ATRIUM MANAGEMENT VS.

CA
Is a corporation to which four crossed checks were indorsed by the payee corporation a
holder in due course and hence entitled to recover the amount of the checks when the same
had been dishonored for the reason of payment stopped?
The checks were crossed checks and specifcally indorsed for deposit to payees account
only. From the beinnin! the corporation was aware of the fact that the checks were all for
deposit only to payees account. "learly then! it could not be considered a holder in due
course. #owever! it does not follow as a leal proposition that simply because it was not a
holder in due course for havin taken the instruments in $uestion! with notice that the same
was for deposit only! that it was altoether precluded from recoverin on the instrument.
The disadvantae in not bein a holder in due course is that the neotiable instrument is
sub%ect to defenses as if it were non&neotiable. '(trium )anaement "orp. v. "(! *.+. ,o.
-./0/-! Feb. 12! 1..-3
Crisologo-Jose vs. Court of Appeals [GR 8!""# $! Septe%&er $"8"'
Second Division, Regalado (J): 3 concur, 1 took no part
(a)ts* In -/2.! +icardo 4. 4antos! 5r. was the vice&president of )over 6nterprises! Inc. in&
chare of marketin and sales7 and the president of the said corporation was (tty. 8scar 9.
:enares. 8n ;. (pril -/2.! (tty. :enares! in accommodation of his clients! the spouses 5aime
and "larita 8n! issued "heck ./;<<; drawn aainst Traders +oyal :ank! dated -0 5une
-/2.! in the amount of =0<!...... payable to 6rnestina "risoloo&5ose. 4ince the check was
under the account of )over 6nterprises! Inc.! the same was to be sined by its president!
(tty. 8scar 9. :enares! and the treasurer of the said corporation. #owever! since at that
time! the treasurer of )over 6nterprises was not available! (tty. :enares prevailed upon
4antos to sin the aforesaid check as an alternate sinatory. 4antos did sin the check. The
check was issued to "risoloo&5ose in consideration of the waiver or $uitclaim by "risoloo&
5ose over a certain property which the *overnment 4ervice Insurance 4ystem '*4I43 areed
to sell to the clients of (tty. :enares! the spouses 8n! with the understandin that upon
approval by the *4I4 of the compromise areement with the spouses 8n! the check will be
encashed accordinly. #owever! since the compromise areement was not approved within
the e>pected period of time! the aforesaid check for =0<!...... was replaced by (tty.
:enares with another Traders +oyal :ank check bearin ;?/1// dated -. (uust -/2.! in
the same amount of =0<!......! also payable to "risoloo&5ose. This replacement check was
also sined by (tty. :enares and by 4antos @hen "risoloo&5ose deposited this replacement
check with her account at Family 4avins :ank! )ayon :ranch! it was dishonored for
insuAciency of funds. ( subse$uent redepositin of the said check was likewise dishonored
by the bank for the same reason. #ence! "risoloo&5ose throuh counsel was constrained to
fle a criminal complaint for violation of :atas =ambansa 11 ':=113 with the BueCon "ity
FiscalDs 8Ace aainst (tty. :enares and 4antos The investiatin (ssistant "ity Fiscal!
(lfonso Elamas! accordinly fled an amended information with the court charin both
:enares and 4antos for violation of := 11 '"riminal "ase B&-02F?3 of then "ourt of First
Instance of +iCal! BueCon "ity. )eanwhile! durin the preliminary investiation of the
criminal chare aainst :enares and 4antos! before (ssistant "ity Fiscal Elamas! 4antos
tendered cashierDs check "" -F.-<1 for =0<!...... dated -. (pril -/2- to "risoloo&5ose!
the complainant in that criminal case. "risoloo&5ose refused to receive the cashierDs check
in payment of the dishonored check in the amount of =0<!....... #ence! 4antos encashed
the aforesaid cashierDs check and subse$uently deposited said amount of =0<!...... with
the "lerk of "ourt on -0 (uust -/2-. Incidentally! the cashierDs check adverted to above
was purchased by (tty. :enares and iven to 4antos to be applied in payment of the
dishonored check. (fter trial! the court a $uo! holdin that it was Gnot persuaded to believe
that consination referred to in (rticle -1<F of the "ivil "ode is applicable to this case!G
rendered %udment dismissin 4antosD complaint for consination and "risoloo&5oseDs
counterclaim. 8n appeal and on 2 4eptember -/2?! the appellate court reversed and set
aside said %udment of dismissal and revived the complaint for consination! directin the
trial court to ive due course thereto. "risoloo&5ose fled the petition.
Issue [$'* @hether 4antos! as an accommodation party! is liable thereon under the
,eotiable Instruments Eaw.
+el, [$'* 4ection 1/ 'Eiability of accommodation party3 of the ,eotiable Instruments Eaw
provides that G(n accommodation party is one who has sined the instrument as maker!
drawer! acceptor! or indorser! without receivin value therefor! and for the purpose of
lendin his name to some other person. 4uch a person is liable on the instrument to a holder
for value! notwithstandin such holder! at the time of takin the instrument! knew him to be
only an accommodation party.G "onse$uently! to be considered an accommodation party! a
person must '-3 be a party to the instrument! sinin as maker! drawer! acceptor! or
indorser! '13 not receive value therefor! and ';3 sin for the purpose of lendin his name for
the credit of some other person. :ased on the foreoin re$uisites! it is not a valid defense
that the accommodation party did not receive any valuable consideration when he e>ecuted
the instrument. From the standpoint of contract law! he diHers from the ordinary concept of
a debtor therein in the sense that he has not received any valuable consideration for the
instrument he sins. ,evertheless! he is liable to a holder for value as if the contract was not
for accommodation! in whatever capacity such accommodation party sined the instrument!
whether primarily or secondarily. Thus! it has been held that in lendin his name to the
accommodated party! the accommodation party is in eHect a surety for the latter.
Issue [-'* @hether )over 6nterprises! Inc. may be held liable on the accommodation
instrument! i.e. the check issued in favor of "risoloo&5ose.
+el, [-'* The provision of the ,eotiable Instruments Eaw which holds an accommodation
party liable on the instrument to a holder for value! althouh such holder at the time of
takin the instrument knew him to be only an accommodation party! does not include nor
apply to corporations which are accommodation parties. This is because the issue or
indorsement of neotiable paper by a corporation without consideration and for the
accommodation of another is ultra vires. #ence! one who has taken the instrument with
knowlede of the accommodation nature thereof cannot recover aainst a corporation where
it is only an accommodation party. If the form of the instrument! or the nature of the
transaction! is such as to chare the indorsee with knowlede that the issue or indorsement
of the instrument by the corporation is for the accommodation of another! he cannot recover
aainst the corporation thereon.
Issue [.'* @hether 4antos! who sined the check in $uestion in a representative capacity
