METROPOLITAN BANK AND TRUST COMPANY

vs.
BA FINANCE CORPORATION and MALAYAN INSURANCE CO., INC.
G.R. No. 179952. December 4, 2009.
FACTS:
Lamberto Bitanga obtained from respondent BA Finance Corporation a loan, to secure which,
he mortgaged his car to respondent BA Finance. Bitanga had the mortgaged car insured by
respondent Malayan Insurance. The car was stolen. On Bitangas claim, Malayan Insurance
issued a check payable to the order of "B.A. Finance Corporation and Lamberto Bitanga", drawn
against China. The check was crossed with the notation "For Deposit Payees Account Only."
Without the indorsement or authority of his co-payee BA Finance, Bitanga deposited the check
to his account with the Asianbank, now merged with herein petitioner Metrobank. Bitanga
subsequently withdrew the entire proceeds of the check. In the meantime, Bitangas loan
became past due, but despite demands, he failed to settle it. BA Finance eventually learned of
the loss of the car and of Malayan Insurances issuance of a crossed check payable to it and
Bitanga, and of Bitangas depositing it in his account at Asianbank and withdrawing the entire
proceeds thereof. BA Finance thereupon demanded the payment of the value of the check from
Asianbank but to no avail, prompting it to file a complaint before the RTC for sum of money and
damages against Asianbank and Bitanga, alleging that, inter alia, it is entitled to the entire
proceeds of the check. The trial court, holding that Asianbank was negligent in allowing Bitanga
to deposit the check to his account and to withdraw the proceeds thereof, without his co-payee
BA Finance having either indorsed it or authorized him to indorse it in its behalf, found
Asianbank and Bitanga jointly and severally liable to BA Finance following Section 41 of the
Negotiable Instruments Law . The appellate court, affirming the trial courts decision, held that
BA Finance has a cause of action against [it] even if the subject check had not been delivered to
BA Finance by the issuer itself. Hence, the present Review on Certiorari filed by Metrobank to
which Asianbank was, as earlier stated, merged, faulting the appellate court.
ISSUE: WON the petitioner is liable for the full value of the check?
HELD:
Yes. Affirming the decision of the CA, the SC held that Section 41 of the Negotiable
InstrumentsLaw provides: Where an instrument is payable to the order of two or more payees or
indorsees who are not partners, all must indorse unless the one indorsing has authority to
indorse for the others. Bitanga alone endorsed the crossed check, and petitioner allowed the
deposit and release of the proceeds
thereof, despite the absence of authority of Bitangas co-payee BA Finance to endorse it on its
behalf. The payment of an instrument over a missing indorsement is the equivalent of payment
on a forged indorsement or an unauthorized indorsement in itself in the case of joint payees.
Clearly, petitioner,through its employee, was negligent when it allowed the deposit of the
crossed check, despite the lone endorsement of Bitanga, ostensibly ignoring the fact that the
check did not, it bears repeating, carry the indorsement of BA Finance.
FAR EAST REALTY INVESTMENT INC. v. CAG.R. No. L-36549 October 5, 1988Paras, J.
Doctrine: Where the instrument is not payable on demand, presentment must be made on the
day it falls due. Where it is payable on demand, presentment must be made within a reasonable
time after issue, except that in the case of a bill of exchange, presentment for payment will be
sufficient if made within a reasonable time after the last negotiation thereof. Reasonable Time
has been defined as so much time as is necessary under the circumstances for a reasonable
prudent and diligent man to do, conveniently, what the contract or duty requires should be done,
having a regard for the rights, and possibility of loss, if any, to the other party. No hard and fast

demarcation line can be drawn between what may be considered as a reasonable or an

unreasonable time, because reasonable time depends upon the peculiar facts and
circumstances in each case.
Facts:Private respondents asked the petitioner to extend an accommodation loan in the sum of
P4,500.00. Respondents delivered to the petitioner a check for P4,500.00, drawn by Dy Hian
Tat, and signed by them at the back of said check, with the assurance that after one month from
September 13, 1960, the said check would be redeemed by them by paying cash in the sum of
P4,500.00, or the said check can be presented for payment on or immediately after one month.
Petitioner agreed and extended an accommodation loan. The aforesaid check was presented for
payment to the China Banking Corporation, but said check bounced and was not cashed by said
bank, for the reason that the current account of the drawer thereof had already been closed.
Petitioner demanded payment but the latter failed and refused to pay notwithstanding repeated
demands. Both private respondents raised the defense that both have been wholly discharged
by delay in presentment of the check for payment.The Lower Court ruled in favor of the
petitioner. However, this was reversed by the CA upon appeal by the respondents, ruling that the
check was not given as collateral to guarantee a loan secured since the check passed through
other hands before reaching the petitioner and the said check was not presented within a
reasonable time. Hence this petition. Petitioner argues that presentment for payment and notice
of dishonor are not necessary as when funds are insufficient to meet a check, thus the drawer is
liable, whether such presentment and notice be totally omitted or merely delayed.
Issues:1. Whether or not presentment for payment can be dispensed with2. Whether or not
presentment for payment and notice of dishonor of the questioned check were made within
reasonable time
Held:1. No. Where the instrument is not payable on demand, presentment must be made on the
day it falls due. Where it is payable on demand, presentment must be made within a reasonable
time after issue, except that in the case of a bill of exchange, presentment for payment will be
sufficient if made within a reasonable time after the last negotiation thereof (Section 71,
Negotiable Instruments Law).
2. No. It is obvious in this case that presentment and notice of dishonor were not made within a
reasonable time. Reasonable time has been defined as so much time as is necessary under
the circumstances for a reasonable prudent and diligent man to do, conveniently, what the
contract or duty requires should be done, having a regard for the rights, and possibility of loss, if
any, to the other party (Citizens Bank Bldg. v. L & E. Wertheirmer 189 S.W. 361, 362, 126 Ark,
38, Ann. Cas. 1917 E, 520).
Notice may be given as soon as the instrument is dishonored; and unless delay is excused must
be given within the time fixed by the law (Section 102, Negotiable Instruments Law).
In the instant case, the check in question was issued on September 13, 1960, but was
presented to the drawee bank only on March 5, 1964, and dishonored on the same date. After
dishonor by the drawee bank, a formal notice of dishonor was made by the petitioner through a
letter dated April 27, 1968. Under these circumstances, the petitioner undoubtedly failed to
exercise prudence and diligence on what he ought to do all required by law. The petitioner
likewise failed to show any justification for the unreasonable delay.
No hard and fast demarcation line can be drawn between what may be considered as a
reasonable or an unreasonable time, because reasonable time depends upon the peculiar
facts and circumstances in each case (Tolentino, Commentaries and Jurisprudence on
Commercial Laws of the Philippines, Vol. I, Eighth Edition, p. 327).
Wong vs. Court of Appeals
Facts:

Petitioner Wong was an agent of Limtong Press, Inc. (LPI), a manufacturer of calendars. After
printing the calendars, LPI would ship the calendars directly to the customers. Thereafter, the
agents would come around to collect the payments. Petitioner, however, had a history of
unremitted collections, which he duly acknowledged in a confirmation receipt he co-signed with
his wife. Petitioner issued several checks in December 1985, initially to guarantee the payment
of unremitted collections, however, upon agreement between the parties, the checks will be
applied to unremitted collections. Before maturity, petitioner advised not to deposit the said
checks, but after failing to replace them, respondent presented the check on June 1986 which
was later on dishonored by reason of account closed. Having failed to pay, a case of violation
of BP 22 was filed against petitioner. Petitioner contends that he is not liable by reason of the
delay in presenting the checks.
Issue: Wether or not the petitioner is discharged from the liability on the said checks due to
delay in presentment?
Held: Under Section 186 of the Negotiable Instruments Law, a check must be presented for
payment
within a reasonable time after its issue or the drawer will be discharged from liability thereon to
the extent of the loss caused by the delay. By current banking practice, a check becomes stale
after more than six (6) months or 180 days. Private respondent herein deposited the checks 157
days after the date of the check. Hence, said checks cannot be considered stale.The
International Corporate
Bank vs. Sps. Francis S. Gueco and Ma. Luz E. Gueco
FACTS: Gueco spouses obtained a loan from ICB to purchase a car. In consideration thereof,
thedebtors executed PNs, and a chattel mortgage was made over the car. The spouses
defaulted inpayment of their obligations whereupon they entered into a compromise agreement
with the bank. After some negotiation and computation, they tendered a managers check in
favor of the bank based on the reduced amount. Nonetheless, the car was still detained for the
spouses refused to sign the joint motion to dismiss. Because of this, the spouses filed an action
for recovery of the car and damages against the bank. As the result of the proceeding, the
managers check tendered to the bank had become stale in the hands of the bank.
Issue: Whether or not the bank should bear the loss on the stale managers check as a result of
the proceedings.
HELD: Failure to present for payment within a reasonable time will result to the discharge of the
drawer only to the extent of the loss caused by the delay. It does not totally wipe out all liability.
In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the
check. In this case, the Gueco spouses have not alleged, much less shown that they or the bank
which issued the managers check has suffered damage or loss caused by the delay or nonpresentment. Definitely, the original obligation to pay certainly has not been erased
FAR EAST REALTY INVESTMENT V. CA
166 SCRA 256
FACTS:
Private respondents approached petitioner and asked the latter to extend to them an
accommodation loan. They proposed to pay with interest. They even gave a check, signed by
Tat, drawn against Chinabank, and signed at the back by the private respondents. They said
that they will change the check with cash after one month and if not, the check could be
presented for payment and it would be paid. The loan was actually extended but when the check
was presented for payment, it was dishonoredthe account on which it is drawn has long been
closed. The trial courts held in favor of petitioner but this was reversed by the appellate court by

