CASE TITLE Topic QUICK FACTS RATIO/DOCTRINE OTHER NOTES

The Court ruled that the private respondent used a certified personal check which
is not legal tender nor the currency stipulated, and therefore, cannot constitute
The private respondent’s president alleged that the petitioner refused to accept tender valid tender of payment.
of payment made by the former on the last day of the grace period. Petitioner, on the In the case of Philippine Airlines v. Court of Appeals, it was ruled that: since a
other hand, said that it did not execute a deed of sale and it cancelled the contract and negotiable instrument is only a substitute for money and not money, the
considered all previous statements forfeited on the ground that private respondent was delivery of such an instrument does not, by itself, operate as payment. A
not able to pay its full obligation. check, whether a manager’s check or ordinary check, is not legal tender, and
an offer of a check in payment of a debt is not a valid tender of payment and
Roman Catholic Bishop of Malolos vs IAC, 191 SCRA 411 may be refused receipt by the creditor.
Marasigan was the holder of BPI credit card. Due to his delinquency in payment,
The issuance of the postdated check was not effective payment on the part of
immediate demand was given by BPI to pay account. Marasigan issued a postdated
Marasigan and thus, the bank was justified in suspending temporarily his use of the
check. The check was thereafter kept in custody by BPI and card was temporarily
credit card. A check is only a substitute for money and not money, and the
suspended. And on a relevant date, Marasigan after eating in Cafe Adriatico tried to
delivery of such instrument does not in itself operate as payment.
BPI Express Card Corporation vs. CA, 296 SCRA 260 use his card to pay but was dishonored.
Firstly, CTDs are negotiable instruments. The documents provide that the amounts
deposited shall be repayable to the depositor or the "bearer." The documents do not
say that the depositor is Angel dela Cruz. If it was really the intention of the bank to
pay the amount to Angel dela Cruz only, it could have expressed so, instead of
having the word "BEARER" stamped on each CTD.

Thus, Caltex's witness merely declared that Angel de la Cruz is the depositor "insofar
as the bank is concerned," but obviously other parties not privy to the transaction
between them would not be in a position to know that the depositor is not the bearer
Security Bank issued Certificate of Time Deposits to Angel dela Cruz. The same were
stated in the CTDs. Hence, the situation would require any party dealing with
given by dela Cruz to Caltex in connection to his purchase of some fuel products.
the CTDs to go behind the plain import of what is written thereon to unravel
Later on, dela Cruz approached the bank manager, communicated the loss of the
the agreement of the parties thereto through facts aliunde. This need for resort
certificates, and requested for a reissuance. Upon compliance with some formal
to extrinsic evidence is what is sought to be avoided by the Negotiable
requirements, he was issued replacements. Thereafter, he secured a loan from the
Instruments Law and calls for the application of the elementary rule that the
bank where he assigned the certificates as security. Now Caltex averred that the
interpretation of obscure words or stipulations in a contract shall not favor the
certificates were not actually lost but were given as security for payment of fuel
party who caused the obscurity.
purchases. the bank demanded some proof of the agreement but the petitioner failed
to comply. The loan matured and the time deposits were terminated and then applied
Secondly, Caltex cannot recover on the CTDs. The records reveal that Angel dela
to the payment of the loan. Caltex demands the payment of the certificates but to no
Cruz, whom Caltex chose not to impleade in this suit, delivered the CTDs without
avail.
informing respondent Security Bank thereof. Although the CTDs are bearer
instrument, a valid negotiation for the true purpose and agreement between it
and Angel dela Cruz, as ultimately ascertained, requires both delivery and
indorsement. For although Caltex seeks to deflect this fact, the CTDs were in reality
delivered to it as a security for De la Cruz' purchases of its fuel products. Any doubt
as to whether the CTDs were delivered as payment for the fuel products or as a
security has been dissipated and resolved in favor of the latter by Caltex's own
authorized and responsible representative himself. This admission or representation
Caltex vs. CA, 212 SCRA 448 is rendered conclusive upon Caltex under the doctrine of estoppel.
It was not negotiable. The CBCI did not contain the words of negotiability. Properly
understood, a certificate of indebtedness pertains to certificates for the creation and
maintenance of a permanent improvement revolving fund, is similar to a "bond."
Being equivalent to a bond, it is properly understood as acknowledgment of an
obligation to pay a fixed sum of money. It is usually used for the purpose of long-
term loans.

The language of negotiability which characterize a negotiable paper as a credit

Section 1
instrument is its freedom to circulate as a substitute for money. Hence, freedom
Filriters assigned a Central Bank Certificate of Indebtedness (CBCI) to Philfinance. of negotiability is the touchtone relating to the protection of holders in due course,
Later, Traders acquired the CBCI through a repurchase agreement. Central Bank and the freedom of negotiability is the foundation for the protection which the law
refused to issue a new certificate in Traders’ name. Traders filed a petition for throws around a holder in due course. This freedom in negotiability is totally
mandamus to compel the Central Bank to issue a new certificate. absent in a certificate indebtedness as it merely to pay a sum of money to a
specified person or entity for a period of time.

The accepted rule is that the negotiability or non-negotiability of an instrument is

determined from the writing, that is, from the face of the instrument itself. In the
construction of a bill or note, the intention of the parties is to control, if it can be
legally ascertained. While the writing may be read in the light of surrounding
circumstance in order to more perfectly understand the intent and meaning of the
parties, yet as they have constituted the writing to be the only outward and visible
Traders Royal Bank vs. CA, 269 SCRA 15 expression of their meaning, no other words are to be added to it or substituted
Fojas-Arca (FA) and Firestone Tire entered into a franchising agreement wherein the
former had the privilege to purchase on credit the Firestone’s products. In paying for
these products FA could pay through special withdrawal slips. In turn Firestone would
The essence of negotiability which characterizes a negotiable paper as a credit
deposit these slips with Citibank. Citibank would then honor and pay the slips.
instrument lies in its freedom to circulate freely as a substitute for money. The
Citibank automatically credits the account of Firestone then merely waited for the
withdrawal slips in question lacked this character. Likewise, both parties
same to be honored and paid by Luzon Development Bank. As this was the
recognize that the withdrawal slips in non-negotiable. Hence, the rules governing the
circumstances Firestone believed in the sufficient funding of the slips until there was a
giving of immediate notice of dishonor of negotiable instruments (Sec.89 NIL) do not
time that Citibank informed it that one of the slips was dishonored. It wrote then a
apply in this case.
demand letter to FA for the payment and damages but FA refused to pay prompting
Firestone to file an action against it.
Firestone Tire vs. CA, 353 SCRA 601
The “negotiation” of a negotiable instrument is not the same as the “assignment” or
“transfer” of an instrument. Only negotiable instruments may be “negotiated” (by
indorsement + delivery or by delivery alone if the note is payable to bearer). Such
Raul Sesbreño made a “money market placement” in the amount of P300,000 with negotiable instruments may also be “assigned” and “transferred.” On the other hand,
PHILFINANCE. PHILFINANCE then issued a Delta Motors Corporation Promissory non-negotiable instruments cannot be “negotiated,” but it may be “assigned” or
Note (DMC PN), a delivery receipt with a notation that the DMC PN was with Pilipinas “transferred” unless expressly prohibited. Such express prohibition must be written
Bank, and post-dated checks payable on maturity date. Upon maturity date, Sesbreño on the instrument itself. A non-negotiable document may not be negotiated; but it
went to encash the post-dated checks, but they were dishonored because DAIF. A may be assigned or transferred, absent an express prohibition against assignment or
month after, Sesbreño went to Pilipinas Bank and handed a demand letter for the transfer written on the face of the instrument. [A] note, though not negotiable, may be
unpaid placement with PHILFINANCE. On the original DMC PN, he found out that it transferred by assignment, the assignee taking it being subject to the equities
had been issued a year ago, with PHILFINANCE as payee and Delta Motors as between the original parties.
maker, and that the document was stamped “NON-NEGOTIABLE.”
The words “NON-NEGOTIABLE” stamped on the DMC PN did not mean that it
cannot be transferred or assigned, since no prohibition was written on the
Sesbreno vs. CA, 222 SCRA 466 note. The assignment made by PHILFINANCE to Sesbreño was valid.
Loreta Serrano bought some pieces of jewelry from Niceta Ribaya. Petitioner, then in
need of money, instructed her private secretary, Josefina Rocco, to pawn the jewelry.
Having been notified that jewelry pawned to it was either stolen or involved in an
Josefina Rocco went to private respondent Long Life Pawnshop, Inc. , pledged the
embezzlement of the proceeds of the pledge, pawnbroker became duty bound to
jewelry to Yu An Kiong and then absconded with said amount and the pawn ticket.
hold the things pledged and to give notice to petitioner and the police of any effort to
The pawnshop ticket issued to Josefina Rocco stipulated that it was redeemable
redeem them. The circumstance that the pawn ticket stated that the pawn was
"on presentation by the bearer." Yu An Kiong permitted one Tomasa de Leon,
redeemable by the bearer, did not dissolve that duty. The pawn ticket was not
exhibiting the appropriate pawnshop ticket, to redeem the jewelry. Petitioner filed a
a negotiable instrument under the Negotiable Instruments Law nor a
complaint with the then Court of First Instance of Manila for damages against private
negotiable document of title under Articles 1507 et seq. of the Civil Code.
respondent Long Life for failure to hold the jewelry and for allowing its redemption
Serrano vs. CA, 196 SCRA 107 without first notifying petitioner or the police.
It may lawfully be stipulated in favor of the creditor, whether the obligation be
evidenced by promissory note or otherwise, that in the event that it becomes
necessary, by reason of the delinquency of the debtor, to employ counsel to enforce
payment of the obligation, a reasonable attorney's fee shall be paid by the debtor, in
addition to the amount due for principal and interest. The legality of such a
It is provided in a Promissory Note given by the defendant for the purchase price of a
stipulation, when annexed to a negotiate instrument is expressly recognized
truck that, in the event it becoming necessary to employ counsel to enforce its
Section 2 by the Negotiable Instruments Law (Sec 2 par. e).
collection, the maker is to pay an additional twenty-five per cent "as fees for the
attorney collecting the same."
The lawful purpose to be accomplished by such a stipulation is to permit the creditor
to receive the whole amount due him under his contract without the deduction of the
expenses caused by the delinquency of the debtor. It should not be permitted for him
to convert such a stipulation into a source of speculative profit at the expense of the
Bachrach vs. Golingco, 39 Phil. 139 debtor.
A treasury warrant payable to the appropriation for food disbursement was issued to a A treasury warrant "payable from the appropriation for food administration," is
govt. disbursement officer, who later transferred it to Abubakar (private individual). actually an order for payment out of "a particular fund," and is not unconditional, and
Abubakar vs. Auditor General, 81 Phil. 359 1 But, the Auditor General refused to redeem it. does not fulfill one of the essential requirements of a negotiable instrument.

Section 3 POBOUT
NEGO LIPARDO
E2022
 Eduardo Gomez opened an account with Golden Savings and deposited over a period
of two months, 38 treasury warrants with a total value of P1,755,228.37. They were all
drawn by the Philippine Fish Marketing Authority and purportedly signed by the
General Manager and Auditor
Treasury warrants in question are not negotiable instruments. Clearly stamped
Section 3 They were then sent for clearing by the branch office ultimately to the Bureau of on their face is the word “non-negotiable.” Moreover, and this is of equal
Treasury for special clearing. More than two weeks after the deposits, Gloria Castillo significance, it is indicated that they are payable from a particular fund, to wit, Fund
went to the Calapan branch several times to ask whether the warrants had been 501. The indication of Fund 501 as the source of the payment to be made on the
cleared. treasury warrants makes the order or promise to pay “not unconditional” and the
warrants themselves non-negotiable.
Metrobank eventually informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury on July 19, 1979, and demanded the refund by
Golden Savings of the amount it had previously withdrawn, to make up the deficit in its
Metropolitan Bank vs. CA, 194 SCRA 169 account.
The manager and treasuer of the Manila Oil Refining & By-Products Company
The warrants of attorney to confess judgments are not authorized nor contemplated
delivered to PNB a promissory ote which contains a stipulation wherein if it failed to
by our law. We are further of the opinion that provisions in notes authorizing
pay the PN, it authorizes any attorney in the Philippine Islands to appear and confess
Section 5 attorneys to appear and confess judgments against makers should not be
judgment, Upon default, PNB brought an action to recover the amount. Mr. Rector, an
recognized in this jurisdiction by implication and should only be considered as valid
attorney associated with the PNB, entered his appearance in representation of Manila
when given express legislative sanction.
National Bank vs. Manila Oil Refining, 43 Phil. 444 Oil and filed a motion confessing judgment.
(sobrang walang relate sa doctrine, kahit read the doctrine na lang) Salas bought a The instrument in order to be considered negotiable must contain the so-called
motor vehicle from Violago Motor Sales Corporation (VMS) for P58,138.20 as "words of negotiability — i.e., must be payable to "order" or "bearer"". Under Section
evidenced by a Promissory Note. This note was subsequently endorsed to FIlinvest 8 of the Negotiable Instruments Law, there are only two ways by which an instrument
Finance & Leasing Corporation (Respondent) which financed the purchase. may be made payable to order. There must always be a specified person named in
Salas defaulted in her installments to a discrepancy in the engine and chassis the instrument and the bill or note is to be paid to the person designated in the
numbers of the vehicle delivered and those indicated in the Sales Invoice, Certificate instrument or to any person to whom he has indorsed and delivered the same.
of Registration and Deed of Chattel Mortgage. This was discovered when the vehicle Without the words "or order” or "to the order of", the instrument is payable
Salas vs. CA 181 SCRA 296 figured in an accident. only to the person designated therein and is therefore non-negotiable.
It is patent that the seller is liable for the breach in warranty against the petitioner.
Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company This liability as a general rule extends to the corporation to whom it assigned its
Industrial Products Marketing, two used tractors. Petitioner was issued a sales invoice rights and interests unless the assignee is a holder in due course of the promissory
for the two used tractors. At the same time, the deed of sale with chattel mortgage with note in question, assuming the note is negotiable. in which case, the latter's rights
promissory note was issued. Simultaneously, the seller assigned the deed of sale with are based on a negotiable instrument and assuming further that the petitioner's
chattel mortgage and promissory note to respondent. The used tractors were then defense may not prevail against it.
delivered but barely 14 days after, the tractors broke down. The seller sent mechanics
but the tractors were not repaired accordingly as they were no longer serviceable. The PN in question is not a negotiable instrument. The PN lacks the so-called words
Petitioner would delay the payments on the promissory notes until the seller completes of negotiability. And as such, it follows that the respondent can never be a holder in
its obligation under the warranty. Thereafter, a collection suit was filed against due course, but remains merely an assignee of the note in question. Thus the
petitioner for the payment of the promissory note. petitioner may raise against the respondents all defenses available to it
Consolidated Plywood vs. IFC Leasing 149 SCRA 448 against the seller.
Montinola purchased money orders from the postal office. He issued a personal check
to pay for the money orders and since it is irregular to have checks as payments, he
was advised to see the Chief of the Money Order Division. He did not do so but left the Postal money orders are not negotiable instruments. In establishing and operating
office with the money orders and the check. A notice was thereafter issued to all post a postal money order system, the government is not engaged in commercial
offices as well as the Bank of America, about the irregularly issued money orders with transactions but merely exercises a governmental power for the public benefit.
Section 8 the instruction not to accepts such orders. Moreover, some restrictions imposed money orders by postal laws and regulations
are inconsistent with the character of negotiable instruments.
Plaintiff was one of those who received the subject money orders and encashed it with
the Bank of America. At first, it was given the money but later on, his account was
PECO vs. Soriano 39 SCRA 587 debited
In 1975, Liberato Casals, majority stockholder of Casville Enterprises, went to buy two
garrett skidders (bulldozers) from Edward J. Nell Company amounting to P970,000.00.
To pay the bulldozers, Casals agreed to open a letter of credit with the Equitable
Banking Corporation. Pursuant to this, Nell Company shipped one of the bulldozers to
Casville. Meanwhile, Casville advised Nell Company that in order for the letter of credit
to be opened, Casville needs to deposit P427,300.00 with Equitable Bank, and that The subject check was equivocal and patently ambiguous. Reading on the wordings
since Casville is a little short, it requested Nell Company to pay the deposit in the of the check, the payee thereon ceased to be indicated with reasonable certainty in
meantime. Nell Company agreed and so it eventually sent a check in the amount of contravention of Section 8 of the Negotiable Instruments Law. As worded, it could be
P427,300.00. The check read: accepted as deposit to the account of the party named after the symbols “A/C,” or
payable to the Bank as trustee, or as an agent, for Casville Enterprises, Inc., with the
Pay to the EQUITABLE BANKING CORPORATION Order latter being the ultimate beneficiary.
of A/C OF CASVILLE ENTERPRISES, INC.
That ambiguity is to be taken contra proferentem that is, construed against Nell
Nell Company sent the check to Casville so that it would be the latter who could send Company who caused the ambiguity and could have also avoided it by the exercise
it to Equitable Bank to cover the deposit in lieu of the letter of credit. Casals received of a little more care. Thus, Article 1377 of the Civil Code, provides:Art. 1377. The
the check, he went to Equitable Bank, and the teller received the check. The teller, interpretation of obscure words or stipulations in a contract shall not favor the party
instead of applying the amount as deposit in lieu of the letter of credit, credited the who caused the obscurity.
check to Casville’s account with Equitable Bank. Casals later withdrew all the P427,
300.00 and appropriated it to himself.

The issue in this case is whether Equitable is liable to Edward J. Nell Co. The Court
Equitable Banking vs. IAC 161 SCRA 518 ruled that it was not liable.
Sps. Rodriguez were engaged in the informal lending business. They had accounts
with PNB (specifically the Amelia Avenue Branch in Cebu city). Due to their business,
they had a discounting arrangement agreement with Philnabank Employees Savings
and Loan Associations (PEMSLA), an association of PNB employees. PEMSLA also
maintained a current and savings account in the PNB Amelia Avenue branch. A check payable to a specified payee is an order instrument. BUT check payable to
PEMSLA then began taking loans out in the name of unknowing members (they did a specified payee may nevertheless be considered as a bearer instrument if it is
this to subvert PEMSLA’s policy which was that they wouldn’t approve applications for payable to the order of a fictitious or non- existing person, and such fact is known to
loans of members with outstanding debts.). These PEMSLA checks were given to the the person making it so payable.
spouses for rediscounting, and in turn, the spouses would issue their personal checks
in the name of their members and these were deposited to the PEMSLA account In this case however, PNB was not able to prove that the Sps. Rodriguez never
without indorsement. PNB found out about the scheme and closed PEMSLA’s intended for the named payees to receive the money. As such, they checks are
account, so when Sps Rodriguez tried to deposit the PEMSLA checks, they were payable to order.
Section 9 dishonored because the account was closed. Sps filed a case to recover the money
taken from their account and deposited to PEMSLA’s account. PNB was arguing that
Sps Rodriguez knew that the payees in their issued checks were “fictitious” in the
sense that they didn’t really intend to give the money to the named payees; as such,
PNB vs. Rodriguez and Rodriguez 566 SCRA 513 the checks were payable to order and the Sps should bear the loss.
Ang Tek Lian was convicted of estafa in the CFI for having issued a rubber check.
Knowing he had no funds therefor, Ang Tek Lian drew a check upon the Checks that are payable to cash are bearer instruments; but banks may still
China Banking Corporation for the sum of P4,000, payable to the order of “cash.” He require identification in order to ascertain forgery. If the bank is not sure of the
delivered it to Lee Hua Hong in exchange for money which the latter bearer’s identity or financial solvency, it has the right to demand identification and/or
handed in the act. The next day, the check was presented by Lee Hua Hong to the assuranceagainst possible complications. The bank may therefore require, for its
drawee bank for payment. Despite repeated efforts to notify him that the check had protection, that theindorsement of the drawer – or of some other person known to it–
been dishonored by the bank, Ang Tek Lian could not be located anywhere until he be obtained.
Ang Tek Lian vs. CA 87 Phil. 383 was summoned by the CFI in view of the complaint for estafa.
In this intestate of Luther Young and Pacita Young who died in 1954 and 1952
If the loan should be paid during the Japanese occupation, the Ballantyne schedule
respectively, Pacifica Jimenez presented for payment four promissory notes signed by
should apply with corresponding reduction of the amount. However, if the loan was
Pacita for different amounts totalling P21,000. The terms stated are: Received from
expressly agreed to be payable only after the war or after liberation, or became
Miss Pacifica Jimenez the total amount of P10,000 ten thousand pesos payable
Section 10 payable after those dates, no reduction could be effected, and peso-for-peso
six months after the war, without interest. But the important question, which
payment shall be ordered in Philippine currency. Now then, as in the case before
obviously compelled the administrator to appeal, is whether the amounts should be
us, the debtor undertook to pay "six months after the war," peso for peso
paid, peso for peso, or whether a reduction should be made in accordance with the
payment is indicated.
Jimenez vs. Bucoy 103 Phil. 40 well-known Ballantyne schedule.
A check has the character of negotiability and at the same time it constitutes an
evidence of indebtedness. By mutual agreement of the parties, the negotiable
character of a check may be waived and the instrument may be treated simply
as proof of an obligation.
Petitioner spouses asked for several loans from Vicencio, who in turn, ordered them to
issue undated checks as evidence of the loan which will not be presented to the bank.
Vicencio should have known that he need not even ask the petitioners to place a
Petitioners even informed Vicencio that their bank bank account no longer had funds.
date on the check, because as holder of the check, he could have inserted the
Vicencio asked petitioner husband to sign the 3 checks on the same understanding
date pursuant to Section 13 of the NIL.
that the check is not to be encashed but merely intended as an evidence of
Sections 12-13
indebtedness which cannot be negotiated. When the petitioners failed to bay the
And pursuant to Section 14 thereof, complainant, as the person in possession of
remaining balance (15K out of 85K), Vicencio asked petitioners to place a date on the
the check, has prima facie authority to complete it by filling up the blanks
check as mere evidence of indebtedness, despite being informed that their account
therein.
with the bank had been closed. Vicencio later on presented the checks for payment
and were dishonored due to Account Closed.
Besides, pursuant to Section 12, a negotiable instrument is not rendered invalid
by reason only that it is antedated or postdated. Thus, the allegation of Vicencio
that the date to be placed by Virginia was necessary so as to make the check
Pacheco vs. CA 319 SCRA 595 evidence of indebtedness is nothing but a ploy.

POBOUT
NEGO LIPARDO
E2022
 When 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.

If it was proven that the instrument had not been filed up strictly in accordance
with the authority given and within a reasonable time, the maker can set this up as
Patrimonio pre-signed several blank checks and entrusted those to Gutierrez with a personal defense and avoid liability.
instructions not to fill them out unless approved by Patrimonio. But Guiterrez filled the
Section 14 forms and gave them to Marasigan as payment for a loan between the two of them. For a non-holder in due course to collect from the check from party prior to
When Marasigan tried to encash them, the checks were dishonored so he's now instrument's completion, it must be shown that
running after Patrimonio. (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.

Here, Marasigan was not a holder in due course he knew that the petitioner is not a
party or a privy to the contract of loan, and had no obligation or liability to him, which
renders him dishonest, hence, in bad faith
Patrimonio vs. Gutierrez 724 SCRA 636
The Spouses Lim ordered for mild steel plates and “Z” Purlins from Linton
Under Sec. 191 of the Negotiable Instruments Law the term "issue" means the first
Commercial Company. They issued as payment seven checks. These checks were
delivery of the instrument complete in form to a person who takes it as a holder. On
dishonored upon deposit to the Rizal Commercial Banking Corporation for
the other hand, the term "holder" refers to the payee or indorsee of a bill or note who
insufficiency of funds. Despite demand, Sps. Lim refused to make good the checks.
is in possession of it or the bearer thereof.
Manuel Lim vs. Court of Appeals 251 SCRA 408 They were charged with estafa and violation of B.P. Blg. 22.
Estafa committed by issuing a bad check may be transitory or continuing crime. The
Parulan is an authorized wholesale dealer of San Miguel Corporation. The two checks elements of damage and deceit may arise at different places. In this case, the deceit
involved in this case were issued and signed by the accused in connection with the was perpetrated in Pampanga; the damage was incurred in Bulacan. While the
beer purchases made by him on various occasions. He handed and delivered the check was issued in Bulacan, it was "delivered" in Pampanga. In estafa, delivery is of
checks to the supervisor of SMC in Guiguinto, Bulacan. The checks were forwarded to decisive importance. When the SMC Supervisor received the check in Bulacan,
the SMC Regional Office in Pampanaga and received by the Finance Officer. They that was not yet the delivery contemplated by law because the Supervisor
were deposited to the BPI San Fernando Branch which received a notice of dishonor cannot yet take the check as a holder. There was no intent to transfer title to
from the drawee bank (PDB) in Bulacan. He was charged before the Pampanga RTC him as payee or indorsee. Delivery took place when the check was received by
for Estafa and Violation of BP 22. The RTC dismissed the cases for lack of jurisdiction. the Finance Officer in Pampanga who deposited the same to the BPI in
People vs. Grospe 157 SCRA 154 Pampanga.
Raul Sesbreno filed a complaint for damages against Assistant City Fiscals
Bienvenido N. Mabanto, Jr., and Dario D. Rama, Jr. A notice of garnishment was Every contract on a negotiable instrument is incomplete and revocable until delivery
served on petitioner De La Victoria as City Fiscal of Mandaue City where defendant of the instrument for the purpose of giving effect thereto. As ordinarily understood,
Mabanto Jr. was detailed. The Notice directed petitioner De la Victoria not to disburse, delivery means the transfer of the possession of the instrument by the maker or Lipardo said something that is
transfer, relese or convey to any other person except to the deputy sheriff concerned drawer with intent to transfer title to the payee and recognize him as the holder weird about the procedure in this
the salary checks or other checks, monies or cash due or belonging to Mabanto Jr. thereof. case. So focus na lang on the
Dela Victoria vs. Burgos 245 SCRA 374 under penalty of law. doctrine.
A negotiable instrument, of which a check is, is not only a written evidence of a
contract right but is also a species of property. Just as a deed to a piece of land must
Sima Wei executed a PN in consideration of a loan secured from Petitioner Bank. She be delivered in order to convey title to the grantee, so must a negotiable instrument
Section 16 was able to pay partially for the loan but failed to pay for the balance. She then issued be delivered to the payee in order to evidence its existence as a binding contract.
two checks to pay the unpaid balance but for some unexplainable reason, the checks Section 16 provides that every contract on a negotiable instrument is incomplete and
were not received by the bank but ended up with someone else. The bank instituted revocable until delivery of the instrument for the purpose of giving effect thereto.
actions against Sima Wei and other people. The trial court dismissed the case and the Thus, the payee of the negotiable instrument acquires no interest with respect
CA affirmed this decision. thereto until its delivery to him. Delivery of an instrument from the drawer to the
payee, there can be no liability on the instrument. Moreover, such delivery must be
Development Bank of Rizal vs. Sima Wei 219 SCRA 736 intended to give effect to the instrument.
Puzon cannot be liable for theft because the ownership of the subject PDC was not
transferred to SMC.

