Stelco Marketing Corp. v. Court of Appeals, G.R. No.

96160, [June 17, 1992]

FACTS: On seven (7) different , petitioner Stelco sold to RYL Construction, steel bars
of various sizes and rolls of G.I. wire delivered at different places at the indication of
RYL Construction for P126,859.61. lthough the corresponding invoices issued by
STELCO stipulated that RYL would pay "COD" (cash on delivery), the latter made no
payments for the construction materials thus ordered and delivered despite
insistent demands for payment by the former.
On April 4, 1981, RYL gave to Armstrong Industries described by STELCO as its
"sister corporation" and "manufacturing arm" a check drawn against Metrobank
in the amount of P126,129.86, numbered 765380 and dated April 4, 1981. That
check was a company check of another corporation, Steelweld Corporation
of the Philippines, signed by its President, Peter Rafael Limson, and its VicePresident, Artemio Torres.
What the record shows is that: (1) the STEELWELD company check in question was
given by its president to R.Y. Lim; (2) it was given only by way of
accommodation, to be "used as collateral for another obligation;" (3) in
breach of the agreement, however, R.Y. Lim indorsed the check to Armstrong in
payment of an obligation; (4) Armstrong deposited the check to its account, after
indorsing it; (5) the check was dishonored
Because of this, Limson and Torres were charged with violation of BP 22. They were
acquitted in a decision "on the ground that the check in question was not issued by
the drawer 'to apply on account for value,' it being merely for accommodation
purposes. That judgment however conditioned the acquittal with the following
pronouncement:
"This is not however to release Steelweld Corporation from its
liability under Sec. 29 of the Negotiable Instruments Law for having
issued it for the accommodation of Romeo Lim."
Sometime later, STELCO filed civil complaint againts both RYL and STEELWELD for
the recovery of the value of the steel bars and wire sold to and delivered to RYL.
Among the allegations of its complaint was that Metrobank Check No.
765380 above mentioned had been given to it in payment of RYL's
indebtedness, duly indorsed by R.Y. Lim.
STEELWELDS CONTENTIONS:
1) STELCO "is a complete stranger to it;" it had "not entered into any transaction
or business dealing of any kind" with STELCO, the transactions described in the
complaint having been solely and exclusively between the plaintiff and RYL
Construction;
2) the check in question was "only given to a certain R. Lim to be used as
collateral for another obligation . . . (but) in breach of his agreement (Lim)
utilized and negotiated the check for another purpose . . .;"

3) nevertheless, the check "is wholly inoperative since . . . Steelweld . . . did

not issue it for any valuable consideration either to R. Lim or to the plaintiff
not to mention also the fact that the said plaintiff failed to comply with the
requirements of the law to hold the said defendant (STEELWELD) liable . . ."
STELCOS CONTENTIONS:
1) STELCO theorizes that it should be deemed a "holder for value" of STEELWELD's
Check No. 765380 because the record shows it to have been in "actual possession"
thereof; otherwise, it "could not have presented, marked and introduced (said
check) in evidence . . . before the court a quo.
2) The check in question was presented by STELCO to the drawee bank for payment
through Armstrong Industries, the manufacturing arm of STELCO and its sister
company
ISSUE: Whether or not STELCO ever became a holder in due course of Check No.
765380, a bearer instrument within the contemplation of the Negotiable
Instruments Law.
HELD: NO, it never did. It is clear from the relevant circumstances that STELCO
cannot be deemed a holder of the check for value. It does not meet two of the
essential requisites prescribed by the statute. It did not become "the holder of it
before it was overdue, and without notice that it had been previously
dishonored," and it did not take the check "in good faith and for value.
The record does show that after the check had been deposited and dishonored,
STELCO came into possession of it in some way, and was able, several years after
the dishonor of the check, to give it in evidence at the trial of the civil case it had
instituted against the drawers of the check (Limson and Torres) and RYL. But, as
already pointed out, possession of a negotiable instrument after
presentment and dishonor, or payment, is utterly inconsequential; it does
not make the possessor a holder for value within the meaning of the law;
it gives rise to no liability on the part of the maker or drawer and
indorsers.
Neither is there any evidence whatever that Armstrong Industries, to
whom R.Y. Lim negotiated the check, accepted the instrument and
attempted to encash it in behalf, and as agent of STELCO. On the contrary,
the indications are that Armstrong was really the intended payee of the check and
was the party actually injured by its dishonor; it was after all its representative (a
Mr. Young) who instituted the criminal prosecution of the drawers, Limson and
Torres, albeit unsuccessfully.
As regards an accommodation party (such as STEELWELD), the fourth
condition for one to be considered as a holder in due course, i.e., lack of
notice of any infirmity in the instrument or defect in title of the persons
negotiating it, has no application. This is because Section 29 of the NIL
preserves the right of recourse of a "holder for value" against the
accommodation party notwithstanding that "such holder, at the time of

taking the instrument, knew him to be only an accommodation party.

