Nego Cases (Part 1 of 2)

8/10/2019 Nego Cases (Part 1 of 2)

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Decided Cases on Negotiable Instruments Law based on the outline of Atty. Rene Alexis P. Villarente (PART 1 of 2)

0"!1: %he legislature was not thoughtless in im&osing se#ere&enalties for #iolation of &ar. 2(d) of Article 91/ of the Be#ised'enal "ode. %he history of the law will show that the se#ere&enalties were intended to sto& the u&surge of swindling byissuance of bouncing checks. It was felt that unless aborted, thiskind of estafa C. . . would erode the &eo&les confidence in the useof negotiable instruments as a medium of commercial transactionand conse6uently result in the retardation of trade and commerceand the undermining of the banking system of the country.

#. Medium of credit transaction $% No. 8'), Nov. ,,* ,''(

ISS/": "an a check &ro#e a loan transaction that was re6uired to bein writing under Article 19/E of the "i#il "ode (All other contractswhere the amount in#ol#ed eceeds ' /00.00 must a&&ear in writing,e#en &ri#ate one)$ (See Article 19/E of the "i#il "ode)

0"!1: J?S, it can. %he lower "ourt mis&laced its reliance on Article19/E of the "i#il "ode &ro#iding that to be enforceable, contractswhere the amount in#ol#ed eceed fi#e hundred &esos, must a&&ear inwriting. Such re6uirement, it has been held, is only for con#enience,not for #alidity. It bears em&hasis that at the time &laintiff-a&&ellant

deli#ered the crossed-check to defendants-a&&ellees, &laintiff-a&&ellanthad no account whatsoe#er with them.

At all e#ents, a check, the entries of which are no doubt inwriting, could &ro#e a loan transaction.

#0/A $A? vs. #0/A $% No. 8')(( April 8* ,'')

ISS/":Is the check e#idence of indebtedness$

0"!1: It is well to remember that a check may be e#idence ofindebtedness. A check, the entries of which are in writing, could &ro#ea loan transaction.

Section

Section 1. orm of negotiable instruments H An instrument to benegotiable must conform to the following re6uirements8(a) It must be in writing and signed by the make or drawerD(b) >ust contain an unconditional &romise or order to &ay a

sum certain in moneyD(c) >ust be &ayable on demand, or at a fied or determinable

future timeD(d) >ust be &ayable to order or to bearerD and(e) *here the instrument is addressed to a drawee, he must

be named or otherwise indicated therein withreasonable certainty.

2%A1"%S vs. #A $% No. --; Marc3 -* ;

ISS/": Is a "entral 3ank "ertificate of Indebtedness ("3"I) a

negotiable instrument$

0"!1: Admittedly, the sub+ect "3"I is not a negotiable instrument inthe absence of words of negotiability within the meaning of thenegotiable instruments law (Act 2091).

%he &ertinent &ortions of the sub+ect "3"I read8 %he "entral 3ank of the 'hili&&ines (the 3ank) for #alue recei#ed,hereby &romises to &ay bearer, of if this "ertificate ofindebtedness be registered, to I;BI%?BS KFABA%J

ASSFBA"? "LB'LBA%IL, the registered owner hereof, the&rinci&al sum of IV?


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'ro&erly understood, a certificate of indebtedness &ertains to

certificates for the creation and maintenance of a &ermanentim&ro#ement re#ol#ing fund, is similar to a Cbond,C. 3einge6ui#alent to a bond, it is &ro&erly understood as acknowledgmentof an obligation to &ay a fied sum of money. It is usually used forthe &ur&ose of long term loans.

ISS/":*hat is negotiability and what is its relation to the rights

conferred to a holder in due course$

0"!1: %he language of negotiability which characteri=e anegotiable &a&er as a credit instrument is its freedom to circulate asa substitute for money. ISSLBJ L%?4 ' 00,000.00

4B?"?IV?@ BL> A%%J. @ILISIL V. ;;A>AS, thesum of LFB ON 071%O $% No. 98;; Nov. ,,*

,''9

ISS/": *hat is a letter of credit$ Is it a negotiable instrument$


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P"OP!" vs. %"7"S $% No. (9( Marc3 -* ,''(

ISS/": *hat is a negotiable order of withdrawal (L*)$ Is it anegotiable instrument$ Is negotiability the gra#amen of estafa$

0"!1: Section Q229 of the >anual of Begulations for 3anksdefines egotiable Lrder of *ithdrawal (L*) Accounts asinterest-bearing de&osit accounts that combine the &ayable on

demand feature of checks and the in#estment feature of sa#ingsaccounts.

%he fact that a L* check shall be &ayable only to a s&ecific&erson, and not #alid when made &ayable to 43?AB?B5 or to

4"AS


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dis&osal. As there is no borrowing, there is no debt with res&ect towhich the seller can be &rimarily bound. or is the sellersubsidiarily bound to res&ond in case the issuer of the saidsecurities defaults, hy&othetically assuming that the 'hili&&ineKo#ernment, as issuer of the securities sold, could default.'recisely, the sale of said go#ernment securities is always Cwithoutrecourse.C

6PI vs. #I% $% No. -;'', +uly ,;* ,''8

ISS/": *hat does Section 1E2 of the IB" co#er$

Sec. 1E2. Stam& ta on foreign bills of echange and letters ofcredit. Ln all foreign bills of echange and letters of credit(including orders, by telegra&h or otherwise, for the &ayment ofmoney issued by e&ress or steamshi& com&anies or by any&erson or &ersons) drawn in but &ayable out of the 'hili&&ines ina set of three or more according to the custom of merchants andbankers, there shall be collected a documentary stam& ta ofthirty centa#os on each two hundred &esos, or fractional &artthereof, of the face #alue of such bill of echange or letter ofcredit, or the 'hili&&ine e6ui#alent of such face #alue, ife&ressed in foreign country.

