Commercial Law digest

Negotiable instrument

TRADERS ROYAL BANK Vs CA

Defendant Filriters is the registered owner of CBCI No. D891. Under a deed of assignment dated November 27, 1971, Filriters transferred CBCI No. D891 to Philippine Underwriters Finance Corporation (Philfinance). Subsequently, Philfinance transferred CBCI No. D891, which was still registered in the name of Filriters, to appellant Traders Royal Bank (TRB). The transfer was made under a repurchase agreement dated February 4, 1981, granting Philfinance the right to repurchase the instrument on or before April 27, 1981. When Philfinance failed to buy back the note on maturity date, it executed a deed of assignment, dated April 27, 1981, conveying to appellant TRB all its rights and title to CBCI No. D891.

Armed with the deed of assignment, TRB then sought the transfer and registration of CBCI No. D891 in its name before the Security and Servicing Department of the Central Bank (CB). Central Bank, however, refused to effect the transfer and registration in view of an adverse claim filed by defendant Filriters. Petitioner argued that the subject CBCI was a negotiable instrument, and having acquired the said certificate from Philfinance as a holder in due course, its possession of the same is thus free from any defect of title of prior parties and from any defense available to prior parties among themselves, and it may thus, enforce payment of the instrument for the full amount thereof against all parties liable thereon.

CB Certificate of Bank indebtedness a negotiable instrument?

2. BPI vs CA SALAZAR, TEMPLONUEVAOOn the claim of Templonuevo that 3 checks payable to him were deposited with BPI to Salazar’s account without his knowledge and endorsement. BPI debited salazars bank account and paid Templonuevo with managers check.

does a collecting bank, over the objections of its depositor, have the authority to withdraw unilaterally from such depositor's account the amount it had previously paid upon certain unendorsed order instruments deposited by the depositor to another account that she later closed?

Is Salazar a holder in due course?

NO.

FREEDOM OF NEGOTIABILITY; NOT PRESENT IN CERTIFICATE OF INDEBTEDNESS. — The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchstone relating to the protection of holders in due course, and the freedom of negotiability is the foundation for the protection which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This freedom in negotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a sum of money to a specified person or entity for a period of time.

NO. the presumption under the Rules of court that a NI was given for a sufficient consideration, thus a HOLDER in due course will not apply to Salazar. The term given is not merely a transfer of physical possession of the instrument. The phrase GIVEN or ENDORSED in the contest of a negotiable instrument refers to the manner in wc such instrument maybe negotiated . NI are negotiated by one person to another in such a manner as to constitute the transferee the HOLDER thereof. If payable to bearer, by delivery, if payable to ORDER by INDORSEMENT completed by The present case involves checks payable to order. Not being a payee or indorsee of the checks, private respondent Salazar could not be a holder thereof delivery. The weight of authority is that the mere possession of a negotiable instrument does not in itself conclusively establish either the right of the possessor to receive payment, or of the right of one who has made payment to be discharged from liability. Thus, something more than mere possession by persons who are not payees or indorsers of the instrument is necessary to authorize payment to them

3. NORBERTO TIBAJIA, JR. ET AL, VS CA et alExecution of judgment against Tibajia couple, instead of satisfying the judgment debt from the amount garnished and deposited with the clerk of court, the couple paid cash and cashier’s check.Is a check legal tender?

4, ROMAN CATHOLIC BISHOP OF MALOLOS, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT, and ROBES-FRANCISCO REALTY AND DEVELOPMENT CORPORATION,1990

5. NEW PACIFIC TIMBER & SUPPLY COMPANY, INC., petitioner, vs. HON. ALBERTO V. SENERIS, RICARDO A. TONG and EX-OFFICIO SHERIFF HAKIM S. ABDULWAHID, 1980

Before the auction sale set by the Clerk of Court as Ex-Officio sheriff, pursuant to a writ of execution issued by respondent Judge at the instance of private respondent, upon failure of petitioner to pay the judgment obligation in the amount of P63,130.00, the latter deposited with the Clerk of Court the amount of P50,000.00 in cashier's check and P13,130.00 in cash which were both refused by private respondent. The sheriff proceeded with auction sale, sold the levied properties to private respondent as highest bidder in the amount of P50,000.00, declared a deficiency of P13,130.00 and issued a certificate of sale in favor of private respondent for P50,000.00 only. Petitioner filed an ex-parte motion

in the absence of any other facts from which the authority to receive payment may be inferred.(In State Investment House v. IAC, 20 the Court enumerated the effects of crossing a check, thus: (1) that the check may not be encashed but only deposited in the bank; (2) that the check may be negotiated only once — to one who has an account with a bank; and (3) that the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that such holder must inquire if the check has been received pursuant to that purpose. )

CIVIL LAW; EXTINGUISHMENT OF OBLIGATIONS; PAYMENT OR PERFORMANCE; LEGAL TENDER; CASHIER'S CHECK IS NOT LEGAL TENDER. — In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals and Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court, this Court held that — "A 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 may be refused receipt by the obligee or creditor." The ruling in these two (2) cases merely applies the statutory provisions which lay down the rule that a check is not legal tender and that a creditor may validly refuse payment by check, whether it be a manager's, cashier's or personal check.

2. ID.; ID.; ID.; NOT VALIDLY CONSTITUTED BY PAYMENT OF A CERTIFIED PERSONAL CHECK. — With regard to the third issue, granting arguendo that we would rule affirmatively on the two preceding issues, the case of the private respondent still can not succeed in view of the fact that the latter used a certified personal check which is not legal tender nor the currency stipulated, and therefore, can not constitute valid tender of payment. The first paragraph of Art. 1249 of the Civil Code provides that "the payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The Court en banc in the recent case of Philippine Airlines v. Court of Appeals, (Promulgated on January 30, 1990) G.R. No. L-49188, stated thus: Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (citing Sec. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan London Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A 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 may be refused receipt by the obligee or

for the issuance of a certificate of satisfaction of judgment which was denied in an order by the trial court. Hence, this petition.

On certiorari, the Supreme Court holding that respondent Judge gravely abused his discretion in denying said motion, ruled that private respondent cannot validly refuse acceptance of payment in cashier's check which is deemed as cash in the business sector and that a special civil action of certiorari is proper and not an appeal which is not an adequate and speedy remedy in this case, apart from the fact that the subject of the petition as having been issued in grave abuse of discretion is not the decision, but the order which was issued in execution of said decision.

Petition granted, order of execution set aside.

6. ALFARO FORTUNADO, EDITH FORTUNADO, NESTOR FORTUNADO and RAMON A. GONZALES, petitioners, vs. COURT OF APPEALS, BASILISA CAMPANO, as City Sheriff of Iligan City, REGISTER OF DEEDS, Iligan City, ANGEL L. BAUTISTA and NATIONAL STEEL CORPORATION, respondents.

said judgment, respondent Basilisa Campano, City Sheriff of Iligan City, levied upon two parcels of land registered in the name of Bautista located at Iligan City and covered by TCT Nos. T-7625 and T-14133. The latter lot had already been purchased by respondent National Steel Corporation as of August 17, 1983, but had not yet been registered in its name.