as vice&president of )over 6nterprises Inc.! is liable thereon under the ,eotiable
Instruments Eaw.
+el, [.'* (n oAcer or aent of a corporation shall have the power to e>ecute or indorse a
neotiable paper in the name of the corporation for the accommodation of a third person
only if specifcally authoriCed to do so. "orollarily! corporate oAcers! such as the president
and vice&president! have no power to e>ecute for mere accommodation a neotiable
instrument of the corporation for their individual debts or transactions arisin from or in
relation to matters in which the corporation has no leitimate concern. 4ince such
accommodation paper cannot thus be enforced aainst the corporation! especially since it is
not involved in any aspect of the corporate business or operations! the inescapable
conclusion in law and in loic is that the sinatories thereof shall be personally liable
therefor! as well as the conse$uences arisin from their acts in connection therewith.
Issue [/'* @hether the lack of capacity of the corporation absolved the sinatories of the
instrument.
+el, [/'* The fact that for lack of capacity the corporation is not bound by an
accommodation paper does not thereby absolve! but should render personally liable! the
sinatories of said instrument where the facts show that the accommodation involved was
for their personal account! undertakin or purpose and the creditor was aware thereof.
"risoloo&5ose was evidently chared with the knowlede that the check was issued at the
instance and for the personal account of (tty. :enares who merely prevailed upon 4antos to
act as cosinatory in accordance with the arranement of the corporation with its depository
bank. That it was a personal undertakin of said corporate oAcers was apparent to
"risoloo&5ose by reason of her personal involvement in the fnancial arranement and the
fact that! while it was the corporationDs check which was issued to her for the amount
involved! she actually had no transaction directly with said corporation. There should be no
leal obstacle! therefore! to "risoloo&5oseDs claims bein directed personally aainst (tty.
:enares and 4antos! president and vice&president! respectively! of )over 6nterprises! Inc.
Salas vs. Court of Appeals [GR 01088# -- Ja2uar3 $""'
Third Division, Fernan (CJ): concur
(a)ts* 8n F February -/2.! 5uanita 4alas bouht a motor vehicle from the Iiolao )otor
4ales "orporation 'I)43 for =<2!-;2.1. as evidenced by a promissory note. This note was
subse$uently endorsed to Filinvest Finance J Eeasin "orporation 'Fininvest3 which fnanced
the purchase. 4alas defaulted in her installments beinnin 1- )ay -/2. alleedly due to a
discrepancy in the enine and chassis numbers of the vehicle delivered to her and those
indicated in the sales invoice! certifcate of reistration and deed of chattel mortae! which
fact she discovered when the vehicle fured in an accident on / )ay -/2.. This failure to
pay prompted Filinvest to initiate "ivil "ase </-< for a sum of money aainst 4alas before
the +eional Trial "ourt of 4an Fernando! =ampana. In its decision dated -. 4eptember
-/21! the trial court rendered %udment orderin 4alas to pay =hilinvest the sum of
=12!0-0.0. with interest thereon at the rate of -0K from 1 8ctober -/2. until the said sum
is fully paid7 and the further amount of =-!...... as attorneyDs fees. The court dismissed
4alasD counterclaim. :oth 4alas and Filinvest appealed the aforesaid decision to the "ourt of
(ppeals. Imputin fraud! bad faith and misrepresentation aainst I)4 for havin delivered a
diHerent vehicle to 4alas! the latter prayed for a reversal of the trial courtDs decision so that
she may be absolved from the obliation under the contract. 8n 1? 8ctober -/2F! the "ourt
of (ppeals rendered its decision! modifyin the trial courtDs decision. The appellate court
ordered 4alas to pay =hilinvest the sum of =<0!/.2.;. at -0K per annum from 1 8ctober
-/2. until full payment! with costs aainst 4alas. 4alasD motion for reconsideration was
denied. 4alas fled the petition for review on certiorari.
Issue* @hether the promissory note in $uestion is a neotiable instrument which will bar
completely all the available defenses of 4alas aainst =hilinvest.
+el,* 4alasD liability on the promissory note! the due e>ecution and enuineness of which
she never denied under oath was! under the factual milieu! as inevitable as it was clearly
established. The records revealed that what was involved was not a simple case of
assinment of credit as 4alas would have it appear! where the assinee merely steps into
the shoes of! is open to all defenses available aainst and can enforce payment only to the
same e>tent as! the assinor&vendor. #erein! the basis of FilinvestDs claim aainst 4alas is a
promissory note which bears all the earmarks of neotiability. The $uestioned promissory
note is a neotiable instrument! havin complied with the re$uisites under the law as
followsL MaN it is in writin and sined by the maker 5uanita 4alas7 MbN it contains an
unconditional promise to pay the amount of =<2!-;2.1.7 McN it is payable at a f>ed or
determinable future time which is G=-!F-0./< monthly for ;F months due and payable on the
1-st day of each month startin )arch 1-! -/2. thru and inclusive of Feb. 1-! -/2;7G MdN it is
payable to Iiolao )otor 4ales "orporation! or order and as such! MeN the drawee is named
or indicated with certainty. It was neotiated by indorsement in writin on the instrument
itself payable to the 8rder of Filinvest Finance and Eeasin "orporation and it is an
indorsement of the entire instrument. Onder the circumstances! there appears to be no
$uestion that Filinvest is a holder in due course! havin taken the instrument under the
followin conditionsL MaN it is complete and reular upon its face7 MbN it became the holder
thereof before it was overdue! and without notice that it had previously been dishonored7 McN
it took the same in ood faith and for value7 and MdN when it was neotiated to Filinvest! the
latter had no notice of any infrmity in the instrument or defect in the title of I)4
"orporation. (ccordinly! Filinvest holds the instrument free from any defect of title of prior
parties! and free from defenses available to prior parties amon themselves! and may
enforce payment of the instrument for the full amount thereof. This bein so! 4alas cannot
set up aainst Filinvest the defense of nullity of the contract of sale between her and I)4.
(ACTS* =etitioner bouht a car from Iioloo )otor 4ales "ompany! which was
secured by a promissory note! which was later on indorsed to Filinvest
Finance! which fnanced the transaction. =etitioner later on defaulted in her
installment payments! alleedly due to the fraud imputed by I)4 in
sellin her a diHerent vehicle from what was areed upon. This default in payment
prompted Filinvest Finance to initiate a case aainst petitioner. The trial court
decided in favor of Filinvest! to which the appellate court upheld by increasin
the amount to be paid.
It is the contention of petitioner that since the areement between her and the motor
company was ine>istent! none had been assined in favor of private respondent.

