CASE DOCTRINES

DE OCAMPO vs GATCHALIAN
Issue: W/N Plaintiff De Ocampo is a holder in due course
Held: The Court held that plaintiff is NOT a holder in due course since it was their duty to ascertain the nature of Gonzales title to the check or the nature of
his possession. Since they failed to do so, they are guilty of gross negligence amounting to legal absence of good faith. A holder in due course should have
taken the instrument in good faith and for value. There were various instances which should have put plaintiff De Ocampo to inquire why Gonzales possessed
the check and why he used such to pay his wifes hospital bills. Some of these are that respondents had no obligation to the Ocampo Clinic, that the amount
did not correspond with the amount of Gonzales obligation, that the check was a crossed-check meaning it could only be deposited and not converted to cash
MESINA vs IAC
Issue: W/N Petitioner Mesina is a holder in due course and is thus entitled to the amount of the check
Held: The Court held that petitioner Mesina is not a holder in due course. Petitioner failed to substantiate his claim that he is a holder in due course and for
consideration. Petitioner admitted that he became the holder of the check through Alexander Lim who stole the check. Also he refused to disclose details or
information on how and why it was passed to him. Thus, he had notice of the defect of the title over the check from the start.
METROPOL (Bacolod) FINANCING AND INVESTMENT CORPORATION vs SAMBOK MOTORS COMPANY AND NG SAMBOK SONS
MOTORS CO.
Issue: W/N Sambok Motors Co. is a qualified indorser
Held: The Court held that Sambok Motors, Co is not a qualified indorser. A qualified indorsement may be made by adding to the indorsers signature the
words without recourse or any words of similar import. Such an indorsement relieves the indorser of the general obligation to pay if the instrument is
dishonored but not of the liability arising from warranties on the instrument as provided in Sec. 65 of the NIL. However, the plaintiff actually indorsed the
instrument with recourse and even waived the notice of demand, dishonor, protest and presentment. The plaintiff, by indorsing the note with recourse
does not make itself a qualified indorser but a general indorser who is secondarily liable
MARALIT vs IMPERIAL
Issue: W/N respondent Imperial should be made liable for the total amount of the US Treasury Warrants
Held: The Court held that there was negligence on both the complainant and accused but greater responsibility should be borne by the private complainant.
The complainant should have been more diligent in imposing the banking rules strictly. However, the court held that the loss should be charged to the accused
who upon her indorsements, warrant that the instrument is genuine and that she will pay the amount in case of dishonor as stated in Sec. 66 of NIL.
Respondent should pay the petitioner the amounts of the altered treasury warrants as the logical consequence of the MTCs ruling that private respondent is
civilly liable for the treasury warrants.
SAPIERA vs COURT OF APPEALS (Sari-Sari store)
Issue: W/N petitioner Remedios Sapiera should be held liable for the value of the checks.
Held: The Court affirmed the ruling of the Court of Appeals since the dismissal of the criminal case did not erase petitioners civil liability. Petitioner signed
the 4 checks at the back without any indication as to how she should be bound. Thus, she is deemed to be an indorser based on Sec.63 of NIL and is liable as
a general indorser based on Sec.65.
BPI VS CA AND NAPIZA
Issue: Whether or not Napiza may be held liable to refund the amount of the check.
Held: No. The Supreme Court ruled that ordinarily, Napiza would have been liable because he is an accommodation indorser. But due to the attendant
circumstances, Napiza is discharged from liability.
The withdrawal slip indicates as well as the rules promulgated by BPI that withdrawal from the bank should be accompanied by the presentment of the
account holders (Napizas) savings bankbook. This was not done so in the case at bar because Gayon was able to withdraw without it. Further, BPI allowed
the withdrawal even before the check cleared. BPI already credited the $2,500.00 to Napizas account even without the drawee bank clearing the check. This
is contrary to common banking practices and because of such negligence and lack of diligence, BPI, as the collecting bank, shall suffer the loss
PRUDENTIAL BANK vs INTERMEDIATE APPELLATE COURT
Issue: W/N petitioners claim for full reimbursement is proper. W/N presentment for acceptance of the drafts was indispensible to make Phil Rayon liable.
W/N respondent Chi is jointly and severally liable.
Held: The Court held that respondent Philippine Rayon Mills, Inc. is liable on the 12 drafts in question. A letter of credit is defined as a engagement by a bank
or other person at the request of the customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in
the credit. In the present case, drawee for the drafts was necessarily the petitioner bank. There was no need for acceptance as the issued drafts are sight drafts
and are payable on demand. Philippine Rayon immediately became liable upon petitioners payment, which is the essence of the letter of credit issued by
petitioner. As regards respondent Chi, he is liable as a guarantor for affixing his signature at the back of the trust receipt.
WONG vs COURT OF APPEALS
Issue: W/N prosecution was able to establish beyond reasonable doubt all the elements of the offense penalized under BP.22.
Held: The Court affirmed the conviction of petitioner. Knowledge of insufficiency of funds is presumed form the dishonor of the check due to insufficiency of
funds. Petitioner contends that since the check was deposited 157 days after maturity date, the presumption of knowledge of lack of funds under Sec.2 of
BP.22 should not apply to him. He claims that he is only expected to keep his bank account active and funded within 90 days. However, Sec,2 of BP.22 does
not state that a maker must maintain funds in his bank account for only 90 days. A check, in fact, must be presented within reasonable time after its issue or
the drawer will be discharged liability thereon to the extent of the loss caused by the delay. The current banking practice is that a check becomes stale after
more than 6 months or 180 days. Hence, the checks in issue cannot be considered stale.
THE INTERNATIONAL CORPORATE BANK vs SPOUSES GUECO
Issue: W/N petitioner should suffer the loss occasioned by the fact that the check had become stale.
Held: The Court held that respondents should pay the original obligation of P150,000. The petitioner was not in bad faith in not encashing the check since it