Thus,
SEC. 29. Liability of an accommodation party. An accommodation party is
one 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. 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.'
There is no evidence whatever that STELCO's possession of Check No.
765380 ever dated back to any time before the instrument's presentment
and dishonor. There is no evidence whatsoever that the check was ever given to
it, or indorsed to it in any manner or form in payment of an obligation or as security
for an obligation, or for any other purpose before it was presented for payment.
STELCO never became a holder for value and that "(n)owhere in the check itself
does the name of Stelco Marketing appear as payee, indorsee or depositor thereof.
Further, the record does not show any intervention or participation by STELCO in
any manner or form whatsoever in the transactions regarding the check, or any
communication of any sort between STEELWELD and STELCO, or between either of
them and Armstrong Industries, at any time before the dishonor of the check.

Travel-On, Inc. v. Court of Appeals, G.R. No. 56169 (Resolution), [June 26,
1992]
FACTS: Petitioner Travel-On, Inc. ("Travel-On") is a travel agency selling airline
tickets on commission basis for and in behalf of different airline companies. Private
respondent Arturo S. Miranda had a revolving credit line with petitioner. He procured
tickets from petitioner on behalf of airline passengers and derived commissions
therefrom.
Travel-On filed suit before the Court of First Instance ("CFI") of Manila to collect on
six (6) checks issued by private respondent with a total face amount of
P115,000.00. It averred that from 5 August 1969 to 16 January 1970, petitioner sold
and delivered various airline tickets to respondent at a total price of P278,201.57;
that to settle said account, private respondent paid various amounts in cash and in
kind, and thereafter issued six (6) postdated checks amounting to
P115,000.00 which were all dishonored by the drawee banks. Travel-On
further alleged that in March 1972, private respondent made another payment of
P10,000.00 reducing his indebtedness to P105,000.00. The writ of attachment was
granted by the court a quo.
Respondents contention: Private respondent claimed that he had already fully
paid and even overpaid his obligations and that refunds were in fact due to him. He
argued that he had issued the postdated checks for purposes of
accommodation, as he had in the past accorded similar favors to petitioner. In
support of his theory that the checks were issued for accommodation, private

respondent testified that he had issued the checks in the name of Travel-On in order
that its General Manager, Elita Montilla, could show to Travel-On's Board of
Directors that the accounts receivable of the company were still good. He
further stated that Elita Montilla tried to encash the same, but that these were
dishonored and were subsequently returned to him after the accommodation
purpose had been attained.
ISSUES:
1. Whether or not the postdated checks are per se evidence of liability on the part
of private respondent.
2. Whether or not the checks issued are for accomodation.
3. Even assuming that the checks were for accommodation, whether or not private
respondent is still liable thereunder considering that petitioner is a holder for value.
HELD:
1. YES, the Court finds that the checks are the all important evidence of petitioner's
case; that these checks clearly established private respondent's indebtedness to
petitioner; that private respondent was liable thereunder.
It is important to stress that 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. Thus, the mere introduction of the instrument sued on in
evidence prima facie entitles the plaintiff to recovery. Further, the rule is quite
settled that a negotiable instrument is presumed to have been given or indorsed for
a sufficient consideration unless otherwise contradicted and overcome by other
competent evidence. The fact that all the checks issued by private respondent to
petitioner were presented for payment by the latter would lead to no other
conclusion than that these checks were intended for encashment. There is nothing
in the checks themselves (or in any other document for that matter) that states
otherwise.
In the case at bar, the Court of Appeals, contrary to these established rules, placed
the burden of proving the existence of valuable consideration upon petitioner. This
cannot be countenanced; it was up to private respondent to show that he had
indeed issued the checks without sufficient consideration. The Court
considers that private respondent was unable to rebut satisfactorily this legal
presumption. It must also be noted that those checks were issued immediately after
a letter demanding payment had been sent to private respondent by petitioner
Travel-On.
2. NO, the checks herein involved were not issued for accomodation. In the first
place, while the Negotiable Instruments Law does refer to accommodation
transactions, no such transaction was here shown. Section 29 of the Negotiable
Instruments Law provides as follows:

"Section 29. Liability of accommodation party. An accommodation party is

one 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. 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.
In accommodation transactions recognized by the Negotiable Instruments Law, an
accommodating party lends his credit to the accommodated party, by issuing or
indorsing a check which is held by a payee or indorsee as a holder in due course,
who gave full value therefor to the accommodated party. The latter, in other words,
receives or realizes full value which the accommodated party then must repay to
the accommodating party, unless of course the accommodating party intended to
make a donation to the accommodated party. But the accommodating party is
bound on the check to the holder in due course who is necessarily a third party and
is not the accommodated party. Having issued or indorsed the check, the
accommodating party has warranted to the holder in due course that he will pay the
same according to its tenor.
In the case at bar, Travel-On was payee of all six (6) checks; it presented these
checks for payment at the drawee bank but the checks bounced. Travel-On
obviously was not an accommodated party; it realized no value on the
checks which bounced.
3. YES, Travel-On was entitled to the benefit of the statutory presumption that it
was a holder in due course, that the checks were supported by valuable
consideration. Private respondent maker of the checks did not successfully rebut
these presumptions. The only evidence aliunde that private respondent offered was
his own self-serving uncorroborated testimony. He claimed that he had issued the
checks to Travel-On as payee to "accommodate" its General Manager who allegedly
wished to show those checks to the Board of Directors of Travel-On to "prove" that
Travel-On's account receivables were somehow "still good." It will be seen that this
claim was in fact a claim that the checks were merely simulated, that private
respondent did not intend to bind himself thereon. Only evidence of the clearest and
most convincing kind will suffice for that purpose; no such evidence was submitted
by private respondent. The latter's explanation was denied by Travel-On's General
Manager; that explanation, in any case, appears merely contrived and quite hollow
to us. Upon the other hand, the "accommodation" or assistance extended to TravelOn's passengers abroad as testified by petitioner's General Manager involved, not
the accommodation transactions recognized by the NIL, but rather the
circumvention of then existing foreign exchange regulations by passengers booked
by Travel-On, which incidentally involved receipt of full consideration by private
respondent.
Thus, we believe and so hold that private respondent must be held liable on the six
(6) checks here involved. Those checks in themselves constituted evidence of
indebtedness of private respondent, evidence not successfully overturned or
rebutted by private respondent.

BPI v. Court of Appeals, G.R. No. 112392, [February 29, 2000], 383 PHIL
538-557
FACTS: By way of accommodation and only for the purpose of clearing, Benjamin
Napiza (private respondent herein), deposited a check in the amount of $2,500.00
in his dollar deposit with the petitioner Bank of the Philippine Islands. This check
belongs to Henry Chan. Napiza delivered to Chan a signed blank withdrawal slip,
with the understanding that as soon as the check is cleared, both of them would go
to the bank to withdraw the amount of the check upon private respondent's
presentation to the bank of his passbook. However, using the same blank
withdrawal slip, a bank employee was able to withdraw the amount of $2,541.67,
which was made payable to Ramon A. de Guzman and Agnes C. de Guzman. Later,
the bank received a communication that the deposited check was a counterfeit. The
bank informed respondent Napiza that the check bounced, hence, the latter tried to
locate Chan. Since Napiza was unable to locate Chan, the bank demanded payment
from him. Napiza refused to pay on the ground that the check was deposited for
clearing purposes only to accommodate Chan. As a result, petitioner bank filed a
complaint against private respondent for the return of the amount of $2,500.00 or
the prevailing peso equivalent plus interest, attorney's fees, and litigation costs.
ISSUES:
1. Whether or not Respondent Napiza is liable under his warranties as a general
indorser.
2. Whether or not petitioner was grossly negligent in allowing the withdrawal.
HELD:
1. Hmmmm (morag yes but ba). Ordinarily private respondent may be held liable
as an indorser of the check or even as an accommodation party. However, to hold
private respondent liable for the amount of the check he deposited by the strict
application of the law and without considering the attending circumstances in the
case would result in an injustice and in the erosion of the public trust in the banking
system. The interest of justice thus demands looking into the events that led to the
encashment of the check.

According to NIL:
SECTION 66. Liability of general indorser. Every indorser who indorses
without qualification, warrants to all subsequent holders in due course
(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the
next preceding section; and

(b) That the instrument is at the time of his indorsement, valid and
subsisting.
And, 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."
Section 65, on the other hand, provides for the following warranties of a person
negotiating an instrument by delivery or by qualified indorsement: (a) that the
instrument is genuine and in all respects what it purports to be; (b) that he has
good title to it, and (c) that all prior parties had capacity to contract. 15 In People v.
Maniego, 16 this Court described the liabilities of an indorser as follows:
"Appellant's contention that a mere indorser, she may not be liable on
account of the dishonor of the checks indorsed by her, is likewise untenable.
Under the law, the holder or last indorsee of a negotiable instrument has the
right 'to enforce payment of the instrument for the full amount thereof
against all parties liable thereon.' Among the 'parties liable thereon' is an
indorser of the instrument, i.e., 'a person placing his signature upon an
instrument otherwise than as maker, drawer or acceptor ** unless he clearly
indicated by appropriate words his intention to be bound in some other
capacity.' Such an indorser 'who indorses without qualification,' inter alia
'engages that on due presentment, ** (the instrument) 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 any subsequent indorser who may
be compelled to pay it.' Maniego may also be deemed an 'accommodation
party' in the light of the facts, i.e., 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 such, she is
under the law 'liable on the instrument to a holder for value, notwithstanding
such holder at the time of taking the instrument knew ** (her) to be only an
accommodation party,' although she has the right, after paying the holder, to
obtain reimbursement from the party accommodated, 'since the relation
between them is in effect that of principal and surety, the accommodation
party being the surety."
So he is liable as an indorser, but, for the interest of justice, alams na...
Under the rules appearing in the passbook that BPI issued to private respondent, to
be able to withdraw under the Philippine foreign currency deposit system, two
requisites must be presented to petitioner BPI by the person withdrawing an
amount:
1) A duly filled-up withdrawal slip; and
2) The depositors passbook.

