Negotiable Instrument Law case digest

7/22/2019 Negotiable Instrument Law case digest

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TITLE FACTS ISSUE HELD

STATE INVESTMENTHOUSE, INC., petitioner,vs.COURT OF APPEALS andNORA B.MOULIC, respondents.

Private respondent Nora B. Moulic issued to CorazonVictoriano, as security for pieces of jewelry to be sold oncommission, two (2) post-dated Equitable BankingCorporation checks in the amount of Fifty Thousand Pesos(P50,000.00) each, one dated 30 August 1979 and the other,30 September 1979. Thereafter, the payee negotiated thechecks to petitioner State Investment House. Inc. (STATE).

MOULIC failed to sell the pieces of jewelry, so she returnedthem to the payee before maturity of the checks. Thechecks, however, could no longer be retrieved as they hadalready been negotiated. Consequently, before theirmaturity dates, MOULIC withdrew her funds from the draweebank.

Upon presentment for payment, the checks were dishonoredfor insufficiency of funds. Petitioner sued respondent for itsnon payment of the checks she issued. Respondent aversthat she should not be liable for she issued the checksmerely as security for the pieces of jewelry, and it was notintended to be negotiated.

Whether or notrespondent isliable on thechecks issuedmerely assecurity to a

holder in duecourse.

Yes. The respondent is liable. The issued checnegotiable instruments.

Culled from the foregoing, a prima facie presuexists that the holder of a negotiable instrument is a hdue course. Consequently, the burden of proving that Snot a holder in due course lies in the person who dispupresumption. In this regard, MOULIC failed.

The evidence clearly shows that: (a) on their fa

post-dated checks were complete and regular: (b) pebought these checks from the payee, Corazon Vicbefore their due dates; (c) petitioner took these checks faith and for value, albeit at a discounted price; apetitioner was never informed nor made aware thachecks were merely issued to payee as security and value.

Consequently, STATE is indeed a holder in due cousuch, it holds the instruments free from any defect ofprior parties, and from defenses available to prior among themselves; STATE may, therefore, enforpayment of the checks.

MOULIC cannot set up against STATE the defenthere was failure or absence of consideration. MOULIC cinvoke this defense against STATE if it was privy purpose for which they were issued and therefore isholder in due course.

In addition, the Negotiable Instruments Laenacted for the purpose of facilitating, not hindehampering transactions in commercial paper. Thsaid statute should not be tampered with haphaor lightly. Nor should it be brushed aside in ormeet the necessities in a single case.

The drawing and negotiation of a check have effects aside from the transfer of title or the inculiability in regard to the instrument by the transferholder who takes the negotiated paper makes a contrathe parties on the face of the instrument. There is an representation that funds or credit are available payment of the instrument in the bank upon whicdrawn. Consequently, the withdrawal of the money frdrawee bank to avoid liability on the checks cannot prthe rights of holders in due course. In the instant caswithdrawal renders the drawer, Nora B. Moulic, li able to

PARTIES

Petitioners

A- STATE INVESTMENTHOUSE, INC

Respondents

B-

NORA B. MOULIC

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a holder in due course of the checks.


G.R. No. L-56169 June26, 1992

TRAVEL-ON,

INC., petitioner,

vs.

COURT OF APPEALS and

ARTURO S.

Petitioner Travel-On. Inc. ("Travel-On") is a travel agencyselling airline tickets on commission basis for and in behalfof different airline companies. Private respondent Arturo S.Miranda had a revolving credit line with petitioner. Heprocured tickets from petitioner on behalf of airlinepassengers and derived commissions therefrom. Petitionersold and delivered various airline tickets to respondent at atotal price of P278,201.57; that to settle said account,private respondent paid various amounts in cash and in kind,and thereafter issued six postdated checks amounting to

Whether or not

respondent is

liable to a

holder for value

in issuing a

postdated

checks although

YES. Respondent is liable. The Court finds that theare the all important evidence of petitioner's case; thachecks clearly established private respondent's indebtto petitioner; that private respondent was liable thereun

It is important to stress that a check whregular on its face is deemed prima facie to havissued for a valuable consideration and every pwhose signature appears thereon is deemed tobecome a party thereto for value. Thus, the

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MIRANDA, respondents P115,000.00 which were all dishonored by the draweebanks.

Travel-On filed suit before the Court of First Instance ofManila to collect on six checks issued by private respondent.

Travel-On further alleged that in March 1972, privaterespondent made another payment of P10,000.00 reducinghis indebtedness to P105,000.00. The writ of attachmentwas granted by the court a quo.

In his answer, private respondent admitted having hadtransactions with Travel-On during the period stipulated inthe complaint. Private respondent, however, claimed that hehad already fully paid and even overpaid his obligations andthat refunds were in fact due to him. He argued that he hadissued the postdated checks for purposes ofaccommodation , as he had in the past accorded similarfavors to petitioner. During the proceedings, privaterespondent contested several tickets alleged to have beenerroneously debited to his account. He claimedreimbursement of his alleged over payments, plus litigationexpenses, and exemplary and moral damages by reason ofthe allegedly improper attachment of his properties.

it is merely for

accommodation

.

introduction of the instrument sued oevidence prima facie entitles the plaintiff to recFurther, the rule is quite settled that a neginstrument is presumed to have been given or infor a sufficient consideration unless othcontradicted and overcome by other comevidence.

The fact that all the checks issued by private responpetitioner were presented for payment by the latter wouto no other conclusion than that these checks were intfor encashment. There is nothing in the checks them(or in any other document for that matter) thatotherwise.

We are unable to accept the Court of Appeals' conthat the checks here involved were issue"accommodation" and that accordingly private respmaker of those checks was not liable thereon to pepayee of those checks. In the first place, while the NegInstruments Law does refer to accommodation transactsuch transaction was here shown.

In the case at bar, Travel-On was payee of all six it presented these checks for payment at the drawee bthe checks bounced. Travel-On obviously was n

accommodated party; it realized no value on the checkbounced.

Thus, we believe and so hold that prespondent must be held liable on the six checkinvolved. Those checks in themselves consevidence of indebtedness of private respoevidence not successfully overturned or rebuttprivate respondent.

PARTIES

Petitioners

A- TRAVEL-ON, INC

Respondents

B-

ARTURO S. MIRANDA


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G.R. No. L-15380September 30, 1960

CHAN WAN, plaintiff-appellant,vs.TAN KIM and CHENSO, defendants-appellees.

Petitioner presented for payment to the drawee bankeleven checks payable to "cash or bearer" which were drawnby defendant Tan Kim upon the Equitable BankingCorporation; but they "were all dishonored and returned tohim unpaid due to insufficient funds and/or causesattributable to the drawer."

At the hearing of the case, in the Manila court of firstinstance, the plaintiff did not take the witness stand. His

attorney, however, testified only to identify the checks plusthe letters of demand upon defendants.

On the other hand, Tan Kim declared withoutcontradiction that the checks had been issued to twopersons named Pinong and Muy for some shoes the formerhad promised to make and "were intended as merereceipts".

In view of such circumstances, the court declined toorder payment for two principal reasons: (a) plaintiff failedto prove he was a holder in due course, and (b) the checksbeing crossed checks should not have been depositedinstead with the bank mentioned in the crossing.

Eight of the checks here in question bear across their

face two parallel transverse lines between which thesewords are written: non-negotiable China BankingCorporation. These checks have, therefore, been crossedspecially to the China Banking Corporation, and should havebeen presented for payment by China Banking, and not byChan Wan.

Nevertheless, on the backs of the checks, endorsementswhich apparently show they had been deposited with theChina Banking Corporation and were, by the latter,presented to the drawee bank for collection. And then as thedrawee has no fund, it was dishonored. Consequently, ChanWan got hold of this dishonored check. Thus, apparently, hewas not a holder in due course.

Whether or notthe petitionerhas a right tocollect on theelevencommercialdocumentsconsidering he

is not a holderin due course.

YES. It does not follow as a legal propothat simply because he was not a holder icourse Chan Wan could not recover on the cThe Negotiable Instruments Law does not prthat a holder who is not a holder in due comay not in any case, recover on the instrume

If B purchases an overdue negopromissory note signed by A, he is not a hol

due course; but he may recover from A, if thehas no valid excuse for refusing paymentonly disadvantage of holder who is nholder in due course is that the negotinstrument is subject to defense as if it non- negotiable.

Tan Kim admitted on cross-examieither that the checks had been issued as eviof debts to Pinong and Muy, and/or that thebeen issued in payment of shoes which Pinonpromised to make for her.