7. TEDDY G. PABUGAIS, petitioner, vs. DAVE P. SAHIJWANI, respondent.2004

Petitioner failed to deliver the required documents. In compliance with their agreement, he returned to respondent the latter's P600,000.00 option/reservation fee by way of Far East Bank & Trust Company Check No. 25AO54252P, which was, however, dishonored.

creditor. Hence, where the tender of payment by the private respondent was not valid for failure to comply with the requisite payment in legal tender or currency stipulated within the grace period and as such, was validly refused receipt by the petitioner, the subsequent consignation did not operate to discharge the former from its obligation to the latter.

MERCANTILE LAW; NEGOTIABLE INSTRUMENT; CASHIER'S CHECK GOOD AS CASH. — 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 transferred from the credit of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the depositor of the drawee bank, with rights and duties of one in such situation. Where a check is certified by the bank on which it is drawn, the certification is equivalent to acceptance. Said certification "implies that the check is drawn upon sufficient funds in the hands of the drawee, that they have been set apart for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an understanding that the check is good then, and shall continue to be good, and this agreement is as binding on the bank as its notes in circulation, a certificate of deposit payable to the order of the depositor, or any other obligation it can assume.

The central issue in this case is whether or not redemption has been validly effected by the private respondents. Petitioners contended that the check issued by NSC, not being legal tender, could not be considered payment of the redemption price. Private respondents however contended that Article 1249 of the New Civil Code is inapplicable as it "deals with a mode of extinction of debts" while the "right to redeem is not an obligation, nor is it intended to discharge a pre-existing debt." Tolentino v. Court of Appeals, besides citing Javellana, stresses the liberality of the courts in redemption cases. On the issue of the applicability of Article 1249 of the Civil Code and the validity of the tender of payment through check, this Court held: Redemption is not rendered invalid by the fact that the said officer accepted a check for the

What transpired thereafter is disputed by both parties. Petitioner claimed that he twice tendered to respondent, through his counsel, the amount of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per annum computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank & Trust Company Manager's Check No. 088498, dated August 3, 1994, but said counsel refused to accept the same. His first attempt to tender payment was allegedly made on August 3, 1994 through his messenger; 6 while the second one was on August 8, 1994, 7 when he sent via DHL Worldwide Services, the manager's check attached to a letter dated August 5, 1994. 8 On August 11, 1994, petitioner wrote a letter to respondent saying that he is consigning the amount tendered with the Regional Trial Court of Makati City. 9 On August 15, 1994, petitioner filed a complaint for consignation.

8. GEORGE A. KAUFFMAN, plaintiff-appellee, vs. THE PHILIPPINE NATIONAL BANK, defendant-

on October 9, 1918, George B. Wicks, treasurer of the Philippine Fiber and Produce Company, presented himself in the exchange department of the Philippine National Bank in Manila and requested that a telegraphic transfer of $45,000 should be made to the plaintiff in New York City, upon account of the Philippine Fiber and Produce Company. He was informed that the total cost of said transfer, including exchange and cost of message, would be P90,355.50. Accordingly, Wicks, as treasurer of the Philippine Fiber and Produce Company, thereupon drew and delivered a check for that amount on the Philippine National Bank; and the same was accepted by the officer selling the exchange in payment of the transfer in question. As evidence of this transaction a document was made out and delivered to Wicks, which is referred to by the bank's assistant cashier as its official receipt.

the admitted facts show that the defendant bank for a valuable consideration paid by the Philippine Fiber and Produce Company agreed on October 9, 1918, to cause a sum of money to be paid to the plaintiff in New York City;

9. GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO

". . . for value received, we the undersigned . . . JOINTLY, SEVERALLY and SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded monthly payable in . . .(120) equal monthly installments of . . . (P127.65) each." 3

private respondents alleged that they signed the mortgage contracts not as sureties or guarantors for the Lagasca spouses but they merely gave their common property to the said co-owners who were solely benefited by the loans from the GSIS

amount necessary to make the redemption instead of requiring payment in money. It goes without saying that if he had seen fit to do so, the officer could have required payment to be made in lawful money, and he undoubtedly, in accepting a check, placed himself in a position where he could be liable to the purchaser at the public auction if any damage had been suffered by the latter as a result of the medium in which payment was made. But this cannot affect the validity of the payment.

TENDER OF CHECK SUFFICIENT TO COMPEL REDEMPTION BUT IS NOT IN ITSELF A PAYMENT. — We are not, by this decision, sanctioning the use of a check for the payment of obligations over the objection of the creditor. What we are saying is that a check may be used for the exercise of the right of redemption, the same being a right and not an obligation. The tender of a check is sufficient to compel redemption but is not in itself a payment that relieves the redemptioner from his liability to pay the redemption price. In other words, while we hold that the private respondents properly exercised their right of redemption, they remain liable, of course, for the payment of the redemption price.

The issues to be resolved in the instant case concerns one of the important requisites of consignation, i.e., the existence of a valid tender of payment. As testified by the counsel for respondent, the reasons why his client did not accept petitioner's tender of payment were — (1) the check mentioned in the August 5, 1994 letter of petitioner manifesting that he is settling the obligation was not attached to the said letter; and (2) the amount tendered was insufficient to cover the obligation. It is obvious that the reason for respondent's non-acceptance of the tender of payment was the alleged insufficiency thereof — and not because the said check was not tendered to respondent, or because it was in the form of manager's check. While it is true that in general, a manager's check is not legal tender, the creditor has the option of refusing or accepting it. 24 Payment in check by the debtor may be acceptable as valid, if no prompt objection to said payment is made. 25 Consequently, petitioner's tender of payment in the form of manager's check is valid.

Negotiable Instruments Law (Act No. 2031) are not relevant to the case. The reason for this is that before the Negotiable Instruments Law can come into operation there must be a document in existence of the character described in section 1 of that Law; and no rights properly speaking arise in respect to said

10. STATE INVESTMENT HOUSE, INC., petitioner, vs. COURT OF APPEALS and NORA B. MOULIC, respondents

Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on commission, two (2) post-dated Equitable Banking Corporation 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 the checks to petitioner State Investment House, Inc. (STATE). cdll

MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks. The checks, however, could no longer be retrieved as they had already been negotiated. Consequently, before their maturity dates, MOULIC withdrew her funds from the drawee bank.

Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20 December 1979, STATE allegedly notified MOULIC of the dishonor of the checks and requested that it be paid in cash instead, although MOULIC avers that no such notice was given her.

On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and expenses of litigation.