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
Puzon purchased SMC products on credit. SMC then required him to issue PDCs long-standing policy of SMC to require its dealers to issue postdated checks to cover
equivalent to the value of the products purchased on credit before the same were its receivables. The check was only meant to cover the transaction and in the
released to him. Said checks were returned to Puzon when the transactions covered meantime Puzon was to pay for the transaction by some other means other than the
by these checks were paid or settled in full. Puzon purchased products on credit to check.
cover said transaction. Puzon thereafter visited the SMC Sales Office wherein he
requested to see a check different to the two PDCs. Puzon then left the office with one Delivery as the term is used means that the party delivering did so for the purpose of
of the PDCs subject of the case. SMC sent a letter to Puzon demanding the return of giving effect thereto. Otherwise, it cannot be said that there has been delivery of the
the checks. When Puzon ignored such demand, SMC filed a complaint against him for negotiable instrument. Once there is delivery, the person to whom the instrument is
theft. delivered gets the title to the instrument completely and
irrevocably. If the subject check was given by Puzon to SMC in payment of the
obligation —the purpose of giving effect to the instrument is evident thus title to or
ownership of the check was transferred upon delivery.
But if the check was not given as payment, there being no intent to give effect to the
San Miguel Corporation vs. Puzon, Jr. 631 SCRA 48 instrument — then ownership of the check was not transferred to SMC.
As the promissory note was executed jointly and severally by the same parties,
namely, Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S.
Sarte, the payee of the promissory note had the right to hold any one or any two of
Concepcion Mining, Legarda, and Sarte executed a promissory note in favor of PNB. the signers of the promissory note responsible for the payment of the amount of the
PNB filed an action to recover from the defendants. In the defendants’ answer, they note
prayed that Legarda (who was already dead at this point) should be included as party-
defendant. The CFI ruled that this was unnecessary and immaterial as per Art. 1216 of Under Section 17 (g) of the Negotiable Instrument Law and Art. 1216 of the Civil
the Civ Code and Section 17 (g) of the NIL. Code, where the promissory note was executed jointly and severally by two or more
persons, the payee of the promissory note had the right to hold any one or any two
of the signers of the promissory note responsible for the payment of the amount of
PNB vs. Concepcion Mining 115 Phil. 732 the note
Shozo Yamaguchi (President/Chief Operating Officer) and Fermin Canlas (Treasurer)
by virtue of Board Resolution of Worldwide Garment Manufacturing, Inc were
Under the Negotiable lnstruments Law, persons who write their names on the face of
authorized to apply for credit facilities with the Republic Planters Bank in the forms of
promissory notes are makers and are liable as such. By signing the notes, the maker
export advances and letters of credit/trust receipts accommodations.
promises to pay to the order of the payee or any holder according to the tenor
9 promissory notes with Worldwide Garment Manufacturing, Inc. was apparently
thereof.
rubber stamped above the signatures of Yamaguchi and Canlas were issued to
Section 17
Republic Planters Bank. Worldwide Garment Manufacturing, Inc. changed its
Where an instrument containing the words "I promise to pay" is signed by two or
corporate name to Pinch Manufacturing Corporation. Republic Planters then filed a
more persons, they are deemed to be jointly and severally liable thereon. An
complaint for the recovery of sums of money. Yamaguchi did not file an Amended
instrument which begins" with "I",We", or "Either of us" promise to, pay, when signed
Answer and failed to appear at the scheduled pre-trial conference despite due notice.
by two or more persons, makes them solidarily liable. The fact that the singular
Canlas denied having issued the promissory notes as an officer of Pinch
pronoun is used indicates that the promise is individual as to each other; meaning
Manufacturing Corporation and when he issued said promissory notes in behalf of
that each of the co-signers is deemed to have made an independent singular
Worldwide Garment Manufacturing, Inc., it was in blank (typewritten entries not
promise to pay the notes in full.
appearing when he signed)
Republic Planters Bank vs. Court of Appeals 216 SCRA 738
Ruiz went to Surigao San Andres’ office to make an investment. He received a
postdated Butuan City Rural Bank PD check (instead of the usual redeemable
Sec. 17 states that where the sum payable is so expressed in words and also in
coupon) in exchange for an investment of P150k. Eventually, the checks were
figures and there is a discrepancy between the two, the SUM denoted by the words
dishonored because DAIF. The fiscal filed with the court for information for violation of
is the sum payable but if the words are ambiguous or uncertain, reference may be
BP 22 against Romero. The accused countered that there was a discrepancy
had to the figures to fix the amount.
between the amount in words and in the amount in figures on check that was
It was agreed that by the end of 21 day period, the investment will be P1,200,000.
dishonored.
People vs. Romero 306 SCRA 90 Words'' –'Php1,000,200 Numbers' –'Php1,200,000'
The board of directors of Akron, composed of petitioner Jose Remo, Jr., Ernesto
Bañares, Feliciano Coprada, Jemina Coprada, and Dario Punzalan with Lucia Lacaste
as Secretary, adopted a resolution authorizing the purchase of thirteen (13) trucks for It was Coprada, President and Chairman of Akron, who negotiated with said
use in its business to be paid out of a loan the corporation may secure from any respondent for the purchase of 13 cargo trucks on January 25, 1978. It was Coprada
lending institution. The obligation is further secured by a promissory note who signed a promissory note to guarantee the payment of the unpaid balance of the
executed by Coprada in favor of Akron. After the lapse of 90 days, private purchase price out of the proceeds of a loan he supposedly sought from the DBP.
respondent tried to collect from Coprada but the latter promised to pay only upon the The word "WE' in the said promissory note must refer to the corporation which
release of the DBP loan. Private respondent sent Coprada a letter of demand. In his Coprada represented in the execution of the note and not its stockholders or
reply to the said letter, Coprada reiterated that he was applying for a loan from the directors. Petitioner did not sign the said promissory note so he cannot be
DBP from the proceeds of which payment of the obligation shall be made. Upon personally bound thereby.
inquiry, private respondent found that no loan application was ever filed by Akron with
Remo vs. Court of Appeals 172 SCRA 405 DBP.

POBOUT
NEGO LIPARDO
Sections 19-20
E2022
 Not only did PNB permit Foerster to indorse the checks and then place them to his
U. E. Foerster was instructed by Insular Drug to take the checks which came to his personal account, but it went farther and permitted Foerster's wife and clerk to
hands for the drug company to the Iloilo branch of the Chartered Bank of India, indorse the checks. The right of an agent to indorse commercial paper is a very
Australia and China and deposit the amounts to the credit of Insular Drug. But responsible power and will not be lightly inferred. A salesman with authority to
INSTEAD, Foerster deposited checks with the Iloilo branch of PNB. The checks in that collect money belonging to his principal DOES NOT have the implied authority
bank were placed in the personal account of Foerster. After the indorsements on the to indorse checks received in payment.
checks was written "Received payment prior indorsement guaranteed by the Philippine
National Bank, Iloilo Branch, Angel Padilla, Manager." The checks were even indorsed This is a case where 132 checks made out in the name of Insular Drug were brought
by Foerster's wife and stenographer. As a consequence of the indorsements on the to the branch office of the PNB in Iloilo by Foerster, a salesman of the drug
checks the amounts therein stated were subsequently withdrawn by U. E. Foerster company, Foerster's wife, and Foerster's clerk. PNB could tell by the checks
and his wife. themselves that the money belonged to the Insular Drug and NOT to Foerster or
his wife or his clerk. When PNB credited those checks to the personal account of
PNB argues that Foerster had implied authority to indorse all checks made out in the Foerster and permitted Foerster and his wife to make withdrawals without there
name of Insular Drug. being any authority from Insular Drug to do so, PNB made itself responsible to the
Insular Drug vs. PNB 58 Phil. 634 drug company for the amounts represented by the checks.
Aruego was the PResident of Phil Education Foundation Company which prints a Aruego did not disclose in any of the drafts that he accepted that he was signing as
periodical World Current Events. To pay for printing, he got a credit accomodation with representative of the Philippine Education Foundation Company. For failure to
PBCom where the printer of World Current would draw a draft against PBCom, and disclose his principal, Aruego is personally liable for the drafts he accepted, pursuant
PBCom would send the draft to Aruego for acceptance. Now, PBCom is claiming for to Section 20 of the NIL. He only signed on them as: JOSE ARUEGO (Acceptor)
Sections
Philippine Bank of Commerce vs. Aruego 102 SCRA 530 19-20 payment of those drafts (SGD) JOSE ARGUEGO.
A Land Development and Construction Contract was entered by A. Francisco Realty
and Development Corporation (AFRDC) (where petitioner is President) and Herby
Commercial and Construction Corporation (HCCC) (where Jaime C Ong is President
and General Manager). This is pursuant a housing project of AFRDC in San Jose del
Monte, Bulacan, financed by the Government Service Insurance System (GSIS).
Under the contract, HCCC agreed to undertake the construction of 35 housing units An agent, when so signing, should indicate that he is merely signing in behalf of the
and the development of 35 hectares of land. The payment of HCCC for its services principal and must disclose the name of his principal; otherwise he shall be held
was on a turn-key basis, that is, HCCC was to be paid on the basis of the completed personally liable.
houses and developed lands delivered to and accepted by AFRDC and the GSIS.

After an examination of the records of the GSIS, Ong discovered that Diaz and
Francisco had executed and signed seven checks drawn against the IBAA and
Francisco vs. Court of Appeals 319 SCRA 354 payable to HCCC for completed and delivered work under the contract.
Astro was granted several loans by Philtrust amounting to 3M with interest and
secured by 3PMs. In each of these promissory notes, it appears that petitioner Rosxas
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 it appears on the notes, Roxas signed twice: first, as president of Astro and
as Surety. Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust the
second, in his personal capacity. In signing his name aside from being the President
payment of 70% of Astros loan, subject to the condition that upon payment by
of Astro, Roxas became a co-maker of the promissory notes and cannot escape any
Philguarantee of said amount, it shall be proportionally subrogated to the rights of
liability arising from it. Under the NIL, persons who write their names on the face of
Philtrust against Astro.
promissory notes are makers, promising that they will pay to the order of the payee
or any holder according to its tenor. Thus, even without the phrase "personal
As a result of Astro's failure to pay its loan obligations and despite demands,
capacity," Roxas will still be primarily liable as a joint and several debtor under the
Philguarantee paid 70% of the guaranteed loan to Philtrust. Philguarantee filed against
notes considering that his intention to be liable as such is manifested by the fact that
Astro and Roxas a complaint for sum of money.
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
Roxas disclaims any liability on the instrument alleging that he merely signed thie
and personal.​
same in blank and the phrases in his personal capacity and in his official capacity
were fraudulently inserted without his knowledge.

Astro Electronics Corp. vs. Phil. Export 411 SCRA 462

Francisco Gozon is accompanied by his friend Ernesto Santos at PNB bank where his
Gozon’s act was not the proximate cause of the loss of the said check. Petitioner
personal belongngs are left. In the car, Santos removed and stole a check from
PNB (drawee) was negligent when it accepted the check.
Gozon’s checkbook without the knowledge and consent of the latter. Santos filled up
the check up to the amount of Php5,0000 and forged the signature of Gozun and
A bank is bound to know the signatures of its customers; and if it pays a
encashed the check in a bank on the same day.
forged check, it must be considered as making the payment out of its own
(bank’s) funds, and cannot ordinarily change the amount so paid to the
Gozon filed a complaint for recovery. PNB contends that Gozun was indeed the
account of the depositor whose name was forged.
proximate cause of the loss and thereby precluding him to set up the defense of
forgery or want of authority under Section 23 of NIL. In reference to the allegation of
Where the private respondent's check was removed and stolen from his checkbook
the petitioner that it is the negligence of private respondent that is the cause of the
without his knowledge and consent, he cannot be considered negligent in this case.
PNB vs. Quimpo 158 SCRA 582 loss which he suffered, the trial court held otherwise.
This case is about PNB who is claiming for reimbursement from PCIB. Augusto
Lim deposited a GSIS check which was drawn against PNB in his PCIB current By not returning the check to PCIB and indicating that it didn’t find anything wrong
account. Following an established banking practice, the check was forwarded through with the check and saying that it would honor the same, and by actually paying its
the Central Bank for clearing to PNB. The check was retained and paid its amount to amount to PCIB, PNB induced PCIB not only to believe that the check was genuine
the PCIB. Later on, PNB demanded from PCIB the refund of said sum after finding and good, but also to pay its amount to Lim. With PNB being the proximate cause, it
PNB vs. CA 25 SCRA 693 that the signatures found in the check were forged which PCIB refused to do may not recover from PCIB.
There was no categorical finding that the 23 checks were signed by persons other
MWSS had an account from PNB. Its treasurer, auditor, and General
than those authorized to sign. On the contrary, the NBI reports shows that the fraud
Manager are the ones authorized to sign checks. During a period of time,
was an “inside job” and that the delay in the reconciliation of the bank statements
23 checks were drawn and debited against the account of petitioner.
and the laxity and loss of records
Bearing the same check numbers, the amounts stated therein were again
control in the printing of the personalized checks facilitated the fraud. It further
debited from the account of petitioner. The amounts drawn were deposited
doesn’t provide that the signatures were forgeries. Forgery cannot be presumed. It
in the accounts of the payees in PCIB. It was found out though that the
should be proven by clear, convincing and positive evidence. This wasn’t done
names stated in the drawn checks were all fictitious. Petitioner demanded
in the present case. The petitioner cannot invoke Section 23 because it was guilty of
the return of the amounts debited but the bank refused to do so. Thus, it
negligence not only before the questioned checks but even after the same had
filed a complaint.
MWSS vs. CA 143 SCRA 20 already been negotiated.
Ramon Ilusorio entrusted his credit cards and checkbooks with blank checks to his
secretary, Katherine Eugenio. Ilusorio was the Managing Director of Multinational
Investment Bancorporation and the Chairman and/or President of several other
corporations. He was a depositor in good standing of respondent bank, the Manila The exception under Sec. 23 NIL applies. Petitioner is precluded from setting up the
Banking Corporation. Eugenio was able to encash and deposit to her personal forgery, assuming there is forgery, due to his own negligence in entrusting to his
account about seventeen (17) checks drawn against the account of Mr. Illusorio at the secretary his credit cards and checkbook including the verification of his statements
MBC. Illusorio fired Eugenio immediately, and instituted a criminal action against her of account.
for estafa thru falsification. llusorio then requested the MBC to credit back and restore
to its account the value of the checks which were wrongfully encashed but the bank
Ilusorio vs. CA 393 SCRA 261 refused
CASA opened a current account with BPI, with CASA’s President, Ms. Ma. Carina C.
Lebron as one of the authorized signatories. In 1991, CASA found out that some of
their checks have been encashed by a certain Sonny D. Santos. It turns out that
Under Section 23 of the NIL, a forged signature is a real or absolute defense, and a
Sonny D. Santos is a fictitious name used by Leonardo T. Yabut, an external auditor of
person whose signature on a negotiable instrument is forged is deemed to have
CASA, who forged the signature of Ms. Lebron and encashed the checks. CASA filed
never become a party thereto and to have never consented to the contract that
a case against BPI for Collection with Damages, praying that BPI be ordered to
allegedly gave rise to it.
reinstate the amount of ₱782,500.007 in the current and savings accounts of CASA
with interest at 6% per annum.
BPI vs. Casa Montessori Internationale 430 SCRA 261
Cooper is the agent of San Carlos Milling Co. Cooper is authorized to have a
subagent. Wilson is the sub-agent. Cooper wanted to go on vacation, so he gave
Baldwin a general power of attorney, at the same time, gave Wilson the same
power. Wilson, Conspiring with Dolores, a clerk, requested from San Carlos in Hawaii
thru telegraphic transfer a China Bank $100,000. Upon receipt by China Bank, it then Drawee bank is liable for forged signature of drawer. It is bound to know
sent an exchange contract to San Carlos offering the sum of P201,000. Then, a signatures of its own depositors. A bank is bound to know the signatures of its
manager's check on China Bank for P201,000 payable to San Carlos was customers; and if it pays a forged check, it must be considered as
received by Dolores. This was deposited to BPI, made possible by the forgery of making the payment out of its own funds, and cannot ordinarily charge the
Baldwin's signature. Before BPI delivered the amounts in cash, the bank asked amount so paid to the account of the depositor whose name was forged.
Dolores for P1 to cover the cost of packing. So Dolores gave BPI another check in the
same amount purporting to be signed by Baldwin again. Eventually this was China Bank is absolved. The duty was upon BPI ot inspect and verify all the
discovered. San Carlos filed a complaint because BPI refused to credit the amount endorsement of the check. The proximate cause of loss was due to the negligence of
withdrawn from them. China Bank was also impleaded. China Bank argued that as BPI in honoring and cashing the two forged checks.
the prior endorsement guaranteed by BPI, they are absolved even if the
endorsement of Baldwin was indeed forged. BPI countered that it did not act
negligently, and the loss should be imputed to San Carlos employees'
San Carlos Milling vs. BPI 59 Phil. 59 negligence and its appointed againt, Baldwin.
The aforementioned warrants were cleared and paid by the Treasurer, in view which
Corporacion de los Padres Dominicos obtained 24 treasury warrants from Carranza.
the PI Bank and the Equitable Bank credited the corresponding amounts to the
Carranza then asked Corporacion to encash the warrants. Corporacion acceded to
respective depositors of the warrants and then honored their checks for said
Carranza’s request conditionally. The 3 conditions were: 1) to deposit the warrants
amounts. Thus, the Treasury had not only been negligent in clearing its own
with BPI first. 2) Treasury should clear the warrants and 3) Proceeds credited to
warrants, but had, also, thereby induced the PI Bank and the Equitable Bank to pay
Corporacion’s BPI account. All the conditions were met. BPI accepted the proceeds
the amounts thereof to said depositors. The gross nature of the negligence of the
for collection only and BPI then presented the warrants to the Government. The
Treasury becomes more apparent when we consider that each one of the warrants
Treasury paid these warrants to 24 payees. After payment, Treasury returned the
was for over P5,000, and, hence; beyond the authority of the auditor of the Treasury
warrants due to forged signature of the Auditor. The Treasuer instituted a case for
— whose signature thereon had been forged — to approve. In other words, the
recovery against both banks and with leave of court, both banks filed a civil suit for the
irregularity of said warrants was apparent the face thereof, from the viewpoint of the
value of what they may be held liable to the government. BPI sued Corporacion while
Treasury. Neither had the PI Bank nor the Equitable Bank been informed of any
Equitable sued Wong, Kau and Ching. The common ground of these civil suits are the
irregularity in connection with any of the warrants As a consequence, the loss of the

Republic vs. Equitable Bank 10 SCRA 8

forged signature of the Auditor and personnel in the drawing office who cleared the
checks.
amounts thereof is mainly imputable to acts and omissions of the Treasury, for which
the PI Bank and the Equitable Bank should not and cannot be penalized.
POBOUT
NEGO LIPARDO
E2022
 Considering that payment does not constitute acceptance, PNB, having paid out
the checks cannot be deemed to have acknowledged and vouched for the
genuineness of the checks (Sec. 62 does not apply). Neither did PNB perform any
act which would have induced the MSC to believe in the genuineness of said
checks before appellant purchased them for value. Therefore PNB may set up
defense of forgery; MSC not entitled to retain the amount of the forged check paid to
Unknown person/s negotiated with MSC 2 checks in payment for automobile tires
it by the appellee.
purchased from its stores, purporting to be issued by PTC by J.L Klar, Manager and
Treasurer against PNB and in favor of Int’l Auto Repair Shop. The said checks were
To entitle the holder of a forged check to retain the money obtained thereon, there
then indorsed ​for deposit ​by the MSC at the Nat’l City Bank of NY. The said checks
must be a showing that the duty to ascertain the genuineness of the signature
were cleared at the clearing house and the PNB credited the Nat’l Bank of NY for such
rested entirely upon the drawee, and that the constructive negligence of such
amounts, believing that the signatures of J.L. Klar were genuine, that the payee is an
drawee in failing to detect the forgery was not affected by any disregard of
existing entity and the endorsements at the bank thereof regular and genuine.
duty on the part of the holder, or by failure of any precaution which, from his
implied assertion in presenting the check as a sufficient voucher, the drawee had the
PNB then found out that the purported signatures of J.L. Klar were forged, and it
right to believe he had taken. PNB is no more chargeable with knowledge of the
demanded from MSC the reimbursement of the amounts for which it credited the
drawer’s signature than the MSC since the drawer was asmuch the customer of
National City Bank of NY at the clearing house and for which the latter credited MSC,
PNB as of MSC. Therefore the presumption that a drawee bank is bound to know
but the latter refused, and continue to refuse, to make such reimbursements. MSC
more than any indorser DOES NOT hold. (basically MSC also should've known the
claims that the payment of the checks in question made by the PNB constitutes an
sig of the drawer)
"acceptance", and, consequently, the case should be governed by the provisions of
Section 62 of the NIL.
In the absence of actual fault on the part of the drawee, his constructive fault in
not knowing the signature of the drawer and detecting the forgery will NOT
preclude his recovery from one who took the check under circumstances of
suspicion and without proper precaution, or whose conduct has been such as to
mislead the drawee or induce him to pay the check without the usual scrutiny or
PNB vs. National City Bank of NY 63 Phil. 711 other precautions against mistake or fraud;
Samsung Construction had an account with FETBC Bel-Air. Then, Gonzaga presented The general rule is to the effect that a forged signature is wholly inoperative, and
an FETBC check on the same branch. The check was payable and drawn against the payment made through or under such signature is ineffectual or does not discharge
account of Samsung Construction. The teller and the bank officers were satisfied with the instrument. An exception to this is if the drawer was negligent, but there was no
the genuineness of the signature, as it was also verified by Samsung's accountant showing of negligence on Samsung's part in this case.
who was at the bank. So, the check was encashed. Then, it was discovered that that
check was missing and that the signatory was forged. Now, Samsung is seeking General rule remains that the drawee who has paid upon the forged signature
Samsung vs. FEBTC 436 SCRA 402 reimbursement. bears the loss.
Souses Cabamongan opened a joint and/or foreign currency time deposit in favor of
their two children with Citibank. On When she left with the money, she left an
identification card. Bank is ‘bound to know the signatures of its customers; and if it pays a forged check,
it must be considered as making the payment out of its own funds, and cannot
ordinarily charge the amount so paid to the account of the depositor whose name
They were presently residing in the US and there was a prior incident wherein they got was forged.
robbed in their house, with jewelry box, a the bank certificate and cards stolen.
Subsequently, a person who claimed to be Carmelita sought the pre-termination
of the account. She presented identification cards to ascertain her identity to
Citibank N.A. vs. Cabamongan 488 SCRA 517 the then account officer.
GELI's check was drawn on Shanghai Bank payable to the order of Melicor.
GELI authorized and directed the Shanghai Bank to pay Melicor, or his order,
P2,000. It did not authorize or direct the bank to pay the check to any other person
than Melicor, or his order, and the testimony is undisputed that Melicor never did part
with his title or endorse the check, and never received any of its proceeds. Neither is
GELI estopped or bound by the banks statement, which was made to it by the
Great Eastern Life Insurance (GELI) drew its check for P2000 on HSBC, payable to Shanghai Bank.
the order of Lazaro Melicor. E.M. Maasim fraudulently obtained possession of the
check, forged Melicor's signature, as an endorser, and then personally endorsed and In this case, the forgery was that of Melicor, who was the payee of the check,
presented it to the PNB where it was credited. After having paid the check, and on the and the legal presumption is that the bank would not honor the check without
next day, PNB endorsed the check to the account of GELI. In the ordinary course of the genuine endorsement of Melicor. In other words, when GELI received it banks
business, it was paid and the amount was charged to the account of Great Eastern statement, it had a right to assume that Melicor had personally endorsed the check,
Life Insurance. Four months after the check was charged to its account, it developed and that, otherwise, the bank would not have paid it.
that Melicor, the payee, never received it and that his signature, as endorser, was
forced by Maasim. GELI made a demand upon HSBC to reimburse the amount of the Section 23 of Act No. 2031, known as the Negotiable Instruments Law, says:
check.
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, unless the party
against whom it is sought to enforce such right is precluded from setting up the
Great Eastern Life vs. HSBC 43 Phil. 678 forgery or wa
She cannot anymore claim from the bank.
Section 23 General Rule: a drawee bank who has paid a check on which an indorsement has
Gempesaw owned grocery stores in Caloocan. To pay her suppliers she would issue
been forged cannot charge the drawer’s account for the amount of said check.
checks prepared by her bookkeeper, Galang. Gempesaw would sign the checks
Exception: where the drawer is guilty of such negligence which causes the bank to
without verifying the accuracy of the checks against the corresponding
honor such a check or checks.
invoices, because she trusted Galang. Because of this trust, Gempesaw did not
know that the checks prepared by Galang contained amounts more than what she
Petitioner's negligence was the proximate cause of her loss (she didn’t examine her
actually has to pay to the suppliers. Gempesaw also did not check if the payees
records with diligence before signing; she didn’t go over her current accounts by
actually received the check. The checks were then honored by respondent bank
going over the daily reports made by the bank). And since it was her negligence
through Boon, the accountant of the bank, who had no authority to do so. The
which caused the respondent drawee Bank to honor the forged checks or prevented
amounts of the checks were deposited in the accounts of Romero and Lam. After 2
it from recovering the amount it had already paid on the checks, petitioner cannot
years, Gempesaw finally found out about the fraud. She then went to the bank asking
now complain should the bank refuse to recredit her account with the amount of such
them to credit the amount wrongfully charged against her account.
checks. Under Section 23 of the NIL, she is now precluded from using the forgery to
Gempesaw vs. CA 218 SCRA 682 prevent the bank's debiting on her account
BDO cannot escape liability of an indorser of a check and which may turn out to be a
forged indorsement. Whenever a bank treats the signature at the back of the checks
BDO drew checks payable to member establishments. Subsequently, the checks were
as indorsements and thus logically guarantees the same as such there can be no
deposited in Trencio’s account with Equitable. The checks were sent for clearing and
doubt that said bank had considered the checks as negotiable. A long line of cases
was thereafter cleared. Afterwards, BDO discovered that the indorsements in the back
also held that in the matter of forgery in endorsements, it is the collecting bank that
of the checks were forged. It then demanded that Equitable credit its account but the
generally suffers the loss because it had the dutyh to ascertain the genuineness of
latter refused to do so. This prompted BDO to file a complaint against Equitable and
all prior indorsements considering that the act of presenting the check for payment to
PCHC. The trial court and RTC held in favor of the Equitable and PCHC.
the drawee is an assertion that the party making the presentment has done its duty
Banco de Oro Savings vs. Equitable 157 SCRA 188 to ascertain the genuineness of the indorsements.
Someone who identified herself to be Fernando called up BPI, requesting
for the pre-termination of her money market placement with the bank. Since the payee’s indorsement has been forged, the instrument is wholly inoperative.
The person who took the call didn't bother to verify with Fernando’s office if However, underlying circumstances of the case show that the general rule on forgery
whether or not she really intended to preterminate her money market isn’t applicable. The issue as to who between the parties should bear the loss in the
placement. Instead, he relied on the verification stated by the caller. He payment of the forged checks necessitates the determination of the rights and
proceeded with the processing of the termination. Thereafter, the caller gave delivery liabilities of the parties involved in the controversy in relation to the forged checks.
instructions that instead of delivering the checks to her office, it would be picked up by
her niece and it indeed happen as such. It was found out later on that the person The acts of the employees of BPI were tainted with more negligence if not criminal
impersonated Fernando and her alleged niece in getting the checks. The dispatcher than the acts of CBC. First, the act of disclosing information about the money market
also didn't bother to get the promissory note evincing the placement when he gave the placement over the phone is a violation of the General Banking Law. Second, there
checks to the impersonated niece. This was aggravated by the fact that this was failure on the bank’s part to even compare the signatures during the termination
impersonator opened an account with the bank and deposited the subject checks. It of the placement, opening of a new account with the specimen signature in file of
then withdrew the amounts. Fernando. And third, there was failure to ask the surrender of the promissory note
evidencing the placement. The acts of BPI employees was the proximate cause to
The day of the maturity of the money market placement happened and the real the loss. Nevertheless, the negligence of the employees of CBC should be taken
Fernando surfaced herself. She denied preterminating the money market placements also into consideration. They closed their eyes to the suspicious large amount
and though she was the payee of the checks in issue, she didn't receive any of its withdrawals made over the counter as well as the opening of the account.
proceeds. This prompted the bank to surrender to CBC the checks and asking for
BPI vs. CA 216 SCRA 51 reimbursement on alleged forgery of payee’s indorsements.
Jai Alai deposited with BPI 10 checks worth P8,030.58 from Antonio Ramirez, a sales
agent of Inter-Island Gas and a regular bettor at jai-alai games. But, it turned out that
the checks were forged so the drawee-banks told BPI this. BPI then shouldered the A forged signature in a negotiable instrument is wholly inoperative and no right to
cost of the checks, but BPI’s cashier called Jai Alai’s cashier and said he would debit discharge it or enforce its payment can be acquired under the forged signature
the value of the checks against the Jai Alai’s account as soon as they were returned except against a party who cannot invoke the forgery. BPI, as a collecting bank
by the respective drawee-banks. which indorsed the checks to the drawee banks for clearing should be liable to the
latter for reimbursement. When BPI accepted the check, the nature of the
Meanwhile, the drawers of the checks, having been notified of the forgeries, relationship was one of agency; the bank was to collect from the drawee of the
demanded reimbursements from the drawee-banks, which in turn demanded from BPI, checks the proceeds.
as collecting bank, the return of the amounts they had paid on account thereof. BPI
debited Jai Alai’s current account and forwarded to the latter the checks containing the It is the obligation of the collecting bank to reimburse the drawee-bank the value of
forged indorsements, which Jai Alai, refused to accept. When Jai-alai issued a check the checks subsequently found to contain the forged indorsement of the payee. But,
for P135,000 to Mariano Olondriz, it was dishonored due to lack of funds. Jai Alai must in turn shoulder the loss of the amounts which its collecting agent, had
to reimburse to the drawee-banks. Since it indorsed the forged checks, it warranted
that the checks were genuine and in all respects what it purports to be.
The question here is whether BPI was correct in debiting the forged checks' amount
Jai Alai vs. BPI 66 SCRA 29 from Jai-alai's account. The SC ruled in the affirmative.

