NEGOTIABLE

INSTRUMENTS CASE LIST 1

1. Traders Royal Bank Employees Union-Independent vs. NLRC

Emergency Recit:

Lawyer wins case for his client, Traders Royal Bank Employees Union, and asks 10% of awarded fees. Client refuses,
saying he already receives monthly retainer fees. Dispute brought to SC. SC says that Attorneys should be paid for
services rendered over and above Retainer Fees, as the latter is just a fee to secure future services from a lawyer. Even
if no fee is agreed upon, Attorneys should be paid on the basis of quasi-contract (unless there is a clear waiver). The
basis of this amount should be quantam merit, or reasonably based on the amount of work performed.

Facts:
-

Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A. Cruz, head of the
E.N.A. Cruz and Associates law firm, entered into a retainer agreement on February 26, 1987 whereby the former
obligated itself to pay the latter a monthly retainer fee of P3,000.00 in consideration of the law firm's undertaking
to render the services enumerated in their contract. 1
The Union had a case against Traders Royal Bank (TRB) with the Labor Arbiter over holiday, mid year and end-year
bonus differentials. Union was granted bonus differentials.
Decision was appealed to in the SC, SC affirmed, but only the Holiday bonuses. The amount won was Php
175,794.32.
Upon hearing this decision, lawyer for Union asked for 10% of the amount as lawyers fees from labor arbiter and
this was granted.
Union appeals this to the SC. They claim for abuse of discretion because by awarding the lawyer 10%, they violated
the retainer agreement found in the engagement contract with the lawyer, which states that the lawyer gets Php
3,000 a month as retainer fee.

Issue:
-

Was the Lawyers filing for attorneys fees after the decision of the SC was rendered valid?
Was the Lawyer entitled to attorneys fees over and above that of the stated retainer fee in his contract?

Held:
WHEREFORE, the impugned resolution of respondent National Labor Relations Commission affirming the order of the
labor arbiter is MODIFIED, and petitioner is hereby ORDERED to pay the amount of TEN THOUSAND PESOS (P10,000.00)
as attorney's fees to private respondent for the latter's legal services rendered to the former.
Ratio:
It appears necessary to explain and consequently clarify the nature of the attorney's fees subject of this petition, in
order to dissipate the apparent confusion between and the conflicting views of the parties.
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. 20 In its
ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services
he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with
the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing
party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such as those
authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that
the award shall pertain to the lawyer as additional compensation or as part thereof.

NEGOTIABLE INSTRUMENTS CASE LIST 1

It is the first type of attorney's fees which private respondent demanded before the labor arbiter. Also, the present
controversy stems from petitioner's apparent misperception that the NLRC has jurisdiction over claims for attorney's
fees only before its judgment is reviewed and ruled upon by the Supreme Court, and that thereafter the former may no
longer entertain claims for attorney's fees. Accordingly, when the labor arbiter ordered the payment of attorney's fees,
he did not in any way modify the judgment of the Supreme Court and is therefore valid.
It is well settled that a claim for attorney's fees may be asserted either in the very action in which the services of a
lawyer had been rendered or in a separate action. 21
It is apparent from the foregoing discussion that a lawyer has two options as to when to file his claim for professional
fees. Hence, private respondent was well within his rights when he made his claim and waited for the finality of the
judgment for holiday pay differential, instead of filing it ahead of the award's complete resolution.
It is elementary that an attorney is entitled to have and receive a just and reasonable compensation for services
performed at the special instance and request of his client. As long as the lawyer was in good faith and honestly trying
to represent and serve the interests of the client, he should have a reasonable compensation for such services. 26 It will
thus be appropriate, at this juncture, to determine if private respondent is entitled to an additional remuneration under
the retainer agreement 27 entered into by him and petitioner.
The difference between a compensation for a commitment to render legal services and a remuneration for legal
services actually rendered can better be appreciated with a discussion of the two kinds of retainer fees a client may pay
his lawyer. These are a general retainer, or a retaining fee, and a special
retainer. 28
A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future services as general counsel for any
ordinary legal problem that may arise in the routinary business of the client and referred to him for legal action. The
future services of the lawyer are secured and committed to the retaining client. For this, the client pays the lawyer a
fixed retainer fee which could be monthly or otherwise, depending upon their arrangement. The fees are paid whether
or not there are cases referred to the lawyer. The reason for the remuneration is that the lawyer is deprived of the
opportunity of rendering services for a fee to the opposing party or other parties. In fine, it is a compensation for lost
opportunities.
A special retainer is a fee for a specific case handled or special service rendered by the lawyer for a client. A client may
have several cases demanding special or individual attention. If for every case there is a separate and independent
contract for attorney's fees, each fee is considered a special retainer.
Hilado vs. David expounds on this concept in this wise:
"A retaining fee is a preliminary fee given to an attorney or counsel to insure and secure his future services, and
induce him to act for the client. It is intended to remunerate counsel for being deprived, by being retained by one
party, of the opportunity of rendering services to the other and of receiving pay from him, and the payment of such
fee, in the absence of an express understanding to the contrary, is neither made nor received in payment of the
services contemplated; its payment has no relation to the obligation of the client to pay his attorney for the services
for which he has retained him to perform."
Evidently, the Php 3,000 retainer fee only covers the law firms pledge, or as expressly stated therein, its commitment
to render the legal services enumerated. The fee is not payment for private respondents execution or performance of
the services listed in the contract, subject to some particular qualifications or permutations stated there.
The fact that petitioner and private respondent failed to reach a meeting of the minds with regard to the payment of
professional fees for special services will not absolve the former of civil liability for the corresponding remuneration
therefor in favor of the latter. The civil liability of the union is one for quasi-contract.