In her Answer, MOULIC contends that she incurred no obligation on the checks because the jewelry was never sold and the checks were negotiated without her knowledge and consentThe liability to a holder in due course of the drawer of checks issued to another merely as security

instrument until it is delivered. In the case before us there was an order, it is true, transmitted by the defendant bank to its New York branch, for the payment of a specified sum of money to George A. Kauffman. But this order was not made payable "to order" or "to bearer," as required in subsection (d) of that Act; and inasmuch as it never left the possession of the bank, or its representative in New York City, there was no delivery in the sense intended in section 16 of the same Law. In this connection it is unnecessary to point out that the official receipt delivered! by the bank to the purchaser of the telegraphic order, and already set out above, cannot itself be viewed in the light of a negotiable instrument, although it affords complete proof of the obligation actually assumed by the bank.

NEGOTIABLE INSTRUMENTS LAW; ACCOMMODATION PARTY; DEFINED. — Both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known as the Negotiable Instruments Law, which provide that an accommodation party is one who has signed an instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held liable on the instrument to a holder for value although the latter knew him to be only an accommodation party

. CIVIL LAW; OBLIGATIONS AND CONTRACTS; DEED OF MORTGAGE AND PROMISSORY NOTES, NOT CONSIDERED NEGOTIABLE INSTRUMENTS. — The promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments. These documents do not comply with the fourth requisite to be considered as such under Section 1 of Act No. 2031 because they are neither payable to order nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 would not apply, governance shall be afforded, instead, by the provisions of the Civil Code and special laws on mortgages.

A prima facie presumption exists that the holder of a negotiable instrument is a holder in due course. (State Investment House, Inc. v. Court of Appeals, G.R. No. 72764, 13 July 1989, 175 SCRA 310). Consequently, the burden of proving that STATE is not a holder in due course lies in the person who disputes the presumption. In this regard, MOULIC failed. The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular; (b) petitioner bought these checks from the payee, Corazon Victoriano, before their due dates; (c) petitioner took these checks in good faith and for value, albeit at a discounted

11. FEDERICO O. BORROMEO, LOURDES O. BORROMEO and FEDERICO O. BORROMEO, INC, petitioners, vs. AMANCIO SUN and the COURT OF APPEALS, respondents.

Private respondent (amancio Sun) brought before the then Court of the First Instance of Rizal, an action, against Lourdes O. Borromeo, Federico O. Borromeo and Federico O. Borromeo, Inc. (FOB), to compel the transfer to his name in the books of FOB 23, 223 shares of stock registered in the name of Federico Borromeo, as evidenced by a Deed of Assignment dated January 16, 1974. After trial, the lower court came out with a decision declaring the questioned signature on subject Deed of Assignment as the genuine signature of Federico Borromeo. On appeal by petitioners, the Court of Appeals adjudged as forgery the controverted signature of herein petitioner Borromeo. However, after the private respondent filed a motion for reconsideration, the appellate court reversed its decision and affirmed in toto the decision of the trial court. Aggrieved by the decision, petitioners filed the instant petition contending that the appellate court erred in holding that the signature of Federico Borromeo in Deed of Assignment is a genuine signature.

12. SESBRENO V. CA Petitioner made a placement with Philfinance. The latter delivered to him documents, some of which was a promissory note from Delta Motors and a post-dated check. The post-dated checks were dishonored. This prompted petitioner to ask for the promissory note from DMC and it

price; and, (d) petitioner was never informed nor made aware that these checks were merely issued to payee as security and not for value. Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free from any defect of title of prior parties, and from defenses available to prior parties among themselves; STATE may, therefore, enforce full payment of the checks. (Sales v. Court of Appeals, G.R. No. 76788, 22 January 1990; 181 SCRA 296). MOULIC cannot set up against STATE the defense that there was failure or absence of consideration. MOULIC can only invoke this defense against STATE if it was privy to the purpose for which they were issued and therefore is not a holder in due course.

The drawing and negotiation of a check have certain effects aside from the transfer of title or the incurring of liability in regard to the instrument by the transferor. The holder who takes the negotiated paper makes a contract with the parties on the face of the instrument. There is an implied representation that funds or credit are available for the payment of the instrument in the bank upon which it is drawn (11 Am Jur 589). Consequently, the withdrawal of the money from the drawee bank to avoid liability on the checks cannot prejudice the rights of holders in due course. In the instant case, such withdrawal renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks. Under the facts of this case, STATE could not expect payment as MOULIC left no funds with the drawee bank to meet her obligation on the checks, so that Notice of Dishonor would be futile.

That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as against a holder in due course. For, the only grounds are those outlined in Sec. 119 of the Negotiable Instrument Law: "Sec. 119. Instrument; how discharged. — A negotiable instrument is discharged: (a) By payment in due course by or on behalf of the principal debtor; (b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple contract for the payment of money; (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right." Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument. But, the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up, burning it, or writing the word "cancelled" on the instrument. The act of destroying the instrument must also be made by the holder of the instrument intentionally. Since MOULIC failed to get back possession of the post-dated checks, the intentional cancellation of the said checks is altogether impossible. On the other hand, the acts which will discharge a simple contract for the payment of money

was discovered that the note issued by DMC was marked as non-negotiable. As Sesbreno failed to recover his money, he filed case against DMC and Philfinance.

13. CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T. VERGARA, petitioners, vs. IFC LEASING AND ACCEPTANCE CORPORATION, respondent.

Simultaneously with the execution of the deed of sale with chattel mortgage with promissory note, the seller-assignor (atlantic), by means of a deed of assignment (Exh. "1"), assigned its rights and interest in the chattel mortgage in favor of the respondent.

Because of the breaking down of the tractors, the road building and simultaneous logging operations of petitioner-corporation were delayed and petitioner Vergara advised the seller-assignor that the payments of the installments as listed in the promissory note would likewise be delayed until the seller-assignor completely fulfills its obligation under its warranty

"FOR VALUE RECEIVED, I/we jointly and severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING, the sum of ONE MILLION NINETY THREE THOUSAND SEVEN HUNDRED EIGHTY NINE PESOS & 71/100 only (P1,093,789.71), Philippine Currency, the said principal sum, to be payable in 24 monthly installments starting July 15, 1978 and every 15th of the month thereafter until fully paid. . . . ."

whether the plaintiff-appellee is a holder in due course of the promissory note.

under paragraph (d) are determined by other existing legislations since Sec. 119 does not specify what these acts are, e.g., Art. 1231 of the Civil Code which enumerates the modes of extinguishing obligations. Again, none of the modes outlined therein is applicable in the instant case as Sec. 119 contemplates of a situation where the holder of the instrument is the creditor while its drawer is the debtor. In the present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time the jewelry was returned.

MOULIC may not unilaterally discharge herself from her liability by the mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability on her checks to a holder in due course. Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. The need for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable Instruments Law. Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve the checks when she returned the jewelry. She simply withdrew her funds from her drawee bank and transferred them to another to protect herself. After withdrawing her funds, she could not have expected her checks to be honored. In other words, she was responsible for the dishonor of her checks, hence, there was no need to serve her Notice of Dishonor, which is simply bringing to the knowledge of the drawer or indorser of the instrument, either verbally or by writing, the fact that a specified instrument, upon proper proceedings taken, has not been accepted or has not been paid, and that the party notified is expected to pay it (Martin v. Browns, 75 Ala. 442) In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering transactions in commercial paper. Thus, the said statute should not be tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities in a single case. (Reinhart vs. Lucas, 118 M Va 466, 190 SSE 72).

