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REQUISITES OF NEGOTIABILITY
HSBC LTD.-PHIL. BR. V. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 166018 | June 04, 2014 | Leonardo-De Castro, J.
FACTS: HSBC received emails from its foreign clientele to debit funds from their accounts for the
payment of shares and securities in the Philippines. After debiting the appropriate taxes to
the BIR, HSBC then requested that the latter rule on whether or not such email transactions
were negotiable instruments subject to documentary stamp tax (DST). The BIR responded
in the negative, holding that such emails were not transactions contemplated in Sec. 181
of the 1997 Tax Code. On the strength of this response, HSBC proceeded to demand the
return of their tax payments advanced on the presumption that DST was applicable.
However, as BIR did not heed HSBCs requests for the return of the payments, HSBC filed
with the Court of Tax Appeals. CTA ruled in their favor. CA reversed, holding that Sec. 181
does not apply to the instrument or bill of exchange per se, but on the acceptance or
payment of said order. Hence this petition for review on certiorari before the SC.
ISSUE: Whether or not the emails are negotiable instruments subject to DST
HELD: No. Under Section 1 of the Negotiable Instruments law, the emails fail to conform to all the
requirements listed therein. Ergo, the emails are not negotiable instruments. They are not
written and signed by the maker or drawer; they do not contain an unconditional order to
pay a sum certain in money as the payment is supposed to come from a specific fund or
account of the investor-clients; and, they are not payable to order or bearer but to a
specifically designated third party. Thus, the electronic messages are not bills of exchange.
As there was no bill of exchange or order for the payment drawn abroad and made payable
here in the Philippines, there could have been no acceptance or payment that would trigger
the imposition of the DST under Section 181 of the Tax Code.
RODRIGO RIVERA vs. SPS. SALVADOR AND VIOLETA CHUA

G.R. No. 184458 | Jan. 14, 2015 | Perez, J.
FACTS: Petitioner Rivera obtained a loan from Respondent Spouses Chua in the amount of
P120,000, and the same was evidenced by a promissory note to be paid on the December
31, 1995, with 5% monthly interest from the date of default until the entire obligation is fully
paid for. Three years after the date of payment stipulated in the promissory note, Rivera,
in partial payment of the loan, issued two checks drawn against his current account with
the Philippine Commercial International Bank (PCIB). The first check stipulated the
Spouses Chua as payee, but the second check was payable to cash. Upon presentment
of the checks, however, both were dishonored for the reason account closed. The
Spouses Chua then demanded payment from Rivera, but because of the latters unjustified
refusal to comply, a complaint for the collection of a sum of money was filed before the
MeTC.
In Riveras Answer, he claimed that he did not execute the subject promissory notes and
claims forgery of the same, denying his indebtness thereunder. The MeTC, upon further
examination and comparison of the signature of Rivera on the promissory note and other
several documents, ruled in favor of the Spouses Chua, ordering Rivera to pay
respondents. The RTC, likewise ruled in favor of the Spouses Chua but deleting the award
of attorneys fees. It was noted that both trial courts found the promissory notes as authentic
and bore genuine signatures of Rivera.
Peitioner Rivera now comes before the Court Appeals which affirmed Riveras liability
under the promissory note, but reducing the interest on the loan. Hence, this petition.
Rivera argues that the promissory notes were not signed by him and was forged, hence,
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he could not be held liable as the said promissory note became wholly inoperative against
him. He further argues that even assuming the validity of the promissory note, demand was
still necessary for him to be in delay, hence, his liability. Rivera also argues that the CA
erred in applying Sec. 70 if the Negotiable Instruments Law (NIL) which states that
presentment for payment is not necessary for one to be liable under the instrument.
ISSUE: Whether or not Sec. 70 of the NIL is applicable
HELD: No. The subject promissory note is not a negotiable instrument under Sec. 1 of the NIL.
The said promissory note was made out to the Spouses Chua, and not to order or to bearer,
or to the order of the Spouses Chua as payees. Sec. 1 (d) specifically provides that for one
to be considered a negotiable instrument, the said instrument must be payable to order or
to bearer. Since there was no compliance to the requirements of the NIL, Sec. 70 cannot
be applied to the present case.
SPS PREDO AND FLORENCIA VIOLAGO VS BA FINANCE CORPORATION

G.R. No. 158262 | July 21, 2008 | Velasco, J.
FACTS: Avelino Violago, President of Violago Motor Sales Corp (VMSC), offered to sell a car to his
cousin, Pedro Violago, and latters wife, Florencia. Avelino explained that he needed to sell
his vehicle to increase sales quota of VMSC, and that spouses would just have to pay
P60,500.00 while the balance would be financed by respondent BA Finance. The spouses
would pay the monthly installments to BA Finance while Avelino would take care of the
documentation and approval of financing of the car. the spouses and Avelino signed a
promissory note under which they bound themselves to pay jointly and severally to the
order of VMSC the amount of PhP 209,601 in 36 monthly installments of PhP 5,822.25 a
month, the first installment to be due and payable on September 16, 1983. Avelino
prepared a Disclosure Statement of Loan/Credit Transportation which showed the net
purchase price of the vehicle, down payment, balance, and finance charges. In turn, the
spouses executed a chattel mortgage over the car in favor of VMSC as security for the
amount of PhP 209,601. VMSC, through Avelino, endorsed the promissory note to BA
Finance without recourse. After receiving the amount of PhP 209,601, VMSC executed a
Deed of Assignment of its rights and interests under the promissory note and chattel
mortgage in favor of BA Finance. Meanwhile, the spouses remitted the amount of PhP
60,500 to VMSC through Avelino. The spouses were unaware that the same car had
already been sold and registered in 1982 to Esmeraldo Violago, another cousin of Avelino.
Since VMSC failed to deliver the car, Pedro did not pay any monthly amortization to BA
Finance. BA Finance filed with the RTC a complaint for Replevin with Damages against
the spouses. RTC ruled in favored BA finance , however, Spouses Violago were declared
in default and that they are entitled to be indemnified by Avelino. Spouses Violago
appealed to the CA and affirmed promissory note was a negotiable instrument and that BA
Finance was a holder in due course
ISSUE: Whether or not the promissory note was a negotiable instrument
HELD: Yes, the promissory note is negotiable. Section 1 of the Negotiable Instruments Law
provides that 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 conform 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 addresses to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
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In this case, the promissory note clearly satisfies the requirement of a negotiable
instrument under the Negotiable Instruments Law. It is in writing; it is signed by the Violago
spouses; has an unconditional promise to pay a certain amount on specific dates in the
future which could be determined from the terms of the note; it is made payable to the order
of VMSC; and names the drawees with certainty. The indorsement by VMSC to BA Finance
appears likewise to be valid and regular.
CONSOLIDATED PLYWOOD INDUSTRIES INC. vs IFC LEASING AND ACCEPTANCE

CORPORATION
G.R. No. 72593 l April 30, 1987 l J. Rodriguez
FACTS: Petitioner bought two tractors for its logging business. It executed a Deed of Sale with
Chattel Mortgage with a Promissory Note in favor of the seller-assignor AG&P Co. of
Manila. Consequently, AG&P assigned its rights to the Promissory note in favor of
Respondent. The tractors later broke down and rendered unserviceable. Respondent has
demanded payment but to no avail, with the petitioner refusing to make payments as the
tractors were yet to be reconditioned. Both the RTC and the IAC ruled in favor of
respondent.
ISSUE: Whether or not the Promissory Note is negotiable.
HELD: The Promissory note is not a negotiable instrument. The fourth requisite, as per Section 1
of the NIL was not complied with. The PN only indicated, ...I/we jointly and severally
promise to pay to the INDUSTRIAL PRODUCTS MARKETING. Insofar as the PN does
not contain the words of negotiability, it is not a negotiable instrument.
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APPLICABILITY OF THE NEGOTIABLE INSTRUMENTS LAW
ROMEO GARCIA V. DIONISIO LLAMAS

GR 154127 | December 8, 2003 | PANGANIBAN, J.
FACTS: Garcia and de Jesus borrowed P400,000 from Llamas, executing a promissory note,
binding themselves solidarily to pay on or before 1997 Jan. Loan has long been overdue
& despite repeated demands, they failed to pay. Garcia replied that he assumed no liability
because he merely signed as an accommodation party for de Jesus.Alternatively, he is
relieved from any liability inasmuch as de Jesus already paid the loan through a check on
1997 Apr (accepted by Llamas)as such, the same novated the agreement.
Llamas said that the check bounced, and that Garcias answer was not accompanied by a
Certificate of Non Forum Shopping.
RTC ruled against Garcia and de Jesus.CA ruled that RTC erred with de Jesus; de Jesus
still had to present his evidence. As to Garcia, summary judgmentGarcia was not even
able to raise a single genuine issue regarding any material fact. No novation. Garcia
appealed to the SC.
ISSUES:
1. Whether or not Garcia was only an accommodation partyreleased as an obligor when
Llamas agreed to extend the term of the obligation
2. Whether or not the acceptance of the check by the co-debtor novated the agreement
HELD: 1. NO, he is not liable as an accommodation party, as defined under the Negotiable
Instruments Law. The Promissory Note was not a Negotiable Instrument under Section 1
of the NIL.
By its terms, the note was made payable to a specific person rather than to bearer or to
ordera requisite for negotiability under Act 2031, the NIL. Hence, petitioner cannot avail
himself of the NILs provisions on the liabilities and defenses of an accommodation party.
A non-negotiable note is merely a simple contract in writing and is evidence of such

intangible rights as may have been created by the assent of the parties covered by Civil
Code, not by the NIL. Even granting arguendo that the NIL was applicable, still, petitioner
would be liable for the promissory note. Under Art 29 of NIL, an accommodation party is
liable for the instrument to a holder for value even if, at the time of its taking, the latter knew
the former to be only an accommodation party. Accommodation partycreates a surety-
principal relationship. Surety is bound equally and absolutely with the principal.
Effect is, he cannot escape his solidary liability with de Jesus.
2. NO NOVATION TOOK PLACE. No equivocal declaration that old obligation had been
extinguished by acceptance of check nor that check would take place of note. No
incompatibility either.
FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES v. CA AND LUZON

DEVELOPMENT BANK
G.R. No. 113236 | March 5, 2001 | Quisumbing, J:
FACTS: Defendant Luzon Development (the bank), had Fojas-Arca Enterprises Company (Fojas-
Arca) as its client with a maintaining special savings account. Fojas-Arca authorized the
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bank to withdraw funds through special withdrawal slips. Plaintiff Firestone and Fojas-Arca
entered into a Franchise Dealership Agreement, where Fojas-Arca has the privilege to
purchase on credit and sell the plaintiffs products (tires)
Pursuant to the agreement, Fojas-Arca purchased on credit Firestone products with a total
of P4.8M. As payment, Fojas-Arca delivered 6 special withdrawal slips drawn upon the
defendant. This instance made the plaintiff believe that the withdrawal slips were funded.
Due to this, plaintiff Firestone extended another credit in favor of Fojas-Arca. Plaintiff
Firestone deposited the said slips to Citibank for payment and collection, and only 4
withdrawal slips were honored and paid by the defendant bank.
Citibank informed plaintiff that the special withdrawal slips were dishonored due to NO
ARRANGEMENT six months after Fojas-Arca purchased the tires. Plaintiff Firestone
served a written demand upon the defendant bank, and the defendant bank refused to pay.
ISSUES: 1. Whether or not the special withdrawal slips are negotiable instruments.
2. Whether or not respondent bank was liable for failure to give notice to plaintiff that the
special withdrawal slips were dishonored.
HELD: 1. No. Petitioner admitted that the withdrawal slips were non-negotiable. Hence, the rules
governing immediate notice of dishonor of negotiable instruments do not apply in this case.
The essence of negotiability which characterizes a negotiable paper as a credit instrument
lies in the freedom to circulate freely as a substitute for money. The withdrawal slips in
question lack this character.
2. No. Since withdrawal slips are non-negotiable, the respondent bank has no obligation to
give notice that it would not make payment on the subject withdrawal slips, in contrast to
the situation involving checks.
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ADDITIONAL CASES: APPLICABILITY OF NIL
CALTEX (PHILIPPINES), INC. v. COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY
GR. No. 97753 | August 10, 1992| J. REGALADO
FACTS: Security Bank and Trust Co. (Security Bank) issued 280 certificates of time deposit (CTD)
in favor of one Mr. Angel dela Cruz who deposited with the bank P1.12 million. Angel dela
Cruz delivered the CTDs to Caltex in connection with his purchase of fuel products from
the latter. Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus
executed an affidavit of loss to facilitate the issuance of the replacement CTDs. Meanwhile,
dela Cruz negotiated and obtained a loan from Security Bank in the amount of P875,000
and executed a notarized Deed of Assignment on the replaced CTDs. Mr. Aranas, Credit
Manager of Caltex went to the Sucat branch to verify the CTDs declared lost by dela Cruz.
When Caltex presented said CTDs for verification with the bank and formally informed the
bank of its decision to pre-terminate the same, the bank rejected Caltex claim and demand
as Caltex failed to furnish copies of certain requested documents. In 1983, dela Cruz loan
matured and the bank set-off and applied the time deposits as payment for the loan. Caltex
filed a complaint praying the bank to pay 1,120,000 plus 16% interest, which was dismissed
by the RTC on the ground that the subject certificates of deposit are non-negotiable. CA
affirmed the lower courts dismissal.
ISSUE(S): (1) Whether or not the foregoing Certificates of Time Deposit (CTDs) are negotiable
instruments?
(2) Whether or not Caltex as holder in due course can rightfully recover on the CTDs?
HELD: (1) YES. The CTDs in question are negotiable instruments as they meet the requirements
of the law for negotiability as provided for in Section 1 of the Negotiable Instruments Law.
The documents provide that the amounts deposited shall be repayable to the depositor.
And according to the document, the depositor 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.
(2) NO. Note that although the CTDs are bearer instruments, a valid negotiation thereof
for the true purpose and agreement between it and dela Cruz, as ultimately ascertained,
requires both delivery and indorsement. In this case, there was no indorsement as the
CTDs were delivered not as payment but only as a security for dela Cruz' fuel purchases.
Hence, petitioner cannot recover on the CTDs.
ASTRO ELECTRONICS CORP. VS. PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORP.
G.R. No. 136729 | September 23, 2003 | Austria-Martinez, J.
FACTS: Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting to
P3,000,000 with interest and secured by three promissory notes:
PN No. PFX254 dated December 14, 1981 for P600,000,

PN No. PFX258 also dated December 14, 1981 for P400,000 and
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PN No. 15477 dated August 27, 1981 for P2,000,000
In all of the promissory notes, Roxas signed twice, as President of Astro and in his personal
capacity. He also signed a Continuing Suretyship Agreement in favor of Philtrust Bank, as
President of Astro and as surety. Then, Philguarantee, with the consent of Astro,
guaranteed in favor of Philtrust the payment of 70% of Astros loan, subject to the condition
that upon payment by Philguarantee of said amount, it shall be proportionally subrogated
to the rights of Philtrust against Astro. Astro failed to pay the loans. As a result,
Philguarantee paid 70% of the guaranteed loan to Philtrust. Philguarantee filed against
Astro and Roxas a complaint for sum of money with the RTC of Makati. In his Answer,
Roxas alleged that he merely signed the instruments in blank, the phrases in his personal
capacity and in his official capacity fraudulently inserted without his knowledge. The RTC
ruled in favor of Philguarantee saying that if Roxas really intended to sign the instruments
merely in his capacity as President, he should have signed the note only once. The CA
affirmed the RTCs decision.
ISSUE: Whether or not Roxas should be solidarily liable with Astro for the sum.
HELD: Yes. The promissory notes are valid and binding against Astro and Roxas. Under the NIL,
persons who write their names on the face of promissory notes are makers, promising that
they will pay to the order of the payee or any holder according to its tenor. As it appears on
the notes, Roxas signed twice: first, as president of Astro and second, in his personal
capacity. In signing his name aside from his capacity as President, Roxas became a co-
maker of the promissory notes and cannot escape any liability arising from it. This means
that even without the phrase personal capacity, Roxas will still be liable as a joint and
several debtor considering that such intention is shown by the fact that he affixed his
signature on each of the promissory notes twice implies that he is undertaking the
obligation in two different capacities, official and personal.
A closer examination of the signatures on the promissory notes, reveals that portions of his
signatures covered portions of the typewritten words personal capacity indicating with
certainty that the typewritten words were already existing at the time Roxas affixed his
signatures thus demolishing his claim that the typewritten words were just inserted after he
signed the promissory notes.
An instrument which begins with I, We, or Either of us promise to pay, when signed by
two or more persons, makes them solidarily liable. Also, the phrase joint and several
binds the makers jointly and individually to the payee so that all may be sued together for
its enforcement, or the creditor may select one or more as the object of the suit. Having
signed under such terms, Roxas assumed the solidary liability of a debtor and Philtrust
Bank may choose to enforce the notes against him alone or jointly with Astro.
It is not disputed that Roxas does not deny that he signed the notes twice. As aptly found
by both the trial and appellate court, Roxas did not offer any explanation why he did so. It
devolves upon him to overcome the presumptions that private transactions are presumed
to be fair and regular and that a person takes ordinary care of his concerns.
Clearly, he knew the nature of the transactions and documents involved as he not only
executed these notes on two different dates but he also executed, and again, signed twice,
a Continuing Suretyship Agreement wherein he guaranteed, jointly and severally with
Astro the repayment of P3,000,000.00 due to Philtrust. Such continuing suretyship
agreement even re-enforced his solidary liability to Philtrust because as a surety, he bound
himself jointly and severally with Astros obligation. CAs Decision is affirmed in toto.
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REPUBLIC PLANTERS BANK VS. COURT OF APPEALS AND FERMIN CANLAS

G.R. No. 93073 | December 21, 1992 | Campos Jr., J.
FACTS: Shozo Yamaguchi and Fermin Canlas, as President/COO of Worldwide Garment

Manufacturing Inc., by virtue of a Board Resolution was authorized to apply for credit
facilities with Republic Planters Bank in forms of export advances and letters of credit/trust
receipts accommodations. The Bank issued nine (9) promissory notes which contained the
signatures of Yamaguchi and Canlas with a stamp below their signatures and (in) his
personal capacity, and was addressed to be received by Worldwide Garment
Manufacturing Inc. Worldwide Garment Manufacturing Inc. later changed its name to Pinch
Manufacturing Corporation. When the Worldwide Garment Manufacturing Inc. defaulted
with their obligations, the Bank filed a complaint for recovery of sums of money including
the nine (9) promissory notes. Fermin Canlas is ordered to pay by the lower courts holding
him solidarily liable with the Worldwide Garment Manufacturing Inc., for each of the
promissory notes bearing his signature. Canlas appealed this decision with the Court of
Appeals stating that he should not be held liable for authorized corporate acts he
performed. The CA absolved the solidary liability of Canlas with its decision. The Bank
appealed this decision to the Supreme Court stating that Canlas should be held solidarily
liable for the instruments.
ISSUE: Whether or Not Fermin Canlas is solidarily liable for each of the promissory notes bearing
his signature
HELD: The Supreme Court held that Canlas is solidarily liable for each of the promissory notes
bearing his signature. Under the Negotiable Instruments Law, persons who write their
names on the face of promissory notes are makers and are liable. By signing the notes,
the maker promises to pay to the order or any holder according to the tenor thereof. Since
Canlas signed the instruments, in this case, on the face of the instruments, he is considered
as co-makers thereof. Therefore, he cannot escape liability arising from it. It is also
discussed by the Supreme Court here that where an instrument containing the words I
promise to pay is signed by two or more persons, they are deemed to be jointly and
severally liable thereon. An instrument which begins" with "I"/We" , or "Either of us"
promise to, pay, when signed by two or more persons, makes them solidarily liable. In this
case, the presence of the words joint and several further cements Canlas solidary liability
with each of the instruments. From the foregoing, the Supreme Court held that Canlas
should be liable for each of the instruments bearing his signature.
SAN MIGUEL CORP v. PUZON

631 SCRA 48 | September 22, 2010 | Del Castillo, J.
FACTS: Bartolome V. Puzon, Jr., owner of Bartenmyk Enterprises, was a dealer of beer products
of San Miguel Corporation. Puzon purchased SMC products on credit. To ensure payment
and as a business practice, SMC required him to issue postdated checks equivalent to the
value of the products purchased on credit before the same were released to him. Said
checks were returned to Puzon when the transactions covered by these checks were paid
or settled in full. Puzon purchased products on credit amounting to P11,820,327 for which
he issued, and gave to SMC, Bank of the Philippine Islands (BPI) Check Nos. 27904 (for
P309,500.00) and 27903 (forP11,510,827.00) to cover the said transaction. Puzon,
together with his accountant, visited the SMC Sales Office to reconcile his account with
SMC. During that visit Puzon allegedly requested to see BPI Check No. 17657. However,
when he got hold of BPI Check No. 27903 which was attached to a bond paper together
with BPI Check No. 17657 he allegedly immediately left the office with his accountant,
bringing the checks with them. SMC sent a letter to Puzon demanding the return of the
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said checks. Puzon ignored the demand hence SMC filed a complaint against him for theft
with the City Prosecutors Office. The investigating prosecutor, Elizabeth Yu Guray found
that the relationship between SMC and Puzon appears to be one of credit or creditor-debtor
relationship. The problem lies in the reconciliation of accounts and the non-payment of
beer empties which cannot give rise to a criminal prosecution for theft. She recommended
the dismissal of the case for lack of evidence. SMC appealed. DOJ affirmed the
prosecutors resolution. The CA found that the postdated checks were issued by Puzon
merely as a security for the payment of his purchases and that these were not intended to
be encashed. It thus concluded that SMC did not acquire ownership of the checks as it was
duty bound to return the same checks to Puzon after the transactions covering them were
settled. The CA agreed with the prosecutor that there was no theft, considering that a
person cannot be charged with theft for taking personal property that belongs to himself.
ISSUE: Whether or not Puzon is liable for theft
HELD: NO. The essential elements of the crime of theft are the following: (1) that there be a
taking of personal property; (2) that said property belongs to another; (3) that the taking
be done with intent to gain; (4) that the taking be done without the consent of the owner;
and (5) that the taking be accomplished without the use of violence or intimidation against
persons or force upon things. Considering that the second element is that the thing taken
belongs to another, it is relevant to determine whether ownership of the subject check
was transferred to petitioner. On this point the Negotiable Instruments Law provides:
Sec. 12. Antedated and postdated The instrument is not invalid for the reason only that it
is antedated or postdated, provided this is not done for an illegal or fraudulent purpose.
The person to whom an instrument so dated is delivered acquires the title thereto as of the
date of delivery.
Note however that delivery as the term is used in the aforementioned provision means that
the party delivering did so for the purpose of giving effect thereto. Otherwise, it cannot be
said that there has been delivery of the negotiable instrument. Once there is delivery, the
person to whom the instrument is delivered gets the title to the instrument completely and
irrevocably. xxx When taken in conjunction with the counter-affidavit of Puzon where he
states that As the [liquid beer] contents are paid for, SMC return[s] to me the corresponding
PDCs or request[s] me to replace them with whatever was the unpaid balance. it becomes
clear that both parties did not intend for the check to pay for the beer products. The
evidence proves that the check was accepted, not as payment, but in accordance with the
long-standing policy of SMC to require its dealers to issue postdated checks to cover its
receivables. The check was only meant to cover the transaction and in the meantime
Puzon was to pay for the transaction by some other means other than the check. This
being so, title to the check did not transfer to SMC; it remained with Puzon. The second
element of the felony of theft was therefore not established. Petitioner was not able to show
that Puzon took a check that belonged to another. Hence, the prosecutor and the DOJ
were correct in finding no probable cause for theft.
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LORETO R. DE LA VICTORIA V. HON. JOSE P. BURGOS

G.R. No. 111190| June 27, 1995 | Bellosillo, J
FACTS: Raul H. Sesbreno filed a Complaint for Damages against Assistant City Fiscals Bienvenido
N. Mabanto Jr. And Dario D. Rama, Jr. Later, judgement was rendered ordering the fiscals
to pay P11,000 to herein respondent. A notice of garnishment was given to petitioner as
City Fiscal of Mandaue City where Fiscal Mabanto worked. The notice directed petitioner
not to give the salary checks of Mabanto to any other person except the deputy sheriff.
Trial court later ordered petitioner to submit a report showing the amount of the garnished
salaries of Mabanto. Petitioner did not comply. Respondent filed a motion to require
petitioner to explain why he should not be cited for contempt for his refusal to comply with
the order. Petitioner contended that the salary checks of Mabanto were not yet the latters
properties because they were not yet delivered to him. Hence, the said checks still form
part of public funds and cannot be subjected to garnishment. Trial court ordered petitioner
to immediately comply with its earlier order (Submission of Report). Through Section 16 of
the Negotiable Instruments Law, it contended that there was no reason for petitioner to
hold on to the checks since they were presumed delivered to the payee(Mabanto) and was
thus his property. Trial court denied petitioners motion for reconsideration. Hence, this
petition.
ISSUE: 1. Whether or not, a check still in hands of the maker or its authorized representative is
already owned by the payee even before the physical delivery of the check.
2. Whether or not, the salary check of a government employee funded by public funds be
subjected to garnishment
HELD: 1. No. Section 16 of the Negotiable Instruments Law states that Where the instrument is
no longer in the possession of a party whose signature appears thereon, a valid and
intention delivery by him is presumed until the contrary is proved. Proof to the contrary is
that the checks were still with petitioner so this implies that there was no delivery yet to
Mabanto and hence the checks did not belong to him yet
2. No. Public funds cannot be subject to Garnishment in order to satisfy a judgement as it

is against public policy to do so as held in the case of Commissioner of Public Highways v.
San Diego. There the court stated that Functions and public services rendered by the state
cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their
legitimate and specific objects as appropriated by law.
FAR EAST BANK v. QUERIMIT

GR 148582 | January 16, 2002 | MENDOZA, J.
FACTS: Esterella O. Querimit opened a dollar savings account with Far East Bank and was issued
four Certificates of Desposit, each representing the amount of $15,000 or a total of
$60,000. The certificates contained that statement that if the instruments were not
presented for encashment or pre-termination, it will accrue interest and would accumulate
automatically. Estrella kept her dollars in FEBTC as she would use it to fund herself after
retirement. In 1989, Estrella left for the US to accompany her husband for medical
treatment. Upon her return in 1993, she went to FEBTC to withdraw her deposit but FEBTC
informed her that the money was withdrawn and given to her husband. Thus, Estrella filed
a complaint against FEBTC. Far East contended that they allowed Dominador, Estrellas
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husband to withdraw the deposit as an accommodation and showed certified true copies
of documents showing the payment made.
The RTC ruled that FEBTC is liable and ordered that they allow Estrella to withdraw her
US Time Deposit of $60,000. The CA affirmed the lower courts decision with modification
that it is only FEBTC who is liable. The appellate court ruled that FEBTC failed to prove
the certificates has been paid out of its funds and the certificates of deposit remain
unendorsed, undelivered and unwithdrawn by Estrella.
ISSUES: Whether or not the Far East is liable in paying the certificates of deposit without the
presentation of such certificates
HELD: YES. The certificate of deposit is a written acknowledgement by a bank or banker of the
receipt of sum of money on deposit which the bank or banker promises to pay to the
depositor, to the order of the depositor or some other person or his order, which creates
the relationship between the depositor and the bank. In this case, the certificates of deposit
was clearly marked as payable to bearer, which means, the person in possession of an
instrument, document of title or security payable to bearer or indorsed in blank. Far East
should not have paid Estrellas husband without requiring the surrender of the certificates.
The accommodation Far East claims to have extended to Dominador is in violation of bank
policies and procedures. It is an act which constitutes FEBTCs failure to exercise the
diligence required for the nature of its business.
Side note: The doctrine of laches is not applied in this case as it will be unjust to deprive
Estella of her deposit as she did not withdraw her deposit to set it aside for her retirement.
She relied on FEBTCs assurance that the the deposit will accumulate interest annually
even after their maturity.
CITYTRUST BANKING CORP. VS. CA

G.R. No. 92591 | April 30, 1991 | GUTIERREZ, JR., J.
FACTS: Plaintiff-private respondent Samara purchased on December 10, 1980 from defendant
petitioner Citytrust Bank Draft Number 23681 for US $40,000.00, the payee being Thai
International Airways and the corresponding bank in the United States or the drawee,
defendant Marine Midland. On December 23, 1980, Samara executed a stop-payment
order of the bank draft instructing Citytrust to inform Marine Midland about the order
through telex. Citytrust transmitted the message to Marine Midland the next day and
followed it up with a cable, which the latter bank acknowledged to have received on January
14, 1981 stating in its receipt that it has noted the stop-payment order and has not paid the
bank draft. Citytrust credited back Samara's account for U.S. $40,000.00 due to the non-
payment. After seven months or on July 3, 1981, Citytrust re-debited Samara's account for
U.S. $40,000.00 upon discovering that Marine Midland had already debited Citytrust's own
account for the same amount allegedly on December 22, 1980, Despite the alleged
discovery, however, there is evidence to show that Marine Midland informed Citytrust
through a letter of the non-payment or non-encashment of the bank draft as of August 4,
1981. It is also shown that Marine Midland even confirmed in a telex letter dated August
31, 1981 that the bank draft had not been paid as of that date.
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The trial court brushed aside Marine Midland's contention that it had already paid the bank
draft of Samara on December 22, 1980 or before it received the stop payment order. The
CA affirmed with modifications.
ISSUE: Whether or not the respondent appellate court committed reversible error in ruling that the
liability of the petitioner should be based on the original decision of the trial court and not
the modified one.
HELD: The Court is of the considered view that it was the trial court judgment that created a joint
and several obligation to pay the private respondent certain sums. No solidary liability as
between them existed from the drawer-drawee relationship in the draft transaction.
The trial court judgment, however, does not alter the fact that the respective defenses of
the co-defendants are distinct on trial and even on appeal. Citytrust and Marine Midland
were not in privity with each other in a transaction involving payment through a bank draft.
A bank draft is a "bill of exchange drawn by a bank upon its correspondent bank, . . . issued
at the solicitation of a stranger who purchases and pays therefor. It is also defined as an
"order for payment of money." In the case at bar, Citytrust from which the private
respondent purchased the bank draft, was the drawer of the draft through which it ordered
Marine Midland, the drawee bank, to pay the amount of US $40,000.00 in favor of Thai
International Airways, the payee. The drawee bank acting as a "payor" bank is solely liable
for acts not done in accordance with the instructions of the drawer bank or of the purchaser
of the draft. The drawee bank has the burden of proving that it did not violate. Meanwhile,
the drawer, if sued by the purchaser of the draft is liable for the act of debiting the
customer's account despite an instruction to stop payment. The drawer has the duty to
prove that he complied with the order to inform the drawee.
BALDOMERO INCIONG JR. VS. COURT OF APPEALS & PHILIPPINE BANK OF COMMUNICATIONS
G.R. No. 96405 | June 26, 1996 | Romero, J.
FACTS: Rene Naybe took out a loan from Philippine Bank of Communications (PBC) in the amount
of Php50,000. For that, he executed a promissory note in the same amount wherein,
together with Baldomero Inciong, Jr and Gregorio Pantanosas, who co-signed as co-
makers, they held themselves jointly and severally liable to PBC. The promissory note
eventually went due but was left unpaid. PBC then demanded payment from the three but
no payment was made.
In effect, PBC filed a complaint for collection of the sum of Php50,000 against the three
obligors. The complaint was eventually dismissed for failure of plaintiff to prosecute.
Eventually, the lower court reconsidered the dismissal order and required the sheriff to
serve the summonses. PBC later released Pantanosas from its obligations. Meanwhile,
Naybe left for Saudi Arabia hence cannot be served summons and the complaint against
him was subsequently dropped. Inciong was left to face the suit.
Inciong argued that that since the complaint against Naybe was dropped, and that
Pantanosas was released from his obligations, he too should have been released.
Petitioner alleged further that five (5) copies of a blank promissory note were brought to
him by Campos at his office. He affixed his signature thereto but in one copy, he indicated
that he bound himself only for the amount of P5,000.00. Thus, it was by trickery, fraud and
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misrepresentation that he was made liable for the amount of P50,000.00. The trial court
ordered Inciong to pay PBC, which the CA affirmed. Hence, this petition.
ISSUE: Whether or not Inciong should be held liable.
HELD: Yes. Inciong is considering himself as a guarantor in the promissory note. And he was
basing his argument based on Article 2080 of the Civil Code which provides that guarantors
are released from their obligations if the creditors shall release their debtors. It is to be
noted however that Inciong did not sign the promissory note as a guarantor. He signed it
as a solidary co-maker.
While a guarantor may bind himself solidarily with the principal debtor, the liability of a
guarantor is different from that of a solidary debtor. A guarantor who binds himself in
solidum with the principal debtor does not become a solidary co-debtor to all intents and
purposes. There is a difference between a solidary co-debtor and a fiador in solidum
(surety). The latter, outside of the liability he assumes to pay the debt before the property
of the principal debtor has been exhausted, retains all the other rights, actions and benefits
which pertain to him by reason of the fiansa; while a solidary co-debtor has no other rights
than those bestowed upon him.
Given that the promissory note involved in this case expressly states that the three
signatories therein are jointly and severally liable, any one, some or all of them may be
proceeded against for the entire obligation. The choice is left to the solidary creditor (PBC)
to determine against whom he will enforce collection. Consequently, the dismissal of the
case against Pontanosas may not be deemed as having discharged Inciong from liability
as well. As regards Naybe, suffice it to say that the court never acquired jurisdiction over
him. Inciong, therefore, may only have recourse against his co-makers, as provided by law.
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BEARER INSTRUMENT
PEOPLE V WAGAS
G.R. NO. 157943| J. BERSAMIN| SEP 4, 2013
FACTS: This is an appeal from the decision of the Regional Trial Court, convicting respondent
Wagas of Estafa. It was alleged in the complaint that Wagas placed an order, over the
telephone, to a certain Ligaray for 200 bags of rice. By reason of the alleged transaction,
Wagas issued a check payable to bearer in the amount of 200,000 pesos. Upon
presentment of the check for payment, the check was dishonored because of insufficiency
of funds. When demands made by Ligaray remained unheeded he filed a complaint for
Estafa against Wagas. On cross-examination, Ligaray admitted that he did not personally
meet Wagas because they transacted through telephone only; that he released the 200
bags of rice directly to Robert Canada, the brother-in-law of Wagas, who signed the
delivery receipt upon receiving the rice. Wagas, on the other hand, countered that he did
not issue the check in favor of Ligaray but it was issued to his brother in law. Trial ensued
and RTC convicted Wagas for Estafa. When motion for reconsideration was denied,
petitioner appealed directly to the Supreme Court. Wagas now contends that RTC
committed an error in convicting him of Estafa because the prosecution failed to prove
beyond reasonable doubt that Wagas issued the subject check to Ligaray to defraud him.
ISSUE: Whether or not the prosecution was able to prove that the check was issued to Ligaray?
HELD: No. In every criminal prosecution, the identity of the offender, like the crime itself, must be
established by proof beyond reasonable doubt. In that regard, the Prosecution did not
establish beyond reasonable doubt that it was Wagas who had defrauded Ligaray by
issuing the check. In the first place the transaction was made over the phone, and Ligaray
has no sufficient basis to conclude that it was really Wagas he was talking to. Even after
the dishonor of the check, Ligaray did not personally see and meet whoever he had dealt
with and to whom he had made the demand for payment, and that he had talked with him
only over the telephone. Moreover, the fact that the check was payable to bearer rendered
it highly probable that Wagas really did not issue the check in favor of Ligaray. Under the
Negotiable instrument law, a check payable to bearer could be negotiated by mere delivery
without the need of an indorsement. Hence, petition was granted and Wagas was acquitted
of the crime of Estafa.
PHILIPPINE NATIONAL BANK V. ERLANDO T. RODRIGUEZ