0"!1: Section 1E2 im&oses a documentary stam& ta on (1)foreign bills of echange, (2) letters of credit, and (9) orders, bytelegra&h or otherwise, for the &ayment of money issued bye&ress or steamshi& com&anies or by any &erson or &ersons. %hisenumeration is further limited by the 6ualification that they shouldbe drawn in the 'hili&&ines and &ayable outside of the 'hili&&ines.

ISS/": *hat is the definition of a 3ill of ?change (3?)$

0"!1: A definition of a 4bill of echange5 is &ro#ided by Section 9!of Begulations o. 2, the rules go#erning documentary taes&romulgated by the 3ureau of Internal Be#enue (3IB) in 1!28

Sec. 9!. @efinition of 4bill of echange5. %he term bill ofechange denotes checks, drafts, and all other kinds of orders forthe &ayment of money, &ayable at sight, or on demand or after a

s&ecific &eriod after sight or from a stated date.

Section 12 of %he egotiable Instruments ;aw (Act o. 2091)reiterates that it is an 4order for the &ayment of money5 ands&ecifies the &articular re6uisites that make it negotiable.

Sec. 12. 3ill of echange defined.H A bill of echange is anunconditional order in writing addressed by one &erson toanother, signed by the &erson gi#ing it, re6uiring the &erson towhom it is addressed to &ay on demand or at fied ordeterminable future time a sum certain in money to order or tobearer.

Section 12! of the same law classifies bills of echange asinland and foreign, the distinction is laid down by where the bills

are drawn and &aid. %hus, a 4foreign bill of echange5 may bedrawn outside the 'hili&&ines, &ayable outside the 'hili&&ines, orboth drawn and &ayable outside of the 'hili&&ines.

Sec. 12!. Inland and foreign bills of echange. -- An inland billof echange is a bill which is, or on its face &ur&orts to be, bothdrawn and &ayable within the 'hili&&ines. Any other bill is aforeign bill.

ISS/": *hat is the distincition between a 3? and a letter ofcredit$

0"!1: A bill of echange and a letter of credit may differ as totheir negotiability, and as to who owns the funds used for the&ayment at the time &ayment is made.


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ISS/": Are the Sa#ings Account-ied Sa#ings @e&osit (S@s)sub+ect to @S%$

S?". 1E0 of the %a "ode. Stam& ta on all loan agreements,&romissory notes, bills of echange, drafts, instruments andsecurities issued by the go#ernment or any of itsinstrumentalities, certificates of de&osit bearing interest andothers not &ayable on sight or demand. - Ln all loan agreementssigned abroad wherein the ob+ect of the contract is located or

used in the 'hili&&inesD bills of echange (between &oints withinthe 'hili&&ines), drafts, instruments and securities issued by theKo#ernment or any of its instrumentalities or certificates ofdeposits dra5ing interest*or orders for the &ayment of anysum of money otherwise than at sight or on demand, or on all&romissory notes, whether negotiable or non-negotiable, ece&tbank notes issued for circulation, and on each renewal of anysuch note, there shall be collected a documentary stam& ta

0"!1: "ertificates of time de&osit are sub+ect to the @S% andthat a certificate of time de&osit is but a ty&e of a certificate ofde&osit drawing interest.%he S@, like a time de&osit, &ro#ides for ahigher interest rate when the de&osit is not withdrawn within there6uired fied &eriodD otherwise, it earns interest &ertaining to aregular sa#ings de&osit.


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another check. In effect, it is a bill of echange drawn by thecashier of a bank u&on the bank itself, and acce&ted in ad#ance bythe act of its issuance. It is really the banks own check and may betreated as a &romissory note with the bank as a maker. %he checkbecomes the &rimary obligation of the bank which issues it andconstitutes its written &romise to &ay u&on demand. %he mereissuance of it is considered an acce&tance thereof. If treated as&romissory note, the drawer would be the maker and in which casethe holder need not &ro#e &resentment for &ayment or &resent the

bill to the drawee for acce&tance.

Section


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FA#2S: "hing instituted criminal com&laints for 11 counts of#iolation of 3' 22 against res&ondent icdao. "hing a#erred thatthe checks were issued to him by icdao as security for the loansthat she obtained from him. %heir transaction began whenres&ondent icdao, &ro&rietormanager of Vignette Su&erstore,together with her husband, a&&roached him to borrow money inorder for them to settle their financial obligations. %hey agreed thatres&ondent icdao would lea#e the checks undated and that shewould &ay the loans within one year.


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Section 1:. "onstruction where instrument is ambiguous. H*here the language of the instrument is ambiguous, or there areomissions therein, the following rules of construction a&&ly8(a) *here the sum &ayable is e&ressed in words and also infigures and there is a discre&ancy between the two, the sumdenoted by the words is the sum &ayableD but if the words areambiguous or uncertain, reference may be had to the figures tofi the amountD

0"!1: o, it is not a&&licable%he rule in the egotiable Instruments ;aw is that when there

is ambiguity in the amount in words and the amount in figures, itwould be the amount in words that would &re#ail.


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account with I3AA. %he forgery was satisfactorily established in thetrial court u&on the strength of the findings of the 3I handwritinge&ert. Lther than &etitioners self-ser#ing denials, there is nothingin the records to rebut the 3Is findings. *ell-entrenched is therule that findings of trial courts which are factual in nature,es&ecially when affirmed by the "ourt of A&&eals, deser#e to beres&ected and affirmed by the Su&reme "ourt, &ro#ided it issu&&orted by substantial e#idence on record, as it is in the case atbench.