ruling that the check has passed through other hands before reaching the petitioner and the said
check wasnt presented within reasonable time and after its issuance.
HELD:
Where the instrument is not payable on demand, presentment must be made on the day it falls
due. Where it is payable on demand, presentment must be made within a reasonable time after
issue, except that in case of a bill of exchange, presentment for payment is sufficient if made
within reasonable time after the last negotiation thereof. Notice may be given as soon as
instrument has been dishonored and unless delay is excused must be given within the time fixed
by law. In this case, presentment and notice of dishonor were not made within reasonable time.
Negotiable Instruments Case Digest
SADAYA V. SEVILLA
19 SCRA 924
FACTS:
Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the bank. Varona was the only
one who received the proceeds of the note. Sadaya and Sevilla both signed as co-makers to accommodate
Varona. Thereafter, the bank collected from Sadaya. Varona failed to reimburse. Consequently, Sevilla
died and intestate estate proceedings were established. Sadaya filed a creditors claim on his estate for the
payment he made on the note. The administrator resisted the claim on the ground that Sevilla didn't
receive any proceeds of the loan. The trial court admitted the claim of Sadaya though tis was reversed by
the CA.
HELD:
Sadaya could have sought reimbursement from Varona, which is right and just as the latter was the only
one who received value for the note executed. There is an implied contract of indemnity between Sadaya
and Varona upon the formers payment of the obligation to the bank. Surely enough, the obligations of
Varona and Sevilla to Sadaya cannot be joint and several. For indeed, had payment been made by Varona,
Varona couldn't had reason to seek reimbursement from either Sadaya or Sevilla. After all, the proceeds of
the loan went to Varona alone. On principle, a solidary accommodation makerwho made paymenthas
the right to contribution, from his co-accomodation maker, in the absence of agreement to the contrary
between them, subject to conditions imposed by law. This right springs from an implied promise to share
equally the burdens thay may ensue from their having consented to stamp their signatures on the
promissory note. The following are the rules:
1. A joint and several accommodation maker of a negotiable promissory note may demand from the
principal debtor reimbursement for the amount that he paid to the payee
2. A joint and several accommodation maker who pays on the said promissory note may directly demand
reimbursement from his co-accommodation maker without first directing his action against the principal
debtor provided that a. He made the payment by virtue of a judicial demand b. A principal debtor is
insolvent.
It was never shown that there was a judicial demand on Sadaya to pay the obligation and also, it was
never proven that Varona was insolvent. Thus, Sadaya cannot proceed against Sevilla for reimbursement.
Travel-On v. CA
(210 SCRA 352)
Facts: Travel-On (petitioner) is a travel agency, selling airline ticketson commission basis for and in
behalf of different air-line companies. Arturo Miranda (respondent) had a running credit line with said
agency. He procured tickets from Travel-On on behalf ofairline passengers and derived commissions
therefrom. Travel-On filed a suit to collect six (6) checks issued by the respondent totalling 115,000
pesos. Respondent avers that he has no obligations to petitioner and argues that the checks that the
petitioner is seeking to collect from him were for purposes of accommodation. The respondents story is
that the General Manager of Travel-On asked respondent to write the checks because she used them as
evidence to show the Board of Directors that the financial condition of the company was sound.
Petitioner denies this accusation. Issue: Whether or not the checks are evidence of the liability of the
respondent to the petitioner even assuming that they were for purposes of accommodation. Held: The
checks themselves are proof of the indebtedness of the respondent to petitioner. Even if the checks were
for purposes ofaccommodation, as described in Sec. 29 of the Negotiable Instruments Law, the
respondent would still be liable considering that the petitioner is a holder for value. A check which is
regular on its face is deemed prima facie to have been issued for a valuable consideration and every
person whose signature appears thereon is deemed to have become a party thereto for value. The rule is
quite settled that a negotiable instrument is presumed to have been given or indorsed for a sufficient
consideration unless otherwise contradicted by other competent evidence. The facts that all checks

issued by the respondent to petitioner were presented for payment by the latter would lead to no other
conclusion than that these checks were intended for enchasment. There is nothing in the checks
themselves or in any other document that states otherwise. The argument of the respondent that the checks
were merely simulated cannot stand without the clearest and most convincing kinds of evidence. No
such evidence was submitted by the respondent.
Negotiable Instruments Case Digest: Ang V. Associated Bank (2007)
FACTS:
* August 28, 1990: Associated Bank (formerly Associated Banking Corporation and now known as
United Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng Liong (principal
debtor) and petitioner Tomas Ang (co-maker) for the 2 promissory notes
* October 3 and 9, 1978: obtained a loan of P50,000 and P30,000 evidenced by promissory note payable,
jointly and severally, on January 31, 1979 and December 8, 1978
* Despite repeated demands for payment, the latest on September 13, 1988 and September 9, 1986, they
failed to settle their obligations totalling to P539,638.96 as of July 31, 1990
* Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80,000
* Tomas Ang: bank is not the real party in interest as it is not the holder of the promissory notes, much
less a holder for value or a holder in due course; the bank knew that he did not receive any valuable
consideration for affixing his signatures on the notes but merely lent his name as an accommodationparty
* bank granted his co-defendant successive extensions of time within which to pay, without his
knowledge and consent
* the bank imposed new and additional stipulations on interest, penalties, services charges and attorney's
fees more onerous than the terms of the notes, without his knowledge and consent
* he should be reimbursed by his co-defendant any and all sums that he may be adjudged liable to pay,
plus P30,000, P20,000 and P50,000 for moral and exemplary damages, and attorney's fees, respectively.
* October 19, 1990: RTC held Antonio Ang Eng Liong was ordered to pay the principal amount of
P80,000 plus 14% interest per annum and 2% service charge per annum
* Lower Court: Granted against the bank, dismissing the complaint for lack of cause of action.
* CA: ordered Ang to pay the bank - bank is a holder
* CA observed that the bank, as the payee, did not indorse the notes to the Asset Privatization Trust
despite the execution of the Deeds of Transfer and Trust Agreement and that the notes continued to
remain with the bank until the institution of the collection suit.
* With the bank as the "holder" of the promissory notes, the Court of Appeals held that Tomas Ang is
accountable therefor in his capacity as an accommodation party.
* Tomas Ang cannot validly set up the defense that he did not receive any consideration therefor as the
fact that the loan was granted to the principal debtor already constitutes a sufficient consideration.
ISSUE: W/N Ang is liable as accomodation party even without consideration and his co-accomodation
party was granted accomodation w/o his knowledge
HELD: CA AFFIRMED
* At the time the complaint was filed in the trial court, it was the Asset Privatization Trust which had the
authority to enforce its claims against both debtors
* accommodation party as a person "who has signed the instrument as maker, drawer, acceptor, or
indorser, without receiving value therefor, and for the purpose of lending his name to some other person."
As gleaned from the text, an accommodation party is one who meets all the three requisites, viz: (1) he
must be a party to the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive
value therefor; and (3) he must sign for the purpose of lending his name or credit to some other person
* petitioner signed the promissory note as a solidary co-maker and not as a guarantor. This is patent even
from the first sentence of the promissory note which states as follows:
* "Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay
to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro,
Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together
with interest x x x at the rate of SIXTEEN (16) per cent per annum until fully paid."
* immaterial so far as the bank is concerned whether one of the signers, particularly petitioner, has or has
not received anything in payment of the use of his name.
* since the liability of an accommodation party remains not only primary but also unconditional to a
holder for value, even if the accommodated party receives an extension of the period for payment without
the consent of the accommodation party, the latter is still liable for the whole obligation and such
extension does not release him because as far as a holder for value is concerned, he is a solidary codebtor.
Negotiable Instruments Case Digest: Gonzales V. RCBC (2006)
FACTS:
* Gonzales, New Accounts Clerk in the Retail Banking Department at RCBC Head Office
* Dr. Don Zapanta of the Ade Medical Group drew a foreign check of $7,500 against the drawee bank