G.R. No. 170325 | September 26, 2008 | Reyest,R.T.,J
FACTS: Spouses Rodriguez are engaged in the informal lending business and possess an account
in the Philippine National Bank. In line with their business, Rodriguez has a discounting
agreement with the Philnabank Employees Savings and Loan Association (PEMSLA)
which is an association of PNB employees. PEMSLA regularly grants loans to its members
and Rodriguez would rediscount the postdated checks issued to members whenever the
association was short of funds.
PEMSLA officers who were disqualified from acquiring a loan from PEMSLA due to
outstanding loan accounts circumvented the system by acquiring loans in the names of
unknowing members. PEMSLA issued checks for these loans and the officers gave these
checks to Rodriguez for rediscounting. The officers carried this out by forging the
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indorsement of the named payees in the checks. Rodriguez then deposited these checks
in their savings account and issued their personal checks (Rodriguez checks) in the name
of the members and delivered the checks to an officer of PEMSLA. The Rodriguez checks
would then be deposited to the PEMSLA savings account without any indorsement from
the named payees.
PNB eventually found out about these fraudulent acts and closed the current account of
PEMSLA. When Rodriguez deposited the PEMSLA account it was dishonored for the
reason Account Closed. The Rodriguez checks, however, were deposited to the PEMSLA
savings account and was debited from the account of Rodriguez. As such, Rodriguez
incurred losses amounting to 2,345,804.00.
Rodriguez filed a civil complaint against PNB claiming that PNB should be liable because
they allowed the checks to be deposited even though it was not indorsed by the named
payees. PNB, on the other hand, claims that the named payees are fictitious which makes
the check payable to bearer thus not needing any indorsement. The RTC ruled in favor of
Rodriguez and ordered the PNB to pay for damages. The CA then reversed the decision
of the RTC but eventually affirmed the decision of the RTC after a motion for
reconsideration.
ISSUE: WON the Rodriguez checks are payable to bearer?
HELD NO. The checks are payable to order.
A check that is payable to a specified payee is an order instrument. However, under Section
9(c) of the NIL, a check payable to a specified payee may nevertheless be considered as
a bearer instrument if it is payable to the order of a fictitious or non-existing person, and
such fact is known to the person making it so payable. The term Fictitious may also cover
actual, exiting, and living payees if the maker of the check did not intent for the payee to
receive the proceeds of the check.
In a fictitious-payee situation, the bank is absolved from liability and the drawer bears the
loss unless the act of the bank is attended with commercial bad faith.
In this case, the Rodriguez checks are presumed order instruments. This is because, as
found by both lower courts, PNB failed to present sufficient evidence to defeat the claim of
respondents-spouses that the named payees were the intended recipients of the checks
proceeds. The bank failed to satisfy a requisite condition of a fictitious-payee situation that
the maker of the check intended for the payee to have no interest in the transaction. As
such, the fictitious-payee rule does not apply making the checks payable to order.
The distinction between bearer and order instruments lies in their manner of negotiation.
Under Section 30 of the NIL, an order instrument requires an indorsement from the payee
or holder before it may be validly negotiated. A bearer instrument, on the other hand, does
not require an indorsement to be validly negotiated. It is negotiable by mere delivery.
Since the Rodriguez checks are considered as payable to order and the bank allowed the
same to be deposited even without any indorsement from the named payees, the PNB is
liable for damages.
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COMPLETION OF BLANKS
JOHN DY VS. PEOPLE

G.R. NO. 158312 | NOV. 14, 2008 | J. Quisumbing
FACTS: John Dy was a distributor of W.L. Food Products. Dy would pay W.L. Foods either in cash
or check upon pick up of stocks of snack foods at the latters branch. In two instances, Dys
driver went to pick up said merchandise and handed the checker two blank FEBTC Checks
(with check nos. 553602 for P106,579.60 postdated July 22 and 553615 for P226,794.36
postdated July 31), one check for each transaction. These checks signed by Dy did not
indicate a specific amount. The amount for the Dys purchases were filled in by W.L. Foods
accountant, Ong. Upon presentment for payment, FEBTC dishonored the checks for
insufficiency of funds. Later, it was advised that Check No. 553602 was returned to drawee
bank for the reasons stop payment order and drawn against uncollected deposit, and not
for insufficiency of funds.
Lim, owner of W.L. Foods, sent Dy demand letter, which were ignored. Lim charged Dy
with two counts of estafa and two counts of violation of B.P. 22.
On one hand, Dy contended that the checks were ineffectively issued and that the
accountant had no authority to fill the amounts. On the other hand, OSG, for the State,
averred that the delivery of the checks by Dys driver constituted valid issuance and that
Ong had prima facie authority based on the value of goods taken. When Ong filled up the
checks, there was no violation of Dys instructions or their previous agreement.
ISSUE: Whether or not John Dy is liable for estafa and for violation of B.P. 22.
HELD: John Dy is only guilty of estafa and violation of B.P. 22 with regard to one of the two checks
issued.One of the elements of estafa is issuance of a check in payment of an obligation
contracted at the time the check was issued. Sec. 191 of the NIL defines issue as the
first delivery of an instrument complete in form, to a person who takes it as holder. The fact
that the checks were given to W.L. Foods in blank did not make its issuance invalid. When
the checks were delivered to Lim, through his employee, he became a holder with prima
facie authority to fill the blanks, pursuant to Sec. 14 of the NIL. The law presumes agency
to fill up the blank. Because of this, the burden of proving want of authority or that the
authority was exceeded is placed on the person questioning such authority. In the case,
Dy failed to fulfill this requirement. Having declared the issuance valid and the other
elements of estafa present, Dy was guilty of estafa and violation of B.P. 22 with regard to
FEBTC Check No. 553615 for P266, 794.36.
However, the same is not true with respect to Check No. 553602 for P106,659.39. This
check was dishonored for the reason that it was drawn against uncollected deposit. Dy had
P160,659.39 in his account as of July 22, 1992. Since Dy technically and retroactively had
sufficient funds at the time Check No. 553602 was presented for payment then the second
element (insufficiency of funds to cover the check) of the crime is absent. Hence, Dy is not
criminally liable for the issuance of Check No. 553602.
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INCOMPLETE BUT DELIVERED INSTRUMENTS
ALVIN PATRIMONIO v. NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III

G.R. No. 187769 | June 4, 2014 | Brion, J.
FACTS: Patrimonio and Gutierrez entered into a business venture under the name Slam Dunk
Corporation. In the course of their business, Patrimonio pre-signed several checks to
answer for the expenses of Slam Dunk. Although signed, these checks had no payees
name, date or amount. The blank checks were entrusted to Gutierrez with the specific
instruction not to fill them out without previous notification to and approval by Patrimonio.
Without Patrimonios knowledge and consent, Gutierrez went to Marasigan to secure a

loan on the excuse that Patrimonio needed the money for the construction of his house, to
which Marasigan acceded. Gutierrez delivered to Marasigan one of the blank checks
Patrimonio pre-signed with the blank portions filled out. Marasigan deposited the check but
it was dishonored for the reason "ACCOUNT CLOSED."
Marasigan sought recovery from Gutierrez as well as Patrimonio, to no avail. Thus, he filed
a criminal case for violation of B.P. 22 against Patrimonio.
Patrimonio filed before the RTC a Complaint for Declaration of Nullity of Loan and
Recovery of Damages against Gutierrez and Marasigan. The RTC ruled in favor of
Marasigan and dismissed the complaint. While under Section 14 of the NIL Gutierrez had
the prima facie authority to complete the checks by filling up the blanks therein, the RTC
ruled that he deliberately violated Patrimonios specific instructions and took advantage of
the trust reposed in him by the latter. The CA affirmed. Hence, this petition for review on
certiorari.
ISSUE: Whether or not Gutierrez completely filled out the subject check strictly under the authority
given by Patrimonio
HELD: No. Section 14 of the NIL applies to an incomplete but delivered instrument. Under this
rule, if the maker or drawer delivers a pre-signed blank paper to another person for the
purpose of converting it into a negotiable instrument, that person is deemed to have prima
facie authority to fill it up. It merely requires that the instrument be in the possession of a
person other than the drawer or maker and from such possession, together with the fact
that the instrument is wanting in a material particular, the law presumes agency to fill up
the blanks.
In order however that one who is not a holder in due course can enforce the instrument
against a party prior to the instruments completion, two requisites must exist: (1) that the
blank must be filled strictly in accordance with the authority given; and (2) it must be filled
up within a reasonable time. If it was proven that the instrument had not been filled up
strictly in accordance with the authority given and within a reasonable time, the maker can
set this up as a personal defense and avoid liability. However, if the holder is a holder in
due course, there is a conclusive presumption that authority to fill it up had been given and
that the same was not in excess of authority.
Notably, Gutierrez was only authorized to use the check for business expenses; thus, he
exceeded the authority when he used the check to pay the loan he supposedly contracted
for the construction of Patrimonio's house. It cannot therefore be validly concluded that the
check was completed strictly in accordance with the authority given by Patrimonio.
Considering that Marasigan is not a holder in due course, Patrimonio can validly set up the
personal defense that the blanks were not filled up in accordance with the authority he
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gave. Consequently, Marasigan has no right to enforce payment against Patrimonio and
the latter cannot be obliged to pay the face value of the check.
BANK OF AMERICA VS. PHILIPPINE RACING CLUB

G.R. 150228 | July 30, 2009 | Leonardo-De Castro, J:
FACTS: Philippine Racing Club Inc. (PRCI) is a domestic corporation which maintains a current
account with petitioner Bank of America. PRCIs authorized signatories are the company
President and Vice-President. They were set to travel abroad so they pre-signed checks
to accommodate any expenses that may come up while they were abroad for a business
trip. Furthermore, the said pre-signed checks were left for safekeeping by PRCIs
accounting officer. Unfortunately, the two (2) of said checks came into the hands of one of
its employees who managed to encash it with petitioner. The said check was filled in with
the use of a check-writer, wherein in the blank for the 'Payee', the amount in words was
written, with the word 'Cash' written above it. Indeed, there was an irregularity with the
filling up of the blank checks as both showed similar infirmities and irregularities and yet,
the bank did not try to verify with the corporation and proceeded to encash the checks.
Hence, PRCI filed an action for damages against the bank. The lower court awarded actual
and exemplary damages. On appeal, the CA affirmed the lower court's decision and held
that the bank was negligent.
ISSUE: Whether or not the Bank of America can be held liable for negligence and thus should pay
damages to PRCI
HELD: The Supreme court held that both parties are held to be at fault. The court stated that there
was no dispute that the signatures in the checks are genuine but the presence of
irregularities on the face of the check should have alerted the bank to exercise caution
before encashing them. Moreover, it is well-settled that banks are in the business
impressed with public interest that they are duty bound to protect their clients and their
deposits at all times. They must treat the accounts of these clients with meticulousness
and a highest degree of care considering the fiduciary nature of their relationship. The
diligence required of banks are more than that of a good father of a family. On the other
hand, the PRCI officers' practice of pre-signing checks is a seriously negligent and highly
risky behavior which makes them also contributor to the loss. Its own negligence must
therefore mitigate the petitioner's liability. Furthermore, the person who stole the checks is
also an employee of the plaintiff, a clerk in its accounting department at that. As the
employer, PRCI supposedly should have control and supervision over its own employees.
The court held that the petitioner is liable for 60% of the total amount of damages while
PRCI should shoulder 40% of the said amount
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COMPLETE BUT UNDELIVERED INSTRUMENTS
RCBC VS. HI-TRI DEV. CORP., ET AL.

G.R. No. 192413 | June 13, 2012 | J. Sereno
FACTS: Teresita Millan offered to buy the land of Spouses Manuel and Luz Bakunawa. Millan
further promised the spouses that she will clear all possible obstacles to the completion of
the sale. The spouses agreed to sell the land and collected P1,019,514.29 from Millan as
down payment.
Millan, however, failed to clear the said obstacles. Hence, the spouses rescinded the sale.
They then offered to return the down payment Millan paid, but Millan refused to accept it.
Thus, in 1991, the spouses, through Hi-Tri, their company, took out a managers check
from RCBC payable to Rosmil, the company of Millan. Millan, however, never withdrew the
check.
In 2006, by virtue of RCBCs report on unclaimed balances, escheat proceedings were

instituted by the Office of the Solicitor-General before the RTC. Included among these
unclaimed balances was the managers check payable to Rosmil. The RTC then declared
these unclaimed balances escheated to the Republic.
The spouses, however, argued that they were not notified of the unclaimed check by
RCBC. Hence, the CA reversed the RTC and ruled in favor of the spouses. RCBC then
brought the case to the SC, arguing that it is Millan and Rosmil who have the right to be
notified, being the payees of the check, and not the spouses.
ISSUE: Whether or not the spouses have the right to be notified of the escheat proceedings?
HELD: Yes. Under Section 16 of the Negotiable Instruments Law, a complete but undelivered
instrument remains under the ownership of the maker or drawer, and is thus revocable by
said maker or drawer. In this case, since the check was never withdrawn by Millan, there
was no delivery made to Millan or to Rosmil. Hence, ownership of the funds payable under
the managers check was never transferred. The spouses remain as the owners of these
funds and thus had the right to be notified of the escheat proceedings regarding their
unclaimed balances payable under the managers check.
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ISSUANCE AND DELIVERY
DEVELOPMENT BANK OF RIZAL v. SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY,
SAMSON TUNG, ASIAN INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE
PHILIPPINES
GR. No. 85419 | March 9, 1993 | J. CAMPOS JR
FACTS: Petitioner bank (DBP) extended a loan to respondent Sima Wei, whereby the latter
executed and delivered a promissory note engaging to pay DBP or order the amount of
P1,820,000. Sima Wei made partial payments on the note, leaving a balance of
P1,032,450.02. Sima Wei issued two crossed checks (in the amounts of P550,000 and
P500,000) payable to DBP drawn against ChinaBank allegedly for full settlement of the her
outstanding note. It was found that said two checks were not delivered to the DBP (payee)
or any of its authorized representatives. For reasons unknown, said checks came into the
possession of respondent Lee Kian Huat, who then deposited the checks without payees
endorsement (forged or otherwise) to the account of respondent Plastic Corporation with
Producers Bank. Despite the fact that the crossed checks were payable to DBP and bore
no endorsement of the latter, the Branch Manager of Producers Bank authorized the
acceptance of the checks for deposit and credited them to the account of said Plastic
Corporation. DBP consequently filed a complaint for a sum of money against respondents
herein on two causes of action: 1) enforce payment of the outstanding balance on the
promissory note, and 2) enforce payment of two checks executed by Sima Wei payable to
DBP. Respondents, except for Lee Kian Huat, filed their separate Motions to Dismiss
alleging a common ground that the complaint states no cause of action. The trial court
granted the defendants' Motions to Dismiss. The Court of Appeals affirmed this decision.
ISSUE: Whether or not petitioner bank DBP has a cause of action against (1) any or (2) all of the
defendants, in the alternative or otherwise?
HELD: (1) YES, insofar as Sima Wei and the first cause of action is concerned.
(2) NO, insofar as the other respondents are concerned, petitioner Bank has no privity with
them.
Court AFFIRMED the dismissal of the petitioners complaint insofar as the second cause
of action is concerned. On the first cause of action, the case is REMANDED to the trial
court for a trial on the merits, consistent with this decision, in order to determine whether
respondent Sima Wei is liable to the Development Bank of Rizal for any amount under the
promissory note allegedly signed by her.
Sima Weis allegation that she has paid the balance of her loan with the two checks payable
to petitioner Bank has no merit for these checks were never delivered to petitioner Bank.
And even granting, without admitting, that there was delivery to petitioner Bank, the delivery
of checks in payment of an obligation does not constitute payment unless they are cashed
or their value is impaired through the fault of the creditor. Respondent Sima Wei alleged
none of these exceptions. Therefore, unless respondent Sima Wei proves that she has
been relieved from liability on the promissory note by some other cause, petitioner Bank
has a right of action against her for the balance due thereon.
Upon the other hand, since petitioner Bank never received the checks on which it based
its action against said respondents, it never owned them (the checks) nor did it acquire
any interest therein. Thus, anything that the respondents may have done with respect to
said checks could not have prejudiced petitioner Bank. Petitioner Bank has therefore no
cause of action against said respondents, in the alternative or otherwise. If at all, it is
Sima Wei, the drawer, who would have a cause of action against her co-respondents, if
the allegations in the complaint are found to be true.
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FORGERY
SAMSUNG CONSTRUCTION CO. PHILS. INC. VS. FAR EAST BANK AND TRUST CO. ET. AL.
G.R. No. 129015 | August 13, 2004 |J. Tinga
FACTS: Samsung Construction Company Phils. (Samsung Construction) maintained a current

account with Far East Bank and Trust Company (FEBTC). Jong Kyu Lee, its Project
Manager, was the sole signatory to the banks accounts. The checks were kept by the
companys accountant, Kyu Yong Lee.
Later, a certain Roberto Gonzaga presented for payment an FEBTC Check amounting to
P999,500. After making sure that there were enough funds to cover the check, the bank
teller (Justiani) compared the signature appearing on the check with the signature card of
Jong with the bank. Justiani was satisfied that the signature was authentic. She then asked
Gonzaga to submit proof of his identity, to which he presented 3 IDs. The same was done
by the senior assistant cashier (Velez), and another bank officer (Syfu). Syfu then noticed
that Jose Sempio III was also in the bank. Sempio was well-known to Syfu and the other
bank officers because he is the assistant accountant of Samsung Construction. Sempio
vouched for the genuineness of Jongs signature. Satisfied with the genuineness of the
signature of Jong, Syfu authorized the banks encashment of the check to Gonzaga.
The following day, Kyu, discovered the encashment. Kyu examined the checkbook and
found that the last blank check was missing. Jong learned of the encashment of the check,
and realized that his signature had been forged. Samsung Construction filed a Complaint
for violation of Section 23 of the NIL. During the trial, both sides presented their respective
expert witnesses. Samsung Corporation, presented Senior NBI Document Examiner Roda
B. Flores, who testified that Jongs signature had been forged. On the other hand, FEBTC,
presented Rosario C. Perez, a document examiner from the PNP Crime Laboratory who
testified Jongs signature on the check was genuine.
The RTC chose to believe the findings of the NBI expert and ruled in favor of Samsung
Construction. However, the Court of Appeals reversed the RTCs decision, absolving
FEBTC from any liability. It stated that conflicting findings of the experts created doubt as
to forgery. Also, assuming there was forgery, it occurred due to the negligence of Kyu, for
lack of care and prudence in keeping the checks.
ISSUES: 1. Whether the check was indeed forged.

2. Whether Samsung Construction was precluded from setting up the defense of forgery
under Section 23 of the Negotiable Instruments Law.
HELD: Yes. The NBI expert, Rhoda Flores, clearly qualifies as an expert witness. A document
examiner for 15 years, she had been promoted to the rank of Senior Document Examiner
with the NBI, and had held that rank for 12 years prior to her testimony. She received
training abroad and was top 5 in the Competitive Seminar in Question Document
Examination, conducted by the NBI Academy. As of the time she testified, she had
examined more than 50,000 to 55,000 questioned documents. In comparison, PNP
document examiner Perez admitted to having examined only around five hundred
documents as of her testimony. The NBI found that there were significant differences in
the handwriting characteristics existing between the questioned and the sample
signatures, therefore, such signature was indeed forged.
Yes. The general rule is a forged signature is wholly inoperative, and payment made
through or under such signature is ineffectual. If payment is made, the drawee cannot
charge it to the drawers account. The justification is that the drawee is in a superior position
to detect a forgery because he has the makers signature and is expected to know and
compare it. Under Section 23 of the NIL, forgery is a real or absolute defense by the party
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whose signature is forged. On the premise that Jongs signature was indeed forged,
FEBTC is liable for the loss since it authorized the discharge of the forged check. Such
liability attaches even if the bank exerts due diligence and care. The bare fact that the
forgery was committed by an employee of Samsung Construction cannot necessarily imply
that such partys negligence was the cause for the forgery. Negligence is not presumed,
but must be proven by him who alleges it. Since the drawer, Samsung Construction, is not
precluded by negligence from setting up the forgery, the general rule should apply.
Consequently, if a bank pays a forged check, it must be considered as paying out of its
funds and cannot charge the amount so paid to the account of the depositor. A bank is
liable, irrespective of its good faith, in paying a forged check. Petition GRANTED
ASSOCIATED BANK VS. HON. COURT OF APPEALS, PROV. OF TARLAC AND PHILIPPINE
NATIONAL BANK
G.R. No. 107382/107612 | January 31, 1996
FACTS: The question here is who would be held liable for drawing 30 checks with forged
endorsements. The Prov. of Tarlac allocated portion of its funds to the Concepcion
Emergency Hospital. The allotment checks are drawn to order of Concepcion Emergency
Hospital or The Chief, Concepcion Emergency Hospital. For a period of years, a total of
30 checks were issued and encashed. The Provincial Treasurer of Tarlac discovered that
the hospital was not able to receive its allotment checks drawn by the Province.
The Treasurer learned that a certain, Fausto Pangilinan, encashed the questioned checks
which amounted to 203,000.00 PHP with the Associated Bank as its collecting bank. It was
revealed that Pangilinan was the administrative officer and cashier of the hospital until he
retired in 1978. He was the one who collected the checks and claimed to be the one
assisting or helping the hospital in releasing the checks. The manager of the Associated
Bank initially refused the issuance of the checks but eventually the checks were withdrawn
when it was cleared and paid by the drawee bank PNB. Pangilinan forged the signatures
of Dr. Adena Canlas and made it appear that the checks were payable to him, as claimed
by the manager of Associated Bank.
PNB allege that the Province of Tarlac is negligent because it delivered and released the
checks to Pangilinan even when he was already retired as the hospitals cashier and
administrative officer. PNB also maintains that they were holder in due course being the
innocent party between the three of them. Associated Bank, on the other hand, argued that
PNB should be solidly liable being the drawee bank. It also contended that since PNB
cleared and paid the value of the forged checks, therefore, should be the only one liable.
ISSUE: Whether or Not, the Associated Bank be held liable for the issuance of PNB of the forged
checks
HELD: The Supreme Court held that Sec. 23 of the Negotiable Instruments Law is applicable.
Under Sec. 23, a forged signature is wholly inoperative and no one can gain title to the
instrument through it. When the indorsement is forged, only the person whose signature is
forged can raise the defense of forgery against a holder in due course. In cases involving
checks with forged indorsements, the chain of liability does not end with the drawee bank,
PNB in this case, it can seek reimbursement or return of the amount of the check who
indorsed it, which is the Associated Bank. Since a forged indorsement is inoperative,
Associated Bank had no right to be paid by PNB rather it should repay the other because
it was wrongfully paid. The Court also held that the collecting bank is the last endorser and
therefore should generally suffer the loss because it has the duty to ascertain the
genuineness of all prior endorsements. Hence, PNB can reclaim the amount paid on the
check bearing a forged instrument from Associated Bank.
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ATTY. CENIZA
However, PNB cannot escape liability altogether because it breached its duty to pay
according to the terms of the check. The checks were deposited in the account of
Pangilinan even if it was made payable to Concepcion Emergency Hospital. It has no duty
to credit it to the account of Pangilinan but credited it so. PNB also delayed in informing
the Associated Bank of the forgery thereby depriving it the opportunity to go after the forger,
hence, it is precluded from claiming reimbursement. Province of Tarlac also cannot escape
liability for being negligent in their part. They gave the checks to Pangilinan even though
they fully know that he retired. The Court found it proper to the proportionate sharing due
to the negligence of Province of Tarlac in releasing the checks to an unauthorized person,
which only allows them to claim 50% from PNB. Associated Bank shall be liable to PNB
only 50% for indorsing the forged checks.
TRADERS ROYAL BANK v. RADIO PHILIPPINES NETWORK, INC.

G.R. No. 138510 | October 10, 2002 | Corona, J.
FACTS: BIR assessed network companies RPN, IBC and BBC of their tax obligations for the
taxable years 1978-1983. In order to settle their tax obligations, the aforementioned
network companies purchased 3 managers check from Traders Royal Bank. TRB turned
over the checks to Mrs. Lourdes C. Vera who was supposed to deliver the same for the
payment of the taxes. Later on, it was discovered that the 3 managers checks were never
delivered nor paid to the BIR by Vera. Instead, the checks were presented for payment by
unknown persons to Security Bank and Trust Company, as shown by the banks routing
symbol transit number. Meanwhile, RPN, IBC, BBC were constrained to enter into a
compromise and paid BIR their unpaid tax deficiencies. RPN, IBC, and BBC filed an instant
suit against TRB and SBTC demanding reimbursement and payment of damages before
the RTC. RTC ruled in favor of the network companies. CA absolved SBTC and made TRB
solely liable. In a petition for certiorari filed by TRB before the CA, SBTC denies liability on
the ground that it had no participation in the negotiation of the checks since the checks did
not go through the Philippine Clearing House Corporation for clearing.
ISSUE: Whether or not TRB should solely bare the loss for its negligence.
HELD: YES. When a signature is forged or made without the authority of the person whose
signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or
to give a discharge therefor, or to enforce payment thereof against any party thereto, can
be acquired through or under such signature. Consequently, if a bank pays a forged check,
it must be considered as paying out of its funds and cannot charge the amount so paid to
the account of the depositor. In the instant case, the 3 checks were payable to the BIR. It
was established, however, that said checks were never delivered or paid to the payee BIR
but were in fact presented for payment by some unknown persons who, in order to receive
payment therefor, forged the name of the payee. Despite this fraud, petitioner TRB paid
the 3 checks in the total amount of P9,790,716.87. Petitioner ought to have known that,
where a check is drawn payable to the order of one person and is presented for payment
by another and purports upon its face to have been duly indorsed by the payee of the
check, it is the primary duty of petitioner to know that the check was duly indorsed by the
original payee and, where it pays the amount of the check to a third person who has forged
the signature of the payee, the loss falls upon petitioner who cashed the check. Its only
remedy is against the person to whom it paid the money. xxx By encashing in favor of
unknown persons checks which were on their face payable to the BIR, a government
agency which can only act only through its agents, petitioner did so at its peril and must
suffer the consequences of the unauthorized or wrongful endorsement. In this light,
petitioner TRB cannot exculpate itself from liability by claiming that respondent networks
were themselves negligent. xxx A collecting bank which indorses a check bearing a forged
indorsement and presents it to the drawee bank guarantees all prior indorsements,
including the forged indorsement itself, and ultimately should be held liable therefor.
However, it is doubtful if the subject checks were ever presented to and accepted by SBTC
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ATTY. CENIZA
so as to hold it liable as a collecting bank, as held by the Court of Appeals. Since TRB did
not pay the rightful holder or other person or entity entitled to receive payment, it has no
right to reimbursement. Petitioner TRB was remiss in its duty and obligation, and must
therefore suffer the consequences of its own negligence and disregard of established
banking rules and procedures.
CASA MONTESSORI INTERNATIONALE V. BANK OF THE PHILIPPINE ISLANDS

G.R. No. 149454| May 28, 2004 | Panganiban, J
FACTS: Petitioner opened a current account with Respondent bank with the formers president, Ms.
Ma. Carina C. Lebron as one of its signatories. After an investigation, Petitioner found that
nine of its checks had been encashed by a certain Sonny D. Santos in the amount
P782,000. It was found out that the certain Sonny D. Santos was really Leonardo T. Yabut
who was the external auditor of petitioner school. Yabut admitted that he had forged the
signature of Ms. Lebron and encashed the checks. The examination done by the PNP
affirmed the forgery. Petitioner filed a complaint for Collection with Damages against
Respondent bank , praying that the amount of P782,000 be reinstated. RTC ruled in favor
of Petitioner. CA modified the decision of the RTC. Proportioned the loss between
petitioner and respondent because it held that petitioner was also negligent which in turn
gave rise to the forgery.
ISSUE: 1. Whether or not there was forgery under the Negotiable Instruments Law
2. Whether or not, any of the parties negligent and therefore precluded from setting up
forgery as a defense
HELD: 1. Yes. Yabut admitted himself that he forged the signatures of Ms. Lebron then encashed
the checks. The PNPs examination of the checks also revealed that there was indeed
forgery. Moreover, a forged signature is wholly inoperative.
Section 21 of the Negotiable Instruments Law:

When a signature is forged or it is made without the authority whose signature it purports
to be, it is wholly inoperative, and no right to retain the instrument or to give a discharge
therefore, or to enforce payment thereof against any party thereto can be acquired through
or under such signature unless the party against whom the right is sought to be enforced
is precluded from setting up the defense of forgery or want of authority.
Forgery is then a real defense that may be invoked by the one whose signature may be
forged
2. Yes. BPI alone is negligent in this case. The public expects the bank to exercise the
highest degree of diligence in its operations. Nonetheless, It failed to notice the nine
instances of forgery even though it had a signature verification procedure. Moreover, Yabut
was able to open an account in one BPIs branches using only a fictious name because
the bank did not even verify his identification papers. Finding that petitioner is not negligent
in this case, it may validly set up the defense of forgery against petitioner.
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ATTY. CENIZA
CONSIDERATION
ENGR. JOSE E. CAYANAN v. NORTH STAR INTL TRAVEL, INC.

