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JUANITA SALAS VS. HON. COURT OF APPEALS AND FILINVEST


FINANCE & LEASING CORPORATION January 22, 1990

parties among themselves, and may enforce payment of the instrument for
the full amount.

FACTS:

CALTEX (PHILIPPINES), INC.VS. COURT OF APPEALS AND SECURITY


BANK AND TRUST COMPANY August 10, 1992

Juanita Salas bought a motor vehicle from the Violago Motor Sales
Corporation (VMS for brevity) as evidenced by a promissory note. This note
was subsequently endorsed to Filinvest Finance & Leasing Corporation
which financed the purchase. Petitioner defaulted in her installments
allegedly due to a discrepancy in the engine and chassis numbers of the
vehicle delivered to her and those indicated in the sales invoice after an
accident involving the motorcycle. Failure to pay prompted Filinvest
collection for a sum of money against petitioner before the RTC where the
court ordered Salas to pay the plaintiff with interest Both petitioner and
private respondent appealed, imputing fraud, bad faith and
misrepresentation against VMS for having delivered a different vehicle to
petitioner. CA decided in favor of Filinvest, hence the this petition.
ISSUE:
Can petitioner set up against respondent the defense of nullity of the
contract of sale between her and VMS?
HELD: No.
the basis of private respondent's claim against petitioner is a promissory
note which bears all the earmarks of negotiability. It is payable to Violago
Motor Sales Corporation, or order and as such, [e] the drawee is named or
indicated with certainty. It was negotiated by indorsement in writing on the
instrument itself payable to the Order of Filinvest Finance and Leasing
Corporation and it is an indorsement of the entire instrument.
Under the circumstances, there appears to be no question that Filinvest is
a holder in due course, having taken the instrument under the following
conditions: [a] it is complete and regular upon its face; [b] it became the
holder thereof before it was overdue, and without notice that it had
previously been dishonored; [c] it took the same in good faith and for
value; and [d] when it was negotiated to Filinvest, the latter had no notice
of any infirmity in the instrument or defect in the title of VMS Corporation.
Accordingly, respondent corporation holds the instrument free from any
defect of title of prior parties, and free from defenses available to prior

FACTS:
On various dates, Security Bank issued 280 certificates of time deposit
(CTDs) in favor of one Angel dela Cruz who deposited the aggregate
amount of P1,120,000.00 2. Angel dela Cruz delivered the said CTDs to
herein plaintiff in connection with his purchase of fuel products from the
latter.
Angel dela Cruz lost all the certificates of time deposit in dispute. Mr.
Tiangco advised him to execute an Affidavit of Loss, as required the bank's
procedure. Dela Cruz complied and 280 CTDs were issued as
replacement.On March 25, 1982, Angel dela Cruz obtained a loan from said
bank in the amount of P875,000.00. On the same date, said depositor
executed a notarized Deed of Assignment of Time Deposit which stated,
that he surrenders to defendant bank full control of the time deposits from
and after date of the assignment and further authorizes said bank to preterminate, set-off and apply the said time deposits to the payment of
whatever amount or amounts may be due' on the loan upon its maturity.
Caltex (Phils.) Inc., went to said bank's Sucat branch and presented for
verification the CTDs declared lost by Angel dela Cruz alleging that the
same were delivered to herein plaintiff as security for purchases made
with Caltex. Defendant received a letter from herein plaintiff formally
informing it of its possession of the CTDs in question and of its decision to
pre-terminate the same.
No copy of the requested documents was furnished herein defendant. And,
defendant bank rejected the plaintiff's demand and claim for payment of
the value of the CTDs.
In April 1983, the loan of Angel dela Cruz with the defendant bank matured
and fell due and on August 5, 1983, the latter set-off and applied the time
deposits in question to the payment of the matured loan.
Plaintiff filed the instant complaint, praying that defendant bank be
ordered to pay it the aggregate value of the CTDs P1,120,000.00 plus
interest. Court dismissed said complaint
On appeal, respondent court affirmed the lower court's dismissal. Hence
this petition.

