I.

Sesbreno vs. CA
GR 89252, 24 May 1993
Third Division, Feliciano (J)

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

Issue:Whether non-negotiability of a promissory note prevents its assignment.

Held:Only an instrument qualifying as a negotiable instrument under the relevant statute may be negotiatedeither by indorsement
thereof coupled with delivery, or by delivery alone if it is in bearer form. A negotiable instrument, instead of being negotiated, may
also be assigned or transferred. The legal consequences of negotiation and assignment of the instrument are different. A negotiable
instrument may not be negotiated but may be assigned or transferred, absent an express prohibition against assignment or transfer
written in the face of the instrument. herein, there was no prohibition stipulated.

II.7

Caltex (Philippines) Inc. vs. CA

GR 97753, 10 August 1992
Second Division, Regalado (J)

Facts:On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued 280certificates of time
deposit (CTD) in favor of one Angel dela Cruz who deposited with the bank the aggregate amount of P1.12 million. Anger
de la Cruz delivered the CTDs to Caltex in connection with his purchase offuel 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. De la Cruz was able to obtain a loan of P875,000 from the bank, and in turn, he executed a
notarized Deed of Assignment of Time Deposit in favor of the bank. Thereafter, Caltex presented for verification the CTDs
(which were declared lost by de la Cruz) with the bank. Caltex formally informed the bank of its possession of the CTDs
and its decision to preterminate the same. The bank rejected Caltex’ claim and demand, after Caltex failed to furnish
copy of the requested documents evidencing the guarantee agreement, etc. In 1983, de la Cruz’ loan matured and the
bank set-off and applied the time deposits as payment for the loan. Caltex filed the complaint, but which was dismissed.

Issue [1]:Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.

Held [1]:The CTDs in question meet the requirements of the law for negotiability. Contrary to the lowercourt’s findings,
the CTDs are negotiable instruments (Section 1). Negotiability or non-negotiability of an instrument is determined from
the writing, i.e. from the face of the instrument itself. The documents provided that the amounts deposited shall be
repayable to the depositor. The amounts are to be repayable to the bearer of the documents, i.e. whosoever may be the
bearer at the time of presentment.

Issue [2]:Whether the CTDs’ negotiation require delivery only.

Held [2]:Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose andagreement
between it (Caltex) and de la Cruz requires both delivery and indorsement; as the CTDs were delivered to it as security
for dela Cruz’ purchases of its fuel products, and not for payment. Herein, there was no negotiation in the sense of a
transfer of title, or legal title, to the CTDs in which situation mere delivery of the bearer CTDs would have sufficed. The
delivery thereof as security for the fuel purchases at most constitutes Caltex as a holder for value by reason of his lien.
Accordingly, a negotiation for such purpose cannot be effected by mere delivery of the instrument since the terms thereof
and the subsequent disposition of such security, in the event of non-payment of the principal obligation, must be
contractually provided for.

III.7

Philippine Commercial Industrial Bank vs. CA

GR 121413, 29 January 2001
Second Division, Quisumbing (J)

Facts:Ford issued Citibank checks in favor of the Commissioner of Internal Revenue as payments of itstaxes, through
the depository bank Insular Bank of Asia and America (later PCIBank). Proceeds of the checks were never received by
the Commissioner, but were encashed and diverted to the accounts of members of a syndicate, to which Ford’s General
Ledger Accountant Godofredo Rivera belongs. Upon demand of the Commissioner anew, Ford was forced to make
second payment of its taxes. Thus, Ford instituted actions to recover the amounts from the collecting (depository) and
drawee banks.

Issue:Whether Ford has the right to recover from the collecting bank (PCI Bank) and/or the drawee bank(Citibank) the
value of the checks.
Held:The mere fact that forgery was committed by a drawer- payor’s confidential employee or agent, who byvirtue of his
position had unusual facilities to perpetrate the fraud and imposing the forged paper upon thebank, does not entitle the
bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. The
rule applies to checks fraudulently negotiated or diverted by the confidential employees who hold them in their
possession.

In GRs 121413 and 121479, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. Furthermore,
PCIBank’s clearing stamp which guarantees prior or lack of indorsements render PCIBank liable as it allowed Citibank
without any other option but to pay the checks. PCIBank, being a depository / collecting bank of the BIR, had the
responsibility to make sure that the crossed checks were deposited in “Payee’s account only” as found in the instrument.

In GR 128604, on the other hand, the switching operation involving the checks, while in transit for clearing, were the
clandestine or hidden actuations performed by the members of the syndicate in their own personal, covert and private
capacity; without the knowledge nor official or conscious participation of PCIBank in the process of embezzlement.
Central Bank Circular 580 (1977), however, provide d that any theft affecting items in transit for clearing are for the
account of the sending bank (herein PCIBank). Still, Citibank was likewise negligent in the performance of its duties as it
failed to establish its payment of Ford’s checks were made in due course and legally in order. The fact that drawee bank
did not discover the irregularity seasonably constitutes negligence in carrying out the bank’s duty to its depositors.