Petitioner bank alleged that had private respondent indicated therein the person
authorized to receive the money, then Gayon could not have withdrawn any
amount. However, the withdrawal slip itself indicates a special instruction that the
amount is payable to Ramon de Guzman and/or Agnes de Guzman. Such being
the case, petitioners personnel should have been duly warned that Gayon was not
the proper payee of the proceeds of the check. Moreover, the fact that private
respondents passbook was not presented during the withdrawal is evidenced by
the entries therein showing that the last transaction that he made was when he
deposited the subject check.
2. YES. Petitioner, in allowing the withdrawal of private respondent's deposit, failed
to exercise the diligence of a good father of a family. A 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 total disregard of its own rules,
petitioner's personnel negligently handled private respondent's account to
petitioner's detriment. Petitioner violated its own rules by allowing the withdrawal of
an amount that is definitely over and above the aggregate amount of private
respondent's dollar deposits that had yet to be cleared.
The proximate cause of the withdrawal and eventual loss of the amount of
$2,500.00 on petitioners part was its personnels negligence in allowing such
withdrawal in disregard of its own rules and the clearing requirement in the banking
system. In so doing, petitioner assumed the risk of incurring a loss on account of a
forged or counterfeit foreign check and hence, it should suffer the resulting damage.

Agro Conglomerates, Inc. v. Court of Appeals, G.R. No. 117660, [December

18, 2000], 401 PHIL 644-657
FACTS: On July 17, 1982, petitioner Agro Conglomerates, Inc. sold two parcels of
farmland to Wonderland Food Industries, Inc. The parties executed a Memorandum
of Agreement which provides that the P5 million as purchase price shall be paid as
follows: P1million shall be paid in cash upon the signing of the agreement, P2
million worth of common shares of stock of Wonderland Food Industries, Inc., and
the remaining P2 million shall be paid in four equal installments. On July 19, 1982,
Agro Conglomerate, Inc. as vendor, Wonderland Food Industries as vendee, and the
herein respondent Regent Savings and Loan Bank (formerly Summa Savings and
Loan Association) executed as Addendum to the previous Memorandum of
Agreement to the effect that the vendee authorized the vendor to obtain a loan
from the respondent bank for the total amount of the initial payments and that the
vendee undertook to assume the settlement of the said loan. Petitioner Mario
Soriano signed several promissory notes and received the proceeds in behalf of
Agro Conglomerates, Inc. However, the sale of the said farmland did not materialize
which resulted to a rescission of contract of sale between the Agro Conglomerates,
Inc. and Wonderland Food Industries, Inc. Subsequently, petitioners Agro
Conglomerates, Inc. and Mario Soriano failed to meet their obligations as they fell
due. Thus, after several opportunities given to petitioner to settle their accounts,
the respondent bank filed three separate complaints for Collection of Sums of

Money before the Regional Trial Court of Manila against the petitioners. In their
answer, petitioners interposed the defense of novation and insisted that there was a
valid substitution of debtor based on the executed addendum. After trial, the trial
court rendered judgment in favor of the respondent bank. The Court of Appeals
affirmed in toto the said judgment. Hence, this Petition.
ISSUE: Whether the court of appeals erred in not finding that the addendum, signed
by the petitioners, respondent bank and Wonderland Inc., constitutes a novation of
the contract by substitution of debtor, which exempts the petitioners from any
liability over the promissory notes.
HELD: NO. This Court ruled that there was no novation by "substitution" of debtor
because there was no prior obligation which was substituted by a new contract. It
will be noted that the promissory notes, which bound the petitioners to pay, were
executed after the addendum. The addendum modified the contract of sale, not the
stipulations in the promissory notes which pertain to the surety contract. At this
instance, Wonderland apparently assured the payment of future debts to be
incurred by the petitioners. Consequently, only a contract of surety arose. It was
wrong for petitioners to presume a novation had taken place. The well-settled rule is
that novation is never presumed, it must be clearly and unequivocally shown. As it
turned out, the contract of surety between Wonderland and the petitioners was
extinguished by the rescission of the contract of sale of the farmland. With the
rescission, there was confusion or merger in the persons of the principal obligor and
the surety, namely, the petitioners herein. The addendum which was dependent
thereon likewise lost its efficacy.
When petitioner Soriano signed several promissory notes and received the proceeds
in behalf of petitioner company, a subsidiary contract of suretyship had taken effect
since petitioners signed the promissory notes as maker and accommodation party
for the benefit of Wonderland. Petitioners became liable as accommodation party.
An accommodation party is a person who has signed the instrument as maker,
acceptor, or indorser, without receiving value therefor, and for the purpose of
lending his name to some other person and is liable on the instrument to a holder
for value, notwithstanding such holder at the time of taking the instrument knew
(the signatory) to be an accommodation party. 8 He has the right, after paying the
holder, to obtain reimbursement from the party accommodated, since the relation
between them has in effect become one of principal and surety, the accommodation
party being the surety. 9 Suretyship is defined as the relation which exists where
one person has undertaken an obligation and another person is also under the
obligation or other duty to the obligee, who is entitled to but one performance, and
as between the two who are bound, one rather than the other should perform. 10
The surety's liability to the creditor or promisee of the principal is said to be direct,
primary and absolute; in other words, he is directly and equally bound with the
principal. 11 And the creditor may proceed against any one of the solidary debtors.
Moreover, it was admitted that petitioners received the proceeds of the promissory
notes obtained from respondent bank. Petitioners had no legal or just ground to
retain the proceeds of the loan at the expense of private respondent. Neither could

petitioners excuse themselves and hold Wonderland still liable to pay the loan upon
the rescission of their sales contract.

