Kauffman vs.

PNB, 42 Phil 182, September 29, 1921

FACTS

Wicks, the treasurer of the Philippine Fiber and Produce Company (PFPC), presented
himself in the exchange department of the Philippine National Bank in Manila and
requested that a telegraphic transfer of $45,000 should be made to Kauffman in
New York City, upon account of the PFPC.
Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.)
PHILIPPINE NATIONAL BANK, Manila.

PNBs representative in New York withheld the money from Kauffman, in view of his
reluctance to accept certain bills of the PFPC. Kauffman demanded the money but
was refused to be paid.
ISSUE

Whether or not Kauffman has a right of action based on Negotiable Instruments

Law.
RULING

NO. Kauffman has no right of action based on Negotiable Instruments Law on the
ground that it can only come into operation if there is a document in existence of
the character described in Section 1 of the said Law, and rights properly speaking
arise in respect to said instrument until it is delivered. In this case, there was an
order transmitted by PNB to its New York branch, for the payment of a specified sum
of money to Kauffman. But this order was not made payable to order or to
bearer, as required in subsection (d) of that Act; and inasmuch as it never left the
possession of the bank, or its representative in New York City, there was no delivery
in the sense intended in Section 16 of the same Law. In this connection it is
unnecessary to point out that the official receipt delivered by the bank to the
purchaser of the telegraphic order, and already set out above, cannot itself be
viewed in the light of a negotiable instrument, although it affords complete proof of
the obligation actually assumed by the bank. Kauffman, however, has remedy
based on the Civil Code, particularly on stipulations pour atrui.

GSIS vs. CA, 170 SCRA 533, February 23, 1989

FACTS
Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr.
and Mrs. Flaviano Lagasca, executed a deed of mortgage, in favor of petitioner
Government Service Insurance System (GSIS) and subsequently, another deed of
mortgage, in connection with two loans granted by the latter in the sums of P
11,500.00 and P 3,000.00, respectively. A parcel of land co-owned by said
mortgagor spouses, was given as security under the aforesaid two deeds. They also
executed a promissory note which states in part:
for value received, we the undersigned JOINTLY, SEVERALLY and
SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE
SYSTEM the sum of . . . (P 11,500.00) Philippine Currency, with interest at
the rate of six (6%) per centum compounded monthly payable in . . .
(120)equal monthly installments of . . . (P 127.65) each.
Both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known
as the Negotiable Instruments Law, which provide that an accommodation party is
one who has signed an instrument as maker, drawer, acceptor of indorser without
receiving value therefor, but is held liable on the instrument to a holder for value
although the latter knew him to be only an accommodation party.
ISSUE
Whether or not the executed promissory note is a negotiable instrument.
RULING
NO.The promissory note hereinbefore quoted, as well as the mortgage deeds
subject of this case, are clearly not negotiable instruments. These documents do not
comply with the fourth requisite to be considered as such under Section 1 of Act No.
2031 because they are neither payable to order nor to bearer. The note is payable
to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act
No. 2031 would not apply; governance shall be afforded, instead, by the provisions
of the Civil Code and special laws on mortgages.

Tibajia vs. CA, 223 SCRA 163

FACTS
Tibajia spouses delivered to Sheriff the total money judgment in cashiers check and cash.Private
respondent, Eden Tan, refused to accept the payment made by the Tibajia spouses and instead insisted
that the garnished funds deposited with the cashier of the Regional Trial Court of Pasig, Metro Manila be
withdrawn to satisfy the judgment obligation. Tibajias filed a motion to lift the writ of execution on the
ground that the judgment debt had already been paid. The motion was denied.
ISSUE
Whether or not payment by means of cashiers check is considered payment in legal tender.
RULING
NO. A check, whether a managers check or ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor.
A check is not legal tender and that a creditor may validly refuse payment by check, whether it be a
managers, cashiers or personal check. The Supreme Court stressed that, We are not, by this decision,
sanctioning the use of a check for the payment of obligations over the objection of the creditor.

PAL vs. CA, GR. 49188, Jan. 30, 1990

FACTS
Amelia Tan was found to have been wronged by Philippine Air Lines (PAL). She filed her complaint in
1967. After ten (10) years of protracted litigation in the Court of First Instance and the Court of Appeals,
Ms. Tan won her case. Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the
courts have solemnly declared as rightfully hers. Through absolutely no fault of her own, Ms. Tan has
been deprived of what, technically, she should have been paid from the start, before 1967, without need
of her going to court to enforce her rights. And all because PAL did not issue the checks intended for her,
in her name. Petitioner PAL filed a petition for review on certiorari the decision of Court of Appeals
dismissing the petition for certiorari against the order of the Court of First Instance (CFI) which issued an
alias writ of execution against them. Petitioner alleged that the payment in check had already been
effected to the absconding sheriff, satisfying the judgment

