Philippine National Bank vs.

Seeto
G.R. No. L-4388 (August 1952)
FACTS:
On March 13, 1948, Benito Seeto presented to the Philippine National Bank
at Surigao a check in the amount of P5,000, payable to cash or bearer, and drawn
by one Gan Yek Kiao against the Cebu branch of the Philippine National Bank of
Communications. After consultation with the bank employees, Seeto made a
general and unqualified endorsement of the check, which was accepted by PNBs
agency, which paid Seeto the value of the check therefore. Upon being presented to
the drawee bank for payment, however, the check was dishonored for insufficient
funds. PNB demanded refund from Seeto. Seeto, however, refused, claiming that
at the time of the negotiation of the check, the drawer had sufficient funds in the
drawee bank, and had not PNB delayed in forwarding the check until the drawers
funds were exhausted, the same would have been paid.
PNB alleged that Seeto gave assurances that the drawer of the check had
sufficient funds with the bank, and that Seeto had made a general and unqualified
indorsement thereon. As evidence, PNB presented two witnesses at the trial, who
testified that the check was cashed due to assurances given by Seeto and the
promise that he would refund the amount paid by PNB should the check be
dishonored.
ISSUE:
WON should parole evidence with respect to the verbal assurances made by
Seeto be admitted as evidence.
HELD:
Yes. It has been held that any prior or contemporaneous conversation in
connection with a note or its indorsement may be proved by parole evidence. An
extrinsic agreement between indorser and indorsee which cannot be embodied in
the instrument without impairing its credit is provable by parole. If, therefore, the
supposed assurances that the drawer had funds and that the Seeto would refund the
amount of the check if the drawer had no funds, were the considerations or reasons
that induced the branch agency of PNB to go out of its ordinary practice of not

cashing out of town checks and accept the check and to pay its face value, the same
would be provable by parole, provided, of course, that the assurances or
inducements offered would not vary, alter, or destroy the obligations attached by
law to the indorsement.
However, in this case, there was no express obligation assumed by Seeto
that the drawer would always have funds, or that he would refund the amount of
the check even if there was delay in its presentation. Therefore, though the
supposed assurances given were part of Seetos obligation as an indorser, such
assurances were discharged by the unreasonable delay in the presentation of the
check for payment.
DOCTRINE:
Any prior or contemporaneous conversation in connection with a note or its
indorsement may be proved by parole evidence. An extrinsic agreement between
indorser and indorsee which cannot be embodied in the instrument without
impairing its credit is provable by parole.