+E45* =etitioners liability on the promissory note! the due e>ecution and enuineness
of which she never denied under oath! is under the foreoin factual milieu! as
inevitable as it is clearly established.

The records reveal that involved herein is not a simple case of assinment of credit
as petitioner would have it appear! where the assinee merely steps into the
shoes of! is open to all defenses available aainst and can enforce payment
only to the same e>tent as! the assinor&vendor.

The instrument to be neotiable must contain the so&called words of
neotiability. There are only 1 ways for an instrument to be payable to
order. There must always be a specifed person named in the instrument and the bill
or note is to be paid to the person desinated in the instrument or to any person
to whom he has indorsed and delivered the same. @ithout the words or order
or to the order of! the instrument is payable only to the person desinated
therein and is thus non&neotiable. (ny subse$uent purchaser thereof will not
en%oy the advantaes of bein a
holder in due course but will merely step into the shoes of the person
desinated in the instrument and will thus be open to the defenses available
aainst the latter.

In the case at bar! the promissory notes is earmarked with neotiability and
Filinvest is a holder in due course.
6ru,e2)io vs. CA
GR 4-./!."# $/ Jul3 $"81
Se)o2, 5ivisio2# Gutierre7 Jr. 8J9
(a)ts* 6ulalio and 6lisa =rudencio are the reistered owners of a parcel of land located in
4ampaloc! )anila. The property was mortaed to =,: to uarantee a loan of =-!...
e>tended to one Pomino =rudencio. 4ometime in -/<<! "oncepcion J Tamayo "onstruction
"o.! throuh 5ose Toribio '=rudencios relative3! persuaded the =rudencios to mortae their
property to secure the loan of =-.!... which the company was neotiatin with the =,:.
The =rudencios sined the (mendment of +eal 6state )ortae. The promissory note
coverin the =-.!... loan was sined by Toribio. The =rudencios also sined the portion of
the note indicatin that they are re$uestin the =,: to issue the check coverin the loan to
the "ompany. 5ose Toribio e>ecuted the Peed of (ssinment assinin all payments made
by the :ureau to the company on account of the =uerto =rincesa buildin pro%ect in favor of
=,:. The :ureau! however! conditioned that the payment should be for labor and materials.
The =rudencios wrote =,: that since =,: authoriCed payments to the "ompany where there
were chanes in the conditions of the contract without their knowlede! they seek to cancel
the mortae contract. Failin to cancel the mortae! they fled suit to cancel the same.
Issue* @hether the =rudencios were solidary co&debtors or sureties as a result of bein
accommodation makers.
+el,* In lendin his name to the accommodated party! the accommodation party is in eHect
a surety. #owever! unlike in a contract of suretyship! the liability of the accommodation
party remains not only primary but also unconditional to a holder for value such that even if
the accommodated party receives an e>tension of the period of payment without the
consent of the accommodation party! the latter is still liable for the whole obliation and
such e>tension does not release him because as far as the holder for value is concerned! he
is a solidary co&debtor. "onse$uently! the =rudencios cannot claim to have been released
from their obliation simply because the time of payment of such obliation was temporarily
deferred by =,: without their knowlede and consent. To be freed of obliation! it is thus
necessary to determine if =,:! the payee of the promissory note! is a holder in due course.
#erein! =,: was an immediate party or in privy to the note! besides that it dealt directly
with the =rudencios knowin fully well that they are accommodation makers. The eneral
rule that a payee may be considered a holder in due course does not apply to =,:.
+el,* There is no $uestion that as accommodation makers! petitioners would be primarily
and unconditionally liable on the promissory note to a holder for value! reardless of
whether they stand as sureties or solidary co&debtors since such distinction would be
entirely immaterial and inconse$uential as far as a holder for value is concerned.
"onse$uently! the petitioners cannot claim to have been released from their obliation
simply because at the time of payment of such obliation was temporarily deferred
by the
=,: without their knowlede and consent. There has to be another basis for their claim of
havin been freed from their obliation. It has to be determined if =,: was a holder
for value.

