Metropolitan Bank vs.

Court of Appeals
February 18, 1991

Facts:

- Eduardo Gomez opened an account with Golden Savings (a loan association)

and deposited 38 treasury warrants1 with a total value of P1.75M. They were
all drawn by the Philippine Fish Marketing Authority.
- Six of the warrants were directly payable to Gomez while the other 32
appeared to have been endorsed by their respective payees, followed by
Gomez as second indorser.
- All warrants were subsequently endorsed by the cashier of Golden Savings
and deposited to its savings account in the Metrobank branch in Mindoro.
They were then sent for special clearing to the Bureau of Treasury.
- Awaiting clearing, Gomez was allowed to withdraw from his account.
- Later, exasperated over the inquiries of Golden Savings and as a way to
accommodate valued clients, Metrobank allowed Golden Savings to withdraw
from the proceeds of the warrants. There were three withdrawals made on
three separate dates, amounting to P1.16M from the apparently cleared
warrants.
- Metrobank informed Golden Savings that 32 of the warrants had been
dishonoured by the Bureau of Treasury and demanded refund by Golden
Savings of the amount it had previously withdrawn to make up for the deficit
in its account.
- Metrobank then sued Golden Savings for rejecting the demand.
- The lower court rendered judgment in favor of Golden Savings. The decision
was affirmed on appeal.

Issue (relevant nego issue only): Whether or not the treasury warrants involved
in this case are not negotiable instruments.

Held/Ratio: NO. They were not negotiable instruments.

- Clearly stamped on the face of the treasury warrants is the word non-
negotiable. Moreover, it is indicated that they are payable from a particular
fund (Fund 501).
- Section 3 of the Negotiable Instruments Law states that an order or promise
to pay out of a particular fund is not unconditional.

1 Treasury Warrant

- A check drawn by a competent officer of the Philippines authorising another to pay a particular sum
of money, and is an obligation or security of the Philippine Islands.

- It is an order in the form of a check. It is through treasury warrants that government disbursements
are paid. With the treasury warrant, a drawer authorises someone to pay a particular sum of money to
another.
- The indication therefore of Fund 501 as the source of the payment to be made
on the treasury warrants makes the order or promise to pay not
unconditional, failing to meet the second requisite in Section 1 of the same
law that for an instrument to be negotiable it must contain an unconditional
promise or order to pay a sum certain in money.
- The endorsement was made by the Golden Savings cashier not for the
purpose of guaranteeing the genuineness of the warrants but merely to
deposit them with Metrobank for clearing. Golden Savings never represented
that the warrants were negotiable but signed them only for the purpose of
depositing them for clearance.
- It was through Metrobanks negligence that they preempted the clearing of
the treasury warrants and allowed the withdrawal of P1.16M. The withdrawn
by Gomez should therefore be borne by Metrobank and not charged to Golden
Savings.