ISS/":


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(b) %hat he became the holder of it before it waso#erdue, and without notice that it had been &re#iouslydishonored, if such was the factD

(c) %hat he took it in good faith and for #alueD(d) %hat at the time it was negotiated to him he had nonotice of any infirmity in the instrument or defect in the

title of the &erson negotiating it.

ISS/": Is Atrium a holder in due course when it re-discounted thecrossed checks$

0"!1: In the instant case, the checks were crossed checks ands&ecifically indorsed for de&osit to &ayees account only. rom thebeginning, Atrium was aware of the fact that the checks were all forde&osit only to &ayees account, meaning ?.%.


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or last endorser generally suffers the loss because it has the duty toascertain the genuineness of all &rior endorsements consideringthat the act of &resenting the check for &ayment to the drawee isan assertion that the &arty making the &resentment has done itsduty to ascertain the genuineness of the endorsements.5 >oreo#er,the collecting bank is made liable because it is &ri#y to thede&ositor who negotiated the check. %he bank knows him, hisaddress and history because he is a client. It has taken a risk on hisde&osit. %he bank is also in a better &osition to detect forgery,

fraud or irregularity in the indorsement.%he drawee bank is not similarly situated as the collecting

bank because the former makes no warranty as to the genuinenessof any indorsement. %he drawee bank7s duty is but to #erify thegenuineness of the drawer7s signature and not of the indorsementbecause the drawer is its client.

%he drawee bank can reco#er the amount &aid on the checkbearing a forged indorsement from the collecting bank. rs. Lmnes failed toreturn after some time, >r. Antonio decided to follow u& the matterwith her. As he was going out of his office, >r. Antonio saw >rs.Lmnes crossing the street and taking a +ee&ney bound for 'asig.

Alarmed, >r. Antonio looked for the stub to the check, which he foundand saw that the amount indicated therein was '99/.1/.

;ater on the same day, res&ondent bank called >r. Antonioregarding a check for '!:,/00.00 &ayable to cash. F&on #erification,>r. Antonio found that the stub of the check indicated a differentamount.

It was found that the 2 checks were credited to the sa#ingsaccount of >rs. Lmnes at the ar ?ast 3ank and %rust "om&any,%anay 3ranch. At the re6uest of >r. Antonio, res&ondent bankfurnished him with &hotoco&ies of the 2 checks, which he deniedha#ing signed.

>r. Antonio conducted an eamination of the records. r. Antonio and his wife Amor) filed an action againstres&ondents with the trial court, and +udgment was rendered in theirfa#or. "A re#ersed the decision of the trial court.

ISS/": Are the Antonio7s &recluded from reco#ering from Standard"hartered 3ank due to negligence$

0"!1: Jes, they are &recluded from reco#ering.'etitioners failed to meet the 6uantum of &roof necessary to

establish forgery, the eistence of which cannot be &resumed. thefailure of >r. Antonio for o#er three years to detect the re&eatedcommission of fraud within his business, which he claims e#entuallyin#ol#ed the total amount of ',:20,00.00, des&ite the fact thatres&ondent bank sent monthly statements to Barecrafts, is indicati#eof his etreme negligence. It a&&ears that >r. Antonio com&letely leftto >rs. Lmnes the management of such an im&ortant as&ect of hisbusiness. *hile the general rule is that a drawee bank which clears aforged check for &ayment should reimburse the drawer, this does nota&&ly when the failure of the latter to eercise ordinary care made theloss &ossible.


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checks to the account of ;ily 3allesteros with &etitioner bank, byfalsifying the indorsements of ?ngr. FrreaD that &etitioner bank,des&ite the falsification of the indorsements of ?ngr. Frrea and theob#ious irregularity of his alleged indorsements, acce&ted thede&osit of the 2 checks to the account of ;ily 3allesterosD and thatby #irtue of the negligent acts of &etitioner bank, together with thatof ?duardo %alaue, res&ondent had been damaged and &re+udicedin the total amount of '9E,!!.0.

'etitioner contends that res&ondent7s com&laint does not state

a cause of action against it, since the same does not allege that&etitioner committed any wrongdoing or fraud but only alleges that&etitioner agreed to act as collecting bank and did not honor thechecks.

%his contention is without merit. Section 29of the egotiableInstruments ;aw &ro#ides that when a signature is forged or madewithout authority of the &erson whose signature it &ur&orts to be, itis wholly ino&erati#e and no right to retain the instrument or to gi#ea discharge therefor or to enforce &ayment thereof against any&arty thereto can be ac6uired through or under such signatureunless the &arty against whom it is sought to enforce such right is&recluded from setting u& the forgery or want of authority. %alaueforged the indorsements of ?ngr. Frrea which allowed the former tode&osit the checks to the account of ;ily 3allesteros. %he checkswere then indorsed by &etitioner >etrobank (as collecting bank) to@3', as drawee bank. 'etitioner acted as a general indorser when it

stam&ed 4all &rior indorsements andor lack of indorsementsguaranteed5 because it thereby warranted the genuineness of all&rior indorsenients. 'etitioner is thus liable to @3' for the twochecks as a forged indorsement does not o&erate as the &ayee7sindorsement.

3y reason of the statutory warranty of a general indorser inSection of the egotiable Instruments ;aw, a collecting bankwhich indorses a check bearing a forged indorsement and &resentsit to the drawee bank guarantees all &rior indorsements, includingthe forged indorsement. It warrants that the instrument is genuine,and that it is #alid and subsisting at the time of his indorsement.3ecause the indorsement is a forgery, the collecting bank commitsa breach of this warranty and will be accountable to the draweebank. %his liability scheme o&erates without regard to fault on the&art of the collecting&resenting bank. ?#en if the latter bank wasnot negligent, it would still be liable to the drawee bank because of

its indorsement.

