1) BPI vs.

ROXAS
Facts:
Gregorio C. Roxas, respondent, is a trader. Sometime in March 1993, he delivered stocks of vegetable oil to spouses Rodrigo and Marissa
Cawili. As payment therefor, spouses Cawili issued a personal check in the amount of P348,805.50. However, when respondent tried to
encash the check, it was dishonored by the drawee bank. Spouses Cawili then assured him that they would replace the bounced check with
a cashiers check from the Bank of the Philippine Islands (BPI), petitioner.
On March 31, 1993, Respondent and Rodrigo Cawili went to petitioners branch at Shaw Boulevard to replace the check. The cashiers
check was drawn against the account of Marissa Cawili. Rodrigo then handed the check to respondent in front of the branch manager,
Elma. The following day, respondent returned to the same branch to encash the cashiers check but it was dishonored. Elma informed him
that Marissas account was closed on that date, April 1, 1993.
Respondent filed a complaint for sum of money against petitioner. He prayed that petitioner be ordered to pay the amount of the check,
damages, and cost of suit.
RTC: rendered judgment in favor of Roxas and orders BPI to pay Roxas.
CA: Affirmed the trial courts judgment
Issue: (1) Whether the respondent is a holder in due course; and (2) Whether the petitioner is liable to respondent for the amount of the
cashiers check.
Held:
Petition denied.
Section 52 of the Negotiable Instruments Law provides:

SEC. 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 that 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 person negotiating it.

As a general rule, under the above provision, every holder is presumed prima facie to be a holder in due course. One who claims
otherwise has the onus probandi to prove that one or more of the conditions required to constitute a holder in due course are lacking. In
this case, petitioner contends that the element of value is not present, therefore, respondent could not be a holder in due course.

Petitioners contention lacks merit. Section 25 of the same law states:

SEC. 25. Value, what constitutes. Value is any consideration sufficient to support a simple contract. An antecedent or
pre-existing debt constitutes value; and is deemed as such whether the instrument is payable on demand or at a future
time.
Petitioner bank became liable to respondent from the moment it issued the cashiers check. Having been accepted by respondent, subject to
no condition whatsoever, petitioner should have paid the same upon presentment by the former.
2) Simex International (Manila) Inc. vs. Court of Appeals G.R. No. 88013, March 19, 1990
The petitioner is a private corporation engaged in the exportation of food products. It buys these products from various local
suppliers and then sells them abroad, particularly in the United States, Canada and the Middle East. Most of its exports are
purchased by the petitioner on credit.

The petitioner was a depositor of the respondent bank and maintained a checking account in its branch at Romulo Avenue,
Cubao, Quezon City. On May 25, 1981, the petitioner deposited to its account in the said bank the amount of P100,000.00,
thus increasing its balance as of that date to P190,380.74. 1 Subsequently, the petitioner issued several checks against its
deposit but was suprised to learn later that they had been dishonored for insufficient funds.
As a consequence, the California Manufacturing Corporation sent on June 9, 1981, a letter of demand to the petitioner,
threatening prosecution if the dishonored check issued to it was not made good. It also withheld delivery of the order made by
the petitioner. Similar letters were sent to the petitioner by the Malabon Long Life Trading, on June 15, 1981, and by the G.
and U. Enterprises, on June 10, 1981. Malabon also canceled the petitioner's credit line and demanded that future payments
be made by it in cash or certified check. Meantime, action on the pending orders of the petitioner with the other suppliers
whose checks were dishonored was also deferred.
The petitioner complained to the respondent bank on June 10, 1981. 3 Investigation disclosed that the sum of P100,000.00
deposited by the petitioner on May 25, 1981, had not been credited to it. The error was rectified on June 17, 1981, and the
dishonored checks were paid after they were re-deposited. 4
The petitioner then filed a complaint in the then Court of First Instance of Rizal claiming from the private respondent moral
damages in the sum of P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25% attorney's fees, and
costs.
Trial court rendered judgment holding that moral and exemplary damages were not called for under the circumstances.
However, observing that the plaintiff's right had been violated, he ordered the defendant to pay nominal damages in the
amount of P20,000.00 plus P5,000.00 attorney's fees and costs.
Respondent court affirmed trial courts decision.
Issue: Whether the bank is guilty of negligence, which warrants SIMEX for damages
Held:
The Supreme Court feels that the award of nominal damages in the sum of P20,000.00 was not the proper relief to which the
petitioner was entitled. Under Article 2221 of the Civil Code, "nominal damages are adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him." The Supreme Court found that the petitioner has indeed incurred loss
through the fault of the private respondent, the proper remedy is the award to it of moral damages, which we impose, in our
discretion, in the same amount of P20,000.00.

The depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few
hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as
promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can
dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the
bank, such as the dishonor of a check without good reason, can cause the depositor not a little embarrassment if not also
financial loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their
relationship. In the case at bar, it is obvious that the respondent bank was remiss in that duty and violated that relationship.
What is especially deplorable is that, having been informed of its error in not crediting the deposit in question to the petitioner,
the respondent bank did not immediately correct it but did so only one week later or twenty-three days after the deposit was
made.

3) BANK OF THE PHILIPPINE ISLANDSvs.HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIMG.R. No.
104612May 10, 199
FACTS:
Private respondents Eastern Plywood Corporation and Benigno Lim as
officer of the corporation, had an AND/OR joint account with Commercial Bank
and Trust Co (CBTC), the predecessor-in-interest of petitioner Bank of the
Philippine Islands. Lim withdraw funds from such account and used it to open a

joint checking account (an AND account) with Mariano Velasco. When Velasco
died in 1977, said joint checking account had P662,522.87. By virtue of an
Indemnity Undertaking executed by Lim and as President and General Manager
of Eastern withdrew one half of this amount and deposited it to one of the
accounts of Eastern with CBTC.
Eastern obtained a loan of P73,000.00 from CBTC which was not secured.
However, Eastern and CBTC executed a Holdout Agreement providing that the
loan was secured by the Holdout of the C/A No. 2310-001-42 referring to the
joint checking account of Velasco and Lim.
Meanwhile, a judicial settlement of the estate of Velasco ordered the
withdrawal of the balance of the account of Velasco and Lim.
Asserting that the Holdout Agreement provides for the security of the loan
obtained by Eastern and that it is the duty of CBTC to debit the account of
respondents to set off the amount of P73,000 covered by the promissory note,
BPI filed the instant petition for recovery. Private respondents Eastern and Lim,
however, assert that the amount deposited in the joint account of Velasco and
Lim came from Eastern and therefore rightfully belong to Eastern and/or Lim.
Since the Holdout Agreement covers the loan of P73,000, then petitioner can
only hold that amount against the joint checking account and must return the
rest.
ISSUE:
Whether BPI can demand the payment of the loan despite the existence of
the Holdout Agreement and whether BPI is still liable to the private respondents
on the account subject of the withdrawal by the heirs of Velasco.
RULING:
Yes, for both issues. Regarding the first, the Holdout Agreement
conferred on CBTC the power, not the duty, to set off the loan from the account
subject of the Agreement. When BPI demanded payment of the loan from
Eastern, it exercised its right to collect payment based on the promissory note,
and disregarded its option under the Holdout Agreement. Therefore, its demand
was in the correct order.
Regarding the second issue, BPI was the debtor and Eastern was the
creditor with respect to the joint checking account. Therefore, BPI was obliged
to return the amount of the said account only to the creditor. When it allowed
the withdrawal of the balance of the account by the heirs of Velasco, it made the
payment to the wrong party. The law provides that payment made by the
debtor to the wrong party does not extinguish its obligation to the creditor who
is without fault or negligence. Therefore, BPI was still liable to the true creditor,
Eastern.

4) PNB VS. San Miguel Corp

facts:
On July 1, 1996, respondent San Miguel Corporation (SMC, for brevity) entered into an Exclusive Dealership Agreement with a
certain Rodolfo R. Goroza (Goroza, hereafter), wherein the latter was given by SMC the right to trade, deal, market or otherwise
sell its various beer products. Goroza applied for and issued an initial credit line of two million pesos, and started selling SMCs
beer products.
On February 11, 1997, Goroza applied for an additional credit line with the PNB, which the latter also granted, in the amount not
exceeding two million four hundred thousand pesos (P2,400,000.00), making his total credit line with PNB reached four million
four hundred thousand pesos (P4,400,000.00) x x x. Initially, Goroza was able to pay his credit purchases with SMC x x x.
Sometime in January 1998, however, Goroza started to become delinquent with his accounts.
Demands to pay the amount of three million seven hundred twenty-two thousand four hundred forty pesos and 88/100
(P3,722,440.88) were made by SMC against Goroza and PNB, but neither of them paid. Thus, on April 23, 2003, SMC filed a
Complaint for collection of sum of money against PNB and Goroza with the respondent Regional Trial Court Branch 3, Butuan City