Wilshire Center Bank, LA, California payable to Eva Alviar (Alviar), Gonzales mother.
* Alviar then endorsed this check.
* Since RCBC gives special accommodations to its employees to receive the checks value w/o awaiting
the clearingperiod, Gonzales presented the foreign check to Olivia Gomez, the RCBCs Head of Retail
Banking
* Olivia Gomez requested Gonzales to endorse it which she did. Olivia Gomez then acquiesced to the
early encashment of the check and signed the check but indicated thereon her authority of "up to
P17,500.00 only".
* Carlos Ramos signed it with an "ok" annotation.
* Presented the check to Rolando Zornosa, Supervisor of the Remittance section of the Foreign
Department of the RCBC Head Office, who after scrutinizing the entries and signatures authorized its
encashment.
* Gonzales received its peso equivalent P155,270.85
* RCBC tried to collect through its correspondent bank, the First Interstate Bank of California but it was
dishonoredthe check because:
* "END. IRREG" or irregular indorsemen
* "account closed"
* Unable to collect, RCBC demanded from Gonzales
* November 27, 1987: Through letter Gonzales agreed that the payment be made thru salary deduction.
* October 1987: deductions started
* March 7, 1988: RCBC sent a demand letter to Alviar for the payment but she did not respond
* June 16, 1988: a letter was sent to Gonzales reminding her of her liability as an indorser
* July 1988: Gonzales resigned from RCBC paying only P12,822.20 covering 10 months
* RCBC filed a complaint for a sum of money against Eva Alviar, Melva Theresa Alviar-Gonzales and the
latters husband Gino Gonzales
* CA Affirmed RTC: liable Eva Alviar as principal debtor and Melva Theresa Alviar-Gonzales as
guarantor
ISSUE: W/N Eva Alviar and Melva Theresa Alvia-Gonzales is liable as general endorsers
HELD: NO. CA REVERSED. RCBC reimburse Gonzales
* Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to
all subsequent holders in due course
1. The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section;
(a) That the instrument is genuine and in all respects what it purports to be
(b) That he has a good title to it (c) That all prior parties had capacity to contract
2. That the instrument is, at the time of his indorsement, valid and subsisting
* In addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case may
be, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled
to pay it
* Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor
of subsequent endorsers extend only to the state of the instrument at the time of their endorsements,
* This provision cannot be used by the party which introduced a defect on the instrument (RCBC) w/c
qualifiedly endorsed it
* Had it not been for the qualified endorsement "up to P17,500.00 only" of Olivia Gomez, who is the
employee of RCBC, there would have been no reason for the dishonor of the check
* The holder or subsequent endorser who tries to claim under the instrument which had been dishonored
for "irregular endorsement" must not be the irregular endorser himself who gave cause for the dishonor.
* Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the
instrument defective and later claim from prior endorsers who have no knowledge or participation in
causing or introducing said defect to the instrument, which thereby caused its dishonor.
AGRO CONGLOMERATES V. SORIANO
348 SCRA 450
FACTS:
Petitioner sold to Wonderland Food Industries two parcels of land. They stipulated under a Memorandum
of Agreement that the terms of payment would be P1,000,000 in cash, P2,000,000 in shares of stock, and
the balance would be payable in monthly installments. Thereafter, an addendum was executed between
them, qualifying the cash payment. Instead of cash payment, the vendee authorized the vendor to obtain a
loan from the financier on which the vendee bound itself to pay for. This loan was to cover for the
payment of P1,000,000. This addendum was not notarized. Petitioner Soriano signed as maker the
promissory notes payable to the bank. However, the petitioners failed to pay the obligations as they were
due. During that time, the bank was in financial distress and this prompted it to endorse the promissory
notes for collection. The bank gave ample time to petitioners then to satisfy their obligations. The trial

