0ith Metro+an7 for c2earing. It 0as in fact
Metro+an7 that 3ade the guarantee 0hen it sta3ped on the +ac7 of the 0arrants: >A22
prior indorse3ent and=or 2ac7 of endorse3ents guaranteed, Metropo2itan $an7 C 9rust
Co., Ca2apan $ranch.>
9he a3ount 0ithdra0n +, &o3e4 3ust +e charged to Metro+an7, 0hich 3ust +ear the
conseGuences of its o0n neg2igence.
PIILIPPINE E%CA9I"N C"., INC. vs. MA%!ICI" A. #"!IAN", E9 AL.
&.!. No. L'**1)/ June F), (.J(
EnriGue Montino2a sought to purchase fro3 the Mani2a Post "ffice ten 5()6 3one,
orders of P*)).)) each pa,a+2e to E.P. Montino2a 0ithaddress at Lucena, Kue4on. After
the posta2 te22er had 3ade out 3one, orders, Montino2a offered to pa, for the3 0ith a
private chec7s 0ere not genera22, accepted in pa,3ent of 3one, orders, the te22er
advised hi3 to see the Chief of the Mone, "rder ivision, +ut instead of doing so,
Montino2a 3anaged to 2eave +ui2ding 0ith his o0n chec7 and the ten5()6 3one, orders
0ithout the 7no02edge of the te22er.
%pon discover, of the disappearance of the unpaid 3one, orders, an urgent 3essage
0as sent to a22 post3asters, and the fo22o0ing da, notice 0as 2i7e0ise served upon a22
+an7s, instructing the3 not to pa, an,one of the 3one, orders aforesaid if presented for
pa,3ent. 9he $an7 of A3erica received a cop, of said notice three da,s 2ater.
Phi2. Education Co. Inc. 5PECI6 received one of the 3one, orders as part of its sa2es
receipt and deposited it to $an7 of A3erica. 9he 3one, order 0as c2eared +, the
$ureau of post and the a3ount of the order 0as received +, the +an7 fro3 the +ureau
Mauricio A. #oriano, Chief of the Mone, "rder ivision of the Mani2a Post "ffice, acting
for and in +eha2f of Post3aster Enrico Pa2o3ar, notified the $an7 of A3erica that the
3one, order had +een found to have +een irregu2ar2, issued and that, in vie0 thereof,
the a3ount it represented had +een deducted fro3 the +an7Hs c2earing account.
For its partthe $an7 of A3erica de+ited PECIHs account 0ith the sa3e a3ount and gave
it advice thereof +, 3eans of a de+it 3e3o
PECI sought rei3+urse3ent of the a3ount deducted fro3 its account
ISSUE: <=N the posta2 3one, is negotia+2e, thus, the 2etter of the ir. of Posts instructing +an7s
not to pa, if the su+8ect 3one, orders 0ere presented, does not affect PECIAs rights arising fro3
the 3one, order
HELD: &IL inappliable to money orders
It is to +e noted in this connection that so3e of the restrictions i3posed upon 3one,
orders +, posta2 2a0s and regu2ations are inconsistent 0ith the character of negotia+2e
instru3ents. For instance, such 2a0s and regu2ations usua22, provide for not 3ore than
one endorse3entL pa,3ent of 3one, orders 3a, +e 0ithhe2d under a variet, of
circu3stances
9he condition i3posed +, the ir. of Post is that >in cases of adverse c2ai3, the 3one,
order or 3one, orders invo2ved 0i22 +e returned to ,ou 5the +an76 and the, corresponding
a3ount 0i22 have to +e refunded to the Post3aster, Mani2a, 0ho reserves the right to
deduct the va2ue thereof fro3 an, a3ount due ,ou if such step is dee3ed necessar,.>
9he conditions thus i3posed in order to ena+2e the +an7 to continue en8o,ing the
faci2ities theretofore en8o,ed +, its depositors, 0ere accepted +, the $an7 of A3erica.
9he +an7 is therefore +ound +, the3. 9hat it is so is c2ear2, referred fro3 the fact that,
upon receiving advice that the a3ount represented +, the 3one, order in Guestion had
+een deducted fro3 its c2earing account 0ith the Mani2a Post "ffice, the +an7 did not fi2e
an, protest against such action.
EK%I9A$LE $ANBIN& C"!P"!A9I"N vs. IAC and 9IE E<A! J. NELL C".
&.!. No. J11/( Ma, */, (.--
Li+erato Casa2s +ought fro3 Ed0ard J. Ne22 Co3pan,, a dea2er of 3achineries,
eGuip3ent and supp2ies, severa2 3achineries +, representing hi3se2f as the 3a8orit,
stoc7ho2der, president and genera2 3anager of Casvi22e Enterprises, Inc., a fir3 engaged
in the 2arge sca2e production, procure3ent and processing of 2ogs and 2u3+er products.