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 The signature of the original payee of the check, Martin Lorenzo, was a forgery
because he was already dead for almost 11 years before the check was issued by
the Bureau of Treasury.

Where the signature on a negotiable instrument is forged, the negotiation of the

Ebranda encashed a check for P1,246.08 at Republic Bank. The check was issued by check is without force or effect. However, where a check has several indorsements
Bureau of Treasury. After encashment, the bank was advised by the bureau that the on it, it was held that it is only based on the forged or unauthorized signature which
alleged indorsement on the reverse side of the check by payee “Martin Lorenzo” was is inoperative.
forged, since Lorenzo had died in 1952. Bureau of Treasury requested a refund for the
amount and in turn, Republic Bank made demands upon Ebranda. Ebranda claimed In this case, it is only the negotiation predicated on the forged indorsement that
she’s a holder in due course of the check or has received her rights from a holder in should be declared inoperative.
due course.
The negotiation of the check in question from Martin Lorenzo, the original payee, to
Ramon R. Lorenzo, the second indorser, should be declared of no effect, but the
negotiation of the check from Ramon R. Lorenzo to Adelaida Dominguez, the third
indorser, and from Domingues to Ebrada who did not know of the forgery, should be
Republic vs. Ebrada 65 SCRA 680 considered valid and enforceable, barring any claim of forgery.
From Jan. 29, 1960 to June 22, 1961, Perez collected from different clients of plaintiff
company some 49 checks with a total value of P91,153.11. The endorsement of the
A bank is not liable for negligence if it caused checks to pass through the
payee, plaintiff Manila Lighter, Inc., by its general manager, Luis Gaskell appear on
clearing house before it allowed proceeds to be withdrawn by the depositors in
the checks. The latter disclaimed such signatures and presented a handwriting expert
accordance with banking practice.
who gave the opinion that the signatures "L. Gaskell" on the indorsement were indeed
forgeries. The checks as thus endorsed were negotiated by Lagamon, accountant of
Since the petitioner was not a client of respondent Bank, i.e., did not maintain an
Manila Lighter and relative of Gaskell with Cao Pek and Co., an electronic store,
account in said Bank, the latter had no way of ascertaining the authenticity of its
whose treasurer is Ko Lit. Most of the checks were deposited by Ko Lit in his account
indorsements on the checks which were deposited in the accounts of the third-
with defendant bank. Three checks with a total amount of P1,115.05 were deposited in
party defendants in said Bank. Respondent Bank was not negligent because, in
the account of Cao Pek & Co. while one check for P2,735.19 was deposited in the
accordance with banking practice, it caused the checks to pass through the clearing
accounts of Lu Siu Po, manager. Bank denied liability for the petitioner's loss which
house before it allowed their proceeds to be withdrawn by the depositors (third-party
was due to its own negligence. It alleged that petitioner is estopped from denying
defendants in the lower court).
its collector's authority to receive the checks from the drawers/customers; that
petitioner failed to give defendant Bank and the drawee Banks notice of the
Looks like a stray case because collecting bank has the duty to ascertain the
alleged forged or unauthorized indorsements within a reasonable time; and that
genuineness of indorsements
its loss was occasioned by its own failure to observe the proper degree of
Manila Lighter Trans. vs. CA 182 SCRA 251 diligence
The six checks in the case at bar had been crossed and issued "for payee's
account only." This could only signify that the drawers had intended the same
for deposit only by the person indicated, to wit, Melissa's RTW. The subject
checks were accepted for deposit by the Bank for the account of Rafael Sayson
Merle Reyes had a business named Melissa’s RTW that sold ready to wear garments.
although they were crossed checks and the payee was not Sayson but Melissa's
Unbeknownst to her, these crossed checks were deposited and encashed by Rafael
RTW. The Bank stamped thereon its guarantee that "all prior endorsements and/or
Sayson. Reyes argues that she had not authorized anyone to deposit and encash
lack of endorsements (were) guaranteed." By such deliberate and positive act, the
checks on her behalf, and since they were crossed checks, they could not be
Bank had for all legal intents and purposes treated the said checks as negotiable
encashed in the first place and are depositable only to her account, Melissa’s RTW.
instruments and, accordingly, assumed the warranty of the endorser. Assuming that
Associated Bank argues that they allowed the checks to be deposited and encashed
Eddie Reyes did endorse the crossed checks, we hold that the Bank would still be
to Sasyon because these were indorsed by Reyes’ own husband
liable to the private respondent because he was not authorized to make the
endorsements. And even if the endorsements were forged, as alleged, the Bank
would still be liable to the private respondent for not verifying the endorser's
Associated Bank vs. CA 208 SCRA 465 authority.
Drawer cannot go after collecting bank because there is no privity of contract
between them. If payable to order at the time of forgery, all parties prior to the
forgery may raise the real defense of forgery against all subsequent parties thereto;
if payable to bearer, only the person whose signature is forged can raise the defense
The province of Tarlac maintains a current account with PNB where the provincial of forgery against a holder in due course.
funds--including an appropriation for the Concepcion Emergency hospital--are
deposited. Checks are drawn against such account payable to the order of the said The drawee bank can seek reimbursement from the person who indorsed the check
hospital, released by the Provincial Treasurer and received for the hospital by the to it and so on. The loss falls on the party who took the check from the forger or on
Administrative Officer and Cashier. Faustino Pangilinan was the hospital's the forger himself. The drawee bank is not similarly situated as the collecting bank
administrative officer and cashier until his retirement in Feb. 28, 1978. However, it was because the former makes no warranty as to the genuineness of any indorsement.
later discovered that even after the retirement of Pangilinan, he was able to collect and The drawee bank's duty is but to verify the genuineness of the drawer's
encash 30 checks with petitioner Bank by forging the indorsement of the payee signature and not of the indorsement because the drawer is its client.
hospital. The Province sought from PNB the restoration of the amounts of the checks.
PNB, as drawee, in turn demanded reimbursement from petitioner Bank. Both banks Therefore, PNB, the drawee bank, cannot debit the current account of the Province
resisted payments. of Tarlac because it paid checks which bore forged indorsements. However, if the
Province of Tarlac as drawer was negligent to the point of substantially contributing
to the loss, then the drawee bank PNB can charge its account. If both drawee bank-
PNB and drawer-Province of Tarlac were negligent, the loss should be properly
Associated Bank vs. CA 252 SCRA 620 apportioned between them.
Wetmont Bank should pay for the checks. As a general rule, a bank or corporation
Ong sold stocks thru Island Securities. To pay Ong, Island bought 2 Pacific Banking who has obtained possession of a check upon an unauthorized or forged
manager's checks. But, Ong's friend forged Ong's signature and deposited the checks indorsement of the payee's signature and who collects the amount of the check from
to his account with Westmont where the friend also had an account. Ong is now the drawee, is liable for the proceeds thereof to the payee or other owner,
claiming the amount of the checks from Westmont. notwithstanding that the amount has been paid to the person from whom the check
Westmont Bank vs. Ong 375 SCRA 212 was obtained.
The first and second cases concern a second check issued by Ford payable to the
Commissioner of Internal Revenue (CIR) as payment for Ford’s manufacture sales
taxes for 3rd quarter of 1977, after the first check it issued was found to not have been
received by CIR. The second check was a crossed check with which were written In Section 23, the general rule is to the effect that a forged signature is "wholly
“payable to the payee’s account only.” The second check worth P4.7M was issued inoperative", and payment made "through or under such signature" is ineffectual or
with Citibank and deposited with IBAA. IBAA accepted the check and sent it for does not discharge the instrument.
clearing with the indorsement at the back “all prior indorsements and/or lack of
indorsements guaranteed.” The exception to this rule is when the party relying on the forgery is "precluded from
setting up the forgery or want of authority." In this jurisdiction we recognize
The third case concerns two checks issued by Ford amounting to P5.8M and P6.3M negligence of the party invoking forgery as an exception to the general rule.
payable to CIR as payment for percentage tax for the first quarter of 1979. Both were
crossed checks with which were written “payable to payee’s account only.” Checks
never reached CIR but the amounts were debited to Ford’s account. Ford paid from its
PCIB vs. CA 350 SCRA 446 own money. Now it asks the court to hold Citibank liable for the proceeds of the check.
The checks clearly established Miranda's indebtedness to Travel On and he was
liable thereunder. A check, which is regular on its face is deemed prima facie to have
Travel On filed a suit against Miranda to collect six checks issued with a total amount been issued for a valuable consideration and every person whose signature appears
of P115,000. Travel On sold and delivered various airline tickets to Miranda at a total thereon is deemed to have become a party thereto for value. Mere introduction of the
price of P278,201.57. To settle account, Miranda paid various amounts in cash and in instrumnet sued on in eveidence prima facie entitles the plaintiff to recovery. It was
kind and issued the six checks which were dishonored. Miranda claims that he had up to Miranda to show that he issued the checks without sufficient consideration. In
fully paid and even overpaid his obligations. He argued that he issued the checks for this case, he failed to rebut the presumption as the checks were issued immediately
purpose of accommodation. after a letter demanding payment has been sent to him by Travel On.

Travel-on vs. CA 210 SCRA 351

Pineda sought the services of Atty. Dela Rama for purposes of making The presumption that a negotiable instrument is issued for a valuable consideration
representations with the chairman and general manager of NARIC to stop or delay the is only prima facie. It can be rebutted by proof to the contrary. (Bank of the Philippine
institution of criminal charges against Pineda who allegedly misappropriated 11,000 Islands v. Laguna Coconut Oil Co. et al., 48 Phil. 5).
cavans of palay. According to Atty. Dela Rama, Pineda issued a promissory note The case at bar involves a grant of loan by a lawyer (Dela Rama) to a moneyed
amounting to P9,300 in consideration of a loan. Pineda, on the other hand, claims that client (Pineda) without security and interest for the loan and whom he (Dela Rama)
he signed the promissory note because Atty. Dela Rama told him that such amount had known only for 3 months (as may be gleaned from Dela Rama’s testimony and
was already given to the chairman and general manager of NARIC to save Pineda other pieces of evidence) is unusual and highly unlikely. Section 24 of NIL is only a
Pineda vs. dela Rama 121 SCRA 671 from criminal prosecution. prima facie presumption that may be overcome by evidence to the contrary.
Petitioner is the owner and general manager of a recruitment agency. Virginia
Balagtas, general manager of the respondent travel agency sent 60,000USC to View
Sea Ventures in Nigeria from her personal account in accommodation and upon
instructions of the petitioner as he was a client. On various dates, North Star extended
credit to Cayanan for the plane tickets of his clients for which Cayanan issued 5
checks to cover payment. The checks were dishonored. Petitioner argues that North Upon issuance of a check, in the absence of evidence to the contrary, it is presumed
Star did not give any valuable consideration for the checks and that the money sent to that the same was issued for valuable consideration which may consist either in
View Sea Ventures was not sent for the account of North Star but for the account of some right, interest, profit or benefit accruing to the party who makes the contract, or
Virginia as her investment, as it was taken from Virginia's personal dollar account in some forbearance, detriment, loss or some responsibility, to act, or labor, or service
Cayanan vs. North Star 658 SCRA 644 Citibank. given, suffered or undertaken by the other side.
Section 24

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 Section 24 The 17 original checks, completed and delivered to petitioner, are
Respondent spouses issued 17 checks in favor of petitioner to pay for the loans they
sufficient by themselves to prove the existence of the loan
obtained from her under a compounded interest agreement on various dates but were
obligation of the respondents to petitioner. Note that respondent
dishonored. Petitioner demanded payment but respondents pleaded for more time.
Caroline had not denied the genuineness of these checks. Instead,
Sometime in September 1996, respondents allegedly called and asked
respondents argue that they were given to various other persons
petitioner for the computation of their loan obligations. Petitioner handed them a
and petitioner had simply collected all these 17 checks from them
computation which showed that, at the agreed 2% compounded interest rate per
in order to damage respondents’ reputation. This account is not
month, the amount of the loan payable to petitioner rose to PhP 13,218,544.20. Upon
only incredible; it runs counter to human experience, as enshrined
receiving the computation, the respondents asked petitioner to reduce their
in Sec. 16 of the NIL which provides that when an instrument is
indebtedness to PhP 8,500,000. Petitioner agreed to the lowered amount.
no longer in the possession of the person who signed it and it is
Respondents delivered to petitioner an Asiatrust check bearing the amount of PhP
complete in its terms "a valid and intentional delivery by him is
8,500,000 with the assurance that the check was good. RTC rendered judgment in
presumed until the contrary is proved."
favor of petitioner. In holding thus, the RTC stated that the possession by petitioner of
the checks signed by Caroline, under the Negotiable Instruments Law, raises the
A check constitutes an evidence of indebtedness and is a veritable proof of an
presumption that they were issued and delivered for a valuable consideration. CA
obligation. Hence, it can be used in lieu of and for the same purpose as a
reversed.
Pua vs. Spouses Tiong and Teng 708 SCRA 571 promissory note.
Manuel entered into a valid agreement with Wilson for the supply of gravel, sand and
boulders for the Macagtas Dam project. Wilson issued to him 3 checks payable to
The SC ruled in favor of Manuel. Jurisprudence holds that in a suit for recovery of
CASH worth P1.5M. At Wilson’s behest, Manuel only deposited the checks to Far East
sum of money, the petitioner has the burden of proof to show that the respondent
Bank on June 29, 1998. When he deposited them, they were dishonored due to a stop
had not paid him the amount of the contracted loan. As the RTC correctly ruled, it is
payment order. Manuel demanded payment but to no avail. Wilson’s version of the
presumed that the subject checks were issued for a valid consideration, which
story is that he never paid Manuel with the said checks, and that the checks were
therefore, dispensed with the necessity of any documentary evidence to support
actually entrusted to his engineer who lost the said checks. Manuel then filed a
petitioner's monetary claim. Unless otherwise rebutted, the legal presumption of
complaint for sum of money. The RTC ruled in favor of Manuel. The RTC said
consideration under Section 24 of the NIL stands.
respondent failed to overcome the disputable presumption that every party to an
instrument acquired the same for a valuable consideration under Section 24 of the
Section 24. Presumption of Consideration. — Every negotiable instrument is deemed
Negotiable Instruments Law. The CA reversed the ruling.
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.
The Surpeme Court in this case held that Wilson was not able to overcome the
Ubas, Sr. vs. Chan 816 SCRA 659 presumption of consideration under Sec. 24 of the NIL.
The fact that a joint and several note has been signed by one or various of the
makers thereof for the accommodation by one or more of his or their co-makers,
does not render him or them an accommodation maker or makers with respect to the
creditor who, upon the receipt of the note, pays the full value thereof. In such a case
Sellner, together with two other persons, signed a note in favor of the plaintiff Clark
the payment by the creditor of the value of the note upon the latter passing into his
stating that after 6 months from July 1, 1914, for 12k pesos, Sellner jointly and
hands, renders all the signers of the note liable thereon; and it is of no importance
severally promise to pay to the order of R.N Clark. The amount was not paid upon
that one or more of the signers has or have not received absolutely any part of the
maturity. Counsel for Sellner alleged that the latter, being an accommodation party, is
consideration.
is not liable unless the note is negotiated, which was not done, as shown by the
evidence.
The expression "without receiving value therefor" used in Section 29 of the
Negotiable Instruments Law, means that no value has been received for the
negotiable instrument.
Clark vs. Sellner 42 Phil. 384
Gueson fexecuted a promissory note for P18,960 in favor of Gregorio Caneda, Jr. It has been ruled that one who signs as maker, drawer, acceptor or indorser, without
promising to pay P 790 for 24 months with 14%/annum. Gueson executed a chattel receiving value therefore, and for the purpose of lending his name to some other
mortgage and used a Toyota Jiffy jeep as a collateral. In case of default in the person is liable to the instrument to a holder for value, notwithstanding
payment of any installment will make the entire obligation due and demandable. The the fact that such holder at the time of the taking the instrument knew him to
PN and chattel mortgage were assigned by Caneda in favor of FNCB. Gueson be only an accommodation party. Nonetheless, after paying the holder, he is
defaulted in his obligation. FNCB filed a complaint for replevin and/or sum of money entitled to obtain reimbursement from the party accommodated. Caneda is the
against Gueson and John Doe. As relief, FNCB prayed for the seizure of the Toyota real debtor of the company and Gueson is only an accommodation party of Caneda.
Jiffy jeep. In the alternative FNCB also prayed for the payment. Gueson countered he It is no defense to state that Caneda and Gueson didn't receive any value for the
did not receive any value for the promissory note he executed as he merely promissory note executed, both claiming to be accommodation parties. A
accommodated the real debtor Caneda, Jr.; that as the accommodated party Caneda, third person advances the face value of the note to the accommodated
Jr. executed a deed of sale in Gueson's favor covering the Jiffy jeep subject matter of party at the time of the creation of the note, the consideration for the note
the chattel mortgage and he also executed a counter deed of sale in favor of Caneda, as regards the maker is the money advanced to the accommodated party, and
Jr.; that with the consent of FNCB, Caneda Jr. executed an "undertaking" whereby he it cannot be said that the note is lacking in consideration as to the
bound himself to pay and assume the obligation stipulated in the promissory note and accommodating party just becaue he himself received some of the money.
chattel mortgage; that FNCB is not a holder in due course of the promissory note nor It is enough that the value given for the note at the time of its creation.
an assignee in good faith
Caneda vs. CA 181 SCRA 762
The Hipolitos applied for, and were granted, a loan in the amount of P700,000.00 with In this case, there is no question that the private respondents signed the promissory
interest for which they executed and delivered to Town Savings and Loan Bank a note in order to enable Pilarita H. Reyes, who is Miguel Hipolito's sister, to borrow
promissory note with a maturity period of three (3) years. For failure to keep currentthe total sum of P1.4 million from TSLB. As observed by both the trial court and the
their monthly payments on the account, the obligors were deemed to have defaulted. appellate court, the actual beneficiary of the loan was Pilarita H. Reyes and no other.
The Hipolitos denied being personally liable on the P700,000.00 promissory note The Hipolitos accommodated her by signing a promissory note for half of the
which they executed. The loan was allegedly for the account of Pilarita H. Reyes, loan that she applied for because TSLB may not lend any single borrower
the sister of Miguel Hipolito. The Hipolitos, not having received any part of the more than the authorized limit of its loan portfilio. Under Section 29 of the
loan, were mere guarantors for Pilarita. They allegedly signed the promissory Negotiable Instruments Law, the Hipolitos are liable to the bank on the
Town Savings and Loan Bank vs. CA 223 SCRA 459 note because they were persuaded to do so by Joey Santos, President of TSLB. promissory note that they signed to accommodate Pilarita.
As accommodation parties, the defendants having signed the instruments without
receiving value therefor and for the purpose of lending their names to some other
Maza and Mecenas executed 5 promissory notes at the request of Echaus, in case
person, are still liable on the instruments. An accommodation party is liable
Echaus might need to negotiate them with PNB. Upon maturity, PNB enforced the
according to the face of his undertaking, the same as if he were himself financially
PNs against Maza and Mecenas, but the two refused saying they never negotiated it
interested in the transaction. Also, to fasten liability upon an accommodation maker,
with PNB nor receive value therefof, and that it was Echaus who negotiated the PNs to
it is not necessary that any consideration should move to him. The consideration
PNB.
which supports the promise of the accommodation maker is that parted with by the
PNB vs. Maza & Mecenas 48 Phil. 207 person taking the note and received by the person accommodated.
Sevilla's estate is not liable since Sadaya paid the bank even without judicial demand
nor evidence to show Varona is insolvent
Sevilla, Varona, and Sadaya solidarily executed a promissory note in favor of BPI.
(1) A joint and several accommodation maker of a negotiable promissory note may
Sevilla and Sadaya signed this as a favor to Varona, and Varona received the full
demand from the principal debtor reimbursement for the amount that he paid to the
P15k. Varona paid some installments but still had a balance with BPI, which Sadaya
payee; and
paid for. Sevilla then died. But, Varona refused to reimburse Sadaya for the money
(2) A joint and several accommodation maker who pays on the said promissory note
she gave as payment for the balance. So now, Sadaya is running after Servilla's
may directly demand reimbursement from his co-accommodation maker without first
estate for reimbursement.
directing his action against the principal debtor provided that
(a) he made the payment by virtue of a judicial demand, or
Sadaya vs. Sevilla 19 SCRA 924 (b) a principal debtor is insolvent
Atty. Benares, in accommodation of his clients (Spouses Ong) issued a check drawn
against Traders Royal Bank (TRB) in the amount of P45K, payable to Ernestina
Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the Section 29 of the NIL which holds an accommodation party liable on the instrument
same was to be signed by its president (Atty. Benares) and its treasurer. But, since at to a holder for value, although such holder at the time of taking the instrument knew
that time, the treasurer was not available, Atty. Benares asked Ricardo S. Santos, Jr., him to be only an accommodation party, does not include nor apply to corporations
to sign the check as an alternate signatory. which are accommodation parties. The fact that for lack of capacity the corporation is
not bound by an accommodation paper does not absolve, but should render
Since the compromise agreement was not approved within the expected period of personally liable, the signatories of said instrument where the facts show that the
time, the check was replaced by Atty. Benares with another TRB check (also signed accommodation involved was for their personal account, undertaking or purpose and
Section 29
by Atty Bernas and Santos Jr.) in the same amount of P45K also payable to the the creditor was aware thereof.
Crisologo-Jose. When Crisologo-Jose deposited this replacement check with her
Crisologo Jose vs. CA 177 SCRA 594 account, it was dishonored for insufficiency of funds.
Serrano was a broker bringing together lenders and borrowers around Manila for a In this case, there never was any moment when Serrano was the owner of the said
commission. He personally took the money from the lender, delivered the same to the note. Serrano acted merely as agent, a vehicle through w/c the naked title to the
borrower, took the notes in his own name, and immediately indorsed the same to the note passed from borrower to the lender. He was never paid on the instrument – he
lenders. In this case, he indorsed in favor of Maulini a note executed in his favor for P was only paid separately for his services in negotiating the loan. Thus, he was not an
3,000.00. Maulini now goes after Serrano for the value of the said note; Serrano accommodation indorser and should thus not be held liable under the note. No
Maulini vs. Serrano 28 Phil. 640 denies any liability. contract of indorsement ever existed in this case.
When a person lends his name to the accommodated party, the accommodation
party is in effect a suretyship. However, unlike a contract of suretyship, the liability
Since they lacked funds for the construction, their attorney-in fact, Jose Toribio
of the accommodation party remains not only primary but also unconditional
convinced his relatives, the Prudencios to mortgage their property to secure their loan
to a holder for value.
with PNB for P10,000. And so, the Prudencios mortgaged their land and executed a
A holder for value is one who must meet all the requirements of a holder in due
promissory note for P10,000 in favor of PNB.
course under Section 52 of the same law except notice of want of consideration. If
he does not qualify, then he holds the instrument subject to the same defenses as if
Prudencio vs. CA 143 SCRA 7 it were non-negotiable.
Petitioner sold to Wonderland Food Industries two parcels of land. They stipulated
First, there was no contract of sale that materialized. The original agreement was
under a MoA that the terms of payment would be P1,000,000 in cash, P2,000,000 in
that Wonderland would pay cash and petitioner would deliver possession of the
shares of stock, and the balance would be payable in monthly installments. Thereafter,
farmlands. But this was changed through an addendum, that petitioner would instead
an addendum was executed between them, qualifying the cash payment. Instead of
secure a loan and the settlement of the same would be shouldered by Wonderland.
cash payment, the vendee authorized the vendor to obtain a loan from the financier on
Petitioners became liable as accommodation parties. They have the right after
which the vendee bound itself to pay for. This loan was to cover for the payment of P1,
paying the instrument to seek reimbursement from the party accommodated,
000,000. This addendum was not notarized.
since the relation between them has in effect became one of principal and
surety.
Petitioner Soriano signed as maker the promissory notes payable to the bank.
However, the petitioners failed to pay the obligations as they were due. During that
Furthermore, as it turned out, the contract of surety between Woodland and
time, the bank was in financial distress and this prompted it to endorse the promissory
petitioner was extinguished by the rescission of the contract of sale o the farmland.

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notes for collection. The bank gave ample time to petitioners then to satisfy their
With the rescission, there was confusion in the persons of the principal debtor and
obligations. The trial court held in favor of the bank. It didn't find merit to the contention
surety. The addendum thereon likewise lost its efficacy.
Agro Conglomerates vs. Soriano 348 SCRA 450 that Wonderland was the one to be held liable for the promissory notes.

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 Section 29 of the NIL defines an accommodation party as 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."