court held in favor of the bank. It didn't find merit to the contention that Wonderland was the one to be
held liable for the promissory notes.
HELD:
First, there was no contract of sale that materialized. The original agreement was that Wonderland would
pay cash and petitioner would deliver possession of the farmlands. But this was changed through an
addendum, that petitioner would instead secure a loan and the settlement of the same would be shouldered
by Wonderland.
Petitioners became liable as accommodation parties. They have the right after paying the instrument to
seek reimbursement from the party accommodated, since the relation between them has in effect became
one of principal and surety. Furthermore, as it turned out, the contract of surety between Woodland and
petitioner was extinguished by the rescission of the contract of sale of the farmland. With the rescission,
there was confusion in the persons of the principal debtor and surety. The addendum thereon likewise lost
its efficacy.
NEW PACIFIC TIMBER & SUPPLY CO. INC. VS. SENERIS
NEW PACIFIC TIMBER & SUPPLY CO. INC. VS. SENERIS 10 SCRA 686 FACTS: Petitioner, New
Pacific Timber & Supply Co. Inc. was the defendant in a complaint for collection of money filed by
private respondent, Ricardo A. Tong. In this complaint, respondent Judge rendered a compromise
judgment based on the amicable settlement entered by the parties wherein petitioner will pay to private
respondent P54,500.00 at 6% interest per annum and P6,000.00 as attorneys fee of which P5,000.00 has
been paid. Upon failure of the petitioner to pay the judgment obligation, a writ of execution worth
P63,130.00 was issued levied on the personal properties of the petitioner. Before the date of the auction
sale, petitioner deposited with the Clerk of Court in his capacity as the Ex-Officio Sheriff P50,000.00 in
Cashiers Check of the Equitable Banking Corporation and P13,130.00 in cash for a total of P63,130.00.
Private respondent refused to accept the check and the cash and requested for the auction sale to proceed.
The properties were sold for P50,000.00 to the highest bidder with a deficiency of P13,130.00. Petitioner
subsequently filed an ex-parte motion for issuance of certificate of satisfaction of judgment which was
denied by the respondent Judge. Hence this present petition, alleging that the respondent Judge
capriciously and whimsically abused his discretion in not granting the requested motion for the reason
that the judgment obligation was fully satisfied before the auction sale with the deposit made by the
petitioner to the Ex-Officio Sheriff. In upholding the refusal of the private respondent to accept the check,
the respondent Judge cited Article 1249 of the New Civil Code which provides that payments of debts
shall be made in the currency which is the legal tender of the Philippines and Section 63 of the Central
Bank Act which provides that checks representing deposit money do not have legal tender power. In
sustaining the contention of the private respondent to refuse the acceptance of the cash, the respondent
Judge cited Article 1248 of the New Civil Code which provides that creditor cannot be compelled to
accept partial payment unless there is an express stipulation to the contrary.
ISSUE: Can the check be considered a valid payment of the judgment obligation?
RULING: Yes. It is to be emphasized that it is a well-known and accepted practice in the business sector
that a Cashiers Check is deemed cash. Moreover, since the check has been certified by the drawee bank,
this certification implies that the check is sufficiently funded in the drawee bank and the funds will be
applied whenever the check is presented for payment. The object of certifying a check is to enable the
holder to use it as money. When the holder procures the check to be certified, it operates as an assignment
of a part of the funds to the creditors. Hence, the exception provided in Section 63 of the Central Bank
Act which states that checks which have been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor in cash the amount equal to that which is credited to his account.
The Cashiers Check and the cash are valid payment of the obligation of the petitioner. The private
respondent has no valid reason to refuse the acceptance of the check and cash as full payment of the
obligation
Negotiable Instruments Case Digest: Bataan Cigar V. CA (1994) G.R. No. 93048 March 3, 1994
Lessons Applicable: Rights of a holder (Negotiable Instruments Law)
FACTS:
* Bataan Cigar & Cigarette Factory, Inc. (BCCFI), a corporation involved in the manufacturing of
cigarettes purchased from King Tim Pua George (George King) 2,000 bales of tobacco leaf to be
delivered starting October 1978.
* July 13, 1978: it issued crossed checks post dated sometime in March 1979 in the total amount of
P820K
* George represented that he would complete delivery w/in 3 months from Dec 5 1978 so BCCFI agreed
to purchase additional 2,500 bales of tobacco leaves, despite the previous failure in delivery
* It issued post dated crossed checks in the total amount of P1.1M payable sometime in September 1979.
* July 19, 1978: George sold to SIHI at a discount check amounting to P164K, post dated March 31,
1979, drawn by BCCFI w/ George as payee.