( holder for value is one who meets the re$uirement of bein a holder in due course e>cept
the notice for want of consideration. In the case at bar! =,: may not be considered as a
holder for value. ,ot only was =,: an immediate party or privy to the promissory
note! knowin fully well that petitioners only sined as accommodation parties! but more
importantly it was the Peed of (ssinment which moved the petitioners to sin the
promissory note. =etitioners also relied on the belief that there will be no
alterations to the terms of the areement. The deed provided that there will no further
conditions which could possibly alter the areement without the consent of the petitioner
such as the rant of reater priority to obliations other than the payment of the loan.
This notwithstandin! the bank approved the release of payments to the "ompany
instead of the same to the bank. This was in violation of the deed of assinment
and pre%udiced the rihts of petitioners. The bank was not in ood faithQa re$uisite
for a holder to be one in due course.
Asso)iate, :a2; vs. CA
GR $0.8-# .$ Ja2uar3 $""1
Se)o2, 5ivisio2# Ro%ero 8J9
(a)ts* The =rovince of Tarlac maintains a current account with the =hilippine ,ational :ank
'=,: Tarlac :ranch3 where the provincial funds are deposited. =ortions of the funds were
allocated to the "oncepcion 6merency #ospital. "hecks were issued to it and were received
by the hospitals administrative oAcer and cashier 'Fausto =anilinan3. =anilinan! throuh
the help of (ssociated :ank but after forin the sinature of the hospitals chief '(dena
"anlas3! was able to deposit the checks in his personal account. (ll the checks bore the
stamp (ll prior endorsement uaranteed (ssociated :ank. Throuh post&audit! the
province discovered that the hospital did not receive several allotted checks! and souht the
restoration of the debited amounts from =,:. In turn! =,: demanded reimbursement from
(ssociated :ank. :oth banks resisted payment. #ence! the present action.
Issue* @ho shall bear the loss resultin from the fored checks.
+el,* =,: is not nelient as it is not re$uired to return the check to the collectin bank
within 10 hours as the banks involved are covered by "entral :ank "ircular <2. and not the
rules of the =hilippine "learin #ouse. (ssociated :ank! and not =,:! is the one duty&bound
to warrant the instrument as enuine! valid and subsistin at the time of indorsement
pursuant to 4ection FF of the ,eotiable Instruments Eaw. The stamp uaranteein prior
indorsement is not an empty rubric7 the collectin bank is held accountable for checks
deposited by its customers. #owever! due to the fact that the =rovince of Tarlac is e$ually
nelient in permittin =anilinan to collect the checks when he was no loner connected
with the hospital! it shares the burden of loss from the checks bearin a fored indorsement.
Therefore! the =rovince can only recover <.K of the amount from the drawee bank '=,:3!
and the collectin bank '(ssociated :ank3 is liable to =,: for <.K of the same amount.
Ge%pesa< vs. CA
GR "--//# " (e&ruar3 $"".
Se)o2, 5ivisio2# Ca%pos Jr. 8J9
(a)ts* ,atividad *empesaw issued checks! prepared by her bookkeeper! a total of 21
checks in favor of several supplies. )ost of the checks for amounts in e>cess of actual
obliations as shown in their correspondin invoices. It was only after the lapse of more than
1 years did she discovered the fraudulent manipulations of her bookkeeper. It was also
learned that the indorsements of the payee were fored! and the checks were brouht to the
chief accountant of =hilippine :ank of "ommerce 'the Prawee :ank! :uendia :ranch3 who
deposited them in the accounts of (lfredo +omero and :enito Eam. *empesaw made
demand upon the bank to credit the amount chared due the checks. The bank refused.
#ence! the present action.
Issue* @ho shall bear the loss resultin from the fored indorsements.
+el,* (s a rule! a drawee bank who has paid a check on which an indorsement has been
fored cannot chare the drawers account for the amount of said check. (n e>ception to
the rule is where the drawer is uilty of such nelience which causes the bank to honor
such checks. *empesaw did not e>ercise prudence in takin steps that a careful and prudent
businessman would take in circumstances to discover discrepancies in her account. #er
nelience was the pro>imate cause of her loss! and under 4ection 1; of the ,eotiable
Instruments Eaw! is precluded from usin forery as a defense. 8n the other hand! the
bankin rule bannin acceptance of checks for deposit or cash payment with more than one
indorsement unless cleared by some bank oAcials does not invalidate the instrument7
neither does it invalidate the neotiation or transfer of said checks. The only kind of
indorsement which stops the further neotiation of an instrument is a restrictive
indorsement which prohibits the further neotiation thereof! pursuant to 4ection ;F of the
,eotiable Instruments Eaw. In liht of any case not provided for in the (ct that is to be
overned by the provisions of e>istin leislation! pursuant to 4ection -/F of the ,eotiable
Instruments Eaw! the bank may be held liable for damaes in accordance with (rticle --?.
of the "ivil "ode. The drawee bank! in its failure to discover the fraud committed by its
employee and in contravention bankin rules in allowin a chief accountant to deposit the
checks bearin second indorsements! was ad%uded liable to share the loss with *empesaw
on a <.L<. ratio.
Repu&li) :a2; vs. E&ra,a
GR 4-/0"1# .$ Jul3 $"0!
(irst 5ivisio2# Marti2 8J9
(a)ts* )auricia 6brada encashed a back pay check for =-10F..2 at +epublic :ank '6scolta
:ranch3. The :ureau of Treasury! which issued the check advised the bank that the alleed
indorsement of the check by one )artin EorenCo was a forery as the latter has been dead
since -0 5uly -/<17 and re$uested that it be refunded he sum deducted from its account. The
bank refunded the amount to the :ureau and demanded upon 6brada the sum in $uestion!
who refused. #ence! the present action.
Issue* @hether the bank can recover from the last indorser.
+el,* (ccordin to 4ection 1; of the ,eotiable Instruments Eaw! where the sinature on a
neotiable instrument is fored! the neotiation of the check is without force or eHect.
#owever! followin the rulin in :eam vs. Farrel 'O4 case3! where a check has several
indorsements on it! only the neotiation based on the fored or unauthoriCed sinature
which is inoperative. The last indorser! 6brada! was duty&bound to ascertain whether the
check was enuine before presentin it to the bank for payment. #er failure to do so makes
her liable for the loss and the :ank may recover from her the money she received for the
check. #ad she performed her duty! the forery would have been detected and fraud
defeated. 6ven if she turned over the amount to PominueC immediately after receivin the
cash proceeds of the check! she is liable as an accommodation party under 4ection 1/ of the
,eotiable Instruments Eaw.
M=SS VS. CA
GR 4-1-"/.# $/ Jul3 $"81
Se)o2, 5ivisio2# Gutierre7 Jr. 8J9
(a)ts* :y special arranement with =,:! )@44 used personaliCed checks in drawin from
its account. The checks were printed by its printer! F. )esina 6nterprises. 1; checks were
paid and cleared by =,:! and debited aainst )@44 account from )arch to )ay -/F/. The
checks were deposited by payees +aul PiCon! (rturo 4ison! and (ntonio )endoCa in their
account with ="I:ank. 4aid persons were later found to be fctitious. )@44 re$uested =,: to
restore the amount debited due to the 1; checks! alleedly fored! to its account. The bank
refused. #ence! the present action.
Issue* @ho shall bear the loss resultin from the alleed fored checks.
+el,* There was no e>press and cateorical fndin that the 1; checks were fored or
sined by persons other than the authoriCed )@44 sinatories. Forery is not presumed but
should be established by clear! positive and convincin evidence. )@44 is barred from
settin up defense of forery under 4ection 1; of the ,eotiable Instruments Eaw as )@44
committed ross nelience in the printin of its personaliCed checks! failed to reconcile its
bank statements with its own records! and failed to provide appropriate security measures
over its own record. =,:! the drawee bank! had taken necessary measures in the detection
of fored checks and the prevention of their fraudulent encashment throuh constant
reminders to all its current account bookkeepers informin them of the activities of forery
syndicates. )@44 ross nelience was the pro>imate cause of the loss '=; million3! and
should bear the loss.
Metropolita2 :a2; > Trust Co%pa23 vs. Court of Appeals [GR 88811# $8 (e&ruar3
$""$'
First Division, Cru! (J): concur
(a)ts* The )etropolitan :ank and Trust "o. ')etro:ank3 is a commercial bank with branches
throuhout the =hilippines and even abroad. *olden 4avins and Eoan (ssociation was! at
the time these events happened! operatin in "alapan! )indoro! with Eucia "astillo! )ano
"astillo and *loria "astillo as its principal oAcers. In 5anuary -/?/! a certain 6duardo *omeC
opened an account with *olden 4avins and deposited over a period of 1 months ;2
treasury warrants with a total value of =-!?<<!112.;?. They were all drawn by the =hilippine
Fish )arketin (uthority and purportedly sined by its *eneral )anaer and counter&sined
by its (uditor. F of these were directly payable to *omeC while the others appeared to have
been indorsed by their respective payees! followed by *omeC as second indorser. 8n various
dates between 5une 1< and 5uly -F! -/?/! all these warrants were subse$uently indorsed by
*loria "astillo as "ashier of *olden 4avins and deposited to its 4avins (ccount 10/2 in the
)etrobank branch in "alapan! )indoro. They were then sent for clearin by the branch oAce
to the principal oAce of )etrobank! which forwarded them to the :ureau of Treasury for
special clearin. )ore than 1 weeks after the deposits! *loria "astillo went to the "alapan
branch several times to ask whether the warrants had been cleared. 4he was told to wait.
(ccordinly! *omeC was meanwhile not allowed to withdraw from his account. Eater!
however! Ge>asperatedG over *loriaDs repeated in$uiries and also as an accommodation for a