ISS/": *ho bears the loss in case of a forged instrument$

0"!1: %he "ourt has consistently ruled that Cthe collecting bankor last indorser generally suffers the loss because it has the duty toascertain the genuineness of all &rior indorsements considering thatthe act of &resenting the check for &ayment to the drawee is anassertion that the &arty making the &resentment had done its dutyto ascertain the genuineness of the indorsements.5

%he drawee bank is not similarly situated as the collectingbank because the former makes no warranty as to the genuinenessof any indorsement. %he drawee bank7s duty is but to #erify thegenuineness of the drawer7s signature and not of the indorsementbecause the drawer is its client.

>oreo#er, the collecting bank is made liable because it is &ri#yto the de&ositor who negotiated the check. %he bank knows him,his address and history because he is a client. It has taken a risk onhis de&osit. %he bank is also in a better &osition to detect forgery,fraud or irregularity in the indorsement.

?"S2MON2 6AN vs. ON$ $% No. -,(8' +an. -'* ,'',

ISS/": *hat is the effect of forgery$

0"!1: Fnder Section 29 of the egotiable Instruments ;aw8

Section 29. *hen a signature is forged or made without theauthority of the &erson whose signature it &ur&orts to be, it iswholly ino&erati#e, and no right to retain the instrument, or togi#e a discharge therefor, or to enforce &ayment thereof against

any &arty thereto, can be ac6uired through or under suchsignature, unless the &arty against whom it is sought to enforcesuch right is &recluded from setting u& the forgery or want ofauthority.

Since the signature of the &ayee, in the case at bar, wasforged to make it a&&ear that he had made an indorsement in fa#orof the forger, such signature should be deemed as ino&erati#e andineffectual. 'etitioner, as the collecting bank, grossly erred inmaking &ayment by #irtue of said forged signature. %he &ayee,herein res&ondent, should therefore be allowed to reco#er from thecollecting bank.

ISS/": *hat is the nature of the liability of a collecting bank inforgeries of indorsements$

0"!1: %he collecting bank is liable to the &ayee and must bear theloss because it is its legal duty to ascertain that the &ayee7sendorsement was genuine before cashing the check. As a general rule,a bank or cor&oration who has obtained &ossession of a check u&on anunauthori=ed or forged indorsement of the &ayee7s signature and who

collects the amount of the check from the drawee, is liable for the&roceeds thereof to the &ayee or other owner, notwithstanding thatthe amount has been &aid to the &erson from whom the check wasobtained.

ISS/": Is Lng a holder under Section /1 and 1!1 when he wasne#er in actual or &hysical &ossession of the checks$

Section /1. Bight of holder to sueD &ayment H %he holder of anegotiable instrument may sue thereon in his own nameD and&ayment to him in due course discharges the instrument.

Section 1!1. @efinitions and meaning of termsH In this Act, unlessthe contet otherwise re6uires H

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'aciano %anlimco. Lnly after he had ehausted &ossibilities ofsettling the matter amicably with the family of %anlimco andthrough the "3, about fi#e months after the unlawful transactiontook &lace, did he resort to making the demand u&on the &etitionerand e#entually before the court for reco#ery of the money #alue ofthe two checks. %hese acts cannot be construed as undue delay inor abandonment of the assertion of his rights.

>oreo#er, the claim of &etitioner that res&ondent should bebarred by laches is clearly a #ain attem&t to deflect res&onsibility

for its negligent act. As e&lained by the a&&ellate court, it is&etitioner which had the last clear chance to sto& the fraudulentencashment of the sub+ect checks had it eercised due diligenceand followed the &ro&er and regular banking &rocedures in clearingchecks. As we had earlier ruled, the one who had the last clearo&&ortunity to a#oid the im&ending harm but failed to do so ischargeable with the conse6uences thereof.

2%A1"%S vs. %A1IO $% No. -)(' Oct. '* ,'',

FA#2S: 3IB assessed &laintiffs B', I3", and 33" of their taobligations. 'laintiffs &urchased from defendant %raders Boyal3ank (%B3) 9 manager7s checks to be used as &ayment for their taliabilities. %he 9 checks were &ayable to the 3IB. It wasestablished, howe#er, that said checks were ne#er deli#ered or &aidto the &ayee 3IB but were in fact &resented for &ayment by someunknown &ersons who, in order to recei#e &ayment therefor, forgedthe name of the &ayee. %he checks were &resented for &ayment byunknown &ersons to defendant Security 3ank and %rust "om&any(S3%"), %aytay 3ranch. @es&ite this fraud, &etitioner %B3 &aid the9 checks in the total amount of '!,:!0,:1.E:.

ISS/": *hether or not %B3 should be held solely liable when it&aid the amount of the checks in 6uestion to a &erson other thanthe &ayee indicated on the face of the check, the 3IB$

0"!1: J?S, %B3 is solely liable. 'etitioner ought to ha#e knownthat, where a check is drawn &ayable to the order of one &ersonand is &resented for &ayment by another and &ur&orts u&on its faceto ha#e been duly indorsed by the &ayee of the check, it is the&rimary duty of &etitioner to know that the check was duly indorsedby the original &ayee and, where it &ays the amount of the check toa third &erson who has forged the signature of the &ayee, the lossfalls u&on &etitioner who cashed the check. Its only remedy isagainst the &erson to whom it &aid the money.

Since %B3 did not &ay the rightful holder or other &erson orentity entitled to recei#e &ayment, it has no right to reimbursement.'etitioner %B3 was remiss in its duty and obligation, and musttherefore suffer the conse6uences of its own negligence anddisregard of established banking rules and &rocedures.

ISS/": *hat is the effect of Section 29 of the I;$ *hat is theconse6uence of a bank &aying a forged check$

0"!1: *hen a signature is forged or made without the authorityof the &erson whose signature it &ur&orts to be, it is whollyino&erati#e, and no right to retain the instrument, or to gi#e a

discharge therefor, or to enforce &ayment thereof against any &artythereto, can be ac6uired through or under such signature.5"onse6uently, if a bank &ays a forged check, it must be

considered as &aying out of its funds and cannot charge theamount so &aid to the account of the de&ositor.