was due to the present controversy that prevented such. A check must be presented for payment within a reasonable time after its issue; otherwise, it becomes
stale. Since the present case involves a managers check, presentment is not needed. The mere issuance is already considered an acceptance thereof.
PNB vs NATIONAL BANK vs CA
Issue: W/N alteration of the serial number of a check is material alteration
Held: The Court held that material alteration is an alteration of the effect of an instrument. It means an unauthorized change in an instrument that purports to
modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the
obligation of a partly. In other words, it is a change which pertains to the items in Sec. 1 of the NIL. The present case is not one of material alteration. The
checks serial number is not the sole indication of its origin. The name of the government agency which issued the subject check was prominently printed
therein. Thus, the identity of the issuing government office was not changed thereby; there was no material alteration.
MONTINOLA vs THE PHILIPPINE NATIONAL BANK
Issue: W/N petitioner Montinola can encash the check
Held: The Court held that petitioner cannot enforce the payment for such check since there was material alteration. The insertion of the words Agent, Phil
National Bank which converts the bank from a mere drawee to a drawer constitutes material alteration. Petitioners version of the story is untenable. He is
not holder in due course within the meaning of Sec.52 of the NIL since petitioner became the holder after it was overdue.
STATE INVESTMENT HOUSE, INC vs. COURT OF APPEALS
Issue: W/N petitioner is a holder in due course. W/N the checks were validly discharged
Held: Yes. State Investment is a holder in due course as it met all the requirements to be one pursuant to Section 52 of the Negotiable Instruments Law. In
particular, it is clearly shown that: (a) on their faces the post-dated checks were complete and regular: (b) State Investment bought these checks from
Victoriano, before their due dates; (c) State Investment took these checks in good faith and for value, (d) State Investment was never informed nor made
aware that these checks were merely issued to Victoriano as security and not for value.
Further, there is no need to issue a notice of dishonor to Moulic. After Moulic withdrew her funds, she could not have expected her checks to be honored. It
would only be futile for State Investment to be sending her notices of dishonor for the two checks.
BATAAN CIGAR AND CIGARETTE FACTORY, INC. vs COURT OF APPEALS
Issue: whether or not SIHI, a second indorser, a holder of crossed checks, is a holder in
due course, to be able to collect from the drawer, BCCFI?
Held: No,
crossing of a check should have the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only
once
to one who has an account with a bank; (c) and the act of crossing the check serves as warning to the holder that the check has been issued for a definite
purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course.
BCCFI's defense in stopping payment is as good to SIHI as it is to George King. Because, really, the checks were issued with the intention that George King
would supply BCCFI with the bales of tobacco leaf. There being failure of consideration,
SIHI is not a holder in due course
CITYTHRUST BANKING CORPORATION vs. IAC
Issue: W/N petitioner is liable to respondent for the dishonor of her checks
Issue: Whether or not Citytrust banking Corp. has the duty to honor checks issued by Emme Herrero despite the failure to accurately stating the account
number resulting to insufficiency of funds for the check.
Held: Yes, even it is true that there was error on the account number stated in the deposit slip, its is, however, indicated the name of Emme Herrero. This is
controlling in determining in whose account the deposit is made or should be posted. This is so because it is not likely to commit an error in ones name than
merely relying on numbers which are difficult to remember. Numbers are for the convenience of the bank but was never intended to disregard the real name
of its depositors. The bank is engaged in business impressed with public trust, and it is its duty to protect in return its clients and depositors who transact
business with it. It should not be a matter of the bank alone receiving deposits, lending out money and collecting interests. It is also its obligation to see to it
that all funds invested with it are properly accounted for and duly posted in its ledgers.
TAN vs COURT OF APPEALS
Issue: W/N respondent bank is liable to petitioner for the misrouting of the check
Issue:
Whether a cashiers check is as good as cash, so as to have funded the two checks subsequently drawn.
Held:
An ordinary check is not a mere undertaking to pay an amount of money. There is an element of certainty or assurance that it will be paid upon presentation;
that is why it is perceived as a convenient substitute for currency in commercial and financial transactions. Herein, what is involved is more than an ordinary
check, but a cashiers check. A cashiers check is a primary obligation of the issuing bank and accepted in advance by its mere issuance. By its very nature, a
cashiers check is a banks order to pay what is drawn upon itself, committing in effect its total resources, integrity and honor beyond the check. Herein, PCIB
by issuing the check created an unconditional credit in favor any collecting bank. Reliance on the laymans perception that a cashiers check is as good as
cash is not entirely misplaced, as it is rooted in practice, tradition and principle.

PAPA vs A.U. VALENCIA

Myron Papa is the administrator of the estate of Angela Butte. In 1973, he sold a portion of said estate to Felix Pearroyo through A.U. Valencia and Co. Inc.
Pearroyo gave Papa P5,000.00 plus a check worth P40,000.00. However, Papa was not able to deliver the certificate of title to Pearroyo. A litigation ensued
and ten years after, Papa argued that the sale between him and Pearroyo was never consummated because he did not encash the P40,000.00 check and that

the P5,000.00 cash was merely earnest money.

ISSUE: Whether or not Papa is correct.
HELD: No. After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that the check had been encashed.
Granting that Papa had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay. While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant
to Article 1249 of the Civil Code, the rule is otherwise if the debtor (Pearroyo) is prejudiced by the creditors (Papas) unreasonable delay in presentment.
The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of
such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given