G.R. No. 172954 | October 5, 2011 | J. Villarama, Jr.
FACTS: North Star International (North Star), a travel agency, is engaged in business with JEAC
International Management and Contractor Services, a recruitment agency. In
accommodation and per the instruction of petitioner Engr. Cayanan of JEAC, North Stars
General Manager Virginia Balagtas sent the amount of $60,000 to View Sea Ventures Ltd.
(VSV) in Nigeria using her personal account. Subsequently, Balagtas sent $40,000 to VSV
with $15,000 of the said amount from Engr. Cayanan. In addition, North Star extended
credit in favor of Engr. Cayanan for the plane tickets of his clients which amounted to
P510,035.47. As proof of payment, Cayanan issued five checks in favor of North Star.
Upon presentation of the checks, two were dishonored for insufficiency of funds and the
other three due to the stop payment order of Cayanan. North Star demanded payment
which Cayanan failed to settle.
Hence, North Star charged Cayanan for violation of B.P. 22 or the Bouncing Checks Law
where the MeTC found Cayanan guilty beyonf reasonable doubt. On appeal, the RTC ruled
to acquit Cayanan as the issued checks were presented beyond the ninety-day period thus
there is is no violation of the provision of B.P. 22. Aggrieved, North Star elevated the case
to the CA, which ruled that despite being acquitted Cayanan is still civilly liable to North
Star.
Now, petitioner assails the CA decision and contends that he should not be held civilly
liable to North Star. Cayanan claims that North Star did not give any valuable consideration
for the checks as it was taken from Virginias personal account and not from the corporate
funds of North Star. Furthermore, he asserted that he never instructed Balagtas to transfer
said amounts. He claims that the transactions were made by Virginia as her personal
investment to VSV. Likewise, he claims that there is no valuable consideration as he did
not personally receive the money transacted by Balagtas to VSV.
ISSUE: Whether or not Cayanan is civilly liable to North Star for the five postdated checks he issued
HELD: YES. In accordance to Sec. 24 of the Negotiable Instruments Law, that every instrument
is issue for a valuable consideration. It is presumed that every party to an instrument
acquires the same for a consideration or for value. The burden of proving to the contrary
rests upon the person claiming otherwise. In this case, petitioner failed to prove that there
was no valuable consideration given when the checks were issued. There is no evidence
that Balagtas had business transactions with VSV. The subject checks speak for
themselves, Cayanan specifically named North Star as payee of the subject checks. This
is an admission of Cayanan that he is liable to North Star and not to Balagtas, who merely
facilitated the fund transfer.
The Supreme Court upheld the CAs decision and ordered Cayanan to fully settle his
obligation to North Star.
BAYANI v. PEOPLE
G.R. 154947 | August 11, 2004 | J. Callejo, Sr.
FACTS: Alicia Rubia went to the store of Dolores Evangelista to rediscount a PS Bank check in the
amount of P55,000, which the latter did. The check was drawn by Leodegario Bayani
against his PS Bank account. When Dolores presented the check in her FEBTC, it was
dishonored by the drawee bank for the reason that the account was closed.
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ATTY. CENIZA
Dolores filed a BP 22 case against Bayani. The trial court ruled that Bayani is guilty. On
appeal to the CA, the petitioner averred that the prosecution failed to prove that he issued
the check. He avers that even assuming that he issued the check, the prosecution failed
to prove that it was issued for valuable consideration and that he received the amount of
P55,000 from Rubia. The CA affirmed the RTC ruling.
ISSUE: Whether or not the check was issued for a valuable consideration -- YES
HELD: The petitioner cannot escape criminal liability by denying that he has received the amount
of P55,000 from Rubia after he issued the check to her.
Sec. 24 of the NIL states that every negotiable instrument is deemed prima facie to have
been issued for a valuable consideration; and every person whose signature appears
thereon to have become a party thereto for value.
Such presumption cannot be overcome by the petitioners bare denial of receipt of the
amount of P55,000 from Rubia.
CARMELA BROBIO MANGAHAS VS. EUFROCINA A. BROBIO

G.R. No. 183852 | October 20, 2010 | Nachura, J.
FACTS: Pacifico Brobio died intestate, leaving three parcels of land He was survived by his wife,
respondent Eufrocina Brobio, and four legitimate and three illegitimate children; petitioner
Carmela Brobio Mangahas is one of the illegitimate children. The heirs executed a Deed
of Extrajudicial Settlement of Estate of the Late Pacifico Brobio with Waiver. In the Deed,
petitioner and Pacificos other children, in consideration of P150,000, waived and ceded
their respective shares over the three parcels of land in favor of respondent. According to
petitioner, respondent promised to give her an additional amount for her share in her
fathers estate. Thus, after signing the Deed, petitioner demanded from respondent the
promised additional amount, but respondent refused to pay.
A year later, while processing her tax obligations with BIR, respondent was required to
submit an original copy of the Deed. Since she had no more original copy of the Deed,
respondent asked petitioner to countersign a copy. Petitioner refused, demanding that
respondent first give her the additional amount she promised. Respondent executed a
promissory note payable to petitioner at the amount of P600,000. When the promissory
note fell due, respondent persistently refused to pay the amount.
Petitioner filed a Complaint for Specific Performance with Damages with the RTC against
respondent. In respondents answer, while she admitted that she signed the promissory
note, she claimed that she was forced to do so. She also claimed that the undertaking was
not supported by any consideration. The RTC rendered a decision in favor of petitioner,
and held that there was no undue influence that would have vitiated respondents consent.
The RTC also brushed aside respondents claim that the promissory note was not
supported by valuable consideration, maintaining that the promissory note was an
additional consideration for the waiver executed by petitioner.
The CA reversed the RTC decision and dismissed the complaint. It ruled that there was a
complete absence of consideration in the execution of the promissory note. The CA held
that the waiver of petitioner may not be considered as the consideration, considering that
petitioner signed the Deed way back in 2002 and that she had already received the
consideration amounting to P150,000. Hence, this petition.
ISSUE: 1. Whether or not there was undue influence

2. Whether the promissory note is void for not being supported by a consideration
26
ATTY. CENIZA
HELD: 1. NO. The fact that respondent may have felt compelled, under the circumstances, to
execute the promissory note will not negate the voluntariness of the act. As rightly observed
by the trial court, the execution of the promissory note in the amount of P600,000.00 was,
in fact, the product of a negotiation between the parties. There is intimidation when one of
the contracting parties is compelled to give his consent by a reasonable and well-grounded
fear of an imminent and grave evil upon his person or property, or upon the person or
property of his spouse, descendants, or ascendants. Certainly, the payment of penalties
for delayed payment of taxes would not qualify as a reasonable and well-grounded fear of
an imminent and grave evil.
2. NO. Under Art. 1354 of the Civil Code, a contract is presumed to be supported by cause
or consideration. The presumption that a contract has sufficient consideration cannot be
overthrown by a mere assertion that it has no consideration. To overcome the presumption,
the alleged lack of consideration must be shown by preponderance of evidence. In this
case, respondent failed to prove that the promissory note was not supported by any
consideration. From her testimony and her assertions in the pleadings, it is clear that the
promissory note was issued for a cause or consideration, which, at the very least, was
petitioners signature on the document. Even if the consideration is inadequate, the
contract is still considered valid, absent fraud, mistake, or undue influence.
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ACCOMMODATION PARTY
FIDELIZA J. AGLIBOT VS. INGERSOL L. SANTIA

G.R. No. 185945 | December 5, 2012 | Reyes, J.
FACTS: Respondent Engr. Ingersol L. Santia (Santia) loaned the amount of P2,500,000 to Pacific
Lending & Capital Corportion (PLCC) through its Manager, petitioner Fideliza J. Aglibot
(Aglibot) which was evidenced by a promissory note issued by the latter in behalf of PLCC.
Allegedly as security for the payment of the note, Aglibot issued and delivered to Santia 11
post-dated personal checks drawn from her own demand account maintained at
Metrobank. Upon presentment of said checks, they were dishonoured due to insufficient
funds or closed account. Santia demanded payment of said checks but it was not heeded
by PLCC and Aglibot. 11 informations for violation of B.P. 22 was filed against Aglibot
before the MTCC. Aglibot countered that Santia demanded security in the form of checks
before granting the loan, and that she obtained such loan in behalf of PLCC. Aglibot further
claimed that she had already paid for the checks in cash. The MTCC acquitted Aglibot of
the criminal charges but held her civilly liable to pay Santia P3,000,000. Aglibot appealed
to the RTC which absolved the former of any civil liability on the ground of failure to fulfil
the condition precedent of exhausting all means to collect from the principal debtor. Santia
appealed to the CA which rejected the dismissal of RTC and held that her acquittal did not
bar Santias recovery of civil liability. The CA ordered Aglibot to pay Santia P3,000,000.
Hence, Aglibot filed a petition for review on certiorari before the SC.
ISSUE: Whether or not Aglibot is personally liable for the 11 checks
HELD: The SC denied the petition. It held that Aglibot is an accommodation party and is therefore
liable to Santia. When Aglibot issued her own post-dated checks, she bound herself
personally and solidarily to pay Santia. She could have issued PLCCs checks but opted
to issue her own checks, drawn against her personal account with Metrobank. Aglibot
intended to personally assume repayment of the load, she also submitted in her counter-
affidavit that she was personally indebted to Santia. Aglibot agreed to accommodate the
loan of PLCC to Santia by issuing her own post-dated checks in payment thereof. Under
the Negotiable Instruments Law, she is an accommodation party. An accommodation party
is one who has signed the instrument as maker, indorser, drawer, without receiving value
therefor and for the purpose of lending his name to some other person. In lending his name
to the accommodated party, the accommodation party is in effect a surety for the latter.
Thus, the relation between the accommodation party and party accommodated party is
one of principal and surety. It is settled that the surety is bound equally and absolutely with
the principal and is deemed an original promisor and debtor from the beginning. The liability
of the accommodation party remains unconditional to a holder for value. The checks that
Aglibot issued were for payment of the loan of PLCC. Aglibot issued her own checks to
Santia made her personally liable to the latter on her checks without the need of Santia to
go against PLCC to collect payment.
EUSEBIO GONZALES vs. PHILIPPINE COMMERCIAL BANK & INTERNATIONAL BANK

G.R. No. 180257. February 23, 2011. Velasco, Jr., J.
FACTS: Petitioner Eusebio Gonzales was a client of Philippine Commercial and International Bank
(PCIB) for 15 years. PCIB, through a Credit-On-Hand Loan Agreement (COHLA), granted
the credit line of Gonzales. Gonzales drew from said credit line through the issuance of
check. At the institution of the instant case, Gonzales had a Foreign Currency Deposit
(FCD) of USD8,715.72 with PCIB. Gonzales and his wife obtained a loan for PhP
500,000.00. Consequently, Spouses Panlilio and Spouses Gonzales obtained a loan with
PCIB in the amount of PhP 1,000,000.00 and PhP 300,000.00, respectively. The three
loans were covered by three promissory notes, and as a security, the spouses Panlilio and
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ATTY. CENIZA
spouses Gonzales executed a Real Estate Mortgage in favor of PCIB. The promissory
notes specified the solidary liability of both parties. However, it was spouses Panlilio who
received the loan of PhP 1,800,000.00. The monthly interests were paid by the spouses
Panlilio, but after some time, the spouses Panililio already failed to pay their loan.
In the meantime, Gonzales issued a check in favor of Rene Unson for PhP 250,000.00
drawn against the COHLA, but the check was dishonored due to the termination of the
COHLA, and the PCIB also froze the account of Gonzales. Gonzales, through counsel,
wrote PCIB insisting that the check he issued had been fully funded, and demanded the
return of the proceeds of his FCD as well as damages for the unjust dishonor of the check.
PCIB stood its ground in freezing the account of Gonzales. Gonzales reminded PCIB that
it was the spouses Panlilio who benefited from the loans, but PCIB ignored Gonzales
contention. The refusal of PCIB prompted Gonzales to file a case against PCIB with the
Regional Trial Court (RTC). The RTC ruled in favor of PCIB and held that the spouses
Panlilio and spouses Gonzales were solidarily liable on the three promissory notes. Hence,
the termination of the COHLA was just because of the outstanding loan. Also, the dishonor
of check is also proper given that the COHLA was already terminated. The Court of Appeals
affirmed in toto. CA held that the spouses Panlilio and spouses Gonzales were indeed
solidary debtors, and PCIB correctly dishonored the checks because it was only exercising
its rights under the contractual stipulations in the COHLA.
ISSUE: Whether or not Gonzales is liable for the three promissory he executed with spouses
Panlilio
HELD: YES. Gonzales is liable for the loans covered by the above promissory notes. Gonzales
admitted that he is an accommodation party which PCIB did not dispute. In his testimony,
Gonzales admitted that he merely accommodated the spouses Panlilio at the suggestion
of Ocampo, who was then handling his accounts, order to facilitate the fast release of the
loan. The fact that the loans were undertaken by Gonzales when he signed as borrower or
co-borrower for the benefit of the spouses Panlilio as shown by the fact that the proceeds
went to the spouses Panlilio who were servicing or paying the monthly dues is beside
the point. For signing as borrower and co-borrower on the promissory notes with the
proceeds of the loans going to the spouses Panlilio, Gonzales has extended an
accommodation to said spouses. Also, the promissory notes specified that spouses Panlilio
and spouses Gonzales were solidarily liable.
An accommodation party is a person who has signed the instrument as maker, drawer,
acceptor or indorser without receiving value therefor and for the purpose of lending his
name to some other person. As an accommodation party, Gonzales is solidarily liable with
the spouses Panlilio for the loans. In Ang v. Associated Bank, 532 SCRA 244 (2007),
quoting the definition of an accommodation party under Section 29 of the Negotiable
Instruments Law, the Court cited that an accommodation party is a person who has
signed the instrument as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to some other person.
Furthermore, an accommodation party is one who meets all the three requisites, viz.: (1)
he must be a party to the instrument, signing as maker, drawer, acceptor, or indorser; (2)
he must not receive value therefor; and (3) he must sign for the purpose of lending his
name or credit to some other person. An accommodation party lends his name to enable
the accommodated party to obtain credit or to raise money; he receives no part of the
consideration for the instrument but assumes liability to the other party/ies thereto.
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ANG v. ASSOCIATED BANK

GR. No. 146511 | 5 September 2007 | J. Azcuna
FACTS: Associated Bank filed a collection suit against Antonio Ang Eng Liong (Antonio) and Tomas
Ang (Tomas) after they defaulted in payment of their loans that were executed with two
promissory notes amounting to P50,000 and P30,000, where they signed as principal
debtor and co-maker, respectively. They agreed that the loan would be payable jointly and
severally. After a series of motions were filed and/or withdrawn by Tomas in the trial court
and Court of Appeals (CA), the trial court rendered a decision, declaring Antonio in default
and liable to pay the principal amount with interest and penalties. The trial court also
decided against the respondent bank in favor of Tomas who argues he is merely an
accommodation party not liable for Antonios loans and that the respondent bank is not a
real party-in-interest or a holder of the notes, because it was under the trust agreement of
PNB, DBP, and the National Government that created the Asset Privitization Trust (APT).
Tomas argues that it is the APT that can enforce the obligations that the government may
have against any person since it held the notes.
The respondent bank elevated the case to the CA where it rendered the respondent banks
errors irrelevant and unmeritorious, respectively. The CA decided on its independently
assigned issue of whether or not the lower court erred in dismissing the complaint for
collection of a sum of money for a lack of cause of action since the bank was not a holder
of the notes. The CA rendered a decision stating that the respondent bank is a holder of
the notes and that APT cannot be a holder because it is neither the payee, indorsee, or
bearer of the notes, and that Tomas is liable for the notes as an accommodation party
under Section 29 of the Negotiable Instruments Law (NIL) and as a co-maker of the notes
who agreed to be liable jointly and severally. Tomas filed a motion for reconsideration,
which was denied.
ISSUE: Whether or not Tomas Ang is liable for the promissory notes as an accommodation party
and co-maker?
HELD: Yes, Tomas Ang is liable for the promissory notes as an accommodation party and co-
maker.
The respondent bank is a holder of the notes under Sec. 29 of the NIL since its owner,
Leonardo Ty, managed to buy back Associated Bank from the APT, thereby reclaiming
their interest over the unpaid loans. Consequently, in issuing the two promissory notes,
Tomas, as accommodating party warranted to the holder in due course that he would pay
the same according to its tenor. It is no defense to state on his part that he did not receive
any value therefor because the phrase without receiving value therefor used in Sec. 29
of the NIL means without receiving value by virtue of the instrument and not as it is
apparently supposed to mean, without receiving payment for lending his name.
Therefore, Tomas is liable as an accommodation party.
Tomas also acknowledged that the relationship of an accommodation party and

accommodated party is that of a surety-principal relationship. According to prevailing
jurisprudence (International Finance Corporation v. Imperial Textile Mills, Inc., and Inciong,
Jr. v. CA), the suretys liability to the creditor is equally bound with the principal. Tomas
also agreed to be jointly and severally liable. Hence, he is liable as a co-maker.
The petition is denied.
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BAUTISTA v. AUTO PLUS TRADERS

G.R. NO. 166405 | AUG. 6, 2008 | J. QUISUMBING
FACTS: Petitioner Claude P. Bautista, in his capacity as President and Presiding Officer of
Cruiser Bus Lines and Transport Corporation, purchase various spare parts from
Respondent Auto Plus Traders, Inc. Bautista issued two postdated checks to cover his
purchases. The first check was to the amount of P151,200 while the second check was in
the amount of P97,500. Upon presentment, both checks were dishonored which prompter
Auto Plus Traders to file a complaint against Bautista for violation of Batas Pambansa
Blg. 22.
The MTCC dismissed the complaint but both parties appealed such to the RTC. The RTC
ruled in favor of Auto Plus Traders and ordered Bautista to pay the amount of the checks
issued with interest. This was affirmed by the Court of Appeals.
ISSUE: Whether or not the Petitioner Bautista should be held liable to pay the amounts of the
dishonored checks.
HELD: No, Bautista should not pay for the dishonored checks because the corporation has a
distinct and separate personality from its officers. The purchases were made by the
company and the checks were only signed by Bautista in his capacity as the companys
president.
Bautista also cannot be held as an accommodation party. In order for one to be considered
as an accommodation party, the following requisites must concur:
1. He must be a party to the instrument;

2. He must not receive value therefor;
3. He must sign for the purpose of lending his name or credit to some other person.
Although the first two requisites are present, the last one is lacking. There was no
agreement that Bautista would guaranty the payment of the dishonored checks, nor could
it be shown that he lent his name or credit to the company.
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KINDS OF INDORSEMENTS
PCIB v. CA
G.R. No. 121413 | January 29, 2001 | QUISUMBING, J.
FACTS: Ford issued a Citibank check in favor of the Commissioner of Internal Revenue (CIR) as
payment for its manufacturers sales tax for 1977. The check was a crossed check, with two
parallel lines and the instruction Payees Account Only The check was cleared and deposited
with IBAA (now PCIB) as authorized agent collecting bank. However, CIR never received the
proceeds of the check. Accordingly, Ford was forced to make a second payment to the CIR.
Two other Citibank crossed checks were again issued in 1978 and 1979 for payment of Fords
taxes to the CIR. Neither reached the payee. Both Citibank and PCIB denied liability and refused
to reimburse Ford. As a result, Ford filed a complaint.
Upon investigation by the NBI, it was found that Rivera, Fords General Ledger Accountant had
recalled the first check, due to an alleged error in the comptation of the tax. He then instructed
PCIB to replace it with two managers checks, which were deposited by syndicate members with
the Pacific Banking Corporation (PBC). As far as the next two checks, the syndicate had Rivera
pass the checks to a co-conspirator and manager of a PCIB branch, to open a fictitious account
in another PCIB branch with the help of a third member. After depositing a worthless Bank of
America check, the syndicates other members would tamper with and replace this with the
stolen Citibank checks once it reached the clearing process.
The trial court ruled in favor of Ford, ordering PCIB and Citibank to pay the full value of the
check, and ordering PCIB to reimburse Citibank for its share. CA affirmed the decision, but
dismissed the complaint against Citibank. In the second case, the RTC held Citibank solely
liable for the payment of the two checks, with the CA affirming.
ISSUE: W/N Ford may recover from PCIB as collecting bank and Citbank as drawee bank.
HELD: YES. As far as Ford is concerned, it was not negligent due to its own employee facilitating the
embezzlement. Its Board of Directors never assented to any of Riveras actions in replacing the
check. The banks cannot shift the blame to the drawer-payor whose employee perpetrated the
fraud given the circumstances.
PCIB, as an agent of the BIR should only receive instructions from its principal, and not from
any other person. It was negligent to have relied on Riveras phone call and signature
considering it is the BIR and not him who is the client. Any diversion of the amount of a check
payable to the collecting bank of the designated payee may only be allowed if properly
authorized by the payor, and justified with proof of authority from the drawer, which Rivera did
not have. PCIBs clearing stamp appears at the back of the checks, guaranteeing prior and lack
of indorsements, and such checks had also been crossed, binding PCIB to scrutinize the check
and ensure that it be deposited only in payees account. Therefore PCIB alone is liable for the
first check.
PCIB never held the other two checks however, and had no conscious participation in the
embezzlement subject of the second case. PCIB is also a victim of the syndicates scheme, but
due to the fiduciary nature of the banking business, the general rule is that a bank is liable for
the fraudulent acts or representations of an officer or agent acting within the course and
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apparent scope of his employment or authority. And if an officer or employee of a bank, in his
official capacity, receives money to satisfy an evidence of indebtedness lodged with his bank
for collection, the bank is liable for his misappropriation of such sum.
Citibank is likewise remiss in its duties. Citibank owes Ford an absolute and contractual duty
to pay the proceeds of the checks to the payee only, and under the NIL, Citibank accepts the
instrument under the agreement that it will pay only according to the tenor of its acceptance. A
crossed check bearing Payees Account Only is clear that it should only have been paid to
the CIRs account. On the two subsequent checks, Citibank failed to notice and verify the lack
of clearing stamps. Its negligence could have prevented the embezzlement and discover the
scheme on time. Therefore both PCIB and Citibank are liable for the two checks.
METROBANK v. BA FINANCE
G.R. No. 179952 | December 4, 2009 | Carpio-Morales, J.
FACTS: Bitanga obtained from BA Finance a loan secured by a mortgage over the formers car. As
stipulated in the mortgage, BA Finance required the said car to be insured and in case of
its loss, that payment be made in favor of BA Finance. Bitanga complied and entered into
an agreement with Malayan Insurance. Later on, the car was stolen and Malayan
Insurance, on Bitangas claim, issued a crossed check payable to the order of BA Finance
Corp. and Lamberto Bitanga. Bitanga then deposited the said check to his Asianbank (now
Metrobank) account even without the indorsement or authority of his co-payee, BA
Finance, and subsequently withdrew its proceeds.
Bitangas loan with BA Finance fell due and the latter found out about the check that was
issued and delivered by Malayan Insurance. It then proceeded to demand payment from
Asianbank, but the latter refused to pay. A complaint for a sum of money was then filed
before the RTC against Asianbank and Bitanga.
The RTC held that Asianbank was negligent in allowing Bitanga to deposit and withdraw
the proceeds of the check without the indorsement or authority of BA Finance, and that it
was solidarily liable with Bitanga to BA Finance under Section 41 of the NIL. This was
affirmed by the CA, hence, this appeal.
ISSUES: Whether or not there was negligence on the part of Asianbank to hold them liable to BA
Finance?
HELD: YES. Section 41 of the NIL states that: Where an instrument is payable to the order of two
or more payees who are not partners, all must indorse unless the one indorsing has
authority to indorse for the others. In this case, Bitanga solely indorsed the crossed check
and Asianbank allowed Bitanga to deposit and withdraw the proceeds of the check for
himself without any authorization or indorsement of his co-payee, BA Finance.
Asianbank, as collecting bank and last indorser, must bear the loss as they ascertained
the genuineness of all prior indorsements, which led to the drawee bank relying thereon
and paying the value of the check. Asianbank is liable to BA Finance for the full value of
the check, however, they are still entitled to reimbursement from Bitanga.
METROBANK VS PBCOM
G.R. No. 141408 | October 18, 2007 | Sandoval-Gutierrez, J.
FACTS: Pipe Master Corporation (Pipe Master) represented by Yu Kio, its president, applied for
check discounting with Filipinas Orient Finance Corporation (Filipinas Orient) and was later
approved and granted. The Board of Directors of Pipe Master issued a Board Resolution
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authorizing Yu Kio and/or Tan Juan Lian in their capacity as president and vice-president
respectively, to execute, indorse, make, sign, deliver or negotiate instruments, documents
and other papers in connection with any transaction coursed through Filipinas Orient for
and in behalf of the corporation. Tan Juan Lian, in favor of Filipinas Orient, executed a
continuing guaranty that he shall pay at maturity the indebtedness for which Pipe Master
may become liable ; that his liability shall not exceed P1,000,000.00; and that in default of
Pipe Master, Filipinas Orient may proceed directly against him. Yu Kio sold to Filipinas
Orient four Metro Bank checks amounting to P1,000,000.00 and in exchange, Filipinas
Orient issued four PBCom crossed checks totaling P964,303.62, payable to Pipe Master
with the statement for payees account only. Yu Kio indorsed and deposited in his personal
account in Metro Bank, three of the checks and as to the remaining, he deposited it in the
Solid Bank, also in his personal capacity. In turn, Metro Bank and Solid Bank credited the
value of the checks in Yu Kios personal accounts. When Filipinas Orient presented the
four Metro Bank checks, the drawee bank dishonored them. Pipe Master, the drawer,
refused to pay the checks and claimed that it never the received the proceeds of the
PBCom checks. Filipino Orient demanded that PBCom restore to its account the value of
the PBCom checks. PBCom sought reimbursement from Metro Bank and Solid Bank but
they refused. Thus, Filipinas Orient filed with the RTC a complaint for a sum of money
against Pipe Master, Tan Juan Lian and/or PBCom. They filed a cross-claim against
PBCom for negligence for having paid the wrong party and a third-party complaint against
Metro Bank and Solid Bank. RTC rendered a Decision against Metro Bank and Solid Bank.
On appeal, the appellate court affirmed in toto the decision of the trial court.
ISSUE: Whether or not Metro Bank and Solid Bank are liable to Filipinas Orient for the value of the
checks.
HELD: YES. The crossing of a check with the phrase Payees Account Only is a warning that the
check should be deposited in the account of the payee. It is the collecting bank which is
bound to scrutinize the check and to know its depositors before it can make the clearing
indorsement, all prior indorsements and/or lack of indorsement guaranteed. In this case,
petitioner banks accommodated Yu Kio, being a valued client and the president of Pipe
Master, and accepted the crossed checks. They stamped at the back thereof that all prior
indorsements and/or lack of indorsements are guaranteed. In so doing, they became
general endorsers. Under Section 66 of the Negotiable Instruments Law, an endorser
warrants that the instrument is genuine and in all respects what it purports to be; that he
has a good title to it; that all prior parties had capacity to contract; and that the instrument
is at the time of his indorsement valid and subsisting. Clearly, petitioner banks, being
endorsers, cannot deny liability.
ALLIED BANKING CORPORATION v. LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and
PRODUCERS BANK
GR. No. 133179 | March 27, 2008 | J. VELASCO, JR
FACTS: Respondent Lim Sio Wan deposited with petitioner bank (Allied) a money market
placement of P1,152,597.35 to mature after 31 days. Prior the date of maturity, a person
claiming to be Lim Sio Wan called up Cristina So (officer of AlliedBank) and instructed the
latter to pre-terminate Lim Sio Wans money market placement, to issue a managers check
representing proceeds of the placement, and to give the check to one Deborah Dee Santos
who would pick up the check. Later, Santos arrived and signed the application form for a
managers check to be issued. Allied issued a Managers Check representing Lim Sio
Wans money market placement in the name of Lim Sio Wan as payee. Said check was
crosschecked For Payees Account Only and was given to Santos. Thereafter, the
managers check was deposited in the account of Filipinas Cement Corporation (FCC) at
Metrobank with the forged signature of Lim Sio Wan as indorser. (Santos was the money
market trader assigned to handle FCCs account. The Allied check was deposited in the
account of FCC purportedly representing the proceeds of FCCs money market placement
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with Producers Bank, so much so as to make it appear that the Allied check was payment
of Producers Bank of its obligation to FCC.) Unaware of the pre-termination, Lim Sio Wan
deposited with Allied a second money market placement. Upon the maturity of the first
money market placement, Lim Sio Wan went to Allied to withdraw it. She was then informed
that the placement had been pre-terminated upon her instructions. Lim Sio Wan however
denied giving instructions and receiving proceeds thereof. Consequently, Lim Sio Wan filed
with the RTC a Complaint to recover the proceeds of her first money market placement
against Allied. Also, she withdrew her second placement from Allied. RTC held Allied liable
to pay Lim Sio Wan plus damages and attorneys fees. CA modified and ruled Allied to pay
60% and Metrobank to pay 40%.
ISSUE: Whether or not petitioner bank Allied is liable to the extent of 60% of amount adjudged
demandable in clear disregard to the ultimate liability of Metrobank as guarantor of all
endorsement on the check, it being the collecting bank?
HELD: YES. The trial court correctly found Allied negligent in issuing the managers check and in
transmitting it to Santos without even a written authorization. In fact, Allied did not even
ask for the certificate evidencing the money market placement or call up Lim Sio Wan at
her residence or office to confirm her instructions. Both actions could have prevented the
whole fraudulent transaction from unfolding. Allieds negligence must be considered as the
proximate cause of the resulting loss.
The liability of Allied, however, is concurrent with that of Metrobank as the last indorser of
the check. When Metrobank indorsed the check in compliance with the PCHC Rules and
Regulations55 without verifying the authenticity of Lim Sio Wans indorsement and when it
accepted the check despite the fact that it was cross-checked payable to payees account
only,56 its negligent and cavalier indorsement contributed to the easier release of Lim Sio
Wans money and perpetuation of the fraud. Given the relative participation of Allied and
Metrobank to the instant case, both banks cannot be adjudged as equally liable. Hence,
the 60:40 ratio of the liabilities of Allied and Metrobank, as ruled by the CA, must be upheld.
MELVA GONZALES V. RCBC

GR 156294 | November 29, 2006 | GARCIA, J.
FACTS: Gonzales was a rank-and-file employee of RCBC. Her mother, Alviar, had a foreign, USD
7,500 check payable to her. As an employee of RCBC, Gonzales obtained the special
accommodation of being able to receive checks value without waiting for clearing period.
Alviar thus indorsed the check and Gonzales presented the check to RCBC to have its
proceeds.
RCBCs head of Retail Banking, Gomez, endorsed the check and allowed the early
encashment. Her endorsement, though, was up to 17,500 only. The check passed through
Ramos, an employee, who also signed with an ok annotation. The check then passed
through Zamosa, Supervisor of Remittance section of RCBCs Head Offices Foreign
Department, also authorized the encashment.
Upon presentment, the check was dishonored for bearing an End. irregular or irregular
indorsement. RCBC faulted Gonzales and subsequently made several deductions on her
monthly salary, totaling only P 12,822.20, until she quit years later. No longer having her
salary to enforce payment against, RCBC sued Gonzales for the remaining balance. RTC
ruled in RCBCs favor. CA affirmed RTC.
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ISSUE: Whether or not RCBC has recourse against Gonzales as general indorsers for the value
of the dishonored check
HELD: NO. A subsequent party which caused the defect cannot have any recourse against any of
the prior endorsers in good faith. The warranties of Alviar and Gonzales as general
indorsers under Section 66 of the Negotiable Instruments Law, should be read with the
equity rule that those who come to court should come with clean hands.
In this case, RCBC, which introduced the defect of only indorsing up to a certain amount.
Ruling in favor of RCBC would result in an absurd situation whereby a subsequent party
may render the instrument useless to have the prior innocent parties bear the loss.
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ADDITIONAL CASES - NEGOTIATION
CALTEX (PHILS.) V COURT OF APPEALS

G.R. No. 97753 | August 10, 1992 | REGALADO, J.
FACTS: Security Bank and Trust Company issued 280 certificates of time deposit (CTD) to
Angel dela Cruz who deposited P1,120,000.00 with the former. Angel dela Cruz delivered
the CTDs to Caltex for the purchase of fuel products, however the former informed the
latters Sucat branch manager that he lost the CTDs. Angel dela Cruz executed and
delivered an affidavit of loss to Security Bank which replaced the lost CTDs with another
280 CTDs. Angel dela Cruz obtained a loan from Security Bank amounting to
P875,000.00 and he used his time deposits as collateral. Caltex sent a letter to Security
Bank formally informing it of its possession of the CTDs and of its decision to pre-terminate
it. Caltex went to Security Bank presenting the CTDs delivered by Angel dela Cruz
for verification, however the latter refused to accept the same and required Caltex to
present documents proving its agreement with Angel dela Cruz. Caltex failed to provide
such documents. Security Bank rejected Caltexs demand and claim for payment for the
value of the CTDs. The loan of Angel dela Cruzs loan with Security Bank matured
and no payment was made. Eventually, Security Bank set-off the time deposit to pay
off the loan. Caltex sue Security Bank to compel the latter to pay off the CTDs.
Security Bank argued that the CTDs are non-negotiable instruments as the word
bearer contained therein referred to the depositor and only the depositor can encash
the CTDs. The trial court dismissed the complaint. The CA affirmed the dismissal of the
complaint.
ISSUE: Whether or not the certificates of time deposits are negotiable instruments
HELD: Yes. The CTDs are payable to the bearer; there is an implication that it is payable
to the depositor, however the depositor is not known. It does not say on its face
that Angel dela Cruz is the depositor. Security Bank should have made the CTDs
payable to Angel dela Cruz instead, not to bearer. On the wordings of the CTDs, the
amounts are repayable to whoever may be the bearer. Angel dela Cruz is the depositor
insofar as Security Bank is concerned, but other parties not privy to the transaction would
not know that the depositor is not the bearer stated in the CTDs.
PEOPLE OF THE PHILIPPINES v. GILBERT REYES WAGAS

G.R. No. 157943 | September 4, 2013 | Bersamin, J.
FACTS: Gilbert Wagas was charged with the crime of estafa. After he entered a plea of not guilty,
the pre-trial was held and Alberto Ligaray was presented as a witness. Ligaray claimed
that Wagas placed an order of 200 sacks of rice over the phone. Wagas issued a postdated
check as payment. Thereafter, he assured Ligaray that the postdated check has funds
because he has a money lending business. When Ligaray deposited the check, it was
dishonored for insufficiency of funds. He talked to Wagas over the phone and the latter
said that he will pay Ligaray after his trip to Cebu. However, despite repeated demands,
Wagas failed to comply with his obligation. Ligaray admitted that he did not meet Wagas
personally and it was Robert Caada, the brother-in-law of Wagas, who received the sacks
of rice.
In Wagas defense, he admitted that the check belonged to him. However, he issued it to
Caada, and it was payable to cash. He explained that the check was intended as payment
for a portion of Caada's property that he wanted to buy, but when the sale did not push
through, he did not fund the check anymore. During the cross-examination, the prosecution
showed Wagas a letter dated July 3, 1997 apparently signed by him and addressed to
Ligaray's counsel, wherein he admitted owing Ligaray P200,000.00 for goods received.
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ATTY. CENIZA
Wagas admitted the letter, but insisted that it was Caada who had transacted with Ligaray,
and that he had signed the letter only because his sister and her husband (Caada) had
begged him to assume the responsibility. RTC convicted Wagas for estafa. After his motion
for reconsideration was denied, he appealed directly with the Supreme Court.
ISSUE: Whether or not Wagas has issued the check to Ligaray
HELD: NO. The check delivered to Ligaray was made payable to cash. Under the Negotiable
Instruments Law, this type of check was payable to the bearer and could be negotiated by
mere delivery without the need of an indorsement. This rendered it highly probable that
Wagas had issued the check not to Ligaray, but to somebody else like Caada, his brother-
in-law, who then negotiated it to Ligaray. Relevantly, Ligaray confirmed that he did not
himself see or meet Wagas at the time of the transaction and thereafter, and expressly
stated that the person who signed for and received the stocks of rice was Caada.
Ligaray admitted that it was Caada who received the rice from him and who delivered the
check to him. Considering that the records are bereft of any showing that Caada was then
acting on behalf of Wagas, the RTC had no factual and legal bases to conclude and find
that Caada had been acting for Wagas. This lack of factual and legal bases for the RTC
to infer so obtained despite Wagas being Caada's brother-in-law.
BANK OF THE PHILIPPINE ISLANDS v. COURT OF APPEALS, SALAZAR and TEMPLONUEVO