9he purchase 0as to +e paid through LC, 0ith Ne22 Co3pan, as +eneficiar, M Casa2
issued * chec7s as securit, for the a3ount to +e advanced +, Ne22
Casa2 app2ied for an LC and the +an7 reGuired other docu3ents to +e su+3itted. Casa2
sent a 2etter to Ne22 infor3ing it of the reGuired docu3ents and enc2osed thereto severa2
chec7s to secure the a3ount to +e paid to EGuita+2e under the ne0 app2ication for LC.
Ne22 then issued a chec7 pa,a+2e to the >order of EK%I9A$LE $ANBIN&
C"!P"!A9I"N A=C CA#DILLE EN9E!P!I#E#, INC.> and dra0n against the first
Nationa2 Cit, $an7 in re2ation to the app2ication for LC
Ne22 entrusted the de2iver, of the chec7 and the 2atter to defendant Casa2s +ecause it
+e2ieved that no one, inc2uding defendant Casa2s, cou2d encash the sa3e as it 0as
3ade pa,a+2e to the the +an7 a2one. $esides, Casa2s 0as 7no0n to the +an7 as the one
fo22o0ing up the app2ication for the 2etters of credit.
Casa2s i33ediate2, deposited it 0ith the defendant +an7 and the +an7 te22er accepted
the sa3e for deposit in defendant Casvi22eHs chec7ing account. After depositing said
chec7, defendant Casvi22e, acting through defendant Casa2s, then 0ithdre0 a22 the
a3ount deposited
Mean0hi2e, upon their presentation for encash3ent, Ne22 discovered that the three
chec7s that 0ere issued +, defendant Casvi22e as co22atera2 0ere a22 dishonored for
having +een dra0n against a c2osed account.
Ne22 instituted a co22ection case ' Casa2 and Casvi22e do not dispute their 2ia+i2it, to Ne22
ISSUE: <=N EGuita+2e $an7 3a, +e he2d 2ia+2e for a22o0ing Casa2 to encash the chec7 issued
+, Ne22
HELD: &ELL's own ats% whih put it into the power of Casals and Cas$ille Enterprises to
perpetuate the fraud against it and% onsequently% it must bear the loss
9he su+8ect chec7 0as eGuivoca2 and patent2, a3+iguous. $, 3a7ing the chec7 read:
Pa, to the EK%I9A$LE $ANBIN& C"!P"!A9I"N "rder of A=C "F CA#DILLE
EN9E!P!I#E#, INC.
9he pa,ee ceased to +e indicated 0ith reasona+2e certaint, in contravention of #ection -
of the Negotia+2e Instru3ents La0. As 0orded, it cou2d +e accepted as deposit to the
account of the part, na3ed after the s,3+o2s >A=C,> or pa,a+2e to the $an7 as trustee,
or as an agent, for Casvi22e Enterprises, Inc., 0ith the 2atter +eing the u2ti3ate
+eneficiar,. 9hat a3+iguit, is to +e ta7en contra proferente3 that is, construed against
NELL 0ho caused the a3+iguit, and cou2d have a2so avoided it +, the e;ercise of a 2itt2e
3ore care
Contrar, to the finding of respondent Appe22ate Court, the su+8ect chec7 0as, initia22,, not
non'negotia+2e. Neither 0as it a crossed chec7. 9he ru++er'sta3ping transversa22 on the
face of the su+8ect chec7 of the 0ords >Non'negotia+2e for Pa,eeHs Account "n2,>
+et0een t0o 5*6 para22e2 2ines, and >Non'negotia+2e, 9e22er' No. 1, August (J, (.JE,>
separate2, +o;ed, 0as 3ade on2, +, the $an7 te22er in accordance 0ith custo3ar, +an7
practice, and not +, NELL as the dra0er of the chec7, and si3p2, 3eant that thereafter
the sa3e chec7 cou2d no 2onger +e negotiated.