ISS/": *hat is a crossed check$

0"!1: It should be noted further that one of the sub+ect checkswas crossed. %he crossing of one of the sub+ect checks shouldha#e &ut &etitioner on guardD it was duty-bound to ascertain theindorser7s title to the check or the nature of his &ossession.'etitioner should ha#e known the effects of a crossed check8 (a)the check may not be encashed but only de&osited in the bankD (b)the check may be negotiated only once to one who has an accountwith a bank and (c) the act of crossing the check ser#es as a

warning to the holder that the check has been issued for a definite&ur&ose so that he must in6uire if he has recei#ed the check&ursuant to that &ur&ose, otherwise, he is not a holder in duecourse.

ISS/": *as %B3 negligent$

0"!1: J?S, %B3 was negligent. 3y encashing in fa#or of unknown&ersons checks which were on their face &ayable to the 3IB, ago#ernment agency which can only act only through its agents,&etitioner did so at its &eril and must suffer the conse6uences ofthe unauthori=ed or wrongful endorsement. In this light, &etitioner

%B3 cannot ecul&ate itself from liability by claiming that res&ondentnetworks were themsel#es negligent.

A bank is engaged in a business im&ressed with &ublic interestand it is its duty to &rotect its many clients and de&ositors whotransact business with it. It is under the obligation to treat theaccounts of the de&ositors and clients with meticulous care, whethersuch accounts consist only of a few hundreds or millions of &esos.

ISS/": *hat is a collecting bank$

0"!1: A collecting bank where a check is de&osited and whichindorses the check u&on &resentment with the drawee bank, is suchan indorser. So e#en if the indorsement on the check de&osited by thebank7s client is forged, the collecting bank is bound by his warrantiesas an indorser and cannot set u& the defense of forgery as against thedrawee bank. A collecting bank which indorses a check bearing aforged indorsement and &resents it to the drawee bank guarantees all&rior indorsements, including the forged indorsement itself, andultimately should be held liable therefor.

ISS/": Fnder the circumstances, is Security 3ank and %rust"om&any (S3%") a collecting bank$

0"!1: L, S3%" is not a collecting bank. It is doubtful if the sub+ectchecks were e#er &resented to and acce&ted by S3%" so as to hold it

liable as a collecting bank

ISS/": *ho are deemed indorsers$

0"!1:

Sec. 9. *hen &erson deemed indorser. - A &erson &lacing hissignature u&on an instrument otherwise than as maker, drawer oracce&tor, is deemed to be an indorser unless he clearly indicates bya&&ro&riate words his intention to be bound in some other ca&acity.

I!/SO%IO vs. #A $% No. -9' November ,;* ,'',

FA#2S: Ilusorio is a &rominent businessman who was the >anaging

@irector of >ultinational In#estment 3ancor&oration and the "hairmanandor 'resident of se#eral other cor&orations. anila 3anking "or&oration. As he was thenrunning about 20 cor&orations, and was going out of the country anumber of times, &etitioner entrusted to his secretary, atherine ?.?ugenio, his credit cards and his checkbook with blank checks. It wasalso ?ugenio who #erified and reconciled the statements of saidchecking account.

3etween the dates Se&tember /, 1!E0 and Ganuary 29, 1!E1,?ugenio was able to encash and de&osit to her &ersonal account about1: checks drawn against the account of the &etitioner at theres&ondent bank, with an aggregate amount of '11!,9.9.'etitioner did not bother to check his statement of account until abusiness &artner a&&rised him that he saw ?ugenio use his creditcards. 'etitioner fired ?ugenio immediately, and instituted a criminalaction against her for estafa thru falsification.

'etitioner then re6uested the res&ondent bank to credit back andrestore to its account the #alue of the checks which were wrongfullyencashed but res&ondent bank refused.


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issued thereunder -- month after month. 3ut he did not, until his&artner asked him whether he had entrusted his credit card to hissecretary because the said &artner had seen her use the same.'etitioner7s failure to eamine his bank statements a&&ears as the&roimate cause of his own damage. 'roimate cause is thatcause, which, in natural and continuous se6uence, unbroken by anyefficient inter#ening cause, &roduces the in+ury, and without whichthe result would not ha#e occurred. In the instant case, the bankwas not shown to be remiss in its duty of sending monthly bank

statements to &etitioner so that any error or discre&ancy in theentries therein could be brought to the bank7s attention at theearliest o&&ortunity. 3ut, &etitioner failed to eamine these bankstatements not because he was &re#ented by some cause in notdoing so, but because he did not &ay sufficient attention to thematter. anager7s "heck inthe amount of '1,//,000 &ayable to res&ondent rank %anD the&etitioner later recei#ed information that the aforesaid manager7scheck was de&osited with the res&ondent Associated 3ank, Bosario3ranch, to the account of a certain Gulius @i=onD the clearing andor&ayment by the res&ondents of the check to an im&ro&er &arty andthe absence of any indorsement by the &ayee thereof, res&ondentrank %an, is a clear #iolation of the res&ondents7 obligations underthe egotiable Instruments ;aw and standard banking &racticeDconsidering that the &etitioner7s intended &ayee for the check, theres&ondent rank %an, did not recei#e the #alue thereof, the&etitioner demanded from the res&ondents "itibank and the

Associated 3ank the &ayment or reimbursement of the #alue of thecheckD the res&ondents, howe#er, obstinately refused to heed hisre&eated demands for &ayment andor reimbursement of theamount of the checkD hence, the &etitioner was com&elled to filethis com&laint &raying for the restitution of the amount of thecheck, and for moral damages and attorney7s fees.

