1. PHILIPPINES EDUCATION CO.

VS SORIANO, 39 SCRA 587

FACTS: In April 1958, a certain Enrique Montinola was purchasing ten money
orders from theManila Post Office. Each money order was worth P200.00.
Montinola offered to pay the money orders via a private check but the cashier
told him he cannot pay via a private check. But still somehow, Montinola was
able to leave the post office with themoney orders without him paying for them.
Days later, the missing money orders were discovered. Meanwhile, the
Philippine Education Co., Inc. (PECI) presented one of the missing
postal money orders before the Bank of America. The money order was initially
credited and so P200.00 was deposited in PECIs account with the bank. But
then later the post office, through Mauricio Soriano (Chief of the Money
Order Division of the Post Office), advised the bank that the money order was
irregularly issued hence the P200.00 was debited back from PECIs account.
PECI is now invoking that the money order was duly negotiated to them and thus
they are entitled to the amount it represents.
ISSUE: Whether or not postal money orders are negotiable instruments.
HELD: No. Postal money orders are not negotiable instruments. The rationale
behind this rule is the fact that in establishing and operating a postal money
order system, the government is not engaging in commercial transactions but
merely exercises a governmental power for the public benefit. In fact,
postal money orders are subject to a lot of restrictions limiting their negotiability.
Particularly in this case, as far back as 1948, there was already an agreement
between Bank of America and the Manila Post Office, that in case the post office
would have an adverse claim against any Bank of America depositor involving
postal money orders issued by the post office, all amounts cleared in relation
thereto shall be refunded back to the post offices account with the bank this in
itself is already a limitation in the negotiability and nature of the postal money
orders issued by the post office because of the special conditions attached.

2. CALTEX PHIL. VS CA, 212 SCRA 448

FACTS: In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs)

from Security Bank and Trust Company for the formers deposit with the said
bank amounting to P1,120,000.00. The said CTDs are couched in the following
manner:
This is to Certify that B E A R E R has deposited in this Bank the sum
of _______ Pesos,
Philippine
Currency,
repayable
to
said
depositor _____ days. after date, upon presentation and surrender of this
certificate, with interest at the rate of ___ % per cent per annum.
Angel de la Cruz subsequently delivered the CTDs to Caltex in connection with
the purchase of fuel products from Caltex.
In March 1982, Angel de la Cruz advised Security Bank that he lost the CTDs. He
executed an affidavit of loss and submitted it to the bank. The bank then issued
another set of CTDs. In the same month, Angel de la Cruz acquired a loan of
P875,000.00 and he used his time deposits as collateral.
In November 1982, a representative from Caltex went to Security Bank to
present the CTDs (delivered by de la Cruz) for verification. Caltex advised
Security Bank that de la Cruz delivered Caltex the CTDs as security for
purchases he made with the latter. Security Bank refused to accept the CTDs
and instead required Caltex to present documents proving the agreement made
by de la Cruz with Caltex. Caltex however failed to produce said documents.
In April 1983, de la Cruz loan with Security bank matured and no payment was
made by de la Cruz. Security Bank eventually set-off the time deposit to pay off
the loan.
Caltex sued Security Bank to compel the bank to pay off the CTDs. Security
Bank argued that the CTDs are not negotiable instruments even though the word
bearer is written on their face because the word bearer contained therein refer
to depositor and only the depositor can encash the CTDs and no one else.
ISSUE: Whether or not the certificates of time deposit are negotiable.
HELD: Yes. The CTDs indicate that they are payable to the bearer; that there is
an implication that the depositor is the bearer but as to who the depositor is, no
one knows. It does not say on its face that the depositor is Angel de la Cruz. If it
was really the intention of respondent bank to pay the amount to Angel de la

Cruz only, it could have with facility so expressed that fact in clear and
categorical terms in the documents, instead of having the word BEARER
stamped on the space provided for the name of the depositor in each CTD. On
the wordings of the documents, therefore, the amounts deposited are repayable
to whoever may be the bearer thereof.
Thus, de la Cruz is the depositor insofar as the bank is concerned, but
obviously other parties not privy to the transaction between them would not be in
a position to know that the depositor is not the bearer stated in the CTDs.
However, Caltex may not encash the CTDs because although the CTDs are
bearer instruments, a valid negotiation thereof for the true purpose and
agreement between Caltex and De la Cruz, requires both delivery and
indorsement. As discerned from the testimony of Caltex representative, the
CTDs were delivered to them by de la Cruz merely for guarantee or security and
not as payment.