Needless to say, if it were true thachecks had been issued in payment for sthat were never made and delivered, Tanwould have a good defense as againholder who is not a holder in due course.

PARTIES

Petitioners

A- CHAN WAN

Respondents

B- TAN KIM

C- CHEN SO

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LEODEGARIOBAYANI,petitioner,

vs. PEOPLE OF THEPHILIPPINES, resp

ondent.

Alicia Rubia went to the grocery store ofDoloresEvangelista in Candelaria, Quezon, and asked the latter torediscount Philippine Savings Bank(PSBank) Check in theamount of P55,000.00. The check was drawn byLeodegario Bayani against his account with the PSBankand postdated August 29, 1992. Rubia told Evangelistathat Bayani asked her to rediscount the check for himbecause he needed the money. Evangelista agreed to

rediscount the check. After Rubia endorsed the check,Evangelista gave her the amount ofP55,000.00.

However, when Evangelista deposited the check in heraccount with the Far East Bank & Trust Companyon September 11, 1992, it was dishonored by the draweebank for the reason that on September 1, 1992, Bayaniclosed his account with the PSBank. The reason for thedishonor of the check was stamped at its dorsal portion. AsofAugust 27, 1992, the balance of Bayanis account with thebank was P2,414.96.

Evangelista then informed Rubia of the dishonor of thecheck and demanded the return of her P55,000.00. Rubiareplied that she was only requested by Bayani to have thecheck rediscounted and advised Evangelista to seehim. When Evangelista talked to Bayani, she was told thatRubia borrowed the check from him.

Thereafter, Evangelista, Rubia, Bayani and his wife,

Aniceta, had a conference in the office of Atty. EmmanuelVelasco, Evangelistas lawyer. Later, in the Office of theBarangay Captain Nestor Baera, Evangelista showed Bayania photocopy of the dishonored check and demandedpayment thereof. Bayani and Aniceta, on one hand, andRubia, on the other, pointed to each other and deniedliability thereon. Aniceta told Rubia that she should be theone to pay since the P55,000.00 was with her, but the latterinsisted that the said amount was in payment of the piecesof jewelry Aniceta purchased from her. Upon Atty. Velascosprodding, Evangelista suggested Bayani and Rubio topay P25,000.00 each. Still, Bayani and Rubia pointed to theother as the one solely liable for the amount of thecheck. Rubia reminded Aniceta that she was given the checkas payment of the pieces of jewelry Aniceta bought from her.

Whether or notpetitioner isliable forissuing thechecks althoughit was not

issued forvaluableconsideration,as it wasallegedlyborrowed fromhim.

Yes. Petitioner is liable. Petitioner cannot udefense want of valuable consideration agaperson who is a holder in due course.

SECTION 28. Effect of want of consideraAbsence or failure of consideration is a madefense as against any person not a holder i

course; and partial failure of considerationdefensepro tanto, whether the failure is an ascerand liquidated amount or otherwise.

Evangelista is a holder of the check icourse.The evidence on record shows that Evanrediscounted the check and gave P55,000.00 toafter the latter endorsed the same. Under Sectionthe Negotiable Instruments Law (NIL), absence or of consideration is a matter of defense only as aany person not a holder in due course.

Moreover, Section 24 of the NIL providpresumption of consideration.

SECTION 24. Presumption of consideration.negotiable instrument is deemedprima facie tobeen issued for a valuable consideration; andperson whose signature appears thereon tobecome a party thereto for value.

Such presumption cannot be overcome

petitioners bare denial of receipt of the aof P55,000.00 from Rubia. Indubitably, it followthere was a presumption of consideration bepetitioner and Rubia for issuing the check.

PARTIES

Petitioners

A- LEODEGARIO BAYANI

Respondents

B- PEOPLE OF THEPHILIPPINES

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G.R. No. 105836 March7, 1994SPOUSES GEORGEMORAN and LIBRADA P.MORAN, petitioners,vs.

THE HON. COURT OFAPPEALS and CITYTRUSTBANKINGCORPORATION, respondents.

Petitioner spouses George and Librada Moran are theowners of the Wack-Wack Petron gasoline station. Theyregularly purchased bulk fuel and other related productsfrom Petrophil Corporation on cash on delivery (COD)basis. Orders for bulk fuel and other related products weremade by telephone and payments were effected bypersonal checks upon delivery.

Petitioners maintained three joint accounts, namely

one current account and two savings accounts wi th CitytrustBanking Corporation.The two savings account was coveredby a pre-authorized transfer (PAT) agreement. It is intendedfor automatic transfer of funds from the savings accountwhenever the current account is not sufficient to paywithdrawals.

On December 12, 1983, petitioners, through Librada

Whether or notthe respondentbank is liablefor dishonoringthe checksdrawn by the

Petitioners infavor of Petrophil inrelation to thePAT agreement.

No. Respondent Bank is not liable. Petitionno reason to complain, for they alone were at fdrawer must remember his responsibilities every tissues a check. He must personally keep track of his abalance in the bank and not rely on the bank to notifythe necessity to fund certain check she previously isscheck, as distinguished from an ordinary bill of exchasupposed to be drawn against aprevious dep

funds for it is ordinarily intended for immepayment.

The bank could not be faulted for not accepting ethe two checks. The first check issued was in the amP50,576.00, while the second one was for P56,090.00. Account No. 1307001372 then had a balance oP26,104.30. This being the case, Citytrust could PARTIES

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Moran, drew a check for P50,576.00 payable to PetrophilCorporation. The next day, December 13, 1983,petitioners, again through Librada Moran, issued anothercheck in the amount of P56,090.00 in favor of the samecorporation. The total sum of the two checks wasP106,666.00.

On December 14, 1983, Petrophil Corporationdeposited the two aforementioned checks to its account withthe Pandacan branch of the Philippine National Bank (PNB),the collecting bank. In turn, PNB, Pandacan branchpresented them for clearing with the Philippine ClearingHouse Corporation in the afternoon of the same day. Therecords show that on December 14, 1983, Current Accounthad a zero balance, while Savings Account No.1037001372 (covered by the PAT) had an available balanceofP26,104.30 and Savings Account No. 1037002387 had anavailable balance of P43,268.39.

It was clear that the savings accounts were notsufficient to cover the two checks earlier issued. It was onlyon Dec. 15 that the Morans deposited money in the banksufficient to pay the two checks. Thus, petrophil refused todeliver fuel on credit basisbecause the two checks they hadpreviously issued were dishonored upon presentment forpayment.

expected to accept for payment either one of the two nor partially honor one check.

A bank is under no obligation to makpayment on a check, up to only the amount drawer's funds, where the check is drawn amount larger than what the drawer has on dSuch a practice of paying checks in part hasexisted.

On the above premises which irresistibly cothemselves to our acceptance, we find no cogesufficient to award actual, moral, or exemplary dampetitioners. Although we take judicial notice of the fathere is a fiduciary relationship between a bank depositors, as well as the extent of diligence expectedhandling the accounts entrusted to its care, the bannot be held responsible for such damages absence of fraud, bad faith, malice, or wanton att

Petitioners

A- SPOUSES GEORGEMORAN and LIBRADA P.MORAN

Respondents

B- CITYTRUST BANKINGCORPORATION


EUMELIA R. MITRA,- versus -PEOPLE OFTHE PHILIPPINES andFELICISIMO S. TARCELO,

Petitioner Eumelia R. Mitra(Mitra) wasthe Treasurer, and Florencio L. Cabrera, Jr.(now deceased) was the President, of Lucky NineCredit Corporation(LNCC), a corporation engagedin money lending activities.

Between 1996 and 1999, privaterespondent invested money in LNCC. As theusual practice in money placement transactions,

Tarcelo issued checks equivalent to the amounts

Whether or notpetitioner isliable to privaterespondent forissuing thechecks.

Yes. Petitioner is liable.A check is a negotiable instrument that s

as a substitute for money and as a convenienof payment in financial transactions obligations. The use of checks as payment commercial and banking transactions to prwithout the actual handling of money, thus, away with the need to physically count billcoins whenever payment is made. It pcommercial and banking transactions to be cPARTIES

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he invested plus the interest on his investments.The following checks, signed by Mitra andCabrera, were issued by LNCC to Tarcelo.