ISSUE
Whether or not payment by check to the sheriff extinguished the judgment debt.
RULING
NO. The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in
checks. The checks were not payable to Amelia Tan or Able Printing Press but to the
absconding sheriff.In the absence of an agreement, either express or implied, payment means the
discharge of a debt or obligation in money and unless the parties so agree, a debtor has no rights, except
at his own peril, to substitute something in lieu of cash as medium of payment of his debt. Strictly
speaking, the acceptance by the sheriff of the petitioners checks, in the case at bar, does not, per se,
operate as a discharge of the judgment debt. The check as a negotiable instrument is only a substitute for
money and not money, the delivery of such an instrument does not, by itself, operate as payment. A
check, whether a managers check or ordinary cheek, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor.
Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not
extinguished and remains suspended until the payment by commercial document is actually realized (Art.
1249, Civil Code, par. 3).

Sesbreno vs. CA, GR 89252, May 24, 1993

FACTS
Petitioner Raul Sesbreo made a money market placement in the amount of P300,000.00 with the
Philippine Underwriters Finance Corporation (Philfinance). The latter issued a Certificate of Confirmation
of Sale without recourse from Delta Motors Corporation Promissory Note, a Certificate of securities
indicating the sale to petitioner, with the notation that the said security was in custodianship of Pilipinas
Bank, andpost-dated checks payable with petitioner as payee, Philfinance as drawer. Petitioner
approached private respondent Pilipinas Bank and handed her a demand letter informing the bank that
his placement with Philfinance had remained unpaid and outstanding, and that he in effect was asking for
the physical delivery of the underlying promissory note. Pilipinas did not deliver the Note, nor any
certificate of participation in respect thereof, to petitioner.
ISSUES
Whether or not non-negotiable instruments are transferrable.
RULING
YES. 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. It is important to bear in mind that the negotiation of a negotiable instrument must be
distinguished from theassignment or transfer of an instrument whether that be negotiable or nonnegotiable. 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.

Philippine Education Co. vs. Soriano, GR L-22405, June 30, 1971

FACTS
Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders each payable to
E.P. Montinola. After the postal teller had made out money orders, Montinola offered to pay for them with
a private checks were not generally accepted in payment of money orders, the teller advised him to see
the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave building with
his own check and the ten(10) money orders without the knowledge of the teller. Upon discovery of the
disappearance of the unpaid money orders, an urgent message was sent to all postmasters, and the
following day notice was likewise served upon all banks, instructing them not to pay anyone of the money
orders aforesaid if presented for payment. The Bank of America received a copy of said notice three days
later. It debited appellants account with the same amount and gave it advice thereof by means of a debit
memo.
ISSUE
Whether or not postal money orders are negotiable instruments.
RULING
NO. Postal money orders are not negotiable instruments. Our postal statutes were patterned after
statutes in force in the United States. For this reason, ours are generally construed in accordance with the
construction given in the United States to their own postal statutes, in the absence of any special reason
justifying a departure from this policy or practice. The weight of authority in the United States is that postal
money orders are not negotiable instruments, the reason behind this rule being 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.It is to be noted in this connection that some
of the restrictions imposed upon money orders by postal laws and regulations are inconsistent with the
character of negotiable instruments. For instance, such laws and regulations usually provide for not more
than one endorsement; payment of money orders may be withheld under a variety of circumstances

Metropolitan Bank vs. CA, 194 SCRA 169 (1991)

FACTS:
Gomez opened an account with Golden Savings bank and deposited 38 treasury warrants.
All these warrants were indorsed by the cashier of Golden Savings, and deposited it to the
savings account in a Metrobank branch.

They were sent later on for clearing by the branch

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

On persistent inquiries on whether the warrants have been cleared, the

branch manager allowed withdrawal of the warrants, only to find out later on that the treasury
warrants have been
dishonored.

issue: whether or not treasury warrants are negotiable instruments

HELD:
The treasury warrants were not negotiable instruments.

Clearly, it is indicated that it was

non-negotiable and of equal significance is the indication that they are payable from a
particular fund, Fund 501.

This indication as the source of payment to be made on the

treasury warrant
makes the promise to pay conditional and the warrants themselves non-negotiable.
Metrobank then cannot contend that by indorsing the warrants in general, GS assumed that they
were genuine and in all respects what they purport it to be, in accordance to Section 66 of the NIL.
The simple reason is that the law isnt applicable to the non-negotiable treasury warrants.
The
indorsement was made for the purpose of merely depositing them with Metrobank for
clearing.

It was in fact Metrobank which stamped on the back of the warrants: All prior

indorsements and/or lack of endorsements guaranteed