ISS/": *as there negligence on the &art of the banks in &ayingthe amount of the check without the indorsement of rank %an$ Is

the ruling in the Associated 3ank case (1!!) on the liability of acollecting bank a&&licable int his case$

0"!1: L, there was no negligence.L, it is not a&&licable for, as has been am&ly demonstrated,

the &etitioner failed to establish that the &roceeds of the check wasindeed wrongfully &aid by the res&ondents 3anks to a &erson otherthan the intended &ayee. In addition, the egotiable Instruments;aw was enacted for the &ur&ose of facilitating, not hindering orham&ering transactions in commercial &a&er. %hus, the said statuteshould not be tam&ered with ha&ha=ardly or lightly. or should itbe brushed aside in order to meet the necessities in a single case.

%he &etitioner7s allegation that res&ondent %an did not recei#ethe &roceeds of the check is belied by the e#idence on record andattendant circumstances. 'etitioner ne#er bothered to find outfrom the said res&ondent whether the latter recei#ed the check

from his messenger. And if it were to be su&&osed that res&ondent%an did not recei#e the check, gi#en that his need for the moneywas urgent, it strains credulity that res&ondent %an ne#er e#enmade an effort to get in touch with the &etitioner to inform thelatter that he did not recei#e the check as agreed u&on, and toin6uire why the check had not been deli#ered to him.

6PI vs. #ASA MON2"SSO%I $% No. 99(9 May ,)* ,''9#ASA MON2"SSO%I vs. 6PI $% No. 9('; May ,)* ,''9

ISS/": *hat is forgery under Section 29$

0"!1: Fnder Section 29, a forged signature is a real or absolutedefense, and a &erson whose signature on a negotiable instrument isforged is deemed to ha#e ne#er become a &arty thereto and to ha#ene#er consented to the contract that allegedly ga#e rise to it.

%he counterfeiting of any writing, consisting in the signing ofanother7s name with intent to defraud, is forgery.

In the &resent case, there was forgery of the drawer7s signatureon the check.

ISS/": *hat are the factual findings of the sole negligence of 3'I$

0"!1: J?S, negligence is attiributable to 3'I alone.


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SAMS/N$ vs. FA% "AS2 $% No. ,'( Aug. -* ,''9

FA#2S: Samsung maintained a current account with defendant ar?ast 3ank and %rust "om&any (?3%"). %he sole signatory toSamsung "onstruction7 account was Gong yu ;ee (Gong), its'ro+ect >anager, while the checks remained in the custody of thecom&any7s accountant, yu Jong ;ee (yu).

A certain Boberto Kon=aga &resented for &ayment an ?3%""heck. %he check, &ayable to cash and drawn against Samsung"onstruction7s current account, was in the amount of '!!!,/00.00.%he bank teller com&ared the signature a&&earing on the checkwith the s&ecimen signature of Gong as contained in the s&ecimensignature card with the bank. After com&aring the two signatures,Gustiani (the bank teller) was satisfied as to the authenticity of thesignature a&&earing on the check. She then asked Kon=aga tosubmit &roof of his identity, and the latter &resented 9 identificationcards. %he Senior Assistant "ashier likewise counterchecked thesignature on the check. Sem&io, the assistant accountant ofSamsung, was at the bank at that time.


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A!!I"1 vs. !IM SIO ?AN $% No. --; Marc3 ,;* ,'')

FA#2S: ;im Sio *an de&osited with Allied 3anking "or&oration(Allied) a money market &lacement of ' 1,1/2,/!:.9/ for a term of91 days to mature on @ecember 1/, 1!E9.

A &erson claiming to be ;im Sio *an called u& "ristina So, an

officer of Allied, and instructed the latter to &re-terminate ;im Sio*ans money market &lacement, to issue a managers checkre&resenting the &roceeds of the &lacement, and to gi#e the checkto one @eborah @ee Santos who would &ick u& the check. ;im Sio*an described the a&&earance of Santos so that So could easilyidentify her. Santos arri#ed at the bank and signed the a&&licationform for a managers check to be issued. %he bank issued amanager7s check re&resenting the &roceeds of ;im Sio *ans moneymarket &lacement in the name of ;im Sio *an, as &ayee. %hecheck was cross-checked Cor 'ayees Account LnlyC and gi#en toSantos. %he said check was then de&osited in the account ofili&inas "ement "or&oration ("") at res&ondent >etrobank withthe forged signature of ;im Sio *an as indorser. ?arly on, ""de&osited a money market &lacement with 'roducer7s 3ank whereinSantos was the money market trader assigned to handle saidaccount. Ln the same date that So recei#ed the &hone callinstructing her to &re-terminate ;im Sio *ans &lacement, themanagers check in the name of ;im Sio *an was de&osited in theaccount of "", &ur&ortedly re&resenting the &roceeds of ""smoney market &lacement with 'roducers 3ank. In other words, the

Allied check was de&osited with >etrobank in the account of "" as'roducers 3anks &ayment of its obligation to "".

%o clear the check and in com&liance with re6uirements,>etrobank stam&ed a guaranty on the check, which reads8 CAll &riorendorsements andor lack of endorsement guaranteed.C F&on&resentment, Allied funded the check e#en without checking theauthenticity of ;im Sio *ans &ur&orted indorsement. %hus, theamount on the face of the check was credited to the account of"".

F&on the maturity date of the first money market &lacement,;im Sio *an went to Allied to withdraw it. She was then informedthat it was &re-terminated u&on her instructions. She denied gi#ingany instructions and recei#ing the &roceeds thereof. ;im Sio *an,reali=ing that the &romise that her money would be reco#eredwould not materiali=e, sent a demand letter to Allied asking for the&ayment of the first &lacement. Allied refused to &ay ;im Sio *an,claiming that the latter had authori=ed the &re-termination of the&lacement and its subse6uent release to Santos.