CAL9EN 5PIILIPPINE#6, INC. vs. CA and #EC%!I9Y $ANB AN 9!%#9 C"MPANY
&.!. No. .JJ/F August (), (..*
#ecurit, $an7 #ucat $ranch issued *-) Certificates of 9i3e eposit in favor of Ange2
de2a Cru4 0ho de2ivered the C9s to Ca2te; in connection 0ith his purchased of fue2
products
Ange2 then infor3ed the +an7 +ranch 3anager that he 2ost the C9s and he see7s the
rep2ace3ent thereof. 9he +an7 rep2aced the C9s on the +asis of an Affidavit of Loss
e;ecuted +, Ange2
Ange2 then o+tained a 2oan fro3 the +an7 and negotiated the ne02, issued C9s giving
the +an7 >fu22 contro2 of the indicated ti3e deposits fro3 and after date> of the
assign3ent and further authori4es said +an7 to pre'ter3inate, set'off and >app2, the said
ti3e deposits to the pa,3ent of 0hatever a3ount or a3ounts 3a, +e due> on the 2oan
upon its 3aturit,
Ca2te; then 0ent to the +an7Hs #ucat +ranch and presented for verification the C9s
dec2ared 2ost +, Ange2 de2a Cru4 M the +an7 infor3ed Ca2te; that it 0as in possession of
the C9s and infor3ed Ca2te; of its decision to pre'ter3inate the sa3e
9he +an7 re8ected Ca2te;As c2ai3 for pa,3ent and upon 3aturit, of Ange2As 2oan, the
+an7 set off and app2ied the ti3e deposits in Guestion to the pa,3ent of the 3atured
2oan
Ca2te; fi2ed a co22ection case against the +an7
For eas, reference, the C9 states: O9his is to Certif, that $ E A ! E ! has deposited in
this $an7 the su3 of PE#"#: F"%! 9I"%#AN "NLY, #EC%!I9Y $ANB #%CA9
"FFICE P1,))) C )) C9# Pesos, Phi2ippine Currenc,, repa,a+2e to said depositor JF(
da,s. after date, upon presentation and surrender of this certificate, 0ith interest at the
rate of (EP per cent per annu3.?
$an7: C9s are not pa,a+2e to order or +earer, contrar, to #ec( 5d6 of NIL
ISSUE: <=N the C9s are negotia+2e instru3ents
HELD: C(Ds are negotiable instruments
Contrar, to 0hat respondent court he2d, the C9s are negotia+2e instru3ents. 9he
docu3ents provide that the a3ounts deposited sha22 +e repa,a+2e to the depositor. And
0ho, according to the docu3ent, is the depositorQ It is the >+earer.> 9he docu3ents do
not sa, that the depositor is Ange2 de 2a Cru4 and that the a3ounts deposited are
repa,a+2e specifica22, to hi3. !ather, the a3ounts are to +e repa,a+2e to the +earer of
the docu3ents or, for that 3atter, 0hosoever 3a, +e the +earer at the ti3e of
present3ent.
If it 0as rea22, the intention of respondent +an7 to pa, the a3ount to Ange2 de 2a Cru4
on2,, it cou2d have 0ith faci2it, so e;pressed that fact in c2ear and categorica2 ter3s in the
docu3ents, instead of having the 0ord >$EA!E!> sta3ped on the space provided for
the na3e of the depositor in each C9. "n the 0ordings of the docu3ents, therefore,
the a3ounts deposited are repa,a+2e to 0hoever 3a, +e the +earer thereof
%nfortunate2, for Ca2te;, a2though the C9s are +earer instru3ents, a va2id negotiation
thereof for the true purpose and agree3ent +et0een it and e 2a Cru4, as u2ti3ate2,
ascertained, reGuires +oth de2iver, and indorse3ent. For, a2though petitioner see7s to
def2ect this fact, the C9s 0ere in rea2it, de2ivered to it as a securit, for e 2a Cru4H
purchases of its fue2 products.
In a 2etter addressed to #ecurit, $an7, the Ca2te; Credit Manager, 0rote: >. . . 9hese
certificates of deposit 0ere negotiated to us +, Mr. Ange2 de2a Cru4 to guarantee his
purchases of fue2 products>. 9his ad3ission is conc2usive upon petitioner, its
protestations not0ithstanding.
%nder the Negotia+2e Instru3ents La0, an instru3ent is negotiated 0hen it is transferred
fro3 one person to another in such a 3anner as to constitute the transferee the ho2der
thereof, and a ho2der 3a, +e the pa,ee or indorsee of a +i22 or note, 0ho is in
possession of it, or the +earer thereof. In the present case, ho0ever, there 0as no
negotiation in the sense of a transfer of the 2ega2 tit2e to the C9s in favor of Ca2te; in
0hich situation, for o+vious reasons, 3ere de2iver, of the +earer C9s 0ou2d have
sufficed. Iere, the de2iver, thereof on2, as securit, for the purchases of Ange2 de 2a Cru4
5and 0e even disregard the fact that the a3ount invo2ved 0as not disc2osed6 cou2d at the
3ost constitute Ca2te; on2, as a ho2der for va2ue +, reason of his 2ien. According2,, a
negotiation for such purpose cannot +e effected +, 3ere de2iver, of the instru3ent
since, necessari2,, the ter3s thereof and the su+seGuent disposition of such securit,, in
the event of non'pa,3ent of the principa2 o+2igation, 3ust +e contractua22, provided for
#UELLE) * #+)(I& $. LI,E)(- I&SU)+&CE
*(. #< 1E/
5Cannot find fu22 case M digest fro3 the case of PN$ v. #ps !odrigue4 as su33ari4ed +, the
#C6
9he corporation Mue22er C Martin 0as defrauded +, &eorge L. Martin, one of its authori4ed
signatories +, dra0ing seven chec7s pa,a+2e to the &er3an #avings Fund Co3pan, $ui2ding
Association 5&#FC$A6 against the account of the corporation 0ithout authorit, fro3 the 2atter.