III.15

MWSS vs. CA
GR L-62943, 14 July 1986
Second Division, Gutierrez Jr. (J)

Facts:By special arrangement with PNB, MWSS used personalized checks in drawing from its account. Thechecks were
printed by its printer, F. Mesina Enterprises. 23 checks were paid and cleared by PNB, and debited against MWSS’
account from March to May 1969. The checks were deposited by payees Raul Dizon, Arturo Sison, and Antonio
Mendoza in their account with PCIBank. Said persons were later found to be fictitious. MWSS requested PNB to restore
the amount debited due to the 23 checks, allegedly forged, to its account. The bank refused. Hence, the present action.

Issue:Who shall bear the loss resulting from the alleged forged checks.

Held:There was no express and categorical finding that the 23 checks were forged or signed by persons otherthan the
authorized MWSS signatories. Forgery is not presumed but should be established by clear, positive and convincing
evidence. MWSS is barred from setting up defense of forgery under Section 23 of the Negotiable Instruments Law

[ G.R. No. L-222, April 26, 1950 ]

SALVACION F. VDA. DE EDUQUE, ETC. PLAINTIFF AND APPELLEE, VS. JOSE M. OCAMPO, DEFENDANT AND
APPELLANT.

Facts:

On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon,
DonaEscolastica delos Reyes and Don Jose M. Ocampo, with amount s of P40,000 and
P15,000, both payablewithin 20 years with interest of 5% per annum. Payment of the loans
was guaranteed by mortgage on realproperty. On 6 December 1943, Salvacion F. Vda
de Eduque, as administratrix of the estate of Dr. Jose Eduque, tendered payment by means
of a cashier’s check representing Japanese War notes to Jose M. Ocampo, who refused payment.
By reason of such refusal, an action was brought and the cashier’s check wasdeposited in court. After
trial, judgment was rendered against Ocampo compelling him to accept the amount,to pay the expenses
of consignation, etc. Ocampo accepted the judgment as to the second loan but appealed as to the first
loan.

Issue:

Whether or not the tender of payment by means of a cashier’s check representing Japanese war notes is
valid.

Held:

The Supreme Court ruled that Japanese military notes were considered as legal tender during the
Japanese occupation, thus, the payment was valid. Furthermore, defendant accepted impliedly the
consignation of the cashier's check when he himself asked the court that out of the money thus consigned
he be paid the amount of the second loan of P15,000.00.It is a rule that a cashier's check may constitute
a sufficient tender where no objection is made on this ground.

[ GR No. L-27782, Jul 31, 1970 ]

OCTAVIO A. KALALO v. ALFREDO J. LUZ

FACTS:
Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an architect in 1961. Luz contracted Kalalo to work on
ten projects across the country, one of which was an in the International Rice Research Institute (IRRI) Research Center in Los
Baños, Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalo’s work, Luz agreed to pay him 20% of what IRRI is
going to pay or equivalent to $28,000.00.
ISSUE:
Whether or not appellee be paid in US currency?
RULING:
No. The agreement was forged in 1961, years before the passage of Republic Act 529 in 1950. The said law requires that payment in
a particular kind of coin or currency other than the Philippine currency shall be discharged in Philippine currency measured at the
prevailing rate of exchange at the time the obligation was incurred. Nothing in the law however provides which rate of exchange
shall be used hence it is but logical to use the rate of exchange at the time of payment.

III.2

Astro Electronics Corp. and Peter Roxas vs. Philippine Export and Foreign Loan Guarantee Corporation

Facts:
- Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting to P3,000,000.00 with interest and
secured by three (3) promissory notes. [P600,000.00; P400,000.00 and P2,000,000.00]. In each of these promissory notes,
it appears that Petitioner Roxas signed twice, as President of Astro and in his personal capacity. Roxas also signed a
Continuing Surety ship Agreement in favor of Philtrust Bank, as President of Astro and as surety.
- Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust the payment of 70% of Astros loan, subject to
the condition that the Philguarantee shall be proportionately subrogated of Philtrust’s rights against Astro.
- Astro failed to pay its loan obligations. 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.
- Roxas disclaims any liability on the instruments, alleging, inter alia, that he merely signed the same in blank and the
phrases in his personal capacity and in his official capacity were fraudulently inserted without his knowledge.
- RTC rendered its decision in favor of Philguarantee ordering the defendants Astro and Roxas to pay jointly and severally,
the plaintiff (Philguarantee) the sum of P3,621,187.52 (with interest at stipulated rate of 16% per annum)
- CA affirmed the decision of the RTC agreeing with the trial court that Roxas failed to explain satisfactorily why he had to
sign twice in the contract and therefore the presumption that private transactions have been fair and regular must be
sustained.
Issue:
- Whetehr or not Roxas should be jointly and severally liable (solidary) with Astro for the sum awarded by the RTC.
Held:
- Yes. The answer is in the affirmative.