GR. No. 136202 | 25 January 2007 | J. Azcuna
FACTS: A.A. Salazar Construction and Engineering Services has an account with Bank of the
Philippine Islands (BPI). Three checks amounting to Php267,692.50 were deposited in
another account, that of Anabelle A. Salazar with BPI. These checks were allegedly
payable to Julio R. Templonuevo and he demanded their proceeds from BPI because it
was deposited in Anabelles account without his consent and indorsement. BPI accepted
and found Templonuevos claim as a valid one and froze Salazar Constructions account,
where they debited Php267,707.70 (check value and bank charges) since Anabelles
account (where the checks were deposited) was already closed due to insufficient funds.
Anabelle substituted Salazar Construction as the real party-in-interest in their action for a
sum of money and damages against BPI at the RTC of Pasig City. Templonuevo, as third-
party defendant admitted the payment of the said amount to him and that the debiting of
BPI from Salazar Constructions account was a matter of exclusivity that did not affect him.
The RTC and CA ruled in favor of Salazar. The CA also held that Salazar was entitled to
the proceeds of the three checks despite the lack of indorsement from Templonuevo.
ISSUE: Whether or not BPI had the authority to debit the value of the unendorsed and order checks
it had already paid, without Anabelles consent, from Salazar Constructions account even
if the checks were deposited in Anabelles account?
HELD: The petition is partly meritorious. BPI is not liable to reimburse Anabelle of the value of the
checks.
Section 49 of the Negotiable Instruments Law contemplates a situation whereby the payee
or indorsee delivers a negotiable instrument for value without indorsing it, thus: Where the
holder of an instrument payable to his order transfers it for value without indorsing it, the
transfer vests in the transferee such title as the transferor had therein, and the transferee
acquires in addition, the right to have the indorsement of the transferor. But for the purpose
of determining whether the transferee is a holder in due course, the negotiation takes effect
as of the time when the indorsement is actually made.
The present case involves delivered checks payable to order but were not indorsed.
Anabelle could not be a considered a holder because she was neither a payee or indorsee.
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Transferees in this situation do not enjoy the presumption of ownership in favor of holders
since they are neither payees nor indorsees of such instruments.
Hence, BPI, as the collecting bank, had the right to debit Anabelles account for the value
of the checks it previously credited in her favor. It is of no moment that the account debited
by petitioner was different from the original account to which the proceeds of the check
were credited because both admittedly belonged to her, the former being the account of
the sole proprietorship which had no separate and distinct personality from her, and the
latter being her personal account.
However, BPI debited the account held in the name of the sole proprietorship of Anabelle
without due notice upon her. This ran contrary to BPIs assurances Anabelle that the
account would remain untouched, pending the resolution of the controversy between her
and Templonuevo.
RAUL SESBREO V. CA, DELTA MOTORS CORPORATION AND PILIPINAS BANK

GR NO. 89252 | May 24, 1993 | Feliciano, J.
FACTS: Raul Sesbreo made a money market placement in the amount of P300,000 with
Philfinance that would mature with a term of 32 days. Philfinance issued a certificate of
confirmation of sale, a certificate of securities delivery receipt indicating the sale of DMC
PN No. 2371 to petitioner, with the notation that the said security was in custodianship of
Philipinas Bank and post-dated checks with petitioner as payee, Philfinance as drawer and
Insular Bank of Asia and America as drawee.
He presented a demand letter informing the bank that his placement with Philfinance in the
amount reflected in the DCR had remained unpaid and outstanding and that in effect, he
was asking for physical delivery of the underlying promissory note. He issued subsequent
demand letters but all remained Philfinance never performed its obligation. As petitioner
had failed to collect his investment and interest, he filed an action for damages with the
RTC of Cebu. The RTC dismissed the complaint for lack of merit and for lack of cause of
action with costs against petitioner. The Court of Appeals upheld the ruling of the RTC.
ISSUE: Whether or not the DMC promissory note contained in the DCR was negotiated to
Petitioner.
HELD: No, it was merely assigned to Petitioner and not duly negotiated. Only an instrument under
the relevant statute may be negotiated either by indorsement thereof coupled with delivery,
or by delivery alone where the negotiable instrument is in bearer form. A negotiable
instrument may, however, instead of being negotiated, also be assigned or transferred.
GEMPESAW V COURT OF APPEALS

G.R. No. 92244 | February 9, 1993 | Campos, Jr., J.
FACTS: Natividad Gempesaw was the owner of 4 grocery stores. He maintains a checking account
with Philippine Bank of Communications (PBCom). Gempesaw draws checks against her
checking account to facilitate payment of her debts to her suppliers. She has a customary
practice that the material particulars of the said checks will be filled up by her trusted
bookkeeper, Galang. After preparing the checks, it will be submitted to Gempesaw for her
signature together with the corresponding invoice which indicate the correct obligations
due. Gempesaw signed each checks without verifying the accuracy of the checks. She was
notified by the bank of all checks presented and paid by the bank but she did not check the
accuracy of the amounts. After two years, she was able to issue 82 crossed checks in favor
of her suppliers however, the aggregate amount of the checks she issued was more than
her actual obligation.
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ATTY. CENIZA
It was subsequently discovered that the 82 checks bore forged signatures of the payees.
The checks were presented to Boon, the chief accountant of PBCom, and without authority
accepted the checks. The payees testified that they did not receive nor see the checks.
Gempesaw then filed a case against PBCom for recovery of the money value of the 82
checks. The RTC dismissed the case and this was affirmed by the CA.
ISSUE: 1. Whether or not the bank should be liable for paying an instrument with a forged
indorsement
2. Whether or not the bank should not have honored the checks because they are crossed
checks
3. Whether or not the bank should be held liable for damages
HELD: 1. No. As a rule, the drawee bank cannot charge to the drawers account the amount it paid
on a check with forged indorsement. However, there is an exception to this rule and that is
when the drawer is guilty of negligence which causes the bank to honor the checks. In the
case, Gempesaw was negligent and failed to act as a prudent businessman. She relied on
the honesty and loyalty of her employee Galang. She did not even verify the correctness
of the amounts indicated in the checks. Although she regularly received her bank
statements, she did not examine it. The SC also said that it is highly improbable that in a
period of two years, she will not find out about it and not one of her suppliers even
complained about the non-payment of her debt. It is highly impossible that in a span of 2
years she will not notice that she is paying more than the supplies she was getting. The
court held that Gempesaws negligence is the proximate cause of her loss. It was her
negligence that caused the bank to honor the forged checks.
2. No. Issuing a crossed-check imposes no legal obligation on the drawee bank to dishonor
a check. It is a warning to the holder that the check cannot be presented for payment and
can only be deposited. The banking rule banning the acceptance of checks for deposit or
cash payments with more than 1 indorsement unless cleared y some bank officials des not
invalidate the instrument, neither does it invalidate the negotiation or transfer of the said
check.
In the NIL the only kind of indorsement which stops further negotiation is a restrictive
indorsement. Under sec. 36 of NIL, the restrictive indorsement prohibits further negotiation
of the instrument. The prohibition must be written in express words at the back of the
instrument in order to forewarn the subsequent parties.
3. Yes. The bank is held liable for damages under Art. 1170 of the Civil Code. It provides
that who in the performance of their obligations are guilty of fraud, negligence or delay, and
those who in any manner contravene the tenor thereof, are liable for damages. Second
indorsements are not to be accepted without the approval of its branch managers and it
did accept the same upon the mere approval of Boon who was just a chief accountant.
WHEREFORE, case REMANDED to the trial court for reception of evidence to determine
the exact amount of loss suffered by petitioner.
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HOLDER IN DUE COURSE
BPI V. ROXAS
GR NO. 157833 | OCTOBER 15, 2007 | Sandoval-Gutierrez, J.
FACTS: Roxas, a trader, delivered stocks of vegetable oil to Spouses Cawili. As payment, Spouses
Cawili issued a personal check. However, when Roxas tried to encash it, the check was
dishonored. Roxas and Cawili went to BPI and BPI issued a cashiers check drawn against
Cawilis account. The following day, Roxas returned to BPI to encash the check but the
officers of the bank redused to encash it. The officers tried to retrieve the cashiers check
from Roxas. Subsequently, the check was dishonored due to closed account. Roxas filed
a petition to collect the sum of money in the check in the RTC. BPI opposed and says the
issuance of a check is a mistake and there is no consideration. RTC ruled in favor of Roxas.
CA affirmed
ISSUE: Whether or not Roxas is a holder in due course, which entitles him to receive the amount
of the check
HELD: Yes. Sec. 52 of the NIL presumes prima facie that every holder is a holder in due course.
The one who alleges that holder is not a holder in due course has the onus probandi
(burden of proof) of establishing that one of the conditions required to constitute a holder
in due course is lacking
In the present case, BPI did not present any proof to the contrary that Roxas is not a holder
in due course.
DINO V JUDAL-LOOT
G.R. No. 170912 | J. Carpio | April 19, 2010
FACTS: A Syndicate, posing as owner of several parcels of land induced Dino (Petitioner) to loan
them a sum of money amounting to 3 million pesos, using the parcel of lands as collateral.
Dino agreed and issued 3 metrobank crossed-checks with the aggregate amount of 3
million pesos all payable to a member of the syndicate. Subsequently, Dino found out that
he had been deceived and hence, he ordered metro bank to stop payment. However, two
of the checks had already been encashed. Meanwhile, the last check was negotiated to
Judal-Loot (respondent) by a member of the syndicate. When Judal-Loot presented the
check for payment it was dishonored prompting her to file a complaint against Dino and
the member of the syndicate who negotiated the check. Judal-Loot alleged that she is a
holder in due course since she had no prior knowledge of the transaction between Dino
and then syndicate. The RTC ruled in favor of Judal-Loot, in which ruling was affirmed by
the Court of Appeals. Hence, this petition. Dino contends that the checks issued were
crossed-checks and hence, Judal-Loot was duty bound to ascertain the title of the person
negotiating and the nature of her possession in which, the latter failed to do so. Hence, she
is not a holder in due course.
ISSUE: Whether or not Judal-Loot is a holder in due course?
HELD: No. The checks issued by petitioner Dino were crossed checks and in such cases, the
following principles must be considered: that a crossed check a.) may not be encashed but
only deposited b.) may be negotiated only once- to one who has a bank account c.) that
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the checks were issued for a definite purpose and hence, the holder must inquire if he has
received the check for that purpose; otherwise he is not a holder in due course. In this case
Judal-Loot failed to ascertain the title of the person who negotiated the check as well as
the nature of her possession. Such being the case, she is guilty of gross negligence
amounting to legal absence of good faith, which made Judal-Loot not a holder in due
course.
HI-CEMENT CORPORATION V. INSULAR BANK OF ASIA AND AMERICA

G.R. No. 132403 | September 28, 2007 | CORONA, J.
FACTS: Hi-Cement Corporation is a customer of E.T. Henry & Co., Inc. a company engaged in the
business of processing and distributing bunker fuel. For its purchases Hi-Cement issued
crossed postdated checks to E.T. Henry. E.T. Henry then discounted the crossed
postdated checks with Insular Bank of Asia and America through a credit facility known as
Purchase of Short Term Receivables.
However, 20 checks of Hi-Cement was dishonored which prompted Insular Bank to file a
complaint for sum of money against E.T. Henery and Hi-Cement before the Court of First
Instance of Rizal.
The Court of First Instance held that E.T. Henry and Insular Bank are liable to the Insular
Bank for the amount of the checks. This was later affirmed by the CA.
ISSUES: 1. Whether or not Insular Bank of Asia and America is a Holder in Due Course?
2. Whether or not Hi-Cement could be held liable for the value of the discounted checks?
HELD: 1. NO. The Insular Bank is not a holder in due course. Insular Bank did not take the
instruments in good faith and for value and at the time it was negotiated to him he had
notice of an infirmity in the instrument.
It should be noted that the checks issued by Hi-Cement were crossed. The Supreme Court
in the case of Bataan Cigar and Cigarette Factory, Inc. v. CA ruled that the act of crossing
the checks serves as a warning to the holder that the check has been issued for a definite
purpose so that he must inquire if he has received the check pursuant to that purpose,
otherwise, he is not a holder in due course.
In this case, Insular Bank ignored the telling signs of irregularity on the checks. Therefore,
Insular Bank cannot be considered as a Holder in due course.
2. NO. Hi-Cement could not be held liable for the value of the crossed checks. In the cases
of SIHI v. IAC and in Atrium Management v. CA the court ruled that the drawer of the
postdated crossed checks was not liable to the holder who was deemed not a holder in
due course. The proper remedy of Insular Bank would be to go after the indorser, E.T.
Henry.
CELY YANG v. COURT OF APPEALS, PHILIPPINE COMMERCIAL INTERNATIONAL BANK, FAR

EAST BANK & TRUST CO., EQUITABLE BANKING CORPORATION, PREM CHANDIRAMANI and
FERNANDO DAVID
G.R. No. 138074 | August 15, 2003| Quisumbing, J.
FACTS: Yang and Prem Chandiramani agreed to exchange the latter's manager's check for two of
Yang's managers checks, both payable to the order of David. They further agreed that
Yang would secure a dollar draft in exchange for Chandiramani's dollar draft. Yang gave
the cashiers checks and dollar drafts to her business associate, Albert Liong, to be
delivered to Chandiramani by Liongs messenger, Danilo Ranigo. Chandiramani allegedly
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did not appear at the rendezvous and Ranigo lost the two cashiers checks and the dollar
draft bought by petitioner. However, the checks and the dollar draft were in reality not lost,
for Chandiramani was able to get hold of said instruments, without delivering the exchange
consideration consisting of the managers check and the dollar draft.
Yang requested FEBTC and Equitable to stop payment on the instruments believed to be
lost. Both banks complied, but FEBTC subsequently lifted the stop payment order on the
dollar draft, thus enabling the holder to receive the amount of US$200,000.00. Yang lodged
a complaint for injunction and damages against Equitable, Chandiramani, and David, with
prayer for a TRO, with the RTC. He also filed a separate case for injunction and damages,
with prayer for a writ of preliminary injunction against FEBTC, PCIB, Chandiramani and
David.
The RTC rendered judgment in favor of David, declaring him entitled to the proceeds of
the 2 cashiers checks. The trial court ratiocinated that the evidence shows that David was
a holder in due course for the reason that the cashiers checks were complete on their face
when they were negotiated to him. They were not yet overdue when he became the holder
thereof and he had no notice that said checks were previously dishonored; he took the
cashiers checks in good faith and for value. He parted some $200,000.00 for the 2
cashiers checks which were given to Chandiramani; he had also no notice of any infirmity
in the cashiers checks or defect in the title of the drawer. The CA affirmed.
ISSUE: Whether or not David is a holder in due course
HELD: Yes. Every holder of a negotiable instrument is deemed prima facie a holder in due course.
However, this presumption arises only in favor of a person who is a holder as defined in
Section 191 of the NIL, meaning a "payee or indorsee of a bill or note, who is in possession
of it, or the bearer thereof." David was the payee of the checks in question. Hence, the
presumption that he is a prima facie holder in due course applies in his favor. However,
said presumption may be rebutted.
What is vital to the resolution is whether David took possession of the checks under the
conditions provided for in Section 52 of the NIL. Yangs challenge to Davids status as a
holder in due course hinges on two arguments: (1) lack of proof to show that David
tendered any valuable consideration for the checks; and (2) Davids failure to inquire from
Chandiramani as to how the latter acquired possession of the checks.
First, Section 24 of the NIL creates a presumption that every party to an instrument
acquired the same for a consideration or for value. Thus, the law itself creates a
presumption in Davids favor that he gave valuable consideration for the checks in
question. Yang must present convincing evidence to overthrow the presumption, which she
failed to do so. The lower courts found that David gave Chandiramani US$360,000.00 as
consideration for the said instruments.
Second, Yang fails to point any circumstance which should have put David on inquiry as
to the why and wherefore of the possession of the checks by Chandiramani. David was not
privy to the transaction between Yang and Chandiramani. David took the step of asking
the manager of his bank to verify from FEBTC and Equitable as to the genuineness of the
checks and only accepted the same after being assured that there was nothing wrong with
said checks. At that time, David was not aware of any "stop payment" order. Under these
circumstances, David thus had no obligation to ascertain from Chandiramani what the
nature of the latters title to the checks was, if any, or the nature of his possession.
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ATRIUM MGMT CORP. VS. CA

G.R. Nos. 109491 and 121794 | February 28, 2001 | J. Pardo
FACTS: Hi-Cement, through its Chairman De Las Alas and its treasurer De Leon, issued crossed
checks in favor of E.T. Henry. The latter then indorsed 4 of these checks to Atrium. Upon
presentment, however, these checks were dishonored for the common reason payment
stopped. Atrium filed an action for the collection of the proceeds of the 4 checks before
the Regional Trial Court (RTC). Said court ruled in favor of Atrium and held De Leon, her
husband, E.T. Henry, and Hi-Cement solidarily liable. Upon appeal, the Court of Appeals
(CA), although still ruling in favor of Atrium, absolved Hi-Cement from liability on the
grounds that De Leon was not authorized to issue the checks and that the said checks
were not issued for valuable consideration.
Atrium questioned the finding of the CA as to the liability of Hi-Cement. It cited that Hi-
Cement cannot be absolved from liability because want of consideration is only a personal
defense and thus may not be invoked against a holder in due course such as itself.
ISSUE: Whether or not Atrium is a holder in due course?
HELD: No. Under Section 52, a holder in due course is a holder who has taken the instrument: (a)
that it is complete and regular upon its face; (b) before it was overdue and without notice
that it had been previously dishonored; (c) in good faith and for value; and (d) without notice
of any infirmity in the instrument or defect in the title of the person negotiating it. In this
case, Atrium was aware that the 4 checks were crossed. A crossed check being negotiable
only for deposit to the account of the payee, there was a defect in the negotiation of E.T.
Henry of the 4 checks. Atrium therefore cannot be considered a holder in due course.
Atrium, however, is not precluded from recovering on the instrument. It can still recover
payment, but only subject to defenses available as if it were non-negotiable, such as want
of consideration. Hi-Cement, being able to invoke the defense of want of consideration
against Atrium, cannot be held liable for the 4 checks.
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ADDITIONAL CASES HOLDER IN DUE COURSE
CESAR AREZA & LOLITA AREZA V. EXPRESS SAVINGS BANK

G.R. No. 176697 | September 10, 2014 | Perez, J.
FACTS: Petitioners maintained two bank deposits with Express Savings. They were engaged in the
business of buy and sell of motor vehicles. On 2 May 2000, they received an order from
a certain Gerry Mambuay for the purchase of a second-hand Mitsubishi Pajero and a
brand-new Honda CRV. Mambuay paid petitioners with 9 Philippine Veterans Affairs Office
checks payable to different payees, and drawn against Philippine Veterans Bank, each
valued at P200,000.00. The spouses deposited the checks in their saving account with the
bank, who in turn deposited it with their depositary bank, the Equitable-PCI Bank. The latter
then presented the checks to the drawee bank, which honored the checks. Upon being
informed that the checks were honored, the spouses released the two cars to the buyer.
In July, 2000, two months after the checks were honored, the drawee bank, Philippine
Veterans Bank, informed Equitable-PCI that the checks the spouses presented for
payment were materially altered, the amount for each check being only P4,000.00 instead
of P200,000.00. This set off a series of events which lead to the case. When Equitable-
PCIs protest with the Philippine Clearing House Inc. was denied, it proceeded to debit
Express Savings account the amount of P1,800,000, the amount of the check. On the
other hand, when the spouses issued a check for P500,000.00 Express Saving Bank
dishonored the check, with notation Deposit Under Hold. Upon demand by the spouses
to honor the check, the bank closed the special saving account, transferred the balance to
the savings account of the spouses, then debited the amount of P1,800,000.00
representing the amount of the nine dishonored checks, from the spouses savings
account.
The petitioners filed a Complaint for Sum of Money with Damages against Express Savings
and Potenciano. The RTC initially ruled in favor of the petitioners but eventually granted
the MR. CA affirmed.
ISSUES:
1. Is the drawee bank liable for the altered tenor of acceptance in case the instrument is
altered before acceptance?
2. Can respondent bank debit the P1.8M from petitioners accounts?
HELD:
1. YES. The acceptor/drawee, despite the tenor of his acceptance, is liable only to the
extent of the bill prior to alteration. This view appears to be in consonance with Section
124 of the Negotiable Instruments Law which states that a material alteration avoids
an instrument except as against an assenting party and subsequent indorsers, but a
holder in due course may enforce payment per its original tenor. Thus, when the
drawee bank pays a materially altered check, it violates the terms of the check, as well
as its duty to charge its clients account only for bona fide disbursements he had made.
If the drawee did not pay according to the original tenor of the instrument, as directed
by the drawer, then it has no right to claim reimbursement from the drawer, much less,
the right to deduct the erroneous payment it made from the drawers account which it
was expected to treat with utmost fidelity. The drawee, however, still has recourse to
recover its loss. It may pass the liability back to the collecting bank which is what the
drawee bank exactly did in this case. It debited the account of Equitable-PCI Bank for
the altered amount of the checks.
2. NO. No. The Bank cannot debit the savings account of petitioners. A
depositary/collecting bank may resist or defend against a claim for breach of warranty
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ATTY. CENIZA
if the drawer, the payee, or either the drawee bank or depositary bank was negligent
and such negligence substantially contributed to the loss from alteration. In the instant
case, no negligence can be attributed to petitioners. We lend credence to their claim
that at the time of the sales transaction, the Banks branch manager was present and
even offered the Banks services for the processing and eventual crediting of the
checks. True to the branch managers words, the checks were cleared three days later
when deposited by petitioners and the entire amount of the checks was credited to
their savings account
STATE INVESTMENT HOUSE V. IAC, ANITA PENA CHUA AND HARRIS CHUA
G.R. No. 72764 | July 13, 1989 | FERNAN, C. J.
FACTS: New Sikatuna Wood Industries, Inc. received a loan from Harris Chua on the condition that
it waited till he had the money. Pursuant to this agreement, Anita Pena Chua issued three
crossed checks payable to New Sikatuna, which subsequently entered into an agreement
with State Investment House, Inc. wherein it assigned and discounted under a deed of
sale, eleven postdated checks, including the three issued by Chua.
The three checks were dishonored by reason of insufficient funds, stop payment and
account closed. State Investment House filed a collection suit against spouses Chua. Chua
impleaded New Sikatuna.
RTC ruled against spouses Chua, but ordered New Sikatuna to reimburse them. CA
reversed, and dismissed the complaint.
ISSUE: W/N State Investment House is a holder in due course (HDC) with a right to proceed
against the spouses Chua for the checks
HELD: NO. Sec 52 of NIL defines a HDC as one who takes the instrument in good faith and for
value, without any knowledge or notice of any defect in the title of the person negotiating
it. Sec 59 presumes ever holder as a prima facie HDC. But the NIL is silent when it comes
to crossed checks, which are instruments bearing two parallel lines in the upper left hand
corner signifying that it may only be deposited and not converted to cash. Such a
circumstance should put the payee on inquiry and obligate him to ascertain the holders
title to the check or the nature of his possession. He would be guilty of gross negligence if
otherwise, and the effect is that the holder is not one in good faith.
When State Investment House rediscounted the crossed check, it knowingly violated the
intention of crossing the check. Absent any inquiry from its part to New Sikatuna the
purpose of the cross on the checks, it cannot be deemed to be in good faith, and therefore
is not a HDC.
Accordingly, it is vulnerable to personal defenses set up by the spouses, such as lack of

consideration between them and New Sikatuna. There was no consideration as the
checks were issued as a loan on the condition that deposits be made to back them up.
No deposits being made, there was no loan consummated, and the checks are without
consideration. New Sikatuna also negotiated the checks in breach of faith, violating Sec.
55 of the NIL; a personal defense available to the spouses Chua as against State
Investment Houses claim.
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PRUDENCIO V. CA
G.R. No. L-34539 | July 14, 1986 | Gutierrez, J.
FACTS: The Spouses. Prudencio obtained a loan from Philippine National Bank (PNB) secured
by a mortgage over the property that they owned. Concepcion & Tamayo Construction
Co. (Company), on the other hand, had a pending contract with the Bureau of Public
Works (Bureau) for the construction of a building in Palawan. However, due to
insufficiency funds, Toribio, a relative of the Prudencios and the Companys attorney-in-
fact, approached the Prudencios asking them that their property be mortgaged to secure
for a loan that the Company was negotiating with PNB.
The spouses agreed and the following were executed: (1) an Amendment of Real Estate
Mortgage where the terms and conditions of the original mortgage were made an integral
part of the new mortgage, (2) a promissory note signed by both Toribio and the spouses in
favor of PNB, and (3) a Deed of Assignment assigning all payments to be made by the
Bureau to PNB to be applied to the loan. The assignment of credit, however, conditioned
that the three (3) payments made by the Bureau were for labor and materials only, and
PNB allowed such payments to be released to the Company. The loan fell due and the
Company abandoned the work, the Bureau also rescinding the contract and assuming the
completion of the building.
The Prudencios filed an action against PNB, the partners of the Company and Toribio
seeking for the cancellation of their mortgage contract, arguing that changes were made in
the conditions of the contract without their knowledge. The RTC denied the complaint and
the Prudencios were ordered to pay PNB the amount of the loan or else the property shall
be sold. The case was then brought before the CA which affirmed the same. Hence, this
petition.
ISSUE: Whether or not PNB is a holder for value?
HELD: NO. A holder for value must meet all the requirements of a holder in due course, except
notice of want of consideration. Section 52 sets the following conditions for a holder who
has taken an instrument to be considered a holder in due course:
(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it has
been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.
In this case, PNB acted in bad faith in altering the terms and conditions of the Deed of
Assignment without the consent of the Prudencios. The said Deed was, in fact, was what
principally moved the spouses to sign the promissory note in the first place. Furthermore,
the Bureau, upon the PNBs approval, released the payments directly to the Company
instead of the same being applied as payment for the loan which lead to the spouses being
threatened with foreclosure.
Since PNB is not a holder in due course, the Prudencios can validly set up their personal
defense of release from the real estate mortgage and they are absolved from liability on
the promissory note under the mortgage contract.
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EQUITABLE PCI BANK VS ROWENA ONG

G.R. No. 156207 | September 15, 2006 |Chico-Nazario, J.
FACTS: Warliza Sarande deposited in her account at Philippine Commercial International (PCI)
Bank a check in the amount of P225,000.00. Upon inquiry by Sarande on whether the
check has been cleared, she received an affirmative answer. She relied on the assurance
thus she issued two checks drawn against the proceeds of the check that she deposited.
One of there was a PCI Bank check for P132,000.00 which Sarandre issued to Respondent
Rowena Ong owing to a business transaction. On the same day, Ong presented it to PCI
Bank and requested bank to convert the proceeds into a managers check. The next day,
Ong deposited the managers check in her account with Equitable Banking Corporation.
She received a check return-slip informing her that PCI Bank had stopped the payment of
the said check on the ground of irregular issuance. Despite several demands made by her
to PCI Bank for the payment, the same was met with refusal. Thus, Ong was constrained
to file a complaint for sum of money, damages and attorneys against PCI Bank. RTC ruled
in favor of Ong and ordered PCI Bank to pay. PCI appealed before the CA. However the
CA denied the appeal of PCI Bank and affirmed the orders and decision of the trial court.
Hence this present petition for review.
ISSUE: Whether or not Ong is a holder in due course.
HELD: YES. Section 52 of the Negotiable Instruments Law provides that a holder in due course is
a holder who has taken the instrument under the following conditions: (a) That it is
complete and regular upon its face; (b) That he became the holder of it before it was
overdue, and without notice it had been previously dishonored, if such was the fact; (c) That
he took it in good faith and for value; (d) That at the time it was negotiated to him, he had
no notice of any infirmity in the instrument or defect in the title of the person negotiating it.
Section 24 of the same law provides further that every negotiable instrument is deemed
prima facie to have been issued for a valuable consideration; and every person whose
signature appears thereon to have become a party thereto for value. What Ong obtained
from PCI Bank was not just any ordinary check but a managers check. It is similar to a
cashiers check both as to effect and use. A cashiers check is a check of the banks cashier
on his own or another another check. In effect, it is a bill of exchange drawn by the cashier
of a bank upon the bank itself, and accepted in advance by the act of its issuance. Thus,
the check becomes the primary obligation of the bank which issues it and constitutes its
written promise to pay upon demand. The mere issuance of it is considered an acceptance
thereof. Moreover, by accepting PCI Bank check issued by Sarade to Ong and issuing in
turn a managers check in exchange thereof, PCI Bank assumed the liabilities of an
acceptor and Section 62 provides that the acceptor by accepting the instrument engages
that he will pay it according to the tenor of his acceptance, and admits the existence of the
drawer, the genuineness of his signature and his capacity and authority to draw the
instrument and the existence of the payee and his then capacity to indorse. In conclusion,
the issues on Ong being not a holder in due course and failure or want of consideration for
PCI Banks issuance of the managers check is our of sync.
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ATTY. CENIZA
DE OCAMPO V GATCHALIAN
No. L-15126 l November 30, 1961 l J. Labrador
FACTS: Anita Gatchalian is interested in purchasing a car. Manuel Gonzales represented himself
as an agent of the Ocampo clinic, of which he claimed that he was duly authorized to look
for a buyer a car owned by the clinic. Gonzales advised that the owners would only comply
upon a showing of interest on the part of the buyer. Gonzales recommended issuing a
check (P600 / payable-to-bearer /cross-checked) as evidence of the buyers good faith.
Gonzales added that it will only be for safekeeping and will be returned to her the following
day. The next day, Gonzales never appeared. The failure of Gonzales to appeal resulted
in Gatchalian to issue a STOP PAYMENT ORDER on the check. It was later found out that
Gonzales used the check as payment to the Vicente de Ocampo (Ocampo Clinic) for the
hospitalization fees of his wife (the fees were only P441.75, so he got a refund of P158.25).
De Ocampo now demands payment for the check, which Gatchalian refused, arguing that
de Ocampo is not a holder in due course and that there is no negotiation of the check. The
CFI ruled in favor of De Ocampo.
ISSUE: Whether or not petitioner is a holder in due course
HELD: De Ocampo is not a holder in due course. As per Section 52(d) of the NIL, a holder in due
course must also be aware that at the time the instrument was negotiated to him, he had
no notice of any infirmity in the instrument or defect in the title of the person negotiating it.
Several circumstances in this case were present which shows that petitioner was negligent
in his acquisition of the check. First, the drawer in the check has no liability with de Ocampo.
Second, it was cross-checked but was used a payment by Gonzales. Lastly, it was not the
exact amount of the medical fees availed of by Gonzales wife. The circumstances should
have led him to inquire on the validity of the check. However, he failed to exercise
reasonable prudence and caution.
In showing a person had knowledge of facts that his action in taking the instrument
amounted to bad faith need not prove that he knows the exact fraud. It is sufficient to show
that the person had NOTICE that there was something wrong. The bad faith here means
bad faith in the commercial sense obtaining an instrument with no questions asked or no
further inquiry upon suspicion.
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LIABILITIES OF PARTIES - ACCEPTOR
FAR EAST BANK & TRUST CO VS GOLD PALACE JEWELLERY

G.R. No. 168274 | August 20, 2008 | Nachura, J.
FACTS: A foreigner, Samuel Tagoe, purchased from Gold Palace Jewellery Co. (Gold Palace)
Store pieces of jewelry amounting to P258,000.00. In payment, he offered Foreign Draft
issued by the United Overseas Bank (Malaysia), addressed to the Land Bank of the Phil
(LBP) and payable to Gold Palace. Judy Yang, assistant general manager of Gold Palace
inquired from petitioner Far East Bank the nature of the draft and teller said that it was
similar to a managers check, but advised her not to release the jewelry until the draft has
been cleared. Julie yang-Go, manager of Gold Palace, deposited the foreign draft in the
companys account with the Far East Bank. When Far East Bank (collecting bank),
presented the draft for clearing to LBP (drawee bank), the LBP cleared the same. So the
foreigner went back to the store and claimed the purchased jewelry. Because the amount
of the draft was more than the value of the goods purchased, she issued a Far East Check
amounting to P122,000.00 as change and was later encashed. 3 weeks after, the LBP
informed Far East that the amount in Foreign Draft had been materially altered from
P300,000 to P380,000 and that it was returning the same. Far East subsequently refunded
the P380,000 earlier paid by LBP. Gold Palace had already used a portion of the amount
so Far East Bank was only able to debit P168,053.00, and this was done without prior
notice to the account holder. (Far East only notified by the phone.) Far East demanded that
Gold Palace to pay 211,946.64 (amount materially altered amount debited from the
account of Gold Palace). Gold Palace did not listen to the demand. Hence Far East filed a
cased for collection of sum of money and damages before the RTC. RTC ruled in favor of
Far East Bank. On bases of its warranties as a general endorser, Gold Palace is liable to
Far East. Gold Palace appealed before the CA and reversed the ruling of RTC. Drawee
bank had already cleared the check so its remedy should be against the party responsible
for the alteration. Motion for Reconsideration was denied, hence this petition.
ISSUE: Whether or not Gold Palace should be held liable for the altered Foreign Draft
HELD: NO. The Negotiable Instruments Law explicitly provides that the acceptor, by accepting the
instrument, engages that he will pay according to the tenor of his acceptance. Following
the plain language of the law, the drawee, by said payment, recognized and complied with
its obligations to pay in accordance with the tenor of his acceptance. The tenor of the
acceptance is determined by the terms of the bill, as it is when the drawee accepts. LBP
was not liable on its payment of the check according to the tenor of the check at the time
of payment, which was the raised amount. Gold Palace was not a participant in the
alteration of the draft, was not negligent, and was a holder in due course. It relied on the
drawee banks clearance and payment of the draft and not being neglect is protected by
the provision provided in Sec. 62 that the acceptor, by accepting the instrument, engages
that he will pay it according to the tenor of his acceptance and admits the existence of the
drawer, the genuineness of his signature, and his capacity and authority to draw the
instrument; and the existence of the payee and his then capacity to indorse. Gold Palace
had no facility to ascertain with the drawer, UOB, the true amount in the draft. It was left
with no option but to rely on the representations of the LBP that the draft was good. The
principle that the drawee bank, having paid to an innocent holder the amount of an
uncertified, altered check in good faith and without negligence which contributed to the
loss, could recover from the person to whom payment was made as for money paid by
mistake, is not applicable.
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LIABILITES OF PARTIES INDORSER
SALAZAR v. J.Y. BROTHERS MARKETING CORPORATION