When Tarcelo presented these checks forpayment, they were dishonored for the reasonaccount closed. Tarcelo made several oraldemands on LNCC for the payment of thesechecks but he was frustrated. Constrained, in

2002, he caused the filing of seven informationsfor violation of Batas Pambansa Blg. 22 (BP 22) inthe total amount of P925,000.00 with the MTCCin Batangas City.

out quickly and efficiently. But the conveafforded by checks is damaged by unfchecks that adversely affect confidence icommercial and banking activities, and ultiminjure public interest.

Petitioners

A- EUMELIA R. MITRA

Respondents

B- FELICISIMO S.TARCELO


[G.R. No.141968. February 12,2001]

THE INTERNATIONALCORPORATE BANK (nowUNION BANK OF THEPHILIPPINES),petitioner,vs. SPS. FRANCIS S. GUECOand MA. LUZ E.GUECO, respondents.

The respondents Gueco Spouses obtained a loan frompetitioner International Corporate Bank (now UnionBank of the Philippines) to purchase a car a Nissan Sentra1600 4DR, 1989 Model. In consideration thereof, theSpouses executed promissory notes which were payable inmonthly installments and chattel mortgage over the car toserve as security for the notes.

The Spouses defaulted in payment ofinstallments. Consequently, the Bank filed the case Sum ofMoney with Prayer for a Writ of Replevin before the

Whether or notthere was avalid tender ofpayment in thedelivery of themanagerscheck to thepetitioner,although thelatter did not

No. There was no valid tender of payment. Thuobligation to pay has not been extinguished.

The original obligation to pay certainly has noerased. It has been held that, if the check had become becomes imperative that the circumstances that caunon-presentment be determined. In the case at baris no doubt that the petitioner bank held on theand refused to encash the same because ocontroversy surrounding the signing of the joint to dismiss. We see no bad faith or negligence in this taken by the Bank.

A stale checkis one which has not been presen

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Metropolitan Trial Court. As a result of the non-payment ofthe reduced amount, the car was detained inside the bankscompound.

On August 29, 1995, Dr. Gueco delivered amanagers checkin the amount of P150,000.00 but the carwas not released because of his refusal to sign the JointMotion to Dismiss.

After several demand letters and meetings with bank

representatives, the respondents Gueco spouses initiated a

civil action for damages before the Metropolitan Trial Court

of Quezon City. The Metropolitan Trial Court dismissed the

complaint for lack of merit. On appeal to the Regional Trial

Court, the decision of the Metropolitan Trial Court was

reversed. In its decision, the RTC held that there was a

meeting of the minds between the parties as to the

reduction of the amount of indebtedness and the release of

the car but said agreement did not include the signing of the

joint motion to dismiss as a condition sine qua non for the

effectivity of the compromise.

Respondents would make us hold that petitioner

should return the car or its value and that the latter,

because of its own negligence, should suffer the loss

occasioned by the fact that the check had become stale. It is

their position that delivery of the managers check produced

the effect of payment and, thus, petitioner was negligent in

opting not to deposit or use said check.

sign the jointmotion todismiss.

payment within a reasonable time after its issuvalueless and, therefore, should not be paid. A chebe presented for payment within a reasonable time aissue, and in determining what is a reasonable time,is to be had to the nature of the instrument, the usage oor business with respect to such instruments, and the the particular case. The test is whether the employed such diligence as a prudent man exerchis own affairs. This is because the nature and behind the use of a check points to its immedia

and payability.In the case at bar, however, the check involve

an ordinary bill of exchange but a managers cmanagers check is one drawn by the banks managthe bank itself. It is similar to a cashiers check boteffect and use. A cashiers check is a check of thecashier on his own or another check. In effect, it is aexchange drawn by the cashier of a bank upon thitself, and accepted in advance by the act issuance. It is really the banks own check and mtreated as apromissory note with the bank as a

The check becomes the primary obligation of the banissues it and constitutes its written promise to paydemand. The mere issuance of it is consideracceptance thereof. If treated as promissory nodrawer would be the maker and in which case the holdnot prove presentment for payment or present the bildrawee for acceptance.

Thus, even assuming that presentment is nfailure to present for payment within a reasonable ti

result to the discharge of the drawer ONLYTOTHEEXTTHE LOSS CAUSED BYTHE DELAY. Failure to prestime, thus, does not totally wipe out all liabifact, the legal situation amounts to an acknowledof liability in the sum stated in the check. In ththe Gueco spouses have not alleged, much less shothey or the bank which issued the managers chesuffered damage or loss caused by the delay opresentment. Definitely, the original obligation tcertainly has not been erased.

PARTIES

Petitioners

A-UNION BANK OF THEPHILIPPINES

Respondents

B-SPS. FRANCIS S. GUECOand MA. LUZ E. GUECO


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G.R. No. 85419 March 9, 1993DEVELOPMENT BANK OFRIZAL, plaintiff-petitioner,vs.SIMA WEI and/or LEE KIANHUAT, MARY CHENG UY,SAMSON TUNG, ASIANINDUSTRIAL PLASTICCORPORATION andPRODUCERS BANK OF THE

PHILIPPINES, defendants-respondents.

In consideration for a loan extended bypetitioner Bank to respondent Sima Wei, thelatter executed and delivered to the former apromissory note, engaging to pay the petitionerBank or order the amount of P1,820,000.00 on orbefore June 24, 1983 with interest at 32% perannum.

Sima Wei made partial payments on the

note, leaving a balance of P1,032,450.02. OnNovember 18, 1983, Sima Wei issued twocrossed checks payable to petitioner Bankdrawn against China Banking Corporation, for

Whether or not

petitioner Bankhas a cause ofaction againstany or all of thedefendants, inthe alternativeor otherwise.

Petitioner bank has a cause of action only arespondent Sima Wei. The normal parties to a check are the drawer, theand the drawee bank. Courts have long recognizbusiness custom of using printed checks where blaprovided for the date of issuance, the name of the payamount payable and the drawer's signature. All the drato do when he wishes to issue a check is to properly fillblanks and sign it. However, the mere fact that he hathese does not give rise to any liability on his part, un

unless the check is delivered to the payee representative .

A negotiable instrument, of which a check is, is na written evidence of a contract right but is also a spePARTIES

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the amount of P550,000.00 and for the amount ofP500,000.00.

The said checks were allegedly issued infull settlement of the drawer's account evidencedby the promissory note. These two checks werenot delivered to the petitioner-payee or to anyof its authorized representatives.

For reasons not shown, these checks came

into the possession of respondent Lee KianHuat, who deposited the checks without thepetitioner-payee's indorsement (forged orotherwise) to the account of respondent PlasticCorporation, to the Producers Bank. ChengUy, Branch Manager of Producers Bank, relyingon the assurance of respondent Samson Tung,President of Plastic Corporation, that thetransaction was legal and regular, instructed thecashier of Producers Bank to accept the checksfor deposit and to credit them to the account ofsaid Plastic Corporation, inspite of the factthat the checks were crossed and payableto petitioner Bankand bore no indorsement of

the latter. Hence, petitioner filed the complaint asaforestated.

property. Just as a deed to a piece of land must be delivorder to convey title to the grantee, so must a neinstrument be delivered to the payee in order to evideexistence as a binding contract. Section 16 oNegotiable Instruments Law, which governs cprovides in part: Every contract on a negotiable instis incomplete and revocable until delivery of the instrumthe purpose of giving effect thereto.

Thus, the payee of a negotiable instrument acquinterest with respect thereto until its delivery to him. 3D

of an instrument means transfer of possession, acconstructive, from one person to another. 4Without thdelivery of the instrument from the drawer to the payecan be no liability on the instrument. Moreover, such dmust be intended to give effect to the instrument.

Notwithstanding the above, it does not necefollow that the drawer Sima Wei is freed from liabpetitioner Bank under the loan evidenced by the pronote agreed to by her. Her allegation that she has pbalance of her loan with the two checks payable to peBank has no merit for, as We have earlier explainedchecks were never delivered to petitioner Bank. Angranting, without admitting, that there was delivpetitioner Bank, the delivery of checks in paymentobligation does not constitute payment unless they are or their value is impaired through the fault creditor. None of these exceptions were alleged by resp

Sima Wei.Therefore, unless respondent Sima Wei proves t

has been relieved from liability on the promissory nsome other cause, petitioner Bank has a right of action her for the balance due thereon.