Astros loan with Philtrust Bank is secured by three (3) promissory notes. These promissory notes are valid and binding
against Astro and Roxas. 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 being the President of Astro, Roxas became a co-maker of the promissory
notes and cannot escape any liability arising from it. Under the Negotiable Instruments Law, persons who write their names
on the face of promissory notes are makers, promising that they will pay to the order if the payee or any holder according to
its tenor. Thus, even without the phrase personal capacity, Roxas will still be primarily liable as a joint and several debtor
under the notes considering that his intention to be liable as such is manifested by the fact that he affixed his signature on
each of the promissory notes twice which necessarily would imply that he is undertaking the obligation in two different
capacities, official and personal.

ADALIA FRANCISCO, petitioner, vs. COURT OF APPEALS , HERBY COMMERCIAL & CONSTRUCTION CORPORATION
AND JAIME C. ONG, respondents.

This is a petition for review on certiorari on the decision of the Court of Appeals affirming the decision rendered by the Regional
Trial Court in favor of private respondents. The controversy originated from a contract entered into by A. Francisco Realty &
Development Corporation, Adalia Francisco the petitioner was its president and Herby Commercial & Construction Corporation,
Jaime C. Ong the private respondent as its president. The contract was a Land Development and Construction Contract pursuant to a
housing projet of petitioner’s company and financed by Government Service Insurance System. An Executive Committee Account
with Insular bank of Asia & America was set up to facililtate payments to respondent. A case for the collection of the completed and
delivered units but was dismissed after an amicable settlement through Memorandum of Agreement signed. However,
the respondent discovered that there were checks issued in his favor but was not delivered to him. Instead, Francisco forged his
signature and deposited the checks in her IBAA savings account. Another case was filed against the petioner charging him with estafa
thru falsification of commercial documents. Eventually, the case was dismissed on the merit that the checks were used as security for
the completion of the project. The respondent case was elevated for the collection.The Regional Trial Court held in favor of the
plaintiffs and against the defendants INSULAR BANK OF ASIA & AMERICA and ATTY. ADALIA FRANCISCO. Moreover, the
Court of Appeals affirmed the trial court’s ruling, hence this petition for review on certiorari filed by petitioner.

Issue:
whether or not Francisco forged the signature of Ong on the seven checks.

Held:
Yes. The forgery was satisfactorily established in the trial court upon the strength of the findings of the NBI handwriting expert.]
Other than petitioners self-serving denials, there is nothing in the records to rebut the NBIs findings. Well-entrenched is the rule that
findings of trial courts which are factual in nature, especially when affirmed by the Court of Appeals, deserve to be respected and
affirmed by the Supreme Court, provided it is supported by substantial evidence on record, as it is in the case at bench. The
petitioners claims that she was authorized to sign Ongs name on the checks by virtue of the Certification executed by Ong in her
favor giving her the authority to collect all the receivables of HCCC from the GSIS, including the questioned checks.Petitioners
alternative defense must similarly fail. The Negotiable Instruments Law provides that where any person is under obligation to indorse
in a representative capacity, he may indorse in such terms as to negative personal liability. An agent, when so signing, should indicate
that he is merely signing in behalf of the principal and must disclose the name of his principal; otherwise he shall be held personally
liable.Even assuming that Francisco was authorized by HCCC to sign Ongs name, still, Francisco did not indorse the instrument in
accordance with law. Instead of signing Ongs name, Francisco should have signed her own name and expressly indicated that she was
signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate her act of forgery.Therefore, the court
affirmed the Regional Trial Court decision in favor of private respondents.

BPI V. CASA MONTESORRI INTERNATIONALE

430 SCRA 261

FACTS:
CASA Montessori Internationale is a depositor of BPI and a holder of a current account with BPI. It was discovered that
for a material period of time, several checks were encashed by a certain Sonny Santos, who eventually was known to be a
fictitious name used by the external auditor of CASA. The external auditor by the name of Leonardo T. Yabut admitted forging
the signature of CASA’s president to be able to encash the checks. The trial court held the bank liable but this was modified in the
decision of appellate court. The Court of Appelas in its modified decision apportioned the loss between BPI and CASA.

Issue:
Whether or not there was forgery under the Negotiable Instruments Law (NIL)?