NEGOTIABLE INSTRUMENTS CASE LIST 1

It is not necessary that the parties agree on a definite fee for the special services rendered by private respondent in
order that petitioner may be obligated to pay compensation to the former. Equity and fair play dictate that petitioner
should pay the same after it accepted, availed itself of, and benefited from private respondent's services.
Viewed from another aspect, since it is claimed that petitioner obtained respondent's legal services and assistance
regarding its claims against the bank, only they did not enter into a special contract regarding the compensation
therefor, there is at least the innominate contract of facio ut des (I do that you may give). 36 This rule of law, likewise
founded on the principle against unjust enrichment, would also warrant payment for the services of private respondent
which proved beneficial to petitioner's members.
Respondent lawyer claims 10% of the awarded bonuses to his client. He bases this on Art. 111 of the Labor Code, stating
that:
Art. 111 Attorneys fees. - in cases of unlawful withholding of wages, the culpable party may be assessed
attorneys fees equivalent to ten percent of the amount of the wages recovered.
However, this cannot apply since this pertains to extraordinary fees, which is in the form of damages, and that is not the
case at hand. Instead, the measure of compensation for private respondent's services as against his client should
properly be addressed by the rule of quantum meruit long adopted in this jurisdiction. Quantum meruit, meaning "as
much as he deserves," is used as the basis for determining the lawyer's professional fees in the absence of a contract, 41
but recoverable by him from his client.
Over the years and through numerous decisions, this Court has laid down guidelines in ascertaining the real worth of a
lawyer's services. These factors are now codified in Rule 20.01, Canon 20 of the Code of Professional Responsibility and
should be considered in fixing a reasonable compensation for services rendered by a lawyer on the basis of quantum
meruit. These are: (a) the time spent and the extent of services rendered or required; (b) the novelty and difficulty of
the questions involved; (c) the importance of the subject matter; (d) the skill demanded; (e) the probability of losing
other employment as a result of acceptance of the proffered case; (f) the customary charges for similar services and the
schedule of fees of the IBP chapter to which the lawyer belongs; (g) the amount involved in the controversy and the
benefits resulting to the client from the services; (h) the contingency or certainty of compensation; (i) the character of
the employment, whether occasional or established; and (j) the professional standing of the lawyer.
It should be this, and not the provision in the Labor Code, that should be used in determining the amount due to the
Lawyer. Based on SCs sound discretion, they place this amount to be at Php 10,000, instead of the Php 17,000+ (10% of
award) asked for by Lawyer.
Summary of Doctrines:
1. Lawyer may ask for fees before or after judgment is rendered.
2. Two kinds of attorneys fees Ordinary (compensation for services) and Extraordinary (for of damages)
3. Two kinds of Retainer fees Ordinary (to secure future services and is considered remuneration for opportunity
costs of the lawyer) and Extraordinary (which is paid on a per case basis)
4. Even if there is no stipulated fee arrangement, lawyer is entitled based on unjust enrichment principle, a form
of quasi contract (unless there is a clear waiver).
5. When there is no basis, Courts will dictate a price based on Quantum meruit, or as much as he deserves.
6. What he deserves, from this case, stems from the Code of Professional Responsibility (posted above).

