NEGOTIABLE INSTRUMENTS LAW CASE DIGESTS safekeeping only, such delivery was conditional and

the condition had not been fulfilled.

(RIGHTS OF THE HOLDER AND LIABILITIES OF
PARTIES)

Horeb Felix B. Villa, JD NT-3, EH 403, 1st Semester A.Y. Furthermore, Gatchalian alleges that plaintiff is
2019-2020. not a holder in due course as there was no
negotiation prior to them having possession of the
check and that plaintiff is not a holder in due course
V. RIGHTS OF THE HOLDER as it acquired the check with notice of the defect in
the title of the holder.

1. DE OCAMPO vs. GATCHALIAN (3 SCRA 596

[1961]). Issue:

Whether or not plaintiff Ocampo Clinic is a holder in

due course.
Facts:

Anita Gatchalian was looking for a car for her

husband’s use. She was then shown a car by Manuel Held:
Gonzales who represented himself as duly authorized NO. Plaintiff was guilty of gross neglect in not
to sell the car by Ocampo Clinic. Gatchalian then finding out the true nature of the title and possession
expressed her intention to purchase the said car. of Gonzales, amounting to legal absence of good faith.
Gonzales then told her that the car’s owner would Thus, plaintiff should not be able to recover the value
not give her the certificate of registration unless a of the check.
check will be shown to the owner as evidence of their
bona fide intention to buy the said car. Gatchalian
then issued the check and said that said check would
be for safekeeping only and that the check should be Furthermore, the rule that the possessor of an
returned to Gatchalian the next day along with the instrument is a prima facie holder in good faith does
car and the certificate of registration. not apply in this case as there was a defect in the title
of Gonzales because the instrument is not payable to
him or to bearer. Based on the facts presented thus,
that the drawer had no account with the payee; that
But, instead of keeping the check for the holder did not show or tell the payee why he had
safekeeping, Gonzales delivered the check to the check in his possession and why he was using it
Ocampo Clinic for payment of the hospital exprnses for the payment of his own personal account show
of his wife. When the car and the check were not that holder's title was defective or suspicious.
delivered to Gatchalian the next day as agreed, Because the holder's title was defective or suspicious,
Gatchalian issued a stop payment order on the check it cannot be stated that the payee acquired the check
with the drawee bank, without the plaintiff (Ocampo without knowledge of said defect in holder's title,
Clinic) knowing of such. and for this reason the presumption that it is a holder
in due course or that it acquired the instrument in
good faith does not exist. And having presented no
The plaintiff then filed a complaint for estafa evidence that it acquired the check in good faith, the
against Gonzales, which was subsequently dropped. payee cannot be considered as a holder in due
Then , this complaint for recovery of the value of the course.
check worth P600.00, which plaintiff received as
payment for the indebtedness of Matilde Gonzales
(Manuel Gonzales’ wife). In other words, under the circumstances of the
case, instead of the presumption that payee was a
holder in good faith, the fact is that it acquired
Gatchalian alleges that the check is not a possession of the instrument under circumstances
negotiable instrument, and that plaintiff Ocampo that should have put it to inquiry as to the title of the
Clinic is not a holder in due course because there was holder who negotiated the check to it. The burden
no intention on the part of Gatchalian to transfer her was, therefore, placed upon it to show that
property as the check was for safekeeping only, and notwithstanding the suspicious circumstances, it
that assuming that the delivery was not for acquired the check in actual good faith.
 Whether or not petitioner can collect on the stolen
check on the ground that he is a holder in due course.
In this case, as the payee acquired the check