HELD:
Yes. In the present case, the court held that there was forgery of the drawers signature on the check. The RTC and CA found
Leonardo Yabut guilty of forgery through his Affidavit where he voluntarily admitted that he forged the signature of CASA’s
President Ms. Ma. Carina C. Lebron. Said forgery was made on the subject checks and he also admitted that the same encashed by
him. It was also ruled by the same courts that the PNP Crime Laboratory report showing disparity in the signature of Lebron and the
signature in the said checks is admissible as it is consistent with the report said laboratory issued to BPI upon the latter’s previous
request. The court affirmed the RTC’s factual findings, especially when affirmed by the appellate court, since these were supported
by substantial evidence on record.
The court affirmed partly CA’s ruling, it held that BPI is held liable for P547,115, the total value of the forged checks less
the amount already recovered by CASA from Leonardo T. Yabut, plus interest at the legal rate of six percent (6%) per annum --
compounded annually, from the filing of the complaint until paid in full; and attorneys fees of ten percent (10%) thereof, subject to
reimbursement from Respondent Yabut for the entire amount, excepting attorneys fees.
The ruling was made against BPI, because firstly, forged signature is a real and absolute defense, and a person
whose signature appears on a negotiable instrument is forged is deemed to never have become a party thereto and to have never
consented to the contract that allegedly gave rise to it. Secondly, BPI was held to be negligent. Because by the nature of its functions,
a bank is required to take meticulous care of the deposits of its clients, who have the right to expect high standards of integrity and
performance from it. Among its obligations in furtherance thereof is knowing the signatures of its clients.

G.R. No. 107382/G.R. No. 107612 January 31, 1996

ASSOCIATED BANK, petitioner,

vs.
HON. COURT OF APPEALS, PROVINCE OF TARLAC and PHILIPPINE NATIONAL BANK, respondents.

xxxxxxxxxxxxxxxxxxxxx

G.R. No. 107612 January 31, 1996

PHILIPPINE NATIONAL BANK, petitioner,

vs.
HONORABLE COURT OF APPEALS, PROVINCE OF TARLAC, and ASSOCIATED BANK, respondents.

Facts:
The Province of Tarlac maintains a current account with the Philippine National Bank (PNB) Tarlac Branch where the provincial
funds are deposited. A portion of the funds of the province is allocated to the Concepcion Emergency Hospital. 2 The allotment checks
for said government hospital are drawn to the order of "Concepcion Emergency Hospital, Concepcion, Tarlac" or "The Chief,
Concepcion Emergency Hospital, Concepcion, Tarlac." In January 1981, the books of account of the Provincial Treasurer were post-
audited by the Provincial Auditor. It was then discovered that the hospital did not receive several allotment checks drawn by the
Province. On February 1981, the Provincial Treasurer requested the manager of the PNB to return all of its cleared checks which
were issued from 1977 to 1980 in order to verify the regularity of their encashment.The Provincial Treasurer learned that 30 checks
amounting to P203,300.00 were encashed by one Fausto Pangilinan, with the Associated Bank acting as collecting bank. It turned out
that Fausto Pangilinan, who was the administrative officer and cashier of payee hospital until his retirement on February 28, 1978,
collected the questioned checks from the office of the Provincial Treasurer. On February 26, 1981, the Provincial Treasurer wrote the
manager of the PNB seeking the restoration of the various amounts debited from the current account of the Province. In turn, the
PNB manager demanded reimbursement from the Associated Bank on May 15, 1981. As both banks resisted payment, the Province
of Tarlac brought suit against PNB which, in turn, impleaded Associated Bank as third-party defendant. The latter then filed a fourth-
party complaint against Adena Canlas and Fausto Pangilinan. RTC rendered a decision in favor of the plaintiff, PNB and associated
bank Appealed
Issue:
Where thirty checks bearing forged endorsements are paid, who bears the loss, the drawer, the drawee bank or the collecting bank?
Ruling:
The supreme court ruled that PNB and associated bank bears the loss. The Court finds as reasonable, the proportionate sharing of
fifty percent - fifty percent (50%-50%). Due to the negligence of the Province of Tarlac in releasing the checks to an unauthorized
person (Fausto Pangilinan), in allowing the retired hospital cashier to receive the checks for the payee hospital for a period close to
three years and in not properly ascertaining why the retired hospital cashier was collecting checks for the payee hospital in addition to
the hospital's real cashier, respondent Province contributed to the loss amounting to P203,300.00 and shall be liable to the PNB for
fifty (50%) percent thereof. In effect, the Province of Tarlac can only recover fifty percent (50%) of P203,300.00 from PNB.
The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liable on its warranties as
indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed the genuineness of all prior indorsements,
including that of the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to ascertain the
genuineness of the payee's indorsement.
The Philippine National Bank shall pay fifty percent (50%) of P203,300.00 to the Province of Tarlac, with legal interest from March
20, 1981 until the payment thereof. Associated Bank shall pay fifty percent (50%) of P203,300.00 to the Philippine National Bank,
likewise, with legal interest from March 20, 1981 until payment is made.
Case to Digest
Pio Baretto Realty Dev. Corp vs CA 360 SCRA 127
Inciong vs. CA 257 SCRA 578
Dev. Bank of Rizal vs Sim Wei 219 SCRA 736
BPI Family Bank vs. Buenaventura 471 SCRA 431
Gempesaw vs. CA 218 SCRA 682