G.R. No. 171998 | 20 October 2010 | J. Peralta
FACTS: J.Y. Brothers Marketing Corporation (J.Y. Brothers) is engaged in the business of selling
sugar, rice and other commodities. Anamer Salazar, along with Isagani Calleja and Jess
Kallos procured 300 cavans of rice worth Php214,000 from J.Y. Brothers. As payment,
Salazar negotiated and indrorsed a Prudential Bank Check issued by Nena Tumario to J.Y.
Brothers. Salazar assured J.Y. Brothers that the check was as good as cash. Upon the
presentment of payment by J.Y. Brothers, the check was dishonored due to closed
account. When J.Y. Brothers informed Salazar, Calleja, and Kallos, the latter three
delivered a crossed Solid Bank Check again issued by Tamario in the same amount.
However, this check bounced due to insufficient funds. Despite demands, Salazar failed to
settle the amount that is due J.Y. Brothers, prompting the latter to charge estafa against
Salazar and Tumario at the RTC of Legaspi City.
The RTC acquitted Salazar of the crime of estafa but still held her liable to pay for the 300
cavans of rice. Salazars motion for reconsideration was denied, so she went up to the
Supreme Court on a petition for review on certiorari under Rule 45. The Court granted the
petition and directed the RTC Branch 5 of Legaspi City to continue trial on the civil aspect
of the case. The RTC Branch 5 of Legaspi City found that the extent of Salazars liability
should be limited to the allegation stating she indorsed and negotiated the check. Since
Salazar was never a holder, her action of signing the dorsal side of the check did not qualify
as an indorsement. The RTC Branch 5 also ruled that the replacement of the Prudential
Bank Check by the Solid Bank Check was effectively a novation. J.Y. Brothers appealed
to the CA who relied on Section 63, 66, and 29 of the Negotiable Instruments Law and
considered Salazar as an indorser of the checks paid to J.Y. Brothers and also an
accommodation indorser, who was liable on the instrument to a holder for value even if
such holder knew Salazar to be only an accommodation indorser at the time of taking the
instrument.
ISSUE: Whether or not the replacement of the Prudential Bank check with the crossed Solid Bank
check amounted to novation?
HELD: The petition is denied.
In this case, J.Y. Brothers acceptance of the Solid Bank check, which replaced the
dishonored Prudential Bank check, did not result to novation as there was no express
agreement to establish that Salazar was already discharged from her liability to pay
respondent the amount of Php.214,000.00 as payment for the 300 bags of rice. Novation
is never presumed, there must be an express intention. When the Solid Bank check was
delivered to J.Y. Brothers, the same was also indorsed by Salazar which show her
recognition of the existing obligation to respondent to pay P214,000.00 subject of the
replaced Prudential Bank check.
Salazar also contends that the acceptance of the Solid Bank check, a non-negotiable check
being a crossed check, which replaced the dishonored Prudential Bank check, a negotiable
check, is a new obligation in lieu of the old obligation arising from the issuance of the
Prudential Bank check, since there was an essential change in the circumstance of each
check. This argument bears no weight. One type of checks issued by a drawer is a crossed
check. The Negotiable Instruments Law does not mention crossed checks, but it can be
found within the Code of Commerce. It is of judicial cognizance that a check with two
parallel lines in the upper left hand corner means that it could only be deposited and cannot
be converted into cash. The effect of crossing a check relates to the mode of payment,
meaning that the drawer had intended the check for deposit only by the payee named
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therein. The change in the mode of paying the obligation was not a change in any of the
objects or principal condition of the contract for novation to take place.
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO and

MARY T. BUENAVENTURA vs. HEIRS OF BARTOLOME RAMOS
G.R. No. 156262 | July 14, 2005
FACTS: Spouse Tuazon (Leonilo and Maria) purchased several cavans of rice from Bartolome
Ramos, who is now deceased and being represented by his heirs. Of this cavans of rice,
a portion of the total they acquired was left unpaid amounting to 1,211,919.00 PhP. In
payment for the remaining balance, the spouses issued several checks (Traders Royal
Bank checks) to fulfill their obligation. Upon encashment of such checks, it bounced due to
insufficiency of funds.
Respondents heirs argued that the spouses already knew the fact that they had no
available funds to support such checks thereby would not allow them to fulfill their
obligation. The heirs further alleged that because the spouses knew that they would not be
able to fulfill their obligation and thus be sued, they sold their properties fictitiously to
defraud their creditors thereby defrauding them as well.
Spouses denied ever having purchased cavans of rice from Ramos. They allege that Maria
Tuazon was merely an agent of Magdalena Ramos, wife of the deceased. They argue that
it was Evangeline Santos who actually bought the cavans of rice and the one who issued
the checks to Maria Tuazon as payment therefor. They allege that in good faith, these
checks were indorsed and delivered to Ramos without even knowing whether or not they
were funded. They also refuted any allegations contending about the sale of their
properties to different persons as fictitious and done for fraudulent reasons.
The trial court dismissed the criminal complaints against the spouses but upheld their civil
liability to the respondents. This appeal to the Court of Appeals which sustained the ruling
of the trial court holding that the spouses failed to prove the existence of agency between
Ramos and Maria Tuazon, Spouses Tuazon.
ISSUE: 1. Whether or not Maria Tuazon is an agent of the deceased and;

2. Whether or not the judgment is valid despite the respondents failed to include Evangeline
Santos as an indispensable party to the case
HELD: The Court held that the courts a quo were not errant with their decision in holding that the
spouses failed to establish the agency between them and the deceased party. It was found
that the spouses were rice buyers themselves and were not mere agents of respondents
in their rice dealership. The declarations of agents alone are generally insufficient to
establish the fact of agency. The law makes no presumptions on agency; it is thus
incumbent upon the person alleging such fact.
As for the issue of being an indispensable party, the Court held that the respondents cause
of action is founded on petitioners failure to pay the purchase price of the rice. It was held
in the trial court that Maria Tuazon indorsed the checks in favor of respondents, in
accordance with Sec. 31 and 63 of NIL; that Santos was the drawer of the checks is
immaterial to the case.
The Court held that Maria Tuazon as the indorser of the check warranted, upon due
presentment, the checks were to be paid or accepted according to its tenor, and in the case
they were dishonored, she would pay the corresponding amount. When an instrument is
dishonored, the indorsers cease to be merely secondarily liable to it but instead they
become principal debtors whose liability is the same with the original obligor. The holder
need not to proceed against the maker before suing the indorser of such instrument. As
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such, in this case, Evangeline Santos, as the drawer of the checks, need not to be
impleaded in the case being that she is not an indispensable party in the action against
Maria Tuazon, the indorser of the check. It is clear that there is no privity of contracts
between Evangeline Santos and the respondents predecessor. Hence, no need to implead
her in the case.
BANK OF THE PHILIPPINE ISLANDS v. COURT OF APPEALS & BENJAMIN NAPIZA

G.R. No. 112392 | February 29, 2000 | Ynares-Santiago, J.
FACTS: Benjamin Napiza deposited in his foreign current deposit with BPI a dollar check owned by
Henry Chan in which he affixed his signature at the dorsal side thereof. For this purpose,
Napiza gave Chan a signed blank withdrawal slip. Napiza acceded, and agreed to deliver
to Chan a signed blank withdrawal slip, with the understanding that as soon as the check
is cleared, both of them would go to the bank to withdraw the amount of the check upon
Napizas presentation to the bank of his passbook. However, Gayon Jr. got hold of the
withdrawal slip and used it to withdraw the proceeds of the dollar check, even before the
check was cleared and without the presentation of the bank passbook. In reply, private
respondent wrote petitioners counsel on April 20, 1985 stating that he deposited the check
"for clearing purposes" only to accommodate Chan. Petitioner filed a complaint against
private respondent, praying for the return of the amount of $2,500.00 or the prevailing peso
equivalent plus legal interest from date of demand to date of full payment, a sum equivalent
to 20% of the total amount due as attorney's fees, and litigation and/or costs of suit. Private
respondent filed his answer, admitting that he indeed signed a "blank" withdrawal slip with
the understanding that the amount deposited would be withdrawn only after the check in
question has been cleared. He likewise alleged that he instructed the party to whom he
issued the signed blank withdrawal slip to return it to him after the bank drafts clearance
so that he could lend that party his passbook for the purpose of withdrawing the amount of
$2,500.00. However, without his knowledge, said party was able to withdraw the amount
of $2,541.67 from his dollar savings account through collusion with one of petitioners
employees. Private respondent added that he had "given the Plaintiff fifty one (51) days
with which to clear the bank draft in question." Petitioner should have disallowed the
withdrawal because his passbook was not presented. He claimed that petitioner had no
one to blame except itself "for being grossly negligent;" in fact, it had allegedly admitted
having paid the amount in the check "by mistake" x x x "if not altogether due to collusion
and/or bad faith on the part of (its) employees." RTC dismissed the complaint. On appeal,
the Court of Appeals affirmed RTC.
ISSUE: Whether or not petitioner can hold private respondent liable for the proceeds of the check
for having affixed his signature at the dorsal side as indorser.
HELD: NO. Ordinarily private respondent may be held liable as an indorser of the check or even
as an accommodation party. However, petitioner BPI, in allowing the withdrawal of private
respondents deposit, failed to exercise the diligence of a good father of a family. BPI
violated its own rules by allowing the withdrawal of an amount that is definitely over and
above the aggregate amount of private respondents dollar deposits that had yet to be
cleared. The proximate cause of the eventual loss of the amount of $2,500.00 on BPI's
part was its personnels negligence in allowing such withdrawal in disregard of its own rules
and the clearing requirement in the banking system. In so doing, BPI assumed the risk of
incurring a loss on account of a forged or counterfeit foreign check and hence, it should
suffer the resulting damage.
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ADDITIONAL CASES - INDORSER
BANK OF THE PHILIPPINE ISLANDS V. COURT OF APPEALS AND CHINA BANKING

CORPORATION
GR 102383 | November 26, 1992 | GUTIERREZ, JR., J.
FACTS: BPI got a call from a woman calling herself Eligia Fernando. She sought to pre-terminate
a money market placement (placement), totaling Php 2.4 Million, the real Eligia Fernando
had made. Initially, she asked for the proceeds to be delivered to the real Fernandos office
but later said that the proceeds, in the form of cashiers checks (one for Php 1.8 Million,
the other for Php 600 thousand), would be picked up by her nice. Without calling the real
Eligia Fernando at her Philamlife office to verify, information which BPI had on their file,
BPI allowed this impersonator to receive the checks. The niece only presented a written
authorization as well as a letter requesting the pre-termination, both of which had forged
signatures of the true Eligia Fernando (bearing a close similarity). No surrender of the
promissory note evidencing the placement was required by BPI.
Then, two days later, the impostor opened a current account in China Bank under Eligia
Fernandos name. The impostor showed only her tax account number as a means of
identification. Antonio Concepcion, a person opening an account in China Bank, vouched
for her. Cash Supervisor Cuaso was not comfortable with this; she made it appear that the
Fernando impostor was introduced by a long-standing client, Valentin Co.
The processed application shows the signature of the alleged Eligia Fernando. The
impostor deposited the two checks in the China Bank account and deposited the proceeds
thereof days later. It is to be noted that the computerized teller terminal where the tellers
delivering the money did not display the accounts opening date, the amounts and dates of
deposits and withdrawals.
China Bank found that this impostors endorsement conformed with the depositors
specimen signature, the depositor being the impostor. China Bank thus stamped on the
two checks its guaranty of prior indorsements or lack thereof. Checks were sent to clearing.
BPI cleared, not seeing that the endorsement of Eligia Fernando at the back of the checks
were forged.
Around a month later, the true Eligia Fernando came to BPI and demanded the proceeds
of the placement. She showed the original promissory note evidencing the placement. BPI
issued her a new promissory note evidencing the placements roll over. BPI returned the
two checks due to Payees endorsement forged. China Bank returned the checks due to
Beyond Clearing Time.
BPI sued China Bank for the crediting of 1.2 Million, which BPI paid, to its clearing account
in the Philippine Clearing House Corporation (PCHC). PCHCs Arbitration Committee ruled
in BPIs favor but the same was overturned through a Motion for Reconsideration by the
PCHCs Board of Directors. RTC affirmed the order with the modification on attorneys fees
and interests. CA affirmed RTC.
ISSUE: Whether or not China Banks guarantee of all prior endorsements and/or lack of
endorsements relieves BPI from liability due to the forgery of the endorsement
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HELD: NO. The aforesaid guarantee mandates the collecting bank or the last endorser to suffer
the loss due to its negligence in not detecting the defect. This guarantee can only be
enforced to a certain extent (40%) as it was BPI that was more negligent (60%).
BPIs basis for arguing that it should be absolved from liability is Sec. 23 of the NIL, which
states that forged signatures are wholly inoperative. Thus, the check presented by China
Bank bearing an endorsement with a wholly inoperative signature cannot be enforced
against BPI.
The Court interpreted Sec 23 of the NIL to hold that estoppel by a partys own negligence
can bar a party from setting up forgery as a defense. BPI is either grossly negligent or
fraudulent in this case. Despite how easy it is to call the true Fernandez to verify the pre-
termination, BPI did not do so. BPI also did not even require the presentation of the
promissory note that evidenced the placement.
BPI cannot rely on the last clear chance doctrine. SC analyzed the Picart case which
explained the doctrine. According to Picart, when a party can no longer prevent an
expected harm, the duty to avoid injury passes to the person who has complete control of
the situation.
Here, China Bank had no complete control of the situation. China Bank had no prior notice
of BPIs fraud on the pre-termination of the placement. Fernandos signature comparison
does not result in the discovery of the fraud. China Bank could not have any knowledge of
the fraud.
Being negligent, BPI cannot setup the forgery against China Bank.
However, while bereft of complete control, China Bank is not without blame. Their
employees closed their eyes to the suspicious circumstances of:
1. Huge over-the-counter withdrawals shortly after the account was opened
2. The account was opened only on the strength of the tax account number as
identification as well as that of the introduction of its client
Considering the comparative negligence of the two banks, BPI is responsible for 60% while
China Bank is responsible for 40%.
BDO v. EQUITABLE PCI

GR L-74917 | JAN. 20, 1988 | J. GANCAYCO
FACTS: Plaintiff drew 6 crossed Managers checks payable to certain establishments of Visa Card.
Checks were deposited with defendant to the credit of its depositor, Aida Trencio.
Defendant sent the check to the clearing house after it stamped its guarantee at the back
of the check. Plaintiff paid the checks, and its clearing account was subsequently debited
and the defendants clearing account was credited. Plaintiff discovered that the
endorsements belong to persons other than payees. Pursuant to PCHC Clearing Rules,
plaintiff presented the checks directly to defendant for the purpose of claiming
reimbursement. However, defendant refused to accept and reimburse the value of the
check. Arbiter ruled in favor of plaintiff. Upon appeal, PCHC and RTC affirmed Arbiters
decision.
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ISSUE: Whether or not the PCHC subject checks are non-negotiable, and beyond the jurisdiction
of the PCHC
HELD: No. As provided in the aforecited articles of incorporation of PCHC its operation extend to
clearing checks and other clearing items. No doubt transactions on non-negotiable checks
are within the ambit of its jurisdiction.
The term, check as used in the said Articles of Incorporation of PCHC can only connote
checks in general use in commercial and business activities. It cannot be conceived to be
limited to negotiable checks only
Checks are used between banks and bankers and their customers, and are designed to
facilitate banking operations. It is of the essence to be payable on demand, because the
contract between the banker and the customer is that the money is needed on demand.
When endorsement is forged, the collecting bank generally suffers the loss. The indorser
who indorses without qualification warrants to all subsequent holders in due course: (a)
that the instrument is genuine and in all respects what it purports to be; (b) that he has
good title to it; (c) that all prior parties have capacity to contract; and (d) that the instrument
is at the time of his indorsement valid and subsisting.
While the drawer owes no duty of diligence to the collecting bank but collecting bank bound
to scrutinize checks deposited with it to determine genuineness and regularity. The
collecting bank being primarily engaged in banking holds itself out to the public as the
expert and the law holds it to a high standard of conduct.
And although the subject checks are non-negotiable the responsibility of petitioner as
indorser thereof remains. To countenance a repudiation by the petitioner of its obligations
would be contrary to equity and would deal a negative blow to the whole banking system
of this country.
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ADDITONAL CASES- LIABILITY OF PARTIES
TRADERS ROYAL BANK V RADIO PHILIPPINES NETWORK ET AL.

G.R. No. 138510 | October, 10 2002 | J. Corona
FACTS: BIR assessed respondent networks for their tax obligations, and for the purpose of the said
obligations issued 3 Traders Royal Bank managers check. Subsequently, it was found out
that the checks were never paid to the payee BIR but instead it was deposited by unknown
persons to respondent Security Bank. respondent Networks demanded payment from both
TRB and Security Bank but to no avail. Hence, respondent networks filed a complaint
against the two banks for then reimbursement of the amount of the checks. The RTC ruled
in favor of respondent Networks, ordering TRB to pay the amount of then checks and for
Security Bank, as the collecting bank, to reimburse TRB for whatever amount it may be
forced to pay. The two banks appealed and the CA held TRB solely liable while absolving
Security Bank. Hence, this petition. TRB contends that Security Bank should be held liable
as the collecting bank.
ISSUE: Whether or not Traders Royal Bank should be held solely liable to the amount of the subject
checks?
RULING: Yes. This case involved a forged indorsement and in such case, under section 23 of the
Negotiable Instruments Law, the instrument cannot be discharged. TRB should have
known that when a check is payable to the order of one person it has the duty to ascertain
the genuineness of the signatures. If it paid the amount to 3 rd persons who forged the
signature of the payee, it shall bear the loss. TRB argues that Security Bank should be
the one primarily liable as the collecting bank because it merely relied on its endorsement.
Such contention would have been acceptable if Security Bank really endorsed the subject
checks. In this case, there was nothing in the instrument that indicates that Security Bank
did endorse the checks. In the normal practice of Security Bank, the checks that it
endorses usually bears the stamp at the back of the check, which says non-negotiable,
which did not appear in the subject checks. Moreover under section 19 of Philippine
Clearing House Rules, the banks would create an add-list which contains the checks
which passed through the clearing house. Upon checking the add list of Security Bank the
subject checks were not there. The following circumstances, creates a serious doubt if it
was ever presented to and accepted by Security Bank. By reason therefore, it is TRB who
should be made liable to the amount of the checks.
BPI V. CA AND BENJAMIN NAPIZA

G.R. NO. 112392 | February 29, 2000 | YNARES SANTIAGO, J.
FACTS Benjamin Napiza maintains a Foreign Currency Deposit Unit with BPI. He deposited a
check payable to cash in the amount of $2,500 which he indorsed in the dorsal side. The
check actually belonged to Henry who requested Napiza to deposit the check in his account
by way of accommodation and for the purpose of clearing the same. Napiza then delivered
a blank withdrawal slip with Henry with the agreement that they would withdraw the amount
once the check was cleared. However, the amount was withdrawn by Gayon through the
use of the blank deposit slip even before the amount has been cleared and without the
presentment of the passbook. The check eventually bounced when Wells Fargo Bank
International of New York informed BPI that the check was a counterfeit check. As such,
BPI sought to recover the withdrawn amount from Napiza but Napiza refused to pay. This
prompted BPI to file the present complaint.
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The RTC ruled that the Napiza could not be held liable for the value of the check since the
bank allowed the withdrawal of the amount without first clearing the check. The CA affirmed
the decision of the RTC and said that BPI committed clear gross negligence.
ISSUE Whether or not Benjamin Napiza should be held liable for the value of the check?
HELD NO. Benjamin Napiza should not be held liable for the value of the check.
Napiza indorsed the check and is considered as a general indorser and should be held
liable for the value of the check if it is dishonored under ordinary circumstances. However,
in this particular case, Napiza could not be held liable if we take into consideration the
surrounding circumstances and the negligence of BPI in handling Napizas account.
Under BPIs own banking rules, in order to withdraw an amount from the Foreign currency
account there are two requisites: first, is a duly filled-up withdrawal slip, and second, the
depositors passbook. In this particular case, the withdrawal slip contains a special
instruction that the amount is payable to Ramon A. de Guzman &/or Agnes C. de Guzman
which should have warned BPI that Gayon was not the proper payee of the proceeds of
the check. It should also be noted that the passbook was not presented during the
withdrawal. These acts are a clear violation of their own rules. As such, BPI is guilty of
gross negligence and should be held liable for the amount of the checks.
The passbook also provides another rule which states that deposits of drafts checks xxx
will be accented as subject to collection only and credited to the account only upon receipt
of the notice of final payment. According to ordinary banking practices, the bank shall only
credit the amount once the drawee bank shall have paid the amount of the check or the
check has been cleared for deposit. Since BPI allowed the withdrawal of the amount
without waiting for the clearance of the check, the principle that the collecting bank
generally suffers the loss finds application in the current case. This is especially true when
the check involved is drawn on a foreign bank and therefore collection is more difficult.
PEOPLE v. MANIEGO
G.R. No. L-30910 | Feb. 27, 1987 | Narvasa, J.
FACTS: Maniego (as indorser of the check) and co-conspirators were charged with malversation.
The checks issued for the encashing of the public funds were dishonored upon
presentment. The CFI criminally acquitted Maniego, but she and co-conspirator Ubay were
held civilly liable so they were ordered to pay jointly and severally to the Government.
Maniego, on reconsideration, prayed that she be absolved from the civil liability or at least
that it be reduced; this was denied. On appeal, the CA held that Maniegos brief raised only
questions of law, so her appeal was certified to the SC. Maniego contends that as mere
indorser, she may not be made liable on account of the dishonor of the checks endorsed
by her.
ISSUE: W/N Maniego is civilly liable. YES.
HELD: The holder or last indorsee of a negotiable instrument has the right to enforce payment of
the instrument for the full amount thereof against all parties liable thereon. Among the
parties liable thereon is an indorser of the instrument i.e., a person placing his signature
upon an instrument otherwise than as maker, drawer, or acceptor unless he clearly
indicates by appropriate words his intention to be bound in some other capacity. Such an
indorser who indorses without qualification, inter alia engages that on due presentment,
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the instrument 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.
In the case, Maniego signed the check as an indorser and must therefore be bound as
such. The check having been dishonored, Maniego is civilly liable to pay the amount
thereof.
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO and

MARY T. BUENAVENTURA v. HEIRS OF BARTOLOME RAMOS
G.R. No. 156262 | July 14, 2005 | Panganiban, J.
FACTS: Spouses Tuazon purchased 8,326 cavans of rice from deceased Bartolome Ramos. In
payment therefor, they issued several Traders Royal Bank checks. But when these checks
were encashed, all of them bounced due to insufficiency of funds. Thus, respondents, the
heirs of Ramos, filed a case for collection of the sum of money before the RTC.
Respondents advanced that before issuing said checks, the spouses already knew that
they had no available fund to support the checks, and they failed to provide for the payment
of these despite repeated demands made on them.
The spouses argued that it was Evangeline Santos who was the buyer of the rice and
issued the checks to Maria Tuazon as payments therefor. In good faith, the checks were
received by petitioner from Evangeline Santos and turned over to Ramos without knowing
that these were not funded. And it is for this reason that petitioners have been insisting on
the inclusion of Evangeline Santos as an indispensable party, and that her non-inclusion
was a fatal error.
The RTC ruled in favor of respondents and ordered the spouses to pay. The CA affirmed,
ruling that inasmuch as all the checks had been indorsed by Maria Tuazon, who thereby
became liable to subsequent holders for the amounts stated in those checks, there was no
need to implead Santos.
ISSUE: Whether or not Evangeline Santos, the drawer of the checks, is an indispensable party in
an action against Maria Tuazon, the indorser of the checks
RULING: No. Petitioner Maria Tuazon had indorsed the checks in favor of respondents, in
accordance with Sections 31 and 63 of the Negotiable Instruments Law. That Santos was
the drawer of the checks is thus immaterial to the respondents cause of action. As indorser,
petitioner warranted that upon due presentment, the checks were to be accepted or paid,
or both, according to their tenor; and that in case they were dishonored, she would pay the
corresponding amount. After an instrument is dishonored by nonpayment, indorsers cease
to be merely secondarily liable; they become principal debtors whose liability becomes
identical to that of the original obligor. The holder of a negotiable instrument need not even
proceed against the maker before suing the indorser. Clearly, Evangeline Santos -- as the
drawer of the checks -- is not an indispensable party in an action against Maria Tuazon,
the indorser of the checks.
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GREAT ASIAN SALES V CA

GR No. 105774 | April 25, 2002 | J. Carpio
FACTS: Great Asian is engaged in the business of buying and selling household appliances. In
March 1981, the board of directors of Great Asian approved a resolution authorizing its
Treasurer and GM, Arsenio Lim Piat, Jr. to secure a loan from Bancasia in an amount not
to exceed P1M and also authorized Arsenio to sign all papers, documents or promissory
notes necessary to secure the loan. In Feb. 1982, the board of directors of Great Asian
approved a 2nd resolution authorizing Great Asian to secure a discounting line with
Bancasia in an amount not exceeding P2M and also designated Arsenio as the authorized
signatory to sign all instruments, documents and checks necessary to secure the
discounting line. In March 1981 and 1982, Tan Chong Lin signed 2 Surety Agreements in
favor of Bancasia to guarantee, solidarily, the debts of Great Asian to Bancasia. Great
Asian, through Arsenio, signed 4 Deeds of Assignment of Receivables, assigning to
Bancasia 15 postdated checks issued by various customers in payment for appliances and
other merchandise. Arsenio endorsed all the 15 checks by signing his name at the back
of the checks. Eight of the dishonored checks bore the endorsement of Arsenio below the
stamped name of Great Asian Sales Center, while the rest of the dishonored checks just
bore the signature of Arsenio. The drawee banks dishonored the fifteen checks on maturity
when deposited for collection by Bancasia, with any of the following as reason for the
dishonor: account closed, payment stopped, account under garnishment, and
insufficiency of funds. After the drawee bank dishonored the checks, Bancasia sent letters
to Tan Chong Lin, notifying him of the dishonor and demanding payment from him. Neither
Great Asian nor Tan Chong Lin paid Bancasia the dishonored checks. In June 1982,
Bancasia filed a complaint for collection of a sum of money against Great Asian and Tan
Chong Lin. Great Asian raised the alleged lack of authority of Arsenio to sign the Deeds of
Assignment as well as the absence of consideration and consent of all the parties to the
Surety Agreements signed by Tan Chong Lin
ISSUE: WON Bancasia and Tang Chon Lin should be held liable because it was a separate and
distinct deed of assignment
HELD: Yes. The court held that the two board resolutions clearly authorize Great Asian to secure
a loan or discounting line from Bancasia. Clearly, the discounting arrangements entered
into by Arsenio under the Deeds of Assignment were the very transactions envisioned in
the two board resolutions of Great Asian to raise funds for its business. There is nothing in
the Negotiable Instruments Law or in the Financing Company Act, that prohibits Great
Asian and Bancasia parties from adopting the with recourse stipulation uniformly found in
the Deeds of Assignment. Instead of being negotiated, a negotiable instrument may be
assigned. The endorsement does not operate to make the finance company a holder in
due course. For its own protection, therefore, the finance company usually requires the
assignor, in a separate and distinct contract, to pay the finance company in the event of
dishonor of the notes or checks. Otherwise, consumers who purchase appliances on
installment, giving their promissory notes or checks to the seller, will have no defense
against the finance company should the appliances later turn out to be defective. As
endorsee of Great Asian, Bancasia had the option to proceed against Great Asian under
the Negotiable Instruments Law. Had it so proceeded, the Negotiable Instruments Law
would have governed Bancasias cause of action. Bancasia, however, did not choose this
route. Instead, Bancasia decided to sue Great Asian for breach of contract under the Civil
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Code, a right that Bancasia had under the express with recourse stipulation in the Deeds
of Assignment. Great Asian, after paying Bancasia, is subrogated back as creditor of the
receivables. Great Asian can then proceed against the drawers who issued the checks.
Even if Bancasia failed to give timely notice of dishonor, still there would be no prejudice
whatever to Great Asian. Under the Negotiable Instruments Law, notice of dishonor is not
required if the drawer has no right to expect or require the bank to honor the check, or if
the drawer has countermanded payment. In the instant case, all the checks were
dishonored. Moreover, under common law, delay in notice of dishonor, where such notice
is required, discharges the drawer only to the extent of the loss caused by the delay. Again,
we reiterate that this obligation of Great Asian is separate and distinct from its warranties
as indorser under the Negotiable Instruments Law.Civil Code are applicable and not the
Negotiable Instruments Law.
BATAAN CIGAR AND CIGARETTE FACTORY, INC. VS. CA AND STATE INVESTMENT HOUSE, INC.
G.R. No. 93048 | March 3, 1994 | J. Nocon
FACTS: King Tim Pua George (George King) supplied Bataan Cigar & Cigarette Factory, Inc.
(BCCFI) with 4,500 bales of tobacco leaf. In consideration thereof, BCCFI issued crossed
checks. George King, however, sold three of the said crossed checks to State Investment
House, Inc. (SIHI) for discounting. George King also failed to deliver the bales of tobacco
leaf as agreed, which led BCCFI to issue a stop payment order on all the checks. SIHI,
having failed to collect from BCCFI the amount of the sold checks, filed a complaint against
BCCFI. Both lower courts ruled in favor of SIHI. BCCFI now argues that it cannot be liable
as a drawer because there is failure of consideration of the said checks, a defense which
may be set up against SIHI, a holder not in due course.
ISSUE: Whether or not BCCFI may be held liable against SIHI for the checks?
RULING: No. A holder not in due course can only recover from the instrument subject to defenses
as if it were non-negotiable. In line with this, under Section 52 of the Negotiable
Instruments, a holder in due course is a holder who has taken the instrument in good faith
and for value. In this case, SIHI is not in good faith since it was grossly negligent in failing
to inquire as to the nature of the crossed check. Therefore, SIHI is not a holder in due
course. BCCFI may thus invoke the defense of failure of consideration against it and may,
as a result, not be held liable to the instrument.
NISSAN GALLERY-ORTIGAS vs. PURIFICACION FELIPE

G.R. No. 199067 | November 11, 2013 | Mendoza, J.
FACTS: Frederick Felipe, son of Purificacion Felipe, purchased a Nissan Terano SUV from Nissan
Gallery-Ortigas on a cash-on-delivery transaction with no required down payment.
However, Frederick failed to pay upon delivery of the SUV. Despite the demands of Nissan,
Frederick still failed to pay. Frederick then asked his mother to issue a check as payment.
Purificacion acceded and issued a postdated check. This check, however, was dishonored
due to a stop payment. Nissan demanded from Purificacion a replacement check or cash
within 5 days, but Purificacion refused because she was not the one who bought the car.
Thus, Nissan filed a criminal complaint against Purificacion for violation of Batas Pambansa
Blg. 22.
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The Metropolitan Trial Court acquitted Purificacion from the criminal charge, but held her
civilly liable. The Regional Trial Court affirmed the MeTCs ruling. However, upon appeal,
the Court of Appeals reversed the lower courts and ruled that Purificacion was not civilly
liable. She was an accommodation party and her liability was limited to her act of issuing
a worthless check. Since she was acquitted from the criminal charge, her civil liability
therefore had no more basis.
ISSUE: Whether or not Purificacion is liable to pay Nissan on the worthless check she issued
HELD: Yes. It is a well-settled rule that civil action is deemed included upon filing a criminal action
and the dismissal of the latter does not automatically mean the dismissal of the former. Her
liability did arise from the issuing of the worthless check. However, her acquittal from the
criminal charge did not reliever her from her civil liability. Her claim that she issued the
check as a mere show check to boost Fredericks credit is not convincing. It was clear
that she assumed her sons obligation with Nissan and issued the check to pay it.
Nevertheless, she was not an accommodation party. Even so, all the more that she cannot
escape her civil liability pursuant to Section 29 of the Negotiable Instruments Law.
METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION v. SAMBOK MOTORS