Pertinent records reveal that the subject Deed of Assignment is embodied in a blank form for the assignment of shares with authority to transfer such shares in the books of the corporation. It was clearly intended to be signed in blank to facilitate the assignment of shares from one person to another at any future time. This is similar to Section 14 of the Negotiable Instruments Law where the blanks may be filled up by the holder, the signing in blank being with the assumed authority to do so. Indeed, as the shares were registered in the name of Federico O. Borromeo just to give

14 CALTEX (PHILIPPINES), INC., petitioner, vs. COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.

Angel Dela cruz deposited by CTD to security bank. Deliverd CTD to Caltex in payment of fuel supplies. Declared lost to the bank. Replaced. Loaned from Bank assigned CTDs.Certificate states that the bearer is teh depositor who will be repaid upon maturity. word `bearer' appears rather boldly in the CTDs issued, it is important to note that after the word `BEARER' stamped on the space provided supposedly for the name of the depositor, the words `has deposited' a certain amount follows. The document further provides that the amount deposited shall be `repayable to said depositor' on the period indicated. Therefore, the text of the instrument(s) themselves manifest with clarity that they are payable, not to whoever purports to be the `bearer' but only to the specified person indicated therein, the depositor. In effect, the appellee bank acknowledges its depositor Angel dela Cruz as the person who made the deposit and further engages itself to pay said depositor the amount indicated thereon at the stipulated date."

15. THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee, vs. JOSE M. ARUEGO, defendant-appellant.defendant signed as a drawee/acceptor.

him personality and standing in the business community, private respondent had to have a counter evidence of ownership of the shares involved. Thus, the execution of the deed of assignment in blank, to be filled up whenever needed. The same explains the discrepancy between the date of the deed of assignment and the date when the signature was affixed thereto. While it is true that the 1974 standard signature of Federico O. Borromeo is to the naked eye dissimilar to his questioned signature circa 1954-1957, which could have been caused by sheer lapse of time, Col. Jose Fernandez, respondent's expert witness, found the said signatures similar to each other after subjecting the same to stereomicroscopic examination and analysis because the intrinsic and natural characteristic of Federico O. Borromeo's handwriting were present in all the exemplar signatures used by both Segundo Tabayoyong and Col. Jose Fernandez. It is therefore beyond cavil that the findings of the Court of origin affirmed by the Court of Appeals on the basis of the corroborative findings of the Philippine Constabulary Crime Laboratory confirmed the genuineness of the signature of Federico O. Borromeo in the Deed of Assignment dated January 16, 1974

The  non-negotiability  of  the  instrument  doesn’t  mean  that  it  is  non-assignable or transferable.  It may still be assigned or transferred in whole or in part, even without the consent of the promissory note, since consent is not necessary for the validity of the assignment.  In  assignment,  the  assignee  is  merely  placed  in  the  position  of  the assignors  and  acquires  the  instrument  subject  to  all  the  defenses  that might have been set up against the original payee.

Distinction – NIL is negotiated by end and delivery- if payable to order, delivery if payabe to bearer- WHILE ordinary contract is transferred from one person to another by deed of assignment or any modes.

It is patent then, that the seller-assignor is liable for its breach of warranty against the petitioner. This liability as a general rule, extends to the corporation to whom it assigned its rights and interests unless the assignee is a holder in due course of the promissory note in question, assuming the note is negotiable, in which case the latter's rights are based on the negotiable instrument and assuming further that the petitioner's defenses may not prevail against it.

Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires that a promissory note "must be payable to order or bearer," it cannot be denied that the promissory note in question is not a

16 BANCO DE ORO SAVINGS AND MORTGAGE BANK, petitioner, vs. EQUITABLE BANKING CORPORATION, PHILIPPINE CLEARING HOUSE CORPORATION, AND REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH XCII (92) respondents.

"It appears that sometime in March, April, May and August 1983, plaintiff through its Visa Card Department, drew six crossed Manager's check (Exhibits 'A' to 'F', and herein referred to as Checks) having an aggregate amount of Forty Five Thousand Nine Hundred and Eighty Two & 23/100 (P45,982.23) Pesos and payable to certain member establishments of Visa Card. Subsequently, the Checks were deposited with the defendant to the credit of its depositor, a certain Aida Trencio.

Following normal procedures, and after stamping at the back of the Checks the usual endorsements: 'All prior and/or lack of endorsement guaranteed' the defendant sent the checks for clearing through the Philippine Clearing House Corporation (PCHC). Accordingly, plaintiff paid the Checks; its clearing account was debited for the value of the Checks and defendant's clearing account was credited for the same amount.

Thereafter, plaintiff discovered that the endorsements appearing at the back of the Checks and purporting to be that of the payees were forged and/or unauthorized or otherwise belong to persons other than the payees.

Pursuant to the PCHC Clearing Rules and Regulations, plaintiff presented the Checks directly to the defendant for the purpose of claiming reimbursement from the latter. However, defendant refused to accept such direct presentation and to reimburse the plaintiff for the value of the Checks; hence, this case.

17. jimenes vs BUCOY

Pacita young Executed in the month of August 1944, the first promissory note read as follows:

"Received from Miss Pacifica Jimenez the total amount of P10,000) ten thousand pesos payable six months after the war, without interest."

Claim from the intestate of pacita young.

negotiable instrument.

"The instrument in order to be considered negotiable must contain the so called 'words of negotiability' — i.e., must be payable to 'order' or 'bearer'. These words serve as an expression of consent that the instrument may be transferred. This consent is indispensable since a maker assumes greater risk under a negotiable instrument than under a non-negotiable one. . . . .

xxx xxx xxx

"When instrument is payable to order. —

"SEC. 8. WHEN PAYABLE TO ORDER. — The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order . . .

xxx xxx xxx

"These are the only two ways by which an instrument may be made payable to order. There must always be a specified person named in the instrument. It means that the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. Without the words 'or order' or 'to the order of,' the instrument is payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but will merely 'step into the shoes' of the person designated in the instrument and will thus be open to all defenses available against the latter." (Campos and Campos, Notes and Selected Cases on Negotiable Instruments Law, Third Edition, page 38). (Emphasis supplied)

Therefore, considering that the subject promissory note is not a negotiable instrument, it follows that the respondent can never be a holder in due course but remains a mere assignee of the note in question. Thus, the petitioner may raise against the respondent all defenses available to it as against the seller-assignor, Industrial Products Marketing.

Section 58 of the Negotiable Instruments Law provides that "in the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable.