Gvalued client!G )etro:ank says it fnally decided to allow *olden 4avins to withdraw from
the proceeds of the warrants. The frst withdrawal was made on / 5uly -/?/! in the amount
of =<.2!......! the second on -; 5uly -/?/! in the amount of =;-.!......! and the third on
-F 5uly -/?/! in the amount of =-<.!....... The total withdrawal was =/F2!....... In turn!
*olden 4avins subse$uently allowed *omeC to make withdrawals from his own account!
eventually collectin the total amount of =-!-F?!<..... from the proceeds of the apparently
cleared warrants. The last withdrawal was made on -F 5uly -/?/. 8n 1- 5uly -/?/!
)etrobank informed *olden 4avins that ;1 of the warrants had been dishonored by the
:ureau of Treasury on -/ 5uly -/?/! and demanded the refund by *olden 4avins of the
amount it had previously withdrawn! to make up the defcit in its account. The demand was
re%ected. )etrobank then sued *olden 4avins in the +eional Trial "ourt of )indoro. (fter
trial! %udment was rendered in favor of *olden 4avins! which! however! fled a motion for
reconsideration even as )etrobank fled its notice of appeal. 8n 0 ,ovember -/2F! the lower
court modifed its decision! by dismissin the complaint with costs aainst )etrobank7 by
issolvin and liftin the writ of attachment of the properties of *olden 4avins and 4pouses
)ano "astillo and Eucia "astillo7 directin )etrobank to reverse its action of debitin
4avins (ccount 10/2 of the sum of =-!?<0!.2/... and to reinstate and credit to such
account such amount e>istin before the debit was made includin the amount of
=2-1!.;;.;? in favor of *olden 4avins and thereafter! to allow *olden 4avins to withdraw
the amount outstandin thereon before the debit7 by orderin )etrobank to pay *olden
4avins attorneyDs fees and e>penses of litiation in the amount of =1..!......7 and by
orderin )etrobank to pay the 4pouses )ano "astillo and Eucia "astillo attorneyDs fees and
e>penses of litiation in the amount of =-..!....... 8n appeal to the appellate court! the
decision was aArmed! promptin )etrobank to fle the petition for review.
Issue* @hether the treasury warrants in $uestion are neotiable instruments.
+el,* "learly stamped on the treasury warrantsD face is the word Gnon&neotiable.G
)oreover! and this is of e$ual sinifcance! it is indicated that they are payable from a
particular fund! to wit! Fund <.-. 4ection - of the ,eotiable Instruments Eaw! provides that
G(n instrument to be neotiable must conform to the followin re$uirementsL 'a3 It must be
in writin and sined by the maker or drawer7 'b3 )ust contain an unconditional promise or
order to pay a sum certain in money7 'c3 )ust be payable on demand! or at a f>ed or
determinable future time7 'd3 )ust be payable to order or to bearer7 and 'e3 @here the
instrument is addressed to a drawee! he must be named or otherwise indicated therein with
reasonable certainty.G 4ection ; '@hen promise is unconditional3 thereof provides that G(n
un$ualifed order or promise to pay is unconditional within the meanin of this (ct thouh
coupled with Q 'a3 (n indication of a particular fund out of which reimbursement is to be
made or a particular account to be debited with the amount7 or 'b3 ( statement of the
transaction which ives rise to the instrument. :ut an order or promise to pay out of a
particular fund is not unconditional.G The indication of Fund <.- as the source of the
payment to be made on the treasury warrants makes the order or promise to pay Gnot
unconditionalG and the warrants themselves non&neotiable. There should be no $uestion
that the e>ception on 4ection ; of the ,eotiable Instruments Eaw is applicable in the
present case. )etrobank cannot contend that by indorsin the warrants in eneral! *olden
4avins assumed that they were Genuine and in all respects what they purport to be!G in
accordance with 4ection FF of the ,eotiable Instruments Eaw. The simple reason is that this
law is not applicable to the non&neotiable treasury warrants. The indorsement was made by
*loria "astillo not for the purpose of uaranteein the enuineness of the warrants but
merely to deposit them with )etrobank for clearin. It was in fact )etrobank that made the
uarantee when it stamped on the back of the warrantsL G(ll prior indorsement andRor lack
of endorsements uaranteed! )etropolitan :ank J Trust "o.! "alapan :ranch.G
SAMSUNG C?NSTRUCTI?N VS. (AR EAST :AN@
F("T4L =laintiH 4amsun "onstruction "ompany =hilippines! Inc. '4amsun "onstruction3!
maintained a current account with defendant Far 6ast :ank and Trust "ompany 'F6:T"3 at
the latters :el&(ir! )akati branch. The sole sinatory to 4amsun "onstructions account
was 5on Syu Eee '5on3! its =ro%ect )anaer! while the checks remained in the custody of
the companys accountant! Syu Ton Eee 'Syu3. 8n -/ )arch -//1! a certain +oberto
*onCaa presented for payment F6:T" "heck ,o. 0;1-.. to the banks branch in :el&(ir!
)akati . The check! payable to cash and drawn aainst 4amsun "onstructions current
account! was in the amount of ,ine #undred ,inety ,ine Thousand Five #undred =esos
'=///!<.....3. The bank teller! "leofe e>ercise the bank procedure in encashment usin
check. 4he then asked *onCaa to submit proof of his identity! and the latter presented
three ';3 identifcation cards.The bank oAcer 4yfu also noticed 5ose 4empio III '4empio3!
the assistant accountant of 4amsun "onstruction ! who supported the claim of *onCaa.
4yfu showed the check to 4empio! who vouched for the enuineness of 5ons sinature.
"onfrmin the identity of *onCaa! 4empio said that the check was for the purchase of
e$uipment for 4amsun "onstruction. 4atisfed with the enuineness of the sinature of
5on! 4yfu authoriCed the banks encashment of the check to *onCaa.
The followin day Syu! discovered that a check in the amount of ,ine #undred ,inety ,ine
Thousand Five #undred =esos '=///!<.....3 had been encashed. Syu perused the
checkbook and found that the last blank check was missin. #e reported the matter to 5on!
who then proceeded to the bank. 5on learned of the encashment of the check! and realiCed
that his sinature had been fored. The :ank )anaer reputedly told 5on that he would be
reimbursed for the amount of the check. 5on proceeded to the police station and consulted
with his lawyers. 4ubse$uently! a criminal case for $ualifed theft was fled aainst 4empio
before the Eauna court. F6:T" on the other hand! said that it was still conductin an
investiation on the matter. Onsatisfed! 4amsun "onstruction fled a"omplaint on -. 5une
-//1 for violation of 4ection 1; of the ,eotiable Instruments Eaw! before the +eional Trial
"ourt '+T"3 of )anila ! :ranch /.
Purin the trial! both sides presented their respective e>pert witnesses to testify on the
claim that 5ons sinature was fored. 4amsun "orporation! which had referred the check
for investiation to the ,:I! presented 4enior ,:I Pocument 6>aminer +oda :. Flores. 4he
testifed that based on her e>amination! she concluded that 5ons sinature had been
fored on the check. 8n the other hand! F6:T"! which had souht the assistance of the
=hilippine ,ational =olice '=,=3! presented +osario ". =ereC! a document e>aminer from the
=,= "rime Eaboratory. 4he testifed that her fndins showed that 5ons sinature on the
check was enuine.
I44O6L @hether or not the sinature of 5on in the sub%ect check was fored?
+OEI,* Opon e>amination of the record! and based on the applicable laws and
%urisprudence! we reverse the "ourt of (ppeals decision. Indeed there was forery in this
case.
4ection 1; of the ,eotiable Instruments Eaw statesL @hen a sinature is fored or made
without the authority of the person whose sinature it purports to be! it is wholly
inoperative! and no riht to retain the instrument! or to ive a dischare therefor! or to
enforce payment thereof aainst any party thereto! can be ac$uired throuh or under such
sinature! unless the party aainst whom it is souht to enforce such riht is precluded from
settin up the forery or want of authority. '6mphasis supplied3
The crucial fact in $uestion is whether or not the check was fored! not whether the bank
could have detected the forery. The latter issue becomes relevant only if there is need to
weih the comparative nelience between the bank and the party whose sinature was
fored. In this case! indeed there was forery.
( bank is liable! irrespective of its ood faith! in payin a fored check. @#6+6F8+6! the
=etition is *+(,T6P. The Pecision of the "ourt of (ppeals dated 12 ,ovember -//F is
+6I6+46P! and the Pecision of the +eional Trial "ourt of )anila! :ranch /! dated 1< (pril
-//0 is +6I,4T(T6P. "osts aainst respondent. 48 8+P6+6P.
6N: vs. Aui%po
GR 4-!.$"/# $/ Mar)B $"88
(irst 5ivisio2# Ga2)a3)o 8J9
(a)ts* Francisco *oCon was a depositor of the =hilippine ,ational :ank '=,: "aloocan "ity
branch3. 6rnesto 4antos! *oCons friend! took a check from the latters checkbook which was
left in the car! flled it up for the amount of =<!...! fored *oCons sinature! and encashed
it. *oCon learned about the transaction upon receipt of the banks statement of account! and
re$uested the bank to recredit the amount to his account. The bank refused. #ence! the
present action.
Issue* @ho shall bear the loss resultin from the fored check.
+el,* The prime duty of a bank is to ascertain the enuineness of the sinature of the
drawer or the depositor on the check bein encashed. It is e>pected to use reasonable
business prudence in acceptin and cashin a check bein encashed or presented to it.
=ayment in nelect of duty places upon him the result of such nelience. 4till! *oCons act
in leavin his checkbook in the car! where his trusted friend remained in! cannot be
considered nelience suAcient to e>cuse the bank from its own nelience. The bank bears
the loss.
:ANC? 5E ?R? SAVING V. EAUITA:4E
$!0 SCRA $88
(ACTS*
:P8 drew checks payable to member establishments. 4ubse$uently! the checks were
deposited in Trencios account with 6$uitable. The checks were sent for clearin
and was thereafter cleared. (fterwards! :P8 discovered that the indorsements in the
back of the checks were fored. It then demanded that 6$uitable credit its account but
the latter refused to do so. This prompted :P8 to fle a complaint aainst 6$uitable and
="#". The trial court and +T" held in favor of the 6$uitable and ="#".