Martin 0as a2so an officer of the &#FC$A +ut did not have signing authorit,. At the +ac7 of the
chec7s, Martin p2aced the ru++er sta3p of the &#FC$A and signed his o0n na3e as
endorse3ent. Ie then successfu22, dre0 the funds fro3 Li+ert, Insurance $an7. <hen the
corporation fi2ed an action against the +an7 to recover the a3ount of the chec7s.
ISSUE: <=N the $an7 can +e he2d 2ia+2e if the pa,ee is fictitious
HELD: .hen the person ma/ing the he/ so payable did not intend for the speified
payee to ha$e any part in the transations% the payee is onsidered as a fititious payee
9he chec7 is then considered as a +earer instru3ent to +e va2id2, negotiated +, 3ere
de2iver,. 9hus, Li+ert, Insurance $an7, as dra0ee, 0as authori4ed to 3a7e pa,3ent to
the +earer of the chec7, regard2ess of 0hether prior indorse3ents 0ere genuine or not.
PIILIPPINE NA9I"NAL $ANB v. E!LAN" 9. !"!I&%EZ and N"!MA !"!I&%EZ
&.!. No. (J)F*/ #epte3+er *E, *))-
#pouses are engaged in the 2ending +usiness and 3aintains chec7ing and savings acct
0ith PN$. #ps had a discounting arrange3ent 0ith the Phi2na+an7 E3p2o,ees #avings
and Loan Association 5PEM#LA6, an association of PN$ e3p2o,ees. 9he association
3aintained current and savings accounts 0ith petitioner +an7.
PEM#LA regu2ar2, granted 2oans to its 3e3+ers. #pouses 0ou2d rediscount the
postdated chec7s issued to 3e3+ers 0henever the association 0as short of funds. As
0as custo3ar,, the spouses 0ou2d rep2ace PEM#LA postdated chec7s 0ith their o0n
chec7s issued in the na3e of the 3e3+ers
It 0as PEM#LAAs po2ic, not to approve app2ications for 2oans of 3e3+ers 0ith
outstanding de+ts. 9o su+vert this po2ic,, so3e PEM#LA officers devised a sche3e to
o+tain additiona2 2oans despite their outstanding 2oan accounts. 9he, too7 out 2oans in
the na3es of un7no0ing 3e3+ers, 0ithout the 7no02edge or consent of the 2atter. 9he
PEM#LA chec7s issued for these 2oans 0ere then given to the spouses for
rediscounting. 9he officers carried this out +, forging the indorse3ent of the na3ed
pa,ees in the chec7s. In return, the spouses issued their persona2 chec7s in the na3e of
the 3e3+ers and de2ivered the chec7s to an officer of PEM#LA. 9he PEM#LA chec7s,
on the other hand, 0ere deposited +, the spouses to their account. Mean0hi2e, the
#pousesA chec7s 0ere deposited direct2, +, PEM#LA to its savings account 0ithout an,
indorse3ent fro3 the na3ed pa,ees. 9his 0as an irregu2ar procedure
PN$ eventua22, found out a+out these fraudu2ent acts and c2osed the current account of
PEM#LA. As a resu2t, the PEM#LA chec7s deposited +, the spouses 0ere returned or
dishonored for the reason OAccount C2osed.? 9he #pousesA chec7s, ho0ever, 0ere
deposited as usua2 to the PEM#LA savings account and the a3ounts 0ere du2, de+ited
#ps fi2ed a case for da3ages against PEM#LA and PN$
#P#: PN$ credited the chec7s to the PEM#LA account even 0ithout indorse3ents, PN$
vio2ated its contractua2 o+2igation to the3 as depositors. PN$ paid the 0rong pa,ees,
hence, it shou2d +ear the 2oss
PN$: spouses !odrigue4, the 3a7ers, did not intend for the na3ed pa,ees to receive
the proceeds of the chec7s. ConseGuent2,, the pa,ees 0ere considered as Ofictitious
pa,ees? as defined under the Negotia+2e Instru3ents La0 5NIL6. $eing chec7s 3ade to
fictitious pa,ees 0hich are +earer instru3ents, the chec7s 0ere negotia+2e +, 3ere
de2iver,
ISSUE: <=N the Pa,ees of the #pousesA chec7s 3a, +e considered as fictitious pa,ee, hence,
chec7s are +earer instru3ents
HELD: 0&, liable for failure to show that the payees were 1fititious2 3la/ of /nowledge
on the part of the payees is not tantamount to a la/ of intention on the part of ma/er that
the payees would not reei$e the he/s4 proeeds5% the fititious"payee rule does not
apply. (hus% the he/s are to be deemed payable to order. Consequently% the drawee
ban/ bears the loss.