REQUIREMENTS FOR NEGOTIABILITY; CERTIFICATE OF TIME DEPOSIT AS NEGOTIABLE INSTRUMENT; CASE AT BAR. — Section 1 of Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an instrument to

18. METROPOLITAN BANK & TRUST COMPANY, petitioner, vs. COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO, respondents.

Treasury warrants Gomez deposited to golden saving loans association. Golden savings treasurer endorsed to metrobank calapan , which sent it to metrobank manila that forwarded it for clearing at bureau of treasury. To accommodate golden and due to persistence metrobank calapan allowed golden to withdraw the proceeds then golden allowed Gomez to withdraw. of the trea. Warrants. 32 of 38 treasury warrants dishonored. Whos liable?

19. PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. JOSE C. ZULUETA, defendant-appellee.

"On October 26, 1948, Defendant-Appellee applied for a commercial letter of credit with Plaintiff-Appellant, Philippine National Bank (Manila) and was granted L/C

become negotiable, viz: "(a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty." The CTDs in question undoubtedly meet the requirements of the law for negotiability. The parties' bone of contention is with regard to requisite (d) set forth above. It is noted that Mr. Timoteo P. Tiangco, Security Bank's Branch Manager way back in 1982, testified in open court that the depositor referred to in the CTDs is no other than Mr. Angel de la Cruz. . . . Contrary to what respondent court held, the CTDs are negotiable instruments. The documents provide that the amounts deposited shall be repayable to the depositor. And who, according to the document, is the depositor? It is the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter, whosoever may be the bearer at the time of presentment.

On this score, 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

NEGOTIABLE INSTRUMENTS LAW; BILLS OF EXCHANGE; PERSONS SIGNING IN REPRESENTATIVE CAPACITY SHOULD DISCLOSE PRINCIPAL. — Where an inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing as a representative of the Philippine Education Foundation Company, and he merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARUEGO", he is personally liable for the drafts accepted by him and he may not interpose as a defense that he signed the drafts merely as an agent of the Philippines Education Foundation Company of which he is president.

5. ID.; ID.; ID.; ACCOMMODATION PARTY DIFFERENTIATED FROM DRAWEE/ACCEPTOR; CASE AT BAR. — An accommodation party is one who has signed the instrument as maker, drawer, acceptor, indorser, without receiving value thereof and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation party. In lending his name to the party accommodated, the accommodation party is in effect a surety for the latter. He lends his name to enable the accommodated party to obtain credit or to

No. 36171 (Exhibit "B") on November 6, 1948, in favor of Otis Elevator Co., 260 Eleventh Avenue, New York City, U.S.A., for $14,449.15 for the purchase of an electric passenger elevator; on May 17, 1949, and under the said letter of credit (Exhibit "B"), Otis Elevator Co. drew a 90 day sight draft for $14,449.15 (Exhibit "A") which draft was duly presented to and accepted by Defendant-Appellee on July 6, 1949. Said acceptance matured on October 4, 1949. Upon Defendant-Appellee's signing a 90 day trust receipt (Exhibit "C") on June 3, 1949, Plaintiff-Appellant released to Defendant-Appellee the covering documents of the shipment. In the meantime, debit advice (Exhibit "G") was received from Plaintiff-Appellant's New York Agency to the effect that it advanced or paid the draft (Exhibit "A") to Otis Elevator Co. on May 17, 1949, and charged Plaintiff-Appellant the sum of $14,467.21 representing the face value of the draft (Exhibit "A") plus $18.06 as 1/8 of 1% commission. After the maturity date (October 4, 1949) Plaintiff- Appellant presented the draft to Defendant-Appellee for payment but the latter failed, neglected and refused to pay.

20. ANG TEK LIAN, petitioner, vs. THE COURT OF APPEALS, respondent.

on November 16, 1946, appellant went to his (complainant's) office, at 1217 Herran, Paco, Manila, and asked him to exchange Exhibit A — which he (appellant) then brought with him — with cash alleging that he needed badly the sum of P4,000 represented by the check, but could not withdraw it from the bank, it being then already closed; that in view of this request and relying upon appellant's assurance that he had sufficient funds in the bank to meet Exhibit A, and because they used to borrow money from each other, even before the war, and appellant owns a hotel and restaurant known as the North Bay Hotel, said complainant delivered to him, on the same date, the sum of P4,000 in cash; that despite repeated efforts to notify him that the check had been dishonored by the bank, appellant could not be located any-where, until he was summoned in the City Fiscal's Office in view of the complaint for estafa filed in connection therewith; and that appellant has not paid as yet the amount of the check, or any part thereof."

raise money. He receives no part of the consideration for the instrument but assumes liability to the other parties thereto because he wants to accommodate another. In the instant case, the defendant signed as a drawee/acceptor. Under the Negotiable Instruments Law, a drawee is primarily liable. Thus, if the defendant who is a lawyer, really intended to be secondarily liable only, he should not have signed as an acceptor/drawee. In doing so, he became primarily and personally liable for the drafts.

6. ID.; ID.; ID.; NATURE OF ACCEPTANCE NOT DETERMINATE AS TO WHETHER COMMERCIAL PAPER IS BILL OF EXCHANGE OR NOT. — 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, requiring the person to whom it is addressed to party on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of exchange. The nature of acceptance is important only in determination of whether a commercial paper is a bill of exchange or not. Thus, in the case at bar, defendant's contentions that the drafts signed by him were not really bills of exchange but mere pieces of evidence of indebtedness because payments were made before acceptance, is not meritorious.

In presenting the Checks for clearing and for payment, the defendant made an express guarantee on the validity of 'all prior endorsements'. Thus, stamped at the bank of the checks are the defendant's clear warranty: ALL PRIOR ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS GUARANTEED. Without such warranty, plaintiff would not have paid on the checks.

No amount of legal jargon can reverse the clear meaning of defendant's warranty. As the warranty has proven to be false and inaccurate, the defendant is liable for any damage arising out of the falsity of its representation

The petitioner by its own acts and representation can not now deny liability because it assumed the liabilities of an endorser by stamping its guarantee at the back of the checks.

The petitioner having stamped its guarantee of "all prior endorsements and/or lack of endorsements" (Exh. A-2

21.PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MANILA OIL REFINING & BY-PRODUCTS COMPANY, INC., defendant-appellant.

On May 8, 1920, the manager and the treasurer of the Manila Oil Refining & By-Products Company, Inc,. executed and delivered to the Philippine National Bank, a written instrument reading as follows:

"RENEWAL.

"P61,000.00

"MANILA, P.I., May 8, 1920.

"On demand after date we promise to pay to the order of the Philippine National Bank sixty-one thousand only pesos at Philippine National Bank, Manila, P.I.

"Without defalcation, value received; and do hereby authorize any attorney in the Philippine Islands, in case this note be not paid at maturity, to appear in my name and confess judgment for the above sum with interest, cost of suit and attorney's fees of ten (10) per cent for collection, a release of all errors and waiver of all rights to inquisition and appeal, and to the benefit of all laws exempting property, real or personal, from levy or sale. Value received. No. —— Due ——

"MANILA OIL REFINING & BY-PRODUCTS CO., INC.,

(Sgd.) "VICENTE SOTELO,

"Manager.