NEGOTIABLE INSTRUMENTS CASE LIST 1

2. Caltex vs. CA and Security Bank

Emergency Recit:
Angel dela Cruz deposited 1,120,000 pesos in Security Bank. In return, he was given 280 certificates of time deposits
(CTDs). These CTDs, despite the trial courts ruling, are made payable to bearer and are thus negotiable instruments.
These CTDs were delivered to Caltexwhich according to it were payments for fuel products. But according to the bank,
and the courts, were merely securities to the eventual payment for the products. Therefore, being that the CTDs were
never negotiated to Caltex, they cannot recover the CTDs. Also, in regards to whether respondent observed the
requirements of the law in the case of lost negotiable instruments and the issuance of replacement certificates, the
Code of Commerce provision is not mandatory and is permissive. It uses the word may. Petition is dismissed, decision
affirmed.

REGALADO, J.:

I. FACTS
On various dates, defendant, a commercial banking institution, through its Sucat Branch issued 280 certificates
of time deposit (CTDs) in favor of one Angel dela Cruz who deposited with herein defendant the aggregate
amount of P1,120,000.00.
Angel dela Cruz delivered the said certificates of time (CTDs) to herein plaintiff in connection with his purchased
of fuel products from the latter.
Sometime in March 1982, Angel dela Cruz informed Mr. Timoteo Tiangco, the Sucat Branch Manger, that he lost
all the certificates of time deposit in dispute. Mr. Tiangco advised said depositor to execute and submit a
notarized Affidavit of Loss, as required by defendant bank's procedure, if he desired replacement of said lost
CTDs
On March 18, 1982, Angel dela Cruz executed and delivered to defendant bank the required Affidavit of Loss.
On the basis of said affidavit of loss, 280 replacement CTDs were issued in favor of said depositor
On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from defendant bank in the amount of
Eight Hundred Seventy Five Thousand Pesos (P875,000.00). On the same date, said depositor executed a
notarized Deed of Assignment of Time Deposit which stated, among others, that de la Cruz surrenders to
defendant bank "full control of the indicated time deposits from and after date" of the assignment and further
authorizes said bank to pre-terminate, 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.
Sometime in November, 1982, Mr. Aranas, Credit Manager of plaintiff Caltex (Phils.) Inc., went to the defendant
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 Philippines, Inc." by said
depositor.
On November 26, 1982, 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.
On December 8, 1982, plaintiff was requested by herein defendant to furnish the former "a copy of the
document evidencing the guarantee agreement with Mr. Angel dela Cruz" as well as "the details of Mr. Angel
dela Cruz" obligation against which plaintiff proposed to apply the time deposits. No copy of the requested
documents was furnished herein defendant.
Accordingly, defendant bank rejected the plaintiff's demand and claim for payment of the value of the CTDs in a
letter dated February 7, 1983

NEGOTIABLE INSTRUMENTS CASE LIST 1

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
In view of the foregoing, plaintiff filed the instant complaint, praying that defendant bank be ordered to pay it
the aggregate value of the certificates of time deposit of P1,120,000.00 plus accrued interest and compounded
interest therein at 16% per annum, moral and exemplary damages as well as attorney's fees.
After trial, the court a quo rendered its decision dismissing the instant complaint & CA affirmed ruling
Issue/Held:
1. that the subject certificates of deposit are non-negotiable despite being clearly negotiable instruments;
a. They are negotiable
2. W/N petitioner can recover the CTDs
a. No
3. The responded erred in disregarding the pertinent provisions of the Code of Commerce relating to lost
instruments payable to bearer.
a. No

Ratio:

SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND ONLY,
SECURITY BANK SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine Currency, repayable to said
depositor 731 days. after date, upon presentation and surrender of this certificate, with interest at the
rate of 16% per cent per annum.
(Sgd. Illegible) (Sgd. Illegible)


Respondent court ruled that the CTDs in question are non-negotiable instruments:
o We disagree with these findings and conclusions, and hereby hold that the CTDs in question are
negotiable instruments. The Negotiable Instruments Law, enumerates the requisites for an instrument
to become negotiable. The CTDs in question undoubtedly meet the requirements of the law for
negotiability. The parties' bone of contention is with regard to requisite ((d) Must be payable to order or
to bearer) It is noted that Mr. Timoteo P. Tiangco, Security Bank's Branch Manager way back in 1982,
testified in open court that the depositor referred to in the CTDs is no other than Mr. Angel de la Cruz.
o 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. In the construction of a bill or note, the intention
of the parties is to control, if it can be legally ascertained. The duty of the court in such case is to
ascertain, not what the parties may have secretly intended as contradistinguished from what their
words express, but what is the meaning of the words they have used. What the parties meant must be
determined by what they said.
o The CTDs are negotiable instruments. The documents provide that the amounts deposited shall be
repayable to the depositorwho is the "bearer." The documents do not say that the depositor is Angel
de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are to
be repayable to the bearer of the documents at the time of presentment.