3. METROBANK VS CA, 194 SCRA 168

FACTS:

January 1979: Eduardo Gomez opened an account with Golden Savings

and deposited over a period of 2 months 38 treasury warrants totalling
P1,755,228.37.

all drawn by the Philippine Fish Marketing Authority and purportedly

signed by its General Manager and countersigned by its Auditor:

6 - directly payable to Gomez

32 - indorsed by their respective payees, followed by Gomez

as second indorser

June 25 - July 16, 1979: all warrants were subsequently indorsed by

Gloria Castillo asCashier of Golden Savings and deposited to its Savings in
the Metrobank branch

They were then sent for clearing by the branch office to

the principal office of Metrobank, which forwarded them to the Bureau of
Treasury for special clearing

More than 2 weeks after the deposits, Castillo asked if the warrants were
cleared.

She was told to wait.

Gomez was also not allowed to withdraw from his account
exasperated over Gloria's repeated inquiries and also as
an accommodation for a "valued client," Metrobank allowed Golden Savings
to make the following withdrawals:

July 9, 1979 - P508,000.00

July 13, 1979 - P310,000.00

July 16, 1979 - P150,000.00

Gomez was also allowed to withdraw a total amount of P1,167,500 (latest

on July 16, 1979)
July 21, 1979: Metrobank informed Golden Savings that 32 of the warrants
had been dishonored by the Bureau of Treasury on July 19, 1979, and
demanded the refund by Golden Savings of the amount it had previously
withdrawn, to make up the deficit in its account. - refused
CA affirmed RTC: favored Golden Savings

ISSUE: W/N Metrobank can claim a refund from Golden Savings

HELD: NO. Affirmed. withdrawn must be charged not to Golden Savings but to
Metrobank, which must bear the consequences of its own negligence. But the
balance of P586,589.00 should be debited to Golden Savings, as obviously
Gomez can no longer be permitted towithdraw this amount from his deposit
because of the dishonor of the warrants

Metrobank was negligent in giving Golden Savings the impression that the
treasury warrants had been cleared and that, consequently, it was safe to
allow Gomez to withdraw

It "presumed" that the warrants had been cleared simply because

of "the lapse of one week."

There was no reason why it should not have waited until the
treasury warrants had been cleared

Art. 1909. The agent is responsible not only for fraud, but also for negligence,
which shall be judged 'with more or less rigor by the courts, according to whether
the agency was or was not for a compensation.

Golden Savings acted with due care and diligence

Forgery cannot be presumed. It must be established by clear, positive and

convincing evidence. -here not proven
treasury warrants in question are not negotiable instruments
stamped on their face is the word "non-negotiable"
indicated that they are payable from a particular fund

Sec. 1. Form of negotiable instruments. An instrument to be negotiable

must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in
money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.
xxx xxx xxx
Sec. 3. When promise is unconditional. An unqualified order or promise to pay
is unconditional within the meaning of this Act though coupled with
(a) An indication of a particular fund out of which reimbursement is to be made or
a particular account to be debited with the amount; or
(b) A statement of the transaction which gives rise to the instrument judgment.
But an order or promise to pay out of a particular fund is not unconditional.
4. SESBRENO VS CA, 222 SCRA 466
FACTS: Raul Sesbreno made a money market placement in the amount of
P300,000 with PhilFinance, with a term of 32 days. PhilFinance issued to
Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation
Promissory Note (DMC PN No. 2731), the Certificate of Securities Delivery
Receipt indicating the sale of the Note with notation that said security was in the
custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank
of Asia and America for P304,533.33 payable on 13 March 1981. The checks
were dishonored for having been drawn against insufficient funds. Philfinance
delivered to petitioner Denominated Custodian Receipt (DCR).
Petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, and
handed her a demand letter informing the bank that his placement with
Philfinance in the amount reflected in the DCR had remained unpaid and
outstanding, and that he in effect was asking for the physical delivery of the