COMPANY and NG SAMBOK SONS MOTORS CO., LTD.
GR. No. L-39641 | February 28, 1983| J. DE CASTRO
FACTS: Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co.,
Ltd. Payable in 12 equal monthly installments with interest. It is further provided that in
case on non-payment of any of the installments, the total principal sum then remaining
unpaid shall become due and payable with an additional interest. Sambok Motors co., a
sister company of Ng Sambok Sons negotiated and indorsed the note in favor of Metropol
Financing & investment Corporation with the following indorsement: Pay to the order of
Metropol Bacolod Financing & Investment Corporation with recourse. Notice of Demand;
Dishonor; Protest; and Presentment are hereby waived. SAMBOK MOTORS CO.
(BACOLOD) By: RODOLFO G. NONILLO Asst. General Manager The maker, Dr. Villaruel
defaulted in the payment as upon presentment of the promissory note he failed to pay the
promissory note as demanded. Thus, Ng Sambok Sons Motors Co., Ltd. notified Sambok
Motors as indorsee as indorsee of said note of the fact that the same has been dishonored
and demanded payment. Sambok failed to pay. Ng Sambok Sons filed a complaint for the
collection of sum of money. During the pendency of the case Villaruel died. Trial court
rendered its decision in favour of Plaintiff. Sambok argues that by adding the words with
recourse in the indorsement of the note, it becomes a qualified indorser; that being a
qualified indorser, it does not warrant that if said note is dishonored by the maker on
presentment, it will pay the amount to the holder. CA certified the case to the SC as the
issue issued therein being one purely of law.
ISSUE: Whether or not Sambok Motors Co is a qualified indorser, and thus it is not liable upon the
failure of payment of the maker.
RULING: NO. Respondent Sambok Motors, by indorsing the note with recourse does not make
itself a qualified indorser but a general indorser who is secondarily liable. By such
indorsement, it agreed that if Dr. Villaruel fails to pay the note, petitioner can go after said
respondent. The effect of such indorsement is that the note was indorsed without
qualification. A person who indorses without qualification engages that on due
presentment, the note shall be accepted or paid, or both as the case may be, and that if it
be dishonored, he will pay the amount thereof to the holder. Respondent Samboks
intention of indorsing the note without qualification is made even more apparent by the fact
that the notice of demand, dishonor, protest and presentment were all waived. The words
added by said appellant do not limit his liability, but rather confirm his obligations as a
general indorser.
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Moreover, a qualified indorsement constitutes the indorser a mere assignor of the title to
the instrument. It may be made by adding to the indorsers signature the words without
recourse or any words of similar import. Such indorsement relieves the indorser of the
general obligation to pay if the instrument is dishonored but not of the liability arising from
warranties on the instrument as provided by section 65 of NIL. However, Sambok indorsed
the note with recourse and even waived the notice of demand, dishonor, protest and
presentment.
GONZALES VS. PHILIPPINE COMMERCIAL INTERNATIONAL BANK (PCIB)

G.R. No. 180257 | February 23, 2011 | Velasco, Jr., J.
FACTS: PCIB granted a credit line to Eusebio Gonzales through the execution of a Credit-On-Hand
Loan Agreement (COHLA), wherein the accounts of Gonzales served as collateral for and
his availment limit under the credit line. Gonzales withdrew from the COHLA through the
issuance of a check. At the institution of the case, Gonzales had a Foreign Currency
Deposit (FCD) of $8,715.72 with PCIB. His account with PCIB was handled by respondent
Edna Ocampo until she was replaced by respondent Roberto Noceda.
Gonzales and his wife obtained a loan of P500,000. Subsequently, the Sps. Panlilio and
Gonzales obtained two additional loans in the amounts of P1,000,000 and P300,000,
respectively. These three loans were covered by three promissory notes. As security, a
real estate mortgage (REM) over a parcel of land was executed by Gonzales and the Sps.
Panlilio. Notably, the promissory notes specified their solidary liability. However, it was the
Sps. Panlilio who received the loan proceeds of P1,800,000. The monthly interest dues of
the loans were paid by the Sps. Panlilio through the automatic debiting of their account
with PCIB. But from the month of July 1998, they defaulted in the payment of the periodic
interest dues. PCIB allegedly called the attention of Gonzales regarding the July 1998 and
subsequent defaults.
Later, Gonzales issued a check in favor of Rene Unson (Unson) for P250,000 drawn
against the COHLA. However, upon presentment, it was dishonored due to the termination
by PCIB of the COHLA for the unpaid periodic interest dues. PCIB likewise froze the FCD
account of Gonzales. Unson sent a demand letter to Gonzales for the P250,000. Then, the
counsel of Unson sent a second demand letter to Gonzales with the threat of legal action.
Gonzales was forced to source out and pay the P250,000 he owed to Unson in cash.
Gonzales, wrote PCIB insisting that the check he issued had been fully funded, and
demanded the return of the proceeds of his FCD as well as damages for the unjust dishonor
of the check. Gonzales reminded PCIB that it knew well that the actual borrowers were the
Sps. Panlilio and he never benefited from the proceeds of the loans, which were serviced
by the PCIB account of the Sps. Panlilio. Gonzales filed the instant case for damages. RTC
ruled in favor of PCIB based on Gonzales solidary liability. CA affirmed in toto the RTCs
decision.
ISSUE: Whether Gonzales is liable for the three promissory notes covering the loan.
RULING: Yes. Gonzales admitted that he merely accommodated the Sps. Panlilio at the suggestion
of Ocampo, who was then handling his accounts, in order to facilitate the fast release of
the loan. The first note for P500,000 was signed by Gonzales and his wife as borrowers,
while the two subsequent notes showed the Sps. Panlilio sign as borrowers with Gonzales.
It is clear that Gonzales signed, as borrower, despite not receiving any of the proceeds.
The fact that the loans were undertaken by Gonzales when he signed as co-borrower for
the benefit of the spouses Panlilio is beside the point. For signing as borrower and co-
borrower on the promissory notes, Gonzales has extended an accommodation to said
spouses.
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As an accommodation party, Gonzales is solidarily liable with the Sps. Panlilio for the loans.
Under Sec. 29 of the NIL, the Court cited that an accommodation party is one who has
signed the instrument as maker, drawer, acceptor, or indorser, without receiving value
therefor, and for the purpose of lending his name to some other person. The knowledge,
acquiescence, or even demand by Ocampo for an accommodation by Gonzales to the Sps.
Panlilio does not exonerate Gonzales from liability on the three promissory notes. Also, the
solidary liability of Gonzales is clearly stipulated in the promissory notes which uniformly
begin, For value received, the undersigned (the BORROWER) jointly and severally
promise to pay xxx.
Art. 1207 of the Civil Code states that there is solidary liability only when the obligation
expressly so states, or when the obligation requires solidarity. In this case, Gonzales, as
accommodation party, is immediately, equally, and absolutely bound with the Sps. Panlilio
on the promissory notes which indubitably stipulated solidary liability for all the borrowers.
Moreover, the three promissory notes serve as the contract between the parties. Contracts
have the force of law between the parties and must be complied with in good faith.
ASSOCIATED BANK VS. VICENTE HENRY-TAN

G.R. No. 156940 | December 14, 2004 | Panganiban, J.
FACTS: Vicente Henry-Tan is a businessman and a regular depositor-creditor of Associated Bank.

He deposited a postdated UCPB check with the bank in the amount of P101,000.00 issued
to him by a certain Willy Cheng. It was alleged that the Bank (Assoc. Bank) stated that the
check was already cleared and backed up by sufficient funds. The check was entered in
his bank record making his balance in the amount of P297,000.00. Tan withdrew the sum
of P240,000.00 from this account leaving P57,793.45 in his bank account. Thereafter, Tan
deposited P50,000.00 in this account totaling his balance in the amount of P107,793.45.
Due to this amount, Tan issued several checks to his business partners. However, his
business partners and suppliers went back to him alleging that the checks he issued
bounced for insufficiency of funds. It was later found that the Bank allegedly returned the
postdated UCPB check, and thus debited the value of it from Tans account. Tan informed
the Bank to address the situation and pay the amount of the subject checks. The Bank did
not act nor offered any apology regarding the incident. This compelled Tan to file a
Complaint for Damages. The Bank denied the allegations of Tan and stated that no banking
institution would give an assurance to any of its client-depositors that the check deposited
by them had already been cleared and backed with sufficient funds but could only presume.
The trial court rendered a decision holding the Bank liable to Tan. The trial court found that
the Bank merely allowed Tan to use the fund prior to clearing merely for accommodation
because the Bank considered him as a valuable client. The Bank appealed to the CA. The
CA affirmed the ruling of the lower court and held that the Bank should not have authorized
the withdrawal of the value of the deposited check prior to its clearing. In doing so, it
violated its obligation to treat its clients account with meticulous care. CA ruled that had
the P101,000.00 not been debited Tan would have had sufficient funds to cover the
postdated checks he had issued. Therefore, the CA ruled that the proximate cause of Tans
business woes and shame is the accommodation accorded to him by the Bank. The Bank
seasonably filed its appeal to the Supreme Court.
ISSUE: Whether or Not the Bank (Assoc. Bank,) which is acting as a collecting bank, has the right
to debit the account of its client for a check deposit which was dishonored by the drawee
bank
HELD: The Supreme Court held that generally the bank has a right of setoff over the deposits
therein for the payment of any withdrawals on the part of a depositor. The right of a
collecting bank to debit a clients account for the value of a dishonored check is governed
and established by jurisprudence. Hence, the relationship of a bank and its depositors has
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been held to be of creditor and debtor. Generally, the right of setoff is legal compensation
under Art. 1278 of the Civil Code. The issue now is whether the Bank properly exercised
its right of setoff, as Tans depository bank and as collecting agent for the check. The Court
held with the Banks obligation to treat the account of Tan was not in the highest degree of
care need from a banking institution. The Bank disregarded the clearance requirement of
the banking system when it accepted the check prior to its clearing. Since a check is not a
legal tender or money, its value can only be transferred once it has been cleared by the
drawee bank. Before the check have been cleared for deposit, the collecting bank can only
assume at its own risk that the check would be cleared and paid out. Therefore, the Bank
is wrong to debit the amount of the check when it assumed all risk in accepting the check
for deposit. Furthermore, the Court discussed the liability of a general indorser under the
Negotiable Instruments Law. It is the duty of the bank to give proper notice of dishonor to
Tan. Citing the case of Gullas v. National Bank, A general indorser of a negotiable
instrument engages that if the instrument is dishonored and the necessary proceedings
for its dishonor are duly taken, he will pay the amount thereof to the holder. (Sec. 66)
Therefore, before the Bank debited the value of the postdated UCPB checks, it should
have given Notice of Dishonor to Tan. However, the Bank failed to do so therefore
establishing that the proximate cause of Tans shame and business woes leading to this
case, is their business practice.
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ADDITIONAL CASES PRESENTMENT FOR PAYMENT
RICAFORTE V. JURADO
G.R. 154438 | September 5, 2007 | Austria-Martinez, J.
FACTS: Leon Jurado filed a Complaint for estafa and violation of B.P. 22 against Alicia Ricaforte
alleging that the two FEBTC checks issued by Ricaforte were dishonored. The said checks
were payment for the procured rice from respondent by Ruby Aguilar. Petitioner denied the
accusation and contended that she lent the said checks because Aguilar lost her
Metrobank checkbook with the condition that she will replace them once her new
checkbook is issued to her. When Aguilar issued the replacement checks, petitioner
demanded for the return of her checks which the respondent refused. Hence, Ricaforte
requested her bank to issue an order of stop payment. The complaint was dismissed for
insufficiency of evidence: petitioner did not have any business transaction with respondent;
subject checks were merely accommodation checks; the same were delivered not a
payment but as a guarantee; the checks were not issued to account or for value.
Respondent filed an MR but it was denied. Upon appeal to the Department of Justice, the
Secretary of Justice modified the findings and directed respondent to file an information
against the petitioner for violation of B.P. 22 and held that: B.P. 22 applies even when
dishonored checks were issued merely in the form of deposit or guarantee. Petitioner filed
an MR but it was denied. CA ruled that mere issuance of a bouncing check constitutes a
probable cause for violation of B.P. 22.
ISSUE: Whether or not there was probable cause against Ricaforte for the violation of B.P. 22
HELD: YES. In a preliminary investigation, the public prosecutor merely determines whether there
is probable cause or sufficient ground to engender a well-founded belief that a crime has
been committed, and that the respondent is probably guilty thereof and should be held for
trial. xxx respondent sufficiently established the existence of probable cause for violation
of B.P. 22. xxx The gravamen of the offense punished by B.P. 22 is the act of making and
issuing a worthless check; that is, a check that is dishonored upon its presentation for
payment. xxx In People v. Nitafan, we said that a check issued as an evidence of debt
though not intended to be presented for paymenthas the same effect as an ordinary
check and would fall within the ambit of B.P. Blg. 22. In this case, petitioner issued the two
subject checks in favor of respondent, and when respondent presented them for payment,
they were dishonored for reason of the stop payment order issued by petitioner. Notably,
a certification from the bank showed that they returned the checks for that reason. In
addition, contrary to the claim of petitioner, at the time the said checks were presented for
deposit/payment, there were no sufficient funds to cover the same. The mere act of issuing
a worthless check whether as a deposit, as a guarantee or even as evidence of
pre-existing debtis malum prohibitum. xxx The validity and merits of a partys defense
and accusation, as well as admissibility of testimonies and evidence, are better ventilated
during trial proper than at the preliminary investigation level.
NARI GIDWANI V. PEOPLE OF THE PHILIPPINES

G.R. 195064| January 15, 2014 | Sereno,CJ
FACTS: Petitioner is president of GSMC which is engaged in the export of ready-to-wear clothes.
It contracted the embroidery services of El Grande Industrial Corporation and as payment,
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issued on various dates from June-December 1997, 10 Banco De Oro Checks worth P
1,626,707.62. These checks were dishonored upon presentment for the reason Account
Closed.
El Grande issued 3 demand letters for 8 out of the 10 checks on September 24, 1997 and
October 8, 1997 respectively. In reply, petitioner alleged that as early as August 29, 1997,
petitioners company already filed a petition with the Securities and Exchange Commission
(SEC) for the Declaration of a State of Suspension of Payments, Approval of a
Rehabilitation Plan and the Appointment of a Management Committee. The SEC granted
the petition. Despite being informed of GMSCs situation, El Grande still present the 2
checks not subject of the demand letter for encashment and thereafter filed a complaint
with the City Prosecutor of Manila charging Petitioner with 8 counts of violation B.P 22.
The MTC found petitioner guilty for 10 counts violation of B.P 22. RTC affirmed the MTC.
The CA modified the decision and found that Petitioner only received the October 8 notice
of dishonor and not the others. The appellate court acquitted petitioner of 8 counts of the
violation of B.P 22 and sustained the remaining 2 counts for the September 25 and October
2 checks subject of the October 8 notice.
ISSUE: Whether or not, the order for the suspension of payments by the SEC is a valid reason to
stop payment of a check even if such order was issued prior to the presentment of the
subject checks for payment
HELD: Yes. The presentment for payment and the demand letters by El Grande to petitioner were
all made after there was a lawful order from the SEC suspending all payments. This order
is the reason why the account of petitioner was closed. Moreover such order from the SEC
is a suspensive condition that would suspend the contract until such a time when a
condition is fulfilled that is when the suspension order is terminated wherein the contract
would become effective again. Hence, when El Grande presented the September 25 and
October 2 checks for encashment, it had no right to do so as there was no obligation due
from petitioner because the contract is still suspended and that the order is not yet
terminated
NGO v. PEOPLE
GR 155815 | July 14, 2004 | PANGANIBAN, J.
FACTS: Kenneth Ngo allegedly issued postdated checks in the amount of Php75,000 in favor od Paul
Gotianse as payment for an obligation. These said checks were dishonored when presented for
the reason of Drawn Against Insufficient Funds. Ngo refused and failed to pay for the checks
despite the notice of dishonor and demands against him. Due to this criminal cases were filed
against Ngo for violation of B.P. 22 and Ngo entered the plea of not guilty. During the trial
proceedings, the prosecution presented evidence that Ngo as a settlement for his indebtedness
with Northern Hill issued eight postdated checks payable to complainant and all drawn against
Equitable Bank, three of which were dishonored. Ngo filed a motion to dismiss which was denied
by the court. The RTC convicted Ngo for the three criminal cases. The CA affirmed the lower
court and found that all the elements of violating BP 22 are present. Ngo contends that in the
two criminal cases the information indicated the checks were issued in favor of Paul Gotianse
but the evidence presented by the prosecution prove that it was in favor of Northern Hill. Ngo
alleges that due to this, the prosecution failed to prove the elements of the offense.
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ISSUES: Whether or not the elements of the offense in BP 22 are present
HELD: YES. All the elements of the offense under the first situation under BP 22 are present: (1) the
making, drawing and issuance of any check to apply on account or for value; (2) the maker,
drawer or issuer knows at the time of issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such check in full upon its presentment; and (3) the
check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or
would have been dishonored for the same reason had not the drawer, without any valid cause,
ordered the bank to stop payment. Ngos contentions are immaterial and irrelevant. The crime
punished under BP 22 is the mere issuance of the check with knowledge that he had no
sufficient funds or credit with the drawee bank. The cause or reason for the issuance of the
check is immaterial. The gravamen of the offense punished by BP 22 is the act of making and
issuing a worthless check; that is, a check that is dishonored upon its presentation for payment.
THERESA MACALALAG v. PEOPLE

G.R. 164358 | December 20, 2006 | Chico-Nazario, J.
FACTS: On two separate occasions, petitioner Theresa Macalalag obtained loans (P100,000 each) from
Grace Estrella. She consistently paid the interests however, finding the interest rate of 10% per
month burdensome, Macalalag requested Estrella for a reduction to which the latter agreed.
Later on, Macalalag executed an Acknowledgment/Affirmation Request promising to pay
Estrella the face value of the loans in the total amount of P200,000.00 within two months from
the date of its execution plus 6% interest per month for each loan. She further obligated herself
to pay for the two loans the total of P100,000 as liquidated damages and attorneys fees once
she breaches their contract.
As security for the loans, Macalalag issues two PNB Checks each in the amount of P100,000,
in favor of Estrella. Upon presentment, the same were dishonored because the account was
closed. Estrella sent a notice of dishonor and demand to make good the said checks to
Macalalag, but the latter failed to do so. Hence, Estrella filed two criminal complaints for violation
of BP 22 before the MTCC of Bacolod City.
On trial, Macalalag admitted her indebtedness and the issuance of the two PNB checks,
however, she stated that she already made payments over and above the value of the said
checks in the total payment of P355,837.98, including the payment of P199,837.98 made during
the pendency of the cases. Estrella admitted the payment of P199,837.98 but claimed that the
same amount was applied to the payment of the interest.
MTCC and RTC: guilty of two counts of violation of BP22. CA: convicted only of 1 count (2 nd
check)
ISSUE: Whether or not petitioner Macalalag is guilty of BP 22 for the second check.
HELD: Even if we agree with petitioner Macalalag that the interests on her loans should not be imputed
to the face value of the checks she issued, petitioner Macalalag is still liable for Violation of
Batas Pambansa Blg. 22. Petitioner Macalalag herself declares that before the institution of the
two cases against her, she has made a total payment of P156,000.00. Applying this amount to
the first check, what will be left is P56,000.00, an amount insufficient to cover her obligation with
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respect to the second check. As stated above, when Estrella presented the checks for payment,
the same were dishonored on the ground that they were drawn against a closed account.
Despite notice of dishonor, petitioner Macalalag failed to pay the full face value of the second
check issued.
Only a full payment of the face value of the second check at the time of its presentment or during
the five-day grace period could have exonerated her from criminal liability. A contrary
interpretation would defeat the purpose of Batas Pambansa Blg. 22, that of safeguarding the
interest of the banking system and the legitimate public checking account user, as the drawer
could very well have himself exonerated by the mere expediency of paying a minimal fraction of
the face value of the check.
Neither could petitioner Macalalag's subsequent payment of P199,837.98 during the pendency
of the cases against her before the MTCC result in freeing her from criminal liability because the
same had already attached after the check was dishonored. Said subsequent payments can
only affect her civil, not criminal, liability. A subsequent payment by the accused would not
obliterate the criminal liability theretofore already incurred.
All these elements have been conclusively proven in Court, the second element by the prima
facie evidence established by Section 2 of Batas Pambansa Blg. 22.
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ADDITIONAL CASES NOTICE OF DISHONOR
BEN B. RICO V PEOPLE OF THE PHILIPPINES

G.R. NO. 137191 | NOVEMBER 18, 2002 | QUISIMBING, J.
FACTS: Petitioner Ben B. Rico was a pakyaw contractor who purchased construction materials on
credit from Ever Lucky Commercial (ELC), represented by its Manager Victor Chan.
Petitioner payed either through cash or post-dated checks. Petitioner Rico issued checks
in the amount of P178,434.00 drawn against PCIB in favor of ELC as payment for
construction materials he that he purchased through credit. However these checks were
dishonered due to insufficient funds or being drawn against a closed account. ELC
demanded payment from Rico, however no formal written demand letter or notice of
dishonor was sent to the latter. It is also established that ELC issued several receipts
covering several payments in various amounts made by Rico as replacement of some
dishonoured checks but returned checks as well as payment of purchased materials. Rico
claimed that he had already paid the amounts covered by the checks totalling P284,340.50
including interest. According to Rico, the difference between the total amount as reflected
in the receipts and the total amount covered by the subject checks represented interest.
ELC filed a complaint for B.P. 22 against Rico. The trial court found Rico guilty beyond
reasonable doubt. The CA affirmed the trial courts decision.
ISSUE: Whether or not petitioner Rico is guilty under B.P. 22
HELD: No. Petitioner Rico is acquitted of the charge for violation of B.P. 22 on the ground of
reasonable doubt. The law enumerated the 3 elements of B.P. 22, namely: (1) the making,
drawing, issuance of any check for account or value; (2) the knowledge of the maker,
drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with
the drawee bank for the payment of the check in full upon its presentment; and (3) the
subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit
or dishonor for the same reason had not the drawer, without any valid cause, ordered the
bank to stop payment. In this case, the second element is not present. Knowledge of
insufficiency of funds or credit in the drawee bank is an essential element of the offense. If
such notice of non-payment by the drawee bank is not sent to the maker or drawer of the
check then the presumption of such knowledge does not arise. The prosecution failed to
prove that petitioner received any notice of dishonor. In fine, the failure of the prosecution
to prove the existence and receipt by petitioner of the requisite written notice of dishonor
and that he was given at least five banking days within which to settle his account
constitutes sufficient ground for his acquittal.
JAIME ALFEREZ vs. PEOPLE OF THE PHILIPPINES

G.R. No. 182301 | January 31, 2011 | Nachura, J.
FACTS: Petitioner Jaime Alferez purchased construction materials from Cebu ABC Sales
Commercial. As payment for the goods, Petitioner Alferez issued three checks for the total
amount of PhP 830, 998.40. However, the checks were dishonored for having been drawn
against a closed account. Petitioner Alferez was charged with three counts of violation of
Batas Pambansa Bilang 22 before the Municipal Trial Court. During the trial, the
prosecution presented its lone witness, private complainant Pingping Co. Thereafter, the
prosecution formally offered the following documentary evidence: (1) Three BPI Checks
amounting to PhP 830, 998.4; (2) The demand letter dated 7 July 1994 addressed to
petitioner; (3) The registry receipt of the Post Office; (4) The face of the Registry Return
Receipt; (5) The dorsal side of the Registry Return Receipt; (6) The Returned Check Ticket
dated 23 June 1994; and (7) The reason for the dishonor. Instead of presenting evidence,
petitioner Alferez filed a Demurrer to Evidence 10 months after the prosecution rested its
case. Petitioner Alferez averred that the prosecution failed to show that he received the
notice of dishonor or demand letter.
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The Municipal Trial Court in Cities (MTCC) denied petitioner Alferezs Demurrer to
Evidence and found petitioner Alferez guilty beyond reasonable doubt. Regional Trial Court
(RTC) affirmed in toto and the Court of Appeals dismissed the petition for lack of merit and
upheld the conviction of petitioner Alferez
ISSUE: Whether or not a notice of dishonor was received by Alferez
HELD: No. For notice by mail, it must appear that the same was served on the addressee or a
duly authorized agent of the addressee. From the registry receipt alone, it is possible that
petitioner or his authorized agent did receive the demand letter. Possibilities, however,
cannot replace proof beyond reasonable doubt. The absence of a notice of dishonor
necessarily deprives the accused an opportunity to preclude a criminal prosecution. As
there is insufficient proof that petitioner received the notice of dishonor, the presumption
that he had knowledge of insufficiency of funds cannot arise. This is so even if petitioner
did not present his evidence to rebut the documentary evidence of the prosecution as he
had waived his right to present evidence for having filed a demurrer to evidence without
leave of court. We must emphasize that the prosecution has the burden of proving beyond
reasonable doubt each element of the crime as its case will rise or fall on the strength of
its own evidence, never on the weakness or even absence of that of the defense. The
failure of the prosecution to prove the receipt by petitioner of the requisite notice of dishonor
and that he was given at least five (5) banking days within which to settle his account
constitutes sufficient ground for his acquittal.
TERESITA ALCANTARA VERGARA v. PEOPLE OF THE PHILIPPINES

G.R. No. 160328 | 4 February 2005 | Ynares-Santiago, J.
FACTS: Livelihood Corporation (LIVECOR) granted Perpetual Garments Corporation

(PERPETUAL) a continuing credit line of Php 750,000. Both agreed that for every
availment of the line, PERPETUAL would execute a promissory note and issue post-dated
checks corresponding to the amount of the loan. Teresita Alcantara Vergara (Vergara), as
Vice President and General Manager of PERPETUAL, signed the credit line agreement
and all the post-dated checks. One of the checks signed and issued by Vergara for Php
150,000 was dishonored for insufficiency of funds. LIVECOR verbally informed Vergara of
the dishonor of the check. LIVECOR charged Vergara for violation of BP 22 who claimed
that the latter failed to pay the full amount of the check or to make arrangements for its
payment within 5 days from receiving the notice of dishonor. Although Vergara made cash
and check payments after the dishonor, LIVECOR treated these as continuing payments
of the outstanding loan by first applying them to interest and penalties, then subsequently
to the principal. Vergara argued that she cannot be held liable for BP 22 because she
replaced the dishonored check with 6 other checks with the same total value, and that from
the time of dishonor, PERPETUAL already paid LIVECOR Php 542,000 which covered the
full amount of the dishonored check. The RTC found Vergara guilty of BP 22 but not civilly
liable to LIVECOR because PERPETUAL is the borrower and there was no agreement that
she would be liable for the loan in her personal capacity. Both parties appealed to the CA
who affirmed in toto the decision of the RTC. Vergara motioned for reconsideration but was
denied. In the Supreme Court, she failed to file a Reply, which prompted the Court to decide
based on the pleadings.
ISSUE: Whether or not Vergara should be convicted of BP 22?
HELD: To hold Vergara liable for violation of BP 22, it is not enough that she issued the check that
was subsequently dishonored for insufficiency of funds. It must also be shown beyond
reasonable doubt that she knew of the insufficiency of funds at the time the check was
issued. Pursuant to the knowledge of insufficiency as a state of mind, Sec. 2 of BP 22
creates a prima facie presumption that upon presentation of the instrument for payment
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within 90 days of its issuance, it is dishonored for insufficient funds. This presumption does
not arise if the issuer pays the amount of the check or makes arrangements for its payment
within five banking days after receiving notice that such check has not been paid by the
drawee.
It was found that there was no clear establishment of when Vergara received the notice of
dishonor. There was no way of determining when the 5-day period prescribed in Section 2
of BP 22 would start and end. LIVECOR failed to state the evidentiary facts that would
establish the prima facie presumption of knowledge of insufficiency of funds in order to
convict Vergara.
The petition is granted. Vergara is acquitted of the charge of violating BP 22.
EUMELIA R. MITRA v. PEOPLE OF THE PHILIPPINES AND FELICISMO S. TARCELO

GR NO. 191404 | JULY 5, 2010 | Mendoza, J.
FACTS: Between 1996 and 1999, Tarcelo invested money in LNCC wherein Mitra was the
treasurer. Tarcelo was issued checks equivalent to the amounts he invested plus the
interest on his investments. The checks were signed by Mitra and Caberera and were
issued by LNCC to Tarcelo. When Tarcelo presented these checks for payment, they were
dishonored for the reason account closed. He made several demands on LNCC for the
payment of such checks.
He filed 7 informations for violation of BP 22 in the total amount of P925,000. After trial, the
MTCC found Mitra and Cabrera guilty of the charges. They appealed to the RTC
contending that they signed such checks in blank with no name of the payee and that they
signed the checks so as not to delay the transactions of LNCC. The RTC affirmed the
MTCC.
ISSUE: Whether or not the elements of BP 22 must be proved beyond reasonable doubt as against
the corporation who owns the current account where the subject checks were drawn before
liability attaches to the signatories.
HELD: No. The 3rd paragraph of BP 22 reads: Where the check is drawn by a corporation,
company or entity, the person or persons who actually signed the check in behalf of such
drawer shall be liable under this Act. Its wording is unequivocal and mandatory that the
person who actually signed the corporate check shall be held liable for a violation of BP
22. The provision does not contain any condition, qualification or limitation.
VICTOR ONGSON v PEOPLE OF THE PHILIPPINES

GR 156169 | August 12, 2005 | Ynares-Santiago, J.
FACTS: On various occasions Samson Uy extended loans to Victor Ongson and as payments for
the loans, Ongson issued 5 post-dated checks. These checks were subsequently
dishonored upon their presentment and Ongson failed to pay for the amounts of the
checks. 8 separate information were filed against Ongson for violation of BP 22. The trial
court rendered a one-page decision and found Ongson guilty. The Court of Appeals
affirmed the conviction of Ongson but modified the penalty. It deleted the penalty of paying
a fine and imposed the penalty of imprisonment. The case was raised to the Supreme
Court questioning the validity of the ruling of the trial court and if the conviction was proper.
ISSUES: 1. Whether or not the ruling of the trial court violated the requirements of the Constitution
and the Rules of Court
2.Whether or not Ongson is guilty for violation of BP 22
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HELD: 1. YES. Sec. 14, Article VIII of the Constitution, Sec. 1 of Rule 36 and Sec. 1, Rule 120 of
the Rules on Civil Procedure state that a decision, judgement or final order shall state
clearly and distinctly the facts and the law on which the decision is based. The ruling of the
trial court did not state the material facts (the transaction that led to the issuance of the
checks, respective amounts, date and reason for dishonor) It also failed to discuss the
elements of BP 22 and other pertinent facts. The decision was only a one page decision.
The decision of the trial court is void and the Court would ordinarily remand the case
but the Court deem it proper to resolve the case on the merits to avoid delay.
2. He is partly guilty for BP 22. The Court acquitted him on 2 counts of BP 22 but found
him guilty for 6 counts of BP 22. The elements of BP 22 are: a.) making, drawing and
issuance of ay check for value, b) knowledge that at the time of issue he does not have
sufficient funds, c)subsequent dishonor of the check for insufficiency of funds or credit or
dishonor for the same reason had not the drawer, without valid cause, ordered the bank to
stop payment. Ongson was acquitted for the 2 counts of BP 22 because there were
discrepancies as to the date and the amount indicated in the check and the information.
On one of the acquitted case of BP 22 the date on the check October 17, 1992 and the
amount was P3,117.50. What was indicated in the information was that the date is October
15, 1992 and the amount was P3,117.00. The second acquitted case the date check was
October 2, 1992 but the one in the information is September 28, 1992.
As for the 6 other cases, the Court found Ongson guilty. It is presumed that the checks
were issued for valuable consideration. The prosecution was able to establish beyond
reasonable doubt tht there was valuable consideration. The gravamen of the offense
punished by BP 22 is the act of issuing a worthless check. BP 22 provides for a prima facie
presumption that the offender knew that he had insufficient funds because knowledge is a
state of mind and it is difficult to establish it. There is a presumption when the offender fails
to pay the amount of the check within 5 banking days from the notice of dishonor. The
presumption is brought into existence only after it is proved that the issuer had receive a
notice of dishonor and he fails to pay for the amount after said receipt of the notice of
dishonor. If such notice of dishonor is not sent to the maker or drawer or if there is no proof
as to when the notice was received by the drawer then there is no way of reckoning the
crucial 5-day period. The notice of dishonor must be in writing. In the case the counsel of
Ongson admitted the receipt of the demand letters sent via registered mail. Thus, the
receipt of Ongson of the notice of dishonor and failure to pay the amount of the checks
within 5 days from receipt of such notice of dishonor gave rise to the prima facie
presumption that he had knowledge of the insufficiency of his funds at the time of the
issuance of the checks.
ERLINDA C. SAN MATEO vs. PEOPLE OF THE PHILIPPINES

G.R. No. 200090 | March 6, 2013 | Abad, J.
FACTS: Petitioner Erlinda San Mateo ordered assorted yarns from ITSP through its the Vice
President for Operations, Ravin A. Sehwani. In partial payment, thereof, she issued 11
postdated checks.W henever a check matured, San Mateo would call Sehwani requesting
him not to deposit the checks. Sehwani finally deposited one check, but was it dishonored
due to insufficient funds. He informed San Mateo of the dishonor, who asked him to defer
depositing the other checks since she was encountering financial difficulties. Sehwani
deposited another check but was dishonored due to a stop payment order. Sehwani
deposited the remaining checks which were all dishonored because the account had been
closed. Sehwani attempted to contact San Mateo but she never responded. Sehwanis
counsel sent a demand letter to San Mateos residence at Greenhills, San Juan but the
security guard of the townhouse complex refused to accept the letter in compliance with
San Mateos order. Thus, the liaison officer left the letter with the security guard with the
instruction to deliver the same to San Mateo. Thereafter, he sent a copy of the demand
letter to San Mateo by registered mail which was returned to his counsels office with the
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notation N/S Party Out 12/12/05 and that San Mateo did not claim it despite three notices
to her dated December 12, 2005, December 22, 2005, and January 2, 2006, respectively.
San Mateo was charged with 11 counts of violation of B.P. 22, and was found guilty of 10
counts by the MTC. On appeal, the ruling was affirmed by the RTC and the CA.
ISSUE: W/N San Mateo was guilty of violating B.P. 22.
HELD: No. The second element, that the knowledge of the maker, drawer, or issuer that at the
time of issue he does not have sufficient funds in or credit with the drawee bank for the
payment of the check in full upon its presentment, was not sufficiently established. Section
2 of B.P. 22 creates the presumption that the issuer of the check was aware of the
insufficiency of funds when he issued a check and the bank dishonored it. This
presumption, however, arises only after it is proved that the issuer had received a written
notice of dishonor.
When Sehwani's counsel's attempted to serve the notice by leaving a copy with the security
guard, there was no showing that the letter ever reached San Mateo. On the second
occasion, Sehwani's counsel sent a demand letter to San Mateo by registered mail.
However, the prosecution must not only prove that a notice of dishonor was sent to the
accused, it must also prove actual receipt of said notice, because the fact of service
provided for in the law is reckoned from receipt of such notice of dishonor by the accused.
Since there is insufficient proof that San Mateo actually received the notice of dishonor,
the presumption that she knew of the insufficiency of her funds cannot arise. For this
reason, the Court cannot convict her of violation of B.P. 22.
Nevertheless, San Mateos acquittal does not entail the extinguishment of her civil liability
for the dishonored checks. An acquittal based on lack of proof beyond reasonable doubt
does not preclude the award of civil damages.
ARMILYN MORILLO v. PEOPLE OF THE PHILIPPINES AND RICHARD NATIVIDAD