Pio Baretto Realty Dev. Corp vs CA 360 SCRA 127

This petition for review on certiorari assails the Decision dated 30 June 1997 of the Court of Appeals in CA-G.R. SP No.
33982, "Pio Barretto Realty Development Corporation v. Hon. Perfecto A. Laguio, et al.," which dismissed the special civil
action for certiorari filed by petitioner.
Facts:
 On 2 October 1984 respondent Honor P. Moslares instituted an action for annulment of sale with damages
before the Regional Trial Court of Manila against the Testate Estate of Nicolai Drepin
 Moslares alleged that the Deed of Sale over four (4) parcels of land of the Drepin Estate executed in favor of the
Barretto Realty was null and void on the ground that the same parcels of land had already been sold to him by
the deceased Nicolai Drepin.
 On 2 May 1986 the parties, to settle the case, executed a Compromise Agreement

 On 24 July 1986 the trial court rendered a decision approving the Compromise Agreement.[2] However,
subsequent disagreements arose on the question of who bought the properties first.
 Moslares claimed that he bought the lots first on 15 January 1990 by delivering to Atty. Tomas Trinidad two (2)
PBCom checks, one (1) in favor of Barretto Realty for P3 million, and the other, in favor of the Drepin Estate
for P1.35 million
 But petitioner Barretto Realty denied receiving the check. Instead, it claimed that it bought the properties
on 7 March 1990 by tendering a Traders Royal Bank Manager's Check for P1million to Moslares, and a Far East
Bank and Trust Company Cashier's Check for P1 million and a Traders Royal Bank Manager's Check
for P350,000.00 to Atty. Tomas Trinidad as Judicial Administrator of the Estate. However, Moslares and Atty.
Trinidad refused to accept the checks.
 Barretto filed a motion with the trial court alleging that he complied with the compromise and agreement and
order Moslares and Atty. Trinidad to comply with the same.
 The court ruled in favor of Barretto
 3 years later Moslares filed a motion for execution alleging the he purchased the lot and that he paid the amount
specified as payment.
 The court issued a writ of execution but was then reversed and set aside upon the motion for reconsideration of
Barretto.
 Moslares moved to reconsider the decision insisting that Barretto Realty's payment by check was not valid
because (a) the check was not delivered personally to him but to his counsel Atty. Pedro Ravelo, (b) the check
was not encashed hence did not produce the effect of payment; and, (c) the check was not legal tender per
judicial pronouncements

Issue:
 Whether or not Barretto be is the absolute owner of the property

Ruling
 It is not disputed, and in fact borne by the records, that petitioner bought the disputed lots of the Drepin Estate
subject matter of the Compromise Agreement ahead of Moslares and that the checks issued in payment thereof
were even personally delivered by the Deputy Sheriff of the RTC-Br. 18, Manila, upon Order of respondent
Judge dated 14 June 1990 after tender was refused by Moslares and the Drepin Estate. Respondent Moslares
never raised the invalidity of the payment through checks either through a motion for reconsideration or a timely
appeal. Hence, with the complete execution and satisfaction of the Decision dated 24 July 1986 which approved
the Compromise Agreemen
 There was already a final and executory order issued by the same judge three years prior. The same may no
longer be amended regardless of any claim or error or incorrectness (save for clerical errors only). It is true that
a check is not a legal tender and while delivery of a check produces the effect of payment only when it is
encashed, the rule is otherwise if the debtor (Barretto Realty) was prejudiced by the creditor’s (Moslares’)
unreasonable delay in presentment. Acceptance of a check implies an undertaking of due diligence in
presenting it for payment. If no such presentment was made, the drawer cannot be held liable irrespective of
loss or injury sustained by the payee. Payment will be deemed effected and the obligation for which the check
was given as conditional payment will be discharged.
 Pio Barretto Realty Development Corporation is declared the absolute owner of the disputed properties subject
matter of the Compromise Agreement

Inciong vs. CA 257 SCRA 578

This is a petition for review on certiorari of the decision of the Court of Appeals affirming that of the Regional Trial Court
of Misamis Oriental, Branch 18,[1] which disposed of Civil Case No. 10507 for collection of a sum of money and damages