Vicente R. De Ocampo & Co. v. Gatchalian, G.R. No. L-15126, [November

30, 1961], 113 PHIL 574-585
FACTS: The action is for the recovery of the value of a check for P600 payable to
the plaintiff and drawn by defendant Anita C.Gatchalian.
On or about 8 September 1953, in the evening, defendant Anita C. Gatchalian who
was then interested in looking for a car for the use of her husband and the family,
was shown and offered a car by Manuel Gonzales who was accompanied by Emil
Fajardo, the latter being personally known to defendant Anita C. Gatchalian. Manuel
Gonzales represented to defendant Anita C. Gatchalian that he was duly authorized
by the owner of the car, OcampoClinic, to look for a buyer of said car and to
negotiate for and accomplish said sale, but which facts were not known to plaintiff.
Anita Gatchalian, satisfied with the car, requested Manuel Gonzales to to bring the
car with the certificate of registration the next day so her husband could see the
car. Manuel Gonzales then advised Anita Gatchalian that the owner of the car will
not be willing to give the certificate of registration unless there is a showing that the
party interested in the purchase of said car is ready and willing to make such
purchase and that for this purpose Manuel Gonzales requested defendant
Anita C. Gatchalian to give him, (Manuel Gonzales) a check which will be
shown to the owner as evidence of buyer's good faith in the intention to
purchase the said car, the said check to be for safekeeping only of Manuel
Gonzales and to be returned to defendant Anita C. Gatchalian the following day
when Manuel Gonzales brings the car and the certificate of registration, but which
facts (circumstances on how the check was delivered to Gatchalian) were
not known to plaintiff.
Relying on these representations, Anita drew and issued a check. However, Manuel
failed to appear the next day and failed to bring the car and the certificate of
registration as well as to return the the check. Anita then issued a stop payment
order on the check, but it was issued without knowldge of the plaintiff who was not
known by defendant Anita.
On the other hand, Manuel actually delivered the check to Ocampo Clinic in
payment of the fees and expenses for the hospitalization of his wife. Ocampo Clinic
accepted the check and applied P441.75 representing the hospitalization fees and
expenses and delivering the difference (change) to Manuel.
ISSUE: Whether or not De Ocampo (plaintiff) is a holder in due course?
HELD: NO. The stipulation of facts contains no statement of such good faith, hence
we are forced to the conclusion that plaintiff payee has not proved that it acquired
the check in good faith and may not be deemed a holder in due course thereof.
Section 52 (c) provides that a holder in due course is one who takes the instrument
"in good faith and for value;" Section 59, "that every holder is deemed prima facie

to be holder in due course;" and Section 52 (d), that in order that one may be a
holder in due course it is necessary that "at the time the instrument was
negotiated" to him "he had no notice of any . . . defect in the title of the person
negotiating it;" and lastly Section 59, that every holder is deemed prima facie to be
a holder in due course.
Where a holder's title is defective or suspicious, it cannot be stated that the payee
acquired the check without the knowledge of said defect in holder's title, and for
this reason the presumption that it is a holder in due course or that it acquired the
instrument in good faith does not exist.
In the case at bar as the payee acquired the check under circumstances
which should have put it to inquiry, why the holder had the check and
used it to pay his own personal account, the duty devolved upon it,
plaintiff-appellee, to prove that it actually acquired said check in good
faith.
The stipulation of facts expressly states that plaintiff-appellee was not aware of the
circumstances under which the check was delivered to Manuel Gonzales, but we
agree with the defendants-appellants that the circumstances indicated by them in
their briefs, such as the fact that appellants had no obligation or liability to the
Ocampo Clinic; that the amount of the check did not correspond exactly with the
obligation of Matilde Gonzales to Dr. V. R. de Ocampo; and that the check had two
parallel lines in the upper left hand corner, which practice means that the check
could only be deposited but may not be converted into cash all these
circumstances should have put the plaintiff-appellee to inquiry as to the
why and wherefore of the possession of the check by Manuel Gonzales, and why he
used it to pay Matilde's account. It was payee's duty to ascertain from the holder
Manuel Gonzales what the nature of the latter's title to the check was or the nature
of his possession. Having failed in this respect, we must declare that plaintiffappellee was guilty of gross neglect in not finding out the nature of the title and
possession of Manuel Gonzales, amounting to legal absence of good faith, and it
may not be considered as a holder of the check in good faith, to such effect is the
consensus of authority.

