Banco Atlantico v.
Auditor General RULING: The record shows that the
GR No. L-33549 | January 31, 1978
FACTS: Banco Atlantico is doing
business in Madrid Spain. Virginia
Boncan, Finance Officer in the
Philippine Embassy in Madrid,
negotiated with Banco Atlantico a
Philippine embassy check signed by
Luis M. Gonzales, its ambassador and
by said Virginia Boncan in the sum of
US10,109.10 payable to Azucena Pace
and drawn against the Philippine
National Bank branch in New York USA.
The check was endorsed by Azucena
Pace and Virginia Boncan. Banco
Atlantio paid the full amount without
clearing the check. Subsequently, two
other checks was negotiated to Banco
Atlantico, it paid the corresponding
amounts of US35,000.75 and
US90,000.00 to Virginia Boncan
without clearing the check with the
drawee bank.
Upon presentment of Banco Atlantico
for acceptance and payment of the
aforesaid checks by Banco Atlantico,
the drawee bank dishonored the
checks by non-acceptance on the
ground that the drawer had ordered
payments to be stopped. Upon receipt
of the notice of dishonor, the
collecting bank of the petitioner sent a
notice of protest with respect to the
checks in question. Thus, they filed a
money claim with the Auditor General.
The claimant Banco Atlantico
contended that it has every right to
recover from the Embassy as drawer
of the checks because it is a holder in
due course.
ISSUE: Whether Banco Atlantico can
recover from the Philippine Embassy
the corresponding amount of the
checks in question.
check was issued for the sum of
US109.10 for the payment of said
payees salary and the other check in
the amount of US75.00 in
reimbursement of Virginia Boncans
living quarters allowance. There is
also a showing that the US90,000.00
check was payable on demand but
Boncan asked that the same be not
presented for collection until a later
date, Banco Atlantico should have
been put on guard that there was
something wrong with the check. The
fact that the amount involved was
quite big and the payees request that
it be paid on a later date was proof of
a glaring infirmity or defect in the
instrument. Therefore, Banco Atlantico
was not a holder in due course
because it had knowledge of the
infirmity or defect of the check
The petitioner paid the amounts of the
three checks in question to Boncan
without previously clearing the said
checks with the drawee bank. This is
contrary to normal or ordinary banking
practice specially so where the drawee
bank is a foreign bank nd the amounts
involved were large. The drawer of the
aforementioned checks was not even
the client of Banco Atlantico. There is
a showing that Boncan has a special
relationship with the employees and
chiefs of the petitioner that it
disregarded the elementary principles
that should attend banking
transactions.
The Philippine embassy in Madrid, as
drawer, cannot be held liable. It is
apparent that the said checks were
altered fraudulently by Virginia Boncan
as to their amounts and, therefore,
wholly inoperative. No right of
payment thereof against any party
thereto could have been acquired by
the petitioner.

Vicente de Ocampo v. Anita
Gatchalian
GR No. L-15126 | November 30,
1961
FACTS: Gatchalian had drawn a check
payable to plaintiff Ocampo on the
amount of P600 as an evidence of the
formers good faith that she had the
intention on purchasing the latters
car. The said check was intended only
for the safekeeping by Manuel
Gonzales and to be returned to
Gatchalian the following day. However,
Manuel Gonzales failed to return the
aforesaid check the following day
which prompted Gatchalian to issue a
Stop Payment Order on the check
with the drawee bank.
It was found that Manuel Gonzales
delivered the check to the Ocampo
Clinic in payment of the fees and
expenses arising from the
hospitalization of his wife. Ocampo
accepted the check applying P441.75
as payment for the aforesaid fees and
delivering the amount of P158.25
representing the balance on the
amount of the said check.
In their appeal, Gatchalian contends
that the check is not a negotiable
instrument and that Ocampo is not a
holder in due course because she had
no intention to transfer her property
and it was merely for safekeeping,
therefore, there was no delivery
required by law.
In his response, Ocampo contends that
Manuel Gonzales was the agent of the
drawer Gatchalian insofar as the
possession of the check is concerned.
So when Gonzales negotiated the
check with the intention of getting its
value from Ocampo, negotiation took
place without the latters fault.
ISSUE: whether Ocampo may be
considered as holder in due course.
RULING: No. Gatchalian had no
obligation or liability to the Ocampo
Clinic and that the amount of the
check did not correspond exactly with
the obligation of Gonzales for the
hospitalization expense; and that the
check had two parallel lines in the
upper left hand corner, which practice
means that the check could only be
deposited but may not be converted
into cash. All these circumstance
should have put Ocampo to inquiry as
to the why and wherefore of the
possession of the check by Manuel
Gonzales. It was the payees duty to
ascertain from the holder Manuel
Gonzales what the nature of the
latters title to the check was or the
nature of his possession. Having failed
in this respect, Ocampo was guilty of
gross neglect in not finding out the
nature of the title and possession of
Manuel Gonzales, amounting to legal
absence of good faith, and it may not
be considered as a holder of the check
in good faith. Although gross
negligence does not of itself constitute
bad faith, it is evidence from which
bad faith may be inferred.
