[G.R. No. 138074. August 15, 2003] CELY YANG, petitioner, vs. HON.

COURT OF APPEALS, PHILIPPINE COMMERCIAL INTERNATIONAL BANK, FAR EAST BANK & TRUST CO., EQUITABLE BANKING CORPORATION, PREM CHANDIRAMANI and FERNANDO DAVID, respondents. Facts: Chandiramani agreed that she will deliver to Yang a PCIB managers check worth P4.2 million and in exchange Yang will deliver two (2) managers check worth P2.078, both payable to the order of Fernando David. They further agreed that Yang would secure from FEBTC a dollar draft in the amount of US$200,000.00, payable to PCIB FCDU Account No. 4195-01165-2, which Chandiramani would exchange for another dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong Kong. On December 22, 1987, Yang procured the two cashiers check and the FEBTC Dollar Draft worth $200,000 which she gave to her associates messenger Ranigo to be delivered to Chandiramani in exchange of the PCIB managers check worth P4.2 million and a Hang Seng Bank dollar draft for US$200,000.00 for Yang. Chandiramani did not appear on the place agreed upon and Ranigo allegedly lost the two managers check and the dollar draft which he then reported to Liong(associate) and after half an hour Liong informed the same to Yang and it was reported to the police. It transpired, however, that the checks and the dollar draft were not lost, for Chandiramani was able to get hold of said instruments, without delivering the exchange consideration consisting of the PCIB managers check and the Hang Seng Bank dollar draft. Chandiramani was able to deliver the instruments to Fernando David and in exchange he received from the latter US$360,000.00 which he deposited to the account of his mother and wife. Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost in which both banks complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft No. 4771, thus enabling the holder of PCIB FCDU Account No. 4195-01165-2 to receive the amount of US$200,000.00. Yang filed a complaint for injunction and damages against Chandiramani, David and Equitable Banking Corporation. Trial Court ruled that David was a holder in due course and was entitled to the proceeds of the two (2) cashiers checks, together with the earnings derived therefrom pendente lite; ordering the plaintiff to pay the defendant Fernando David moral damages in the amount of P100,000.00; attorneys fees in the amount of P100,000.00 and to pay the costs. The decision of the trial court was affirmed by CA upon appeal. Cely Yang contends that David is not a holder in due course because he obtain the the checks and the dollar draft in an unlawful manner. Issue: Whether or not Fernando David is a holder in due course Held: Yes, Fernando David is a holder in due course Ratio: David had no notice, real or constructive, cogent for him to make further inquiry as to any infirmity in the instrument(s) and defect of title of the holder. To mandate that each holder inquire about every aspect on how the instrument came about will unduly impede commercial transactions, Although negotiable instruments do not constitute legal tender, they often take the place of money as a means of payment.

The mere fact that David and Chandiramani knew one another for a long time is not sufficient to establish that they connived with each other to defraud Yang. There was no concrete proof presented by Yang to support her theory. 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 Negotiable Instruments Law, meaning a payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in Davids case, otherwise he cannot be deemed a holder in due course. We find that the petitioners challenge to Davids status as a holder in due course hinges on two arguments: (1) the lack of proof to show that David tendered any valuable consideration for the disputed checks; and (2) Davids failure to inquire from Chandiramani as to how the latter acquired possession of the checks, thus resulting in Davids intentional ignorance tantamount to bad faith. In sum, petitioner posits that the last two requisites of Section 52 are missing, thereby preventing David from being considered a holder in due course. Unfortunately for the petitioner, her arguments on this score are less than meritorious and far from persuasive. First, with respect to consideration, Section 24 of the Negotiable Instruments Law 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. In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks absent said consideration. In other words, the petitioner must present convincing evidence to overthrow the presumption. Our scrutiny of the records, however, shows that the petitioner failed to discharge her burden of proof. The petitioners averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US$360,000.00 as consideration for the said instruments. Factual findings of the Court of Appeals are conclusive on the parties and not reviewable by this Court; they carry great weight when the factual findings of the trial court are affirmed by the appellate court.

WHEREFORE, the instant petition is DENIED. The assailed decision of the Court of Appeals, dated March 25, 1999, in CA-G.R. CV No. 52398 is AFFIRMED. Costs against the petitioner. SO ORDERED.

G.R. No. 105774

April 25, 2002

GREAT ASIAN SALES CENTER CORPORATION and TAN CHONG LIN, petitioners, vs. THE COURT OF APPEALS and BANCASIA FINANCE AND INVESTMENT CORPORATION, respondents. Facts:

The board of directors of Great Asian approved a resolution authorizing its Treasurer and General Manager, Arsenio Lim Piat, Jr. ("Arsenio" for brevity) to secure a loan from Bancasia in an amount not to exceed P1.0 million, a discounting line with amount not exceeding P2.0million and the authority to be the signatory in all the papers documents and instrument related to the said loan and discounting line. Tan Chong Lin signed two Surety Agreement in favor of Bancasia to guaranty solidarily the debts of Great Asian to Bancasia. Great Asian, through its Treasurer and General Manager Arsenio, signed four (4) Deeds of Assignment of Receivables ("Deeds of Assignment" for brevity), assigning to Bancasia fifteen (15) postdated checks. Nine of the checks were payable to Great Asian, three were payable to "New Asian Emp.", and the last three were payable to cash. Various customers of Great Asian issued these postdated checks in payment for appliances and other merchandise. Arsenio endorsed all the fifteen dishonored 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. On the first deed of assignment two of the four checks with a total face value of P244,225.82 were dishonored, on the second deed of assignment all the four checks with a total face value of P312,819.00 were dishonored, on the third deed of assignment eight post dated check with a total face value of P344,475.00 were also dishonored and on the last deed of assignment one post dated check with a face value of P200,000.00 was also dishonored. The drawee bank dishonored the checks for the following reasons "account closed", "payment stopped", "account under garnishment", and "insufficiency of funds". Bancasia sent notice of dishonor and demand letter to Tan Chong Lin but the latter did not heed. Great Asia filed a petition for insolvency andBancasia filed a complaint for collection of sum of money against Great Asian and Tan Chiong Lin. In their answer Great Asian contend that the complaint was unlawfully instituted because of the pending insolvency proceeding and Arsenio has no authority 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. RTC and CA ruled in favor of Bancasia ordering Great Asian and Tan Chong Lin to pay for the debt. Great Asia contends that they did not receive any notice of dishonor and that they are not liable for the dishonored checks on that occasion, hence, this petition.

Issue: Whether or not notice of dishonor is required to make Great Asian liable for the dishonored check Held: 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.

Ratio: 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 for any of the following reasons: "account closed", "account under garnishment", insufficiency of funds", or "payment stopped". In the first three instances, the drawers had no right to expect or require the bank to honor the checks, and in the last instance, the drawers had countermanded payment. 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. This rule finds application in this jurisdiction pursuant to Section 196 of the Negotiable Instruments Law which states, "Any case not provided for in this Act shall be governed by the provisions of existing legislation, or in default thereof, by the rules of the Law Merchant." Under Section 186 of the Negotiable Instruments Law, delay in the presentment of checks discharges the drawer. However, Section 186 refers only to delay in presentment of checks but is silent on delay in giving notice of dishonor. Consequently, the common law or Law Merchant can supply this gap in accordance with Section 196 of the Negotiable Instruments Law. WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 20167 is AFFIRMED with MODIFICATION. Petitioners are ordered to pay, solidarily, private respondent the following amounts: (a) P1,042,005.00 plus 3% penalty thereon, (b) interest on the total outstanding amount in item (a) at the legal rate of 12% per annum from the filing of the complaint until the same is fully paid, (c) attorneys fees equivalent to 25% of the total amount in item (a), including interest at 12% per annum on the outstanding amount of the attorneys fees from the finality of this judgment until the same is fully paid, and (c) costs of suit. SO ORDERED.

G.R. No. 107508 April 25, 1996 PHILIPPINE NATIONAL BANK, petitioner, vs.

COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF COMMUNICATIONS, and F. ABANTE MARKETING, respondents. Facts: A check dated August 7, 1981 in the amount of P97,650.00 was issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports [DECS]) payable to F. Abante Marketing, drawn against Philippine National Bank. On August 11, 1981, F. Abante Marketing, deposited the questioned check to Capitol City Development Bank which in turn deposited the same in its account with the Philippine Bank of Communications (PBCom) for clearing. However due to some alleged material alteration in the check PNB returned the check to PBCom and debited PBCom's account for the amount covered by the check PBCom, as collecting agent of Capitol, then proceeded to debit the latter's account for the same amount, and subsequently, sent the check back to PNB, however, the latter returned the check to PBCom. Capitol could not, in turn, debit F. Abante Marketing's account since the latter had already withdrawn the amount of the check as of October 15, 1981, hence, the former sought clarification from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an explanation and recrediting from petitioner. Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of Manila against PBCom which, in turn, filed a third-party complaint against petitioner for reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourth-party complaint against F. Abante Marketing. RTC ruled in favor of PNB in not allowing the re-crediting of the check but it was reversed by the CA upon appeal, hence this petition. PNB contend that the alteration in the in the serial number of the check constitutes material alteration hence the check should not be credited

Issue: Whether or not an alteration of the serial number of a check is a material alteration under the negotiable instruments law Held: No, an alteration of the serial number of a check is a material alteration under the negotiable instruments law Ratio We shall first deal with the effect of the alteration of the serial number on the negotiability of the check in question. Petitioner anchors its position on Section 125 of the Negotiable Instruments Law (ACT No. 2031) which provides: Sec. 225. What constitutes a material alteration. Any alteration which changes: (a) The date;

(b) The sum payable, either for principal or interest; (c) The time or place of payment; (d) The number or the relations of the parties; (e) The medium or currency in which payment is to be made; (f) Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration. 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. 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. Section 1 of the Negotiable Instruments Law provides: Sec. 1. Form of negotiable instruments. 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 contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. In his book entitled "Pandect of Commercial Law and Jurisprudence," Justice Jose C. Vitug opines that "an innocent alteration (generally, changes on items other than those required to be stated under Sec. 1, N.I.L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it only according to its original tenor." The case at bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. The check's serial number is not the sole indication of its origin.. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The check's issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. WHEREFORE, premises considered, except for the deletion of the award of attorney's fees, the decision of the Court of Appeals is hereby AFFIRMED.