Associated Bank filed a collection suit against Antonio Ang Eng Liong and Tomas Ang An accommodation party is one who meets all the three requisites,
for the two (2) promissory notes that they executed as principal debtor and co-maker. (1) he must be a party to the instrument, signing as maker, drawer, acceptor, or
Ang alleged that the bank knew that he did not receive any valuable consideration for indorser;
affixing his signatures on the notes but merely lent his name as an accommodation (2) he must not receive value therefor; and
party. Ang also showed newspaper clippings proving that Associated Bank was under (3) he must sign for the purpose of lending his name or credit to some other person.
Rehabilitation and so the Government through the Asset Privatization Trust is the real
party in interest and not the bank 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. The accommodation
party is liable on the instrument to a holder for value even though the holder, at the
time of taking the instrument, knew him or her to be merely an accommodation party,
Ang vs. Associated Bank 532 SCRA 244 as if the contract was not for accommodation.
Ingersol Santia loaned Pacific Lending and Capital Corporation P2,500,000 through its
manager, Fideliza Aglibot. This was evidenced by a promissory note issued by
Aglibot is what the Negotiable Instruments Law calls an accommodation party.The
Aglibot in behalf of PLCC. As a guaranty or security for the payment of the note,
relation between an accommodation party and the party accommodated is one of
Aglibot issued and delivered to Santia eleven (11) post-dated personal checks drawn
principal and surety — the accommodation party being the surety. It is a settled rule
from her own demand account maintained at Metrobank. Upon presentment of the
that a surety is bound equally and absolutely with the principal and is deemed an
checks for payment, they were dishonored by the bank for having been drawn against
original promisor and debtor from the beginning. The liability is immediate and direct.
insufficient funds or closed account. Santia demanded payment from PLCC and
It is not a valid defense that the accommodation party did not receive any valuable
Aglibot but his demands were not met. 11 informations for violation of BP 22 was filed.
consideration when he executed the instrument; nor is it correct to say that the
Aglibot, in her counter-affidavit, admitted that she did obtain a loan from Santia, but
holder for value is not a holder in due course merely because at the time he acquired
claimed that she did so in behalf of PLCC; that before granting the loan, Santia
the instrument, he knew that the indorser was only an accommodation party.
demanded and obtained from her security for the repayment thereof in the form of the
checks but with the understanding that upon remittance in cash of the face amount of
A surety is bound equally and absolutely with the principal and is deemed an original
checks, Santia would correspondingly return to her each check paid; but despite
promisor and debtor from the beginning. The liability is immediate and direct. It is not
having already paid the said checks, Santia refused to return them and deposited her
a valid defense that the accommodation party did not receive any valuable
checks, despite giving her assurance that he would not.
consideration when he executed the instrument; nor is it correct to say that the
holder for value is not a holder in due course merely because at the time he acquired
The MTC acquitted her of BP 22 and the RTC absolved her of civil liability. The CA
the instrument, he knew that the indorser was only an accommodation party.
reversed the RTC ruling. The issue in this case is whether Aglibot can be considered
Aglibot vs. Santia 687 SCRA 283 as an accomodation party and therefore be held liable to Santia. The SC said yes.
Security Bank, issued 280 CTDs in favor of one Angel dela Cruz who deposited with
herein defendant the aggregate amount of P1,120,000.00. Angel delivered the said
CTDs to Caltex in connection with his purchased of fuel products. Angel informed Mr.
Tiangco, the Sucat Branch Manger, that he lost all the certificates of time deposit in
dispute. Mr. Tiangco advised him to submit a notarized Affidavit of Loss, if he desired
replacement of said lost CTDs. Angel complied, then 280 replacement CTDs were
issued to him. Angel then negotiated and obtained a loan from defendant bank in the
amount of P875,000.00. On the same date, he executed a notarized Deed of
Assignment of Time Deposit which stated that he (de la Cruz) surrenders to defendant
bank "full control of the indicated time deposits from and after date" of the assignment
Sec. 30. What constitutes negotiation. - An instrument is negotiated when it is
and authorizes said bank to pre-terminate, set-off and "apply the said time deposits to
transferred from one person to another in such manner as to constitute the
the payment of whatever amount or amounts may be due" on the loan upon its
transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if
maturity.
payable to order, it is negotiated by the indorsement of the holder and completed by
delivery.
Mr. Aranas, Credit Manager of Caltex, went to Security bank's Sucat branch and
presented for verification the CTDs declared lost by Angel alleging that the same were
delivered to Caltex "as security for purchases made with Caltex" Security Bank
Section 30 received a letter from Caltex formally informing it of its possession of the CTDs in
question and of its decision to pre-terminate the same. Accordingly, Security Bank
rejected the Caltex's demand and claim for payment of the value of the CTDs. The
loan of Angel with the Security bank matured and fell due and on August 5, 1983, the
Security bank set-off and applied the time deposits in question to the payment of the
matured loan
Caltex vs. CA 212 SCRA 448
Sps Manuel and Rosita Lim of RIGI Built Industries Inc. RIGI had been transacting
business with Linton Company, the latter supplying the former with steel plates, steel Under Sec. 191 of the Negotiable Instruments Law the term “issue” means the first
bars, flat bars and purlin sticks which the company uses in the fabrication, installation delivery of the instrument complete in form to a person who takes it as a
and building of steel structures. The Lims ordered steel plates from Linton, delivering holder. On the other hand, the term “holder” refers to the payee or indorsee of a
checks to the latter’s collector as payment. The checks were dishonored for DAIF with bill or note who is in possession of it or the bearer thereof. Here, the place of
the additional notation “payment stopped”. However, according to them, they ordered issuance is clearly Navotas.
the bank not to issue payment because they claimed that the supplies delivered by The issuance as well as the delivery of the check must be to aperson who
Linton Commercial were not in accordance with the specifications of purchase orders. takes it as a holder. Delivery of the checkssignifies transfer of possession (actual or
Despite demands, the Lims refused to make good the checks or to pay value of the constructive) fromone person to another with intent to transfer title thereto; the
deliveries. delivery being the final act essential to its consummation as anobligation.
Manuel Lim vs. CA 251 SCRA 408
Ramos went to the office of Provincial Treasurer Laya at Misamis Oriental to encash
the check for P500,000 which he had received from the Provincial Treasurer of Lanao.
Laya did not have enough cash to cover the check so he gave Ramos P400,000 in The check was not legally negotiated within the meaning of the Negotiable
emergency notes and a check No. 1382 for P100,000 drawn on the Philippine Instruments Law. Section 32 of the same law provides that "the indorsement
National Bank. Ramos had no opportunity to cash the check because in the evening must be an indorsement of the entire instrument. An indorsement which
of the same day the check was issued to him, the Japanese forces entered the capital purports to transfer to the indorsee a part only of the amount payable, . . . (as
Section 32 of Misamis Oriental, and on June 10, 1942, the USAFFE forces to which he was in this case) does not operate as a negotiation of the instrument." Montinola
attached surrendered. Ramos was made a prisoner of war until February 12, 1943, may therefore not be regarded as an indorsee. At most he may be regarded as a
after which, he was released and he resumed his status as a civilian. The mere assignee of the P30,000 sold to him by Ramos, in which case, as such
circumstances and conditions under which the negotiation or transfer was assignee, he is subject to all defenses available to the drawer Provincial Treasurer of
made are in controversy. The agreement between himself and Montinola Misamis Oriental and against Ramos.
regarding the transfer of the check was that he was selling only P30,000 of the
Montinola vs. PNB 88 Phil. 178 check.
Villaruel executed a PN in favor of Ng Sambok. Sambok Motors (sister company)
negotiated and indorsed the note in favor of Metropol Financing & Investment
By indorsing the note "with recourse" does not make itself a qualified indorser, but a
Corporation. The indorsement stated that it would be paid to the order of Metropol
general indorser who is secondarily liable, because by such indorsement, it agreed
Bacolod Financing & Investment Corporation ​with recourse and a waiver to the
that if Villaruel fails to pay the note, Metropol can go after Sambok. The effect of
notice of demand, dishonor, protest and presentment.
Section 38 such indorsement is that the note was indorsed without qualification. A person who
indorses without qualification engages that on due presentment, the note shall
Sambok contended that ​by adding the words “with recourse” in the indorsement of the
be accepted or paid, or both as the case may be, and that if it be dishonored, he
note, it becomes a qualified indorser; that being a qualified indorser, it does not
will pay the amount thereof to the holder.
warrant that if said note is dishonored by the maker on presentment, it will pay the
Metropol vs Sambok Motors Co. 120 SCRA 864 amount to the holder; that it only warrants the following pursuant to Sec. 65 of the NIL.
Bitanga alone endorsed the crossed check, and Metrobank allowed the deposit and
release of the money, despite the absence of authority of Bitanga’s co-payee BA
Bitanga got a loan from BA finance which he secured by mortgaging his car. But, his Finance to endorse it. So Metrobank is negligent when it allowed the deposit of the
car got lost so Malayan Insurance issued a crossed check (with a notation For Deposit crossed check despite the lone endorsement of Bitanga. The payment of an
Payee's Account Only) payable to the order of BA Finance AND Bitanga. Without instrument over a missing indorsement is the equivalent of payment on a
Section 41
indorsement or authority from co-payee BA Finance, Bitanga deposited this check to forged indorsement or an unauthorized indorsement in itself in the case of joint
his account at AsianBank (now metrobank). BA Finance learned of this and is now payees. So, one who credits the proceeds of a check to the account of the
demanding payment from Asianbank and Bitanga. indorsing payee is liable in conversion to the non-indorsing payee for the entire
amount of the check.
Metrobank vs. BA Finance Corp. 607 SCRA 620
Salazar filed an action for the recovery of money amounting to P267k against BPI
before the RTC. BPI alleged that Temploneuvo demanded from BPI P267k "The presumption under Sec. 131 (a) of the Rules of Court stating that a negotiable
representing the aggregate value of 3 checks, payable to Temploneuvo, but were instrument was given for sufficient consideration will not inure to the benefit of
deposited to Salazar’s account in BPI, without Templonuevo’s knowledge and Salazar because the term “given” does not pertain merely to a transfer of physical
Section 49 endorsement. possession of the instrument. The phrase “given or indorsed” in the context of
negotiable instruments refer to the manner in which such instrument may be
BPI froze A.A. Salazar Construction’s account, instead of Salazar’s personal account, negotiated.
where the checks were deposited. BPI then debited P267k from Salazar’s personal "
BPI vs. Court of Appeals, et al 512 SCRA 620 account and paid the same amount to Templonuevo by means of cashier’s check.

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NEGO LIPARDO
E2022
 A suit was filed to collect eleven checks payable to "cash or bearer" and drawn by Tan
Kim upon the Equitable Banking Corporation. The checks were presented for payment
by Chan Wan to the drawee bank, but they were dishonored and returned to him due
to insufficiency of funds.

On the backs of the checks, endorsements which show they had been deposited to
Chinabank and were presented to the drawee bank for collection. At the back of the
check, Chinabank's endorsement appears: "For deposit to the account of White House
Shoe Supply with the China Banking Corporation."
It does not follow that simply because he was not a holder in due course Chan Wan
All the crossed checks have the "clearance" endorsement of Chinabank. could not recover on the checks. The Negotiable
Instruments Law does not provide that a holder who is not a holder in due course,
may not in any case, recover on the instrument. On the
These circumstances show deposit of the checks with China Bank and subsequent other hand, if it were true that the checks had been issued in payment for shoes that
presentation by the latter through the clearing office; but as drawee had no funds, they were never made and delivered, Tan Kim
were unpaid and returned, some of them stamped "account closed". The plaintiff, in would have a good defense as against a holder who is not a holder in due course.
this case, got the check he after they had been returned, because he presented them
in court with such "account closed" stamps, without bothering to explain. He was not a
holder in due course under the circumstances, since he knew that the checks
had already been dishonored.

Issue is w/n Chan Wan who is not a holder in due course can collect on the eleven
Chan Wan vs. Tan Kim 109 Phil. 706 checks
STELCO Marketing sold to RYL Construction GI wires. RYL did not pay. In another
matter, RYL construction gave Armstrong Industries a check for payment of obligation.
The check was issued by Steelweld Corp, signed by Limson and Torres, as an
accommodation/ financial assistance to RY Lim (as a guarantee only, not for
payment). The check bounced. BP 22 case was filed against Limson and Torres -
case was dismissed. Eleven months later, STELCO got hold of the check and
The possession of a negotiable instrument after presentment and dishonor, or
presented it to Metrobank - again, dishonored. Civil case was filed against Steelweld
payment, is utterly inconsequential; it does not make the possessor a holder for
and RYL for recovery and damages.
value within the meaning of the law; it gives rise to no liability on the part of the
maker or drawer and indorsers. STELCO cannot be deemed a holder of the check
Bearer Instrument
for value.
Steelweld Corp (accommodation party)> RYL Construction (accommodated party) >
Armstrong Industries (payee) >Metrobank (drawee)

(same check)
RYL Construction > STELCO Marketing > Metrobank (Drawee)
Stelco Marketing vs. CA 210 SCRA 51
The negotiability of the check isn’t affected by it being crossed, whether specially or
generally. It may be legally negotiated from one person to another as long as the one
who encashes the check with the drawee bank or if its specially crossed, by the bank
mentioned between the parallel lines.

Jurisprudence provides the following effects of crossing a check:

1. The check may not be encashed but only deposited in the bank
2. The check may be negotiated only once—to one who has an
Bataan Cigar has engaged one of its suppliers, George King, to deliver bales of
account with a bank
tobacco leaves. Petititoner then issued postdated crossed checks in favor of King.
3. The act of crossing the check serves the warning to the holder that the check has
This was continued despite the failure to deliver the bales. Simultaneous to these
been issued for a definite purpose so that he must inquire if he has received the
transactions was the discounting of King of the checks to State Investment House.
check pursuant to that purpose, otherwise, he is not a holder in due course.
Bataan then stopped payment and SIHI tried to collect.
The check should placed the holder in inquiry and upon him devolves the duty to
ascertain the indorser’s title to the check or the nature of his possession. Failing in
this respect, the holder is declared guilty of gross negligence amount to legal
absence of good faith. In the present case, petitioner’s defense in stopping payment
is as good to SIHI as it is to King because really the consideration for the checks
were the delivery of the bales of tobacco leaves which King failed to do. There being
Bataan Cigar vs. CA 230 SCRA 642 failure of consideration, SIHI is not a holder in due course.
The checks in issue were crossed generally and issued payable to New
Sikatuna Wood which could only mean that the drawer has intended the
same for deposit only by the rightful person. Apparently, it was not the
payee who presented the same for payment and therefore, there was no
New Sikatuna requested for a loan from Spouses Chua. Latter issued postdated
proper presentment and the liability didn't attach to the drawer. Thus, in
crossed checks in favor of former. Thereafter, Sikatuna sold checks to SIHI which
the absence of due presentment, the drawer didn't become liable.
upon deposit, checks were dishonored. The trial court decided the case in favor of
Consequently, no right of recourse is available to petitioner against the
SIHI.
drawer of the subject checks considering that the petitioner is the proper
party authorized to make presentment of the checks in question.
Nonetheless, the holder could still collect from New Sikatuna if the latter
State Investment House vs. IAC 175 SCRA 310 doesn't have a valid excuse from refusing payment.
Robert Dino was approached by a syndicate, one of whose member posed as an
The SC in this case held that the Sps. Judal-Loot are not holders in due course and
owner of several parcels of land, and induced petitioner to lend the group P3M. Said
as such, are not entitled to collect the face value of the check from its drawer
member who used the name Vivencia Ompok Consing offered to execute a Deed of When the negotiable instrument
(Roberto Dino). Sps. Judal-Loot had the duty to ascertain the indorser’s, in this case
Absolute Sale instead of the usual mortgage contract. Enticed, petitioner issued three involved is a crossed check, the
Lobitana’s, title to the check or the nature of her possession. They failed to do this.
checks in the said amount. One such check was a cross check, postdated 13 following principles must also be
Their verification from Metrobank on the funding of the check does not amount to
February, 1993 in the amount of P1M payable to Vivencia Ompok Consing and/or Fe considered other than the requisites
determination of Lobitana’s title to the check. Failing in this respect, respondents are
Lobitana. under Sec. 52 of the NIL: A crossed
guilty of gross negligence amounting to legal absence of good faith, contrary to
check (a) may not be encashed but
Section 52(c) of the Negotiable Instruments Law. Hence, respondents are not
Dino discovered that the documents involving the properties covered rights over only deposited in the bank; (b) may
deemed holders in due course of the subject check.
government properties. Realizing he had been deceived, petitioner advised the bank be negotiated only once — to one
to stop payment on the checks. Meanwhile, Lobitana negotiated the said check to who has an account with a bank;
However, the fact that respondents are not holders in due course does not
Judal-loot spouses in exchange of the amount P948,000.00. Before respondents and (c) warns the holder that it has
automatically mean that they cannot recover on the check. The NIL does not provide
accepted the check, they inquired with Metrobank if the check was sufficiently funded been issued for a definite purpose
that a holder who is not a holder in due course may not in any case recover on the
to which the bank responded in the positive. However, when respondents deposited so that the holder thereof must
instrument. The only disadvantage of a holder who is not in due course is that the
the check, it was dishonored for the reason of ‘PAYMENT STOPPED. Respondents inquire if he has received the check
negotiable instrument is subject to defenses as if it were non-negotiable. Among
filed a collection suit with the RTC arguing that they were holders in due course. The pursuant to that purpose;
such defenses is the absence or failure of consideration, which petitioner sufficiently
RTC ruled in favor of Sps. Judal-Loot and ordered Dino and Lobitana to jointly and otherwise, he is not a holder in due
established in this case.
Dino vs. Judal-Loot 618 SCRA 393 severally pay them. The CA affirmed the ruling. course.
Spouses Tan were controlling stockholders of E.T. Henry. Some of E.T. Henry’s It is then settled that crossing of checks should put the holder on inquiry and upon
customers were Hi-Cement, Riverside, and Kanebo. For their purchases, the him devolves the duty to ascertain the indorser’s title to the check or the nature of his
corporations issued postdated checks to E.T. Henry. In 1979, Insular granted E.T. possession. Failing in this respect, the holder is declared guilty of gross negligence
Henry a credit facility called “Purchase of Short Term Receivables.” E.T. Henry was amounting to legal absence of good faith…and as such[,] the consensus of authority
able to encash, with prededucted interest, the postdated checks of its clients is to the effect that the holder of the check is not a holder in due course. However,
(rediscounting). Henry was able to re-discount its clients’ checks (with deeds of the Negotiable Instruments Law (NIL) does not absolutely bar a holder who is not a
assignment) with respondent. However, in February 1981, 20 checks of Hi-Cement holder in due course from recovering on the checks; It may recover from the party
(which were crossed and which bore the restriction “deposit to payee’s account only”) who indorsed/encashed the checks “if the latter has no valid excuse for refusing
Hi-Cement Corporation vs. IBAA 534 SCRA 269 were dishonored as well as the Riverside and Kanebo checks payment.”
Corazon Victoriano provided pieces of jewelry to Private Respondent Nora Moulic so
that the latter may sell the same. As security for pieces of jewelry to be sold on
SIHI is a holder in due course. A prima facie presumption exists that the holder
commission, Moulic issued two (2) post-dated Equitable Banking Corporation checks
of a negotiable instrument is a holder in due course. The evidence clearly shows
in the amount of Fifty Thousand Pesos (P50,000.00) each in favour of Victoriano.
that: (a) on their faces the post-dated checks were complete and regular: (b) SIHI
Victoriano negotiated the checks to petitioner State Investment House. Inc.Moulic
bought these checks from the payee, Victoriano, before their due dates; (c) SIHI took
failed to sell the pieces of jewelry, so she returned them to the payee before maturity
these checks in good faith and for value, albeit at a discounted price; and, (d) SIHI
of the checks. The checks, however, could no longer be retrieved as they had already
was never informed nor made aware that these checks were merely issued to payee
been negotiated. Hence, Moulic withdrew all her funds from the bank. Upon
as security and not for value. SIHI, as holder in due course, holds the instruments
presentment for payment, the checks were dishonored for insufficiency of funds. State
free from any defect of title of prior parties, and from defenses available to prior
then allegedly notified Moulic of such dishonor but the latter avers that she did not
parties among themselves; SIHI may, therefore, enforce full payment of the checks
receive such notice.
State Investment House vs. CA 217 SCRA 32
Virginia Boncan, Finance Officer of Philippine Embassy, negotiated three checks with
The petitioner paid the amounts of the three (3) checks in question to Virginia
Banco Atlantico. Banco Atlantico paid the amounts of US$10,109.10, $35,000.75,
Boncan without previously clearing the said checks with the drawee bank, Philippine
and $90,000.00 without clearing said checks with PNB, New York. Upon
National Bank, New York. This is contrary to normal or ordinary banking practice
presentment for acceptance and payment of the aforementioned checks by Banco
especially so where the drawee bank is a foreign bank and the amounts involved
Atlantico through its collecting bank in New York to PNB New York, PNB dishonored
were large. The drawer of the aforementioned checks was not even a client of the
the checks by non-acceptance allegedly on the ground that the drawer had ordered
petitioner. There is a showing that Virginia Boncan enjoyed special treatment from
payments to be stopped; that upon receipt of the notice of the dishonor, the collecting
the employees and chiefs of the petitioner's foreign department. Banco Atlantico
bank of the Banco Atlantico in New York, U.S.A. sent individual notices of protest with
was not a holder in due course as defined by Section 52 of the N.I.L., because
respect to the checks in question to the Philippine Embassy in Madrid, Spain and to
it was obvious that it had knowledge of the infirmity or defect of the cheek. The
Virginia Boncan as endorser payee that Virginia Boncan and the Philippine Embassy
fact that the check was honored by claimant bank was proof not only of their
in Madrid, Spain refused to pay the petitioner the amounts of the aforementioned
gross negligence but a further manifestation of the special treatment they were
checks. Banco Atlantico, filed the corresponding money claim with the Auditor
according Miss Boncan.
General.
Banco Atlantico vs. Auditor General 81 SCRA 335

POBOUT
NEGO LIPARDO
E2022
Sections 52-59
 Filinvest is a holder in due course, having taken the instrument under the following
conditions: [a] it is complete and regular upon its face; [b] it became the holder
thereof before it was overdue, and without notice that it had previously been
Salas bought a motor vehicle from VMS as evidenced by a PN. This note was dishonored; [c] it took the same in good faith and for value; and [d] when it was
subsequently endorsed to FIlinvest which financed the purchase. Salas defaulted in negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or
her installments, raising as a defense the discrepancy in the engine and chassis defect in the title of VMS.
numbers of the vehicle delivered and those indicated in the Sales Invoice, Certificate
of Registration and Deed of Chattel Mortgage. Filinvest, as a HDIC, holds the instrument free from all defenses available
against the original payee, and may enforce payment of the instrument for the
full amount thereof against all parties liable thereon. Thus, Salas cannot set up
Salas vs. CA 181 SCRA 296 against Filinvest the defense of nullity of contract of sale between her and VMS.
PN is non-negotiable since it did not have the words of negotiability. Even assuming
Consolidated bought 2 tractors from Industrial Products with a warranty of 90 days
the Promissory Note is negotiable, IFC cannot be a holder in due course, because
performance. For this, Conslidated executed a deed of sale with chattel mortgage with
Sections 52-59 prior to the sale of the tractors, there was an arrangement between Industrial and
promissory note. This deed was then assigned by Industrial to IFC Leasing, its sister
IFC whereby IFC would pay Industrial the entire purchase price and Industrial would
company. When the tractors came, however, they malfuctioned and caused work to
assign its rights to IFC which acquired the right to collect the price from
stop.
Consolidated Plywood vs. IFC Leasing 149 SCRA 448 Consolidated.
Avelino Violago, President of VMSC, offered to sell a car to his cousin Pedro and his
wife (Sps. Violago). He said that he needed to sell it to increase the sales quota of
VMSC.

The terms of the agreement are as follows:

The spouses would just have to pay a down payment of PhP60,500 while the balance
would be financed by BA Finance. What constitutes a holder in due course. –– A holder in due course is a holder who
The spouses would pay monthly installments to BA Finance while Avelino would take has taken the instrument under the following conditions:
care of the documentation of approval of the financing of the car. That it is complete and regular upon its face;
That he became the holder of it before it was overdue, and without notice that it had
With this, Sps. Violago agreed to the terms and purchased a Toyota Cressida. They been previously dishonored, if such was the fact;
signed a PN whereby they solidarily bound themselves to pay to the order of VMSC That he took it in good faith and for value;
the amount of P209k in 36 monthly installments + chattel mortgage over the car also in That at the time it was negotiated to him he had no notice of any infirmity in the
favor of VMSC. instrument or defect in the title of the person negotiating it.

Despite repeated demands, there was no delivery of the vehicle. demands, the car As
such, the spouses did not pay any monthly amortization to BA Finance. The spouses
were unaware that the same care had already been sold and registered to Esmeraldo
(another cousin of Avelino)
Sps. Violago vs. BA Finance Corporation 559 SCRA 69
Every holder is a holder in due course. One who claims otherwise has to prove that
one or more of the conditions required to constitute a holder in due course are
lacking.

The check in this case is a cashier's check. The check becomes the primary
Roxas delivered stocks of vegetable oil to Sps. Cawili. As payment, Sps. Cawili issued
obligation of the bank which issues it and constitutes a written promise to pay upon
a personal check. When Roxas tried to encash the check, it was dishonored by the
demand. The mere issuance of a cashier's check is considered an acceptance
drawee bank. Sps. Cawili then assured him that they would replace the check with a
thereof.
cashier's check. Roxas and Cawili went to BPI where they received a cashier's check
drawn against the account of Marissa Cawili, payable to Roxas. The next day, Roxas
The bank became liable from the moment it issued the cashier's check. In this case,
tried to encash the check but it was dishonored.
BPI became liable to Roxas from the moment it issued the cashier's check. Having
been accepted by Roxas, subject to no condition, BPI should have paid the same
upon presentment.

BPI vs. Roxas 536 SCRA 168

Anita Gatchalian, who was then interested in looking for a car, was shown and offered
a car by Gonzales. Gonzales said that he was duly authorized by the owner of the car,
Ocampo Clinic, to look for a buyer of said car and to negotiate for and accomplish said
sale, but which facts were not known to De Ocampo. Gatchalian, satisfied with the
price of the car, requested Gonzales to bring the car the day following together with its
certificate of registration. Gonzales told her that the owner of the car will not be willing Negligence on the part of the plaintiff, or suspicious circumstances sufficient to put a
to give such certificate unless there is a showing that the party interested in the prudent man on inquiry, will NOT of themselves prevent a recovery, but are to be
purchase of said car is ready and willing to make such purchase. Thus, Gonzales considered merely as evidence bearing on the question of bad faith. Then, when the
requested Gatchalian to give him a check which will be shown to the owner as case has taken such shape that the plaintiff is called upon to prove himself a holder
evidence of buyer's good faith in the intention to purchase the said car, the said in due course to be entitled to recover, he is required to establish the conditions
check to be for safekeeping only of Gonzales and to be returned to Gatchalian entitling him to standing as such, including good faith in taking the instrument. It
the following day when Gonzales brings the car and the certificate of devolves upon him to disclose the facts and circumstances attending the transfer,
registration. Relying on these representations of Gonzales and with this assurance from which good or bad faith in the transaction may be inferred.
that said check will be only for safekeeping and which will be returned to Gatchalian
the following day, Gatchalian drew and issued a check that Gonzales executed and
issued a receipt for said check. When Gonzales failed to appear the following day; and
to bring the car and its certificate of registration and to return the check, Gatchalian
De Ocampo vs. Gatchalian 3 SCRA 596 issued a 'Stop Payment Order' on the check, with the drawee bank.
Every holder of a negotiable instrument is presumed to be a holder in due course.
This is specially true if one is a holder because he is the payee or indorsee of the
instrument. In the case at bar, it is evident that David was the payee of the checks.
The prima facie presumption of him being a holder in due course is in his favor.
Yang and Chandimari entered into an agreement that the latter would issue to the
Nonetheless, this presumption is disputable. On whether he took the check under
former a manager’s check in exchange for two checks that Yang has payable to the
the conditions set forth in Section 52 must be proven. Petitioner relies on two
order of David. The difference in amount would be the profit of the two of them. It was
arguments on why David isn’t a holder in due course—first, because he took the
further agreed upon that Yang would secure a dollar draft, which Chandimari would
checks without valuable consideration; and second, he failed to inquire on
exchange with another dollar draft to be secured from a Hong Kong bank. At the
Chandimari’s title to the checks given to him.
agreed time of rendezvous, it was reported by Yang’s messenger that Chandimari
didn't show up and the drafts and checks were allegedly stolen. This wasn't true
The law gives rise to the presumption of valuable consideration. Petitioner has the
however. Chandimari was able to get hold of the drafts and checks. He was even able
burden of debunking such presumption, which it failed to do so. Her allegation that
to deliver to David the two checks and was able to get money in return. Consequently,
David received the checks without consideration is unsupported and devoid of any
Yang asked for the stoppage of payment of the checks she believed to be lost, relying
evidence.
on the report of her messenger. The stoppage order was eventually lifted by the banks
and the drafts and checks were able to be encashed. Yang then filed an action for
Also, petitioner wasn't able to show any circumstance which should have placed
injunction and damages against the banks, Chandimari and David. The trial court and
David in inquiry as to why and wherefore of the possession of the checks by
CA held in favor of David as a holder in due course.
Chandimari. David wasn't a privy to the transactions between Yang and Chandimari.
Instead, Chandimari and David had the agreement between themselves of the
delivery of the checks. David even inquired with the banks on the genuineness of the
Yang vs. Court of Appeals 409 SCRA 159 checks in issue.
Section 52 (c) of the NIL states that a holder in due course is one who takes the
instrument “in good faith and for value.
Patrimonio pre-signed several checks to answer for expenses of Slam Dunk,
his business with Gutierrez. The blank checks were entrusted to Gutierrez
Acquisition in good faith means taking without knowledge or notice of equities of
with specific instructions not to fill them out without previous notification to
any sort which could be set up against a prior holder of the instrument. It means that
and approval by Patrimonio.
he does not have any knowledge of fact which would render it dishonest for him
to take a negotiable paper.
Without Patrimonio’s knowledge, Gutierrez secured a loan from Marasigan
in the amount of P200,000 on the excuse that Patrimonio needed money for
In this case, Marasigan’s knowledge that the Patrimonio is not a party or a privy to
the construction of his house. Gutierrez delivered to Marasigan one of the
the contract of loan, and correspondingly had no obligation or liability to him, renders
blank checks Patrimonio pre-signed. Marasigan deposited the check, but it
him dishonest and in bad faith.
was dishonored. Despite demands, the loan was left unpaid. Marasigan filed
a criminal case against Patrimoni for violation of B.P. 22.
Since Marasigan knew that the underlying obligation was not actually for Patrimonio,
the rule that a possessor of the instrument is prima facie a holder in due course is
Patrimonio denied authorizing the loan or the check’s negotiation, and
inapplicable
asserted that he was not privy to the parties’ loan agreement
Patrimonio vs. Gutierrez 724 SCRA 636
If a payee of a cashier's check obtained it from the issuing bank by fraud, or if there
Jose Go purchased from Associated Bank Cashier's Check, which he left on the top of is some other reason why the payee is not entitled to collect the check, the
the desk of the bank manager when he left the bank. The bank manager entrusted the respondent bank would, of course, have the right to refuse payment of the check
check for safekeeping to a bank official, a certain Albert Uy, who had then a visitor in when presented, since respondent bank was aware of the facts surrounding the loss
the person of Alexander Lim.Uy had to answer a phone call on a nearby telephone of the check in question. Mesina became the holder of the cashier's check as
after which he proceeded to the men's room. When he returned to his desk, his visitor endorsed by Alexander Lim who stole the check. He refused to say how and why it
Lim was already gone. When Jose Go inquired for his cashier's check from Albert Uy, was passed to him. He had therefore notice of the defect of his title over the check
the check was not in his folder and nowhere to be found. Uy advised Jose Go to go to from the start.
the bank to accomplish a "STOP PAYMENT" order, which suggestion Jose Go
immediately followed. On Dec 31, 1983, Associated Bank received the lost check for Respondent bank could not be drawer and drawee for clearly, Jose Go owns the
clearingfrom Prudential Bank, Escolta Branch. The check found its way in the hands of money it represents and he is therefore the drawer and the drawee in the same
Mesina who demanded payment from Associated Bank. He claimed that it was manner as if he has a current account and he issued a check against it; and from the
indorsed to him by Lim, but he refused to say how and why check it was passed to moment said cashier's check was lost and/or stolen no one outside of Jose Go can
him. The bank refused to pay saying that the check belonged to Go. be termed a holder in due course because Jose Go had not indorsed it in due
Mesina vs. IAC 145 SCRA 497 course.