Petitioners

A-DEVELOPMENT BANK OFRIZAL

Respondents

B-SIMA WEI

C- LEE KIAN HUAT, MARYCHENG UY, SAMSON TUNG

D- ASIAN INDUSTRIAL PLASTICCORPORATION

D- PRODUCERS BANK OF THEPHILIPPINES


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G.R. No.117857 February 2,2001LUIS S. WONG, petitioner,vs.COURT OF APPEALS andPEOPLE OF THEPHILIPPINES, respondents.

Petitioner Wong was an agent of LimtongPress. Inc. (LPI), a manufacturer of calendars. LPIwould print sample calendars, then give them toagents to present to customers. The agents would getthe purchase orders of customers and forward themto LPI. After printing the calendars, LPI would ship thecalendars directly to the customers. Thereafter, theagents would come around to collect the payments. Petitioner , however, had a history of

unremitted collections, which he duly acknowledgedin a confirmation receipt he co-signed with hiswife. Hence, petitioners customers were required toissue postdated checks before LPI would accepttheir purchase orders.

In early December 1985, Wong issued six (6)postdated checks totaling P18,025.00, all datedDecember 30, 1985 and drawn payable to the orderof LPI. These checks were initially intended toguarantee the calendar orders of customers whofailed to issue post-dated checks. However, followingcompany policy, LPI refused to accept the checks asguarantees. Instead, the parties agreed to apply thechecks to the payment of petitioners unremittedcollections for 1984 amounting to P18,077.07.3 LPI

waived the P52.07 difference.Before the maturity of the checks, petitioner

prevailed upon LPI not to deposit the checks andpromised to replace them within 30 days. However,petitioner reneged on his promise. Hence, on June 5,1986, 157 days after the date of the check, LPIdeposited the checks with Rizal CommercialBanking Corporation (RCBC). The checks werereturned for the reason "account closed." Thedishonor of the checks was evidenced by the RCBCreturn slip.

On June 20, 1986, complainant through counselnotified the petitioner of the dishonor. Petitionerfailed to make arrangements for payment within five(5) banking days.

On November 6, 1987, petitioner was charged

Whether or notthe checksissued bypetitionerbecame stale.

Under Section 186 of the NegotInstruments Law, "a check must be presentpayment within a reasonable time after its isthe drawer will be discharged from liability thto the extent of the loss caused bydelay." By current banking practice, a becomes stale after more than sixmonths, or 180 days. Private respondent

deposited the checks 157 days after the dthe check. Hence said checks cannoconsidered stale. Only the presumptiknowledge of insufficiency of funds was lostpresented for payment within 90 days aftdate of the check. But such knowledge coulbe proven by direct or circumstantial evidenc

PARTIES

Petitioners

A- LUIS S. WONG

Respondents

B- PEOPLE OF THEPHILIPPINES

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with three (3) counts of violation of B.P. Blg. 22 underthree separate Informations for the three checksamounting to P5,500.00, P3,375.00, and P6,410.00.


[G.R. No. 112214. June18, 1998]

SECURITY BANK &TRUSTCOMPANY,petitioner,vs. COURT OF APPEALS,CRISPULO IKEARBOLEDA, andAMADOR

Petitioner filed an action against private respondents forthe recovery of a sum of money with damages andpreliminary attachment. It alleged that sometime in 1983,A.T. Diaz Realty, through Anita Diaz, bought fromRicardo Lorenzo his undivided share in a parcel of landwhich he owned in common with Servando Solomon. Inconnection with this transaction, Diaz issued a checkfor P60,000.00 in the name of Ricardo Lorenzos agent,private respondent Crispulo Arboleda. The check, datedNovember 7, 1983, was to be drawn against the currentaccount of A.T. Diaz Realty in the Marikina branch of the

Whether or not

petitioner Bank

has a right to

collect money

from private

respondent

Arboleda

considering he

No. There was no contractual relation crebetween petitioner and private respoas a result of the payment by the formthe amount of the check. Petitioner simplthe check for and in behalf of Diaz. Therefore, the question whether prespondent Crispulo Arboleda has a right tothe proceeds of the check is very relevant taction brought to recover the amount.

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LIBONGCO,respondents.Security Bank and Trust Co. (SBTC). According to Diaz, themoney was part of the purchase price of the land. It was tobe used to pay the capital gains tax on the transaction andto reimburse Solomon for payments he had made fordelinquent real estate taxes on the land. In return, Solomonwould deliver to Diaz the title to the land.

On November 8, 1983, Solomon informed Diaz that, ashe had not yet been reimbursed by private respondent, hecould not deliver to Diaz the title to the land. Diaz decidedto reimburse Solomon and to pay the capital gains taxherself. Consequently, she issued two more checks, onefor P20,000.00, in the name of Solomon for thereimbursement, and another one for P40,000.00, payable tobearer, for the payment of the tax. Thereafter, on the samedate, she ordered petitioner to stop payment on thecheck. Diaz allegedly advised private respondent of theorder and requested the return of the check to her.

Instead of returning the check to Diaz, however, privaterespondent encashed it on November 24, 1983. For theirpart, employees of petitioner bank failed to notice that thecheck was the subject of a stop payment order and allowedprivate respondent to encash it. The error was discoveredonly the next day, November 25, 1983. Petitioner recreditedthe amount (P60,000.00) of the check to A.T. Diaz Realtysaccount.

Bank officials went to see respondent Arboleda to askfor the return of the amount of P60,000.00. But they weretold the money had been turned over to AmadorLibongco. When asked by bank officials, Libongco did notdeny receipt of the money, but said he would return itprovided Diaz showed him the receipt for payment of thecapital gains tax.

As Diaz failed to show receipts, Arboleda and Libongcorefused to return the money. Petitioner, therefore, filed theinstant suit.

denies owing

any obligation

to DIAZ, drawer

.

Who are the

real parties to

the collection ofpayment of the

check?

Indeed, even if petitioner is considehave paid Anita Diaz in behalf of Arboleda, itsto recover from Arboleda would be only textent that the payment benefitted Arbbecause the payment (recrediting) was without the consent of Arboleda. Since Arbdenies owing any obligation to petitionercannot ask for reimbursement

1236 of the Civil Code.

Whether petitioner is liable to Anita Dcashing the check after it had been ordered pay is a matter between them. By restoriamount it had paid to the account of A.TRealty, petitioner merely stepped into the shthe drawer. Consequently, its present actsubject to the defenses which private respoArboleda might raise had this action instituted by Anita Diaz.

PARTIES

Petitioners

A- SECURITY BANK &TRUST COMPANY

Respondents

B- CRISPULO IKEARBOLEDA

C- AMADOR LIBONGCO


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TRADERS ROYAL BANK, petitioner,vs.RADIO PHILIPPINES NETWORK,INC.,INTERCONTINENTALBROADCASTING CORPORATIONandBANAHAW BROADCASTINGCORPORATION,through the BOARD OFADMINISTRATORS,

and SECURITY BANK AND TRUSTCOMPANY

The Bureau of Internal Revenue (BIR) assessedRadio Philippines Network (RPN), IntercontinentalBroadcasting Corporation (IBC), and BanahawBroadcasting Corporation (BBC) of their tax obligationsfor the taxable years 1978 to 1983.

Mrs. Lourdes C. Vera, respondents comptroller, senta letter to the BIR requesting settlement of respondents taxobligations.

The BIR granted the request and accordingly, respondentspurchased from Traders Royal Bank(TRB) three (3)managers checks to be used as payment for their taxliabilities.

TRB, through Aida Nuez, TRB Branch Manager atBroadcast City Branch, turned over the checks to Mrs. Verawho was supposed to deliver the same to the BIR in paymentof respondents taxes.

Later, the BIR again assessed respondents for their taxliabilities for the years 1979-82. It was then they discoveredthat the three (3) managers checks intended as payment fortheir taxes were never delivered nor paid to the BIR by Mrs.Vera. Instead, the checks were presented for payment byunknown persons to respondent Security Bank and TrustCompany (SBTC), as shown by the clearing code stampedon the reverse sides of the checks.

Meanwhile, for failure of the respondents to settle theirobligations, the BIR issued warrants of levy, distraint andgarnishment against them. Thus, they were constrained toenter into a compromise and paid BIR P18,962,225.25 insettlement of their unpaid deficiency taxes.

Thereafter, respondents sent letters to petitioner,demanding that the amounts covered by the checks bereimbursed or credited to their account. The petitionerrefused, hence, the instant suit.

whether or notpetitioner TRBshould be heldsolely liable whenit paid theamount of themanagers checksin question to aperson other

than the payeeindicated on theface of the check,the Bureau ofInternal Revenue.

YES. TRB should be held solely liable.