* December 19 and 26, 1978: George sold 2 checks both in the amount of P100K, post dated September
15 & 30, 1979 respectively, drawn by BCCFI w/ George as payee
* Upon failure to deliver, BCCFI issued on March 30, 1979 and September 14 & 28, 1979 a stop payment
order for all checks
* SIHI failing to claim, filed a claim against BCCFI
* RTC: SIHI = holder in due course. Non-inclusion of Gearoge as party is immaterial to the case
ISSUE: W/N SIHI is a holder in due course beign a second indorser and a holder of crossed checks
HELD: YES. GRANTED. RTC reversed.
* Sec. 52
1. That it is complete and regular upon its face
2. That he became the holder of it before it was overdue, and without notice that it had been previously
dishonored, if such was the fact
3. That he took it in good faith and for value
4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in
the title of the person negotiating it
* Sec. 59
* every holder is deemed prima facie a holder in due course
* However, when it is shown that the title of any person who has negotiated the instrument was defective,
the burden is on the holder to prove that he or some person under whom he claims, acquired the title as
holder in due course.
* effect of crossing of a check
1. check may not be encashed but only deposited in the bank
2. check may be negotiated only once to one who has an account with a bank
3. act of crossing the check serves as warning to the holder that the check has been issued for a definite
purpose - he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a
holder in due course
* crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the
indorser's title to the check or the nature of his possession - failure = guilty of gross negligence amounting
to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law
* SIHI is not a holder in due course. Consequently, BCCFI cannot be obliged to pay the checks. However,
that SIHI could not recover from the checks. The only disadvantage of a holder who is not a holder in due
course is that the instrument is subject to defenses as if it were non-negotiable. Hence, SIHI can collect
from the immediate indorser, George
Stelco vs CA
Stelco Marketing vs. CA
GR 96160, 17 June 1992, 210 scra 51
--accommodation party
FACTS:
Stelco Marketing Corporation sold structural steel bars to RYL Construction Inc. RYL gave Stelcos
sister corporation, Armstrong Industries, a MetroBank check from Steelweld Corporation. The check
was issued by Steelwelds President to Romeo Lim, President of RYL, by way of accommodation, as a
guaranty and not in payment of an obligation. When Armstrong deposited the check at its bank, it was
dishonored because it was drawn against insufficient funds. When so deposited, the check bore two
indorsements, i.e. RYL and Armstrong. Subsequently, Stelco filed a civil case against RYL and Steelweld
to recover the value of the steel products.
ISSUE:
Whether Steelweld as an accommodating party can be held liable by Stelco for the dishonored check.
RULING:
Steelweld may be held liable but not by Stelco. Under Section 29 of the NIL, Steelweld Corp. can be held
liable for having issued the subject check for the accommodation of Romeo Lim. An accommodation
party is one who has singed the instrument as maker, drawer, acceptor, or indorser, without receiving
valued therefor, and for the purpose of lending his name to some other person. Such a person is liable on
the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument,
knew him to be only an accommodation party. Stelco however, cannot be deemed a holder of the check
for value as it does not meet two essential requisites prescribed by statute, i.e. that it did not become the
holder of it before it was overdue, and without notice that it had been previously dishonored, and that it
did not take the check in good faith and for value.
Negotiable Instruments Case Digest: Equitable PCI Bank V. Ong (2006)
G.R. No. 156207 September 15, 2006
Lessons Applicable: Promissory Notes and Checks (Negotiable Instruments Law)
FACTS:
* Warliza Sarande deposited in her account at Philippine Commercial International (PCI) Bank a PCI

Bank TCBT Check of P225K.

* December 5 1991: Upon inquiry by Serande at PCI Bank on whether the TCBT Check had been
cleared, she received an affirmative answer.
* Relying on this assurance, she issued 2 checks drawn against the proceeds of TCBT Check.
* PCI Bank Check No. 073661 dated 5 December 1991 for P132K which Sarande issued to respondent
Rowena Ong owing to a business transaction.
* On the same day, Ong presented to PCI Bank requesting PCI Bank to convert the proceeds into a
manager's check, which the PCI Bank obliged.
* December 6 1991: Ong deposited PCI Bank Manager's Check in her account with Equitable Banking
Corporation
* December 9 1991: she received a check return-slip informing her that PCI Bank had stopped the
payment of the check on the ground of irregular issuance.
* Despite several demands made, it was refused
* Ong was constrained to file a Complaint for sum of money, damages and attorney's fees against PCI
Bank
* CA affirmed RTC: favored Ong
ISSUE: W/N Ong can hold PCI liable
HELD: YES. Petition is DENIED. CA affirmed.
* By admitting it committed an error, clearing the check of Sarande and issuing in favor of Ong not just
any check but a manager's check for that matter, PCI Bank's liability is fixed
* certification = acceptance,
* Equitable PCI as drawee bank is bound on the instrument upon certification and it is immaterial to such
liability in favor of Ong who is a holder in due course whether the drawer (Warliza Sarande) had funds or
not with the Equitable PCI Bank
* No unjust enrichment
SECTION 52. What constitutes a holder in due course. A holder in due course is a holder who has taken
the instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice it had been previously
dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect
in the title of the person negotiating it.
The same law provides further:
Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been
issued for a valuable consideration; and every person whose signature appears thereon to have become a
party thereto for value.
Sec. 26. What constitutes holder for value. Where value has at any time been given for the instrument,
the holder is deemed a holder for value in respect to all parties who become such prior to that time.
Sec. 28. Effect of want of consideration. Absence or failure of consideration is a matter of defense as
against any person not a holder in due course; and partial failure of consideration is a defense pro tanto,
whether the failure is an ascertained and liquidated amount or otherwise.
* manager's check
* an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and
honor behind its issuance
* regarded substantially to be as good as the money it represents
* same footing as a certified check
* The object of certifying a check, as regards both parties, is to enable the holder to use it as money.
* check operates as an assignment of a part of the funds to the creditors
Sec. 187. Certification of check; effect of. Where a check is certified by the bank on which it is drawn,
the certification is equivalent to an acceptance
Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the
amount credited to his account
Sec. 62. Liability of acceptor. The acceptor by accepting the instruments engages that he will pay it
according to the tenor of his acceptance; and admits
(a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw
the instrument; and
(b) The existence of the payee and his then capacity to indorse.
STATE INVESTMENT HOUSE VS CA