"MANILA OIL REFINING & BY-PRODUCTS CO., INC.,

(Sgd.) "RAFAEL LOPEZ.

"Treasurer."

to F-2) is now estopped from claiming that the checks under consideration are not negotiable instruments. The checks were accepted for deposit by the petitioner stamping thereon its guarantee, in order that it can clear the said checks with the respondent bank. By such deliberate and positive attitude of the petitioner it has for all legal intents and purposes treated the said checks as negotiable instruments and accordingly assumed the warranty of the endorser when it stamped its guarantee of prior endorsements at the back of the checks. It led the said respondent to believe that it was acting as endorser of the checks and on the strength of this guarantee said respondent cleared the checks in question and credited the account of the petitioner. Petitioner is now barred from taking an opposite posture by claiming that the disputed checks are not negotiable instrument.

NEGOTIABLE INSTRUMENTS; PROMISSORY NOTES; WHEN ACKNOWLEDGMENT BECOMES A PROMISE TO PAY. — An acknowledgment of a debt becomes a promise to pay by the addition of words implying a promise of payment, such as, "payable," "payable on a given day," "payable on demand".

"An acknowledgment may become a promise by the addition of words by which a promise of payment is naturally implied, such as, "payable," "payable" on a given day, "payable on demand," "paid . . . when called for," . . . . (10 Corpus Juris Secundum p. 523.).

"To constitute a good promissory note, no precise words of contract are necessary, provided they amount, in legal effect, to a promise to pay. In other words, if over and above the mere acknowledgment of the debt there may be collected from the words used a promise to pay it, the instrument may be regarded as a promissory note. 1 Daniel, Neg. Inst. sec. 36 et seq.; Byles, Bills, 10, 11, and cases cited . . .. "Due A. B. $325, payable on demand," or, "I acknowledge myself to be indebted to A in $109, to be paid on demand, for value received," or, "I O. U. $85 to be paid on May 5th," are held to be promissory notes, significance being given to words of payment as indicating a promise to pay." 1 Daniel Neg. Inst. see. 39, and cases cited. (Cowan vs. Hallack, (Colo.) 13 Pacific Reporter 700, 703.).

Golden Savings acted with due care and diligence and cannot be faulted for the withdrawals it allowed Gomez to make.

treasury warrants in question are not negotiable

22. EQUITABLE BANKING CORPORATION, petitioner, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and THE EDWARD J. NELL CO., respondents.

"Defendants Casals and Casville hardly disputed their liability to plaintiff. Not only did they show lack of interest in disputing plaintiff's claim by not appearing in most of the hearings, but they also assigned to plaintiff the garrett skidder which is an action of clear recognition of their liability.

"What is left for the Court to determine, therefore, is only the liability of defendant bank to plaintiff.

The crucial issue to resolve is whether or not petitioner Equitable Banking Corporation (briefly, the Bank) is liable to private respondent Edward J. Nell Co. (NELL, for short) for the value of the second check issued by NELL, Exhibit "E-1," which was made payable

"to the order of EQUITABLE BANKING CORPORATION A/C OF CASVILLE ENTERPRISES INC."

and which the Bank teller credited to the account of Casville.

23. PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. CONCEPCION MINING COMPANY, INC., ET AL., defendant-appellants.

The present action was instituted by the plaintiff to recover from the defendants the face of a promissory note the pertinent part of which reads as follows:

"Manila, March 12, 1954

"NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . .

"In case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsers shall pay ten per cent (10%) of the amount due on the note as attorney's fees, which in no case shall be less than P100.00 exclusive of all costs and fees allowed by law as stipulated in the contract of real estate mortgage. Demand and Dishonor Waived. Holder may accept partial payment reserving his right of recourse against each and all indorsers.

(Purpose — mining industry)

CONCEPCION MINING COMPANY, INC.,

instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, and this is of equal significance, it is indicated that they are payable from a particular fund, to wit, Fund 501.

The following sections of the Negotiable Instruments Law, especially the underscored parts, are pertinent:

SECTION 1. — Form of negotiable instruments. — An instrument to be negotiable must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

xxx xxx xxx

SEC. 3. When promise is unconditional. — An unqualified order or promise to pay is unconditional within the meaning of this Act though coupled with —

(a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount; or

(b) A statement of the transaction which gives rise to the instrument.

But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay "not unconditional" and the warrants themselves non-negotiable. There should be no question that the exception on Section 3 of the Negotiable Instruments Law is applicable in the case at bar. This conclusion conforms to Abubakar vs. Auditor General 11 where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and is entitled to the rights and privileges of a holder in due course, free from defenses. But this treasury warrant is not within the scope of the negotiable instrument law. For one thing, the document bearing on its face the words

By:(Sgd.) VICENTE LEGARDA

President

(Sgd.) VICENTE LEGARDA

(Sgd.) JOSE S. SARTE

"Please issue check to —

Mr. Jose S. Sarte"

Sought to implead the estate of dead promissor

24 REPUBLIC PLANTERS BANK, petitioner, vs. COURT OF APPEALS and FERMIN CANLAS, respondents.

From the records, these facts are established: Defendant Shozo Yamaguchi and private respondent Fermin Canlas were President/Chief Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc. By virtue of Board Resolution No. 1 dated August 1, 1979, defendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized to apply for credit facilities with the petitioner Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I inclusive, each of which were uniformly worded in the following manner:

"_____________, after date, for value received, I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of __________ PESOS ( ), Philippine Currency . . . ."

On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi and Fermin Canlas above their printed names with the phrase "and (in) his personal capacity" typewritten below. At the bottom of the promissory notes appeared: "Please credit proceeds of this note to:

_____ Savings Account ___ XX Current Account No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP.

These entries were separated from the text of the notes with a bold line which ran horizontally across the pages.

25. FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS

"payable from the appropriation for food administration, is actually an Order for payment out of "a particular fund," and is not unconditional and does not fulfill one of the essential requirements of a negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable Instruments Law).

Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were "genuine and in all respects what they purport to be," in accordance with Section 66 of the Negotiable Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but merely to deposit them with Metrobank for clearing. It was in fact Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch." LLphil

BILLS AND NOTES; FOREIGN BILLS OF EXCHANGE. — When a foreign bill of exchange expressed in foreign money becomes payable here, it is payable at the rate of exchange in effect on the day it should have been paid not at the rate of exchange prevailing when action therein is brought or when judgment is rendered.

The document is negotiable and is governed by the Negotiable Instruments Law. But this statute does not contain any express provision on the question. We know the draft is a foreign bill of exchange, because, drawn in New York, it is payable here. (Sec. 129 Negotiable Instruments Law.) We also know that although the amount payable is expressed in dollars-not current money here-it is still negotiable, for it may be discharged with pesos of equivalent amount 3 . The problem arises when we try to determine the "equivalent amount", because the rate of exchange fluctuates from day to day.