HELD:
First! ="#" has %urisdiction over the case in $uestion. The articles of incorporation of
=##" e>tended its operation to clearin checks and other clearin items. ,o doubt
transactions on non&neotiable checks are within the ambit of its %urisdiction. Further! the
participation of the two banks in the clearin operations is submission to the %urisdiction of
the ="#".

=etitioner is likewise estopped from raisin the non&neotiability of the checks in
issue. It stamped its uarantee at the back of the checks and subse$uently
presented it for clearin and it was in the basis of these endorsements by the
petitioner that the proceeds were credited in its
clearin account. The petitioner cannot now deny its liability as it assumed the liability of
an indorser by stampin its uarantee at the back of the checks.

Furthermore! the bank cannot escape liability of an indorser of a check and which may turn
out to be a fored indorsement. @henever a bank treats the sinature at the back of the
checks as indorsements and thus loically uarantees the same as such there can be
no doubt that said bank had considered the checks as neotiable.

( lon line of cases also held that in the matter of forery in endorsements!
it is the collectin bank that enerally suHers the loss because it had the dutyh to
ascertain the enuineness of all prior indorsements considerin that the act of presentin
the check for payment
to the drawee is an assertion that the party makin the presentment has done its duty to
ascertain the enuineness of the indorsements.
=ESTM?NT :AN@ V. ?NG
.0. SCRA -$-
(ACTS*
8n was supposed to be the payee of the checks issued by Island 4ecurities. 8n
has a current account with petitioner bank. #e opted to sell his shares of stock throuh
Island 4ecurities. The company in turn issued checks in favor of 8n but unfortunately!
the latter wasnDt able to receive any. #is sinatures were fored by Tamlinco and the checks
were deposited in his own account with petitioner. 8n then souht to collect the
money from the family of Tamlinco frst before flin a complaint with the "entral :ank. (s
his eHorts were futile to recover his money! he fled an action aainst the petitioner.
The trial and appellate court decided in favor of 8n.

HELD:
4ince the sinature of the payee was fored! such sinature should be deemed
inoperative and ineHectual. =etitioner! as the collectin bank! rossly erred in makin
payment by virtue of said fored sinature. The payee! herein respondent! should therefore
be allowed to collect from the collectin bank.

It should be liable for the loss because it is its leal duty to ascertain that the payees
endorsement was enuine before cashin the check. (s a eneral rule! a bank or
corporation who has obtained possession of a check with an unauthoriCed or fored
indorsement of the payees sinature and who collects the amount of the check other from
the drawee! is liable for the proceeds thereof to the payee or the other owner!
notwithstandin that the amount has been paid to the person from whom the check
was obtained.

5?CTRINE ?( 5ESIRA:4E S+?RT CUTQplaintiH uses one action to reach! by desirable
short cut! the person who ouht to be ultimately liable as amon the innocent persons
involved in the transaction. In other words! the payee ouht to be allowed to recover
directly from the collectin bank! reardless of whether the check was delivered to the
payee or not.

8n the issue of laches! 8n didnDt sit on his rihts. #e immediately souht the intervention
of Tamlincos family to collect the sum of money! and later the "entral :ank. 8nly after
e>haustin all the measures to settle the issue amicably did he fle the action.
44US?RI? V. CA
.". SCRA 8"
F("T4L
=etitioner was a prominent businessman who! because of diHerent business commitments!
entrusted to his then secretary the handlin of his credit cards and checkbooks. For
a material period of time! the secretary was able to encash and deposit in her
personal account money from the account of petitioner. Opon knowlede of her
acts! she was fred immediately and criminal actions were fled aainst her.
Thereafter! petitioner re$uested the bank to restore its money but the bank refused to do
so.

HELD:
The petitioner doesnt have a course of action aainst the bank. To be entitled to
damaes! petitioner has the burden of provin nelience on the part of the bank for failure
to detect the discrepancy in the sinatures on the checks. It is incumbent upon petitioner to
establish the fact of forery. "uriously thouh! petitioner failed to supply additional
sinature specimens as re$uested by the ,:I. The bank was not also remiss in performance
of its duties! it practices due dilience in encashin checks. The bank didnt
have any hint of the modus operandi of 6uenio as she was a reular customer!
desinated by the petitioner himself to transact on his behalf.

It was petitioner who was nelient in this case. #e failed to e>amine his bank statements
and this was the pro>imate cause of his own damae. :ecause of this nelience! he
is precluded from settin up the defense of forery with reard the checks.
TRA5ERS R?CA4 :AN@ V. R6N
." SCRA 18
(ACTS*
+=,! I:" and ::" were all assessed for ta> by the :I+. To pay the assessed ta>es!
they bouht manaers checks from petitioner bank. ,one of these checks were paid to
the :I+. They were found to have been deposited in the account of a third person in
4ecurity :ank. (s the ta>es remained unpaid! the :I+ issued a levy! distraint and
arnishment aainst the three networks. (n action was fled wherein it was decided
that the networks should be reimbursed for the amounts of the checks by petitioner bank
and the latter in turn! must be reimbursed by 4ecurity :ank. In the appellate court! it was
held that Traders :ank should be the only bank liable.

HELD:
=etitioner ouht to have known that where a check is drawn payable to the order of one
person and is presented for payment by another and purports upon its face to have been
duly indorsed by the payee of the check! it is the primary duty of the petitioner to know
that the check was duly indorsed by the oriinal payee! and it pays the amount of the
check to the third person! who has fored the sinature of the payee! the loss falls upon the
petitioner who cashed the check. Its only remedy is aainst the person
to whom it paid the money.