"When a signature is forged or made withauthority of the person whose signature it purports to wholly inoperative, and no right to retaiinstrument, or to give a discharge therefor, enforce payment thereof against any party therebe acquired through or under such signature."5 Conseqif a bank pays a forged check, it must be considepaying out of its funds and cannot charge the aso paid to the account of the depositor .

Petitioner ought to have known that, where a cdrawn payable to the order of one person and is presenpayment by another and purports upon its face to havduly indorsed by the payee of the check, it is the pduty of petitioner to know that the check waindorsed by the original payee and, where it paamount of the check to a third person who has forgsignature of the payee, the loss falls upon petitioncashed the check.Its only remedy is against the to whom it paid the money.

It should be noted further that one of the checks was crossed. The crossing of one of the schecks should have put petitioner on guard;

duty-bound to ascertain the indorsers title check or the nature of his possession. Petitionerhave known the effects of a crossed check: (a) the chenot be encashed but only deposited in the bank; (b) thmay be negotiated only once to one who has an accoua bank and (c) the act of crossing the check servewarning to the holder that the check has been issuedefinite purpose so that he must inquire if he has receivcheck pursuant to that purpose, otherwise, he is not ain due course.

By encashing in favor of unknown persons checkwere on their face payable to the BIR, a government which can only act only through its agents, petitioner dits peril and must suffer the consequences unauthorized or wrongful endorsement. In thi

petitioner TRB cannot exculpate itself from liability by c

PARTIES

Petitioners

A-TRADERS ROYAL BANK(TRB)

B-

vs.

Respondents

C-RADIO PHILIPPINES NETWORK,INC

D-INTERCONTINENTALBROADCASTING CORPORATION

E- BANAHAW BROADCASTINGCORPORATION

F- BOARD OF ADMINISTRATORS,and SECURITY BANK AND TRUSTCOMPANY

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that respondent networks were themselves negligent.


G.R. No. 97753 August10, 1992CALTEX (PHILIPPINES),INC., petitioner,vs.COURT OF APPEALS andSECURITY BANK ANDTRUSTCOMPANY, respondents.

On various dates, respondent , a commercial bankinginstitution, issued 280 certificates of time deposit (CTDs) infavor of one Angel dela Cruz who deposited with the bankthe aggregate amount of P1,120,000.00. Angel dela Cruzdelivered the said certificates of time (CTDs) to Caltex inconnection with his purchase of fuel products from the latter.

Angel dela Cruz informed Mr. Timoteo Tiangco, thathe lost all the certificates of time deposit in dispute. Mr.Tiangco advised said depositor to execute and submit anotarized Affidavit of Loss, as required by the bank's

1. Whether ornot subjectcertificates ofdeposit arenon-negotiable.

2. The nextquery iswhether Caltexcan rightfully

1. YES. CTDs are negotiable instruments. We disagrthese findings and conclusions, and hereby hold that thin question are negotiable instruments.

The CTDs in question undoubtedly meet the requirof the law for negotiability. The parties' bone of contewith regard to requisite (d) set forth above. It is noted t

Timoteo P. Tiangco, Security Bank's Branch Manager win 1982, testified in open court that the depositor reto in the CTDs is no other than Mr. Angel de laAfter trial, the court a quo rendered its decision dismiss

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procedure, if he desired replacement of said lost CTDs. Onthe basis of said affidavit of loss, 280 replacement CTDswere issued in favor of said depositor.

On March 25, 1982, Angel dela Cruz negotiated andobtained a loan from respondent bank in the amount ofP875,000.00. Sometime in November, 1982, Mr. Aranas,Credit Manager of Caltex, went to respondent bankand

presented for verification the CTDs declared lost by Angeldela Cruz alleging that the same were delivered to Caltex"as security for purchases made with Caltex Philippines,Inc." by said depositor.

On November 26, 1982, respondent bankreceived a letter from Caltex formally informing it of itspossession of the CTDs in question and of its decision to pre-terminate the same.

On December 8, 1982, Caltex was requested byrespondent bank to furnish the former "a copy of thedocument evidencing the guarantee agreement with Mr.Angel dela Cruz" as well as "the details of Mr. Angel delaCruz" obligation against which plaintiff proposed to apply thetime deposits. No copy of the requested documentswas furnishedby Caltex.

Accordingly, respondent bank rejected the plaintiff'sdemand and claim for payment of the value of the CTDs in aletter dated February 7, 1983.

In April 1983, the loan of Angel dela Cruz withrespondent bank matured and fell due and on August 5,1983, the latter set-off and applied the time deposits inquestion to the payment of the matured loan.

In view of the foregoing, Caltex filed the instant complaint,praying that respondent bank be ordered to pay it theaggregate value of the certificates of time deposit ofP1,120,000.00 plus accrued interest and compoundedinterest therein at 16% per annum, moral and exemplary

recover on theCTDs. instant complaint.

On this score, the accepted rule is thnegotiability or non-negotiability of an instrumdetermined from the writing, that is, from the fthe instrument itself. In the construction of a note, the intention of the parties is to control, ifbe legally ascertained. While the writing may be

the light of surrounding circumstances in order tperfectly understand the intent and meaning of the yet as they have constituted the writing to be the only oand visible expression of their meaning, no other wordsbe added to it or substituted in its stead. The duty court in such case is to ascertain, not what the pmay have secretly intended as contradistingfrom what their words express, but what meaning of the words they have used. What the

meant must be determined by what they said.

Contrary to what respondent court held, the CTnegotiable instruments. The documents provide thamounts deposited shall be repayable to the depAnd who, according to the document, is the depositothe "bearer." The documents do not say that the depoAngel de la Cruz and that the amounts deposit

repayable specifically to him. Rather, the amounts arerepayable to the bearer of the documents or, fomatter, whosoever may be the bearer at the tpresentment.

2. NO. Petitioner cannot rightfully recover on the CTDrecords reveal that Angel de la Cruz, whom petitionernot to implead in this suit for reasons of its own, deliveCTDs amounting to P1,120,000.00 to petitioner informing respondent bank thereof at any Unfortunately for petitioner, although the CTDs are instruments, a valid negotiation thereof for thpurpose and agreement between it and De la C

ultimately ascertained, REQUIRES BOTH DELIVERINDORSEMENT. For, although petitioner seeks to deflfact, the CTDs were in reality delivered to it as a se

PARTIES

Petitioners

A- CALTEX(PHILIPPINES), INC.

Respondents

B- SECURITY BANK ANDTRUST COMPANY

17


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damages as well as attorney's fees. for De la Cruz' purchases of its fuel products. Any douwhether the CTDs were delivered as payment for tproducts or as a security has been dissipated and resofavor of the latter by petitioner's own authorizresponsible representative himself.


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G.R. No. 93073December 21, 1992REPUBLIC PLANTERSBANK, petitioner,vs.COURT OF APPEALS andFERMINCANLAS, respondents.

From the records, these facts are established:Defendant Shozo Yamaguchi and private respondentFermin Canlas were President/Chief Operating Officer and

Treasurer respectively, of Worldwide GarmentManufacturing, Inc.. By virtue of Board Resolution,defendant Shozo Yamaguchi and private respondentFermin Canlas were authorized to apply for credit facilitieswith the petitioner Republic Planters Bank in the formsof export advances and letters of credit/trust receiptsaccommodations. Petitioner bank issued nine promissory

notes. In the promissory notes, the name WorldwideGarment Manufacturing, Inc. was apparently rubberstamped above the signatures of defendant and privaterespondent.

On December 20, 1982, Worldwide GarmentManufacturing , Inc. noted to change its corporate name toPinch Manufacturing Corporation.On February 5, 1982, petitioner bankfiled a complaint forthe recovery of sums of money covered among others, bythe nine promissory notes with interest thereon, plusattorney's fees and penalty charges.

Defendants Pinch Manufacturing Corporation andShozo Yamaguchi did not file an Amended Answer andfailed to appear at the scheduled pre-trial conferencedespite due notice. Only private respondent Fermin Canlasfiled an Amended Answer wherein he, denied having issuedthe promissory notes in question since according to him, he

was not an officer of Pinch Manufacturing Corporation, butinstead of Worldwide Garment Manufacturing, Inc., and thatwhen he issued said promissory notes in behalf of WorldwideGarment Manufacturing, Inc., the same were in blank, thetypewritten entries not appearing therein prior to thetime he affixed his signature.