under questionable circumstances, the plaintiff now
has to prove that it actually acquired said check in
good faith. The facts contain no indication of such Held:
good faith, hence the inevitable conclusion is that NO. Mesina failed to substantiate his claim that
plaintiff has not proved that it acquired the check in he is a holder in due course and for consideration or
good faith and may not be deemed a holder in due value as shown by the established facts of the case.
course. Admittedly, petitioner became the holder of the
cashier's check as endorsed by Alexander Lim who
stole the check. He refused to say how and why it
2. MESINA vs. IAC (145 SCRA 497 [1986]). was passed to him. He had therefore notice of the
defect of his title over the check from the start. The
holder of a cashier's check who is not a holder in due
Facts: course cannot enforce such check against the issuing
bank which dishonors the same.
Jose Go purchased from Associated Bank a
cashier’s check which he left on top of the manager’s
desk when he left the bank. The bank manager, then In other words, a person who became the
had it kept for safekeeping by one of its employees, holder of a cashier's check as endorsed by the person
Albert Uy. Uy, at the time was in a conversation with who stole it and who refused to say how and why it
a certain Alexander Lim. Uy left the check on his desk was passed to him is not a holder in due course.
to relieve himself, and upon his return, Lim and the
check were nowhere to be found. When Go inquired
about his check, the same could not be found, and Go
was advised to fill up a “STOP PAYMENT” form which VI. LIABILITIES OF PARTIES
he did. He also executed an affidavit of loss and
reported the loss of the check to the police.
1. METROPOL FINANCING AND INVESTMENT CORP.
vs. SAMBOK MOTORS CO. (120 SCRA 864 [1983]).
Associated Bank then received the check twice
for clearing purposes. In each time it was presented
for clearing, the check was dishonored for the Facts:
payment had been stopped. After the second time, a
lawyer then contacted Associated Bank, demanding Dr. Javier Villaruel executed a promissory note in
payment for the check. The lawyer refused to name favor of Ng Sambok Sons Motors Co., Ltd. Payable in
his client, and threatened to sue. Later, the name of 12 equal monthly installments with interest. It is
Mesina was revealed when the bank obtained a copy further provided that in case on non-payment of any
of a complaint for damages filed by Mesina because of the installments, the total principal sum then
they refused to pay him the amount in the check. remaining unpaid shall become due and payable with
When asked by the police on how he possessed the an additional interest. Sambok Motors Co., a sister
check, he said it was paid to him by Lim. An company of Ng Sambok Sons negotiated and
information for theft was then filed against Lim. indorsed the note in favor of Metropol Financing &
Investment Corporation. Villaruel defaulted in the
payment, upon presentment of the promissory note
he failed to pay the promissory note as demanded,
Associated Bank then filed a case for hence Ng Sambok Sons Motors Co., Ltd. notified
interpleader because it was unsure as to whom to Sambok as indorsee that the promissory note has
pay the amount as written on the check. Go moved been dishonored and demanded payment. Sambok
to intervene in the interpleader case, and Mesina failed to pay. Ng Sambok Sons filed a complaint for
meanwhile moved to dismiss the interpleader case. the collection of sum of money. During the pendency
The RTC ruled in favor of the bank in the interpleader of the case Villaruel died. Sambok argues that by
case, ordering the bank to replace the cashier’s check adding the words “with recourse” in the indorsement
in favor of Go. of the note, it becomes a qualified indorser, thus, it
does not warrant that in case that the maker failed to
pay upon presentment it will pay the amount to the
Issue: holder.
 became liable to the PNB for the amount of the
treasury warrants in the amount of P320,287.30.
Issue:

Whether or not Sambok Motors Co is a qualified

indorser, thus it is not liable upon the failure of After the trial, the MTC acquitted Imperial of
payment of the maker. the charges against her, but held her civilly liable as
indorser of the checks which are the subject matter
of the criminal action. After the decision became final
Held: and executory, the MTC ordered the enforcement of
the civil liability arising from the criminal action.
NO. A qualified indorserment constitutes the Imperial moved to quash the writ if execution on the
indorser a mere assignor of the title to the ground that the judgment did not order the accused
instrument. It may be made by adding to the to pay a specific amount of money to a particular
indorser’s signature the words “without recourse” or person, as it merely adjudicated the criminal aspect
any words of similar import. Such indorsement of the action and not the civil aspect thereof, hence
relieves the indorser of the general obligation to pay there can be no execution of the accused’s supposed
if the instrument is dishonored but not of the liability civil liability. The MTC denied Imperial’s motion for
arising from warranties on the instrument as lack of merit.
provided by section 65 of NIL. However, Sambok
indorsed the note “with recourse” and even waived
the notice of demand, dishonor, protest and Imperial then filed a petition for certiorari and
presentment. prohibition before the RTC arguing that the writ of
execution was at variance with the judgment of the
MTC. The RTC held that the MTC did not really find
Recourse means resort to a person who is Imperial liable for the questioned amount because in
secondarily liable after the default of the person who fact it was Maralit who was found to be responsible
is primarily liable. Sambok by indorsing the note to be the perpetrator of the fraud. Maralit moved for
“with recourse” does not make itself a qualified reconsideration but was denied. Hence, this petition.
indorser but a general indorser who is secondarily
liable, because by such indorsement, it agreed that if
Villaruel fails to pay the not the holder can go after it. Issue:
The effect of such indorsement is that the note was
indorsed witout qualification. A person who indorses Whether or not the phrase “civilly liable” in the
without qualification engages that on due MTC’s judgment decision also connotes an order to
presentment, the note shall be accepted or paid, or pay on Imperial’s part.
both as the case maybe, and that if it be dishonored,
he will pay the amount thereof to the holder. The
words added by Sambok do not limit his liability, but Held:
rather confirm his obligation as general indorser.
YES. To affirm the RTC’s decision would be to
absolve Imperial both from her criminal and civil
2. MARALIT vs. IMPERIAL (301 SCRA 605 [1999]). liability by the MTC. The dispositive portion of the
MTC decision expressly declared that Imperial was
“civilly liable” as indorser of the checks which was the
subject matter of the criminal action. To hold that
Facts: there was no express finding of civil liability of
The petitioner in this case, Esther Maralit Imperial would amount to disregarding the decision
(Maralit), filed 3 complaints of estafa through of the MTC.
falsification of commercial documents through
reckless imprudence against respondent Jesusa
Corazon Imperial (Imperial). Maralit is the manager of Moreover, such ruling by the RTC finding no
the PNB Naga Branch and that Imperial deposited in express declaration by the MTC of Imprerial’s civil
her savings account in PNB three US Treasury liability would have the effect of amending a final and
Warrants and withdrew their peso equivalent and executory decision of a court of law. If there is any
that the treasury warrants were subsequently ambiguity in the court’s decision, it can easily be
returned one after the other by the US Treasury on clarified by a resort to the text of the decision. By
the ground of altered amounts. As a result, Maralit doing so, it is clear that it can only be to Maralit that
Imperial was made liable as it was Maralit who was the evidence so warrant, Thus, the accused in this
the offended party in this case. case, (Sapiera) should be held liable to pay the value
of the checks signed by her in favor of Sua.

3. SAPIERA vs. COURT OF APPEALS, (314 SCRA 370

[1999].) 4. BPI vs. CA and NAPIZA (G.R. No. 112392, February
29, 2000, 326 SCRA 641).

