Case Digests in Negotiable Instruments Law

NEGOTIABILITY

(1) Philippine Education Co. vs. Soriano

GR L-22405, 30 June 1971
39 SCRA 587

FACTS:
Enrique Montinola sought to purchase from the Manila Post Office 10
money orders (P200 each), offering to pay for them with a private
check. Montinola was able to leave the building with his check and the
10 money orders without the knowledge of the teller. Upon discovery,
message was sent to all postmasters and banks involving the unpaid
money orders. One of the money orders was received by the Philippine
Education Co. as part of its sales receipt. It was deposited by the
company with the Bank of America, which cleared it with the Bureau of
Post. The Postmaster, through the Chief of the Money Order Division of
the Manila Post Office informed the bank of the irregular issuance of the
money order. The bank debited the account of the company. The
company moved for reconsideration.

ISSUE:
Whether postal money orders are negotiable instruments?

HELD:
Philippine postal statutes are patterned from those of the United States,
and the weight of authority in said country is that Postal money orders
are not negotiable instruments inasmuch as the establishment of a
postal money order is an exercise of governmental power for the
publics benefit. Furthermore, some of the restrictions imposed upon
money order by postal laws and regulations are inconsistent with the
character of negotiable instruments. For instance, postal money orders
may be withheld under a variety of circumstances, and which are
restricted to not more than one indorsement.

(2) CALTEX (PHILIPPINES), INC. vs. CA

G.R. No. 97753, August 10, 1992

212 SCRA 448

FACTS:
Security bank issued Certificates of Time Deposits to Angel dela Cruz.
The same were given by Dela Cruz to petitioner in connection to his
purchase of fuel products of the latter. On a later date, Dela Cruz
approached the bank manager, communicated the loss of the
certificates and requested for a reissuance.
Upon compliance with some formal requirements, he was issued
replacements. Thereafter, he secured a loan from the bank where he
assigned the certificates as security. Here comes the petitioner,
averred that the certificates were not actually lost but were
given as security for payment for fuel purchases. The bank demanded
some proof of the agreement but the petitioner failed to comply. The
loan matured and the time deposits were terminated and then applied
to the payment of the loan.
Petitioner demands the payment of the certificates but to no avail.

ISSUE:
Whether or not the certificates of time deposits (CTDs) are negotiable
instruments?

HELD:

The Court held that the CTDs are negotiable instruments. The CTDs in
question undoubtedly meet the requirements of the law for
negotiability. The Negotiable Instruments Law provides, an instrument
to be negotiable must conform to certain requirements, hence, (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.

The documents provide that the amounts deposited shall

be repayable to the depositor. And who, according to the document, is
the depositor? It 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 or, for that matter,
whosoever may be the bearer at the time of presentment.
 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.

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

G.R. No. 88866, February, 18, 1991
194 SCRA 169

FACTS:
Eduardo Gomez opened an account with Golden Savings and deposited
38 treasury warrants. All warrants were subsequently indorsed by Gloria
Castillo as Cashier of Golden Savings and deposited to its Savings
account in Metrobank branch in Calapan, Mindoro. They were sent for
clearance. Meanwhile, Gomez is not allowed to withdraw from his
account, later, however, exasperated over Floria repeated inquiries
and also as an accommodation for a valued client Metrobank decided
to allow Golden Savings to withdraw from proceeds of the warrants. In
turn, Golden Savings subsequently allowed Gomez to make withdrawals
from his own account. Metrobank informed Golden Savings that 32 of
the warrants had been dishonored by the Bureau of Treasury and
demanded the refund by Golden Savings of the amount it had
previously withdrawn, to make up the deficit in its account. The demand
was rejected. Metrobank then sued Golden Savings.

ISSUE:
Whether or not treasury warrants are negotiable instruments?

HELD:
 The Court held in the negative. The treasury warrants are not
negotiable instruments. Clearly stamped on their face is the word: non
negotiable. Moreover, and this is equal significance, it is indicated that
they are payable from a particular fund, to wit, Fund 501. An instrument
to be negotiable instrument must contain an unconditional promise or
orders to pay a sum certain in money. As provided by Sec 3 of NIL an
unqualified order or promise to pay is unconditional though coupled
with: 1st, 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
2nd, a statement of the transaction which give rise to the instrument.
But an order to promise to pay out of particular fund is not
unconditional. The indication of Fund 501 as the source of the payment
to be made on the treasury warrants makes the order or promise to pay
not conditional and the warrants themselves non-negotiable. There
should be no question that the exception on Section 3 of NIL is
applicable in the case at bar.

(4) Sesbreno vs. CA

GR 89252, 24 May 1993

222 SCRA 446

FACTS:
On 9 February 1981, Raul Sesbreno made a money market placement in
the amount of P300,000 with the Philippine Underwriters Finance
Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to
Sesbreno the Certificate of Confirmation of Sale of a Delta Motor
Corporation Promissory Note (2731), the Certificate of Securities
Delivery Receipt indicating the sale of the note with notation that said
security was in the custody of Pilipinas Bank, and postdated checks
drawn against the Insular Bank of Asia and America for P304,533.33
payable on 13 March 1981. The checks were dishonored for having
been drawn against insufficient funds. Pilipinas Bank never released the
note, nor any instrument related thereto, to Sesbreno; but Sesbreno
learned that the security was issued 10 April 1980, maturing on 6 April
1981, has a face value of P2,300,833.33 with PhilFinance as payee and
Delta Motors as maker; and was stamped non-negotiable on its face.
As Sesbreno was unable to collect his investment and interest thereon,
he filed an action for damages against Delta Motors and Pilipinas Bank.
ISSUE:
Whether non-negotiability of a promissory note prevents its
assignment?

HELD:
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 if it is in bearer form. A
negotiable instrument, instead of being negotiated, may also be
assigned or transferred. The legal consequences of negotiation and
assignment of the instrument are different. A negotiable instrument
may not be negotiated but may be assigned or transferred, absent an
express prohibition against assignment or transfer written in the face of
the instrument. Wherein, there was no prohibition stipulated.