G.R. No. 198270 | December 9, 2015 | Peralta, J.
FACTS: Natividad, with Malong and Nanquil, are contractors under the business name RB Custodio
Construction in Pampanga. They purchased construction materials for a project inside the
Subic Freeport Zone from petitioner Morillo, owner of Amasea General Merchandise and
Construction Supplies. Payments were made upon the last delivery to Pampanga, via cash
and two post-dated Metrobank checks.
Upon presentment to her bank account in Makati, the checks were dishonored, but were
subsequently replaced by Natividad. These checks were again dishonored for the reason
closed account. After several demands, Morillo filed two informations for estafa and
violation of B.P. 22 against Natividad and Malong.
The MeTC found all the elements of violation of B.P. 22 present against Natividad, and
convicted him, but dismissing the complaint against Malong. The RTC affirmed. The CA
reversed the ruling due to improper venue, holding that the third element or dishonor of the
checks by the drawee bank happened in Pampanga, and when Morillo presented them in
Makati, she was informed that they had been dishonored by the Metrobank in Pampanga.
Therefore the Makati courts had no jurisdiction over the case, all elements having been
consummated in Pampanga. CA dismissed without prejudice.
ISSUE: W/N all the elements for violation of B.P. 22 were consummated in Pampanga
HELD: NO. Violations of B.P. 22 are transitory or continuing crimes, meaning that some essential
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acts may occur in one territory, while others in another. In such cases, any court having
jurisdiction over any of the municipalities the elements were committed in may exercise
jurisdiction over the case.
In Nieva, Jr. v. CA, it was held that the place where the check was deposited or presented
for encashment confers jurisdiction over the courts in that municipality or territory over
violations of B.P. 22. The fact that the check had been drawn, issued and delivered in
Pampanga, did not strip the Makati MeTC of its jurisdiction over the case, it being
undisputed that the check had been deposited and presented for encashment at the Makati
Branch of Equitable PCIB.
JAMES SVENDSEN v. PEOPLE OF THE PHILIPPINES

G.R. No. 175381 | February 26, 2008 | Carpio-Morales, J.
FACTS: Reyes extended a loan to Svendsen, which the latter partially paid but later on, failed to
settle the balance of P380,000, hence, a collection suit was filed. The same was
subsequently settled when Svendsen paid P200,000 in cash and issued an International
Exchange Bank postdated check which was co-signed by Bolton, and which served as
payment for the remaining P160,000 representing interest. The check was, however,
dishonored upon presentment for having been drawn against insufficient funds. A notice of
dishonor and demand was made upon Svendsen but the latter failed to settle his obligation,
hence, a complaint for violation of BP 22 was filed before the MeTC against Svendsen and
Bolton. It was found that the lower court, however, never acquired jurisdiction over Bolton.
The MeTC found Svendsen guilty of the crime charged, and the RTC and CA affirmed the
same.
ISSUE: Whether or not Svendsen can be convicted for violation of BP 22?
HELD: NO. In order to be convicted of the crime under BP 22, the following requisites must concur:
(1) the making, drawing, and issuance of any check to apply for account or for value; (2)
the knowledge of the maker, drawer, or issuer, that at the time of issue he does not have
sufficient funds or credit with the drawee bank or the payment of the check in full upon
presentment; and (3) the subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit or dishonor for the same reason had not the drawer, without
any valid cause, ordered the bank to stop payment. The first and third elements are
present, however, the third element is wanting. Both a written notice of dishonor and proof
of receipt of such notice is required in order to know whether or not petitioner Svendsen
was given at least five days to settle his obligation and that he was not deprived of due
process. Without such proof, petitioner cannot be convicted.
VICTOR TING VS COURT OF APPEALS

G.R. No. 140665 | November 13, 2000 | Melo, J.
FACTS: Juliet Ting Chan Sioc Hiu obtained loans in the aggregate amount of P2,750,000.00 from
private complainant Josefina K. Tagle for use in Juliets furniture business. As payment,
Juliet issued 11 post-dated checks which, upon maturity, were dishonored for reasons of
Closed Account or Drawn Against Insufficient Funds. Juliet was subsequently prosecuted
for violation of BP 22. Due to her financial difficulties, Juliet requested her Husband Victor
Ting Seng Dee and her sister Emily Chan-Azajar, herein petitioners, to take over the
furniture buinsess, including the obligations appurtenant thereto. Petitioners issued 19
checks in replacement of the 11 checks Juliet issued. However, the planned take-over
never pursued since the employer of Pet Emily Chan-Azajars, Naga Hope Christian
School, refused to let her resign to attend Juliets business. Thus petitioners requested
Juliet to reassume her obligation to private complainant. Juliet then replaced the 19 checks
issued by petitioners with 23 Far East Bank chekcs in favor of Tagle.. Petitioners requested
Tagle to return the 19 checks they issued to her. Instead of returning the checks, Tagle
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deposited 7 of the checks with MetroBank where they were dishonored for being Drawn
Against Insufficient Funds. Consequently, 7 informations for violation of BP 22 were filed
against petitioners. The RTC ruled against the petitioners and found them guilty beyond
reasonable doubt of all charges. Petitioners filed an appeal with the Court of Appeals.
However, the CA affirmed the ruling of the RTC. Petitioner filed a motion for reconsideration
but was likewise denied for lack of merit. Hence, the instant petition.
ISSUE: Whether or not petitioners, Victor Ting Seng Dee and Emily Chan-Azajar, should be held
liable.
HELD: NO. For a violation of Batas Pambansa Blg. 22 to be committed, the following elements
must be present: (1) the making, drawing, and issuance of any check to apply for account
or for value; (2) the knowledge of the maker, drawer, or issuer that at the time of issue
there are no sufficient funds in or credit with the drawee bank for the payment of such
check in full upon is presentment; and (3) the subsequent dishonor of the check by the
drawee bank for insufficiency of funds or credit or dishonor for the same reason had not
the drawer, without any valid cause, ordered the bank to stop payment. An analysis of the
evidence presented, however, shows that not all the aforementioned elements have been
established by the prosecution beyond reasonable doubt. For liability to attach under Batas
Pambansa Blg. 22, it is not enough that the prosecution establishes that a check was
issued and that the same was subsequently dishonored. The prosecution must also prove
the second element, that is, it must further show that the issuer, at the time of the checks
issuance, had knowledge that he did not have enough funds or credit in the bank for
payment thereof upon its presentment. Moreover, It is necessary in cases for violation of
Batas Pambansa Blg. 22, that the prosecution prove that the issuer had received a notice
of dishonor. It is a general rule that when service of notice is an issue, the person alleging
that the notice was served must prove the fact of service. The burden of proving notice
rests upon the party asserting its existence. It is a general rule that, when service of a
notice is sought to be made by mail, it should appear that the conditions on which the
validity of such service depends had existence, otherwise the evidence is insufficient to
establish the fact of service. In the instant case, the prosecution did not present proof that
the demand letter was sent through registered mail, relying as it did only on the registry
return receipt. The prosecution also failed to present the testimony, or at least the affidavit,
of the person mailing that, indeed, the demand letter was sent.
DE LLENADO v. PEOPLE OF THE PHILIPPINES

G.R. No. 193279 l March 14, 2012 l Sereno, J.
FACTS: Petitioner issued checks to secure the loans she secured from private respondent. Those
checks were subsequently dishonored for upon presentment. She was then indicted for 4
counts of violation of B.P. 22. All the MTC, RTC, and CA ruled that all the elements of
B.P.22 were present. She now comes before the SC contending that there was no actual
receipt of notice of dishonor.
ISSUE: Whether or not there was an actual receipt of notice of dishonor
HELD: The remedy of appeal that petitioner availed of contemplates only of questions of fact, and
not of law. The issue in this case is clearly a question of fact. Petitioner failed to provide
any cogent reason for the Court to overturn the findings of the MTC, RTC, and CA.
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EFFECT OF MATERIAL ALTERATION
PHILIPPINE NATIONAL BANK V. COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK,

PHILIPPINE BANK OF COMMUNICATIONS AND F. ABANTE MARKETING
GR NO. 107508 | APRIL 25, 1996 | Kapunan, J.
FACTS: The Ministry of Education and Culture issued a check payable to F. Abante Marketing
which was drawn against PNB. F. Abante deposited the check in its savings account in
Capitol City Development Bank and in turn, Capitol deposited the same in its account with
the Philippine Bank of Communications which sent the check to PNB for clearing.
PNB cleared the check as good and PBCom credited Capitols account for the amount
stated in the check. However, PNB returned the check to PBCom and debited PBComs
account for the amount covered by the check due to a material alteration of the check
number. PBCom proceeded to debit the latters account and sent the check back to the
petitioner but such check was returned to PBCom. Capitol could not debit F. Abantes
account since such a mount was already withdrawn.
ISSUE: Whether or not PNB is liable to reimburse Captiol for the amount of the check.
HELD: Yes. An alteration is said to be material if it alters the effect of the instrument. It means an
unauthorized change in an instrument that purports to modify in any respect the obligation
of a party or an unauthorized addition of words or numbers or other change to an
incomplete instrument relating to the obligation of a party.
A material alteration is on which changes the items which are required to be stated in
Section 1 of the Negotiable Instruments Law. The questioned alteration in this case is the
serial number of the check which is not contemplated in Section 1. The checks serial
number is not the sole indication of its origin since the name of the government agency
which issued the check was prominently printed therein.
THE INTERNATIONAL CORPORATE BANK, INC. V. CA

G.R. NO. 129910 | Septmeber 5, 2006 | Carpio, J.
FACTS: The case originated from a collection suit instituted by the International Corporate Bank
(ICB) against Philippine National Bank (PNB). The Ministry of Education and Culture issued
15 checks drawn against PNB and accepted by IBC. After 24 hours from submission of the
checks to PNB for clearing, IBC paid the value of the checks and allowed the withdrawals
of the deposits. The checks were subsequently returned by PNB due to material
alterations. This resulted to the filing of this case by IBC for collection of sum of money.
The RTC dismissed the case stating that IBC should have made attempts to verify the
status of the checks before making payments thereon. Thus, the RTC ruled that since the
immediate cause of IBCs loss was the lack of caution of its personnel then it cannot
recover the value of the checks from PNB. The issue was brought before the CA and the
CA initially reversed the RTC. The CA ruled that even if the drawee bank returns a check
with material alterations after discovery of the alteration, the return would not relieve the
drawee bank from any liability for its failure to return the checks within the 24-hour clearing
period. However, upon PNBs motion for reconsideration the CA reversed itself and
affirmed the RTC. The alleged material alterations on the checks were on the serial
number.
ISSUE: Whether or not there was material alteration on the checks?
HELD: No. Sec. 125 of the NIL provides what constitutes material alteration. Material alterations
are changes in the date, sum payable, number or relations of the parties, time or place of
payment or medium or currency in which payment is to be made. In Philippine National
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Bank v. Court of Appeals, this Court ruled that the alteration on the serial number of a
check is not a material alteration. Alteration is said to be material if it alters the effect of the
instrument. A material alteration is one which changes the items which are required to be
stated under Section 1 of the Negotiable Instruments Law. In this case what was altered
was the serial number which is an essential element for negotiability as provided by Sec.1
of the NIL.
METROBANK V. RENATO CABILZO JR.

G.R. NO. 154469 | December 6, 2006 | Chico-Nazario, J.
FACTS: Cabilzo maintained a current account with Metrobank Pasong Tamo Branch. Cabilzo
issued a Metrobank Check, payable to CASH and postdated on 24 November 1994 in
the amount of P1000.00. The check was drawn against his account and paid by Cabilzo to
a certain Mr. Marquez as his sales commission. The check was subsequently deposited in
Westmont Bank, and the latter submitted it with Metrobank for clearing. Such check was
cleared.
Thereafter, Metrobanks representative asked Cabilzo if he issued a check for P91,000.

Cabilzo denied such which subsequently led him to call Metrobank for the recrediting of
the P90,000. Petitioner failed to recredit the amount. Cabilzo instituted a civil action for
damages, claiming reimbursement, plus damages. Metrobank claimed that Westmont
should be held liable for being the last indorser, and the collecting bank. Metrobank also
claimed that as an unqualified indorser, Westmont assumed liability of the general indorser,
and thus warranted that the instrument is genuine and in all respect what it purports to be.
They also claimed that Cabilzo was partly responsible in leaving spaces on the check,
which led to the fraudulent insertion of the amounts and figures. Metrobank also filed a
Third-Party Complaint against Westmont on account of the unqualified indorsement.
The RTC ruled in favor of Cabilzo and ordered Metrobank to pay the sum of the check.
The CA affirmed.
ISSUE: Was Metrobank liable for the alterations on the check bearing the authentic signature of
Cabilzo?
HELD: YES. An alteration is said to be material if it changes the effect of the instrument. It means
that an unauthorized change in an instrument that purports to modify in any respect the
obligation of a party or an unauthorized addition of words or numbers or other change to
an incomplete instrument relating to the obligation of a party. In other words, a material
alteration is one which changes the items which are required to be stated under Section 1
of the Negotiable Instruments Law. In the case at bar, the check was altered so that the
amount was increased from P1,000.00 to P91,000.00 and the date was changed from 24
November 1994 to 14 November 1994. Apparently, since the entries altered were among
those enumerated under Section 1 and 125, namely, the sum of money payable and the
date of the check, the instant controversy therefore squarely falls within the purview of
material alteration.
Beyond question, Metrobank failed to comply with the degree required by the nature of its
business as provided by law and jurisprudence. If indeed it was not remiss in its obligation,
then it would be inconceivable for it not to detect an evident alteration considering its vast
knowledge and technical expertise in the intricacies of the banking business.
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BANK OF AMERICA V. PHILIPPINE RACING CLUB

G.R. No. 150228 | July 30, 2009 | LEONARDO-DE CASTRO, J.
FACTS: Philippine Racing Club, Inc. (PRCI) maintains a current account with Bank of America
(BA), maintained by the President and Vice President of the corporation as joint
signatories. When these officers left the country on a business trip, they pre-signed
checks to be drawn on the current account, and entrusted with the accountant with the
instruction to complete and use them to settle any obligations that might become due.
Two of these checks were presented for encashment by a John Doe for P110,000 each.
Both checks had irregularities on them; on the space where the payees name should
have been written, the word CASH and below it, the words ONE HUNDRED TEN
THOUSAND PESOS ONLY were typewritten. Despite such infirmities, the checks were
still encashed, without even a verification process or a phone call to PRCIs office.
RTC ruled in favor of PRCI. CA affirmed.
ISSUE: W/N there was a material alteration upon the checks that would bind BA to verify them
with the drawer
HELD: YES. Although the signatures were genuine, and there were no material alterations or
erasures as found by the trial court, there were indeed irregularities on the face of the
checks. Banks, due to the fiduciary nature of their relationship with their clients, are
bound to show diligence beyond that of a good father of a family. While not strictly
material alterations per se, the misplacement of the entries were glaringly obvious
infirmities that clearly show a mistake on the part of the person filling up the check and
possibly attempting to rectify it. Such irregularities should have alerted the bank the
possibility that the holder attempting to encash the checks did not have proper title to, or
authority to fill up and encash the checks.
However, BA is bound to pay only 60% of the value of the checks due to PRCIs own
negligent practice of pre-signing and leaving checks behind while the officers left the
country.
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ACCEPTANCE - DEFINITION
HSBC v. CIR
G.R. No. 166018 | June 4, 2014 | Leonardo-De Castro, J.
FACTS: HSBC, as custodian bank which performs custodial services on behalf of its investor-
clients, serves as collection/payment agent with respect to dividends and other income
derived from its investor-clients passive investments. HSBC would purchase shares of
stock and other investments upon their clients instructions that are sent through electronic
messages from abroad, and the bank would debit their peso and/or foreign accounts to
pay the purchase price therefor. The bank would also purchase and pay the Documentary
Stamp Tax (DST) pursuant to Section 181 of the 1997 Tax Code, which states that the
same shall be imposed upon payment of any bill of exchange or order for payment of
money to be drawn in a foreign country but payable in the Philippines. The Bureau of
Internal Revenue (BIR), however, issued a ruling that instructions from abroad on the
management of funds located in the Philippines which do not involve the actual transfer of
funds are not subject to DST. This brought HSBC to file an administrative claim for the
refund of the erroneously paid DST to the BIR, which the BIR did not act upon. Hence,
HSBC brought the matter to the Court of Tax Appeals (CTA). The CTA ruled in favor of
HSBC and ordered BIR to refund the erroneously paid DST. The Court of Appeals (CA),
however, reversed the CTA, ruling that the electronic messages are subject to the DST
upon mere acceptance of said messages.
ISSUE: Whether or not the DST should be imposed on HSBC upon the mere acceptance of the
electronic messages?
HELD: No. Acceptance, under Section 132 of the NIL, applies only to bills of exchange. It is the
manifestation of the drawees consent to the drawers order to pay money and the
expression of the drawees promise to pay. Acceptance is made upon presentment of the
bill of exchange or within a reasonable time after presentment. Whether it be presentment
for acceptance or presentment for payment, the negotiable instrument must always be
produced and shown to the drawee or acceptor. It was noted that the history of the Tax
Code has been consistent in requiring the payment of DST upon mere acceptance or
payment of a foreign bill of exchange or order for the payment of money, drawn abroad but
payable in the Philippines. In this case however, the subject electronic messages are not
considered as negotiable instruments since the requisites under Section 1 of the NIL are
lacking, hence, there could have been no acceptance or payment that would trigger the
imposition of the DST under Section 181 of the Tax Code. The erroneously paid DST
should therefore be refunded to HSBC.
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ADDITIONAL CASES ACCEPTANCE
EQUITABLE PCI BANK v. ROWENA ONG

GR 156207 | September 15, 2006 | CHICO-NAZARIO, J.
FACTS: Sarande deposited a check to PCI Bank. Allegedly upon PCI Banks assurance that the
same was cleared, she issued a check to Ong. Instead of encashing, Ong asked PCI Bank
to convert the proceeds into a managers check. PCI Bank complied. Ong deposited the
managers check in her Equitable Banking Corporation account. Three days later, she
received a return slip informing her that PCI Bank stopped payment of the check. PCI Bank
refused to deliver the proceeds despite several demands. PCI Bank defended that the check
it received from Sarande was returned. As such, there were no funds supporting Ongs
check, the same being based on Sarandes deposit.
Ong sued PCI Bank to collect the value of the managers check PCI Bank issued. Ong filed
a motion for summary judgment, which the RTC granted since there were no genuine issues
of fact. RTC denied PCI Banks Motion for Reconsideration. On appeal, CA affirmed RTC.
ISSUES: Whether or not PCI Bank is liable to Ong for the value of the managers check PCI Bank
issued
Whether or not PCI Bank can invoke lack of consideration against Ong
HELD: 1. YES. A managers check stands on the same footing as a certified check which, under
sec 187 of the NIL, bears a certification equivalent to an acceptance. By accepting
Sarandes check and issuing in turn a managers check, PCI Bank assumed acceptors
liabilities under Sec 62 of the NIL where PCI Bank engages that he will pay it according to
the tenor of his acceptance and admits:
(a) The existence of the drawer, the genuineness of his signature, and his capacity and
authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.
2. NO. Under Section 28 of the NIL, absence or failure of consideration is a defense against
a person not a holder in due course. Ong here was a holder in due course, having satisfied
the requisites under Section 52:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice it had been
previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had notice of any infirmity in the instrument
or defect in the title of the person negotiating it
SECURITY BANK AND TRUST CO. vs. RCBC

G.R. No. 170987 | January 30, 2009 | Quisumbing, J.
FACTS: Security Bank and Trust Company (SBTC) issued a managers check for P8 million, payable
to CASH, as proceeds of the loan granted to Guidon Construction and Development
Corporation (GCDC). The P8-million check, along with other checks, was deposited by
Continental Manufacturing Corporation (CMC) in its Current Account with RCBC. RCBC
honored the 8-M check and allowed CMC to withdraw.
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GCDC issued a Stop Payment Order to SBTC, claiming that the P8-million check was
released to a third party by mistake. Consequently, SBTC dishonored and returned the
managers check to RCBC. Thereafter, the check was returned back and forth between the
two banks, resulting in automatic debits and credits in each banks clearing balance. RCBC
filed a complaint for damages against SBTC. RTC ruled in favor of RCBC.
ISSUE: Whether or not SBTC is liable for the unauthorized withdrawal
HELD: Yes. At the outset, it must be noted that the questioned check issued by SBTC is not just
an ordinary check but a managers check. A managers check is one drawn by a banks
manager upon the bank itself. It stands on the same footing as a certified check,13 which is
deemed to have been accepted by the bank that certified it.14 As the banks own check, a
managers check becomes the primary obligation of the bank and is accepted in advance
by the act of its issuance.
In this case, RCBC, in immediately crediting the amount of P8 million to CMCs account,
relied on the integrity and honor of the check as it is regarded in commercial transactions.
Where the questioned check, which was payable to Cash, appeared regular on its face, and
the bank found nothing unusual in the transaction, as the drawer usually issued checks in
big amounts made payable to cash, RCBC cannot be faulted in paying the value of the
questioned check.
SBTC cannot escape liability by invoking Monetary Board Resolution No. 2202, prohibiting
drawings against uncollected deposits. Thus, it is clear from the Memorandum that banks
were given the discretion to allow immediate drawings on uncollected deposits of managers
checks, among others. Consequently, RCBC, in allowing the immediate withdrawal against
the subject managers check, only exercised a prerogative expressly granted to it by the
Monetary Board.
THE INTERNATIONAL CORPORATE BANK vs. SPS. FRANCIS GUECO AND MA. LUZ GUECO
G.R. No. 141968 | J. Kapunan | February 12, 2001
FACTS: Spouses Gueco (respondents) obtained a loan from petitioner International Corporation
Bank (petitioner bank) for the purchase of a car. The spouses defaulted in payment which
prompted petitioner bank to file a complaint against the spouses. The two parties reached
a negotiation and agreed to reduce the obligation. Spouses Gueco issued a managers
check for the payment of their obligation but the bank did not release the car because
spouses Gueco refused to sign the joint motion to dismiss. By reason therefore, spouses
Gueco filed a complaint to the MTC for the recovery of the car. The complaint was dismissed
by the MTC but was reversed by the RTC ruling that the agreement between the two parties
did not include signing of the motion to dismiss as a condition sine qua non for the release
of the car. It was further ruled that petitioner bank should return the car without the issuance
of the a new check because the check became stale because of its own act in not claiming
the proceeds of the check. The CA affirmed the decision of the RTC. Hence, this petition.
Petitioner bank contends that it should not be ordered to return the car without the issuance
of a new check because the obligation of the spouses has not been paid.
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ISSUE: Whether or not the failure of International Corporation Bank to present the check for
payment on time discharges the liability of Spouses Gueco
HELD: No. Failure to present the check on time does not necessarily extinguish the liability. If the
check became stale, the circumstances that cause its non-presentment should be
determined. If the delay in the presentment is reasonable then the liability represented by
the check is not extinguished. In this case, the act of the bank in not presenting the check
for payment, which resulted to it becoming stale, was not done in bad faith and negligence.
The bank delayed in the presentment of the check because of the controversy surrounding
the refusal of spouses Gueco to sign the joint motion to dismiss, which was a valid reason
to withhold presentment.
SPS. GIL AND NOELLI GARDOSE vs. REYNALDO S. TARROZA

G.R. NO. 130570 | May 19, 1998 | PUNO, J.
FACTS Tarroza filed a complaint for a sum of money against Spouses Gardose. However, this
comlaint was dismissed for failure of Tarroza to have summons published in a newspaper
of general circulation within a reasonable time. Tarroza then filed a new complaint against
the couple. Spouses Gil and Noelli Gardose, on the other hand, raised the defense of res
judicata and claims that Noelli Gardose issued the checks in the amount of 320,000 as an
accommodation party.
ISSUE Whether or not Spouses Gardose would not be liable for the value of the checks because
the checks were issued as an accommodation party?
HELD No. Spouses Gardose would still be liable for the value of the check. The mere fact that
Noelli Gardose issued the 3 checks to appellee make her liable to the latter without the
need for the appellee to first go after Cecilia Cacnio because the relationship between an
accommodation party and the party accommodated is in effect one of principal and surety.
Noelli Gardose as an accommodation party is primarily and unconditionally liable to
appellee for the 3 checks that were dishonored by the drawee bank. When a bill is
dishonored by non-acceptance, an immediate right of recourse against the drawers and
indorsers accrues to the holder. The drawer of a negotiable instrument engages that, on
due presentment, the instrument will be accepted or paid, or both, and if dishonored, he
will pay the amount thereof to the holder.
MYRON C. PAPA vs. A.U. VALENCIA AND CO. INC.

G.R. No. 105188 | Jan. 23, 1998 | Kapunan, J.
FACTS: Petitioner Papa, acting as attorney-in-fact of Angela M. Butte, sold to respondent

Penarroyo, through respondent Valencia, a parcel of land. As payment, Valencia and
Penarroyo gave Papa P5,000 in cash and P40,000 in check. Even after the sale to
respondents, Papa still collected monthly rentals from the tenants of the property and
refused to deliver the title to the property to the respondents. Hence, respondents filed a
complaint against Papa for the delivery of the title and the collected rentals. The RTC ruled
in favor of respondents.
Papa, on appeal to the CA, alleged that the sale was never consummated as he did not
encash the check (P40,000) given by Valencia and Penarroyo in payment of the full
purchase price of the subject lot, and that what had only been paid by respondents was
the amount of P5,000 (in cash) as earnest money. The CA affirmed the RTC decision.
In his petition to the SC, Papa argues that the sale had not been consummated since there
was no valid payment for the parcel of land. He invokes Art. 1249 of the Civil Code which
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states that payment by checks shall produce the effect of payment only when they have
been cashed or when through the fault of the creditor they have been impaired. He insists
that he never cashed said check; and, such being the case, its delivery never produced
the effect of payment.
ISSUE: Whether or not there was a valid payment for the subject lot; and, thus, a consummation
of the sale in question.
HELD: YES. While it is true that the delivery of a check produces the effect of payment only when
it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is
prejudiced by the creditors unreasonable delay in presentment. The acceptance of a check
implies an undertaking of due diligence in presenting it for payment, and if he from whom
it is received sustains loss by want of such diligence, acceptance will operate as actual
payment of the debt or obligation for which it was given. Likewise, if no presentment is
made at all, the drawer cannot be held liable irrespective of loss or injury unless
presentment is excused. This is in harmony with Article 1249 of the Civil Code under which
payment by way of check or other negotiable instrument is conditioned on its being cashed,
except when through the fault of the creditor, the instrument is impaired. The payee of a
check would be a creditor under this provision and if its non-payment is caused by his
negligence, payment will be deemed effected and the obligation for which the check was
given as conditional payment will be discharged.
After more than 10 years from the payment in part by cash and in part by check, the
presumption is that the check had been encashed. Since petitioner Papa had never
encashed the check, his failure to do so for more than 10 years resulted in the impairment
of the check through his unreasonable and unexplained delay. Since the check had been
impaired through the fault of Papa, the check produced the effect of payment. Considering
that Valencia and Penarroyo had validly made payment of the purchase price, they,
therefore, had the right to compel Papa to deliver to them the title over the property sold
and the peaceful possession and enjoyment of the lot in question.
BANK OF AMERICA, NT & SA v. ASSOCIATED CITIZENS BANK, BA-FINANCE CORPORATION,

MILLER OFFSET PRESS, INC., UY KIAT CHUNG, CHING UY SENG, UY CHUNG GUAN SENG, and
COURT OF APPEALS
G.R. No. 141001 | May 21, 2009 | Carpio, J.
FACTS: BA-Finance Corporation entered into a transaction with Miller Offset Press, Inc. through
the latters authorized representatives, respondents herein. BA-Finance granted Miller a
credit line facility through which the latter could assign or discount its trade receivables with
the former.
Miller discounted and assigned several trade receivables to BA-Finance by executing

Deeds of Assignment in favor of the latter. In consideration of the assignment, BA-Finance
issued four checks payable to the "Order of Miller Offset Press, Inc." with the notation "For
Payees Account Only." These checks were drawn against Bank of America.
The 4 checks were deposited by respondent Ching Uy Seng, corporate secretary of Miller,
in his joint bank account with respondent Uy Chung Guan Seng in Associated Bank.
Associated Bank stamped the checks with the notation "all prior endorsements and/or lack
of endorsements guaranteed," and sent them through clearing. Later, the drawee bank,
Bank of America, honored the checks and paid the proceeds to Associated Bank as
collecting bank.
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Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables.
Consequently, BA-Finance filed a complaint against respondents for collection of the
amount which BA-Finance allegedly paid in consideration of the assignment.
Respondents denied signing the Continuing Suretyship Agreement with BA-Finance. In

view thereof, BA-Finance impleaded Bank of America as additional defendant for allowing
encashment and collection of the checks by persons other than the payee named thereon.
Bank of America filed a Third Party Complaint against Associated Bank.
The RTC rendered judgment against Bank of America, ordering it to pay BA Finance the
value of the 4 checks. Judgment is likewise rendered ordering Associated Bank to
reimburse Bank of America. The CA affirmed with the modification that respondents are
also ordered to pay Associated Bank the value of the 4 checks.
ISSUE: Whether or not Bank of America, as drawee bank who accepted and honored the 4 checks,
is liable to pay BA-Finance the amount of said checks
HELD: Yes. The drawee bank is under strict liability, based on the contract between the bank and
its customer (drawer), to pay the check only to the payee or the payees order. The drawers
instructions are reflected on the face and by the terms of the check. When the drawee bank
pays a person other than the payee named on the check, it does not comply with the terms
of the check and violates its duty to charge the drawers account only for properly payable
items. Thus, the drawee shall be liable for the amount charged to the drawers account.
A check with two parallel lines in the upper left hand corner means that it could only be
deposited and could not be converted into cash. Thus, the effect of crossing a check relates
to the mode of payment, meaning that the drawer had intended the check for deposit only
by the rightful person, i.e., the payee named therein. In this case, the checks were drawn
by BA-Finance and made payable to the "Order of Miller Offset Press, Inc." The checks
were also crossed and issued "For Payees Account Only." Clearly, the drawer intended
the check for deposit only by Miller Offset Press, Inc. in the latters bank account. Thus,
when a person other than Miller, i.e., Ching Uy Seng, presented and deposited the checks
in his own personal account, and the drawee bank, Bank of America, paid the value of the
checks and charged BA-Finances account therefor, the drawee is deemed to have violated
the instructions of the drawer, and therefore, is liable for the amount charged to the
drawers account.
FAR EAST BANK & TRUST CO. vs. GOLD PALACE JEWELLERY CO.
G.R. No. 168274 | August 20, 2008 | Nachura, J.
FACTS: On June 1998, Samuel Tagoe, a foreigner, purchased from Gold Palace Jewellery Co.'s
store at SM-North EDSA several pieces of jewelry valued at P258,000 paid w/ Foreign
Draft issued by the United Overseas Bank (Malaysia) to Land Bank of the Philippines,
Manila (LBP) for P380,000. A teller of Far East Bank, next door tenant, informed Julie
Yang-Go (manager of Gold Palace) that a foreign draft has similar nature to a manager's
check, but advised her not to release the pieces of jewelry until the draft had been cleared.
Yang issued Cash Invoice so the jewelries can be released. Furthermore, Yang deposited
the draft in the company's account with the Far East on June 2, 1998. When Far East, the
collecting bank, presented the draft for clearing to LBP, the drawee bank, cleared the it and
Gold Palace's account with Far East was credited. On June 6, the foreigner eventually
returned to claim the purchased goods. After ascertaining that the draft had been cleared,
Yang released the pieces of jewelry and his change, Far East Check of P122,000 paid by
the bank. On June 26 LBP informed Far East that the Foreign Draft had been materially
altered from P300 to P300,000and that it was returning the same. Far East refunded the
amount to LBP and debit only P168,053.36 of the amount left in Gold Palace'
account without a prior written notice to the account holder. Far East only notified by phone
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the representatives of the Gold Palace. On August 12, 1998, Far East demanded from
Gold Palace the payment of balance and upon refusal filed in the RTC. RTC ruled in favor
of Far East on the basis that Gold Palace was liable under the liabilities of a general
indorser. However, CA reversed RTC decision since Far East failed to undergo the
proceedings on the protest of the foreign draft or to notify Gold Palace of the draft's
dishonor; thus, Far East could not charge Gold Palace on its secondary liability as an
indorser.
ISSUE: Whether or not Gold Palace should be liable for the altered Foreign Draft
HELD: No. The Negotiable Instruments Law (NIL), expressly provides that the acceptor, by
accepting the instrument, engages that he will pay it according to the tenor of his
acceptance. This provision applies with equal force in case the drawee pays a bill without
having previously accepted it. Actual payment by the drawee is greater than his
acceptance, which is merely a promise in writing to pay. The payment of a check includes
its acceptance. The tenor of the acceptance is determined by the terms of the bill as it is
when the drawee accepts. Furthermore, LBP was liable on its payment of the check
according to the tenor of the check at the time of payment, which was the raised amount.
Gold Palace was not a participant in the alteration of the draft, was not negligent, and was
a holder in due course. LBP, having the most convenient means to correspond with UOB,
did not first verify the amount of the draft before it cleared and paid the same.
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ADDITIONAL CASES PROTEST
Marlou Velasquez vs. Solidbank Corporation

G.R. No. 157309 | March 28, 2008 | J. R.T. Reyes
FACTS: Marlou Velasquez operates an export business under the name Wilderness Trading.
Wilderness Trading entered into a contract of sale with Goldwell Trading of Pusan, South
Korea wherein the former will sell dried sea cucumber to the latter. As payment therefor,
Goldwell Trading opened a letter of credit with the Bank of Seoul in favor of Wilderness
Trading.
Velasquez then applied for credit accommodation with Solidbank Corporation for pre-
shipment financing. Since he wanted to be paid the value of one of the shipments in
advance, Velasquez negotiated for a documentary sight draft to be drawn on the letter of
credit extended by Goldwell Trading. As a condition for the issuance of the sight draft,
Velasquez executed a letter of undertaking, where he promised that the draft will be
accepted and paid by Bank of Seoul and held himself liable upon non-acceptance thereof.
Solidbank, however, failed to collect on the draft because it was not accepted by Bank of
Seoul for reasons of late shipment, forged inspection certificate, and absence of
countersignature of the negotiating bank on the inspection certificate. In addition, Goldwell
Trading issued a stop payment order on the draft because the dried sea cucumber
delivered to it contained soil.
Solidbank then demanded for collection of the payment it had advanced to Velasquez, who
then argued that his liability is extinguished because Solidbank failed to protest the non-
acceptance of the draft. Both lower courts ruled in favor of Solidbank.
ISSUES: Whether or not there was extinguishment of Velasquezs liability:

1. Under the sight draft?
2. Under the deed of undertaking?
HELD: 1. Yes. Under Section 152 of the Negotiable Instruments Law, a foreign bill which is
dishonored by non-acceptance must be duly protested for non-acceptance; otherwise, the
drawer and indorsers are discharged. In this case, Solidbank failed to make a protest on
the non-acceptance of the draft. Therefore, Velasquezs liability under the draft is
extinguished.
2. No. The letter of undertaking is a separate contract from the sight draft. Velasquez
bound himself liable to Solidbank under the letter of undertaking if the sight draft is not
accepted. That being the case at hand, Velasquez is ultimately still liable to Solidbank.
ALLIED BANKING CORP. vs. G.G. SPORTSWEAR MFG. CORP., et al

G.R. No. 125851 | July 11, 2006 | Quisumbing, J.
FACTS: Allied Banking Corp. purchased an export bill from G.G. Sportswear Mfg. Corp, which was
drawn under a letter of credit. The said bill was issued by Chekiang First Bank Ltd. Upon
purchase, Allied credited GGS the peso equivalent of the bill. Respondents Nari Gidwani
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and Alcron International Ltd. then executed letters of guaranty, holding themselves liable if
the export bill is dishonored. Respondents Spouses de Villa and Gidwani also executed a
Continuing Surety. Allied negotiated the export bill to Chekiang, but was dishonored due
to some material discrepancies in the documents. Allied demanded payment from all the
respondents pursuant to the guaranties and sureties. Respondents refused to pay because
Allied admitted not having protested the dishonor of the export bill, thereby discharging
GGS from liability.
The Regional Trial Court dismissed the case. Upon appeal, the Court of Appeals modified
the ruling of the RTC. The CA held GGS liable to reimburse Allied, but exonerated the
guarantors from their liabilities.
ISSUE: Whether or not respondents, as guarantors and sureties, may be held jointly and severally
liable with GGS in the absence of protest on the bill
HELD: Yes. This case is a discounting arrangement on the export bill between Allied and GGS.
GGS, as beneficiary of the export bill, went to Allied instead of Chekiang to have the bill
discounted. Allied, thereafter, required respondents to execute letters of guaranty. The
letters of guaranty and surety clearly show that respondents undertook and bound
themselves to pay the full amount of the export bill. Respondents reliance on Section 152
of the Negotiable Instruments Law is misplaced because it pertains to indorsers, not to
guarantors/sureties. Contracts of indorsement pertain to transfer, while contracts of
guaranty/surety are personal securities. In the former, unless the bill is promptly presented
for payment at maturity and due notice of dishonor is given to the indorser, the indorser is
discharged from liability. In the latter, demand or notice of default is not required. Therefore,
no protest on the export bill is necessary to charge respondent guarantors as jointly and
severally liable with GGS. Moreover, the surety agreement itself contained a clause
whereby sureties waive protest and notice of dishonor.
PRODUCERS BANK OF THE PHILIPPINES v. EXCELSA INDUSTRIES, INC.