#ection .5c6 of the NIL, a chec7 pa,a+2e to a specified pa,ee 3a, neverthe2ess +e
considered as a +earer instru3ent if it is pa,a+2e to the order of a fictitious or non'
e;isting person, and such fact is 7no0n to the person 3a7ing it so pa,a+2e. If the pa,ee
is not the intended recipient of the proceeds of the chec7, the pa,ee is considered a
Ofictitious? pa,ee and the chec7 is a +earer instru3ent.
As a ru2e, 0hen the pa,ee is fictitious or not intended to +e the true recipient of the
proceeds, the chec7 is considered as a +earer instru3ent. A chec7 is Oa +i22 of e;change
dra0n on a +an7 pa,a+2e on de3and.? It is either an order or a +earer instru3ent.
In a fictitious'pa,ee situation, the dra0ee +an7 is a+so2ved fro3 2ia+i2it, and the dra0er
+ears the 2oss. <hen faced 0ith a chec7 pa,a+2e to a fictitious pa,ee, it is treated as a
+earer instru3ent that can +e negotiated +, de2iver,. 9he under2,ing theor, is that one
cannot e;pect a fictitious pa,ee to negotiate the chec7 +, p2acing his indorse3ent
thereon. And since the 3a7er 7ne0 this 2i3itation, he 3ust have intended for the
instru3ent to +e negotiated +, 3ere de2iver,. 9hus, in case of controvers,, the dra0er
of the chec7 0i22 +ear the 2oss. 9his ru2e is 8ustified for other0ise, it 0i22 +e 3ost
convenient for the 3a7er 0ho desires to escape pa,3ent of the chec7 to a20a,s den,
the va2idit, of the indorse3ent. 9his despite the fact that the fictitious pa,ee 0as
purpose2, na3ed 0ithout an, intention that the pa,ee shou2d receive the proceeds of the
chec7.
Io0ever, there is a co33ercia2 +ad faith e;ception to the fictitious'pa,ee ru2e. A
sho0ing of co33ercia2 +ad faith on the part of the dra0ee +an7, or an, transferee of the
chec7 for that 3atter, 0i22 0or7 to strip it of this defense. 9he e;ception 0i22 cause it to
+ear the 2oss. Co33ercia2 +ad faith is present if the transferee of the chec7 acts
dishonest2,, and is a part, to the fraudu2ent sche3e
For the fictitious'pa,ee ru2e to +e avai2a+2e as a defense, PN$ 3ust sho0 that the
3a7ers did not intend for the na3ed pa,ees to +e part of the transaction invo2ving the
chec7s. At 3ost, the +an7As thesis sho0s that the pa,ees did not have 7no02edge of the
e;istence of the chec7s. 9his 2ac7 of 7no02edge on the part of the pa,ees, ho0ever,
0as not tanta3ount to a 2ac7 of intention on the part of respondents'spouses that the
pa,ees 0ou2d not receive the chec7sA proceeds. Considering that respondents'spouses
0ere transacting 0ith PEM#LA and not the individua2 pa,ees, it is understanda+2e that
the, re2ied on the infor3ation given +, the officers of PEM#LA that the pa,ees 0ou2d +e
receiving the chec7s
PN$ 0as re3iss in its dut, as the dra0ee +an7. It does not dispute the fact that its te22er
or te22ers accepted the E. chec7s for deposit to the PEM#LA account even 0ithout an,
indorse3ent fro3 the na3ed pa,ees. It +ears stressing that order instru3ents can on2,
+e negotiated 0ith a va2id indorse3ent.
AME!ICAN #A#I v C"MME!CE 9!%#9
/E #< * ()F1
9he p2aintiff'appe22ant sues the defendant'respondent trust co3pan, for R***E.F), the a3ount
of fift, certain pa,ro22 chec7s, 0hich it is a22eged the defendant 0rongfu22, charged to the
p2aintiffHs deposit account during the three 3onthsH period +et0een #epte3+er (/ and
ece3+er (/, (.**, the indorse3ents of the pa,eesH na3es having +een forged on the +ac7s
of said chec7s, and the defendant trust co3pan, having paid the a3ounts thereof to persons
not entit2ed thereto.