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 Ten Sen Guan ordered from Snow’s Ltd. 10 cases of mercerized bastite to be shipped
from New York to Manila. Upon the arrival of the merchandise, a draft drawn by Snow’
s Ltd. against Ten Sen Guan was presented to them for acceptance through the
plaintiff as agent. The delivery of the bill of lading and other documents were being put
on hold by plaintiff pending acceptance of the draft by Ten Sen Guan and so the latter
Where the proof tends to show that the plaintiff held the draft for collection only, and
accepted the same.
that the acceptance of it by the defendants was conditional, and that after such an
When the cases were opened however, it was found out that the merchandise
acceptance the defendants refused to accept the goods evidenced by the draft,
wasn't bastite but instead were burlap. Ten Sen Guan then was prompted to return
which were returned to and accepted by the plaintiff, who agreed to release the
the bill of lading and other documents and requested Asia Banking Corporation, the
defendants from any liability, plaintiff cannot thereafter recover on the draft.
agent of Snow Ltd to cancel its acceptance, which the corporation promised to do so.
However it didn't do good its promise since it sued Ten Sen Guan for the amount of
the draft. The trial court however ruled in favor of Ten Sen Guan. Plaintiff claimed that
it is a holder in due course.
Asia Banking Corporation vs. Ten Sen Guan 44 Phil. 511
Odrada sold a 2nd hand Montero to Lim. Lim obtained an auto-loan from RCBC. After A manager's check is accepted by the bank upon its issuance. As compared to an
initial payment, Odrada executed a Deed of Absolute Sale to Lim while Lim took ordinary bill of exchange where acceptance occurs after the bill is presented to the
possession of the car. RCBC delivered Manager's check to Odrada, however, prior to drawee, the distinct feature of a manager's check is that it is accepted in advance.
that, Lim informed Odrada about the roadworthiness of the car. Lim requested not th Notably, the mere issuance of a manager's check creates a privity of contract
deposited the manager's check. Odrada did not heed, he deposited. The checks were between the holder and the drawee bank, the latter primarily binding itself to pay
dishonored upon Lim's instructions to RCBC. Because of this, Odrada filed a collection according to the tenor of its acceptance.
case against RCBC and Lim. Lim countered that the cancellation was not done ex The drawee bank, as a result, has the unconditional obligation to pay a manager's
parte but thru a letter. RCBC countered that the dishonor was due to Lim's check to a holder in due course irrespective of any available personal defenses.
cancellation of the auto loan. The RTC ruled that the defective conditoin of the However, while this Court has consistently held that a manager's check is
Montero was not a supervening event that would justify the dishonor of the automatically accepted, a holder other than a holder in due course is still
checks, which was equivalent to cash, and may be treated as PN with the Bank subject to defenses. The holder of a cashier's check who is not a holder in due
as a maker. The bank being primarily liable for the check, hence, RCBC should course cannot enforce such check against the issuing bank which dishonors
RCBC Savings Bank vs. Odrada 806 SCRA 646 be liable. the same.
Maza and Mecenas executed promissory notes in favor of PNB. To recover the The defendants are exactly what they appear to be, the makers of the
amounts stated on the face of the notes with back interest, action was begun by the negotiable instruments, then they must keep their engagement and must pay
Philippine National Bank in the court of first instance of Iloilo against them. The as promised. Their liability on the instruments is primary and unconditional.
special defense interposed by the defendants was that the promissory notes
were sent in blank to them by Enrique Echaus with the request that they sign The other most plausible and reasonable stand for the defendants is that they are
them so that he, Echaus, might negotiate them with the Philippine National Bank accommodation parties. but as accommodation parties, the defendants having
in case of need; that the defendants have not negotiated the promissory notes with signed the instruments without receiving value therefor and for the purpose of
the bank, nor have they received the value thereof, or delivered them to the bank in lending their names to some other person, are still liable on the instruments. The law
payment of any preexisting debt; and that it was Enrique Echaus who negotiated the now is that the accommodation party can claim no benefit as such, but he is liable
noted with the bank and who is accordingly the real party in interest and the party according to the face of his undertaking, the same as if he were himself financially
PNB vs. Maza & Mecenas 48 Phil. 207 liable for the payment of the notes. interested in the transaction.
Maker warrants that he will pay according to the tenor of the instrument. Payee
is not concerned with how the maker supposedly paid the value of the
Perez executed a PN to pay Araneta or order. If the PN is not paid on maturity:
Section 60 instrument in another way or manner. Payee’s only concern is that maker pays the
interest + attorney’s fees. Perez failed to pay despite demand, leading Araneta to file a
value of the instrument according to its tenor, as per Section 60 of the NIL.
complaint for collection. Perez admitted executing the PN and his failure to pay but
averred that he was not able to pay because he applied the proceeds of the note to
Perez bound himself personally in the promissory note; he cannot shift to another the
the payment of the medical treatment of his minor daughter. His daughter was
responsibility of paying its value without the consent of the payee. Perez cannot now
the beneficiary of the trust where Araneta was the trustee; that the treatment was
escape liability as maker by alleging that he spent the money for medical treatment
supposed to be reimbursed from the trust estate. Perez set up a counterclaim through
of his daughter since it is not the Araneta's concern to know how said proceeds
damage.
should be spent. Araneta's interest is merely to see that the note is to paid according
Araneta vs. Perez 14 SCRA 498 to its terms/tenor.
The circumstances show that Gotua knew what he was signing. Inasmuch as he is of
A promissory note was executed by the defendants in favor of the heirs of one
age and a business man at that, he is presumed to have acted with due care, and to
Sebastian Sontian, a former partner of Yu Biao Sontua (Defendant). Defendant Gotua
have signed the document in question with full knowledge of its contents. And this
appealed because he invokes that he did not know the contents of what he is signing.
presumption of law is not overcome by the evidence adduced by the appellant, which
Tan Tua Sia vs. Yu Biao 56 Phil. 707 consists of his own testimony, as held by the trial court.
Virginia Boncan, Finance Officer of Philippine Embassy, negotiated three checks with
Banco Atlantico. Banco Atlantico paid the amounts of US$10,109.10, $35,000.75, and
$90,000.00 without clearing said checks with PNB, New York.

Upon presentment for acceptance and payment of the aforementioned checks by

Section 61 (Liability of a drawer) of the Negotiable instruments Law can only be
Banco Atlantico through its collecting bank in New York to PNB New York, PNB
availed of by holders in due course and Banco Atlantico cannot be considered as
dishonored the checks by non-acceptance allegedly on the ground that the drawer had
one under the definition of Section 52 of the N.I.L. All four conditions enumerated
ordered payments to be stopped; that upon receipt of the notice of the dishonor, the
under this Section 52 must concur before a holder can be considered as a holder in
collecting bank of the Banco Atlantico in New York, U.S.A. sent individual notices of
due course. The absence or failure to comply with any of the conditions set forth
protest with respect to the checks in question to the Philippine Embassy in Madrid,
under this section will make one's title to the instrument defective.
Spain and to Virginia Boncan as endorser payee that Virginia Boncan and the
Philippine Embassy in Madrid, Spain refused to pay the petitioner the amounts of the
Section 61 aforementioned checks. Banco Atlantico, filed the corresponding money claim with the
Auditor General.
Banco Atlantico vs. Auditor General 81 SCRA 335
Picornell, upon instruction of Hyndman, Tavera, & Ventura, bought some 1,700 bales
of tobacco. He obtained from the PNB some P 39,000.00 as value of the tobacco w/ Picornell warranted as drawer that the bill would be accepted upon proper
his commission for w/c he drew a bill of exchange drawn against Hyndman w/c was presentment and would be paid in due course. Since the same was not paid, he
accepted by the latter. The understanding was that the PNB would retain the tobacco became secondarily liable therefor. The fact that he acted as agent to Hyndman in
until payment by Hyndman. The shipment arrived in Manila, and the shipper requested the purchase of tobacco does not make him agent insofar as the Bank is concerned.
Hyndman to claim the tobacco w/o the knowledge of PNB. Hyndman examined the Besides, nothing to this effect was indicated in the bill. Hyndman, by his acceptance
tobacco and found a certain quantity to be adulterated; thus it refused to pay PNB. became primarily liable. The issue of whether the tobacco was worth the value of the
The PNB protested and managed to take possession of the tobacco and sold some for bill does not concern the Bank; it is a stranger to whatever agreements existed
around P 6,700.00. It now sues Picornell for the value of the bill – or the balance between Hyndman and Picornell – its only concern to claim payment upon the bill.
PNB vs. Picornell 46 Phil. 706 thereof.
In general, "acceptance", in the sense in which this term is used in the Negotiable
Instruments Law is not required for checks, for the same are payable on
demand. Indeed, "acceptance" and "payment" are, within the purview of said Law,
essentially different things, for the "acceptance" is "a promise to perform an act,"
whereas "payment is the "actual performance" thereof. In the words of the Law, "the
acceptance of a bill is the signification by the drawee of his assent to the order of the
Lim deposited a GSIS check drawn against PNB in his PCIB current account. drawer," which, in the case of checks, is the payment, on demand, of a given sum of
Following bank procedure, PCIB forwarded the same to PNB via CB for clearing. The money.
check was never returned. February 2, 1962, PNB demanded from PCIB the refund of
said sum, PCIB refused. Upon the other hand, actual payment of the amount of a check implies not only an
With claims for reimbursement, PNB filed a case against PCIB, to which the CFI assent to said order of the drawer and a recognition of the drawer's obligation to pay
dismissed. the aforementioned sum, but, also, a compliance with such obligation.

Essentially speaking, by not returning the check to PCIB and indicating that it didn’t
find anything wrong with the check and saying that it would honor the same, and by
actually paying its amount to PCIB, PNB induced PCIB not only to believe that the
check was genuine and good, but also to pay its amount to Lim. With PNB being the
PNB vs. CA 25 SCRA 693 proximate cause, it may not recover from PCIB.
A check is a bill of exchange payable on demand and only the rules governing bills
of exchanges payable on demand are applicable to it. In view of the fact that
acceptance is a step necessary insofar as negotiable instruments are concerned, it
follows that the provisions relative to acceptance are without application to checks.
Unknown persons negotiated with Motor Services Company checks, which were part
Acceptance implies subsequent negotiation of the instrument, which is not
of the stipulation in payment of automobile tires purchased from the latter’s store. It
true in the case of checks because from the moment it is paid, it is withdrawn
purported to have been issued by Pangasinan Transportation Company. The said
from circulation. When the drawee banks cashes or pays a check, the cycle of
checks were indorsed at the back by said unknown persons, the Motor company
negotiation is terminated and it is illogical thereafter to speak of subsequent holders
believing at that time that the signatures contained therein were genuine. The checks
who can invoke the warrant against the drawee.
were later deposited with the company’s account in National City Bank of NY. The said
checks were consequently cleared and PNB credited National City Bank with the
Further, the responsibility of the drawee who pays a forged check, for the
amounts. Thereafter, PNB discovered that the signatures were forged and it
genuineness of the drawer’s signature is absolute only in favor of one who has not,
demanded the reimbursement of the amounts for which it credited the other bank.
by his own fault or negligence, contributed to the success of the fraud or to mislead
the drawee. National City Bank in purchasing the papers in question from unknown
persons without making any inquiry as to the identity and authority of said persons
negotiating and indorsing them, acted negligently and contributed to the constructive
PNB vs. National City Bank of NY 63 Phil. 711 loss of PNB in failing to detect the forgery.

Section 62

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confusing tiemz..... study the facts na lang. Na
 FEBTC erroneously deducted Gold Palace's account.
Samuel Tagoe, a foreigner, purchased from respondent Gold Palace Jewellery Co.
pieces of jewelry. As payment, Tagoe offered a foreign draft issued by the United
Section 62 of the Negotiable Instruments law provides that the acceptor, by
Overseas Bank of Malaysia, addressed to the Landbank of the Philippines. Petitioner
accepting the instrument, engages that he will pay it according to the tenor of his
Far East Bank & Trust Company informed Gold Palace advised Gold Palace not to
acceptance. The same is applicable if the drawee pays a bill without having
release the jewelry until the draft had been cleared. The latter followed FEBTC’s
previously accepted it. It amounts not only to an assent to the order of the drawer
advice. Consequently, the manager of Gold Palace deposited the draft in the
and recognition of an obligation, but also his clear compliance. The payment of a
Section 62 company’s account with FEBTC. FEBTC, as collecting bank, presented the draft to
check includes its acceptance. LBP was liable on its payment of the check
drawee bank LBP. Thereafter, Gold Palace’s account was credited with the amount
according to the tenor of the check at the time of payment, which was the raised
stated in the draft. Tagoe then returned to Gold Palace to claim his purchase. Gold
amount. Therefore, LBP could not question anymore the payment it erroneously
Palace released the same and even issued an FEBTC check representing an
made to a holder in due course. Gold Palace was not guilty of negligence or
overpayment. Tagoe eventually encashed this and FEBTC paid the same. Thereafter,
participation in the alteration and was thus a holder in due course. Gold Palace is
LBP informed FEBTC that the foreign draft had been materially altered from P300 to
protected by Sec. 62 of the NIL. LBP, having the means to communicate with the
P380,000 and that LBP will be returning it. FEBTC then refunded LBP, intending to
Malaysian bank, should have first verified the amount of the draft before clearing and
debit Gold Palace’s account in return. In the meantime, Gold Palace had already used
paying it.
portions of the amount. FEBTC was able to debit a portion of the amount from Gold
Palace’s account, without a proper written notice. FEBTC demanded from Gold Palace
In some cases, the Court may rule that a drawee bank may recover, having
the remaining balance. However, the latter did not comply. FEBTC then instituted
paid to an innocent holder the amount of an uncertified, altered check, from an
acase for sum of money and damages against Gold Palace. The RTC ruled in favor of
innocent holder if said drawee bank was in good faith and without negligence
FEBTC. CA reversed the RTC
FEBTC vs. Gold Palace Jewellery Co. 562 SCRA 604 which contributed to the loss. However, this does not apply in the present case confusing tiemz..... study the facts na lang. Na
Liability of the drawee
The acceptor/drawee despite the tenor of his acceptance is liable only to the extent 24-hour clearing rule:
of the bill prior to alteration. This view appears to be in consonance with Section 124 As the rule now stands, the 24-hour
of the Negotiable Instruments Law which states that a material alteration avoids an rule is still in force, that is, any
instrument except as against an assenting party and subsequent indorsers, but a check which should be refused by
holder in due course may enforce payment according to its original tenor.When the the drawee bank in accordance
drawee bank pays a materially altered check, it violates the terms of the check, as with long standing and accepted
Spouses Areza has 2 bank deposits with Express Savings Bank. They were in the banking practices shall be returned
well as its duty to charge its client’s account only for bona fide disbursements he had
business of buy and sell of cars. Mambuay ordered 2 cars from Spouses Areza. He through the PCHC/local clearing
made. If the drawee did not pay according to the original tenor of the instrument, as
paid them with 9 Philippine Veterans Affairs Office (PVAO) checks each worth 200k of ce, as the case may be, not later
directed by the drawer, then it has no right to claim reimbursement from the drawer,
for a total of 1.8M payable to different payees and drawn against Phil Veterans Bank than the next regular clearing (24-
much less, the right to deduct the erroneous payment it made from the drawer’s
(PVB). Areza then deposited the check in their savings account with Express. Express
account which it was expected to treat with utmost fidelity. The drawee, however, hour). The modi cation, however,
then deposited the checks with their depository bank - Equitable. Equitable presented
still has recourse to recover its loss. It may pass the liability back to the collecting is that items which have been the
the checks to PVB, which honored the checks. The 1.8M was then credited to the
bank which is what the drawee bank exactly did in this case. It debited the account of subject of material alteration or
account of Areza. Sometime after, the checks were returned by PVAO to PVB
Equitable-PCI Bank for the altered amount of the checks. bearing forged endorsement may
because the checks were altered - the original amount of 4k was altered to 200k. PVB
be returned even beyond 24 hours
then returned the checks to Equitable-PCI. Equitable-PCI then debited the account of
Liability of the collecting/depositary bank so long that the same is returned
Express. Meanwhile, Areza issued a check worth 500k, but this was dishonored
The law imposes a duty of diligence on the collecting bank to scrutinize checks within the prescriptive period xed
because their account was put on hold. Express then closed the savings account of
deposited with it for the purpose of determining their genuineness and regularity. The by law. The consensus among
Areza and withdrew the 1.8M representing the returned checks. Areza filed a a
collecting bank being primarily engaged in banking holds itself out to the public as lawyers is that the prescriptive
complaint for sum of money with damages.
the expert and the law holds it to a high standard of conduct. As collecting banks, period is ten (10) years because a
the Bank and Equitable-PCI Bank are both liable for the amount of the materially check or the endorsement thereon
The RTC ruled for the Sps. Areza. The SC held that the bank had no right to debit P1.
altered checks . Since Equitable-PCI Bank is not a party to this case and the Bank is a written contract. Moreover, the
8M from their accounts.
allowed its account with Equitable-PCI Bank to be debited, it has the option to seek item need not be returned through
recourse against the latter in another forum the clearing house but by direct
presentation to the presenting
Liability of petitioners bank. In short, the 24-hour clearing
A depositary/collecting bank may resist or defend against a claim for breach of rule does not apply to altered
warranty if the drawer, the payee, or either the drawee bank or depositary bank was checks
Areza vs. Express Savings Bank 734 SCRA 588 negligent and such negligence substantially contributed to the loss from alteration.
Lorenzo Ting issued Philippine Bank of Communications check K-81618, for the sum
of P4,000, payable to "cash or bearer".

With Felipe Ang's signature (indorsement in blank) at the back thereof, the instrument
was received by the plaintiff Ang Tiong who thereafter presented it to the drawee bank Section 63 of the Negotiable Instruments Law makes "a person placing his signature
for payment. upon an instrument otherwise than as maker, drawer or acceptor" a general indorser,
— "unless he clearly indicates plaintiff appropriate words his intention to be bound in
The bank dishonored it. The plaintiff then made written demands on both Lorenzo Ting some other capacity,"
and Felipe Ang that they make good the amount represented by the check. These
demands went unheeded; so he filed in the municipal court of Manila an action for
collection of the sum of P4,000, plus P500 attorney's fees.
Ang Tiong vs. Ting 22 SCRA 713
Section 63
As indorser, Petitioner Tuazon warranted that upon due presentment, the checks
Heirs Ramos alleged that on a relevant date,spouses Tuazon purchased from their
were to be accepted or paid, or both, according to their tenor; and that in case they
predecessor-in-interestBartolome Ramos cavans of rice. That on the total number of
were dishonored, she would pay the corresponding amount. Clearly, Santos — as
cavans,only a certain portion has been paid for. In payment thereof, checkshave been
the drawer of the checks — is not an indispensable party in an action against Maria
issued but on presentment, the checks were dishonored.Ramos alleged that since
Tuazon, the indorser of the checks. Indispensable parties are denied as "parties in
spouses anticipated the forthcoming suitagainst them, they made fictitious sales over
interest without whom no final determination can be had."
their properties. Asdefense, the spouses averred that it was the wife of Bartolome who
effected the sale and that Maria Tuazon was merely her agent inselling the rice. The
After an instrument is dishonored by nonpayment, indorsers cease to be
true buyer of the cavans was Evangeline Santosbecause Santos was the one who
merely secondarily liable; they become principal debtors whose liability
issued the check; that Santos wasthe drawer. Spouses Tuazon further averred that
becomes identical to that of the original obligor. The holder of a negotiable
when Ramos got thecheck from Santos, she took it in good faith and didn't knew that
instrument need not even proceed against the maker before suing the
thesame were unfunded.
Tuazon, et al vs. Heirs of Bartolome Ramos 463 SCRA 408 indorser.
Villaruel executed a promissory note in favor of Ng Sambok. Sambok Motors Sambok indorsed the note "with recourse" and even waived the notice of demand,
negotiated and indorsed the note in favor of Metropol Financing & Investment dishonor, protest and presentment. By indorsing the note "with recourse" does
Corporation. The indorsement stated that it would be paid to the order of not make itself a qualified indorser, but a general indorser who is secondarily
Metropol Bacolod Financing & Investment Corporation with recourse and a liable, because by such indorsement, it agreed that if Dr. Villaruel fails to pay
waiver to the notice of demand, dishonor, protest and presentment. Dr. Villaruel the note, Metropol can go after Sambok. Sambok's intention of indorsing the note
Section 65
defaulted in the payment when it became due. Sambok contended that by adding the without qualification is made even more apparent by the fact that the notice of
words “with recourse” in the indorsement of the note, it becomes a qualified indorser; demand, dishonor, protest and presentment were all waived. The words added by
that being a qualified indorser, it does not warrant that if said note is dishonored by the said appellant do not limit his liability, but rather confirm his obligation as a general
maker on presentment, it will pay the amount to the holder; that it only warrants the indorser.
Metropol vs. Sambok Motors Co. 120 SCRA 864 following pursuant to Sec. 65 of the NIL.
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
Ubay was assigned as ​disbursing officer in AFP, entrusted with the custody and bound in some other capacity." Maniego is an indorser.
control of public funds. Conspiring with Pamintuan and Maniego, ​he received and
accepted several personal checks drawn against PNB and BPI​. In the said checks, ​ Such an indorser who indorses without qualification, engages that on due
PAMINTUAN is the drawer and ​MANIEGO is the indorser​. They cashed said checks presentment, . . . (the instrument) shall be accepted or paid, or both according
using the public funds entrusted to and Lt. Ubay. All 3 of them knew that the checks to its tenor, and that if it be dishonored, and the necessary proceedings on
are worthless and are not covered by funds in the said banks. As such, the checks dishonor be duly taken, he will pay the amount thereof to the holder, or to any
were dishonored when presented for encashment, to the damage and prejudice of the subsequent indorser who may be compelled to pay it."
Republic of the Philippines. Maniego was acquitted but was made civilly liable.
(crimpro u should know this na) Maniego ​may also be deemed an "accommodation party" in the light of the facts -- ​
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
People vs. Maniego 148 SCRA 30 other person​.
Gomez deposited 38 treasury warrants in his account at Golden Savings. Gloria, Metrobank was negligent in giving Golden Savings the impression that the treasury
employee of Golden, indorsed these to their account in Metrobank so the latter could warrants had been cleared and that, consequently, it was safe to allow Gomez to
forward them to the Bureau of Treasury for special clearing. After repeated demands withdraw the proceeds thereof from his account with it. Without such assurance,
and follow ups, Metrobank allowed Golden to withdraw from the proceeds of the Golden Savings would not have allowed the withdrawals. Also, Sec. 66 of the NIL
warrant. Later on, Bureau of Treasury dishonored the warrants so Metrobank which provides for the warranties of an indorser is NOT APPLICABLE to treasury
Metropolitan Bank vs. CA 194 SCRA 169 demanded a refund from Golden, which the latter refused warrants, not being negotiable instruments.
Petitioner Atty. Gullas, maintains a current account with respondent PNB. (Cebu
Branch) He and a certain Pedro Lopez signed as endorsers of a Treasury Warrant
issued by the US Veterans Bureau payable to the order of a certain Francisco Bacos.
PNB cashed the check but it was subsequently dishonored by the Insular Treasurer.
PNB then sent notices to Gullas which he wasn’t able to receive because he was in
The Negotiable Instruments Law contains provisions establishing the liability of a
Manila. In the unreceived notices, PNB informed the petitioner that the balance in his
general indorser and giving the procedure for a notice of dishonor. The general
account (P509) was applied as partial payment to cover the dishonored check. The
indorser of negotiable instrument engages that if he be dishonored and the
actual deduction of the funds in Atty. Gullas’ account was made prior to the sending of
necessary proceedings of dishonor be duly taken, he will pay the amount thereof to
the notices and without PNB waiting for any action from him.
the holder. In this connection, it has been held a long line of authorities that notice of
dishonor is in order to charge all indorser and that the right of action against him
Upon petitioner’s return, Atty. Gullas received the notice of dishonor and immediately
does not accrue until the notice is given.
paid the unpaid balance of the warrant. As a consequence of the PNB’s having
deducted his Atty. Gullas’ account without his knowledge, he was inconvenienced
given his insurance was not paid due to lack of funds and the fact was publicized
widely in his area to the prejudice of his reputation.
Gullas vs. PNB 62 Phil. 519

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 Banks are granted by law the right to debit the value of a dishonored check from a
depositor’s account but they must do so with the highest degree of care, so as not to
prejudice the depositor unduly. The degree of diligence required of banks is more
than that of a good father of a family where the fiduciary nature of their relationship
with their depositors is concerned.

In this case, petitioner did not treat respondent’s account with the highest degree of
Tan deposited a postdated UCPB check with Associated Bank in the amount of P101, care. Respondent withdrew his money upon the advice of petitioner that his money
000 issued to him by Willy Cheng. The check was entered into his balance. Upon was already cleared. It is petitioner’s premature authorization of the withdrawal that
advice of Associated Bank, the check was cleared and backed up. On the same day caused the respondent’s account balance to fall to insufficient levels, and the
Tan withdrew the sum of P240,000, leaving a balance of P57,793.45. A day after, Tan subsequent dishonor of his own checks for lack of funds.
deposited 50,000 and issued several checks to his business partners. His business
partners alleged that the checks bounced for inssuficiency of funds. Under the provisions of the NIL regarding the liability of a general indorser and the
procedure fo a notice of dishonor, it was incumbent on the bank to give proper
notice to the respondent. . [A] general indorser of a negotiable instrument engages
that if the instrument — the check in this case — is dishonored and the necessary
proceedings for its dishonor are duly taken, he will pay the amount thereof to the
holder (Sec. 66) It has been held by a long line of authorities that notice of dishonor
is necessary to charge an indorser and that the right of action against
Associated Bank vs. Tan 446 SCRA 282 him does not accrue until notice is given.
BPI, as a collecting bank which indorsed the checks to the drawee-banks for
clearing, should be liable to the latter for reimbursement, for the indorsements on the
checks had been forged prior to their delivery to Jai Alai.