There are decisions in America to the effect that, "the rate of exchange in effect at the time the bill should have been paid" controls. (11 C.J.S. p. 264.)

Such decisions agree with the provisions of the Bills of Exchange Act of England 4 and could be taken as enunciating the correct principle, inasmuch as our Negotiable Instruments Law, practically copied the American Uniform Negotiable Instruments Law which in turn was based largely on the Bills of Exchange Act of

and LUZON DEVELOPMENT BANK, respondents.

plaintiff was induced to continue extending to Fojas-Arca further purchase on credit of its products as per agreement (Exh. Used withrwal slips issued by Luzon dev. Bank. Deposited to Citibank, eventually dishonoured for “ no arrangement”

The initial transaction in this case was between petitioner and Fojas-Arca, whereby the latter purchased tires from the former with special withdrawal slips drawn upon Fojas-Arca's special savings account with respondent bank. Petitioner in turn deposited these withdrawal slips with Citibank. The latter credited the same to petitioner's current account, then presented the slips for payment to respondent bank. It was at this point that the bone of contention arose.

Citibank, with the knowledge that respondent Luzon Development Bank, had honored and paid the previous withdrawal slips, automatically credited petitioner's current account with the amount of the subject withdrawal slips, then merely waited for the same to be honored and paid by respondent bank. It presumed that the withdrawal slips were "good."

Withdrawal slips negotiable?

26 .JUANITA SALAS, petitioner, vs. HON. COURT OF APPEALS and FILINVEST FINANCE & LEASING CORPORATION, respondents.

February 6, 1980, Juanita Salas (hereinafter referred to as petitioner) bought a motor vehicle from the Violago Motor Sales Corporation (VMS for brevity) for P58,138.20 as evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (hereinafter referred to as private respondent) which financed the purchase.

Petitioner defaulted in her installments beginning May 21, 1980 allegedly due to a discrepancy in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when the vehicle figured in an accident on 9 May 1980.

This failure to pay prompted private respondent to initiate Civil Case No. 5915 for a sum of money against petitioner before the Regional Trial Court of San Fernando, Pampanga

The pivotal issue in this case is whether the promissory note in question is a negotiable instrument which will bar completely all the available defenses of the petitioner against private

England of 1882. In fact we practically followed this rule in Westminster Bank vs. K. Nassoor, 58 Phil. 855.

CRIMINAL LAW; ESTAFA"; ISSUING CHECK WITH INSUFFICIENT BANK DEPOSIT TO COVER THE SAME. — One who issues a check payable to cash to accomplish deceit and knows that at the time had no sufficient deposit with the bank to cover the amount of the check and without informing the payee of such circumstances, is guilty of estafa as provided by article 315, paragraph (d), subsection 2 of the Revised Penal Code.

Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the order of "cash" is a check payable to bearer, and the bank may pay it to the person presenting it for payment without the drawer's indorsement

Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the order of "cash" is a check payable to bearer, and the bank may pay it to the person presenting it for payment without the drawer's indorsement.

"A check payable to the order of cash is a bearer instrument. Bacal vs. National City Bank of New York (1933), 146 Misc., 732; 262 N. Y. S., 839; Cleary vs. Da Beck Plate Glass Co. (1907), 54 Misc., 537; 104 N. Y. S., 831; Massachusetts Bonding & Insurance Co. vs. Pittsburgh Pipe & Supply Co. (Tex. Civ. App., 1939), 135 S. W. (2d), 818. See also H. Cook & Son vs. Moody (1916), 17 Ga. App., 465; 87 S. E., 713."

"Where a check is made payable to the order of 'cash', the word cash 'does not purport to be the name of any person', and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but may pay it to the person presenting it without any indorsement. . . ." (Zollmann, Banks and Banking, Permanent Edition, Vol. 6, p. 494.)

Of course, if the bank is not sure of the bearer's identity or financial solvency, it has the right to demand identification and/or assurance against possible complications, — for instance, (a) forgery of drawer's signature, (b) loss of the check by the rightful owner, (c) raising of the amount payable, etc. The bank may therefore require, for its protection, that the indorsement of the drawer — or of some other person known to it — be obtained. But where the Bank is satisfied of the identity and/or the economic standing of the bearer who tenders the check for collection, it will pay the instrument without further question; and it would incur no liability to the drawer in thus acting.

respondent.

26.LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his personal capacity as garnishee, petitioner, vs. HON. JOSE BURGOS, Presiding Judge, RTC, and RAUL H.

28. MANUEL LIM V. COURT OF APPEALS

Spouses Lim were charged with estafa and violations of BP22 for allegedly purchasing goods from Linton

"A check payable to bearer is authority for payment to the holder. Where a check is in the ordinary form, and is payable to bearer, so that no indorsement is required, a bank, to which it is presented for payment, need not have the holder identified, and is not negligent in failing to do so. . . ." (Michie on Banks and Banking, Permanent Edition, Vol. 5, p. 343.)

". . . Consequently, a drawee bank to which a bearer check is presented for payment need not necessarily have the holder identified and ordinarily may not be charged with negligence in failing to do so. See Opinions 6C:2 and 6C:3. If the bank has no reasonable cause for suspecting any irregularity, it will be protected in paying a bearer check, 'no matter what facts unknown to it may have occurred prior to the presentment.' 1 Morse, Banks and Banking, sec. 393.

"Although a bank is entitled to pay the amount of a bearer check without further inquiry, it is entirely reasonable for the bank to insist that the holder give satisfactory proof of his identity . . .." (Paton's Digest, Vol. I, p. 1089.)

NEGOTIABLE INSTRUMENTS LAW (ACT No. 2031), SECTION 5 (b) OF negotiable Instrument otherwise negotiable is not affected by a provision which authorizes a confession of judgment if the instrument be not paid at maturity, cannot be taken to sanction judgments by confession.

A provision in a promissory note whereby in case the same is not paid at maturity, the maker authorizes any attorney to appear and confess judgment thereon for the principal amount, with interest, costs, and attorney's fees, and waives all errors, rights to inquisition, and appeal, and all property exemptions, is not valid in this jurisdiction.

CIVIL LAW; OBLIGATIONS AND CONTRACTS; INTERPRETATION OF CONTRACTS; AMBIGUITY IN THE CONTRACT SHALL BE CONSTRUED AGAINST THE PARTY WHO CAUSED IT. — The subject check

Commercial Corporation and issuing checks as  payment  thereof.    The  checks  when  presented  to  the  bank  were dishonored  for  insufficiency  of  funds  or    the  payment  for  the  checks  has been stopped.    

was equivocal and patently ambiguous. By making the check read; "Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF CASVILLE ENTERPRISES, INC." the payee ceased to be indicated with reasonable certainty in contravention of Section 8 of the Negotiable Instruments Law. As worded, it could be 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 latter being the ultimate beneficiary. That ambiguity is to be taken contra proferentem that is, construed against NELL who caused the ambiguity and could have also avoided it by the exercise of a little more care. In the last analysis, it was NELL's own acts, which put it into the power of Casals and Casville Enterprises to perpetuate the fraud against it and, consequently, it must bear the loss (Blondeau, et al., vs. Nano, et al., 61 Phil. 625 [1935], and other cases cited)

BILLS, NOTES AND CHECKS; NEGOTIABLE INSTRUMENT; SIGNED BY TWO OR MORE PERSONS; LIABILITY. — Under Section 17 (g) of the Negotiable Instrument Law and Art. 1216 of the Civil 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 the note.