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ISSUE: Can Petitioner recover on the CTDs?
HELD: No.
The records reveal that Angel de la Cruz, whom petitioner chose not to
implead in this suit for reasons of its own, delivered the CTDs amounting to
P1,120,000.00 to petitioner without informing respondent bank thereof at
any time. Unfortunately for petitioner, although the CTDs are bearer
instruments, a valid negotiation thereof for the true purpose and
agreement between it and De la Cruz, as ultimately ascertained, requires
both delivery and indorsement. For, although petitioner seeks to deflect
this fact, the CTDs were in reality delivered to it as a security for De la
Cruz purchases of its fuel products. Any doubt as to whether the CTDs
were delivered as payment for the fuel products or as a security has been
dissipated and resolved in favor of the latter by petitioner's own authorized
and responsible representative himself.
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,
petitioner's aforesaid witness merely declared that Angel 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. Hence, the
situation would require any party dealing with the CTDs to go behind the
plain import of what is written thereon to unravel the agreement of the
parties thereto through facts aliunde. This need for resort to extrinsic
evidence is what is sought to be avoided by the Negotiable Instruments
Law and calls for the application of the elementary rule that the
interpretation of obscure words or Stipulations in a contract shall not favor
the party who caused the obscurity.

TRADERS ROYAL BANK, VS. COURT OF APPEALS, FILRITERS March


03, 1997
FACTS:

Filriters Guaranty Assurance Corporation executed a 'Detached


Assignment' whereby Filriters, as registered owner, sold, transferred,
assigned and delivered unto Philfinance all its rights and title to Central
Bank Certificates of Indebtedness (CBCI) Said Detached Assignment
contains an express authorization to complete the assignment through
registration of the transfer in the name of PhilFinance.
Petitioner entered into a Repurchase Agreement with PhilFinance whereby,
PhilFinance sold and delivered to petitioner CBCI with a face value of
P500,000 which CBCI was among those previously acquired by PhilFinance
from Filriters as averred.
Pursuant to the Repurchase Agreement Philfinance agreed to repurchase
CBCI at the stipulated price of PESOS : FIVE HUNDRED NINETEEN
THOUSAND THREE HUNDRED SIXTY-ONE but failed to do so since the
checks were dishonored.
Owing to the default of PhilFinance subsequently transferred same CBCI to
Traders Royal Bank (TRB) under a repurchase agreement. When Philfinance
failed to do so, The TRB tried to register in its name in the CBCI. The
Central Bank did not want to recognize the transfer. Upon these
assertions, TRB prayed for the registration by the Central Bank of the
subject CBCI in its name.
RTC held that transfer is null and void.
ISSUE: Is the CA correct in stating that the subject CBCI is not a negotiable
instrument and thus, Philfinance acquired no title or rights under CBCI?
HELD: SC upheld the decision of CA.
As worded, the instrument provides a promise 'to pay Filriters Guaranty
Assurance Corporation, the registered owner hereof.' Very clearly, the
instrument is payable only to Filriters, the registered owner, whose name is
inscribed thereon. It lacks the words of negotiability which should have
served as an expression of consent that the instrument may be transferred
by negotiation. A reading of the subject CBCI indicates that the same is
payable to FILRITERS GUARANTY ASSURANCE CORPORATION, and to no
one else, thus, discounting the petitioner ' s submission that the same is a
negotiable instrument, and that it is a holder in due course of the
certificate.

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The accepted rule is that the negotiability or non-negotiability of an
instrument is determined from the writing, that is, from the face of the
instrument itself. Thus, the transfer of the instrument from Philfinance to
TRB was merely an assignment, and is not governed by the negotiable
instruments law.

PHILIPPINE NATIONAL BANK VS. ERLANDO T. RODRIGUEZ AND


NORMA RODRIGUEZ September 26, 2008
FACTS:
Spouses Rodriguez were clients of PNB. The spouses were engaged in the
informal lending business. In line with their business, they had a
discounting arrangement with the Philnabank Employees Savings and Loan
Association (PEMSLA), an association of PNB employees. PEMSLA was
likewise a client of PNB PEMSLA regularly granted loans to its members.
Spouses Rodriguez would rediscount the postdated checks issued to
members whenever the association was short of funds. As was customary,
the spouses would replace the postdated checks with their own checks
issued
in
the
name
of
the
members.
It was PEMSLA's policy not to approve applications for loans of members
with outstanding debts. To subvert this policy, some PEMSLA officers
devised a scheme to obtain additional loans despite their outstanding loan
accounts. They took out loans in the names of unknowing members,
without the knowledge or consent of the latter. The PEMSLA checks issued
for these loans were then given to the spouses for rediscounting. The
officers carried this out by forging the indorsement of the named payees in
the checks. PNB eventually found out about these fraudulent acts. To put a
stop to this scheme, PNB closed the current account of PEMSLA. As a
result, the PEMSLA checks deposited by the spouses were returned or
dishonored for the reason "Account Closed." The corresponding Rodriguez
checks, however, were deposited as usual to the PEMSLA savings account.
The amounts were duly debited from the Rodriguez account. Thus,
because the PEMSLA checks given as payment were returned, spouses
Rodriguez incurred losses from the rediscounting transactions.
PNB claimed it is not liable for the checks which it paid to the PEMSLA
account without any endorsement from the payees. After trial, the RTC
rendered judgment in favor of spouses Rodriguez. PNB appealed to CA on
the ground that the checks should be considered as payable to bearer and