Negotiable Instruments Law 217 SCRA 32 Holder in Due Course Notice of Dishonor
Corazon Victoriano provided pieces of jewelry to Nora Moulic so that the latter may sell the
same. As security for the jewelries, Moulic issued to Victoriano two post dated checks in the
aggregate amount of P100,000.00. Moulic was not able to sell the jewelries so she returned the
same to Victoriano. Victoriano was, however, unable to return the checks hence Moulic withdrew
all her funds from the bank.
Apparently, the checks were negotiated by Victoriano to State Investment House. So when the
checks were dishonored, State Investment demanded Moulic to pay. Moulic refused to pay
because she said the checks were merely used as security for the jewelry. Moulic further
averred that she received no notice of dishonor.
ISSUE: Whether or not State Investment House is entitled to be paid.
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.
ASIAN BANKING CORPORATION v. JUAN JAVIER
G.R. No. L-19051 April 4, 1923
Doctrine
When a negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof
must be given to the drawer and each of the indorsers, and those who are not notified shall be
discharged from liability, except as provided otherwise. It is incumbent upon a person, who
seeks to enforce the indorsers liability, to establish said liability by proving that notice was within
the time, and in the manner, required by the law.
Facts:
Salvador B. Chaves drew a check on the Philippine National Bank for P11,000 in favor of La
Insular. This check was indorsed by the limited partners of La Insular, and then deposited by
Salvador B. Chaves in his current account with the plaintiff, Asia Banking Corporation. Another
check was drawn and deposited in similar fashion. The amount represented by both checks was
used by Salvador B. Chaves after they were deposited in the plaintiff bank, by drawing checks
on the plaintiff. Subsequently these checks were presented by the plaintiff to the Philippine
National Bank for payment, but the latter refused to pay on the ground that the drawer, Salvador
B. Chaves, had no funds therein. The lower court sentenced the defendant, as indorser, to pay
the plaintiff P11,000. From this judgment the defendant appealed.
Issue:
Whether or not the defendants liability as an indorser is extinguished for lack of notice
Held:
Yes. Section 89 of the Negotiable Instruments Law (Act No. 2031) provides that, when a
negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof must be
given to the drawer and each of the indorsers, and those who are not notified shall be
discharged from liability, except where this act provides otherwise. According to this, the

indorsers are not liable unless they are notified that the document was dishonored. Then, under
the general principle of the law of procedure, it will be incumbent upon the plaintiff, who seeks to
enforce the defendants liability upon these checks as indorser, to establish said liability by
proving that notice was given to the defendant within the time, and in the manner, required by
the law that the checks in question had been dishonored. If these facts are not proven, the
plaintiff has not sufficiently established the defendants liability. There is no proof in the record
tending to show that plaintiff gave any notice whatsoever to the defendant that the checks in
question had been dishonored, and there it has not established its cause of action.
NYCO SALES VS BA FINANCE
Negotiable Instruments Law Notice of Dishonor 200 SCRA 637 Assignment of Credit
FACTS:
Nyco Sales has discounting privileges with BA Finance. In 1978, brothers Renato Fernandez
and Santiago Renato (officers of Sanshell Corporation) approached Nyco Sales Corporation for
a credit accommodation in order for the brothers make use of Nycos discounting privileges.
Nyco Sales agreed and so on November 15, 1978, Sanshell issued a post-dated (November 17,
1978) BPI check to Nyco Sales in the amount of P60,000.00. Following the discounting process
agreed upon, Nyco Sales, thru its president Rufino Yao, endorsed the check in favor of BA
Finance. Thereafter, BA Finance issued a check payable to Nyco Sales which endorsed it in
favor of Sanshell. Sanshell then made use of and/or negotiated the check. Accompanying the
exchange of checks was a Deed of Assignment executed by Nyco Sales (assignor) in favor of
BA Finance (assignee) with the conformity of Sanshell. Under the said Deed, the subject of the
discounting was P60k BPI check.
The check bounced. BA Finance notified Sanshell. Sanshell substituted the BPI check with a
Security Bank and Trust Company check for P60k. This check again bounced. BA Finance
made repeated demands to Nyco Sales and Sanshell but neither of the two settled the
obligation. Hence, BA Finance sued Nyco Sales. Nyco Sales averred that it received no notice
of dishonor when the second check was dishonored.
ISSUE:
Whether or not Nyco Sales is liable to pay BA Finance.
HELD:
Yes. The relationship between Nyco Sales and BA Finance is one of assignor-assignee. The
assignor-vendor warrants both the credit itself (its existence and legality) and the person of the
debtor (his solvency), if so stipulated, as in the case at bar. Consequently, if there be any breach
of the above warranties, the assignor-vendor should be held answerable there for. There is no
question then that the assignor-vendor is indeed liable for the invalidity of whatever he assigned
to the assignee-vendee. Considering now the facts of the case at bar, it is beyond dispute that
Nyco executed a deed of assignment in favor of BA Finance with Sanshell Corporation as the
debtor-obligor. BA Finance is actually enforcing said deed and the check covered thereby is
merely an incidental or collateral matter. This particular check merely evidenced the credit which
was actually assigned to BA Finance. Thus, the designation is immaterial as it could be any
other check. It is only what is represented by the said checks that Nyco is being asked to pay.
Nyco Sales pretension that it had not been notified of the fact of dishonor is belied not only by
the formal demand letter issued by BA Finance but also by the fact that Nyco Sales and
Sanshell had frequent contacts before, during and after the dishonor. More importantly, as long
as the credit remains outstanding, Nyco Sales shall continue to be liable to BA Finance as its
assignor. The dishonor of an assigned check simply stresses its liability and the failure to give a
notice of dishonor will not discharge it from such liability. This is because the cause of action
stems from the breach of the warranties embodied in the Deed of Assignment, and not from the

dishonoring of the check alone.