Whether privaterespondentFermin Canlasis solidarilyliable with theotherdefendants,namely Pinch

ManufacturingCorporation andShozoYamaguchi, onthe ninepromissorynotes

YES. We hold that private respondent FCanlas is solidarily liable on each of the promnotes bearing his signature for the folreasons:

The promissory notes are negoinstruments and must be governed byNegotiable Instruments Law. 2

Under the Negotiable lnstrumentspersons who write their names on the fapromissory notes are makers and are as such. By signing the notes, the maker proto pay to the order of the payee oholder according to the tenor thereof. Basthe above provisions of law, there is no dethat private respondent Fermin Canlas is one co-makers of the promissory notes. As succannot escape liability arising therefrom.

Where an instrument containing the words

promise to pay" is SIGNEDBYTWOORMOREPERSO

they are deemed to bejointly and severally

liable thereon. An instrument which begins"

"I" ,We" , or "Either of us" promise to, pay, wh

SIGNEDBYTWOORMOREPERSONS, makes them

solidarily liable.

In the case at bar, the solidary liability of

private respondent Fermin Canlas is made cle

and certain, without reason for ambiguity, by

presence of the phrase "joint and several" as

describing the unconditional promise to pay t

PARTIES

Petitioners

A- REPUBLIC PLANTERSBANK

Respondents

B- FERMIN CANLAS

19


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order of Republic Planters Bank.


G.R. No. 107382/G.R. No.107612 January 31,1996ASSOCIATEDBANK, petitioner,vs.HON. COURT OF APPEALS,PROVINCE OF TARLAC andPHILIPPINE NATIONALBANK, respondents.

The Province of Tarlac maintains a current account with thePhilippine National Bank(PNB) where the provincial fundsare deposited. Checks issued by the Province are signed bythe Provincial Treasurer and countersigned by the ProvincialAuditor or the Secretary of the Sangguniang Bayan.

A portion of the funds of the province is allocated to theConcepcion Emergency Hospital. The allotment checks forsaid government hospital are drawn to the order of"Concepcion Emergency Hospital, Concepcion, Tarlac"or "The Chief, Concepcion Emergency Hospital,

Where thirtychecks bearingforgedendorsementsare paid, whobears the loss,the drawer, thedrawee bank orthe collectingbank?

A forged signature, whether it be that of the drathe payee, is wholly inoperative and no one catitle to the instrument through it. A person signature to an instrument was forged was neparty and never consented to the contract allegedly gave rise to such instrument. Sectdoes not avoid the instrument but only the signature. Thus, a forged indorsement doeoperate as the payee's indorsement.

The exception to the general rule in Section 23 is

20


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Concepcion, Tarlac." The checks are released by the Officeof the Provincial Treasurer and received for the hospital byits administrative officer and cashier.

In January 1981, the books of account of the ProvincialTreasurer were post-audited by the Provincial Auditor. It wasthen discovered that the hospital did not receive severalallotment checks drawn by the Province.

On February 19, 1981, the Provincial Treasurer requestedthe manager of the PNB to return all of its cleared checkswhich were issued from 1977 to 1980 in order to verify theregularity of their encashment. After the checks wereexamined, the Provincial Treasurer learned that 30 checksamounting to P203,300.00 were encashed by one FaustoPangilinan, with the Associated Bank acting ascollecting bank.

It turned out that Fausto Pangilinan, who was theadministrative officer and cashier of payee hospital until hisretirement on February 28, 1978, collected the questionedchecks from the office of the Provincial Treasurer. Pangilinansought to encash the first check with Associated Bank.However, the manager of Associated Bank refused andsuggested that Pangilinan deposit the check in his personal

savings account with the same bank. Pangilinan was able towithdraw the money when the check was cleared and paidby the drawee bank, PNB.

After forging the signature of Dr. Adena Canlaswho waschief of the payee hospital, Pangilinan followed the sameprocedure for the second check, in the amount of P5,000.00,as well as for twenty-eight other checks of various amountsand on various dates. All the checks bore the stamp ofAssociated Bank which reads "All prior endorsementsguaranteed ASSOCIATED BANK."

On February 26, 1981, the Provincial Treasurer wrote themanager of the PNB seeking the restoration of the variousamounts debited from the current account of the Province.9

"a party against whom it is sought to enforce a precluded from setting up the forgery or want of autParties who warrant or admit the genuineness

signature in question AND those who, by theisilence or negligence are estopped from setting defense of forgery, are precluded from using this dIndorsers, persons negotiating by deliveryacceptors are warrantors of the genuineness signatures on the instrument.

Example: if the drawee bank can prove a failure by the

customer/drawer to exercise ordinary care that substantially contribumaking of the forged signature, the drawer is precluded from assertinforgery.

If at the same time the drawee bank wanegligent to the point of substantially contributing to tthen such loss from the forgery can be apporbetween the negligent drawer and the negligent

In BEARERINSTRUMENTS, the signature of the payee oris unnecessary to pass title to the instrument. Hence, windorsement is a forgery, only the person whose sigis forged can raise the defense of forgery agaholder in due course. @@@@

The checks involved in this case are ORDERINSTRUhence, the following discussion is made with referenceeffects of a forged indorsement on an instrument payorder.

### Where the instrument is payable to order at the the forgery, such as the checks in this case, the signatits rightful holder (here, the payee hospitessential to transfer title to the same instrument

the holder's indorsement is forged, all parties prior

forgery may raise the real defense of forgery against all

subsequent thereto.

An indorser of an order instrument warrant

PARTIES

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In turn, the PNB manager demanded reimbursement fromthe Associated Bank on May 15, 1981. 10

As both banks resisted payment, the Province of Tarlacbrought suit against PNB which, in turn, impleadedAssociated Bank as third-party defendant. The latter thenfiled a fourth-party complaint against Adena Canlas andFausto Pangilinan. 11

the instrument is genuine and in all respects what it pto be; that he has a good title to it; that all prior particapacity to contract; and that the instrument is at the his indorsement valid and subsisting." He cannot interpdefense that signatures prior to him are forged. A colbank where a check is deposited and which indthe check upon presentment with the drawee bsuch an indorser. So even if the indorsement on thedeposited by the banks's client is forged, the collecting

bound by his warranties as an indorser and cannot the defense of forgery as against the drawee ban

The bank on which a check is drawn, known as the bank, is under strict liability to pay the check to the othe payee. The drawer's instructions are reflected on tand by the terms of the check. Payment under a indorsement is not to the drawer's order. The generthen is that the drawee bank may not debdrawer's account and is not entitled to indemniffrom the drawer. 25 The risk of loss must perforce falldrawee bank.

In cases involving a forged check, where the drawer's sigis forged, the drawer can recover from the drawee badrawee bank has a right to pay a forged check. If it

shall have to recredit the amount of the check to the aof the drawer. The liability chain ends with the drawewhose responsibility it is to know the drawer's signaturthe latter is its customer.

In cases involving checks with forged indorssuch as the present petition, the chain of liability does with the drawee bank. The drawee bank may not deaccount of the drawer but may generally pass liabilitthrough the collection chain to the party who took frforger and, of course, to the forger himself, if availabOTHERWORDS, THEDRAWEEBANKCANSEEKREIMBURSEMENT ORA

OF THE AMOUNT IT PAID FROM THE PRESENTOR BA

PERSON.29 Theoretically, the latter can demand reimburfrom the person who indorsed the check to it and so oloss falls on the party who took the check from the fo

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on the forger himself.

In this case, the checks were indorsed by the colbank (Associated Bank) to the drawee bank (PNBformer will necessarily be liable to the latter fchecks bearing forged indorsements. If the forgthat of the payee's or holder's indorsemencollecting bank is held liable, without prejudice latter proceeding against the forger.

Since a forged indorsement is inoperative, the collecting bank had

to be paid by the drawee bank. The former must necessarily re

money paid by the latter because it was paid wrongfully.

More importantly, by reason of the statutory warrangeneral indorser in section 66 of the Negotiable InstrLaw, a collecting bank which indorses a check bearing aindorsement and presents it to the drawee bank guaranprior indorsements, including the forged indorsemwarrants that the instrument is genuine, and that it and subsisting at the time of his indorsement. Becaindorsement is a forgery, the collecting bank commits aof this warranty and will be accountable to the drawe

This liability scheme operates without regard to faultpart of the collecting/presenting bank. Even if the latte

was not negligent, it would still be liable to the drawebecause of its indorsement.