NEGOTIABLE INSTRUMENTS CASE LIST 1

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.
The next query is whether petitioner can rightfully recover on the CTDs. This time, the answer is in the negative.
The records reveal that Angel de la Cruz 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.
o Aranas, Jr., Caltex Credit Manager, wrote a letter to the bank admitting the CTDs were merely
guarantees and not the payment for fuel products. Under the doctrine of estoppel, an admission or
representation is rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.
o It has been said that a transfer of property by the debtor to a creditor, even if sufficient on its face to
make an absolute conveyance, should be treated as a pledge if the debt continues in inexistence and is
not discharged by the transfer.
Under the Negotiable Instruments Law, an instrument is negotiated when it is transferred from one person to
another in such a manner as to constitute the transferee the holder thereof, and a holder may be the payee or
indorsee of a bill or note, who is in possession of it, or the bearer thereof.
o In the present case, there was no negotiation in the sense of a transfer of the legal title to the CTDs in
favor of petitioner in which situation, for obvious reasons, mere delivery of the bearer CTDs would have
sufficed. Here, the delivery thereof only as security for the purchases of Angel de la Cruz could at the
most constitute petitioner only as a holder for value by reason of his lien. Accordingly, a negotiation for
such purpose cannot be effected by mere delivery of the instrument since, necessarily, the terms
thereof and the subsequent disposition of such security, in the event of non-payment of the principal
obligation, must be contractually provided for.
o The pertinent law on this point is that where the holder has a lien on the instrument arising from
contract, he is deemed a holder for value to the extent of his lien. As such holder of collateral security,
he would be a pledgee but the requirements therefor and the effects thereof, not being provided for by
the Negotiable Instruments Law, shall be governed by the Civil Code provisions on pledge of incorporeal
rights, which inceptively provide:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged.
The instrument proving the right pledged shall be delivered to the creditor, and if negotiable,
must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the thing
pledged and the date of the pledge do not appear in a public instrument.
o Aside from the fact that the CTDs were only delivered but not indorsed, the factual findings of
respondent court quoted at the start of this opinion show that petitioner failed to produce any
document evidencing any contract of pledge or guarantee agreement between it and Angel de la
Cruz. Consequently, the mere delivery of the CTDs did not legally vest in petitioner any right effective
against and binding upon respondent bank. The requirement under Article 2096 aforementioned is not
a mere rule of adjective law prescribing the mode whereby proof may be made of the date of a pledge
o

NEGOTIABLE INSTRUMENTS CASE LIST 1

contract, but a rule of substantive law prescribing a condition without which the execution of a pledge
contract cannot affect third persons adversely.
Finally, petitioner questions whether respondent observed the requirements of the law in the case of lost
negotiable instruments and the issuance of replacement certificates.
o On this matter, we uphold respondent court's finding that the aspect of alleged negligence of private
respondent was not included in the stipulation of the parties and in the statement of issues submitted
by them to the trial court. Issues not raised in the trial court cannot be raised for the first time on
appeal.
o Still, even assuming arguendo that said issue of negligence was raised in the court below, A close
scrutiny of the provisions of the Code of Commerce laying down the rules to be followed in case of lost
instruments payable to bearer, will reveal that said provisions, even assuming their applicability to the
CTDs in the case at bar, are merely permissive and not mandatory.
Art 548. The dispossessed owner, no matter for what cause it may be, may apply to the judge or
court of competent jurisdiction, asking that the principal, interest or dividends due or about to
become due, be not paid a third person, as well as in order to prevent the ownership of the
instrument that a duplicate be issued him. (Emphasis ours.)
o The use of the word "may" in said provision shows that it is not mandatory but discretionary on the part
of the "dispossessed owner" to apply to the judge or court of competent jurisdiction for the issuance of
a duplicate of the lost instrument.
o Moreover, Articles 548 to 558 of the Code of Commerce, on which petitioner seeks to anchor
respondent bank's supposed negligence, merely established
1. a right of recourse in favor of a dispossessed owner or holder of a bearer instrument so that he may
obtain a duplicate of the same, and,
2. an option in favor of the party liable thereon who, for some valid ground, may elect to refuse to
issue a replacement of the instrument.
Significantly, none of the provisions cited by petitioner categorically restricts or prohibits the
issuance a duplicate or replacement instrument sans compliance with the procedure outlined
therein, and none establishes a mandatory precedent requirement therefor.