Facts:
 Petitioner's liability resulted from the promissory note in the amount of P50,000.00 which he signed with Rene
C. Naybe and Gregorio D. Pantanosas on February 3, 1983, holding themselves jointly and severally liable to
private respondent Philippine Bank of Communications, Cagayan de Oro City branch. The promissory note was
due on May 5, 1983.
 Said due date expired without the promissors having paid their obligation.
 Private respondent then filed a complaint for collection from the three obligors
  Petitioner alleged that he only agreed to be a co-maker to the amount of 5,000 and that it was by trickery, fraud
and misrepresentation that he was made liable for the amount of P50,000.00
 Petitioner contends that the Court of Appeals should have declared the promissory note null and void on the
following grounds: (a) the promissory note was signed in the office of Judge Pantanosas; (b) the loan was
incurred for the purpose of buying a second-hand chainsaw which cost only P5,000.00; (c) new chainsaw cost
only P27,500.00; (d) the loan was not approved by the board or credit committee (e) the loan had no collateral;
(f) petitioner and Judge Pantanosas were not present at the time the loan was released in (g) notices of default
are sent simultaneously and separately but no notice was validly sent to him. [8] Finally, his consent was vitiated
by fraud as, contrary to their agreement that the loan was only for the amount of P5, 000.
 Petitioner also argues that the dismissal of the complaint against Naybe, the principal debtor, and against
Pantanosas, his co-maker, constituted a release of his obligation, especially because the dismissal of the case
against Pantanosas was upon the motion of private respondent itself

Issue:
 Whether or not Inciong should be held liable

Ruling
 Yes, because 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.

Development Bank of Rizal VS Sim Wei

GR No. 85419 March 9, 1993
219 SCRA 736

Facts:
 In consideration for a loan respondent Sima Wei issued two crossed checks payable to petitioner. These two checks
were not delivered to the petitioner-payee or to any of its authorized representatives. These checks somehow came into
the possession of respondent Lee Kian Huat who deposited the checks without the petitioner-payee's indorsement to the
account of respondent Plastic Corporation.
Issue:
 Whether or not petitioner has a cause of action against any or all of the defendants.
Held:
Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of
giving effect thereto. Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery
to him.

BPI Family Bank VS Edgardo Buenaventura

GR No. 148196 September 30, 2005
471 SCRA 431

Facts:
 Edgardo Buenaventura et al accepted from Amado Franco a check jointly issued by Eladio Teves and Joseph Teves
which they used to open an account with petitioner. Later, they drew a check which, upon presentment, was dishonored
for the reason that the account was closed on the ground that the source of fund was illegal or unauthorized. It was
alleged that the check received by Buenaventura, et al. from Amado Franco was drawn by Eladio Teves and Joseph
Teves against the Current Account of the Tevesteco Arrastre Stevedoring Co., Inc.; the funds in the said Tevesteco
account allegedly consisted mainly of funds transferred to it from another account belonging to the First Metro
Investment Corporation; such transfer of funds was effected on the basis of an Authority to Debit bearing the signatures
of certain officers of FMIC; upon its investigation, BPI-FB found that the signatures in the Authority to Debit were forged;
before this, however, Tevesteco had already issued several checks against its Current Account, one of which is the check
received by Buenaventura, et al.
Issue:
 Whether or not petitioner should bear the loss in case of fraud.
Held:
 Unless a forgery or alteration is attributable to the fault or negligence of the drawer himself, the remedy of the drawee
bank that negligently clears a forged and/or altered check for payment is against the party responsible for the forgery or
alteration, otherwise, it bears the loss.

Natividad Gempesaw VS Court of Appeals

GR No. 92244 February 9, 1993
218 SCRA 682

Facts:
 To facilitate payment of debts to her suppliers, petitioner draws checks against her checking account with the respondent
bank as drawee. The checks were prepared and filled up as to all material particulars by her trusted bookkeeper. After
the bookkeeper prepared the checks, the completed checks were submitted to the petitioner for her signature, together
with the corresponding invoice receipts which indicates the correct obligations due and payable to her suppliers.
Petitioner signed each and every check without bothering to verify the accuracy of the checks against the corresponding
invoices because she reposed full and implicit trust and confidence on her bookkeeper. The issuance and delivery of the
checks to the payees named therein were left to the bookkeeper. Practically, all the checks issued and honored by the
respondent drawee bank were crossed checks. All the eighty-two (82) checks with forged signatures of the payees were
brought to the Chief Accountant of respondent drawee Bank, who, without authority therefor, accepted them all for
deposit in the accounts of Alfredo Y. Romero and Benito Lam who became the second endorsers of the checks.
Issue:
 Whether or not petitioner should bear the loss on the ground of her negligence.
Held:
 As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawer’s
account for the amount of said check. An exception to this rule is where the drawer is guilty of such negligence which
causes the bank to honor such a check or checks. If a check is stolen from the payee, it is quite obvious that the drawer
cannot possibly discover the forged indorsement by mere examination of his cancelled check. A different situation arises
where the indorsement was forged by an employee or agent of the drawer, or done with the active participation of the
latter.