Applying these rules to the case at bench, PNB, the dbank, cannot debit the current account of the Prov

Tarlac because it paid checks which bore forged indorseHowever, if the Province of Tarlac as drawer was neglithe point of substantially contributing to the loss, thdrawee bank PNB can charge its account. If both drawePNB and drawer-Province of Tarlac were negligent, tshould be properly apportioned between them.

The loss incurred by drawee bank-PNB can be passed ocollecting bank-Associated Bank which presented and inthe checks to it. Associated Bank can, in turn, hold the

23


24/34

Fausto Pangilinan, liable.

If PNB negligently delayed in informing Associated Bankforgery, thus depriving the latter of the opportunity to from the forger, it forfeits its right to reimbursement abe made to bear the loss.

After careful examination of the records, the

finds that the Province of Tarlac was equally neand should, therefore, share the burden of losthe checks bearing a forged indorsement.

The drawee bank PNB also breached its duty only according to the terms of the check. Hencannot escape liability and should also bear partloss.

As earlier stated, PNB can recover from the collecting bank.The sin the case at bench is analogous to the above case, fonot the payee who deposited the checks with the cobank. Here, the checks were all payable to ConEmergency Hospital but it was Fausto Pangilinadeposited the checks in his personal savings account.

A bank is not required to accept all the checks negotiatIt is within the bank's discretion to receive a checkbanking institution would consciously or deliberately acheck bearing a forged indorsement. When a chdeposited with the collecting bank, it takes a riskdepositor. It is only logical that this bank baccountable for checks deposited by its customer

The Court finds as reasonable, the proportsharing of fifty percent - fifty percent (50%-50%to the negligence of the Province of Tarlac in rethe checks to an unauthorized person (Fausto Pangiliallowing the retired hospital cashier to receive the chethe payee hospital for a period close to three years anproperly ascertaining why the retired hospital cashcollecting checks for the payee hospital in addition

24


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hospital's real cashier, respondent Province contributedloss amounting to P203,300.00 and shall be liable to tfor fifty (50%) percent thereof. In effect, the ProviTarlac can only recover fifty percent (50P203,300.00 from PNB.

The collecting bank, Associated Bank, shall be liaPNB for fifty (50%) percent of P203,300.00. It is liits warranties as indorser of the checks which were de

by Fausto Pangilinan, having guaranteed the genuineall prior indorsements, including that of the chief of thehospital, Dr. Adena Canlas. Associated Bank was also reits duty to ascertain the genuineness of the indorsement.


G.R. No. 129015August 13, 2004

SAMSUNG CONSTRUCTIONCOMPANY PHILIPPINES,INC., petitioner,vs.FAR EAST BANK AND TRUSTCOMPANY AND COURT OFAPPEALS, respondents.

Samsung Construction Company Philippines, Inc. ("SamsungConstruction") maintained a current account with Far EastBank and Trust Company1 ("FEBTC").2 The sole signatory toSamsung Constructions account was Jong Kyu Lee("Jong"), its Project Manager,3while the checks remained inthe custody of the companys accountant, Kyu Yong Lee("Kyu").4

On 19 March 1992, a certain Roberto Gonzaga presentedfor payment FEBTC Check No. 432100 to the banks branchin Bel-Air, Makati. The check, payable to cash and drawnagainst Samsung Constructions current account, was in the

if a bank paysout on a forgedcheck, is itliable toreimburse thedrawer fromwhose accountthe funds werepaid out?

YES. Section 23 of the Negotiable Instrumestates:When a signature is forged or made without the auththe person whose signature it purports to be, it is inoperative, and no right to retain the instrumengive a discharge therefor, or to enforce payment against any party thereto, can be acquired throuunder such signature, unless the party against whosought to enforce such right is precluded from settingforgery or want of authority.

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amount of (P999,500.00). The bank teller, Cleofe Justiani,first checked the balance of Samsung Constructionsaccount. After ascertaining there were enough funds tocover the check,5 she compared the signature appearing onthe check with the specimen signature of Jong as containedin the specimen signature card with the bank. Aftercomparing the two signatures, Justiani was satisfied as tothe authenticity of the signature appearing on the check.She then asked Gonzaga to submit proof of his identity, andthe latter presented three (3) identification cards.6

At the same time, Justiani forwarded the check to the branchSenior Assistant Cashier Gemma Velez, as it was bank policythat two bank branch officers approve checks exceeding OneHundred Thousand Pesos, for payment or encashment. Velezlikewise counterchecked the signature on the check asagainst that on the signature card. He too concluded thatthe check was indeed signed by Jong. Velez then forwardedthe check and signature card to Shirley Syfu, another bankofficer, for approval. Syfu then noticed that Jose Sempio III("Sempio"), the assistant accountant of SamsungConstruction, was also in the bank. Sempio was well-knownto Syfu and the other bank officers, he being the assistantaccountant of Samsung Construction. Syfu showed the checkto Sempio, who vouched for the genuineness of Jongssignature. Confirming the identity of Gonzaga, Sempio saidthat the check was for the purchase of equipment forSamsung Construction. Satisfied with the genuineness of the

signature of Jong, Syfu authorized the banks encashment ofthe check to Gonzaga.The following day, the accountant of Samsung Construction,Kyu, examined the balance of the bank account anddiscovered that a check in the amount of (P999,500.00) hadbeen encashed. Aware that he had not prepared such acheck for Jongs signature, Kyu perused the checkbook andfound that the last blank check was missing.7 He reportedthe matter to Jong, who then proceeded to the bank. Jonglearned of the encashment of the check, and realized thathis signature had been forged. The Bank Manager reputedlytold Jong that he would be reimbursed for the amount of thecheck.8

WhetherSamsungConstructionwas guilty ofnegligence; itsemployeecommiting theforgery.

The traditional justification for the result is tdrawee is in a superior position to detect a forgery becahas the makers signature and is expected to kncompare it.22

Under Section 23 of the Negotiable Instrumenforgery is a real or absolute defense by the party signature is forged.26 On the premise that Jongs sigwas indeed forged, FEBTC is liable for the loss sauthorized the discharge of the forged check. Such attaches even if the bank exerts due diligence and

preventing such faulty discharge. Forgeries often deceeye of the most cautious experts; and when a bank haso deceived, it is a harsh rule which compels it toalthough no one has suffered by its being deceiveforgery may be so near like the genuine as to defy deby the depositor himself, and yet the bank is liabledepositor if it pays the check.

The crucial fact in question is whether or ncheck was forged, not whether the bank coulddetected the forgery. The latter issue becomes reonly if there is need to weigh the companegligence between the bank and the party signature was forged.

We recognize that Section 23 of the NegInstruments Law bars a party from setting up the defe

forgery if it is guilty of negligence.52

Yet, we are unconclude that Samsung Construction was guilty of negin this case.The bare fact that the forgery was commian employee of the party whose signature was forgednecessarily imply that such partys negligence wcause for the forgery. Employers do not possepreternatural gift of cognition as to the evil that mwithin the hearts and minds of their employees.

PARTIES

Petitioners

A-SAMSUNG CONSTRUCTIONCOMPANY PHILIPPINES, INC

Respondents

C-FAR EAST BANK ANDTRUST COMPANY

D-


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G.R. No. 74917 January 20,1988BANCO DE ORO SAVINGS ANDMORTGAGE BANK, petitioner,vs.EQUITABLE BANKINGCORPORATION, PHILIPPINECLEARING HOUSECORPORATION, ANDREGIONAL TRIAL COURT OFQUEZON CITY, BRANCH XCII

(92),

It appears that some time in March, April, May andAugust 1983, A through its Visa Card Department,drew six crossed Manager's check having anaggregate amount of (P45,982.23) Pesos and payableto certain member establishments of Visa Card.Subsequently, the Checks were deposited with C tothe credit of its depositor, a certain Aida Trencio.Following normal procedures, and after stamping atthe back of the Checks the usual endorsements. All

prior and/or lack of endorsement guaranteed C sentthe checks for clearing through the PhilippineClearing House Corporation (PCHC). Accordingly,A paid the Checks; its clearing account was debited forthe value of the Checks and C's clearing account wascredited for the same amount,Thereafter, A discovered that the endorsementsappearing at the back of the Checks and purporting tobe that of the payees were forged and/orunauthorizedor otherwise belong to persons otherthan the payees.Pursuant to the PCHC Clearing Rules and Regulations,A presented the Checks directly to C for the purposeof claiming reimbursement from the latter. However, Crefused to accept such direct presentation and toreimburse A for the value of the Checks; hence, thiscase.

Was thepetitioner banknegligent andthusresponsible forany unduepayment?