WHEREFORE, on the modified premises above set forth, the petition is DENIED and the appealed decision is hereby
AFFIRMED.
SO ORDERED.

NEGOTIABLE INSTRUMENTS CASE LIST 1

3. Metropolitan Bank & Trust Company vs. Court of Appeals

Emergency Recit:
Gomez opened an account with Golden Savings Loan Association and deposited 38 treasury warrants worth
P1,755,288.37 drawn by the Philippine Fish Marketing Authority. Golden Savings deposited these warrants in
Metrobank Brank of Calapan to be cleared by the Bureau of Treasury. Because she was persistent in asking them about
the clearance, they just gave in (in other words, nakulitan lang sila). After she withdrew the money and Gomez
subsequently withdrew his money, Metrobank came back to tell them that 32 of the warrants werent cleared by the
Bureau and wanted Golden Savings to pay them back. Went to RTC, judgment in favor of Golden Savings. Court of
Appeals, same judgment. Supreme Court (this case) same judgment. The cause of the dispute was the negligence of
Metrobank. Section 66 of the Negotiable Instruments Law is not applicable to the non-negotiable treasury warrants
because Negotiable Instruments must contain an unconditional promise to pay a sum certain in money (Sec 1) and order
or promise to pay out of a particular fund is not unconditional (Sec 3). the treasury warrants in question are not
negotiable instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, and this is of equal
significance, it is indicated that they are payable from a particular fund, to wit, Fund 501.


CRUZ, J.:

I. FACTS
Metropolitan Bank and Trust Co. commercial bank with branches throughout the Philippines and abroad
Golden Savings and Loan Association operated in Calapan, Mindoro
January 1979 Gomez opened an account with Golden Savings, deposited 38 treasury warrants worth
P1,755,228.37 drawn by the Philippine Fish Marketing Authority
o These warrants were indorsed by Gloria Castillo and deposited to its savings account in the Metrobank
Branch of Calapan
o They were sent for clearing to the principal office of Metrobank which forwarded them to the Bureau of
Treasury for special clearing
Castillo kept going back to Metrobank to ask whether the warrants had been cleared or not. She was told to
wait. Gomez could not withdraw. Later, however, "exasperated" over Gloria's repeated inquiries and also as
an accommodation for a "valued client," the petitioner says it finally decided to allow Golden Savings to
withdraw from the proceeds of the warrants. The total withdrawal was P968.000.00.
Gomez was subsequently allowed to withdraw from his account and collected P1,167,500.00 from the
apparently cleared warrants
July 1979 Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of
Treasury and demanded a refund of the amount previously withdrawn.
Metrobank sued Golden Savings in the RTC. Judgment in favor of Golden Savings. On appeal to the Court of
Appeals, the decision was affirmed, prompting Metrobank to file this petition for review.

Issue/Held:
W/N CA erred in disregarding and failing to apply the clear contractual terms and conditions on the deposit slips
allowing Metrobank to charge back any amount erroneously credited.
W/N CA erred in not finding that as between Metrobank and Golden Savings, the latter should bear the loss.
W/N CA erred in holding that the treasury warrants involved in this case are not negotiable instruments.
The Petition has no merit.

NEGOTIABLE INSTRUMENTS CASE LIST 1

Note: We find the challenged decision to be basically correct. However, we will have to amend it insofar as it directs the
petitioner to credit Golden Savings with the full amount of the treasury checks deposited to its account.
The balance of P586,589.00 should be debited to Golden Savings, as obviously Gomez can no longer be permitted to
withdraw this amount from his deposit because of the dishonor of the warrants. Gomez has in fact disappeared. To also
credit the balance to Golden Savings would unduly enrich it at the expense of Metrobank, let alone the fact that it has
already been informed of the dishonor of the treasury warrants.

