Nego Cases Summary

8/9/2019 Nego Cases Summary

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Summaries: Commercial Law Review (Negotiable Intruments Law)

• Preliminary Considerations

1. Philippine Education Co. Inc. vs. Soriano (GR L-2240! "0 #une 1$%1&

2. 'ia)ia vs. Court o* +ppeals (GR 1002$0! 4 #une 1$$"&

". Philippine +irlines vs. Court o* +ppeals (GR 4$1,,! "0 #anuar 1$$0&

4. Sesreno vs. Court o* +ppeals (GR ,$22! 24 a 1$$"&

•

Form and interpretation o negotiable instruments

. etropolitan /an 'rust Copan vs. Court o* +ppeals (GR ,,,33! 1, eruar 1$$1&

3. +n5 'e Lian vs. Court o* +ppeals (GR L-213! 2 Septeer 1$0&

%. Philippine 6ational /an vs. anila 7il Re*inin5 /-Products Copan! Inc. (GR L-1,10"! , #une 1$22&

,. Repulic Planters /an vs. Court o* +ppeals (GR $"0%"! 21 8eceer 1$$2&

$. Evan5elista vs. ercator inance Corp. (GR 14,,34! 21 +u5ust 200"&

• Negotiation

10. Consolidated Pl9ood Industries Inc. vs. IC Leasin5 and +cceptance Corp. (GR %2$"! "0 +pril 1$,%&

11. 8e la :ictoria vs. /ur5os (GR 1111$0! 2% #une 1$$&

12. 8evelopent /an o* Ri;al vs. Sia <ei (GR ,41$! $ arch 1$$"&

1". etropol (/acolod& inancin5 Investent Corporation vs. Sao otors Co. (GR L-"$341! 2, eruar 1$,"&

14. Gepesa9 vs. Court o* +ppeals (GR $2244. $ eruar 1$$"&

• !olders

1. 8e 7capo vs. Gatchalian (GR L-1123! "0 6oveer 1$31&

13. Stelco aretin5 Corp. vs. Court o* +ppeals (GR $3130! 1% #une 1$$2&

1%. /ataan Ci5ar and Ci5arette actor vs. Court o* +ppeals (GR $"04,! " arch 1$$4&

1,. State Investent =ouse Inc. (SI=I& vs. Interediate +ppellate Court (GR %2%34! 1" #ul 1$,$&

1$. >an5 vs. Court o* +ppeals (GR 1",0%4! 1 +u5ust 200"&

• Liability o Parties

20. Philippine 6ational /an (P6/& vs. Picornell (GR L-1,%1! 23 Septeer 1$22&

21. People vs. anie5o (GR L-"0$10! 2% eruar 1$,%&

22. +stro Electronics Corp. vs. Philippine E?port and orei5n Loan Guarantee Corporation (GR 1"3%2$! 2" Septeer 200"&

2". Garcia vs. Llaas (GR 1412%! , 8eceer 200"&

• "eenses

24. Crisolo5o-#ose vs. Court o* +ppeals (GR ,0$$! 1 Septeer 1$,$&

2. Salas vs. Court o* +ppeals (GR %3%,,! 22 #anuar 1$$0&

23. Philippine 6ational /an vs. Court o* +ppeals (GR 10%0,! 2 +pril 1$$3&

2%. +ssociated /an vs. Court o* +ppeals (GR 10%",2! "1 #anuar 1$$3&

2,. 'he Great Eastern Li*e Insurance Co. vs. =on5on5 Shan5hai /anin5 Corp. (GR 1,3%! 2" +u5ust 1$22&

2$. Repulic /an vs. Erada (GR L-40%$3! "1 #ul 1$%&



"0. Philippine 6ational /an vs. @uipo (GR L-"1$4! 14 arch 1$,,&

"1. Philippine Coercial International /an vs. Court o* +ppeals (GR 12141"! 2$ #anuar 2001&

"2. Papa vs. :alencia (GR 101,,! 2" #anuar 1$$,&

• #norcement o Liability

"". ar East Realt Investent Inc. vs. Court o* +ppeals (GR L-"34$! 7ctoer 1$,,&

"4. <on5 vs. Court o* +ppeals (GR 11%,%! 2 eruar 2001&

". 'he International Corporate /an (no9 Anion /an o* the Philippines& vs. Spouses Gueco (GR 141$3,! 12 eruar 2001&

"3. State Investent =ouse Inc. vs. Court o* +ppeals (GR 10113"! 11 #anuar 1$$"&

"%. +sia /anin5 Corporation vs. #avier (GR 1$01! 4 +pril 1$2"&

",. 6co Sales Corporation vs. /+ inance Corp. (GR %13$4! 13 +u5ust 1$$1&

• C$ec%s

"$. 6e9 Paci*ic 'ier Suppl Copan vs. Seneris (GR L-41%34! 1$ 8eceer 1$,0&

40. Philippine 6ational /an vs. 6ational Cit /an o* 6e9 >or (GR 4"$3! "1 7ctoer 1$"3&

41. oran vs. Court o* +ppeals (GR 10,"3! % arch 1$$4&



Summary

P$ilippine #ducation Co& Inc& vs& Soriano

BGR L-2240! "0 #une 1$%1

En /anc! 8i;on (#&D , concur! 2 too no part

Facts: 7n 1, +pril 1$, Enriue ontinola sou5ht to purchase *ro the anila Post 7**ice 10 one orders o* P200.00 each paale to E. P. ontinola