9he defendantHs ans0er 0as a genera2 denia2 coup2ed 0ith a p2ea of the affir3ative defense that
at the end of each of said three 3onths it had returned to p2aintiff a22 cance22ed chec7s paid
during the 3onth together 0ith a state3ent of the account sho0ing a22 de+its and credits, on
0hich 0as printed a notice or stipu2ation that if no errors 0ere reported in ten da,s the account
0ou2d +e considered correct. 9he ans0er avers this constituted an account statedL that the
p2aintiff neg2igent2, fai2ed to discover and report the forged indorse3ents or that the chec7s
>0ere in an, 3anner incorrect2, charged against the p2aintiffHs account,> 0ithin said ten da,sL
and further fai2ed to report said forged indorse3ents 0ithin a reasona+2e ti3e, as a resu2t of
0hich the defendant trust co3pan, 0as deprived of an opportunit, to protect itse2f against 2oss.
ISSUE: <=N the +an7 is 2ia+2e for the fraudu2ent pa,ro22 chec7s 0ith fictitious pa,ees
HELD:
(6 9he 0ord >person> used in #ection *EF-, !evised #tatutes (.*., 3eans the 3a7er of
the paperL the depositor not +eing +ound +, the gui2t, 7no02edge of its pa,ro22 c2er7, 0ho
caused the chec7s to +e 3ade out to persons not entit2ed to the 3one,, the intent of the pa,ro22
c2er7 did not 3a7e such chec7s pa,a+2e to +earer.
<here a pa,ro22 c2er7 had no authorit, to e;ecute chec7s +ut fraudu2ent2, induced his
principa2 to issue chec7s to persons not entit2ed to the3, the 3a7er 0as not +ound +, the gui2t,
7no02edge of the agentL the padding of the pa,ro22 +, the agent 0as not the pro;i3ate cause of
cashing of the chec7s.
<here chec7s 0ere e;ecuted to persons not entit2ed to the3 through fraudu2ent pa,ro22 2ist
3ade out +, the depositorHs pa,ro22 c2er7, the fact that such c2er7 de2ivered the chec7s pa,a+2e
to e3p2o,ees does not constitute a part of the 3a7ing of such chec7s, 0here the pa,ro22 c2er7
had no authorit, to utter the chec7s nor discretion as to 0ho3 the, shou2d +e de2ivered.
*6 <here the authori4ed officer of a corporation dra0s a chec7 in ignorance of the fact that
the pa,ee is fictitious or none;istent, and the chec7 is put in circu2ation +, an e3p2o,ee acting
outside the scope of his authorit,, the statute, #ection *EF., !evised #tatutes (.*., re2ating to
chec7s pa,a+2e to +earer does not app2, +ecause the corporation 0ou2d +e 0ithout actua2 or
constructive 7no02edge of the fictitious status of the pa,ee.
<here a +an7 rendered 3onth2, state3ents to its depositors 0ith the cance22ed chec7s
0hich had printed thereon a reGuest that the depositor >e;a3ine this state3ent> and report an,
error, in an action +, the depositor for a +a2ance due 0hich the +an7 had paid out on forged
endorse3ents, neg2igence of the depositor in fai2ing to detect the forger, 0as an affir3ative
defense 0hich the facts in the record sho0 0as not supported +, the evidence.
9he fact that the secretar, and treasurer of the depositor 0ho signed chec7s, pa,a+2e to
persons not entit2ed to the3 +, reason of a padded pa,ro22 3ade +, the pa,ro22 c2er7, and 7ne0
that one person na3ed as pa,ee in a chec7 0as not entit2ed to the 3one,, his neg2igence in
fai2ing to note the na3e of such pa,ee 0as not a defense, 0here he signed pa,ro22 chec7s +,
the hundred re2,ing on the pa,ro22 infor3ation presented to hi3 +, the pa,ro22 c2er7.
AN& 9EB LIAN vs. 9IE C"%!9 "F APPEAL#
&.!. No. L'*/(E #epte3+er */, (./)
igest fro3 http:==000.u+erdigests.info=*)(*=)F=ang'te7'2ian'vs'court'of'appea2s=
In (.1E, Ang 9e7 Lian approached Lee Iua and as7ed hi3 if he cou2d give hi3 P1,))).)). Ie
said that he 3eant to 0ithdra0 fro3 the +an7 +ut the +an7As a2read, c2osed. In e;change, he
gave Lee Iua a chec7 0hich is Opa,a+2e to the order of ScashA?. 9he ne;t da,, Lee Iua
presented the chec7 for pa,3ent +ut it 0as dishonored due to insufficienc, of funds. Lee Iua
eventua22, sued Ang 9e7 Lian. In his defense, Ang 9e7 Lian argued that he did not indorse the
chec7 to Lee Iua and that 0hen the 2atter accepted the chec7 0ithout Ang te7 LianAs
indorse3ent, he had done so fu22, a0are of the ris7 he 0as running there+,.