It should be further noted that one of the checks was a crossed check. The crossin of the
check should have put petitioner on uard7 it was duty&bound to ascertain the
indorsers title to the check or the nature of his possession.
6Bilippi2e Natio2al :a2; vs. Court of Appeals [GR $0!8# -! April $""1'
First Division, "apunan (J): concur
(a)ts* ( check with serial number ?&;FFF&11;&;! dated ? (uust -/2- in the amount of
=/?!F<.... was issued by the )inistry of 6ducation "ulture 'now Pepartment of 6ducation!
"ulture and 4ports MP6"4N3 payable to F. (bante )arketin. This check was drawn aainst
=hilippine ,ational :ank '=,:3. 8n -- (uust -/2-! (bante )arketin! a client of "apitol
"ity Pevelopment :ank '"apitol3! deposited the $uestioned check in its savins account with
said bank. In turn! "apitol deposited the same in its account with the =hilippine :ank of
"ommunications '=:"om3 which! in turn! sent the check to =,: for clearin. =,: cleared the
check as ood and thereafter! =:"om credited "apitolDs account for the amount stated in the
check. #owever! on -/ 8ctober -/2-! =,: returned the check to =:"om and debited
=:"omDs account for the amount covered by the check! the reason bein that there was a
Gmaterial alterationG of the check number. =:"om! as collectin aent of "apitol! then
proceeded to debit the latterDs account for the same amount! and subse$uently! sent the
check back to petitioner. =,:! however! returned the check to =:"om. 8n the other hand!
"apitol could not in turn! debit (bante )arketinDs account since the latter had already
withdrawn the amount of the check as of -< 8ctober -/2-. "apitol souht clarifcation from
=:"om and demanded the recreditin of the amount. =:"om followed suit by re$uestin an
e>planation and re&creditin from =,:. 4ince the demands of "apitol were not heeded! it
fled a civil suit with the +eional trial "ourt of )anila aainst =:"om which in turn! fled a
third&party complaint aainst =,: for reimbursementRindemnity with respect to the claims of
"apitol. =,:! on its part! fled a fourth&party complaint aainst (bante )arketin. 8n ;
8ctober -/2/7 the +eional Trial "ourt rendered its decision! orderin =:"om to re&credit or
reimburse "apitol the amount of =/?!F<....! plus interest of -1K thereto from -/ 8ctober
-/2- until the amount is fully paid7 =,: to reimburse and indemnify =:"om for whatever
amount =:"om pays to "apitol7 F. (bante )arketin to reimburse and indemnify =,: for
whatever amount =,: pays to =:"om. 8n attorneyDs fees! the trial court ordered =:"om to
pay "apitol attorneyDs fees in the amount of =-.!......7 but that =:"om is entitled to
reimburseRindemnify from =,:7 and =,: to be! in turn! reimbursed or indemnifed by F.
(bante )arketin for the same amount. The court dismissed the counterclaims of =:"om
and =,:7 without pronouncement as to costs. (n appeal was interposed before the "ourt of
(ppeals which rendered its decision on 1/ (pril -//1! which modifed the appealed
%udment by e>emptin =:"om from liability to "apitol for attorneyDs fees and orderin =,:
to honor the check for =/?!F<....! with interest as declared by the trial court! and pay
"apitol attorneyDs fees of =-.!....... (fter the check shall have been honored by =,:! the
court ordered =:"om to re&credit "apitolDs account with it the amount7 without
pronouncement as to costs. ( motion for reconsideration of the decision was denied by the
appellate "ourt in its resolution dated -F 4eptember -//1 for lack of merit. =,: fled the
petition for review on certiorari.
Issue* @hether the chane in the serial number of the check may be considered a chane
that alters the eHect of the instrument! and thus is a material alteration.
+el,* The present case is uni$ue in the sense that what was altered is the serial number of
the check in $uestion! an item which! it can readily be observed! is not an essential re$uisite
for neotiability under 4ection - of the ,eotiable Instruments Eaw. The aforementioned
alteration did not chane the relations between the parties. The name of the drawer and the
drawee were not altered. The intended payee was the same. The sum of money due to the
payee remained the same. The checkDs serial number is not the sole indication of its oriin.
The name of the overnment aency which issued the sub%ect check was prominently
printed therein. The checkDs issuer was therefore insuAciently identifed! renderin the
referral to the serial number redundant and inconse$uential. If the purpose of the serial
number is merely to identify the issuin overnment oAce or aency! its alteration had no
material eHect whatsoever on the interity of the check. The identity of the issuin
overnment oAce or aency was not chaned thereby and the amount of the check was not
chared aainst the account of the another overnment oAce or aency which had no
liability under the check. The owner issuer of the check is boldly and clearly printed on its
face! second line from the topL G)I,I4T+T 8F 6PO"(TI8, (,P "OETO+6!G and below the
name of the payee are the rubber&stamped wordsL G)inistry of 6duc. J "ulture.G These
words are not alleed to have been falsely or fraudulently intercalated into the check. The
ownership of the check is established without the necessity of recourse to the serial number.
,either is there any proof that the amount of the check was erroneously chared aainst the
account of a overnment oAce or aency other than the )inistry of 6ducation and "ulture.
#ence! the alteration in the number of the check did not aHect or chane the liability of the
)inistry of 6ducation and "ulture under the check and! therefore! is immaterial. The
enuineness of the amount and the sinatures therein of then Peputy )inister of 6ducation
#ermeneildo ". Pumlao and of the resident (uditor! =enomio ". (lvareC are not challened.
,either is the authenticity of the diHerent codes appearin therein $uestioned. =,:! thus
cannot refuse to accept the check in $uestion on the round that the serial number was
altered! the same bein an immaterial or innocent one.
M?NTIN?4A V. 6N:
88 PHIL 178
(ACTS*
+amos! as a disbursin oAcer of an army division of the O4(F6! made cash advancements
wR the =rovincial Treasurer of Eanao. In e>chane! the =rovl Treasurer of Eanao ave
him a =<..!... check. Thereafter! +amos presented the check to Eaya for
encashment. Eaya in his capacity as =rovincial Treasurer of )isamis 8riental as
drawer! issued a check to +amos in the sum of =-.....! on the =hilippines ,ational :ank
as drawee7 the =0..... value of the check was paid in military notes.
+amos was unable to encash the said check for he was captured by the 5apanese.
:ut after his release! he sold =;.... of the check to )ontinola for =/.... 5apanese )ilitary
notes! of which only =0<... was paid by the latter. The writin made by +amos at the
back of the check was to the eHect that he was assinin only =;.... of the value of
the document with an instruction to the bank to pay =;.... to )ontinola and to deposit the
balance to +amosDs credit. This writin was! however! mysteriously obliterated and in
its place! a supposed indorsement appearin on the back of the check was made for the
whole amount of the check. (t the time of the transfer of this check to )ontinola! the
check was lon overdue by about 1&-R1 years.
)ontinola instituted an action aainst the =,: and the =rovincial Treasurer of )isamis
8riental to collect the sum of =-..!...! the amount of the aforesaid check. There
now appears on the face of said check the words in parenthesis G(ent! =hil. ,ational
:ankG under the sinature of Eaya purportedly showin that Eaya issued the check as
aent of the =hilippine ,ational :ank.
+E45*
The words G(ent! =hil. ,ational :ankG now appearin on the face of the check were
added or placed in the instrument after it was issued by the =rovincial Treasurer
Eaya to +amos. The check was issued by only as =rovincial Treasurer and as an oAcial
of the *overnment! which was under obliation to provide the O4(F6 with advance
funds! and not as aent of the bank! which had no such obliation. The addition of those
words was made after the check had been transferred by +amos to )ontinola. The
insertion of the words G(ent! =hil. ,ational :ank!G which converts the bank from a
mere drawee to a drawer and therefore chanes its liability! constitutes a material
alteration of the instrument without the consent of the parties liable thereon! and so
dischares the instrument.
6apa vs. Vale2)ia [GR $!$88# -. Ja2uar3 $""8'
(a)ts* )yron =apa! actin as attorney&in&fact of (nela :utte! alleedly sold a parcel of land
in Ea Eoma! BueCon "ity to Feli> =enarroyo. #owever! prior to the alleed sale! the land was
mortaed by :utte to (ssociated :ankin "orporation alon with other properties and after
the alleed sale but prior to the propertys release by delivery! :utte died. The :ank refused