Section 17(g) of the Negotiable Instruments Law provides as follows:

"SEC. 17. Construction where instrument is ambiguous. — Where the language of the instrument is ambiguous or there are omission therein, the following rules of construction apply:

xxx xxx xxx

"(g) Where an instrument containing the words 'I promise to pay' is signed by two or more persons, they are deemed to be jointly and severally liable thereon."

And Article 1216 of the Civil Code of the Philippines also provides as follows:

"ART. 1216. The creditor may proceed against any one of the solidary debtors or some of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected."

Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. By signing the notes, the maker promises to pay to the order of the payee or any holder according to the tenor thereof. Based on the above provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape liability arising therefrom.

Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon. An instrument which begins with "I", "We", or "Either of us" promise to pay, when signed by two or more persons, makes them solidarily liable. The fact that the singular pronoun is used indicates that the promise is individual as to each other; meaning that each of the co-signers is deemed to have made an independent singular promise to pay the notes in full.

petitioner admits that the withdrawal slips in question were non-negotiable. 9 Hence, the rules governing the giving of immediate notice of dishonor of negotiable instruments do not apply in this case

It bears stressing that Citibank could not have missed the non-negotiable nature of the withdrawal slips. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute for money. 12 The withdrawal slips in question lacked this character.

The fact that the other withdrawal slips were honored and paid by respondent bank was no license for Citibank to presume that subsequent slips would be honored and paid immediately. By doing so, it failed in its fiduciary duty to treat the accounts of its clients with the highest degree of care.The fact that the other withdrawal slips were honored and paid by respondent bank was no license for Citibank to presume that subsequent slips would be honored and paid immediately. By doing so, it failed in its fiduciary duty to treat the accounts of its clients with the highest degree of care.

The records reveal that involved herein is not a simple case of assignment of credit as petitioner would have it appear, where the assignee merely steps into the shoes of, is open to all defenses available against and can enforce payment only to the same extent as, the assignor-vendor.

REQUISITES; SATISFIED IN CASE AT BAR. — The questioned promissory note shows that it is a negotiable instrument, having complied with the requisites under the law as follows: [a] it is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional promise to pay the amount of P58,138.20; [c] it is payable at a fixed or determinable future time which is "P1,614.95 monthly for 36 months due and payable on the 21st day of each month starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to Violago Motor Sales Corporation, or order and as such, [e] the drawee is named or indicated with certainty.

NEGOTIABLE AND NON-NEGOTIABLE INSTRUMENT, DISTINGUISHED. — In the case of Consolidated Plywood Industries Inc. v. IFC Leasing and Acceptance Corp., this Court had the occasion to clearly distinguish between a negotiable and a non-negotiable instrument. Among others, the instrument in order to be considered negotiable must contain the so-called "words of negotiability — i.e., must be payable to 'order' or 'bearer.'" Under Section 8 of the Negotiable Instruments Law, there are only two ways by which an instrument may be made payable to order. There must always be a specified person named in the instrument and the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. Without the words "or order" or "to the order of", the instrument is payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available against the latter.

REQUISITES OF HOLDER IN DUE COURSE. — 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 dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation.

RIGHT OF A HOLDER IN DUE COURSE; APPLICABLE IN THE CASE AT BAR. — Respondent corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof. This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS. Even assuming for the sake of argument that there is an iota of truth in petitioner's allegation that there was in fact deception made upon her in that the vehicle she purchased was different from that actually delivered to her, this matter cannot be passed upon in the case before us, where the VMS was never impleaded as a party.

Garnishment is considered as a species of attachment for reaching credits belonging to the judgment debtor owing to him from a stranger to the litigation. Emphasis is laid on the phrase "belonging to the judgment debtor" since it is the focal point in resolving the issues raised.

RULE IN CASE OF SALARY CHECK OF GOVERNMENT OFFICER OR EMPLOYEE. — As Assistant City Fiscal, the source of the salary of Mabanto Jr., is public funds. He receives his compensation in the form of checks from the Department of Justice through petitioners City Fiscal of Mandaue City and head of office. Under Sec. 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or drawer with intent to transfer title to the payee and recognize him as the holder thereof. According to the trial court, the checks of Mabanto, Jr., were already released by the Department of Justice duly signed by the officer concerned through petitioner and upon service of the writ of garnishment by the sheriff petitioner was under obligation to hold them for the judgment creditor. It recognized the role of petitioner as custodian of the checks. At the same time however it considered the checks as no longer government funds and presumed delivered to the payee based on the last sentence of Sec. 16 of the Negotiable Instruments Law which states: "And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed." Yet, the presumption is not conclusive because the last portion of the provision says "until the contrary is proved." However this phrase was deleted by the trial court for no apparent reason. Proof to the contrary is its own finding that the checks were in the custody of petitioner. Inasmuch as said checks had not

yet been delivered to Mabanto, Jr., they did not belong to him and still had the character of public funds. In Tiro v. Hontanosas (No. L-32312, 25 November 1983, 125 SCRA 697) we ruled that — The salary check of a government officer or employee such as a teacher does not belong to him before it is physically delivered to him. Until that time the check belongs to the government. Accordingly, before there is actual delivery of the check, the payee has no power over it; he cannot assign it without the consent of the Government. As a necessary consequence of being public fund, the checks may not be garnished to satisfy the judgment. The rationale behind this doctrine is obvious consideration of public policy. The Court succinctly stated in Commissioner of Public Highways v. San Diego (No. L 30098, 18 February 1970, 31 SCRA 616) that — The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law.

It is settled that venue in criminal cases is a vital ingredient of jurisdiction.  It  shall  be  where  the  crime  or  offense  was  committed  or  any  one  of  the essential ingredients thereof took place.  In determining the proper venue for these cases, the following are material facts—the checks were issued at the place of business of Linton; they were delivered to Linton at the same place; they were dishonored in Kalookan City; petitioners had knowledge of the insufficiency of funds in their account.    Under  Section  191  of  the  Negotiable Instruments Law,  issue  means  the  first  delivery  of  the instrument complete in its form to a person  who takes  it  as holder.   The term holder on the other hand refers to the payee or indorsee  of a bill or note who is in possession of it or the bearer thereof.  The important place to consider in the consummation of a negotiable instrument is the place of delivery.    Delivery  is  the  final  act  essential  to  its  consummation  as  an obligation.