ISSUE: <=N Ang 3a, escape 2ia+i2it, due to 2ac7 of indorse3ent
HELD: No. %nder the Negotia+2e Instru3ents La0 5sec. . TdU6, a chec7 dra0n pa,a+2e to the
order of Ocash? is a chec7 pa,a+2e to +earer hence a +earer instru3ent, and the +an7 3a, pa, it
to the person presenting it for pa,3ent 0ithout the dra0erAs indorse3ent. <here a chec7 is
3ade pa,a+2e to the order of ScashA, the 0ord Ocash? does not purport to +e the na3e of an,
person, and hence the instru3ent is pa,a+2e to +earer. 9he dra0ee +an7 need not o+tain an,
indorse3ent of the chec7, +ut 3a, pa, it to the person presenting it 0ithout an, indorse3ent.
S+#S6& CHI&7 vs. CL+)I(+ &ICD+6 and H6&. C6U)( 68 +00E+LS
&.!. No. (1((-( Apri2 *J, *))J
Ching, a Chinese nationa2, instituted cri3ina2 co3p2aints for e2even 5((6 counts of
vio2ation of $P ** against Nicdao 0ho issued severa2 chec7s to hi3, supposed2, for the
pa,3ent of her 2oan
"ne of the chec7s 0as for the a3ount of *)3i22ion
Ching ad3itted that the chec7s 0ere issued to hi3 as securit, for a 2oan and 0ere a22
signed +, Nicdao +ut she 2eft the3 undated. Ching a2so ad3itted that he 0as the one
0ho 0rote the date, "cto+er E, (..J, on those chec7s 0hen respondent Nicdao refused
to pa, hi3
Ching contended that he 2ent severa2 a3ounts to Nicdao +ecause he had in his
possession her +2an7 chec7s.
ISSUE: <=N Nicdao 3a, +e he2d 2ia+2e
HELD: Inasmuh as the he/ was inomplete and undeli$ered in the hands of Ching% he
did not aquire any right or interest therein and annot% therefore% assert any ause of
ation founded on said stolen he/
"ne of the chec7s 0as sto2en, hence, such necessari2, a+so2ved Nicdao of an, civi2
2ia+i2it,
As previous2, sho0n, at the ti3e the chec7 0as sto2en, the said chec7 0as +2an7 in its
3ateria2 aspect 5as to the na3e of pa,ee, the a3ount of the chec7, and the date of the
chec76, +ut 0as a2read, pre'signed +, Nicdao. In fact, Ching hi3se2f ad3itted that chec7
in his possession 0as a +2an7 chec7
Moreover, since it has +een esta+2ished that such chec7 had +een 3issing since (../, it
is a+undant2, c2ear that said chec7 0as never de2ivered to co3p2ainant Ching. 9he
chec7 0as an inco3p2ete and unde2ivered instru3ent 0hen it 0as sto2en and ended up
in the hands of Ching.
EDEL"PMEN9 $ANB "F !IZAL vs. #IMA <EI and=or LEE BIAN I%A9, MA!Y CIEN& %Y,
#AM#"N 9%N&, A#IAN IN%#9!IAL PLA#9IC C"!P"!A9I"N and P!"%CE!# $ANB
"F 9IE PIILIPPINE#
&.!. No. -/1(. March ., (..F
#i3a et a2 o+tained a 2oan fro3 eve2op3ent $an7 of !i4a2 5$an76 and as pa,3ent of
the outstanding +a2ance, #i3a issued t0o crossed China+an7 chec7 in favor of the +an7.
9he chec7s, ho0ever, 0ere not de2ivered to the +an7 or an, of its authori4ed
representatives
For reasons not sho0n, the chec7s ca3e into the possession of Lee Bian Iuat, 0ho
deposited the chec7s 0ithout the +an7Hs indorse3ent 5forged or other0ise6 to the
account of P2astic Corporation, at Producers $an7. the $ranch Manager of ProducerAs
$an7 0ho re2ied on the assurance of the President of P2astic Corporation, that the
transaction 0as 2ega2 and regu2ar, instructed the cashier to accept the chec7s for deposit
inspite of the fact that the chec7s 0ere crossed and pa,a+2e to evt $an7 of !i4a2 and
+ore no indorse3ent of the 2atter
evt $an7 of !i4a2 instituted a co22ection case against the respondents, 0ho in turn
sought dis3issa2 of the case
ISSUE: <=N the +an7 has a cause of action against the respondents
HELD: .ithout the deli$ery of said he/s to De$t ,an/ of )i9al% the former did not
aquire any right or interest therein and annot therefore assert any ause of ation%
founded on said he/s% whether against the drawer Sima .ei or against the 0roduers
,an/ or any of the other respondents
9he nor3a2 parties to a chec7 are the dra0er, the pa,ee and the dra0ee +an7. Courts
have 2ong recogni4ed the +usiness custo3 of using printed chec7s 0here +2an7s are
provided for the date of issuance, the na3e of the pa,ee, the a3ount pa,a+2e and the
dra0erHs signature. A22 the dra0er has to do 0hen he 0ishes to issue a chec7 is to
proper2, fi22 up the +2an7s and sign it. Io0ever, the 3ere fact that he has done these
does not give rise to an, 2ia+i2it, on his part, unti2 and un2ess the chec7 is de2ivered to the
pa,ee or his representative.