to release the property despite =enarroyos unless and until the other mortaed properties
by :utte have been redeemed and because of this =enarroyo settled to havin the title of
the property annotated.
It was later discovered that the mortae rihts of the :ank were transferred to one Tomas
=arpana! administrator of the estate of +amon =apa 5r. and his since then been collectin
rents. Pespite repeated demands of =enarroyo and Ialencia! =apa refused to deliver the
property which led to a suit for specifc performance. The trial court ruled in favor of
=enarroyo and Ialencia.
8n appeal to the "(! and ultimately in relation to neotiable instruments! =apa averred that
the sale of the property was not consummated since the ="I: check issued by =enarroyo for
payment worth 0.... pesos was not encashed by him. #owever! the "( saw the contrary
and that =apa in fact encashed the check by means of a receipt.
Finally on appeal to the 4"! =apa cited that accordin to (rt -10/ of the "ivil "ode! payment
of checks only produce eHect once they have been encashed and he insists that he never
encashed the check. #e further alleed that if check was encashed! it should have been
stamped as such or at least a microflm copy. It must be noted that the check was in
possession of =apa for ten '-.3 years from the time payment was made to him.
Issue* @hether or not the check was encashed and can be considered eHective as payment
+el,* T64. The "ourt held that acceptance of a check implies an undertakin of due
dilience in presentin it for payment! and if he from whom it is received sustains loss by
want of such dilience! it will be held to operate as actual payment of the debt or obliation
for which it is iven. In this case! rantin that check was never encashed! =apas failure to
do so for more than ten '-.3 years undoubtedly resulted in the impairment of the check
throuh his unreasonable and une>plained delay.
(fter more than ten '-.3 years from the payment in part by cash and in part by check! the
presumption is that the check had been encashed.
State I2vest%e2t +ouse vs. CA
GR $$$1.# $$ Ja2uar3 $"".
(irst 5ivisio2# :ellosillo 8J9
(a)ts* ,ora :. )oulic issued to "oraCon Iictoriano checks! as security for pieces of %ewelry
sold on commission. Iictoriano neotiated the checks to the 4tate Investment #ouse Inc.
'4I#I3. )oulic failed to sell the pieces of %ewelry! so he returned them to the payee before the
maturity of the checks. The checks! however! could not be retrieved as they had already
been neotiated. :efore the checks maturity dates! )oulic withdrew her funds from the
drawee bank. Opon presentment of the checks for payment! they were dishonored for
insuAciency of funds. 4I#I sued to recover the value of the checks.
Issue* @hether the personal defense of failure or absence of consideration is available! or
conversely! whether 4I#I is a holder in due course.
+el,* 8n their faces! the post&dated checks were complete and reular7 4I#I bouht the
checks from the payee 'Iictoriano3 before their due dates7 4I#I took the checks in ood faith
and for value! albeit at a discounted price7 and 4I#I was never informed not made aware
that the checks were merely issued to payee as security and not for value. "omplyin with
the re$uisites of 4ection <1 of the ,eotiable Instruments Eaw! 4I#I is a holder in due
course. (s such! it holds the instruments free from any defect of title of prior parties! and
from defenses available to prior parties amon themselves. 4I#I may enforce full payment of
the checks. The defense of failure or absence of consideration is not available as 4I#I was
not privy to the purpose for which the checks were issued.
That the post&dated checks were merely issued as security is not a round for the dischare
of the instrument as aainst a holder in due course. It is not one of the rounds outlined in
4ection --/ of the ,eotiable Instrument Eaw! for the instrument to be dischared. It must
be noted that the drawin and neotiation of a check have certain eHects aside from the
transfer of title or the incurrin of liability in reard to the instrument by the transferor. The
holder who takes the neotiated paper makes a contract with the parties on the face of the
instrument. There is an implied representation that funds or credit are available for the
payment of the instrument in the bank upon which it is drawn. "onse$uently! the withdrawal
of the money from the drawee bank to avoid liability on the checks cannot pre%udice the
rihts of holders in due course. The drawer! )oulic! is liable to the holder in due course! 4I#I.
TBe Great Easter2 4ife I2sura2)e Co. vs. +o2g;o2g > SBa2gBai :a2;i2g Corp. [GR
$81!0# -.
August $"--'
#n $anc, Johns (J): % concur
(a)ts* The *reat 6astern Eife Insurance "o. '*6EI"3 is an insurance corporation! while
#onkon J 4hanhai :ankin "orp. '#4:"3 and =hilippine ,ational :ank '=,:3 are bankin
corporations! and each is duly licensed to do its respective business in the =hilippine Islands.
8n ; )ay -/1.! *6EI" drew its check for =1!... on #4:" with whom it had an account!
payable to the order of EaCaro )elicor. 6.). )aasim fraudulently obtained possession of the
check! fored )elicorDs sinature! as an endorser! and then personally endorsed and
presented it to =,: where the amount of the check was placed to his credit. (fter havin
paid the check! and on the ne>t day! =,: endorsed the check to #4:"! which paid it! and
chared the amount of the check to the account of *6EI". In the ordinary course of business!
#4:" rendered a bank statement to *6EI" showin that the amount of the check was
chared to its account! and no ob%ection was then made to the statement. (bout 0 months
after the check was chared to the account of *6EI"! it developed that )elicor! to whom the
check was made payable! had never received it! and that his sinature! as an endorser! was
fored by )aasim! who presented and deposited it to his private account in =,:. @ith this
knowlede! *6EI" promptly made a demand upon #4:" that it should be iven credit for the
amount of the fored check! which the bank refused to do! and *6EI" commenced the action
to recover the =1!... which was paid on the fored check. 8n the petition of #4:"! =,: was
made defendant. #4:" denies any liability! but prays that! if a %udment should be rendered
aainst it! in turn! it should have like %udment aainst =,: which denies all liability to either
party. Opon the issued bein %oined! a trial was had and %udment was rendered aainst
*6EI" and in favor #4:" and =,: from which *6EI" appealed.
Issue* @hether *6EI" can recover inasmuch as )elicors indorsement was fored.
+el,* *6EI"Ds check was drawn on #4:" payable to the order of )elicor. In other words!
*6EI" authoriCed and directed #4:" to pay )elicor! or his order! =1!.... It did not authoriCe
or direct the bank to pay the check to any other person than )elicor! or his order! and the
testimony is undisputed that )elicor never did part with his title or endorse the check! and
never received any of its proceeds. ,either is *6EI" estopped or bound by the bank
statement! which was made to it by #4:". This is not a case where *6EI"Ds own sinature
was fored to one of its checks. The forery was that of )elicor! who was the payee of the
check! and the leal presumption is that the bank would not honor the check without the
enuine endorsement of )elicor. In other words! when *6EI" received its bank statement! it
had a riht to assume that )elicor had personally endorsed the check! and that! otherwise!
the bank would not have paid it. 4ection 1; of the ,eotiable Instruments Eaw is s$uare in
point. The money was on deposit in #4:"! and it had no leal riht to pay it out to anyone
e>cept *6EI" or its order. #ere! *6EI" ordered #4:" to pay the =1!... to )elicor! and the
money was actually paid to )aasim and was never paid to )elicor! and he never personally
endorsed the check! or authoriCed any one to endorse it for him! and the alleed
endorsement was a forery. #ence! upon the undisputed facts! it must follow that #4:" has
no defense to the present action. It is admitted that =,: cashed the check upon a fored
sinature! and placed the money to the credit of )aasim! who was the forer. That =,: then
endorsed the check and forwarded it to #4:" by whom it was paid. =,: had no license or
authority to pay the money to )aasim or anyone else upon a fored sinature. It was its
leal duty to know that )elicorDs endorsement was enuine before cashin the check. Its
remedy is aainst )aasim to whom it paid the money. The 4upreme "ourt reversed the
lower courtDs %udment! and entered another in favor of *6EI" and aainst #4:" for =1!...!
with interest thereon from 2 ,ovember -/1.! at the rate of FK per annum! and the costs of
the action! and a correspondin %udment will be entered in favor of #4:" aainst =,: for
the same amount! toether with the amount of its costs in the action.