;im Sio *an filed with the B%" a "om&laint against Allied toreco#er the &roceeds of her first money market &lacement. Alliedfiled a third &arty com&laint against >etrobank and Santos. In turn,>etrobank filed a fourth &arty com&laint against "". "" for its&art filed a fifth &arty com&laint against 'roducers 3ank.

After more than months, Allied informed >etrobank that thesignature on the check was forged.

%he B%" ordered Allied to &ay ;im Sio *an and dismissed thecross-claim filed by Allied against >etrobank. %he other com&laints

were also dismissed. Ln a&&eal, "A ordered Allied to &ay 0N ofthe amount and >etrobank to &ay 0N thereof.

ISS/": Ki#e the liabilities of the &arties by reason of forgery.

0"!1: *e held in a line of cases that Ca collecting bank whichindorses a check bearing a forged indorsement and &resents it tothe drawee bank guarantees all &rior indorsements, including theforged indorsement itself, and ultimately should be held liabletherefor.C

etrobank as the last indorser of the check.

ISS/": *hat is the effect of the negligence of Allied and>etrobank$

0"!1: *hen >etrobank indorsed the check in com&liance with the'"


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0"!1: 'etitioners argument that the sub+ect check was issuedwithout consideration is inconse6uential. %he law in#ariablydeclares the mere act of issuing a worthless check as malum&rohibitum.

In actions based u&on a negotiable instrument, it isunnecessary to aver or prove consideration* forconsideration is imported and presumed from t3e fact t3atit is a negotiable instrument. %he &resum&tion eists whether

the words C#alue recei#edC a&&ear on the instrument or not.urthermore, such contention is also inconse6uential in 3atas'ambansa 3lg. 22.

?ON$ vs. #A $% No. ;)(; Feb. ,* ,''

FA#2S: *ong was an agent of ;imtong 'ress. Inc. (;'I), amanufacturer of calendars. ;'I would &rint sam&le calendars, thengi#e them to agents to &resent to customers. %he agents would getthe &urchase orders of customers and forward them to ;'I. After&rinting the calendars, ;'I would shi& the calendars directly to thecustomers. %hereafter, the agents would come around to collect the&ayments. 'etitioner, howe#er, had a history of unremittedcollections, which he duly acknowledged in a confirmation recei&the co-signed with his wife. ontinolas, the&rima facie &resum&tion was not rebutted or contradicted by theadministratri who e&ressly manifested that she was dis&ensing withthe &resentation of e#idence against their claims, it has becomeconclusi#e.

6A7ANI vs. P"OP!" $% No. (99; Aug. * ,''9

ISS/": *hat is the gra#amen of 3' 22$

0"!1: %he gra#amen of the offense &unished by 3' 22 is the act ofmaking and issuing a worthless check or a check that is dishonoredu&on its &resentation for &ayment. It is not the non-&ayment of anobligation which the law &unishes. %he law is not intended or designedto coerce a debtor to &ay his debt. %he thrust of the law is to &rohibit,under &ain of &enal sanctions, the making of worthless checks and&utting them in circulation. 3ecause of its deleterious effects on the&ublic interest, the &ractice is &roscribed by the law. %he law &unishesthe act not as an offense against &ro&erty, but an offense against&ublic order.

ISS/": *as ?#angelista considered a holder in due course$

Prepared by: Norliza Mamukid & Jazzie M. Sarona (4-Manresa 2008-2009) 18


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0"!1: %he e#idence on record shows that ?#angelistarediscounted the check and ga#e '//,000.00 to Bubia after thelatter endorsed the same. As such, ?#angelista is a holder of thecheck in due course.

ISS/": *hat is the &resum&tion of consideration (Section 2)$0"!1:

S?"%IL 2. 'resum&tion of consideration. ?#ery negotiable

instrument is deemed &rima facie to ha#e been issued for a#aluable considerationD and e#ery &erson whose signaturea&&ears thereon to ha#e become a &arty thereto for #alue.

Such &resum&tion cannot be o#ercome by the &etitioner7s baredenial of recei&t of the amount of '//,000.00 from Bubia.

ISS/": *hat is the effect of want of consideration (Section 2E)$

0"!1: Fnder Section 2E of the egotiable Instruments ;aw (I;),absence or failure of consideration is a matter of defense only asagainst any &erson not a holder in due course, thus8

S?"%IL 2E. ?ffect of want of consideration. Absence or failureof consideration is a matter of defense as against any &erson nota holder in due courseD and &artial failure of consideration is adefense &ro tanto, whether the failure is an ascertained andli6uidated amount or otherwise.

27 vs. P"OP!" $% No. 9,;( September ,;* ,''9

ISS/": *hat is the basis of the &resum&tion of consideration$

0"!1: As to the issue of consideration, it is &resumed, u&onissuance of the checks, in the absence of e#idence to the contrary,that the same was issued for #aluable consideration. Section 2 ofthe egotiable Instruments ;aw creates a &resum&tion that e#ery&arty to an instrument ac6uired the same for a consideration or for#alue. In alleging otherwise, %y has the onus to &ro#e that thechecks were issued without consideration. She must &resentcon#incing e#idence to o#erthrow the &resum&tion. 'etitioner failed

to discharge her burden of &roof.