Mesina v. Intermediate Appellate Court, G.R. No. 70145, [November 13,

1986], 229 PHIL 495-505
FACTS: Respondent Jose Go, on December 29, 1983, purchased from Associated
Bank Cashier's Check No. 011302 for P800,000.00. Unfortunately, Jose Go left
said check on the top of the desk of the bank manager when he left the
bank. The bank manager entrusted the check for safekeeping to a bank official, a
certain Albert Uy, who had then a visitor in the person of Alexander Lim, Uy had to
answer a phone call on a nearby telephone after which he proceeded to the men's
room. When he returned to his desk, his visitor Lim was already gone. When Jose Go
inquired for his cashier's check from Albert Uy, the check was not in his folder and
nowhere to be found. The latter advised Jose Go to go to the bank to accomplish a
"STOP PAYMENT" order, which suggestion Jose Go immediately followed. He also

executed an affidavit of loss. Albert Uy went to the police to report the loss of the
check, pointing to the person of Alexander Lim as the one who could shed light on
it.
The Associated Bank received the lost check for clearing on December 31, 1983,
coming from Prudential Bank, Escolta Branch. The check was immediately
dishonored by Associated Bank by sending it back to Prudential Bank, with the
words "Payment Stopped" stamped on it. It was sent again but was still dishonored.
Several days later, respondent Associated Bank received a letter, dated January 9,
1984, from a certain Atty. Lorenzo Navarro demanding payment on the cashier's
check in question, which was being held by his client. He however refused to reveal
the name of his client and threatened to sue, if payment is not made. Respondent
bank, in its letter, dated January 20, 1984, replied saying the check belonged to Jose
Go who lost it in the bank and is laying claim to it.
It was found out later that the Atty. Navarros client was actually named Marcelo
Mesina and was the one who gave it to Atty. Navarro. Upon further investigation, it
was found out that the check was paid to Mesina by Laexander Lim for a certain
transaction.
ISSUE: Whether or not Mesina is a holder in due course.
HELD: NO. Petitioner failed to substantiate his claim that he is a holder in due
course and for consideration or value as shown by the established facts of the case.
Theories and examples advanced by petitioner on causes and effects of a cashier's
check such as 1) it cannot be countermanded in the hands of a holder in due course
and 2) a cashier's check is a bill of exchange drawn by the bank against itself are
general principles which cannot be aptly applied to the case at bar, without
considering other things.
Admittedly, petitioner became the holder of the cashier's check as endorsed by
Alexander Lim who stole the check. He refused to say how and why it was passed to
him. He had therefore notice of the defect of his title over the check from the start.
The holder of a cashier's check who is not a holder in due course cannot enforce
such check against the issuing bank which dishonors the same. If a payee of a
cashier's check obtained it from the issuing bank by fraud, or if there is some other
reason why the payee is not entitled to collect the check, the respondent bank
would, of course, have the right to refuse payment of the check when presented by
the payee, since respondent bank was aware of the facts surrounding I he loss of
the check in question. Moreover, there is no similarity in the cases cited by
petitioner since respondent bank did not issue the cashier's check in payment of its
obligation. Jose Go bought it from respondent bank for purposes of transferring his
funds from respondent bank to another bank near his establishment realizing that
carrying money in this form is safer than if it wherein cash. The check was Jose Go's
property when it was misplaced or stolen hence he stopped its payment. At the
outset, respondent bank knew it was Jose Go's check and no one else since Go had
not paid or indorsed it to anyone. The bank was therefore liable to nobody on the
check but Jose Go. The bank had no intention to issue it to petitioner but only to
buyer Jose Go. When payment on it was therefore stopped, respondent bank was

not the one who did it but Jose Go, the owner of the check. Respondent bank could
not be drawer and drawee for clearly, Jose Go owns the money it represents and he
is therefore the drawer and the drawee in the same manner as if he has a current
account and he issued a check against it; and from the moment said cashier's check
was lost and or stolen no one outside of Jose Go can be termed a holder in due
course because Jose Go had not indorsed it in due course. The check in question
suffers from the infirmity of not having been properly negotiated and for value by
respondent Jose Go who as already been said is the real owner of said instrument.

Metropol Financing & Investment Corp. v. Sambok Motors Co., Ltd., G.R.
No. L-39641, [February 28, 1983], 205 PHIL 758-762
FACTS: On April 15, 1969 Dr. Javier Villaruel executed a promissory note in favor of
Ng Sambok Sons Motors Co., Ltd., in the amount of P15,939.00 payable in twelve
(12) equal monthly installments, beginning May 18, 1969, with interest at the rate
of one percent per month. It is further provided that in case on non-payment of any
of the installments, the total principal sum then remaining unpaid shall become due
and payable with an additional interest equal to twenty-five percent of the total
amount due.
On the same date, Sambok Motors Company (hereinafter referred to as Sambok), a
sister company of Ng Sambok Sons Motors Co., Ltd., and under the same
management as the former, negotiated and indorsed the note in favor of plaintiff
Metropol Financing & Investment Corporation with the following endorsements:
"Pay to the order of Metropol Bacolod Financing & Investment Corporation
with recourse. Notice of Demand; Dishonor; Protest; and Presentment are
hereby waived.
SAMBOK MOTORS CO. (BACOLOD)
By:

RODOLFO G. NONILLO
Asst. General Manager"

The maker, Dr. Villaruel defaulted in the payment of his installments when they
became due, so on October 30, 1969 plaintiff formally presented the promissory
note for payment to the maker. Dr. Villaruel failed to pay the promissory note as
demanded, hence plaintiff notified Sambok as indorsee of said note of the fact that
the same has been dishonored and demanded payment.
Sambok failed to pay, so on November 26, 1969 plaintiff filed a complaint for
collection of a sum of money before the Court of First Instance of Iloilo, Branch I.
Sambok did not deny its liability but contended that it could not be obliged to pay
until after its co-defendant Dr. Villaruel, has been declared insolvent.
SAMBOK ARGUES: That by adding the words "with recourse" in the indorsement of
the note, it becomes a qualified indorser; that being a qualified indorser, it does not
warrant that if said note is dishonored by the maker on presentment, it will pay the
amount to the holder; that it only warrants the following pursuant to Section 65 of

the Negotiable Instruments Law: (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; (d) that he has no knowledge of any fact which
would impair the validity of the instrument or render it valueless.
ISSUE: Whether or not Sambok is an assignor and a qualified indorsee of the
promissory note.
HELD: NO. Appellant, by indorsing the note "with recourse" does not make
itself a qualified indorser but a general indorser who is secondarily liable,
because by such indorsement, it agreed that if Dr. Villaruel fails to pay the note,
plaintiff-appellee can go after said appellant. The effect of such indorsement is that
the note was indorsed without qualification.
A qualified indorsement constitutes the indorser a mere assignor of the title to the
instrument. It may be made by adding to the indorser's 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 Section 65 of
the Negotiable Instruments Law already mentioned herein. However, appellant
Sambok indorsed the note "with recourse" and even waived the notice of demand,
dishonor, protest and presentment.
A person who indorses without qualification engages that on due presentment, the
note shall be accepted or paid, or both as the case may be, and that if it be
dishonored, he will pay the amount thereof to the holder. 4 Appellant Sambok's
intention of indorsing the note without qualification is made even more apparent by
the fact that the notice of demand, dishonor, protest and presentment were all
waived. The words added by said appellant do not limit his liability, but rather
confirm his obligation as a general indorser.
"Recourse" means resort to a person who is secondarily liable after the default of
the person who is primarily liable.
The lower court did not err in not declaring appellant as only secondarily liable
because after an instrument is dishonored by non-payment, the person secondarily
liable thereon ceases to be such and becomes a principal debtor. His liability
becomes the same as that of the original obligor. Consequently, the holder need not
even proceed against the maker before suing the indorser.

Maralit v. Imperial, G.R. No. 130756, [January 21, 1999], 361 PHIL 532-542
CAVEAT: I have difficulty identifying the issue relevant to NIL as this case
is more related to remedial. However, there is a little discussion on the
liability of an indorser. Please bear with me.
FACTS: Petitioner Ester B. Maralit filed three complaints for estafa through
falsification of commercial documents through reckless imprudence against
respondent Jesusa Corazon L. Imperial. Maralit alleged that she was the assistant

manager of the Naga City Branch of the Philippine National Bank (PNB), that
respondent deposited in her savings account at the PNB three United States
Treasury Warrants and withdrew their peso equivalent, and that the treasury
warrants were subsequently returned one after the other by the United States
Treasury on the ground that the amounts were altered. As a consequence thereof,
Maralit was held personally liable by the PNB for the amount of the treasury
warrants totaling P320,287.30.
In her counter-affidavit, respondent claimed that she merely helped a relative, Aida
Abengoza, encash the treasury warrants; that she deposited the treasury warrants
in her savings account and then withdrew their peso equivalent with the approval of
petitioner; that she gave the money to Aida Abengoza; that she did not know that
the amounts on the treasury warrants had been altered nor did she represent to
petitioner that the treasury warrants were genuine; and that upon being informed of
the dishonor of the warrants she immediately contacted Aida Abengoza and signed
an acknowledgment of debt promising to pay the total amount of the treasury
warrants.
After trial, the Municipal Trial Court of Naga City (MTC) rendered judgment finding no
ground to hold the accused criminally liable for which she was charged, hence,
Corazon Imperial is ACQUITTED of all the charges against her. The accused, however
was held civilly liable as indorser of the checks which are the subject matter of the
criminal action. The decision having become final and executory, the MTC ordered
the enforcement of the civil liability arising from the criminal action. Respondent
moved to quash the writ of execution issued by the MTC on the ground that the
judgment did not order the accused to pay a specific amount of money to a
particular person as it merely adjudicated the criminal aspect but not the civil
aspect, hence, there was no judgment which can be the subject of execution. The
motion was denied by the MTC for lack of merit. Respondent filed a petition for
certiorari and prohibition in the Regional Trial Court of Naga City (RTC), contending
that the writ of execution issued by the MTC was at variance with the judgment in
the criminal cases. The RTC held that the decision of the MTC did not really find
respondent liable for P320,286.46 because in fact it was petitioner who was found
responsible for making the defraudation possible. Petitioner moved for
reconsideration but was denied. In this petition, petitioner contends that the phrase
"civilly liable" in the judgment part of the MTC's decision also connotes an order to
pay on respondent's part.
ISSUE: Whether or not the MTC merely adjudicated the criminal aspect but not the
civil aspect of Criminal Cases.
HELD: NO. It may fairly be assumed that the decision of the MTC was an
adjudication of both the criminal and civil liability of respondent inasmuch as it does
not appear that petitioner instituted a separate civil action or reserved or waived
the right to bring such action.
The MTC held that respondent was civilly liable as the penultimate paragraph of its
decision makes clear:

The Court sympathizes with the complainant that there was indeed damage
and loss, but said loss is chargeable to the accused who upon her
indorsements warrant that the instrument is genuine in all respect what it
purports to be and that she will pay the amount thereof in case of dishonor.
(Sec. 66, Negotiable Instrument Law)
Thus, while the MTC found petitioner partly responsible for the encashment of the
altered checks, it found respondent civilly liable because of her indorsements of the
treasury warrants, in addition to the fact that respondent executed a notarized
acknowledgment of debt promising to pay the total amount of said warrants.
In this case, to affirm the RTC's decision would be to hold that respondent was
absolved from both criminal and civil liability by the MTC. Such reading of the MTC
decision will not, however, bear analysis. For one, the dispositive portion of the
decision of the MTC expressly declares respondent to be "civilly liable as indorser of
the checks which is [sic] the subject matter of the criminal action." To find therefore
that there is no declaration of civil liability of respondent would be to disregard the
judgment of the MTC. Worse, it would be to amend a final and executory decision of
a court.
It is argued that the decision of the MTC did not order respondent, as accused in the
case, to pay a specific amount of money to any particular person such that it could
not be an adjudication of respondent's civil liability. However, the ambiguity can
easily be clarified by a resort to the text of the decision or, what is properly called,
the opinion part. Doing so, it is clear that it can only be to petitioner that
respondent was made liable as the former was the offended party in the case. As for
what amount respondent is liable, it can only be for the total amount of the treasury
warrants subject of the case, determined according to their peso equivalent, in the
decision of the MTC.

Sapiera v. Court of Appeals, G.R. No. 128927, [September 14, 1999], 373 PHIL 148157
FACTS: On several occasions, petitioner Remedios Nota Sapiera, a sari-sari store
owner, purchased from Monrico Mart certain grocery items and paid for them with
checks issued by one Arturo de Guzman. These checks were signed at the back by
petitioner. When presented for payment the checks were dishonored because the
drawer's account was already closed. Private respondent Ramon Sua informed
Arturo de Guzman and petitioner about the dishonor but both failed to pay the value
of the checks. Consequently, four charges of estafa were filed against petitioner
with the Regional Trial Court of Dagupan City. After trial, the court a quo acquitted
petitioner of all the charges of estafa but did not rule on whether she could be held
civilly liable for the checks she indorsed to private respondent. In a petition for
mandamus filed by private respondent, the Court of Appeals rendered a decision
holding petitioner liable for the value of the checks,
ISSUE: Whether or not Sapiera be required to pay civil indemnity after the trial
court acquitted her of her of the criminal charges.

HELD: NO. The civil liability is not extinguished by acquittal where: (a) the acquittal
is based on reasonable doubt; (b) where the court expressly declares that the
liability of the accused is not criminal but only civil in nature; and, (c) where the civil
liability is not derived from or based on the criminal act of which the accused is
acquitted. The judgment of acquittal extinguishes the liability of the accused for
damages only when it includes a declaration that the fact from which the civil
liability might arise did not exist.
It is undisputed that the four (4) checks issued by de Guzman were signed by
petitioner at the back without any indication as to how she should be bound thereby
and, therefore, she is deemed to be an indorser thereof. The Negotiable Instruments
Law clearly provides
SECTION 17. Construction where instrument is ambiguous. Where the
language of the instrument is ambiguous, or there are admissions therein,
the following rules of construction apply: . . . . (f) Where a signature is so
placed upon the instrument that it is not clear in what capacity the person
making the same intended to sign, he is deemed an indorser. . .
SECTION 63. When person deemed indorser. A person placing his signature
upon an instrument otherwise than as maker, drawer or acceptor, is deemed
to be an indorser unless he clearly indicates by appropriate words his
intention to be bound in some other capacity.
SECTION 66. Liability of general indorser. Every indorser who indorses
without qualification, warrants to all subsequent holders in due course: (a)
The matters and things mentioned in subdivisions (a), (b) and (c) of the next
preceding section; and (b) That the instrument is, at the time of the
indorsement, valid and subsisting;
And, 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. cdtai
The dismissal of the criminal cases against petitioner did not erase her civil
liability since the dismissal was due to insufficiency of evidence and not from
a declaration from the court that the fact from which the civil action might
arise did not exist. An accused acquitted of estafa may nevertheless be held
civilly liable where the facts established by the evidence so warrant. The
accused should be adjudged liable for the unpaid value of the checks signed
by her in favor of the complainant.