Various payors of Inter-Island Gas gave checks to Inter-Island’s sales agent, Ramirez. It is the obligation of the collecting bank to reimburse the drawee-bank the value of
However, Ramirez forged the indorsements on the check and used them as payment the checks subsequently found to contain the forged indorsement of the payee.
with Jai-Alai. Jai Alai then deposited the checks to BPI, who credited Jai Alai’s But, Jai Alai must in turn shoulder the loss of the amounts which the
account. Later on, however, Inter Island found out about the forgeries and told BPI. respondent; as its collecting agent, had to reimburse to the drawee-banks.
The various drawee-banks of the checks then asked BPI for reimbursement, so BPI This is because the bank with which the check was deposited has no right to pay the
Section 66 reimbursed them. Meanwhile, BPI told Jai Alai that it would debit their account for the sum stated therein to the forger "or anyone else upon a forged signature. ​It was its
values of the checks. This was found out by Jai Alai when they issued a check to one duty to know that [the payee’s endorsement was genuine before cashing the check.
Mariano, and the check was dishonored for lack of funds. So, Jai Alai filed a complaint
against BPI. BPI, having received the checks merely for collection and deposit, the respondent
cannot be expected to know or ascertain the genuineness of all prior indorsements
BPI (Collecting Bank) on the said checks
Jai Alai (Indorser) Indeed, having itself indorsed them to the respondent in accordance with the
rules and practices of commercial banks, of which the Court takes due
cognizance, the petitioner is deemed to have given the warranty prescribed in
Section 66
Jai Alai vs. BPI 66 SCRA 29
The warranties for which Alviar and Gonzales are liable as general indorsers in favor of
A foreign check in the amount of $7,500 was drawn against Drawee Bank Wilshire subsequent indorsers extend only to the state of the instrument at the time of their
Center Bank in US. The check was payable to the petitioner's mother. Petitioner's indorsements, specifically that the instrument is genuine and in all respects what it purports
mother then endorsed the check. As petitioner was an employee of RCBC and to be; that they have good title thereto; that all prior parties had capacity to contract; and
allowed to encash the check without the necessary clearing period.
that the instrument, at the time of their endorsements, is valid and subsisting. This however
cannot be used by someone which introduced the defect in the instrument, such as the
Gomez, the head of the RCBC's retail banking requested Petitioner to endorse it,
which she did. Gomez then acquiesed the early encashment and signed the check but bank in this case, which qualifiedly indorsed the same, to hold prior parties liable on the
"up to P17,500 only." Alviar, another employee of RCBC indorsed it with "ok." RCBC instrument because it results to an absurd situation whereby a subsequent party may
encashed the check to its peso equivalent of P155,270.85. RCBC then tried to collect render an instrument useless and inutile and let innocent parties bear the loss while he
from the Drawee Bank but was dishonored for irregular indorsement. himself gets away scot-free. It cannot be overstressed that had it not been for the qualified
Gonzalez vs. RCBC 508 SCRA 459 indorsement of Gomez, there would have been no reason for the dishonor of the check.
In this case is a consolidated petition where BA Finance(drawer) is claiming from
Miller (payee) and Bank of America (DB), and Bank of America (DB) is claiming from
Associated Bank (CB).
BA Finance granted Miller a credit line facility. Miller then discounted and assigned
BA Finance vs. Bank of America - Bank of America is liable. Bank of America is
several trade receivables to BA Finance. In consideration of the assignment, BA
under strict liability to pay the check only to the payee or the payee's order.
FInance issued 4 Bank of America checks payable to the "Order of Miller Offset Press
Inc." with the notation for payees account only. The checks were deposited by Robert,
Bank of America vs. Associated Bank - Associated Bank is liable. A collecting
Miller's corporate secretary, to Associated Citizen's Bank Account The checks were
bank where a check is deposited, and which endorses the check upon
stamped with the notation "all prior endorsements and/or lack of endorsements
presentment with the drawee bank, is an endorser.
guaranteed". The drawee bank honored the checks and paid the proceeds to
Associated Bank. Later on, Miller failed to deliver to BA Finance the proceeds of the
Under Section 66 of the Negotiable Instruments Law, an endorser warrants "that the
assigned trade deliverables. BA Finance then filed a complaint against Miller.
instrument is genuine and in all respects what it purports to be; that he has good title
to it; that all prior parties had capacity to contract; and that the instrument is at the
BA Finance (drawer) > Miller Offset Press Inc. (Payee) > Associated Bank (CB) >
time of his endorsement valid and subsisting".
Bank of America (DB)
Associated Bank vs. Roberts, et. al. - Roberts, et. al. are liable. It is well-settled that
a person who had not given value for the money paid to him has no right to retain the
Bank of America vs. Associated Citizens Bank 588 SCRA 51 money he received.
General Rule: the drawee bank may be held liable to the drawer. The drawee bank, The RTC observed that there was
in turn, may seek reimbursement from the collecting bank for the amount of the nothing irregular with the
check. This rule on the sequence of recovery in case of unauthorized check transaction of Check 1.However, it
found that Check 2 was irregularly
Selwyn Lao entered into a transaction with Everlink (through its representative Goerge transactions had already been deeply embedded in jurisprudence.
deposited and encashed because it
Wu). Under this transaction, Everlink would supply Lao with HCG sanitary wares. Lao
On the other hand, the liability of the collecting bank is anchored on its guarantees was not issued for the account of
issued 2 Equitable crossed checks for payment (payable to Everlink). The amounts
Everlink, the payee, but for the
were ₱273,300.00 and ₱336,500.00, respectively. When the checks were encashed, as the last endorser of the check. Under Section 66 of the Negotiable Instruments
Law, an endorser warrants "that the instrument is genuine and in all respects what it account of New Wave. The trial
he contacted Everlink for the immediate delivery of the sanitary wares, but the latter
court noted further that Check 2
failed to perform its obligation. ater, Lao learned that the checks were deposited in two purports to be; that he has good title to it; that all prior parties had capacity to
contract; and that the instrument is at the time of his endorsement valid and was not even endorsed by Everlink
different bank accounts at International Exchange Bank, now Union Bank. He was
to New Wave. Hence, Union Bank
later informed that the two bank accounts belonged to Wu and a company named New subsisting." It has been repeatedly held that in check transactions, the collecting
was negligent in allowing the
Wave Plastic , represented by a certain Willy Antiporda. Lao filed a complaint against bank generally suffers the loss because it has the duty to ascertain the genuineness
of all prior endorsements considering that the act of presenting the check for deposit and encashment of the said
Everlink and Wu for their failure to comply with their obligation and against BDO for
payment to the drawee is an assertion that the party making the presentment has check without proper endorsement.
allowing the encashment of the two (2) checks. And later also Unionbank as
done its duty to ascertain the genuineness of the endorsements. If any of the The RTC wrote that considering
collecting bank. BDO said it had no obligation to ascertain the owner of the accounts
warranties made by the collecting bank turns out to be false, then the drawee bank that the subject check was a
because the instruction to deposit the said checks to the payee's account only was
may recover from it up to the amount of the check. crossed check, Union Bank failed to
directed to the payee and the collecting bank, which in this case was Union Bank.
take reasonable steps in order to
BDO is simply acting as the drawee bank, and its obligations consist in examining the
determine the validity of the
genuineness of the signatures appearing on the checks, and paying the same if there Nevertheless, the loss would have ultimately pertained to Union Bank. By stamping
at the back of the subject check the phrase "all prior endorsements and/or lack of it representations made by Antiporda.
were sufficient funds in the account under which the checks were drawn.
guaranteed," Union Bank had, for all intents and purposes treated the check as a In the end, it adjudged that BDO
negotiable instrument and, accordingly, assumed the warranty of an endorser. could not be held liable because of
The SC held that BDO is not liable.
Without such warranty, BDO would not have paid the proceeds of the check. Union Bank's warranty when it
stamped on the check that "all prior
endorsement and/or lack of
BDO Unibank, Inc. vs. Lao 827 SCRA 481 endorsement guaranteed."
Republic of the Philippines filed an escheat proceeding pursuant to RA 3936 over
dormant deposits or unclaimed balances in various banks including First National City
Bank of New York.In its answer the First National City Bank of New York claims that,
while it admits that various savings deposits, pre-war inactive accounts, and sundry Our law requires that with regard to drafts or bills of exchange there is a need that
accounts contained in its report submitted to the Treasurer of the Philippines pursuant they be presented either for acceptance or for payment within a reasonable time
to Act No. 3936, totalling more than P100,000.00, which remained dormant for 10 after their issuance or after their last negotiation thereof as the case may be (Section
years or more, are subject to escheat however, it has inadvertently included in said 71, Act 2031).
report certain items amounting to P18,589.89 which, properly speaking, are not credits
or deposits within the contemplation of Act No. 3936. Hence, it prayed that said items
Republic vs. PNB 3 SCRA 851 be not included in the claim of plaintiff.
Gueco Spuses obtained a loan from International Corporate Bank to purchase a car.
A check must be presented for payment within a reasonable time after its issue, and
The Sps executed PNs which were payable in monthly installments and chattel
in determining what is a "reasonable time," regard is to be had to the nature of the
mortgage over the car to serve as security for the notes. Spouses defaulted in
instrument, the usage of trade or business with respect to such instruments, and the
payment of installments. The Bank filed a civil action. The Bank demanded payment of
facts of the particular case. In the case at bar, however, the check involved is not an
the amount of P184,000.00 which represents the unpaid balance for the car loan. After
ordinary bill of exchange but a manager's check. It is really the bank's own check
some negotiations, it was lowered to P154,000.00, However, as a result of the non-
and may be treated as a promissory note with the bank as a maker. The mere
payment of the reduced amount on that date, the car was detained inside the bank's
issuance of it is considered an acceptance thereof.
Section 71 compound. Dr. Gueco delivered a manager's check in amount of P150,000.00 but the
Failure to present for payment within a reasonable time will result to the discharge of
car was not released because of his refusal to sign the Joint Motion to Dismiss. Gueco
the drawer only to the extent of the loss caused by the delay. Failure to present on
filed a civil action for damages. The RTC held that there was a meeting of the minds
time, thus, does not totally wipe out all liability. In fact, the legal situation amounts to
between the parties as to the reduction of the amount of indebtedness and the release
an acknowledgment of liability in the sum stated in the check. In this case, the Gueco
of the car but said agreement did not include the signing of the joint motion to dismiss
spouses have not alleged, much less shown that they or the bank which issued the
as a condition sine qua non for the effectivity of the compromise. The court further
manager's check has suffered damage or loss caused by the delay or non-
ordered the bank to return immediately the subject car to the appellants in good
presentment. Definitely, the original obligation to pay certainly has not been erased.
The International Corporate Bank vs. Spouse Gueco 351 SCRA 516working condition; and that appellee may deposit the Manager's check.

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 Section 71

On September 13, 1960, the private respondents approached the petitioner at its
No hard and fast demarcation line can be drawn between what may be considered
office in Manila and asked the latter to extend to them an accommodation loan in the
as a reasonable or an unreasonable time, because "reasonable time" depends upon
sum of P4,500.00. Petitioner agreed and in fact respondents delivered to the
the peculiar facts and circumstances in each case. In the instant case, the check
petitioner the China Banking Corporation Check, dated September 13, 1960, for
in question was issued on September 13, 1960, but was presented to the
P4,500.00, drawn by Dy Hian Tat, and signed by them at the back of said check. That
drawee bank only on March 5, 1964, and dishonored on the same date. After
on March 5, 1964, the aforesaid check was presented for payment to the China
dishonor by the drawee bank, a formal notice of dishonor was made by the
Banking Corporation, but said check bounced and was not cashed by said bank.
petitioner through a letter dated April 27, 1968. Under these circumstances, the
After dishonor by the drawee bank, a formal notice of dishonor was made by the
petitioner undoubtedly failed to exercise prudence and diligence on what he ought to
petitioner through a letter dated April 27, 1968.
do al. required by law.
Far East Realty Investment vs. CA 166 SCRA 256
New Sikatuna Wood Industries, Inc. requested for a loan from private respondent
Sec. 72. What constitutes a sufficient presentment. - Presentment for payment, to be
Harris Chua, then private respondent-wife, Anita Pena Chua issued three (3) crossed
sufficient, must be made:
checks payable to New Sikatuna Wood Industries, Inc. all postdated December 22,
(a) By the holder, or by some person authorized to receive payment on his behalf;
1980. Subsequently, New Sikatuna Wood Industries, Inc. entered into an agreement
Section 72 (b) At a reasonable hour on a business day;
with herein petitioner State Investment House, Inc. the former assigned and
(c) At a proper place as herein defined;
discounted with petitioner eleven (11) postdated checks including the aforementioned
(d) To the person primarily liable on the instrument, or if he is absent or inaccessible,
three (3) postdated checks issued by Anita Peña Chua to New Sikatuna Wood
to any person found at the place where the presentment is made.
State Investment House vs. IAC 175 SCRA 310 Industries, Inc
Tan executed 4 PNs to Aw Yong. Aw Yong then drew a sight draft for King Kee in
favor of PNB. But, PNB refused to encash it so Tan asked Velasco to inforse the sight When Aw Yong indorsed the PNs to Velasco, 2 of the 4 PNs were already
draft of Aw Yong. In connection with this, the parties agreed that if Velasco were to dishonored. So, he knew Tan was already insolvent and had no reason to expect the
pay for the draft, Tan would reimburse him. Aw Yong also transferred his claim over notes would be paid if purchased. So, under Sec 80 of NIL, presentment is not
Section 80
the PNs (given by Tan) to Velasco as security for Velasco indorsing the draft. So, Aw needed: Presentment for payment is not required in order to charge an indorser
Yong indorsed the 4 PNs to Velasco. But, when the PNs were presented to Tan, Tan where the instrument was made or accepted for his accommodation and he has no
refused to pay for them, and Aw Yong was notified ofit. So now, Velasco is running reason to expect that the instrument will be paid if presented.”
Velasco vs. Tan Liuan 43 Phil. 196 after Aw Yong.
March 10, 1948: Seeto called PNB Surigao Branch and presented a PBC check Cebu
Branch.
PNB paid the amount of the check to Seeto, with the assurance that he would pay if it Although the drawer of a check is discharged only to the extent of loss caused by
was dishonored. unreasonable delay in presentment, an indorser is wholly discharged thereby
March 20: The check was mailed to PNB's Cebu branch. irrespective of any question of loss or injury. Only when there is affirmative proof that
April 9: The check was presented to the drawee bank for payment but the check was the indorser knew when he cashed the check that there would be no funds in the
Section 84
dishonored for insufficient funds. bank to meet it can the rule be avoided. Otherwise, the failure to present the check
in due course for payment will discharge the indorser, even though such
PNB demanded payment from Seeto. Seeto refused claiming that at the time of the presentment would have been unavailing.
negotiation of the check the drawer had sufficient funds in the drawee bank, and that
had the PNB's Surigao agency not delayed in forwarding the check until the drawer's
PNB vs. Seeto 91 Phil. 756 funds were exhausted, the same would have been paid.
Section 89 of the Negotiable Instruments Law (Act No. 2031) provides that,
when a negotiable instrument is dishonored for non-acceptance or non-payment,
notice thereof must be given to the drawer and of each of the endorsers, and those
who are not notified that the document was dishonored. Then, under the general
principle of the law of procedure, it will be incumbent upon the plaintiff, who seeks to
Chavez drew a check on PNB in favor of La Insular. The check was endorsed by the
enforce the defendant's liability upon these checks as endorser, to establish said
limited partners of La Insular, and then it was deposited by Chaves with Asia Bank.
liability by proving that notice was given to the defendant within the time, and in the
Chaves drew another check on PNB. The amount represented by the two checks were
manner, required by the law that the checks in question had been dishonored. If
presented by Asia Banking Corporation
these facts are not proven,
the plaintiff has not sufficiently established the defendant's liability. There is no proof
in the record tending to show that plaintiff gave any notice whatsoever to the
defendant that the checks in question had been dishonored, and therefore it has not
Asia Banking Corp. vs. Javier 44 Phil. 777 established its cause of action.
Fojas-Arca (FA) and Firestone Tire entered into a franchising agreement wherein the
former had the privilege to purchase on credit the Firestone’s products. In paying for
these products FA could pay through special withdrawal slips. In turn Firestone would
deposit these slips with Citibank. Citibank would then honor and pay the slips.
Section 89
Citibank automatically credits the account of Firestone then merely waited for the
same to be honored and paid by Luzon Development Bank. As this was the
circumstances Firestone believed in the sufficient funding of the slips until there was a
time that Citibank informed it that one of the slips was dishonored. It wrote a demand
letter to FA for the payment and damages but FA refused to pay prompting Firestone
Firestone Tire vs. CA 353 SCRA 601 to file an action against it.
The general indorser of a negotiable instrument engages that if it be
dishonored and the necessary proceedings of dishonor be duly taken, he
The US government issued a warrant payable to the order of Bacos. Gullas and Lopez will pay the amount thereof to the holder. In this connection, it has been
appeared as indorsers of the warrant. It was then encashed by PNB. Subsequently, held by a long line of authorities that notice of dishonor is necessary in
the warrant was dishonored by the Insular Treasurer. Upon learning of the dishonor, order to charge an indorser and that the right of action against him doesn’t
notices were sent to Gullas by the bank but it wasn't received by Gullas as he was accrue until the notice is given.
currently not within the vicinity. In the said notices served to Gullas and Lopez, it was
indicated therein that since there was dishonor of the warrant, their corresponding As a general rule, a bank has a right of setoff of the deposits in its hands
accounts have been charged. It was only after the return of Gullas in Cebu when he for payment of any indebtedness on the part of a depositor but this should
received the notices. be enforced properly. It is undeniable in this case that PNB didn’t enforce
its right properly. It made used of the money in the account of Gullas prior
Gullas vs. PNB 62 Phil. 519 to its sending of notice of dishonor.
Private respondents approached petitioner and asked the latter to extend
to them an accommodation loan. They proposed to pay with interest.
They even gave a check, signed by Tat, drawn against Chinabank, and
signed at the back by the private respondents. They said that they will
Where the instrument is not payable on demand, presentment must be
change the check with cash after one month and if not, the check could be
made on the day it falls due. Where it is payable on demand, presentment
presented for payment and it would be paid. The loan was actually
must be made within a reasonable time after issue, except that in case of a
extended but when the check was presented for payment, it was
bill of exchange, presentment for payment is sufficient if made within
dishonored—the account on which it is drawn has long been closed. The
reasonable time after the last negotiation thereof.
trial courts held in favor of petitioner but this was reversed by the appellate
court by ruling that the check has passed through other hands before
reaching the petitioner and the said check wasn’t presented within
Far East Realty Investment vs. CA 166 SCRA 256 reasonable time and after its issuance.
While there is a prima facie presumption that the element of knowledge is present in
Lina Lim Lao was a junior officer of Premiere Investment House (Binondo Branch).
every case, Lina Lim Lao did not have actual knowledge of the insufficiency of funds
She was authorized to sign checks for and in behalf of the corporation. She was
in the corporate accounts at the time she signed the dishonored checks. The scope
required to co-sign checks drawn against the account of the corporation. The other co-
of petitioner's duties and responsibilities did not encompass the funding of the
signor was her head of office, Mr. Teodulo Asprec(other petitioner). Since part of her
corporation's checks; her duties were limited to the marketing department of the
duties required her to be mostly in the field and out of the office, it was normal
Binondo branch. Also, there can be no prima facie evidence of knowledge of
procedure for her to sign the checks in blank, that is, without the names of the payees,
insufficiency of funds in the instant case because no notice of dishonor was actually
the amounts and the dates of maturity. She met complainant Father Artelijo Pelijo, the
sent to or received by the petitioner. The records show that the notice of dishonor
provincial treasurer of the Society of the Divine Word, who was authorized to invest
was addressed to Premiere Financing Corporation and sent to its main office in
donations to the society and had been investing the society's money with Premiere.
Cubao. It was never transmitted to the Binondo Office of Lao.
Section 102 He invested a total of P514,484.04 and was issued checks in return. All the checks
were issued in favor of Artelijo A. Palijo and signed by Lao and Asprec. When Fr.
Because no notice of dishonor was actually sent to and received by Lao, the prima
Palijo presented the checks dfor encashment, they were dishonored (drawn against
facie presumption that she knew about the insufficiency of funds cannot apply.
insufficient funds). He immediately made demands on premiere for payment.
Section 2 of B.P. 22 clearly provides that this presumption arises not from the mere
Subsequently, Premiere was placed under receivership. When the checks were
fact of drawing, making and issuing a bum check; there
subsequently dishonored, private complainant sent a notice of dishonor to Premier
must also be a showing that, within five banking days from receipt of the notice of
Financing Corporation at its head office in Cubao, Quezon City. the notice was never
dishonor, such maker or drawer failed to pay the holder of the check the amount due
sent to Lao at the Binondo branch nor was the investment ever followed up with Lao.
thereon or to make arrangement for its payment in full by the drawee of such check.
Fr. Palijo filed a case for violation of BP 22 against Lao and Asprec. The RTC found
Sec. 102 Time Within Which Notice Must Be Given. — Notice may be given as soon
Lao guilty and the CA affirmed the decision. The SC however, found that Lao did not
as the instrument is dishonored; and unless delay is excused as hereinafter
violate BP 22.
Lina Lim Lao vs. CA 274 SCRA 572 provided, must be given within the times fixed by this Act.
Sec. 102. Time within which notice must be given. - Notice may be given as soon as
the instrument is dishonored and, unless delay is excused as hereinafter provided,
Betty King issued 11 postdated checks to Eileen Fernandez in the amount of P1, must be given within the time fixed by this Act.
070,000 in exchange for cash amounting to P1M. Upon due date, the checks were
deposited to Equitable and thereafter dishonored due to insufficiency of funds. King *The prosecution must prove not only that the accused issued a check that was
failed to pay despite demand, prompting Fernandez to file a complaint for BP22. RTC subsequently dishonored. It must also establish, the court said, that the accused was
& CA convicted King of 11 counts of violation of BP22. Betty King now claims that she actually notified that the check was dishonored and that he or she failed, within five
did not receive the Notice of Dishonor, hence should not be convicted for BP22. banking days from receipt of the Notice of Dishonor, to pay the holder of the check
the amount due or make arrangements for its payment.
Betty King vs. People 319 SCRA 666