ISS/": Is it a #alid defense that no #aluable considerationredowned to the maker &ersonally$

0"!1: Anent %y7s claim that the obligation to &ay the hos&ital billswas not her &ersonal obligation because she was not the &atient,and therefore there was no consideration for the checks, the caseof 3ridges #. Vann, et al. tells us that Cit is no defense to an actionon a &romissory note for the maker to say that there was noconsideration which was beneficial to him &ersonallyD it is sufficientif the consideration was a benefit conferred u&on a third &erson, ora detriment suffered by the &romisee, at the instance of the&romissor. It is enough if the obligee foregoes some right or&ri#ilege or suffers some detriment and the release andetinguishment of the original obligation of Keorge Vann, Sr., for

that of a&&ellants meets the re6uirement. A&&ellee acce&ted onedebtor in &lace of another and ga#e u& a #alid, subsisting obligationfor the note eecuted by the a&&ellants. %his, of itself, is sufficientconsideration for the new notes.C

ON$SON vs. P"OP!" $% No. (88 August ,* ,''(

ISS/": *hat constitutes #aluable consideration$

0"!1: A #aluable consideration may consist either in some right,interest, &rofit or benefit accruing to the &arty who makes thecontract, or some forbearance, detriment, loss or someres&onsibility, to act, or labor, or ser#ice gi#en, suffered orundertaken by the other side. It is an obligation to do, or not to doin fa#or of the &arty who makes the contract, such as the maker or

endorser.

ISS/": *hat is the &resum&tion of consideration$

0"!1: F&on issuance of a check, in the absence of e#idence tothe contrary, it is &resumed that the same was issued for #aluableconsideration.

ISS/": *hat is it that the law &unishes in 3' 22$

0"!1: %he gra#amen of the offense &unished by 3.'. 22 is the actof making and issuing a worthless check, that is, a check that is

dishonored u&on its &resentation for &ayment. %he mere act of issuinga worthless check is malum &rohibitum. So also, it is not thenon&ayment of the obligation that is being &unished, but the makingof worthless checks. *hat the law &unishes is such issuance of a bumcheck and not the &ur&ose for which the check was issued nor theterms or conditions relating to its issuance. %hus, e#en if there hadbeen &ayment through com&ensation or some other means, therecould still be &rosecution for #iolation of 3.'. 22.

6A7ANI vs. P"OP!" $% No. ((8 Aug. 9* ,'';

FA#2S: 'etitioner ;eodegario 3ayani was con#icted of Violation of3atas 'ambansa 3lg. 22 by the Begional %rial "ourt which wasaffirmed by the "ourt of A&&eals.

ISS/": *hat are the elements of 3' 22$

%/!IN$: %he elements of the offense &enali=ed by 3atas 'ambansa3lg. 22 are8(1) the making, drawing, and issuance of any check to a&&ly for

account or for #alueD(2) the knowledge of the maker, drawer, or issuer that at the time

of issue there are no sufficient funds in or credit with thedrawee bank for the &ayment of such check in full u&on its&resentmentD and

(9) the subse6uent dishonor of the check by the drawee bank forinsufficiency of funds or credit or dishonor for the same reasonhad not the drawer, without any #alid cause, ordered the bankto sto& &ayment.

ISS/": *hat is the &resum&tion of consideration (Section 2)$

%/!IN$:As regards the first element, it is &resumed, u&on issuanceof the checks and in the absence of e#idence to the contrary, that thesame was issued for #aluable consideration. Fnder the egotiableInstruments ;aw, it is presumed t3at every party to aninstrument acuired t3e same for a consideration or for value.In alleging that there was no consideration for the sub+ect check, itde#ol#ed u&on &etitioner to &resent con#incing e#idence too#erthrow the &resum&tion and &ro#e that the check was issuedwithout consideration.

ISS/": *hat constitutes #aluable consideration$

%/!IN$: Valuable consideration may consist either of some right,interest, &rofit or benefit accruing to the &arty who makes thecontractD or some forbearance, detriment, loss of some res&onsibilityto actD or labor or ser#ice gi#en, suffered or undertaken by the otherside. It is an obligation to do or not to do, in fa#or of the &arty whomakes the contract, such as the maker or indorser. It was shown inthis case that the check was issued and echanged for cash. %his wasthe #aluable consideration for which the check was issued.

PA!ANA vs. P"OP!" $% No. 9( Sept. ,)* ,'';

FA#2S: 'etitioner Isidro 'ablito 'alana and his wife borrowed money

from &ri#ate com&lainant in the amount of '/!0, 000.00. %o securethe &ayment of the loan, &etitioner issued a &ostdated check for thesame amount in fa#or of the com&lainant.


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of the sub+ect check is material since it forms &art of the secondelement of the offense that at t3e time of its issuance*petitioner 4ne5 of t3e insufficiency of funds. anager of 'er&etual "a&italIn#estments U inance "or&. an affiliate of &etitioner 3ank.3oth the B%" and "A ruled in fa#or of res&ondents.

ISS/"S: Is 'S3 a holder in due course$ @oes the &romissory noteha#e consideration$ *hat is the effect of Section 2E of the I;$

%/!IN$: Ln 11 ebruary 1!E9, res&ondent @olores &ur&ortedlya&&lied for a loan and simultaneously eecuted the sub+ect '.?arlier, on 10 ebruary 1!E9, "ity ?state @e#elo&ers, Inc. eecuteda real estate mortgage of se#eral &arcels of land to secure, amongothers, the loan of res&ondent @olores. %he check issued to

res&ondent @olores as &roceeds of the loan was endorsed andde&osited on 1 ebruary 1!E9 to >etro 3ank Account, the&ersonal account of ati#idad., orofia, Kabriel and the 3aeses.

%he other documentary e#idence further showed that the&ersonal account of ati#idad, et al. was used to transfer the&ur&orted loan of res&ondent @olores to &etitioner 3ank7s account.%hus, petitioner 6an4 as 3older of t3e c3ec4 is not a 3olderin due course and accordingly not entitled to enforce orcollect payment from t3e ma4er


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Imagination is everything. It is the preview of life's comingattractions.

- Albert Einstein

Documents

Nego Cases (Part 1 of 2)