Yes. petitioner is estopped from raising the defe

non-negotiability of the checks in question. It stam

guarantee on the back of the checks and subse

presented these checks for clearing and it was on the b

these endorsements by the petitioner that the proceed

credited in its clearing account.

The petitioner by its own acts and representatnot now deny liability because it assumed the liabilitieendorser by stamping its guarantee at the back of the c

The petitioner having stamped its guarantee of "aendorsements and/or lack of endorsements" (Exh. A-2is now estopped from claiming that the checksconsideration are not negotiable instruments. The checaccepted for deposit by the petitioner stamping therguarantee, in order that it can clear the said checks wrespondent bank. By such deliberate and positive attithe petitioner it has for all legal intents and purposes the said cheeks as negotiable instruments and accoassumed the warranty of the endorser when it stamguarantee of prior endorsements at the back of the chled the said respondent to believe that it was acendorser of the checks and on the strength of this guasaid respondent cleared the checks in question and cthe account of the petitioner. Petitioner is now barretaking an opposite posture by claiming that the dchecks are not negotiable instrument.

A commercial bank cannot escape the li ability of endorser of a check and which may turn out to be a forgendorsement. Whenever any bank treats the signature back of the checks as endorsements and thus logicallyguarantees the same as such there can be no doubt bank has considered the checks as negotiable.

PARTIES

Petitioners

A-BANCO DE ORO SAVINGSAND MORTGAGE BANK

Respondents

C-EQUITABLE BANKINGCORPORATION

D-PHILIPPINE CLEARINGHOUSE CORPORATION

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ALLIEDBANKING

CORPORATIONvs.LIM SIO WAN,METROPOLITANBANK AND TRUST CO and

PRODUCERS BANK

Respondent Lim Sio Wan deposited with petitioner AlliedBanking Corporation (Allied) a money market placementof PhP 1,152,597.35 for a term of 31 days to matureon December 15, 1983.

On December 5, 1983, a person claiming to be LimSio Wan called up Cristina So, an officer of Allied, andinstructed the latter to pre-terminate Lim Sio Wans moneymarket placement, to issue a managers check representing

the proceeds of the placement, and to give the check to oneDeborah Dee Santos who would pick up the check. LimSio Wan described the appearance of Santos so that So

Whether Alliedis solely liableto Lim Sio Wan.

As to the liability of the parties, we find that Allied is liLim Sio Wan. Fundamental and familiar is the doctrthe relationship between a bank and a client is one of creditor. We cannot, however, say outright that Allied iliable to Lim Sio Wan.

Section 66. Liability of general indorser.Every indorsindorses without qualification, warrants to all subholders in due course;

a) The matters and things mentioned in subdi(a), (b) and (c) of the next preceding section ; andPARTIES

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could easily identify her.

Later, Santos arrived at the bank and signed theapplication form for a managers checkto be issued. Thebank issued Managers Check No. 035669 for PhP1,158,648.49, representing the proceeds of Lim Sio Wansmoney market placement in the name of Lim Sio Wan, aspayee. The check was cross-checked For PayeesAccount Only and given to Santos.

Thereafter, the managers check was deposited in theaccount of Filipinas Cement Corporation (FCC) atrespondent Metropolitan Bank and Trust Co.(Metrobank),with the forged signature of Lim Sio Wanas indorser.

Earlier, on September 21, 1983, FCC had deposited amoney market placement for PhP 2 milli on with respondentProducers Bank. Santos was the money market traderassigned to handle FCCs account. The placement maturedon October 25, 1983 and was rolled-over until December 5,1983. When the placement matured, FCC demanded thepayment of the proceeds of the placement. OnDecember 5, 1983, the same date that So received thephone call instructing her to pre-terminate Lim Sio Wansplacement, the managers check in the name of Lim Sio Wanwas deposited in the account of FCC, purportedlyrepresenting the proceeds of FCCs money marketplacement with Producers Bank. [17] In other words, theAllied check was deposited with Metrobank in theaccount of FCC as Producers Banks payment of itsobligation to FCC.

To clear the check and in compliance with the

requirements of the Philippine Clearing House Corporation

(PCHC) Rules and Regulations, Metrobank stamped aguaranty on the check, which reads: All priorendorsements and/or lack of endorsement guaranteed.

The check was sent to Allied through the PCHC.

Upon the presentment of the check, Allied funded thecheck even without checking the authenticity of Lim SioWans purported indorsement. Thus, the amount on the

b) That the instrument is at the time of his indorvalid and subsisting;And in addition, he engages that on due presentment,be accepted or paid, or both, as the case may be accorits tenor, and that if it be dishonored, and the neproceedings on dishonor be duly taken, he will pay the thereof to the holder, or to any subsequent indorser wbe compelled to pay it.Section 65. Warranty where negotiation by delivery, so Every person negotiating an instrument by delivery qualified indorsement, warrants:a) That the instrument is genuine and in all rewhat it purports to be;b) That he has a good title of it;c) That all prior parties had capacity to contract;d) That he has no knowledge of any fact which wouldthe validity of the instrument or render it valueless.But when the negotiation is by delivery only, the wextends in favor of no holder other than the immtransferee.

The provisions of subdivision (c) of this section do not apersons negotiating public or corporation securities, othbills and notes. (Emphasis supplied.)

The warranty that the instrument is genuine anrespects what it purports to be covers all the defectsinstrument affecting the validity thereof, including a indorsement. Thus, the last indorser will be liable amount indicated in the negotiable instrument eveprevious indorsement was forged. We held in a line othat a collecting bank which indorses a check beforged indorsement and presents it to the draweguarantees all prior indorsements, including the indorsement itself, and ultimately should be heldtherefor.[48]

However, this general rule is subject to exceptio

Petitioners

A- ALLIEDBANKING

CORPORATION

Respondents

C-LIM SIO WAN

D-METROPOLITANBANK AND TRUST CO

E- PRODUCERS BANK

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face of the check was credited to the account of FCC .]

On December 9, 1983, Lim Sio Wan deposited with

Allied a second money market placement to matureon January 9, 1984.[20]

On December 14, 1983, upon the maturity date

of the first money market placement, Lim Sio Wanwent to Allied to withdraw it. She was then informedthat the placement had been pre-terminated upon herinstructions. She denied giving any instructions andreceiving the proceeds thereof. She desisted fromfurther complaints when she was assured by thebanks manager that her money would be recovered.

When Lim Sio Wans second placement maturedon January 9, 1984, So called Lim Sio Wan to ask for thelatters instructions on the second placement. Lim Sio Waninstructed So to roll-over the placement for another 30days. On January 24, 1984, Lim Sio Wan, realizing that thepromise that her money would be recovered would notmaterialize, sent a demand letter to Allied asking forthe payment of the first placement. Allied refused topay Lim Sio Wan, claiming that the latter hadauthorized the pre-termination of the placement andits subsequent release to Santos.

Consequently, Lim Sio Wan filed with the RTC aComplaint against Allied to recover the proceeds of her firstmoney market placement. Sometime in February 1984, shewithdrew her second placement from Allied.

Allied filed a third party complaint againstMetrobank and Santos. In turn, Metrobank filed afourth party complaint against FCC. FCC for its partfiled a fifth party complaint against Producers Bank.Summonses were duly served upon all the parties exceptfor Santos, who was no longer connected with ProducersBank.[30]

On May 15, 1984, or more than six (6) months after

funding the check, Allied informed Metrobank that thesignature on the check was forged.[31]Thus, Metrobankwithheld the amount represented by the check fromFCC. Later on, Metrobank agreed to release the amount to

such exception is when the issuance of the check itsattended with negligence. Thus, in the cases citedwhere the collecting bank is generally held liable, in twcases where the checks were negligently issued, thiheld the institution issuing the check just as liable as oliable than the collecting bank.

In isolated cases where the checks were depositeaccount other than that of the payees on the streforged indorsements, we held the collecting bank solelfor the whole amount of the checks involved for indorsed the same. In Republic Bank v. Ebrada,[49] thewas properly issued by the Bureau of Treasury. While inde Oro Savings and Mortgage Bank(Banco de Equitable Banking Corporation,[50] Banco de Oro admissued the checks in the name of the correct payein Traders Royal Bank v. Radio Philippines Network, Incchecks were issued at the request of Radio PhiNetwork, Inc. from Traders Royal Bank.

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FCC after the latter executed an Undertaking, promising toindemnify Metrobank in case it was made to reimburse theamount.

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