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 Even if Bancasia failed to give timely notice ofdishonor, still there would be no
prejudice whateverto Great Asian. Under the Negotiable Instruments Law, notice
of dishonor need not be give to thedrawer if the drawer has no right to expect
Great Asian approved two resolutions authorizing its Treasureer and General
or require the bank to honor the check, or if the drawer has countermanded
Manager, Arsenio Lim Piat, Jr., to secure (1) a loan agreement not to exceed P1.0
payment. In the instant case, all thechecks were dishonored for any of the
Million and (2) a discounting line not to exceed P2.0 Million, both with Bancasia. In
following reasons: account closed, account under garnishment,insufficiency
both resolutions, Arsenio was authorized to be the signatory of Great Asian for all
of funds, or payment stopped. In the first three instances, the drawers had no right
Section 114 necessary papers and documents. Tan Chong Lin signed two Surety Agreements in
to expect orrequire the bank to honor the checks, and in the lastinstance, the
favor of Bancasia to guarantee the loan agreement and discounting line agreed upon
drawers had countermanded payment. Notice of dishonor is not required if drawer
between Great Asian and Bancasia. Arsenio endorsed all the 15 checks by signing his
has no right to expect or require the bank to honor the check, or if the drawer has
name at the back of the checks. 8 were dishonored which bore the endorsement of
countermanded payment. A with recourse stipulation makes the indorser liable,
Arsenio and below reads "Great Asian Sales", while the rest only bore Arsenio.
whether or not notice of dishonor has been given. Delay in notice of dishonor, where
such is required, discharges the drawer only to the extent of the loss caused by the
Great Asian Sales vs. CA 381 SCRA 557 delay
That the posdated checks were merely issued as security is not a ground for the
discharge of the instrument as against a holder in due course.
Moulic (drawer) issued to Victoriano (payee), as security for pieces of jewelry to be
sold on commission, 2 post-dated Equitable Banking Corporation (drawee) checks in
The intentional cancellation contemplated under Sec 119 paragraph (c) is that
the amount of P50K each. Thereafter, the Victoriano negotiated the checks to State
cancellation effected by destroying the instrument either by tearing it up, burning it,
Investment House. Inc. or SIHI (holder). MOULIC failed to sell the pieces of jewelry, so
or writing the word "cancelled" on the instrument. The act of destroying the
she returned them to the Victoriano before maturity of the checks. The checks,
instrument must also be made by the holder of the instrument intentionally. Since
however, could no longer be retrieved as they had already been negotiated.
MOULIC failed to get back possession of the post-dated checks, the intentional
Consequently, before their maturity dates, MOULIC withdrew her funds from the
Section 119 cancellation of the said checks is altogether impossible.
drawee bank. Upon presentment for payment, the checks were dishonored for
insufficiency of funds. SIHI sued to recover the value of the checks plus attorney's fees
On the other hand, the acts which will discharge a simple contract for the payment of
and expenses of litigation. MOULIC contends that she incurred no obligation on
money under paragraph (d) are determined by other existing legislations since Sec.
the checks because the jewelry was never sold and the checks were negotiated
119 does not specify what these acts are, e.g., Art. 1231 of the Civil Code which
without her knowledge and consent, and in addition to the fact that the checks
enumerates the modes of extinguishing obligations. Sec. 119 contemplates of a
were issued as mere security, the instrument has been discharged as against a
situation where the holder of the instrument is the creditor while its drawer is the
holder in due course.
debtor. In the present action, the payee, Corazon Victoriano, was no longer
State Investment House vs. CA 217 SCRA 32 MOULIC's creditor at the time the jewelry was returned.
J.Y. Bros. is a corporation engaged in the business of selling sugar, rice and other
In this case, respondent’s acceptance of the Solid Bank check, which replaced
commodities. On October 15, 1996, Anamer Salazar, a freelance sales agent, was
the dishonored Prudential Bank check, did not result to novation as there was
approached by Isagani Calleja and Jess Kallos, if she knew a supplier of rice.
no express agreement to establish that petitioner was already discharged from
Answering in the positive, Salazar accompanied the two to J.Y. Bros. They procured
his liability to pay respondent the amount of ₱214,000.00 as payment for the
from J. Y. Bros. 300 cavans of rice worth P214,000.00. As payment, Salazar
300 bags of rice. As we said, novation is never presumed, there must be an express
negotiated and indorsed to J.Y. Bros. Prudential Bank Check issued by Nena
intention to novate. In fact, when the Solid Bank check was delivered to respondent,
Jaucian Timario in the amount of P214,000.00 with the assurance that the check
the same was also indorsed by petitioner which shows petitioner’s recognition of the
is good as cash. On that assurance, J.Y. Bros. parted with 300 cavans of rice to
existing obligation to respondent to pay ₱214,000.00 subject of the replaced
Salazar.
Prudential Bank check.
However, upon presentment, the check was dishonored due to closed account.
Moreover, respondent’s acceptance of the Solid Bank check did not result to
Informed of the dishonor of the check, Calleja, Kallos and Salazar delivered to J.
any incompatibility, since the two checks − Prudential and Solid Bank checks
Y. Bros. a replacement cross Solid Bank Check again issued by Nena Jaucian
− were precisely for the purpose of paying the amount of ₱214,000.00, i.e., the
Timario in the amount of P214,000.00 but which, just the same, bounced due to
credit obtained from the purchase of the 300 bags of rice from respondent.
insufficient funds. When despite the demand letter dated February 27, 1997, Salazar
Indeed, there was no substantial change in the object or principal condition of the
failed to settle the amount due J.Y. Bros., the latter charged Salazar and Timario with
obligation of petitioner as the indorser of the check to pay the amount of
the crime of estafa. Petitioner contends that the issuance of the Solid Bank check and
₱214,000.00. It would appear that respondent accepted the Solid Bank check to give
the acceptance thereof by the respondent, in replacement of the dishonored
petitioner the chance to pay her obligation.
Salazar vs. J.Y. Brothers 634 SCRA 95 Prudential Bank check, amounted to novation that discharged the latter check
SMC drew a dividend check on its account with the First National City Bank for its
stockholder Delgado. When the check was delivered to Delgado, the amount was
altered from P240 to P9240. Delgado then indorsed and deposited this in his account
with Republic Bank, who guaranteed all prior indorsements on the check.
When the drawee bank fails to return a forged or altered check to the collecting bank
Sections 124-125
Republic then presented the check to FNCB thru the clearing house for payment, within the 24-hour clearing period, the collecting bank is absolved from liability.
which the latter paid. After around a month though, SMC told FNCB about the forgery
and FNCB re-credited the amount to SMC. FNCB then demanded refund from
Republic on the basis of their indorsement, but Republic refused.
Republic Bank vs. CA 196 SCRA 100
An alteration on the serial number of a check is not a material alteration.
DECS issued 25 checks against PNB, which the International Corporate accepted for Moreover, the check’s serial number is not the sole indication of its origin. The name
deposit. After 24 hours from submission on the checks to PNB for clearing, of the government agency which issued the subject check was prominently printed
INternational Corporate paid the value of the checks and PNB returned the checks to therein. The check’s issuer was therefore sufficiently identified, rendering the referral
Intenrational Corporate without clearing saying they were materially altered. to the serial number redundant and inconsequential.
The International Corporate Bank vs. CA and PNB 501 SCRA 259
An alteration of the serial number is not a material alteration; thus the PNB had no
The DECS issued a check in favor of Abante Marketing, w/c deposited the same to its
right to dishonor the check and return it to PBCom. It does not alter the effect of the
account w/ Capitol Bank. Capitol then deposited it w/ its account in PBCom, w/c
instrument. Innocent alterations and spoliations do not avoid the instrument, and the
endorsed the check to the PNB for clearing. It was cleared, PBCom credited the
holder may enforce it according to its original tenor. The serial number is not an
amount to Capitol and the amount was then withdrawn. Then the PNB returned the
essential requisite for negotiability; and the DECS can be identified as the issuer
check to PBCom and debited its account claiming that the check was materially
because it name is printed in bold letters on the face of the check. Any reference to
altered because its serial number was altered. PBCom thus sought to be reimbursed
the serial number would be unnecessary. Since, the PNB had no right to dishonor
by the PNB.
PNB vs. CA 256 SCRA 491 and return the check, the issue on 24-hour rule need no be discussed.
Cabilzo was not the one who made nor authorized the alteration. Neither did he
assent to the alteration by his express or implied acts. There is no showing that he
failed to exercise such reasonable degree of diligence required of a prudent
man which could have otherwise prevented the loss. Cabilzo placed asterisks
before and after the amount in words and figures in order to forewarn the
subsequent holders that nothing follows before and after the amount indicated other
Cabilzo (Drawer) > Mr. Marquez > Westmont Bank(Collecting Bank) > Metrobank than the one specified between the asterisks. The depositor expects the bank to
(Drawee) treat his account with the utmost fidelity, whether such account consists only of a few
hundred pesos or of millions. The point is that as a business affected with public
interest and because of the nature of its functions, the bank is under obligation to
Upon receipt of the check, Cabilzo discovered that the check which he issued in the treat the accounts of its depositors with meticulous care, always having in mind the
amount of P1,000.00 was altered to P91,000.00 and the date 24 November 1994 was fiduciary nature of their relationship.
changed to 14 November 1994. Cabilzo demanded that Metrobank re-credit the
amount of P91,000.00 to his account. Metrobank should be liable for the Material Alteration. 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
Metropolitan Bank and Trust Company vs. Cabilzo 510 SCRA 301 Section 1 of the NIL.
PRCI is a domestic corporation which maintains a current account with petitioner Bank
of America. Its authorized signatories are the company President and VP for Finance. The SC held Bank of America as the proximate cause of the wrongful encashment.
Because of business travels abroad, these officers pre-signed checks to Although not in the strict sense material alterations, the misplacement of the
accommodate any expenses that may come up while they are away. The said pre- typewritten entries for the payee and the amount on the same blank and the
signed checks were left for safekeeping by PRC’s accounting officer. However, two (2) repetition of the amount using a check writer were glaringly obvious irregularities on
of the said checks came into the hands of one of its employees (Mesina) who the face of the check.
managed to encash it with petitioner bank. The said checks were filled in with the use
of a check-writer, wherein in the blank for payee, the amount in words was written, Extraordinary diligence demands that Bank should have ascertained from PRCI the
with the word “CASH” above it. Bank contended that since the instrument is authenticity of the subject checks or the accuracy of the entries therein not only
incomplete but delivered or complete but undelivered, it could validly presume upon because of the presence of highly irregular entries on the face of the checks but also
presentation of the checks, that the party who filled up the blanks had authority and of the decidedly unusual circumstances surrounding their encashment.
Bank of America vs. Phil. Racing Club 594 SCRA 301 that a valid and intentional delivery to the party presenting the checks had taken place.
Aruego, on behalf of World Current Events, entered into a Credit Agreement with An inspection of the drafts accepted by the defendant would show nowhere that he
PBCom, for the publication of the company’s periodicals. At every printing endeavor has disclosed that he was signing in representation of the Philippine Education
by the printing press, a bill of exchange is drawn against PBCom. The instruments are Foundation Company. He merely signed his name. For failure to disclose his
signed by Aruego, without any indication that he is an agent of World Current Events. principal, Aruego was personally liable for the drafts he accepted.
When he was being held liable by PBCom, he averred that he only signed the
instrument in the capacity of agent of the company. Further, under the Negotiable Instruments Law, a bill of exchange is an unconditional
order in writing addressed by one person to another, signed by the person giving it,
Section 126
The bank instituted an action against Aruego to recover the cost of requiring the person to whom it is
printing of the latter’s periodical. Aruego however argues that the addressed to pay on demand or at a fixed or determinable future time a sum certain
supposed bills of exchange are mere evidence of indebtedness and not in money to order or to bearer. As long as a commercial paper conforms with the
bills of exchange. And that the defendant signed these drafts not as definition of a bill of exchange, that paper is considered a bill of exchange. The
principal obligor, but as accommodation or additional party obligor, to add nature of acceptance is important only in the determination of the kind of
to the security of said plaintiff bank. liabilities of the parties involved, but not in the determination of whether a
Phil. Bank of Commerce vs. Aruego 102 SCRA 530 commercial paper is a bill of exchange or not.

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 A check was issued by the Province of Samar (drawer) to Santos (payee), drawn
against PNB (drawee). It was indorsed to James McGuire (holder) who tried to encash
An implied acceptance of the check by the PNB was thereby created. The request
it with the municipal treasurer but was unable to. The check was then referred to PNB,
by PNB from the Bureau of Posts for photostatic copies of the check and the
and PNB requested for photostatic copies of the check and asked McGuire also to
subsequent requirement by it for its presentation by McGuire to the provincial
follow procedures for proper certification. Meanwhile, McGuire indorsed the check to
treasurer and the provincial auditor for certification, would be an empty gesture if it
Sumacad (current holder), who was unable to collect because the province of Samar
did not thereby mean to assume the obligation of paying the check and holding
withdrew most of their funds from their PNB account. Sumacad filed a case against
sufficient deposit of the drawer for the purpose.
the province of Samar and PNB for collection. PNB argues that they never accepted
Sumacad vs. Province of Samar 100 Phil. 72 the check and therefore cannot be liable.
PCIB as indroser
SC likewise affirmed the CA decision and ruled that PCIB as indorsee is not at all
liable to reimburse PNB as it claims it should, because PNB is even guilty of greater
negligence because it knew 2 months beforehand that the check already was lost
(and take note, PNB’s the drawee in this case).

Augusto Lim deposited in his PCIB current account a GSIS check in the amount of
On Acceptance
P57,415 drawn against PNB. Following an established banking practice in the PH,
In general, "acceptance", in the sense in which this term is used in the Negotiable
check was forwarded for clearing, through the Central Bank (CB), to PNB, which did
Instruments Law is not required for checks, for the same are payable on demand.
not return the check the next day, or any other time, but retained it and upon GSIS’
Indeed, "acceptance" and "payment" are, within the purview of said Law, essentially
demand, the said Amount was re-credited to GSIS’ account, for the reason that the
different things, for the former is "a promise to perform an act," whereas the latter is
signatures on the check were forged. PNB demanded from PCIB the refund of said
the "actual performance" thereof. In the words of the Law, "the acceptance of a bill
sum, PCIB refused. PNB filed a case against PCIB, to which the CFI dismissed. Upon
is the signification by the drawee of his assent to the order of the drawer," which, in
appeal to the CA, the same decision was affirmed.
the case of checks, is the payment, on demand, of a given sum of money.
Section 132
Sec. 132. Acceptance; how made,
The SC held that PCIB is not liable as the indorser despite the forgery of the check. It
On the other hand, actual payment of the amount of a check implies not only an by and so forth. - The acceptance
also held that the lower court did not err in holding that "clearing" is not "acceptance"
assent to said order of the drawer and a recognition of the drawer's obligation to pay of a bill is the signification by the
in contemplation of the NIL.
the aforementioned sum, but, also, a compliance with such obligation. drawee of his assent to the order of
the drawer. The acceptance must
Essentially speaking, by not returning the check to PCIB and indicating that it didn’t be in writing and signed by the
find anything wrong with the check and saying that it would honor the same, and by drawee. It must not express that the
actually paying its amount to PCIB, PNB induced PCIB not only to believe that the drawee will perform his promise by
check was genuine and good, but also to pay its amount to Lim. With PNB being the any other means than the payment
PNB vs. CA 25 SCRA 693 proximate cause, it may not recover from PCIB. of money.
HSBC renders custodial services for its local/foreign investor-clients with respect to
their passive investments in the Philippines. Their clients maintain Philippine peso or
foreign currency accounts with them and HSBC manages them through electronic
The electronic messages received by HSBC from its investor-clients abroad
messages from the clients. Pursuant to these messages, HSBC purchased and then
instructing the former to debit the latter's local and foreign currency accounts and to
paid DST worth P19,672,992.10 and from P32,904,437.30. In response to a letter
pay the purchase price of shares of stock or investment in securities do not properly
questioning whether instructions from abroad which don’t involve transfer of funds are
qualify as either presentment for acceptance or presentment for payment.
subject to DST, the BIR commissioner replied that there is no need to pay DST for
instruction made through an electronic message by non-resident payor-client to debit
Sec. 132. Acceptance; how made, by and so forth. — The acceptance of a bill [of
his local or foreign currency account maintained in the Philippines and to pay a certain
exchange] is the signification by the drawee of his assent to the order of the drawer.
named recipient also residing in the Philippines. As such, HSBC filed an administrative
The acceptance must be in writing and signed by the drawee. It must not express
claim for refunds. The BIR refused to pay so HSBC elevated the case to the CTA.
that the drawee will perform his promise by any other means than the payment of
CTA ruled in favor of HSBC. The CA reversed the CTA decisions. They said that the
money.
tax was levied against the acceptances and payments by [HSBC] of the subject
HSBC vs. CIR 724 SCRA 499 electronic messages/orders for payment.
Under Section 137 of NIL, BPI is primarily liable for accepting the checks. Alegre
accepted the check, instead of requiring payment in money. Yet, when he presented
Alegre invested with Cebu International (CIFC) P500,000 in cash. CIFC issued a PN
it to RCBC for encashment, the same was dishonored by non-acceptance, with BPI's
which covered respondent's placement. CIFC issued BPI check in favor of private
annotation: "Check (is) subject of an investigation." Under these circumstances,
respondent as proceeds of his matured investment. Mrs Alegre deposited the check
and after the notice of dishonor, the holder has an immediate right of recourse
with RCBC but BPI dishonored it, annotating therein that the check is subject of an
against the drawer, and consequently could immediately file an action for the
investigation. BPI took possession of the check pending investigation of several
recovery of the value of the check. In a loan transaction, the obligation to pay a
Section 137 counterfeit checks drawn against CIFC's checking account. Private respondent
sum certain in money may be paid in money, which is the legal tender or, by the use
demanded from CIFC that he be paid in cash but the latter refused. Alegre filed a case
of a check. A check is not a legal tender, and therefore cannot constitute valid tender
for recovery of sum of money against CIFC. CIFC asserts that since BPI accepted
of payment. Although the value of the check was deducted from the funds of CIFC, it
the instrument, the bank became primarily liable for the payment of the check.
was not delivered to Alegre - did not not ipso facto operate as a discharge or
When BPI offset the value of the check against the losses from the forged
payment. BPI's confiscation of Alegre's money constitutes garnishment without the
checks allegedly committed by Alegre, the check was deemed paid.
parties going through a valid proceeding in court. In effect, CIFC has not yet
Cebu International vs. CA 316 SCRA 488 tendered a valid payment of its obligation to Alegre.
Philippine Rayon Mills (PRM), Inc. entered into a contract with Nissho Co., Ltd. of
A letter of credit is defined as an engagement by a bank or other person made at the
Japan for the importation of textile machineries.. To effect payment for machineries,
request of a customer that the issuer will honor drafts or other demands for payment
PRM applied for a commercial letter of credit with the Prudential Bank and Trust
upon compliance with the conditions specified in the credit. Through a letter of credit,
Company in favor of Nissho. Against this letter of credit, drafts were drawn and issued
the bank merely substitutes its own promise to pay for one of its customers who in
by Nissho, which were all paid by the Prudential Bank through its correspondent in
return promises to pay the bank the amount of funds mentioned in the letter of credit
Japan, the Bank of Tokyo, Ltd. Two of these drafts were accepted by PRM through
Section 143 plus credit or commitment fees mutually agreed upon. In the instant case then, the
its president, Anacleto R. Chi, while the others were not. Sometime in 1967, the
drawee was necessarily the herein petitioner. It was to the latter that the drafts were
PRM ceased business operation. The obligation of PRM arising from the letter of
presented for payment. In fact, there was no need for acceptance as the issued
credit and the trust receipt remained unpaid and unliquidated. Both the trial court and
drafts are sight drafts. Presentment for acceptance is necessary only in the
IAC ruled that Philippine Rayon could be held liable for the two (2) drafts. However,
cases expressly provided for in Section 143 of the Negotiable Instruments Law
the liability for the 10 other draft did not arise because they were not presented for
(NIL). Sight drafts do not require presentment for acceptance.
Prudential Bank vs. IAC 216 SCRA 257 acceptance.
Allied Bank purchased an Export Bill worth 20k dollars from (GGS). The bill drawn
under a letter of credit covered Valvoline training suit. It was issued by Chekiang First
Bank. With the purchase of the bill, Allied credited GGS the peso equivalent of the bill
- 151k. Gidwani, Alcron and Spouses de Villa executed Letters of Guaranty and
The contract of indorsement is primarily that of transfer, while the contract of
Continuing Guaranty holding themselves liable if the bill is dishonored. When Allied
guaranty is that of personal security. The liability of a guarantor/surety is broader
negotiated the bill to Chekiang, it was refused because of material discrepancies in the
than that of an indorser. Unless the bill is promptly presented for payment at maturity
documents submitted by GGS relative to the exportation covered by the letter of credit.
and due notice of dishonor given to the indorser within a reasonable time, he will be
discharged from liability thereon. On the other hand, except where required by the
Allied demanded payment from private respondents based on the letters of guaranty.
provisions of the contract of suretyship, a demand or notice of default is not required
The respondents refused prompting Allied to file an action for a sum of money.
to fix the surety’s liability. He cannot complain that the creditor has not notified him in
Respondents argued that they signed the letters in blank and it was filled up by Allied
the absence of a special agreement to that effect in the contract of suretyship.
thereafter. Akron argued that they are merely a liasion office. GGS and Gidwani also
argued that since Allied failed to protest the dishonor of the bill, GGS and Gidwani are
now discharged from liability based on Sec. 152 of NIL.
Allied Banking Corporation vs. Court of Appeals, Section
et al 494152
SCRA 467
Velasquez sold cucumber to South Koea between Wilderness Trading (Seller) and
Goldwell Trading (buyer). For payment, Goldwell opened a letter of credit in favor of
Wilderness. Velasquez also applied for a credit accommodation with Solidbank for
A sight draft made payable outside the Philippines is a foreign bill of
pre-shipment financing. For the 3rd shipping, Velasquez negotiated for a documentary
exchange. When a foreign bill is dishonored by non-acceptance or non-payment,
sight draft to be drawn on the letter of credit. To secure this sight draft, Velasquez
protest is necessary to hold the drawer and indorsers liable.
issued a letter of undertaking in favor of Solidbank promising that the draft will be
accepted with th Bank of Seoul and that he would be liable himself if the sight sraft
Under Sec. 152 of the Negotiable Instruments Law, a protest is necessary where a
was not accepted. Because of this, Solidbank advanced to Velasquez the value of
foreign bill appearing on its face to be such is dishonored by non-acceptance, it must
shipment.
be previously dishonored by non-acceptance, is dishonored by non-payment, it must
be duly protested for non-payment. If it is not so protested, the drawer and indorsers
But, Solidbank failed to collect on the sight-draft since it was dishonored by non-
are discharged.
acceptance of Bank of Seoul. So, Goldwell issued a stop payment order on the sight
draft as the bags contained soil. Because of the dishonor of the sight draft and the
Velasquez vs. Solidbank Corporation 550 SCRA 119 stop payment order, Solidbank demanded restitution of the sum it advanced.
Sps. Moran owned the Wack-Wack Petron Gas Station. They regularly purchased gas
from Petron and made payments by personal checks upon delivery of the fuel. They
maintained 3 joint accounts w/ Citytrust Bank: a Current Account and 2 Savings
Accounts. As valued clients, they had a pre- authorized transfer agreement w/
Citytrust where the latter allowed them to maintain zero-balance in their Current
Account, and the bank would automatically transfer the needed funds from their A check is a bill of exchange drawn on a bank and payable on demand. The
Savings Accounts to fund their checks. It must be emphasized that this is merely an bank is obligated to honor the same so long as the depositor has sufficient
accommodation. funds w/ the bank. Failure to do so entitles the depositor to damages.
Conversely, the bank has every right to refuse payment if the depositor has
Moran issued a check for some P 50,000.00 in favor of Petron; on December 13, he insufficient funds at its disposal. A drawer must keep track of his accounts and
issued another check for some P 56,000.00. At that time, their Current Account had must not rely completely upon the bank for notice. The Spouses had at least 24
zero- balance, and their Savings Accounts did not have sufficient funds. On 10 a.m. of hours to make good the amounts, but this they failed to do. Besides, the pre-
December 15, George proceeded to the bank to deposit certain amounts, but this authorized transfer arrangement between then Bank and the Spouses was merely
came too late as their 2 checks have already been dishonored. Petron also cancelled an accommodation. It was not a binding contract. Neither can the bank be obliged to
their credit accommodation. make partial payments where there are insufficient funds. Such practice is inexistent.
Nonetheless, Diaz (branch manager) secured from the Spouses a cashier’s check and That being the case, there is no basis for a grant of moral damages.
personally delivered the same to Petron. He also wrote Petron attributing “operational
error” to the Bank. This is obviously done only to accommodate their valued clients.
Still, over 6 months after the incident, the Moran Spouses filed a complaint for moral
damages amounting to P 1 million.
Moran vs. CA 230 SCRA 799

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 Firestone Tire filed a case against Ines Chaves & Co for the collection of 6241. 75, for
the price of automobile tires, tubes and other accessories which Firestone had soldOf course, if Firestone agreed to accept the check, knowing that it was not covered
by adequate funds in the bank, no finding of bad faith can be made against the
and delivered to Ines Chaves on different dates. After Trial, the trial court did not honor
appellant. We held in a number of cases that where a person issues a post dated
the agreement in the invoice for lack of proof that Ines Chaves agreed to the condition.
However, the trial court still ordered the payment of interest and additional check without funds to cover it and informs the payee of this fact, he cannot be held
amount of 25% of principal as attorney's fees after finding Ines Chaves guilty of guilty of estafa because there is no deceit.
bad faith in issuing a check which was subsequently dishonored. The check was for But here there is nothing in the record to show that Firestone knew that there were
P1,437.50 and was intended as part payment of appellants' debt. When presented to no funds in the bank when it accepted the check from the Ines Chaves, much less
that appellee "agreed" to take the check with knowledge of the lack of funds.
the Security Bank and Trust Co. by Firestone, the check was returned for insufficiency
of funds. There is nothing to show that Ines Chaves even hinted to Firestone at the lack
of funds when the check was issued. On the contrary, by issuing the check,
Innes Chaves contends that when the check was issued, Firestone knew that there Ines Chaves in effect represented to Firestone that there were funds in the
were no funds to back it up and that Ines Chaves expected that such funds would be bank for its payment.
Firestone Tire vs. Ines Chaves 18 SCRA 356 available when the check became due.
The negotiability of the check isn’t affected by it being crossed, whether specially or
generally. It may be legally negotiated from one person to another as long as the one
who encashes the check with the drawee bank or if its specially crossed, by the bank
mentioned between the parallel lines.

Jurisprudence provides the following effects of crossing a check:

1. The check may not be encashed but only deposited in the bank
2. The check may be negotiated only once—to one who has an
Bataan Cigar has engaged one of its suppliers, George King, to deliver bales of
account with a bank
tobacco leaves. Petititoner then issued postdated crossed checks in favor of King.
3. The act of crossing the check serves the warning to the holder that the check has
This was continued despite the failure to deliver the bales. Simultaneous to these
been issued for a definite purpose so that he must inquire if he has received the
transactions was the discounting of King of the checks to State Investment House.
check pursuant to that purpose, otherwise, he is not a holder in due course.
Bataan then stopped payment and SIHI tried to collect.
The check should placed the holder in inquiry and upon him devolves the duty to
ascertain the indorser’s title to the check or the nature of his possession. Failing in
this respect, the holder is declared guilty of gross negligence amount to legal
absence of good faith. In the present case, petitioner’s defense in stopping payment
is as good to SIHI as it is to King because really the consideration for the checks
were the delivery of the bales of tobacco leaves which King failed to do. There being
Bataan Cigar vs. CA 230 SCRA 643 failure of consideration, SIHI is not a holder in due course.
Under their check discounting agreement, Filipinas Orient issued four (4) PBCom
crossed checks to Yu Kio, the President of Pipe Master Corp., in exchange for four (4) Sec. 185 of NIL provides: “A check is defined by law as a bill of exchange
Metrobank checks. The PBCom checks were payable to Pipe Master and marked “For drawn on a bank payable on demand.” The law imposes on the collecting bank the
Payee’s Account Only.” Yu Kio then indorsed and deposited three (3) of the PBCom duty to diligently scrutinize the checks deposited with it for the purpose of
checks in his personal accounts with MetroBank (721k) and one (1) with Solid Bank determining their genuineness and regularity. The collecting bank, being primarily
(242k). The checks were credited to Yu Kio’s personal accounts. When Filipinas engaged in banking, holds itself out to the public as the expert on this field, and the
Orient presented the checks, they were dishonored. Pipe Master, the drawer, refused law thus holds it to a high standard of conduct.
to pay the amounts of the checks.
Metropolitan Bank vs. PBCom 536 SCRA 556
According to the law, the term "credit" in its usual meaning is a sum credited on the
books of a company to a person who appears to be entitled to it. It presupposes a
creditor-debtor relationship, and may be said to imply ability, by reason of property or
estates, to make a promised payment. It is the correlative to debt or indebtedness,
and that which is due to any person, a distinguished from that which he owes. The
same is true with the term "deposits" in banks where the relationship created Telegraphic transfers are also
between the depositor and the bank is that of creditor and debtor. included.
The case, however, is different with
Demand drafts are not included: regard to telegraphic payment
A demand draft is a bill of exchange payable on demand. Considered as a bill of order. It is said that as the
Republic of the Philippines filed an escheat proceeding pursuant to RA 3936 over exchange, a draft is said to be, like the former, an open letter of request from, and an transaction is for the establishment
dormant deposits or unclaimed balances in various banks including First National City order by, one person on another to pay a sum of money therein mentioned to a third of a telegraphic or cable transfer
Bank of New York.In its answer the First National City Bank of New York claims that, person, on demand or at a future time therein specified. As a matter of fact, the term the agreement to remit creates a
while it admits that various savings deposits, pre-war inactive accounts, and sundry "draft" is often used, and is the common term, for all bills of exchange. And the words contractual obligation a has been
accounts contained in its report submitted to the Treasurer of the Philippines pursuant "draft" and "bill of exchange" are used indiscriminately. termed a purchase and sale
to Act No. 3936, totalling more than P100,000.00, which remained dormant for 10 transaction. The purchaser of a
Section 185 years or more, are subject to escheat however, it has inadvertently included in said On the other hand, a bill of exchange within the meaning of our Negotiable telegraphic transfer upon making
report certain items amounting to P18,589.89 which, properly speaking, are not credits Instruments Law does not operate as an assignment of funds in the hands of the payment completes the transaction
or deposits within the contemplation of Act No. 3936. Hence, it prayed that said items drawee who is not liable on the instrument until he accepts it. insofar as he is concerned, though
be not included in the claim of plaintiff. Since it is admitted that the demand drafts herein involved have not been presented insofar as the remitting bank is
either for acceptance or for payment, the inevitable consequence is that the appellee concerned the contract is executory
The question here is whether manager’s or cashier’s check, telegraphic transfers and bank never had any chance of accepting or rejecting them. Verily, appellee bank until the credit is established.
demand drafts be excluded as part of unclaimed balance or deposits to be escheated. never became a debtor of the payee concerned and as such the aforesaid drafts Our law requires that with regard to
cannot be considered as credits subject to escheat within the meaning of the law. drafts or bills of exchange there is
need that they be presented either
Manager's or cashier's checks are included: for acceptance or for payment
Cashier's or manager's check is a primary obligation of the bank which issues it and within a reasonable time after their
constitutes its written promise to pay upon demand.A cashier's check, being merely issuance or after their last
a bill of exchange drawn by a bank on itself, and accepted in advance by the act of negotiation thereof as the case may
issuance, is not subject to countermand by the payee after indorsement, and has the be. Failure to make such
same legal effects as a certificate deposit or a certified check. A demand draft is not presentment will discharge the
therefore of the same category as a cashier's check which should come within the drawer from liability or to the extent
Republic vs. PNB 3 SCRA 851 purview of the law. of the loss caused by the delay
Sec. 185. Check, defined. - A check is a bill of exchange drawn on a bank payable
on demand. Except as herein otherwise provided, the provisions of this Act
Go bought a cashier’s check from Associated Bank. He left without it however, so it
applicable to a bill of exchange payable on demand apply to a check.
was left to one of the bank employees, Albert Uy. Uy was entertaining a certain
Alexander Lim at the time, but Uy left to take a call. When he came back, Lim and the
The holder of a cashier’s check who is not a holder in due course cannot enforce
check were gone. The check found its way in the hands of Mesina who demanded
such check against the issuing bank which dishonors the same. If a payee of a
payment from Associated Bank. He claimed that it was indorsed to him by Lim, but he
cashier’s check obtained it from the issuing bank by fraud, or if there is some other
refused to say how and why check it was passed to him. The bank refused to pay
reason why the payee is not entitled to collect the check, the respondent bank would,
saying that the check belonged to Go. An interpleader case was filed to determine
of course, have the right to refuse payment of the check when presented by the
who had better right to the check.
payee, since respondent bank was aware of the facts surrounding I he loss of the
Mesina vs. IAC 145 SCRA 497 check in question.
Chiok had been engaged in dollar trading for several years. He usually buys dollars
from Nuguid. Chiok pays Nuguid either in cash or manager’s check, to be picked up by
the latter or deposited in latter’s bank account. Nuguid delivers the dollars either on
It cannot be said that manager’s and cashier’s checks are pre-cleared, clearing
the same day or on a later date as may be agreed upon between them. Upon Chiok’s
should not be confused with acceptance. Manager’s and cashier’s checks are still
instructions, Asian Bank issued 2 Manager’s checks and Metrobank, a Cashier’s
the subject of clearing to ensure that the same have not been materially altered or
check, both to Gonzalo Bernardo (same person as Nuguid). Chiok then deposited the
otherwise completely counterfeited. However, manager’s and cashier’s checks are
3 checks in Nuguid’s account with FEBTC (now BPI). Nuguid was supposed to deliver
pre-accepted by the mere issuance thereof by the bank, which is both its drawer and
the dollar equivalent of the 3 checks on the same day, which he however failed to do.
drawee. Thus, while manager’s and cashier’s checks are still subject to clearing, they
Thus, Chiok filed a Complaint for damages with an application for TRO/Preliminary
cannot be countermanded for being drawn against a closed account, for being drawn
injunction against Sps Nuguid, and the depositary banks (Asian Bank and Metrobank).
against insufficient funds, or for similar reasons such as a condition not appearing on
RTC issued a TRO refraining the depositary banks from honoring checks. Asian Bank
the face of the check. Long standing and accepted banking practicesdo not
thus refused to honor the MCs, and Metrobank, while it initially refused to honor the
countenance the countermanding of manager’s and cashier’s checks on the basis of
CC, had to do so when it became clear that nothing more can be done to retrieve the
a mere allegation of failure of the payee to comply with its obligations towards the
proceeds of the check. Metrobank claimed that since it is the issuer of the CC, the
purchaser. On the contrary, the accepted banking practice is that such checks are as
check is its primary obligation and should not be affected by any prior transaction
good as cash.
between the Chiok and Nuguid. FEBTC then filed a complaint against Asian Bank
claiming that as manager's checks, they were the direct obligations of Asian Bank and
Metropolitan Bank vs. Chiok 742 SCRA 435 were accepted in advance by Asian Bank by the mere issuance thereof.
BPI IS LIABLE TO PAY THE AMOUNT OF THE CASHIER’S CHECK. The disputed
check in this case is a cashier's check. A ​cashier's check is really the bank's own
check and may be treated as a promissory note with the bank as the maker.
Sps. Cawili issued a personal check to Roxas. But when Roxas tried to encash the
The check becomes the primary obligation of the bank which issues it and
check, it was dishonored by the drawee bank (BPI). Sps. Cawili told him that they
constitutes a written promise to pay upon demand.
would replace the bounced check with a cashier's check from BPI. So, Roxas and
Cawili went to BPI Shaw, where the branch manager personally attended to them. A
It is a well-known and accepted practice in the business sector that a cashier's
cashier’s check was then issued payable to Roxas from the account of Marissa
check is deemed as cash. This is because the mere issuance of a cashier's
Cawili, in the presence of the bank manager. Roxas went back to BPI to encash the
check is considered acceptance thereof.
check but it was dishonored. The bank manager informed him that Cawili’s
account was closed and they refused to encash the check.
BPI became liable to Roxas from the moment it issued the cashier's check​. Having
been accepted by Roxas, subject to no condition whatsoever, BPI should have paid
BPI vs. Roxas 535 SCRA 168 the same upon presentment by the former.