CHARLESS LEE, ET AL VS. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONSGR NO.
117913 & 117914, February 1, 2002375 SRA 579

FACTS: Charles Lee, as President of MICO wrote private respondent Philippine Bank of Communications
(PBCom) requesting for a grant of a discounting loan/credit line in the sum of Three Million Pesos
(P3,000,000.00) for the purpose of carrying out MICO’s line of business as well as to maintain its volume of
business. On the same day, Charles Lee requested for another discounting loan/credit line of Three Million
Pesos (P3,000,000.00) from PBCom for the purpose of opening letters of credit and trust receipts. Another
loan of One Million Pesos (P1,000,000.00) was availed of by MICO from PBCom which was likewise later on
renewed. Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap and Richard Velasco, in their personal
capacities executed a Surety Agreement in favour of PBCom whereby the petitioners jointly and severally,
guaranteed the prompt payment on due dates or at maturity of overdrafts, promissory notes, discounts,
drafts, letters of credit, bills of exchange, trust receipts, and other obligations of every kind and nature, for
which MICO may be held accountable by PBCom. Charles Lee, in his capacity as president of MICO,
wrote PBCom and applied for an additional loan in the sum of Four Million Pesos (P4, 000,000.00). The loan
was intended for the expansion and modernization of the company’s machineries. Upon approval of the said
application for loan, MICO availed of the additional loan of Four Million Pesos (P4, 000,000.00).

To secure the trust receipts transactions, MICO and Lee executed a real estate mortgage in favour of PBCOM
over several properties it owns. Upon maturity of all credit availments obtained by MICO from PBCom, the
latter made a demand for payment.[For failure of petitioner MICO to pay the obligations incurred despite
repeated demands, PBCom extrajudicially foreclosed MICO’s real estate mortgage and sold the said
mortgaged properties in a public auction sale. Lee contends that the letters of credit, surety agreements and
loan transactions did not ripen into valid and binding contracts since no part of the proceeds of the loan
transactions were delivered to MICO or to any of the petitioners-sureties. Petitioners-sureties allege that
Chua Siok Suy was the beneficiary of the proceeds of the loans and that the latter made them sign the surety
agreements in blank. Thus, they maintain that they should not be held accountable for any liability that
might arise therefrom.

ISSUE: Whether or not the proceeds of the loans and letters of credit transactions were ever delivered to MICO?

HELD: The letter of credit, as well as the security agreements, have not merely created a prima facie case but
have actually proved the solidary obligation of MICO and the petitioners, as sureties of MICO, in favor of
respondent PBCom.
While the presumption found under the Negotiable Instruments Law may not necessarily be applicable to
trust receipts and letters of credit, the presumption that the drafts drawn in connection with the letters of
credit have sufficient consideration. Under Section 3(r), Rule 131 of the Rules of Court there is also a
presumption that sufficient consideration was given in a contract.
Hence, petitioners should have presented credible evidence to rebut that presumption as well as the evidence
presented by private respondent PBCom. The letters of credit show that the pertinent materials/merchandise
have been received by MICO. The drafts signed by the beneficiary/suppliers in connection with the
corresponding letters of credit proved that said suppliers were paid by PBCom for the account of MICO. On
the other hand, aside from their bare denials petitioners did not present sufficient and competent evidence to
rebut the evidence of private respondent PBCom.
PHILIPPINE BANK OF COMMERCE vs. ARUEGO

102 SCRA 530, G.R NOs. L-25836-37

JAN. 31, 1981

Facts:

Jose Aruego obtained a credit accommodation from the Philippine Bank of Commerce to facilitate the
payment of printing of “World Current Events”, the periodical he is publishing. Thus, for every printing of the
periodical, the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing a draft
against the plaintiff, said draft being sent later to the defendant for acceptance. As an added security for the
payment of the amounts advanced to Encal Press and Photo-Engraving, the plaintiff bank also required
defendant Aruego to execute a trust receipt in favor of said bank wherein said defendant undertook to hold in
trust for plaintiff the periodicals and to sell the same with the promise to turn over to the plaintiff the
proceeds of the sale of said publication to answer for the payment of all obligations arising from the draft.
The Philippine Bank of Commerce instituted an action against Aruego to recover the cost of printing of the
latter’s periodical. Aruego however argues that he signed the supposed bills of exchange only as an agent of
the Philippine Education Foundation Company where he is president.