PACIFICO B. ARCEO, JR vs. PEOPLE OF THE PHILIPPINES
G.R. No. 142641. July 17, 2006.
FACTS:
Pacifico Arceo obtained a loan from Josefino Cenizal. He then issued a check in favor of
Cenizal, in which he promised verbally seven times that he would replace it with cash. After not
replacing the check, he encashed the check but was dishonored due to insufficient funds.
Cenizal went to Arceo's house to inform him of the dishonor but he was not around anymore so
he went to Arceo's lawyer and gave him a letter giving him three days to pay the check. When
Arceo failed, Cenizal charged him in violation of BP 22. The lower court found him guilty.
Arceo contends that he should not be held liable because it was presented beyond the 90-day
period provided under the law; that he only given three days to pay and not five banking days as
per law; and that he paid his obligation.
ISSUE:
Whether Arceo is guilty.
RULING:
The SC denied Arceo's petition. The SC held that the life of a check is six months. Cenizal
presented the check within four months of issuance. The 90-day period in the law is not an
element of the offense. Arceo cannot claim that he was not given five banking days (the rule is
three), because he still remained unpaid after five days of his receipt of dishonor. Lastly, his
claim that he paid the obligation was only mere allegation as there was no proof of his payment
and that the check still remained on Arceo.
ALLIED BANKING COPR. VS CA AND GG SPORTSWEAR
JULY 11, 2006
Lessons Applicable: Liabilities of the Parties
FACTS:
January 6, 1981: Allied Bank (Allied) purchased Export Bill of $20,085 from G.G. Sportswear
Mfg. Corporation (GGS). The bill, drawn under a letter of credit covered Men's Valvoline Training
Suit that was in transit to West Germany. The export bill was issued by Chekiang First Bank
Ltd., Hongkong. With the purchase of the bill, ALLIED credited GGS the peso equivalent of the
bill amounting to P151,474.52 Nari Gidwani and Alcron International Ltd. (Alcron) executed their
respective Letters of Guaranty, holding themselves liable on the export bill if it should be
dishonored or retired by the drawee for any reason. Spouses Leon and Leticia de Villa and Nari
Gidwani also executed a Continuing Guaranty/Comprehensive Surety (surety), guaranteeing
payment of any and all such credit accommodations which ALLIED may extend to GGS. When
ALLIED negotiated the export bill to Chekiang, payment was refused due to some material
discrepancies in the documents submitted by GGS relative to the exportation covered by the
letter of credit. ALLIED demanded payment. GGS and Nari Gidwani: signed blank forms of the
Letters of Guaranty and the Surety, and the blanks were only filled up by ALLIED after they had
affixed their signatures. They also added that the documents did not cover the transaction
involving the subject export bill. Spouses de Villa, not aware of the existence of the export bill,
signed blank forms of the surety and averred that the guaranty was not meant to secure the
export bill. Alcron is a foreign corporation doing business in the Philippines - its branch in the
Philippines is merely a liaison office. Neither its liaison office in the Philippines nor its then
representative, Hans-Joachim Schloer, had the authority to issue Letters of Guaranty for and in
behalf of local entities and persons. RTC ruled in favor of Allied. According to CA, however, GGS
is liable to reimburse Allied, but it exonerated the guarantors from their liabilities under the

Letters of Guaranty
ISSUE:
W/N Gidwani, Alcron and Spouses Villa can be held jointly and severally liable because of their
capacity as guarantors and surety in the absence of protest on the bill in accordance with
Section 152 of the Negotiable Instruments Law
HELD:
YES. CA modified. Nari Gidwani, and Spouses Leon and Leticia de Villa are jointly and severally
liable together with G.G. Sportswear.
Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter
3, Title I of this Book shall be observed. In such case the contract is called a suretyship.
Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by
respondents, is not pertinent to this case.
There are well-defined distinctions between the contract of an indorser and that of a
guarantor/surety of a commercial paper, which is what is involved in this case. The contract of
indorsement is primarily that of transfer, while the contract of guaranty is that of personal
security. The liability of a guarantor/surety is broader than that of an indorser. Unless the bill is
promptly presented for payment at maturity and due notice of dishonor given to the indorser
within a reasonable time, he will be discharged from liability thereon. On the other hand, except
where required by the provisions of the contract of suretyship, a demand or notice of default is
not required to fix the surety's liability. Therefore, no protest on the export bill is necessary to
charge all the respondents jointly and severally liable having affixed their consenting signatures
in several documents executed at different times, it is safe to presume that they had full
knowledge of its terms and conditions, hence, they are precluded from asserting ignorance of
the legal effects of the undertaking they assumed thereunder.