Aftersummons,petitionerPNBfileditsanswerwhileGorozadidnot.UponSMCsMotiontoDeclare
Defendantindefault,Gorozawasdeclaredindefault.TrialproceededinsofarasGorozawas
Concerned.theRTCrendereditsdecisioninfavourofSMC,orderingdefendantRodolfoGorozatopaySMCtheprincipalamountof
P3,722,440.00,legalinterestof12%perannum,litigationexpensesP20,000andattorneysfeeofP30,000.GorozafiledaNoticeof
Appeal,whileSMCfiledaMotionforReconsideration.
PNBfiledan
UrgentMotiontoTerminateProceedingsonthegroundthatadecisionwasalreadyrenderedonMay
10,2005findingGorozasolelyliable.
Issue:Whetherornotthecourtofappealserredinholdingthatproceedingsmaycontinueagainstpnbdespitethecompleteadjudicationof
reliefinfavorofsmc.
Held:
theappealofGoroza,assailingthejudgmentoftheRTCfindinghimliable,willnotpreventthecontinuationoftheongoingtrialbetween
SMCandPNB.TheRTCretainsjurisdictioninsofarasPNBisconcerned,becausetheappealmadebyGorozawasonlywithrespectto
hisownliability.Infact,PNBitself,initsReplytorespondent'sComment,admittedthattheMay10,2005judgmentoftheRTCwas
"decidedsolelyagainstdefendantRodolfoGoroza."

By definition, a letter of credit is a written instrument whereby the writer requests or authorizes the addressee to pay
money or deliver goods to a third person and assumes responsibility for payment of debt therefor to the addressee. A
letter of credit, however, changes its nature as different transactions occur and if carried through to completion ends up
as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract
or disputes between the parties thereto.
xxxx
Thus, the engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft and the required
documents are presented to it. The so-called "independence principle" assures the seller or the beneficiary of prompt
payment independent of any breach of the main contract and precludes the issuing bank from determining whether the
main contract is actually accomplished or not. Under this principle, banks assume no liability or responsibility for the
form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or
particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or
responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods
represented by any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the
consignor, the carriers, or the insurers of the goods, or any other person whomsoever.
xxxx
As discussed above, in a letter of credit transaction, such as in this case, where the credit is stipulated as irrevocable,
there is a definite undertaking by the issuing bank to pay the beneficiary provided that the stipulated documents are
presented and the conditions of the credit are complied with. Precisely, the independence principle liberates the issuing
bank from the duty of ascertaining compliance by the parties in the main contract. As the principle's nomenclature
clearly suggests, the obligation under the letter of credit is independent of the related and originating contract. In brief,
the letter of credit is separate and distinct from the underlying transaction.
27

In other words, PNB cannot evade responsibility on the sole ground that the RTC judgment found Goroza liable and
ordered him to pay the amount sought to be recovered by SMC. PNB's liability, if any, under the letter of credit is yet to
be determined.

5) Lim vs. BDO Unibank

6) Westmont Bank vs. Ong
FACTS
Managers checks payable to respondent Ong was intercepted, indorsed by forging Ongs signature, and deposited to
petitioner. Ong sought for remedies after learning this but to no avail.

ISSUE
Whether or not respondent Ong may still recover from petitioner.

RULING
YES. Ongs signature as payee, in the case at bar, was forged to make it appear that he had made an indorsement in favor of
the forger. Such signature should be deemed as inoperative and ineffectual. Petitioner, as the collecting bank, grossly erred in
making payment by virtue of said forged signature. Ong should therefore be allowed to recover from the collecting bank.

FACTS:
Ong was supposed to be the payee of the checks issued by Island Securities. Ong has a current
account with petitioner bank. He opted to sell his shares of stock through Island Securities. The
company in turn issued checks in favor of Ong but unfortunately, the latter wasn't able to receive any.
His signatures were forged by Tamlinco and the checks were deposited in his own account with
petitioner. Ong then sought to collect the money from the family of Tamlinco first before filing a
complaint with the Central Bank. As his efforts were futile to recover his money, he filed an action
against the petitioner. The trial and appellate court decided in favor of Ong.

HELD:
Since the signature of the payee was forged, such signature should be deemed inoperative and
ineffectual. Petitioner, as the collecting bank, grossly erred in making payment by virtue of said
forged signature. The payee, herein respondent, should therefore be allowed to collect from the
collecting bank.
It should be liable for the loss because it is its legal duty to ascertain that the payees endorsement
was genuine before cashing the check. As a general rule, a bank or corporation who has obtained
possession of a check with an unauthorized or forged indorsement of the payees signature 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, notwithstanding that the amount has been paid to the person from whom the
check was obtained.
DOCTRINE OF DESIRABLE SHORT CUTplaintiff uses one action to reach, by desirable short cut,
the person who ought to be ultimately liable as among the innocent persons involved in the
transaction. In other words, the payee ought to be allowed to recover directly from the collecting bank,
regardless of whether the check was delivered to the payee or not.
On the issue of laches, Ong didn't sit on his rights. He immediately sought the intervention of Tamlincos
family to collect the sum of money, and later the Central Bank. Only after exhausting all the
measures to settle the issue amicably did he file the action.

7) United coconut planters bank vs. Ramos