underlying promissory note. Petitioner then examined the original of the DMC PN
No. 2731 and found: that the security had been issued on 10 April 1980; that it
would mature on 6 April 1981; that it had a face value of P2,300,833.33, with the
Philfinance as payee and private respondent Delta Motors Corporation (Delta)
as maker; and that on face of the promissory note was stamped NON
NEGOTIABLE. Pilipinas did not deliver the Note, nor any certificate of
participation in respect thereof, to petitioner.
Petitioner later made similar demand letters again asking private respondent
Pilipinas for physical delivery of the original of DMC PN No. 2731.
Petitioner also made a written demand upon private respondent Delta for the
partial satisfaction of DMC PN No. 2731, explaining that Philfinance, as payee
thereof, had assigned to him said Note to the extent of P307,933.33. Delta,
however, denied any liability to petitioner on the promissory note.
As petitioner had failed to collect his investment and interest thereon, he filed an
action for damages against private respondents Delta and Pilipinas.
ISSUE: WON DMC PN No. 2731 marked as non-negotiable may be assigned?
HELD: YES. Only an instrument qualifying as a negotiable instrument under the
relevant statute may be negotiated either by indorsement thereof coupled with
delivery, or by delivery alone where the negotiable instrument is in bearer form. A
negotiable instrument may, however, instead of being negotiated, also
be assigned or transferred. The legal consequences of negotiation as
distinguished from assignment of a negotiable instrument are, of course,
different. A non-negotiable instrument may, obviously, not be negotiated; but it
may be assigned or transferred, absent an express prohibition against
assignment or transfer written in the face of the instrument:
The words not negotiable, stamped on the face of the bill of lading, did not
destroy its assignability, but the sole effect was to exempt the bill from the
statutory provisions relative thereto, and a bill, though not negotiable, may be
transferred by assignment; the assignee taking subject to the equities between
the original parties. 12 (Emphasis added)
DMC PN No. 2731, while marked non-negotiable, was not at the same time
stamped non-transferable or non-assignable. It contained no stipulation which
prohibited Philfinance from assigning or transferring, in whole or in part, that
Note.

5. FIRESTONE TIRE AND RUBBER VS CA, 333 SCRA 601

FACTS:
Forjas-Arca Enterprise Company is maintaining a special savings account
with Luzon Development Bank, the latter authorized and allowed withdrawals of
funds though the medium of special withdrawal slips. These are supplied by
Fojas-Arca. Fojas-Arca purchased on credit with FirestoneTire & Rubber
Company, in payment Fojas-Arca delivered a 6 special withdrawal slips. In turn,
these were deposited by the Firsestone to its bank account in Citibank. With this,
relying on such confidence and belief Firestone extended to Fojas-Arca other
purchase on credit of its products but several withdrawal slips were dishonored
and not paid. As a consequence, Citibank debited the plaintiffs account
representing the aggregate amount of the two dishonored special withdrawal
slips. Fojas-Arca averred that the pecuniary losses it suffered are a caused by
and directly attributes to defendants gross negligence as a result Fojas-Arca
filed a complaint.
ISSUE:
Whether or not the acceptance and payment of the special withdrawal
slips without the presentation of the depositors passbook thereby giving the
impression that it is a negotiable instrument like a check.
HELD:
No. Withdrawal slips in question were non negotiable instrument. Hence,
the rules governing the giving immediate notice of dishonor of negotiable
instrument do not apply. The essence of negotiability which characterizes a
negotiable paper as a credit instrument lies in its freedom to circulate freely as a
substitute for money. The withdrawal slips in question lacked this character.
6. ANG TEK LIAN VS CA, 87 SCRA 383
FACTS:
Ang Tek Lian knowing that he had no funds therefor, drew a check upon
China Banking Corporation payable to the order of cash. He delivered it toLee
Hua Hong in exchange for money. The check was presented by Lee Hua hong to
the drawee bank for payment, but it w3as dishonored for insufficiency of funds.
With this, Ang Tek Lian was convicted of estafa.
ISSUE:
Whether or not the check issued by Ang Tek Lian that is payable to the
order to cash and not have been indorsed by Ang Tek Lian, making him not
guilty for the crime of estafa.
HELD:

No.Under Sec. 9 of NIL a check drawn payable to the order of cash is a

check payable to bearer and the bank may pay it to the person presenting it for
payment without the drawers indorsement. However, if the bank is not sure of
the bearers identity or financial solvency, it has the right to demand identification
or assurance against possible complication, such as forgery of drawers
signature, loss of the check by the rightful owner, raising of the amount payable,
etc. But where the bank is satisfied of the identity or economic standing of the
bearer who tenders the check for collection, it will pay the instrument without
further question; and it would incur no liability to the drawer in thus acting.
7. DEVELOPMENT BANK OF THE PHILS. VS SIMA WEI, 219 SCRA 383
FACTS:
Respondent Sima Wei executed and delivered to petitioner Bank a
promissory note engaging to pay the petitioner Bank or order the amount of
P1,820,000.00. Sima Wei subsequently issued two crossed checks payable to
petitioner Bank drawn against China Banking Corporation in full settlement of the
drawer's account evidenced by the promissory note. These two checks however
were not delivered to the petitioner-payee or to any of its authorized
representatives but instead came into the possession of respondent Lee Kian
Huat, who deposited the checks without the petitioner-payee's indorsement to the
account of respondent Plastic Corporation with Producers Bank. Inspite of the
fact that the checks were crossed and payable to petitioner Bank and bore no
indorsement of the latter, the Branch Manager of Producers Bank authorized the
acceptance of the checks for deposit and credited them to the account of said
Plastic Corporation.
ISSUE:
Whether petitioner Bank has a cause of action against Sima Wei for
the undelivered checks.
RULING:
No. A negotiable instrument must be delivered to the payee in
order to evidence its existence as a binding contract. Section 16 of the NIL
provides that every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect
thereto. Thus, the payee of a negotiable instrument acquires no interest with
respect thereto until its delivery to him. Without the initial delivery of the
instrument from the drawer to the payee, there can be no liability on the
instrument. Petitioner however has a right of action against Sima Wei for the
balance due on the promissory note.
8. PHILIPPINE BANK OF COMMERCE VS ARUEGO, 102 SCRA 530
FACTS:

December 1, 1959: Philippine Bank of Commerce (PBC) instituted against

Jose M. Aruego for the recovery of the total sum of about P 35K with interest

from November 17, 1959 and commission of 3/8% for every thirty 30 days
plus attorney's fees of 10% of the total amount due and costs
represents the cost of the printing the periodical published by the
Aruego "World Current Events"
To facilitate the payment of the printing, Aruego obtained a
credit accommodation from the PBC
the printer, Encal Press and Photo Engraving, collected the cost of
every printing by drawing a draft against the PBC, which PBC later accepts
As an added security for the payment of the amounts
advanced to Encal Press and Photo-Engraving, PBC required Aruego to
execute a trust receipt (PBC hold in trust for Aruego the periodicals and to sell
the same with the promise to turn over to the Aruego the proceeds for the
payment of all obligations arising from the draft)
trial court: Aruego to pay to the PBC
Aruego: signed the supposed bills of exchange as an agent of the
Philippine Education Foundation Company where he is president
Section 20 of the Negotiable Instruments Law

"Where the instrument contains or a person adds to his signature words

indicating that he signs for or on behalf of a principal or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the
mere addition of words describing him as an agent or as filing a representative
character, without disclosing his principal, does not exempt him from personal
liability."

signed the drafts only as an accommodation party and as

such, should be made liable only after a showing that the drawer is incapable
of paying

not really bills of exchange but mere pieces of evidence of

indebtedness because payments were made before acceptance

ISSUE:

W/N

Aruego

should

be

personally

liable

HELD: YES. CFI AFFIRMED.

nowhere has he disclosed that he was signing as a representative of the

Philippine EducationFoundation Company

For failure to disclose his principal, Aruego is personally liable for

the drafts he accepted

An accommodation party is one who has signed the instrument as maker,

drawer, indorser, without receiving value therefor and for the purpose of

lending his name to some other person. Such person is liable on the
instrument to a holder for value, notwithstanding such holder, at the time of
the taking of the instrument knew him to be only an accommodationparty
he signed as a drawee/acceptor
Under the Negotiable Instrument Law, a drawee is primarily
liable
As long as a commercial paper conforms with the definition of a bill of
exchange, that paper is considered a bill of exchange
The nature of acceptance is important only in the determination of
the kind of liabilities of the parties involved, but not in the determination of
whether a commercial paper is a bill of exchange or not