Ratio:
From the above undisputed facts, it would appear to the Court that Metrobank was indeed 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 the proceeds thereof from his account with it. Without such assurance, Golden
Savings would not have allowed the withdrawals; with such assurance, there was no reason not to allow the
withdrawal.
By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling more
than one and a half million pesos (and this was 1979). There was no reason why it should not have waited until
the treasury warrants had been cleared; it would not have lost a single centavo by waiting. Yet, despite the lack
of such clearance and notwithstanding that it had not received a single centavo from the proceeds of the
treasury warrants, as it now repeatedly stresses it allowed Golden Savings to withdraw not once, not
twice, but thrice from the uncleared treasury warrants in the total amount of P968,000.00.
The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the clearance
given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the
treasury warrants he had deposited Metrobank misled Golden Savings.
o 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.
A no less important consideration is the circumstance that the treasury warrants in question are not negotiable
instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, and this is of equal
significance, it is indicated that they are payable from a particular fund, to wit, Fund 501.
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were
"genuine and in all respects what they purport to be," in accordance with Section 66 of the Negotiable
Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury warrants.
The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the
warrants but merely to deposit them with Metrobank for clearing. It was in fact Metrobank that made the
guarantee when it stamped on the back of the warrants: "All prior indorsement and/or lack of endorsements
guaranteed, Metropolitan Bank & Trust Co., Calapan Branch."

PERTINENT PROVISIONS OF NEGOTIABLE INSTRUMENTS LAW
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.

NEGOTIABLE INSTRUMENTS CASE LIST 1

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.

Sec. 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.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the dispositive portion
of the judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing defendant
Golden Savings & Loan Association, Inc. to withdraw the amount outstanding thereon, if any, after the debit.

SO ORDERED.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

NEGOTIABLE INSTRUMENTS CASE LIST 1

4. Philippine National Bank vs. Concepcion Mining Co., Inc.

Emergency Recit:
Concepcion Mining Co., Inc. issued a promissory note with Vicente Legarda and Jose Sarte as signatories. Legarda died
on Februaru 24, 1946. Defendants prayed that the estate of the deceased Legarda be included as party-defendant. The
SC held that since the promissory note was executed jointly and severally (solidarily), the payee (PNB) had the right to
hold any of the parties, namely Legarda and Sarte, responsible for the payment of the note.

LABRADOR, J.:

I. FACTS
Appeal from a judgment or decision of the Court of First Instance of Manila. Sentencing defendants Concepcion
Mining Company and Jose Sarte to pay jointly and severally to the plaintiff the amount of P7,197.26 with
interest.
The present action was instituted by the plaintiff to recover from the defendants the face of a promissory note:
o Ninety days after date, for value received, I promise to pay to the order of Philippine National Bank x x
xIn case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsers
shall pay 10% of the amount due on the note as attorneys fees, which in no case shall be less than
P100.00 exclusive of all costs and fees allowed by law as stipulated in the contract of real estate
mortgage. Demand and Dishonor Waived. Holder may accept partial payment reserving his right of
recourse against each and all indorsers. Signed by VICENTE LEGARDA (President), VICENTE LEGARDA,
JOSE S SARTE.
Defendants presented their answer in which they allege that the co-maker of the promissory note Legarda, died
on February 24, 1946 and his estate is in the process of judicial determination in CFI Manila. It is prayed as
special defense, that the estate of said deceased be included as party-defendant.
Motion to reconsider and motion for relief was denied. Hence defendant appealed to the SC.

Issue/Held:
(1) W/N The estate of the deceased Vicente Legarda should be included as party-defendant.

Ratio:
Section 17 of the Negotiable Instruments Law provides:
o Construction where instrument is ambiguous. Where the language of the instrument is ambiguous or
there are omission therein, the following rules of construction apply:
o (g) Where an instrument containing the word I promise to pay is signed by two or more persons, they
are deemed to be jointly and severally liable thereon.
Article 1216 of the Civil Code provides:
o The creditor may proceed against any one of the solidary debtors or some of them simultaneously. The
demand made against one of them shall not be an obstacle to those which may subsequently be
directed against the others as long as the debt has not been fully collected.
In view of these provisions, and as the promissory note was executed jointly and severally by the same parties,
namely, Concepcion Mining Company, Inc. and Vicente Legarda and Jose Sarte, the payee of the promissory
note had the right to hold any one or any two of the signers of the promissory note responsible for the payment
of the amount of the note.
The courts attention has been attracted to the discrepancies on the appeal. (1) The names of the defendants,

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who are evidently the Concepcion Mining Co., Inc. and Jose Sarte, do not appear in the printed record on
appeal. (2)The copy of the promissory note which is set forth in the record on appeal does not contain the name
of the third maker Jose Sarte. Evidently, there is an attempt to mislead the court into believing that Jose Sarte is
not one of the co-makers. The attorney for the defendants is Atty. Jose Sarte himself and he should be held
primarily responsible for the correctness of the record on appeal.