not to order. The CA concluded that the checks were obviously meant by
the spouses to be really paid to PEMSLA. The spouses Rodriguez moved for
reconsideration. They argued, that the checks on their faces were
unquestionably payable to order; and that PNB committed a breach of
contract when it paid the value of the checks to PEMSLA without
indorsement from the payees. They also argued that their cause of action
is not only against PEMSLA but also against PNB to recover the value of the
checks. , the CA reversed itself via an Amended Decision.
ISSUE: Who shall bear the loss?
HELD: Petitioner PNB shall bear the loss.
An order instrument requires an indorsement from the payee or holder
before it may be validly negotiated. A bearer instrument, on the other
hand, does not require an indorsement to be validly negotiated. It is
negotiable by mere delivery.
A review of US jurisprudence yields that an actual, existing, and living
payee may also be "fictitious" if the maker of the check did not intend for
the payee to in fact receive the proceeds of the check. This usually occurs
when the maker places a name of an existing payee on the check for
convenience or to cover up an illegal activity.[14] Thus, a check made
expressly payable to a non-fictitious and existing person is not necessarily
an order instrument. If the payee is not the intended recipient of the
proceeds of the check, the payee is considered a "fictitious" payee
and the check is a bearer instrument. Considering that respondentsspouses were transacting with PEMSLA and not the individual payees, it is
understandable that they relied on the information given by the officers of
PEMSLA that the payees would be receiving the checks. Verily, the subject
checks are presumed order instruments. The bank failed to satisfy a
requisite condition of a fictitious-payee situation - that the maker of the
check intended for the payee to have no interest in the transaction.
Because of such failure, the checks are to be deemed payable to order.
Consequently, the drawee bank bears the loss.

PEOPLE OF THE PHILIPPINES VS. GILBERT REYES WAGAS


September 04, 2013
FACTS:

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Wagas, depositor of BPI issued a check in payment of an obligation, but
which check when presented for encashment By Ligaray with the bank,
was dishonored for the reason drawn against insufficient funds. Despite
of notice and several demands made upon Wagas to make good said check
or replace the same with cash, he had failed and refused and up to the
present time still fails and refuses to do so, and thus he was charged of the
crime of estafa
In his defense, Wagas himself testified. He admitted having issued BPI
Check to Caada, his brother-in-law, not to Ligaray. He denied having any
telephone conversation or any dealings with Ligaray. He explained that the
check was intended as payment for a portion of Caadas property that he
wanted to buy, but when the sale did not push through, he did not
anymore fund the check. He insisted that it was Caada who had
transacted with Ligaray, and that he had signed the letter only because his
sister and her husband had begged him to assume the responsibility. On
redirect examination, Wagas declared that Caada, a seafarer, was then
out of the country; that he signed the letter only to accommodate the
pleas of his sister and Caada, and to avoid jeopardizing Caadas
application for overseas employment. The RTC convicted Wagas of estafa.
ISSUE: Is Wagas guilty as charged?

HELD: No.
The essential elements of the crime charged are that: (a) a check is
postdated or issued in payment of an obligation contracted at the time the
check is issued; (b) lack or insufficiency of funds to cover the check; and
(c) damage to the payee thereof. It is the criminal fraud or deceit in the
issuance of a check that is punishable, not the non-payment of a debt.
Prima facie evidence of deceit exists by law upon proof that the drawer of
the check failed to deposit the amount necessary to cover his check within
three days from receipt of the notice of dishonor.
In every criminal prosecution, however, the identity of the offender, like
the crime itself, must be established by proof beyond reasonable doubt. In
that regard, the Prosecution did not establish beyond reasonable doubt
that it was Wagas who had defrauded Ligaray by issuing the check.
Secondly, the check delivered to Ligaray was made payable to cash. Under
the Negotiable Instruments Law, this type of check was payable to the
bearer and could be negotiated by mere delivery without the need of an
endorsement. It bears stressing that the accused, to be guilty of estafa as
charged, must have used the check in order to defraud the complainant.

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