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 Metrobank should not be held liable for the entire amount of the checks since they
were actually given as payment by Go for loans he got from Chua's parents. But,
Metrobank was negligent since it allowed the deposit/encashment of the crossed
checks without the proper indorsement. An indorsement is necessary for the
proper negotiation of checks specially if the payee named therein or holder
thereof is not the one depositing or encashing it.

A check is a bill of exchange drawn on a bank payable on demand. A crossed check

is one where two parallel lines are drawn across its face or across the corner thereof.
It may be crossed generally or specially. A check is crossed specially when the
Go owned Hope Pharmacy. Crossed checks payable to Hope were deposited in the name of a particular banker or a company is written between the parallel lines
account of Chua (his employee). drawn. It is crossed generally when only the words "and company" are written
or nothing is written at all between the parallel lines, as in this case.

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 once — to one who has an account with a
bank; and
(c) the act of crossing the check serves as 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.
Go vs. Metrobank 628 SCRA 107
Benito Seeto called PNB Surigao Branch and presented a check in the amount of P5,
000 dated at Cebu on March 10, 1948, payable to cash or bearer, and drawn by one
Section 186 of the Negotiable Instruments Law expressly requires that a check must
Gan Yek Kiao against the Cebu branch of PBCom.
be presented for payment within a reasonable time after issue. Although it is a well-
settled principle that a check need not be presented for payment, it must be
Seeto made a general and unqualified indorsement of the check and PNB’s agency
presented within a reasonable time.
accepted it and paid Seeto the amount therefor.
The silence of Sec. 186 (presentment within a reasonable time) as to the indorser is
On March 20, 1948, the check was mailed to PNB’s Cebu branch.
due to the fact that his discharge is already expressly covered by the provisions of
On April 9, 1948, the check was presented to PBCom for payment. It was dishonored
Sec. 84 (discharge of a person secondarily liable), the indorser being secondarily
due to insufficient funds and was returned to PNB Surigao.
liable on the instrument.
On the same date, PNB sent a letter to Seeto demanding the refund of the check.
On April 26, 1948, a second communication of the same tenor was sent, to which
Setto asked the suit to be deferred while he was making inquiries about the reasons
Sec. 186 - Within what time a check must be presented. — A check must be
for the dishonor of the check.
presented for payment within a reasonable time after its issue or the drawer will be
discharged from liability thereon to the extent of the loss caused by the delay.
Seeto refused to make the refund alleging that at the time of negotiation, the drawer
had sufficient funds and that PNB delayed to forward the check until the drawer’s
PNB vs. Seeto 91 Phil. 756 funds were exhausted, the same would have not been paid.
For a check to be dishonored upon presentment on the one had, and to be stale for
not being presented at all in time, on the other, are incompatible developments that
naturally have variant legal consequences. Thus, if the check in question had been
Crystal is the redemptioner of 4 parcels of land sold in an execution under judgment.
dishonored, then the petitioner's redemption was null and void. On the other hand, if
He paid using a check. Plagia Ocang extrajudicially took the properties from Crystal
had only become stale, then it becomes imperative that the circumstances that
claiming that the redemption by Crystal is null and void because the check he issued
caused its non-presentment be determined, for it was not due to the fault of the
to pay the redemption price has been dishonored for insufficient funds.
petitioner, then it would be unfair to deprive him of the rights he had acquired as
redemptioner, particularly the value of the check has been received or realized by
Crystal vs. CA 71 SCRA 443 the party concerned.
Spouses Pacheco obtained a loan of Php 10,000 from Mrs. Vicencio because
Spouses Pacheco were experiencing financial difficulties due to delays in the payment
of their receivables for the construction projects with DPWH. Instead of merely
requiring a note of indebtedness, however, her husband Mr. Vicencio required
By current banking practice, a check becomes stale after more than six (6) months.
petitioners to issue an undated check as evidence of the loan which allegedly will not
In fact a check long overdue for more than two and one-half years is considered
be presented to the bank. Despite being informed by petitioners that their bank
stale. In this case, the checks were issued more than three years prior to their
account no longer had any funds, Mrs. Vicencio insisted that issue the check, which
presentment. In his complaint, complainant alleged that petitioners bought jewelry
according to her was only a formality. Thus, petitioner Virginia Pacheco issued an
from him and that he would not have parted with his jewelry had not petitioners
undated RCBC Check.
issued the checks. The evidence on record, however, does not support the theory of
the crime.
2 Informations for Estafa (against Sps. Pacheco) were filed, alleging that through fraud
and false pretenses and in payment of a diamond ring issued checks which when
presented for payment were dishonored due to account closed
Pacheco vs. CA 319 SCRA 595
A check must be presented for payment within a reasonable time after its issue, and
in determining what is a "reasonable time," regard is to be had to the nature of the
instrument, the usage of trade or business with respect to such instruments, and the
Gueco Spouses obtained a loan from International Corporate Bank to purchase a car. facts of the particular case. In the case at bar, however, the check involved is not an
In consideration thereof, the Spouses executed PNs which were payable in monthly ordinary bill of exchange but a manager's check. It is really the bank's own check
installments and chattel mortgage over the car to serve as security for the notes. and may be treated as a promissory note with the bank as a maker.
Spouses defaulted in payment of installments. Consequently, the Bank filed a civil
action. After some negotiations and computation, the amount was lowered to P154, The mere issuance of it is considered an acceptance thereof. If treated as
000.00, However, as a result of the non-payment of the reduced amount on that date, promissory note, the drawer would be the maker and in which case the holder need
the car was detained inside the bank's compound. More negotiations resulted in the not prove presentment for payment or present the bill to the drawee for acceptance.
further reduction of the outstanding loan to P150,000.00. Dr. Gueco delivered a
manager's check in amount of P150,000.00 but the car was not released because of Failure to present on time, thus, does not totally wipe out all liability. In fact, the
his refusal to sign the Joint Motion to Dismiss The issue in this case is whether the legal situation amounts to an acknowledgment of liability in the sum stated in the
manager's checks have gone stale. check. In this case, the Gueco spouses have not alleged, much less shown that they
or the bank which issued the manager's check has suffered
damage or loss caused by the delay or non-presentment. Definitely, the original
The International Corporate Bank vs. Spouses Gueco 315 SCRA 516 obligation to pay certainly has not been erased.
Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of calendars. He had
a history of unremitted collections, which he duly acknowledged in a confirmation
Section 186
receipt he co-signed with his wife for LPI. Hence, petitioner's consumers were required
to issue postdated checks before LPI would accept their purchase orders. Wong
issued 6 postdated checks drawn payable to the order of LPI. The checks were initially
intended to guarantee the calendar orders of customers who failed to issue postdated
checks. However, following company policy, LPI refused to accept the checks as
By current banking practice, a check becomes stale after more than six (6) months,
guarantees. Instead, the parties agreed to apply the checks to the payment of Wong’s
or 180 days. Limtong herein deposited the checks 157 days after the date of the
unremitted collections for 1984. Before maturity of the checks, Wong prevailed upon
check. Hence said checks cannot be considered stale. Only the presumption of
LPI not to deposit the checks and promised to replace them within 30 days. He failed
knowledge of insufficiency of funds was lost, but such knowledge could still be
to honor his words and upon deposit of LPI, the checks were returned for the reason
proven by direct or circumstantial evidence.
of "account closed." After being notified, petitioner still failed to make arrangement for
payments. He was charged with three counts of violation of B.P. Blg. 22 under three
separate informations

Wong avers that since the complainant deposited the checks 157 days after the
maturity date, the presumption of knowledge of lack of funds under Section 2 of B.P.
Wong vs. CA 351 SCRA 100 Blg. 22 should not apply to him.
That the check must be deposited
The fact that the checks were presented beyond the 90-day period provided in
within ninety (90) days is simply
Manuel Nagrampa purchased a porcelain excavator equipment from Fedcor Trading Section 2 of B.P. Blg. 22 is of no moment. The 90-day period is not an element of the
one of the conditions for the prima
Corporation. He paid 50K downpayment, then provided 2 postdated checks worth 75K offense but merely a condition for the prima facie presumption of knowledge of the
facie presumption of knowledge of
each to cover the balance. The checks were dishonored on the ground that the insufficiency of funds. Such prima facie presumption is intended to facilitate proof of
lack of funds to arise. It is not an
account was already closed for more than 4 years. 2 criminal cases were filed - estafa knowledge, and not to foreclose admissibility of other evidence that may also prove
element of the offense. Neither
and BP 22. In his defense he claimed that he is not guilty of estafa because no such knowledge; thus, the only consequence of the failure to present the check for
does it discharge petitioner from his
damage was caused to FEDCOR and the back hoe being unserviceable was returned payment within the 90-day period is that there arises no prima facie presumption of
duty to maintain sufficient funds in
to FEDCOR. He also argued that FEDCOR deposited the checks 5 months after their knowledge of insufficiency of funds. The prosecution may still prove such knowledge
the account within a reasonable
due date. That FEDCOR, as payee, had the duty or obligation to encash or deposit the through other evidence.
time thereof. Under Section 186 of
checks issued in its favor within ninety days from the date of issue, thus he was not
the Negotiable Instruments Law, "a
liable Since FEDCOR deposited the checks after this period, he cannot be faulted for
check must be presented for
their subsequent dishonor. In this case, FEDCOR presented the checks for encashment on 22 February 1990,
payment within a reasonable time
or within the six-month period from the date of issuance of the checks, and would not
after its issue or the drawer will be
The trial court found him guilty in both cases and was ordered to pay FEDCOR the therefore have been considered stale had petitioner’s account been existing.
discharged from liability thereon to
Court of Appeals affirmed the decision in toto. The question before the SC is whether Although the presumption of knowledge of insufficiency of funds did not arise, such
the extent of the loss caused by the
checks presented beyond the 90-day period provided in Sec. 2 of BP 22 relieves the knowledge was sufficiently proved by the unrebutted testimony of Mirano to the
delay." By current banking practice,
drawer of liability if the check is eventually dishonored. The SC said no. effect that petitioner’s account with the Security Bank was closed as early as May
a check becomes stale after more
1985, or more than four years prior to the issuance of the two checks in question .
Nagrampa vs. People 386 SCRA 412 than six (6) months, or 180 days.

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 John Dy is the distributor of WL Food Products in Naga. Dy would pay WL in either
cash or check upon pick up of stocks at the main branch. Although at times, he would
entrust the payment to his driver. In 2 instances, Dy’s driver went to WL foods to pick
SECTION 186. Within What Time A Check Must Be Presented — A check must be
up the stocks of snacks, and gave 2 postdated FEBTC checks as payment. In both
presented for payment within a reasonable time after its issue or the drawer will be
instances, the driver was issued an unsigned delivery receipt.
discharged from liability thereon to the extent of the loss caused by the delay.
When WL Foods presented the checks for payment, FEBTC dishonored the checks
*Uncollected deposits are not the same as insufficient funds. The prima facie
for insufficiency of funds. As such the manager of FEBTC-Naga notified the counsel of
presumption of deceit arises only when a check has been dishonored for lack or
WL Foods of the dishonor. Later on, another letter was sent advising the counsel that
insufficiency of funds. Notably, the law speaks of insufficiency of funds but not of
one of the checks was returned to the drawee bank for the reason of stop payment
uncollected deposits. Jurisprudence teaches that criminal laws are strictly construed
order and drawn against uncollected deposit (DAUD), and not because it was drawn
against the Government and liberally in favor of the accused
against insufficient funds as stated in the first letter

Dy vs. People of the Philippines and CA 571 SCRA 59 Lim charged Dy with 2 counts of BP 22 and estafa.
Payment is deemed effected and the obligation for which the check was given
Sometime in 1991,Evangelista obtained a loan from Screenex which issued 2 checks
as conditional payment is treated discharged, if a period of 10 years or more
to the former. As security for the payment, Evangelista gave 2 open-dated checks,
has elapsed from the date indicated on the check until the date of encashment
both pay to order of Screenex. From the time it was issued, they were held in
or presentment for payment. The failure to encash the checks within a
safekeeping together with the other documents and papers of the company by Philip
reasonable time after issue, or more than 10 years in this instance, not only
Gotuaco, Sr., father-in-law of respondent Alexander Yu, until the former’s death.
results in the checks becoming stale but also in the obligation to pay being
Before the checks were deposited, there was a personal demand from the family for
deemed fulfilled by operation of law. Similarly in this case, we find that the
Evangelista to settle the loan and a demand letter was sent by the family lawyer. In
delivery of the checks, despite the subsequent failure to encash them within a period
2005, Evangelista was charged with violation of BP 22. He was acquitted criminally
of 10 years or more, had the effect of payment. Petitioner is considered discharged
but was held civilly liable. He appealed the civil aspect. Evangelista argued that the
from his obligation to pay and can no longer be pronounced civilly liable for the
action is already barred by prescription pursuant to Art. 1144.
Evangelista vs. Screenex, Inc. 845 SCRA 131 amounts indicated thereon.
It is a well-known and accepted practice in the business sector that ​a Cashier's
Check is deemed as cash. Moreover, since the said check had been certified by
the drawee bank, by the certification, the funds represented by the check are
Petitioner is the defendant in a complaint for collection of a sum of money filed by the transferred from the credit of the maker to that of the payee or holder, and for all
private respondent. For failure of the petitioner to comply with his judgment intents and purposes, the latter becomes the depositor of the drawee bank, with
obligation, the respondent Judge issued an order for the issuance of a writ of rights and duties of one in such situation.
execution. And pursuant to such issuance, the ​Ex-Officio Sheriff levied upon the
personal properties of the petitioner. Prior to the auction sale, however, petitioner Where a check is certified by the bank on which it is drawn, the certification is
deposited with the clerk of court the total amount of the judgment debt, partly in a equivalent to acceptance. ​Said certification "implies that the check is drawn
Cashier's Check of Equitable Banking Corporation ​and partly in cash. But the ​Ex- upon sufficient funds in the hands of the drawee, that they have been set apart
Officio Sheriff refused to accept the check as well as the cash deposit. Thus, the for its satisfaction, and that they shall be so applied whenever the check is
auction sale pushed through and petitioner's properties were sold to the private presented for payment. It is an understanding that the check is good then, and
respondent as the highest bidder. Petitioner now questions the validity of the auction shall continue good, and this agreement is as binding on the bank as its notes in
sale, claiming that there was already a full satisfaction of the judgment before the circulation, a certificate of deposit payable to the order of the depositor, or any other
auction sale was conducted with the deposit made to the ​Ex-Officio Sheriff in the obligation it can assume.
amount of P63K (judgment debt) consisting of P50K in Cashier's Check and P13,130
in cash. Considering that the whole amount deposited by the petitioner consisting of
Cashier's Check and cash covers the judgment obligation, then, We see no valid
reason for the private respondent to have refused acceptance of the payment of the
New Pacific Timber vs. Seneris 101 SCRA 686 obligation in his favor. The auction sale, therefore, was uncalled for.
PNB can recover from MSC and payment of the check did not amount to acceptance
or certification. Checks can be presented for acceptance, in which case we have
certification equal to acceptance according to Sec 187 (where a check is certified by
the bank on which it is drawn, the certification is equivalent to an acceptance", and it
Checks issued by PTC (against PNB) were negotiated to MSC, who indorsed the is then that the warranty under section 62 exists.) BUT this is not an "acceptance"
same to Nat'l City Bank of NY. The checks were cleared and PNB credited the amiunt of the check in the true sense of that term.
to Nat'l Bank. PNB then discovered that the signatories on the check were forged so it
demanded reimbursement from MSC, which the latter refused. According to MSC, The most ordinary way a bank can accept is when it certifies a check.
payment of the checks in question made by the PNB constitutes an "acceptance", and,
consequently, the case should be governed by the provisions of Section 62 of the NIL. The word "acceptance" has a peculiar meaning in the NIL, and, in the instant case
there was payment but no acceptance, or what is equivalent to acceptance,
certification.
Section 187
PNB vs. Nat'l City Bank of NY 63 Phil. 711
Sarande deposited in her PCI bank account a certain check. Relying on the fact that it
had been cleared, she issued further 2 checks drawn against the proceeds of that first
A manager's check stands on the same footing as a certified check. The mere
check. One of these checks was given to Ong as payment for a business transaction.
issuance of it is considered an acceptance thereof.
Ong went to PCI to convert the check into a manager’s check. PCI obliged and issued
the same. Ong then deposited the manager’s check in her account at Equitable Bank.
The effect of certification is found in Section 187, Negotiable Instruments Law-
She then received a check return-slip informing her that PCI had stopped payment of
Where a check is certified by the bank on which it is drawn, the certification is
the check because it was drawn against an already closed account. Ong is suing to
equivalent to an acceptance.
recover the proceeds. PCI Bank refuses to surrender any because the account is
Equitable PCi Bank vs. Ong 502 SCRA 119 closed, and therefore resulting in a failure or want of consideration.
Manager’s check is drawn by a bank manager upon the bank itself. It stands on the
same footing as a certified check, which is deemed to have been accepted by the
bank that certified it. As the bank’s own check, a manager’s check becomes the
SBTC issued a manager's check for 8M, payable to CASH for a loan granted to
primary obligation of the bank and is accepted in advance by the act of its issuance.
Guidon Construction. On the same day, the check was deposited by Continental
Manufacturing Corporation in its current account with RCBC. RCBC honored the
RCBC did not err in relying on the accepted idea of the integrity and honor of checks,
check and allowed CMC to withdraw the proceeds. Guidon went to SBTC to stop
more particularly manager’s checks. More so in this case where the manager’s
payment of the 8M as it released the check to a third party by mistake. SBTC
check did not show any signs of being fraudulent or false. SBTC is liable. By drawing
dishonored and returned the manager's check to RCBC.
the manager's check, it admits the existence of the payee and his then capacity to
indorse, and engages that on due presentment, the instrument will be accepted or
SBTC vs. RCBC 577 SCRA 407 paid, or both, according to its tenor.
We may say in passing that the contention of Panlilio that the letters "O. K.," with the
initials of the cashier of the bank written on the face of his check was a sufficient
David filed an application in the Bureau of Lands for a lease of tract of land, the certification is without merit; certifications of checks are not made in that manner in
property of Government.David submitted a bid for a rent of P720 per annum. P360 of modern banking practice.
which was an uncertified check, drawnagainst PNB. Panlilio offered P2,600 per
annum. P1,300 of which was a check also drawn against PNB, bearing on its face When David's bid was accepted and the amount of the bid was paid and covered
the letters “O.K. – S.M.” Panlilio argues that the bid of David was not valid since into the Insular Treasury, the Government could hardly be heard to say that the
David’s check was not certified or accepted by the bank against whom it was award was invalid because the amount paid was originally represented in part by an
drawn, as required by Admin Order No. 3. uncertified check. The Court held that though the original bid of David was not made
in the manner and form prescribed by the regulations, the acceptance of it together
with the payment of its amount cured the defect complained of and that,
Panlilio vs. David 50 Phil. 105 consequently, the award to David was valid. (Defect was cured)
Facts of a separate case: Sps. Bakunawa were the registered owners of parcels of
land that were sequestered by the PCCG. Millan offered to but the lots. Sps.
Bakunawa gave her the owner's copies of the TCTs. Eventually, the contract of sale
was rescinded. Sps. Bakunawa offered to return to Millan her downpayment but Millian
refused. Sps. Bakunawa through their company Hi-Tri took out a manager's check RCBC acknowledges that the Manager's Check was procured by Hi-Tri, and that the
from RCBC payable to Millan's company, Rosmil. Sps. Bakunawa retained in their amount to be paid for the check would be sourced from the deposit account of Hi-Tri.
custody the check. All throughout the proceedings, Millan was informed that the checkWhen Rosmil did not accept the Manager's Check offered by respondents, the latter
was available for her withdrawal. retained custody of the instrument instead of cancelling it. As the Manager's Check
neither went to the hands of Rosmil nor was it further negotiated to other persons,
Present case; RCBC declared the amount of the manager’s check as part of their the instrument remained undelivered. As a result, the assigned fund is deemed to
unclaimed balances. Escheat proceedings were filed by the state and the said amount remain part of the account of Hi-Tri, which procured the Manager's Check. The
was included. When Hi-Tri (Sps. Bakunawa) and Rosmil settled their dispute and Hi- doctrine that the deposit represented by a manager's check automatically passes to
Tri the payee is inapplicable, because the instrument — although accepted in advance
asked about the availability of the check, RCBC informed them that they were already — remains undelivered.
subject of the escheat proceedings. Hi-Tri assailed this since there was no order to
debit from their account the amount yet. The RTC ruled in favor of the State for the
escheat proceedings but the CA reversed the decision.
RCBC vs. Hi-Tri Development Corp. 672 SCRA 514
A cashier's check is a primary obligation of the issuing bank and accepted in
advance by its mere issuance. By its very nature, a cashier's check is the bank's
Ramon Tan is a businessman. To avoid carrying cash, he availed of manager’s check
order to pay drawn upon itself, committing in effect its total resources, integrity and
in PCIB Puerto Princesa amounting Php. 30,000. He deposited it at RCBC Binondo
honor behind the check. A cashier's check by its peculiar character and general use
branch. RCBC erroneously sent the same cashier's check for clearing to the Central
in the commercial world is regarded substantially to be as good as the money which
Bank which was returned for having been "missent" or "misrouted." RCBC then
it represents. PCIB by issuing the check created an unconditional credit in favor of
debited the amount which resulted to the dishonor of the checks issued by the
any collecting bank. the RCBC teller should not have accepted the local deposit slip
petitioner. Tan filed a complaint for damages against RCBC. RCBC argued that the
with the cashier's check that on its face was clearly a regional check without calling
misrouting of the check was due to the fault of Tan for using the wrong deposit slip.
the depositor's attention to the mistake at the very moment this was presented to
RTC granted Php. 700,000 as moral damages. CA reversed the RTC ruling
her. Neither should everyone else down the line who processed the same check for
Section 189
Tan vs. CA 239 SCRA 310 clearing have allowed the check to be sent to Central Bank

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 Section 189
Marilyn Nite allegedly obtained a loan from Sincere Villanueva worth P409,000. Nite
issued an Asian Banking Corporation (ABC) check worth P325,000 dated Feb 8, 1994 SEC. 185. Check, defined. — A
If a bank refuses to pay a check (notwithstanding the insufficiency of funds), the
which was later changed to June 8, 1994 with the consent of Villanueva. The check check is a bill of exchange drawn
payee-holder cannot, in view of the cited sections, sue the bank.
was, however, dishonored by ABC due to a material alteration when Villanueva on a bank payable on demand.
The payee should instead sue the drawer who might in turn sue the bank. Section
deposited the check on due date. On Aug. 24, 1994, Nite, while abroad and through Except as herein otherwise
189 is sound law based on logic and established legal principles: no privity of
her representative Emily Abojada, remitted P235,000 to petitioner as partial payment provided, the provisions of this Act
contract exists between the drawee-bank and the payee. Indeed, in this case, there
of the loan.The balance of P174,000 was due on or before Dec. 8, 1994. On Aug. 24, applicable to a bill of exchange
was no such privity of contract between ABC and petitioner. Petitioner should not
1994, however, petitioner filed an action for a sum of money and damages against payable on demand apply to a
have sued ABC.
ABC for the full amount of the dishonored check. The RTC ruled in Villanueva's favor. check.
When respondent Nite went to ABC Salcedo Village Branch on June 30, 1997 to
Indeed, in this case, there was no such privity of contract between ABC and
withdraw money from her account, she was unable to do so because the RTC ordered SEC. 189. When check operates
petitioner. Petitioner should not have sued ABC. f an indispensable party is not
ABC to pay Villanueva the value of Nite’s ABC check. as an assignment . — A check of
impleaded, any judgment is ineffective. As such, they must be joined either as
itself does not operate as an
plaintiffs or as defendants. The general rule with reference to the making of parties in
Nite filed a petition with the CA seeking to annul and set aside the RTC's decision. The assignment of any part of the funds
a civil action requires, of course, the joinder of all necessary parties where possible,
CA granted the petition and ordered Villanueva to pay Nite. The question before the to the credit of the drawer with the
and the joinder of all indispensable parties under any and all conditions, their
SC is whether Villanueva may sue the bank responsible for the dishonor of the check. bank, and the bank is not liable to
presence being sine qua non for the exercise of judicial power.
The SC said that Nite cannot. There was no privity of contract between ABC and the holder, unless and until it
Villanueva vs. Nite 496 SCRA 459 Villanueva. accepts or certifies the check.
In the absence of fraud, the purchase of a cashier's check, like the purchase of a
Leticia Miranda was a depositor of Prime Savings Bank. On June 3, 1999, she
draft on a correspondent bank, creates the relation of creditor and debtor, not that of
withdrew substantial amounts from her account, but instead of cash she opted to be
principal and agent, with the result that the purchaser or holder thereof is not entitled
issued a crossed cashier's check. She was thus issued cashier's check no. 518 in the
to a preference over general creditors in the assets of the bank issuing the check,
sum of P2,500,000.00 and cashier's check no. 514 in the amount of P3,002,000.00.
when it fails before payment of the check. However, in a situation involving the
element of fraud, where a cashier's check is purchased from a bank at a time when it
Petitioner deposited the two checks into her account in another bank on the same day,
is insolvent as its officers know or are bound to know by the exercise of reasonable
however, BSP suspended the clearing privileges of Prime Savings Bank effective 2:00
diligence, it has been held that the purchase is entitled to a preference in the assets
p.m. of June 3, 1999. The two checks of petitioner were returned to her unpaid.
Miranda vs. PDIC, BSP and Prime 501 SCRA 288 of the bank on its liquidation before the check is paid.

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