Not0ithstanding the a+ove, it does not necessari2, fo22o0 that the dra0er #i3a <ei is
freed fro3 2ia+i2it, to petitioner $an7 under the 2oan evidenced +, the pro3issor, note
agreed to +, her. Ier a22egation that she has paid the +a2ance of her 2oan 0ith the t0o
chec7s pa,a+2e to petitioner $an7 has no 3erit for, as <e have ear2ier e;p2ained, these
chec7s 0ere never de2ivered to petitioner $an7. And even granting, 0ithout ad3itting,
that there 0as de2iver, to petitioner $an7, the de2iver, of chec7s in pa,3ent of an
o+2igation does not constitute pa,3ent un2ess the, are cashed or their va2ue is i3paired
through the fau2t of the creditor.
Io0ever, insofar as the other respondents are concerned, evt $an7 has no privit, 0ith
the3. #ince it never received the chec7s on 0hich it +ased its action against said
respondents, it never o0ned the3 5the chec7s6 nor did it acGuire an, interest therein.
9hus, an,thing 0hich the respondents 3a, have done 0ith respect to said chec7s cou2d
not have pre8udiced it. It had no right or interest in the chec7s 0hich cou2d have +een
vio2ated +, said respondents.
PE"PLE "F 9IE PIILIPPINE# vs. MA!9IN L. !"ME!" and E!NE#9" C. !"!I&%EZ
&.!. No. ((*.-/ Apri2 *(, (...
Ernesto !ui4 fi2ed an estafa case against !o3ero and !odrigue4, as &enera2 Manager
and "peration Manager of #AIEC"!, a corporation 0hich so2icit funds fro3 the
genera2 pu+2ic for invest3ent.
!ui4: convinced to invest his 3one, in the a3ount of P(/),))).)) 0ith a pro3ise return
of -)) P profit 0ithin *( da,s and as securit,, !o3ero and !odrigue4 issued a $utuan
Cit, !ura2 $an7 0ith P(,))),*)).)) as the a3ount in 0ords, +ut the a3ount in figures
0as for P(,*)),))).)), as the return on the invest3ent M chec7 dishonored and the,
refused to pa,
!o3ero and !odrigue4: discrepanc, +et0een the a3ount in 0ords and the a3ount in
figures in the chec7 that 0as dishonored. 9he a3ount in 0ords 0as P(,))),*)).)),
0hi2e the a3ount in figures 0as P(,*)),))).)). 9he corporation had in the +an7 the
a3ount necessar, to cover the chec7 in Apri2, (..) 0hi2e the chec7 0as presented for
pa,3ent on2, on "cto+er, (.-.. 9he ru2e in the Negotia+2e Instru3ents La0 is that 0hen
there is a3+iguit, in the a3ount in 0ords and the a3ount in figures, it 0ou2d +e the
a3ount in 0ords that 0ou2d prevai2
ISSUE: <=N
HELD: )ule of interpretation finds no appliation in the ase. (he agreement was
perfetly lear that at the end of twenty one 3:;5 days% the in$estment of 0;<=%===.==
would beome 0;%:==%===.==
9he factua2 narration in this case esta+2ished a 7ind of Pon4i sche3e. 9his is >an
invest3ent s0ind2e in 0hich high profits are pro3ised fro3 fictitious sources and ear2,
investors are paid off 0ith funds raised fro3 2ater ones.> It is so3eti3es ca22ed a p,ra3id
sche3e +ecause a +roader +ase of gu22i+2e investors 3ust support the structure as ti3e
passes. 9he idea +ehind this t,pe of s0ind2e is that the >con'3an> co22ects his 3one,
fro3 his second or third round of investors and then a+sconds +efore an,one e2se
sho0s up to co22ect. Necessari2,, these sche3es on2, 2ast 0ee7s, or 3onths at 3ost, 8ust
2i7e 0hat happened in this case.