Issue:
Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange only
as an agent of Philippine Education Foundation Company.

Held:
Yes. Aruego did not disclose in any of the drafts that he accepted that he was signing as representative of the
Philippine Education Foundation Company. Aruego contends that he signed the supposed bills of exchange
as an agent of the Philippine Education Foundation Company where he is president. Section 20 of the
Negotiable Instruments Law provides that "Where the instrument contains or a person adds to his signature
words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable
on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as
filing a representative character, without disclosing his principal, does not exempt him from personal
liability." An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he
was signing as a representative of the Philippine Education Foundation Company. He merely signed as
follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his principal, Aruego is
personally liable for the drafts he accepted.
LORETO DELA VICTORIA VS. JOSE BURGOS
245 SCRA 374
JUNE 27, 1995

FACTS: Raul Sebreño filed a complaint for damages against Fiscal Bienvenido Mabanto Jr. of Cebu City.
Sebreño won and he was awarded the payment of damages. Judge Burgos ordered De La Victoria, custodian
of the paychecks of Mabanto, to hold the checks and convey them to Sebreño instead. De La Victoria assailed
the order as he said that the paychecks and the amount thereon are not yet the property of Mabanto because
they are not yet delivered to him; that since there is no delivery of the checks to Mabanto, the checks are still
part of the public funds; and the checks due to the foregoing cannot be the proper subject of garnishment.
ISSUE: Whether or not De La Victoria is correct.
HELD: Yes. Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable instrument
is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As
ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or
drawer with intent to transfer title to the payee and recognize him as the holder thereof.
WESTMONT BANK VS. EUGENE ONG

375 SCRA 212, G.R. No. 132560

January 30, 2002

FACTS: Ong was supposed to be the payee of the checks issued by Island Securities. Ong has a
current account with petitioner bank. He opted to sell his shares of stock through Island
Securities. The company in turn issued checks in favor of Ong but unfortunately, the latter wasn't
able to receive any. His signatures were forged by Tamlinco and the checks were deposited in his
own account with petitioner. Ong then sought to collect the money from the family of Tamlinco
first before filing a complaint with the Central Bank. As his efforts were futile to recover his money, he
filed an action against the petitioner. The trial and appellate court decided in favor of Ong.

ISSUE: Whether or not ong can collect back his money?

HELD: Since the signature of the payee was forged, such signature should be deemed inoperative
and ineffectual. Petitioner, as the collecting bank, grossly erred in making payment by virtue of
said forged signature. The payee, herein respondent, should therefore be allowed to collect from the
collecting bank.

It should be liable for the loss because it is its legal duty to ascertain that the payee’s endorsement
was genuine before cashing the check. As a general rule, a bank or corporation who has
obtained possession of a check with an unauthorized or forged indorsement of the payee’s signature
and who collects the amount of the check other from the drawee, is liable for the proceeds thereof to
the payee or the other owner, notwithstanding that the amount has been paid to the person from
whom the check was obtained.
REPUBLIC BANK VS. COURT OF APPEALS
196 SCRA 100, G.R. NO. 42725
APRIL 22, 1991

FACTS: On January 25, 1966, San Miguel Corporation (SMC) issued a P240.00 check in favor of Roberto
Delgado against SMC’s account with the First National City Bank (FNCB). Delgado fraudulently changed the
amount written on the check to P9,240.00. Delgado made a check deposit with Republic Bank. Republic
Bank accepted the check and endorsed it to FNCB by stamping on the back of the check “ all prior and/or
lack of indorsement guaranteed“. The check cleared and FNCB paid Republic Bank P9,240.00.
On April 19, 1966, SMC notified FNCB that the check involved was forged. FNCB refunded SMC the amount
of the check. On May 19, 1966, FNCB informed Republic bank about the forgery, by then Delgado withdrew
his account from Republic Bank. On August 15, 1966, FNCB demanded Republic Bank to refund the
amount of the check.
ISSUE: Whether or not Republic Bank should refund the amount to FNCB.
HELD: No. The 24-hour clearing house rule embodied in Section 4(c) of Central Bank Circular No. 9, as
amended, applies to this case. This rule mandates banks that after a clearing, all cleared items must be
returned not later than 3:00 PM of the following business day.
It is true that when an endorsement is forged, the collecting bank or last endorser, as a general rule, bears
the loss. But the unqualified endorsement of the collecting bank on the check should be read together with
the 24-hour regulation on clearing house operation. Thus, when the drawee bank (FNCB) fails to return a
forged or altered check to the collecting bank (Republic Bank) within the 24-hour clearing period, the
collecting bank is absolved from liability.