GR. No. 152071 | May 8, 2009 | J. TINGA
FACTS: Excelsa Industries, Inc. (Excelsa) is a manufacturer and exporter of fuel products,
particularly charcoal briquettes, as an alternative fuel source. Sometime in January 1987,
Excelsa applied for a packing credit line or a credit export advance with Producers Bank of
the Philippines (Producers Bank) supported by a Letter of Credit issued by Kwang Ju Bank,
Ltd. of Seoul, through its correspondent bank, the Bank of the Philippine Islands, in the
amount of US$23,000 for the account of Shin Sung Commercial Co., Ltd., also located in
Seoul, Korea. T.L. World Development Corporation (T.L. World), as the original beneficiary,
for value received transferred to respondent Excelsa all its rights and obligations under the
said letter of credit. Petitioner approved Excelsas application for a packing credit line in
the amount of P300,000.00, of which about P96,000.00 in principal remained outstanding.
Subsequently, respondent presented for negotiation to petitioner drafts drawn under the
letter of credit and the corresponding export documents in consideration for its drawings in
the amounts of US$5,739.76 and US$4,585.79. Petitioner purchased the drafts and export
documents by paying respondent the peso equivalent of the drawings. The purchase was
subject to the conditions laid down in two separate undertakings by respondent. Later on,
Kwang Ju Bank, Ltd. notified petitioner through cable that the Korean buyer refused to pay
respondents export documents on account of typographical discrepancies and that it
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would be returning the export documents on account of the non-acceptance by the

importer. Petitioner demanded from respondent the payment of the peso equivalent of the
export documents, plus interest and other charges, and also of its other due and unpaid
loans. Due to respondents failure to heed the demand, petitioner moved for the
extrajudicial foreclosure on the real estate mortgage over respondents properties.
Respondent instituted an action for the annulment of the extrajudicial foreclosure with
prayer for preliminary injunction and damages against petitioner. RTC rendered a decision
upholding the validity of the extrajudicial foreclosure and ordering the issuance of a writ of
possession in favor of petitioner. CA invalidated the extrajudicial foreclosure of the REM
on the ground of procedural rules.
ISSUE: (1) Whether or not respondent should be held liable for the dishonor of the draft and export
documents?
HELD: YES. Notwithstanding petitioners alleged failure to comply with the requirements of notice
of dishonor and protest under Sections 89 and 152 respectively, of the NIL, respondent
may not escape its liability under the separate undertakings, where respondent promised
to pay on demand the full amount of the drafts. Respondent agreed to purchase the draft
and credit petitioner its value upon the undertaking that he will reimburse the amount in
case the sight draft is dishonored. The bank would certainly not have agreed to grant
petitioner an advance export payment were it not for the letter of undertaking. The
consideration for the letter of undertaking was petitioners promise to pay respondent the
value of the sight draft if the Bank of Seoul dishonored it for any reason.
Meanwhile, where the drawer therein also executed a separate letter of undertaking in
consideration for the banks negotiation of its sight drafts, the Court held that the drawer
can still be made liable under the letter of undertaking even if he is discharged due to the
banks failure to protest the non-acceptance of the drafts. The Court explained, thus:
petitioner, however, can still be made liable under the letter of undertaking insofar as its
obligation as negotiating bank under the letter of credit. It bears stressing that it is a
separate contract from the sight draft. The liability of petitioner under the letter of
undertaking is direct and primary. It is independent from his liability under the sight draft.
Liability subsists on it even if the sight draft was dishonored for non-acceptance or non-
payment.
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PROMISSORY NOTES
RODRIGO RIVERA VS SPOUSES CHUA

G.R. No. 184458 l January 14, 2015 l J. Perez
FACTS: Petitioner obtained a loan from respondent spouses, and executed a promissory note in
favor of the same. He made partial payments to respondent spouses by issuing and
delivering two checks. However, upon presentment for payment, the two checks were
dishonored for the reason account closed. Respondent spouses have made repeated
demands for payment, but to no avail. The MTC, RTC, and CA ruled in favor of the
respondent spouses.
ISSUE: Whether or not the Promissory Note in this case is a valid one
HELD: The Promissory Note is valid; however, it is not the one contemplated under the NIL. As
per Section 184 of the NIL, a negotiable promissory note within the meaning of this Act is
an unconditional promise in writing made by one person to another, signed by the
maker, engaging to pay on demand, or at a fixed or determinable future time, a sum
certain in money to order or to bearer. Where a note is drawn to the makers own order, it
is not complete until indorsed by him. The Promissory Note in this case is made out to
specific persons (Respondent Spouses), not to order or to bearer, or to the order of the
Respondent spouses.
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CROSSED CHECK
EQUITABLE BANKING CORPORATION vs. SPECIAL STEEL PRODUCTS

G.R. No. 175350 | June 13, 2012 | Del Castillo, J.
FACTS: Special Steel Products, Inc. (SSPI) sells steel products. Interco, its client, issued three
checks drawn against Equitable Banking Corp (Equitable) as payment for welding
electrodes it bought from SSPI bearing the phrase account payee only. Intercos own
purchasing officer, Uy (also happened to be majority stockholders son-in-law) somehow
got these checks and presented the same to Equitable. Equitable granted his request to
transfer the value thereof to his personal accounts in Equitable. Equitable assumed Uy was
only acting for Interco. Thereafter, Equitable stamped on the dorsal portion of the checks
ALL PRIOR ENDORSEMENT AND/OR LACK OF ENDORSEMENT GUARANTEED. Uy
later withdrew the proceeds of the checks.
SSPI demanded payment for the welding electrodes (total of P 985 thousand). Interco said
it already issued checks and SSPI denied receipt. They later discovered that the proceeds
of the checks were received by Uy. Interco thus paid the value but refused to pay the
interests, saying it was not responsible for the delay.
SSPI and its President, Pardo, sued Equitable and Uy for damages with application for writ
of preliminary attachment. Said Equitable was either conniving with Uy or grossly negligent
for depositing the checks proceeds to Uys account despite the account payee only
notation.
RTC clarified: action was for quasi-delict and not to enforce payment on undelivered
checks. RTC then ruled that checks belonged to SSPI, the payee and Uy had no title to
the checks; Equitable was negligent in permitting Uy to deposit the checks in his account.
Equitable did not verify Uys right to endorse.
Only Equitable appealed to CA. CA affirmed RTC.
ISSUE: Whether SSPI has a cause of action against Equitable for quasi-delict for allowing Uy to
deposit a check where he was not named payee
HELD: YES. Equitable should have verified Uys authority to present the checks. Uy was not
named payee and the checks were crossed; this should have put Equitable on guard.
Equitables argument that SSPI has no right based on the undelivered checks has no merit.
SSPIs cause of action is not to enforce the checks but on quasi-delict.
Equitable did not observe the required degree of diligence expected of a banking institution.
The highest degree of diligence is expected of banks, which are impressed with public
interest. Equitable relied only on its knowledge that Uy had close relations with Interco.
PCIB v. BALMACEDA
G.R. No. 158143 | SEPT. 21, 2011 | Brion, J.
FACTS: PCIB filed an action for recovery of sum of money before the RTC and alleged that
Balmaceda took advantage of his position as branch manager and fraudulently obtained
and encashed 31 crossed managers checks for P10.7M. PCIB filed an amended complaint
to implead Ramos as one of the recipients of the proceeds of the alleged fraud. Also, it
sought to recover 34 managers checks for a total of P11.9M. Balmaceda was declared in
default. Ramos filed an Answer and alleged that he is engaged in the business of buying
and selling fighting cocks and Balmaceda was one of his clients. He admitted receiving
money but claims that he had no knowledge of the source of the money Balmaceda paid.
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ATTY. CENIZA
RTC ruled in favor of PCIB. CA dismissed complaint against Ramos. The mere fact that
Balmaceda was payee does not suffice to prove that Ramos was complicit in Balmacedas
fraudulent scheme. PCIB also illegally froze and debited from Ramos account
ISSUE: Whether or not PCIB is negligent
HELD: Yes. A crossed check is one where two parallel lines are drawn across its face or across
its corner. The crossing of a check has the following effects:
(a) the check may not be encashed but only deposited in the bank;
(b) the check may be negotiated only onceto the one who has an account with the bank;
(c) the act of crossing the check serves as a warning to the holder that the check has been
issued for a definite purpose and he must inquire if he received the check pursuant to this
purpose; otherwise, he is not a holder in due course.
Another telling indicator of PCIBs negligence is the fact that it allowed Balmaceda to
encash the Managers checks that were plainly crossed checks. When a check is crossed,
it is the duty of the collecting bank to ascertain that the check is only deposited to the
payees account. In complete disregard of this duty, PCIBs systems allowed Balmaceda
to encash 26 Managers checks which were all crossed checks, or checks payable to the
payees account only.
A bank does not have a unilateral right to freeze the account of a depositor based on its
mere suspicion that the funds therein were proceeds of some shady transactions; For legal
compensation to take place, two persons, in their own right, must first be creditors and
debtors of each other.
While PCIB, as the depositary bank, is Ramos debtor in the amount of his deposits, Ramos
is not PCIBs debtor under the evidence the PCIB adduced. PCIB thus had no basis, in fact
or in law, to automatically debit from Ramos bank account.
EQUITABLE BANKING CORPORATION vs. SPECIAL STEEL PRODUCTS

G.R. No. 175350 | June 13, 2012 | Del Castillo, J.
FACTS: Special Steel Products (respondent) is a domestic corporation engaged in selling steel
products. Its co-respondent, Pardo, is the president of the company. Interco is one of the
customer of Special Steel Products while Uy is an employee of Interco and the son in law
of its majority stock holder. Equitable Banking Corporation (petitioner), on the other hand,
is the depositary bank of Interco and Uy. Special Steel Products sold welding electrodes
to Interco ad as a payment thereof, issued 3 crossed check payable to respondent
company drawn against petitioner bank. For some reason the checks ended up with Uy
and it was deposited in his personal account with the petitioner bank. By reason of the non-
payment of Intercos obligation, respondent company filed a complaint against equitable
bank and Uy, alleging among others that the checks issued were crossed checks and
therefore, the bank has the duty to ascertain the title of the person negotiating the
instrument. Equitable bank, in depositing the checks in the account of Uy, who was neither
the payee nor the maker of the instruments was grossly negligent in performing its duties.
The RTC ruled in favor of respondent company holding that considering that the checks
were crossed, it was the duty of the bank to ascertain the title of the holder. CA affirmed
the ruling of the RTC. Hence, this petition. Equitable bank contends that it acted in good
faith in depositing the check to the personal account of Uy because it had a reason to
believe that he has a legal title to the instrument considering his close relationship with the
majority stockholder of Interco.
ISSUE: Whether or not equitable is guilty of gross negligence in depositing the crossed-checks to
the personal account of Uy
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HELD: Yes. The crossed-checks issued by Interco, contained the notation to payees account
only. This creates a reasonable expectation that the payee alone would receive the
proceeds of the checks. This expectation is found on the accepted banking practice that a
crossed check is intended for deposit in payees account ONLY. At the very least, Equitable
Bank should have ascertained whether Uy was an authorized holder. It should have not
relied solely on the representation of Uy, whose name does not even appear in the
instrument, that he has a legal title to the instrument and such misplaced reliance
amounted to gross negligence.
93
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MANAGERS CHECK
SECURITY BANK AND TRUST COMPANY V. RCBC

G.R. NO. 170987 | January 30, 2009 | QUISUMBING, Acting C.J.
FACTS: Guidon Construction and Development Corporation (GCDC) applied for a loan with the
Security Bank and Trust Company (SBTC). The loan was granted which prompted SBTC
to issue a managers check payable to Cash for the amount of 8 million. The check was
then deposited by Continental Manufacturing Corporation with the RCBC which was
immediately honored and withdrawn. GCDC then issued a Stop Payment Order claiming
that the check was released to a third party by mistake. SBTC then dishonored the check
which promted RCBC to file a complaint for damages.
SBTC argues that RCBC failed to comply with Monetary Board Resolution No. 2202 which
requires all banks to verify the genuineness and validity of all checks before allowing
drawings of the same. RCBC, on the other hand, argues that the managers check is as
good as money and has the effect of advance acceptance.
The RTC ruled in favor of RCBC and found SBTC liable. This ruling was then affirmed by
the CA.
ISSUE: Whether or not RCBC erred in immediately honoring the managers check
HELD: NO. A managers check is one drawn by a banks manager upon the bank itself and is
deemed to have been accepted by the bank that certified it. A managers check becomes
the primary obligation of the bank and is accepted in advance by the act of its issuance.
RCBC relied on the integrity and honor of the check as it is regarded in commercial
transactions. As such, RCBC cannot be faulted in paying the value of the questioned
check.
Monetary Board Resolution No. 2202 allows banks the discretion to allow immediate
drawings on uncollected deposits of managers checks. As such, RCBC merely exercised
a prerogative granted by the memorandum when it allowed the immediate withdrawal of
the value of the check.
RCBC V. HI-TRI DEV. CORP.

G.R. No. 192413 | June 13, 2012 | Sereno, J.
FACTS: Milan offered to buy the parcels of land owned by Spouses Bakunawa and made a down
payment of P1m. The sale was later rescinded and the spouses offered to return to Milan
the down payment made; however, the latter refused to accept the same. In 1991, the
spouses, through their company, Hi-Tri, took out a Managers Check from RCBC in the
amount of P1m payable to Milans company, Rosmil, and used this as basis for their
complaint against Milan to compel the latter to accept the amount. The spouses retained
custody of the Managers check and refrained from canceling and negotiating it.
In 2003, without the knowledge of Hi-Tri and Spouses Bakunawa, RCBC reported the
P1m-credit existing in favor of Rosmil to the Bureau of Treasury as among its unclaimed
balances Pursuant to this, the OSG filed with the RTC the action for Escheat and, in 2008,
the RTC declared said credit escheated to the Republic.
In the meantime, the spouses and Milan had an amicable settlement that the former would
pay the latter P3m instead of P1m. Thereafter, the spouses were informed that the amount
94
ATTY. CENIZA
corresponding to the Managers Check was already subject of an escheat proceeding

before the RTC. Mr. Bakunawa wrote to RCBC to claim that said deposit cannot be subject
of an escheat proceeding and should remain part of Hi-Tris account with RCBC since the
payee rejected the Managers Check. Respondents allege that their ownership of the funds
was evidenced by their continued custody of the Managers Check.
RCBC contends that the funds represented by the Managers Check were deemed
transferred to the credit of the payee, Rosmil, upon issuance of the check. Rosmil having
made no withdrawal of the amount of the Managers Check, credit allocated therefor is
deemed among its unclaimed balances susceptible to escheat proceedings.
ISSUE: Whether or not the allocated funds for the payment of the Managers Check have been
abandoned by the respondents; thus, susceptible to escheat proceedings.
HELD: NO. Managers or cashiers checks are bills of exchange drawn by the banks manager or
cashier, in the name of the bank, against the bank itself. Since the bank issues the check
in its name, with itself as the drawee, the check is deemed accepted in advance.
Nevertheless, the mere issuance of a managers check does not ipso facto work as
an automatic transfer of funds to the account of the payee. If the procurer retains
custody of the check, the deposit represented by the Managers Check does not
automatically transfer to the payee.
In the case, the Managers Check was rejected by the payee (Rosmil) and was retained in
the custody of the respondents. As a result, the assigned fund is deemed to remain part of
the account of Hi-Tri, which procured the Managers Check. Since the respondents have
not abandoned their claim over the fund, the allocated deposit (subject of the Managers
Check) should be excluded from the escheat proceedings.
BANK OF THE PHILIPPINE ISLANDS v. WILFRED N. CHIOK

G.R. No. 175302 | November 26, 2014 | Leonardo-De Castro, J.
FACTS: Chiok had been engaged in dollar trading for several years. He buys dollars from Nuguid
at the exchange rate prevailing on the date of the sale. Chiok pays Nuguid either in cash
or managers check. Nuguid delivers the dollars either on the same day or on a later date
as may be agreed upon. For this purpose, Chiok maintained accounts with Metrobank and
Asian Bank. Chiok likewise entered into a Bills Purchase Line Agreement (BPLA) with
Asian Bank. Under the BPLA, checks drawn in favor of, or negotiated to, Chiok may be
purchased by Asian Bank.
Pursuant to the BPLA, Asian Bank "bills purchased" a Security Bank Managers Check
issued in the name of Chiok, and credited the same amount to the latters Savings Account.
On the same day, Asian Bank issued 2 managers checks to Gonzalo Bernardo, the same
person as Nuguid, pursuant to Chioks instruction and debited from his account. Likewise,
upon Chioks application, Metrobank issued a Cashiers Check in the name of Gonzalo
Bernardo. All 3 checks were debited from Chioks Savings Account.
Chiok deposited the 3 checks in Nuguids account with Far East Bank, the predecessor-in-
interest of BPI. Nuguid was supposed to deliver the dollar equivalent of the 3 checks as
95
ATTY. CENIZA
agreed upon, but failed to do so, prompting Chiok to request that payment on the 3 checks
be stopped. Chiok filed a Complaint for damages with application for ex parte restraining
order and/or preliminary injunction with the RTC against spouses Nuguid and the
depositary banks, Asian Bank and Metrobank.
The RTC rendered its decision in favor of Chiok, declaring as permanent the writ of
preliminary injunction and ordering Global Bank and Metrobank to pay the former. The RTC
ruled that managers checks and cashiers checks may be the subject of a Stop Payment
Order from the purchaser on the basis of the payees contractual breach. The agreement
herein was one in which Nuguid would deliver the equivalent amount in US dollars "on the
same date" that Chiok purchased and delivered the checks, which the latter failed to
perform. The CA affirmed with the modification that the contract between Chiok and
Gonzalo Nuguid is rescinded.
ISSUE: Whether or not payment of the managers and cashiers checks involved are subject to the
condition that Nuguid, the payee thereof, should comply with his obligation to Chiok, the
purchaser of the checks, to deliver the equivalent amount in US dollars "on the same date"
that Chiok purchased and delivered the checks
HELD: Yes. The dedication of such checks pursuant to specific reciprocal undertakings between
their purchasers and payees authorizes rescission by the former to prevent substantial and
material damage to themselves, which authority includes stopping the payment of the
checks. Moreover, it is fallacious to hold that the unconditional payment of managers and
cashiers checks is the rule. To begin with, both managers and cashiers checks are still
subject to regular clearing under the regulations of the BSP, to ensure that the same have
not been materially altered or otherwise completely counterfeited. While it cannot be said
that managers and cashiers checks are pre-cleared, clearing should not be confused with
acceptance. Managers and cashiers checks are pre-accepted by the mere issuance
thereof by the bank, which is both its drawer and drawee.
Thus, while managers and cashiers checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against
insufficient funds, or for similar reasons such as a condition not appearing on the face of
the check. Long standing and accepted banking practices do not countenance the
countermanding of managers and cashiers checks on the basis of a mere allegation of
failure of the payee to comply with its obligations towards the purchaser. On the contrary,
the accepted banking practice is that such checks are as good as cash. Furthermore, the
mere allegation of breach on the part of the payee of his personal contract with the
purchaser should not be considered a sufficient cause to immediately nullify such checks,
thereby eroding their integrity and honor as being as good as cash.
96
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CASHIERS CHECK
INTERNATIONAL CORPORATE BANK V SPS. GUECO

GR 142968 | February 12, 2001
FACTS: Spouses Gueco obtain a loan from ICB (now Union Bank) to purchase a car. In
consideration, spouses Gueco executed PNs and a chattel mortgage was made over the
car. However, the spouses defaulted in payment of their loan and despite the lowering of
the amount to be paid, they still failed to pay. Thereafter, they tendered a managers check
in favor of ICB. Afterwards, the car was detained for the reason that spouses refused to
sign the joint motion to dismiss. The bank averred that the joint motion to dismiss is part of
the standard office procedure to preclude the filing of other claims. Because of this, the
spouses filed an action for damages against ICB. However, by the time the case was
instituted, the check had become stale in the hands of the bank
ISSUE: Whether or not the spouses should replace the check they paid to ICB after it became stale
HELD: Yes. It appeared that the check has not been encashed. The delivery of the managers
check did not constitute payment. The original obligation to pay still exists. Indeed, the
circumstances that caused the non-presentment of the check should be considered to
determine who should bear the loss. In this case, ICB held on the check and refused to
encash the same because of the controversy surrounding the signing of the joint motion to
dismiss. There is no bad faith or negligence on the part of ICB
A stale check is one which has not been presented for payment within a reasonable time
after its issue. It is valueless and should not be paid. A check should be presented for
payment within a reasonable time after its issuance. Here, what is involved is a managers
check which is essentially a banks own check and may be treated as a promissory note
with the bank as a make. Even assuming that presentment is needed, failure to present for
payment within a reasonable time with result to the discharge of the drawer only to the
extent of the loss caused by the delay. In this case, there is no loss sustained. Still, such
failure to present on time does not wipe out liability.
97
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VALID ISSUANCE OF CHECK
EVANGELINE CABRERA VS. PEOPLE OF THE PHILS., ET. AL.

G.R. No. 150618 | July 24, 2003 | J. Callejo, Sr.
FACTS: Boni Co bought lumber materials and merchandise from Luis Go. In payment thereof, Co
gave Go three checks issued by Evangeline Cabrera. Co and Go further agreed that, upon
due date of the checks, either Co would replace them with cash or Go would deposit them.
Upon Cos failure to pay, Go deposited the checks. Said checks, however, were dishonored
due to the reason Account Closed. Go then filed a criminal charge for violation of Batas
Pambansa (BP) Blg. 22 against Cabrera, who invoked that she did not receive
consideration in issuing the checks. Cabrera also said that the checks were not for
encashment nor deposit, but would only serve as guarantee for payment of stocks bought
by Co.
ISSUE: 1. Whether or not Cabrera is criminally liable on the checks?

2. Whether or not Cabrera is civilly liable on the checks?
HELD: 1. No. For one to be held guilty for violating BP 22, the drawer must know at the time of
issue that he does not have sufficient funds in or credit with the drawee bank for the
payment of the check in full upon its presentment. This knowledge is presumed by the
receipt of a notice of dishonor and the subsequent failure to satisfy the amount of the check
or to arrange for its payment within five banking days after the receipt of the notice. In this
case, it was not proven that Cabrera received the notices of dishonor sent by Go.
Therefore, the presumption of knowledge cannot be attached to Cabrera, making her not
criminally liable for violating BP 22.
2. Yes. A check not intended to be presented has the same effect as an ordinary check,
and if passed upon to a third person, will be valid in his hands like any other check. In this
case, Cabreras argument that the checks were issued only to guarantee another obligation
does not affect the right of Go to enforce payment on the instrument. Therefore, Cabrera
is liable for the face value and interest of the checks.
98
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SUFFICIENT FUNDS WITH DRAWEE BANK
FRANCISCO SYCIP, JR. v. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES

G.R. No. 125059 | March 17, 2000 | Quisumbing, J.
FACTS: Francisco Sycip bought a townhouse unit on installment from Francel Realty Corporation
(FRC) and issued 48 postdated Citibank checks as payment. After moving to his unit, Sycip
complained about the defects and incomplete feautures of the townhouse but FRC ignored
the same. Sycip then served notices that he will suspend his monthly payments pending
compliance of FRC with the construction plans. However, FRC continued to present the
checks for encashment as the due date fell. Sycip, in turn, ordered stop payments to the
drawee bank. Citibank thereafter advised Sycip to close his account to avoid paying bank
charges for the stop payment orders. Because of the closing of Sycips account, Citibank
dishonored 6 checks presented by FRC for encashment. Thus, FRC filed a complaint
against Sycip for violations of Batas Pambansa Blg. 22.
As a defense, Sycip reiterated that he sent a notice to FRC about his suspension of
payments until the completion or repair of the unit. Moreover, he stated that he had
P150,000 credit/cash with Citibank.
The Regional Trial Court held Sycip guilty as charged, which the Court of Appeals affirmed.
The CA ruled that Sycip had no justification to stop paying his obligations due to FRC.
ISSUE: Whether or not Sycip, at the time of the issuance of the checks, had knowledge that he did
not have enough funds for payment of the value of the checks upon FRCs presentment,
thus satisfying the second element of B.P. Blg. 22
HELD: B.P. Blg. 22 creates a rebuttable presumption juris tantum of the issuers knowledge, at
the time of the issuance, that he did not have enough funds for payment upon the checks
presentment. However, in this case, Sycip presented evidence that contradicted this
presumption. The checks are postdated checks. This means that on the date indicated on
each checks face, the same would be properly funded, not that the checks should be
deemed as issued only then. The checks were issued at the time of the signing of the
contract to sell. There is nothing that shows that at the time the checks were issued, Sycip
had knowledge that his deposit would be insufficient to cover them when presented. He
could not have foreseen that he would be advised by Citibank to close his account to avoid
paying bank charges due to stop payment orders. There is also Sycips testimony that he
had P150,000 cash/credit with Citibank. This means that the closure of Sycips account
was not for insufficiency of funds, but pursuant to Citibanks advice.
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NEGOTIABLE INSTRUMENTS LAW G02

HSBC LTD.-PHIL. BR. V. COMMISSIONER OF INTERNAL REVENUE

RODRIGO RIVERA vs. SPS. SALVADOR AND VIOLETA CHUA

ISSUE: Whether or not Sec. 70 of the NIL is applicable

SPS PREDO AND FLORENCIA VIOLAGO VS BA FINANCE CORPORATION

ISSUE: Whether or not the promissory note was a negotiable instrument

a. It must be in writing and signed by the maker or drawer;

CONSOLIDATED PLYWOOD INDUSTRIES INC. vs IFC LEASING AND ACCEPTANCE

ISSUE: Whether or not the Promissory Note is negotiable.

APPLICABILITY OF THE NEGOTIABLE INSTRUMENTS LAW

ROMEO GARCIA V. DIONISIO LLAMAS

A non-negotiable note is merely a simple contract in writing and is evidence of such

Effect is, he cannot escape his solidary liability with de Jesus.

FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES v. CA AND LUZON

ADDITIONAL CASES: APPLICABILITY OF NIL

PN No. PFX254 dated December 14, 1981 for P600,000,

PN No. 15477 dated August 27, 1981 for P2,000,000

REPUBLIC PLANTERS BANK VS. COURT OF APPEALS AND FERMIN CANLAS

FACTS: Shozo Yamaguchi and Fermin Canlas, as President/COO of Worldwide Garment

SAN MIGUEL CORP v. PUZON

ISSUE: Whether or not Puzon is liable for theft

LORETO R. DE LA VICTORIA V. HON. JOSE P. BURGOS

2. No. Public funds cannot be subject to Garnishment in order to satisfy a judgement as it

FAR EAST BANK v. QUERIMIT

CITYTRUST BANKING CORP. VS. CA

ISSUE: Whether or not Inciong should be held liable.

PHILIPPINE NATIONAL BANK V. ERLANDO T. RODRIGUEZ

ISSUE: WON the Rodriguez checks are payable to bearer?

HELD NO. The checks are payable to order.

JOHN DY VS. PEOPLE

INCOMPLETE BUT DELIVERED INSTRUMENTS

ALVIN PATRIMONIO v. NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III

Without Patrimonios knowledge and consent, Gutierrez went to Marasigan to secure a

BANK OF AMERICA VS. PHILIPPINE RACING CLUB

COMPLETE BUT UNDELIVERED INSTRUMENTS

RCBC VS. HI-TRI DEV. CORP., ET AL.

In 2006, by virtue of RCBCs report on unclaimed balances, escheat proceedings were

ISSUANCE AND DELIVERY

FACTS: Samsung Construction Company Phils. (Samsung Construction) maintained a current

ISSUES: 1. Whether the check was indeed forged.

TRADERS ROYAL BANK v. RADIO PHILIPPINES NETWORK, INC.

CASA MONTESSORI INTERNATIONALE V. BANK OF THE PHILIPPINE ISLANDS

Section 21 of the Negotiable Instruments Law:

ENGR. JOSE E. CAYANAN v. NORTH STAR INTL TRAVEL, INC.

CARMELA BROBIO MANGAHAS VS. EUFROCINA A. BROBIO

ISSUE: 1. Whether or not there was undue influence

FIDELIZA J. AGLIBOT VS. INGERSOL L. SANTIA

ISSUE: Whether or not Aglibot is personally liable for the 11 checks

EUSEBIO GONZALES vs. PHILIPPINE COMMERCIAL BANK & INTERNATIONAL BANK

ANG v. ASSOCIATED BANK

Tomas also acknowledged that the relationship of an accommodation party and

The petition is denied.

BAUTISTA v. AUTO PLUS TRADERS

1. He must be a party to the instrument;

MELVA GONZALES V. RCBC

ADDITIONAL CASES - NEGOTIATION

CALTEX (PHILS.) V COURT OF APPEALS

PEOPLE OF THE PHILIPPINES v. GILBERT REYES WAGAS

ISSUE: Whether or not Wagas has issued the check to Ligaray

BANK OF THE PHILIPPINE ISLANDS v. COURT OF APPEALS, SALAZAR and TEMPLONUEVO

RAUL SESBREO V. CA, DELTA MOTORS CORPORATION AND PILIPINAS BANK

GEMPESAW V COURT OF APPEALS