Facts:
Facts:
On several occasions, petitioner Remedios
Sapiera, a sari-sari store owner, purchased from Private respondent Bejamin Napiza, deposited a
Monrico Mart, certain grocery items, mostly check in the amount of $2,500.00 in his dollar deposit
cigarettes, and paid for them with checks issued by with the petitioner Bank of the Philippine Islands (BPI)
Arturo De Guzman. Sapiera signed the back portion by was of accommodation and only for the purpose
of these checks. When the checks were presented for of clearing. The check, in reality, belonged to Henry
payment, the checks were dishonored because the Chan. Napiza delivered to Chan a signed blank
drawer’s account had already closed. Private withdrawal slip with the understanding that as soon
respondent Ramon Sua informed De Guzman and as the check is cleared, both of them would go to the
Sapiera about the dishonor but both failed to pay the bank to withdraw the amount of the check upon
value of the checks. As a result, 4 charges of estafa Napiza’s presentation to BPI of his passbook.
were filed against Sapiera in the Regional Trial Court
(RTC) of Dagupan City. After the trial, Sapiera was
acquitted of all the charges against her, but the RTC However, using the same signed blank
did not rule on her civil liability for the checks she withdrawal slip, a bank employee was able to
indorsed to Sua. Sua then filed a notice of appeal withdraw the amount of $2,541.67, which was made
with the RTC with regards to Sapiera’s civil liability, payable to Ramon and Agnes De Guzman. Later, BPI
but the RTC refused to give due course to the appeal, received a communication from Wells Fargo Bank
stating that Sapiera’s acquittal was absolute. International in New York City that the check was a
counterfeit. BPI informed Napiza that the check
bounced, and Napiza tried to locate Chan to no avail.
Sua then filed a petition for mandamus before Thus, BPI demanded payment from Napiza through
the Court of Appeals (CA).The CA granted Sua’s his son, who was an employee of the branch where
petition and ruled that Sua could appeal the civil Napiza had an account, saying that if Napiza was
aspect of the judgment of acquittal by the RTC. The unable to pay the $2,500.00 within 7 days, the matter
CA then ruled that Sapiera should pay Sua would then be forwarded to the bank’s lawyers to
P335,000.00 representing the aggregate value of the protect the bank’s interest. Napiza’s so promised that
4 checks which Sapiera indorsed with interest. his father would pay, but eventually Napiza was
Sapiera moved to reconsider, but the CA denied her unable to pay. In reality, Napiza refused to pay saying
motion. Hence, this petition. that he only deposited the check for clearing
purposes only and only to accommodate Chan. Thus,
BPI filed a complaint against Napiza for the return of
Issue: $2,500.00 in its peso equivalent plus interest and
other costs of litigation.
Whether or not, despite her acquittal, Sapiera can be
adjudged liable to pay the value of the checks signed
by her in favor of Sua. After trial, the lower court dismissed the
complaint. It held that the BPI should suffer the
resultant loss, having committed the mistake of not
Held: waiting for the clearance of the check before
authorizing the withdrawal of its value. On appeal,
YES. The dismissal of the criminal cases of Sapiera did the Court of Appeals (CA), affirmed the lower court’s
not erase her civil liability since the dismissal was decision, and emphasized that mere deposit of a
merely due to insufficiency of evidence and not check did not mean that it was already in the hand of
because of a declaration from the RTC that the fact the depositor. The check has to be cleared and its
from which the civil action might arise did not proceeds can only be withdrawn upon presentation
exist.An accused acquitted of estafa may of a passbook in accordance with the rules and
nevertheless be held civilly liable where the facts of
regulations of the bank. Furthermore, the CA ruled
that BPI’s contention that Napiza warranted the
check's genuineness by endorsing it is untenable for
it would render useless the clearance requirement.
Likewise, the requirement of presentation of a
passbook to ascertain the propriety of the accounting
reflected would be a meaningless exercise. After all,
these requirements are designed to protect the bank
from deception or fraud. Hence, this petition.

Issue:

Whether or not Napiza is liable under his warranties

as a general indorser.

Held:

NO. Ordinarily,under Section 65 of the

Negotiable Instruments Law, Napiza may be held
liable as an indorser of the check or even as an
accommodation party. However, to hold private
respondent liable for the amount of the check he
deposited by the strict application of the law and
without considering the attending circumstances in
the case would result in an injustice and in the
erosion of the public trust in the banking system. The
interest of justice thus demands looking into the
events that led to the encashment of the check.

In this case, while it is true that it was Napiza’s

act of signing the blank withdrawal slip the set in
motion these unfortunate chain of events, to wit, the
withdrawal and encashment of the counterfeit check,
it was the negligence of the personnel of BPI that was
the proximate cause of the loss which petitioner BPI
suffered because it did not wait for the clearance of
the check before it authorized the withdrawal of the
value of the check, in violation of its own rules and
regulations. Thus, it is just proper that BPI should
assume the risk of incurring a loss on ccount of a
forged or counterfeit foreign check and hence, it
should suffer the resulting damage.

Moreover, the CA was correct in ruling that in

depositing the check in his name, Napiza did not
become the outright owner of the amount stated
therein. Under the rules and regulations of the BPI,
by depositing the check, Napiza was merely
designating BPI as the collecting bank. This is in line
with the rule that a check, as a negotiable instrument,
is not legal tender.