The rule that a possessor of an
instrument is prima facie a holder in
due course does not apply because
there was a defect in the title of the
holder (Gonzales), because the
instrument is not payable to him or to
bearer. Under the circumstances of the
case, instead of the presumption that
payee was holder in good faith, the
fact is that it acquired possession of
the instrument under circumstances
that should have put it to inquiry as to
the title of the holder who negotiated
the check to it. The burden was,
therefore, placed upon it to show that
notwithstanding the suspicious
circumstances, it acquired the check in
actual good faith. The circumstances
were such as ought to have excited
the suspicion of a prudent and careful
man, and he made no inquiry, he did
not stand in the legal position of a
bona fide holder.
Republic v. Equitable Banking
Corporation
GR No. L-15894-5 | January 30,
1964
FACTS:
GR L-15894
The Republic seeks to recover from
Equitable Banking Corporation the
sum of 17,100 representing the
aggregate value of four (4) treasury
warrants paid to said bank by the
treasurer of the Philippines. These
warrants were deposited with the
Equitable Bank by its depositors,
namely, Robert Wong, Lu Chiu Kau and
Chung Ching. In due course, the
Equitable Bank cleared said warrants,
thru the clearing office, then collected
the corresponding amounts from the
Treasurer and credited to its
depositors accounts. Thereafter, the
treasurer notified Equitable Bank of
the alleged defect and demanded
reimbursement of the amount but this
demand was rejected by Equitable
Bank.
GR L-15895
The Republic seeks to recover from
the Bank of the Philippine Islands the
total sum of P342,767.63,
representing the aggregate value of
twenty four (24) warrants similarly
paid by the treasury. It was alleged
that the Corporation de los Padres
Dominicos had acquired these
warrants from its employee Jacinto
Carranza who asked the corporation to
encash such warrants the Corporacion
acceded to Carranza's request,
provided that the warrants would first
be deposited with the PI Bank, and
that actual payment of the value of
the warrants would be made only after
the same had been duly accepted and
cleared by the Treasurer and the
proceeds thereof duly credited to the
account of the Corporacion in the PI
Bank. After being cleared, the
warrants were paid by the treasurer.
Thereafter, the treasurer returned the
warrants on the ground that they had
been forged, that the value thereof be
charged against the accounts of the PI
Bank in the Clearing Office and
credited back to the demand deposit
of the Bureau of the Treasury.
These claims for refund are based
upon a common groundalthough
said twenty-eight (28) warrants were
executed on genuine government
forms, the signature thereon of the
drawing office and that of the
representative of the Auditor General
in that office are forged.
The clearing of the aforementioned
twenty-eight (28) warrants thru the
Clearing Office was made pursuant to
the "24-hour clearing house rule",
which had been adopted by the
Central Bank in a conference with
representatives and officials of the
different banking institutions in the
Philippines. However, the Government
maintains that it is not bound by this
rule because: (1) the Treasury is not a
bank; and (2) the Treasurer has
objected to the application of said rule
to his office.
ISSUE: Whether the treasury is
entitled to refund for the warrants it
has paid to both banks.
RULING: the Treasury is a member of
the aforementioned Clearing Office
and it shows that the former "has
agreed to clear its clearable items
through" the latter "subject to the
rules and regulations of the Central
Bank." Besides, the above quoted rule
applies not only to banks, but, also, to
the institutions and entities, therein
alluded to.
The Treasury had not only been
negligent in clearing its own warrants,
but had, also, thereby induced the PI
Bank and the Equitable Bank to pay
the amounts thereof to said
depositors. The gross nature of the
negligence of the Treasury becomes
more apparent when we consider that
each one of the twenty-four (24)
warrants involved in G. R. No. L-15895
was for over P5,000, and, hence,
beyond the authority of the auditor of
the Treasurywhose signature
thereon had been forgedto approve.
In other words, the irregularity of said
warrants was apparent on the face
thereof, from the viewpoint of the
Treasury. Moreover, the same had not
advertised the loss of genuine forms of
its warrants. Neither had the PI Bank
nor the Equitable Bank been informed
of any irregularity in connection with
any of the warrants involved in, these
two (2) cases or after the warrants had
been cleared and honoredwhen the
Treasury gave notice of the forgeries
adverted to above. As a consequence,
the loss of the amounts thereof is
mainly imputable to acts and
omissions of the Treasury, for which
the PI Bank and the Equitable Bank
should not and cannot be penalized.
Mesina v. IAC
GR No. L-70145 | November 13,
1986
FACTS: Respondent Jose Go
purchased from Associated Bank
Cashiers