9ith address at Lucena! @ue;on. +*ter the postal teller had ade out one orders nuered 1243,! 1243,%-1243$! ontinola o**ered to pa *or

the 9ith a private chec. +s private checs 9ere not 5enerall accepted in paent o* one orders! the teller advised hi to see the Chie* o* the

one 7rder 8ivision! ut instead o* doin5 so! ontinola ana5ed to leave the uildin5 9ith his o9n chec and the 10 one orders 9ithout the

no9led5e o* the teller. 7n the sae date! 1, +pril 1$,! upon discover o* the disappearance o* the unpaid one orders! an ur5ent essa5e 9as

sent to all postasters! and the *ollo9in5 da notice 9as lie9ise served upon all ans. instructin5 the not to pa anone o* the one orders

a*oresaid i* presented *or paent. 'he /lan o* +erica received a cop o* said notice " das later. 7n 2" +pril 1$, one o* the aove entioned

one orders nuered 1243,, 9as received Philippine Education Co. as part o* its sales receipts. 'he *ollo9in5 da it deposited the sae 9ith the

/an o* +erica! and one da therea*ter the latter cleared it 9ith the /ureau o* Posts and received *ro the latter its *ace value o* P200.00. 7n 2%

Septeer 1$31! auricio +. Soriano! Chie* o* the one 7rder 8ivision o* the anila Post 7**ice! actin5 *or and in ehal* o* Post-aster Enrico

Paloar! noti*ied the /an o* +erica that one order 1243,, attached to his letter had een *ound to have een irre5ularl issued and that! in vie9

thereo*! the aount it represented had een deducted *ro the anFs clearin5 account. or its part! on +u5ust 2 o* the sae ear! the /an o* +erica

deited Philippine Education Co.Fs account 9ith the sae aount and 5ave it advice thereo* eans o* a deit eo. 7n 12 7ctoer 1$31 Philippine

Education Co. reuested the Postaster General to reconsider the action taen his o**ice deductin5 the su o* P200.00 *ro the clearin5 account o*

the /an o* +erica! ut his reuest 9as denied. So 9as Philippine Education Co.Fs suseuent reuest that the atter e re*erred to the Secretar o*

#ustice *or advice. 'herea*ter! Philippine Education Co. elevated the atter to the Secretar o* Pulic <ors and Counications! ut the latter

sustained the actions taen the postal o**icers. In connection 9ith the events set *orth aove! ontinola 9as char5ed 9ith the*t in the Court o* irstInstance o* anila (Criinal Case 4",33& ut a*ter trial he 9as acuitted on the 5round o* reasonale dout. 7n , #anuar 1$32 Philippine Education

Co. *iled an action a5ainst Soriano! et al. in the unicipal Court o* anila. 7n 1% 6oveer 1$32! a*ter the parties had suitted the stipulation o* *acts!

the unicipal court rendered )ud5ent! orderin5 Soriano! et al. to counterand the notice 5iven to the /an o* +erica on 2% Septeer 1$31!

deductin5 *ro said /anFs clearin5 account the su o* P200.00 representin5 the aount o* postal one order 1243,,! or in the alternative! to

indeni* Philippine Education Co. in the said su o* P200.00 9ith interest thereon at the rate o* ,-12H per annu *ro 2% Septeer 1$31 until *ull

paid 9ithout an pronounceent as to costs and attorneFs *ees.J 'he case 9as appealed to the Court o* irst Instance o* anila 9here! a*ter the

parties had resuitted the sae stipulation o* *acts! the appealed decision disissin5 the coplaints 9ith costs! 9as rendered. Philippine Education

Co. appealed.

Issue: <hether the postal one order is a ne5otiale instruent.

Held: Philippine postal statutes 9ere patterned a*ter siilar statutes in *orce in the Anited States. or this reason! Philippine postal statutes are 5enerall

construed in accordance 9ith the construction 5iven in the Anited States to their o9n postal statutes! in the asence o* an special reason )usti*in5 a

departure *ro this polic or practice. 'he 9ei5ht o* authorit in the Anited Status is that postal one orders are not ne5otiale instruents! the reason

ehind this rule ein5 that! in estalishin5 and operatin5 a postal one order sste! the 5overnent is not en5a5in5 in coercial transactions ut

erel e?ercises a 5overnental po9er *or the pulic ene*it. Soe o* the restrictions iposed upon one orders postal la9s and re5ulations are

inconsistent 9ith the character o* ne5otiale instruents. or instance! such la9s and re5ulations usuall provide *or not ore than one endorseent

paent o* one orders a e 9ithheld under a variet o* circustances.



'ibaia vs& Court o ppeals

BGR 1002$0! 4 #une 1$$"

Second 8ivision! Padilla (#&D " concur

Facts: Case 4,3" 9as a suit *or collection o* a su o* one *iled Eden 'an a5ainst the 'ia)ia spouses (6orerto #r. and Caren&. + 9rit o*

attachent 9as issued the trial court on 1% +u5ust 1$,% and on 1% Septeer 1$,%! the 8eput Sheri** *iled a return statin5 that a deposit ade

the 'ia)ia spouses in the Re5ional 'rial Court (R'C& o* Kalooan Cit in the aount o* P442!%0.00 in another case! had een 5arnished hi. 7n 10

arch 1$,,! the R'C! /ranch 11 o* Pasi5! etro anila rendered its decision in Civil Case 4,3" in *avor o* Eden 'an! orderin5 the 'ia)ia spouses to

pa her an aount in e?cess o* P"00!000.00. 7n appeal! the Court o* +ppeals odi*ied the decision reducin5 the a9ard o* oral and e?eplar

daa5es. 'he decision havin5 ecoe *inal! Eden 'an *iled the correspondin5 otion *or e?ecution and therea*ter! the 5arnished *unds 9hich then

9ere on deposit 9ith the cashier o* the R'C o* Pasi5! etro anila! 9ere levied upon. 7n 14 8eceer 1$$0! the 'ia)ia spouses delivered to 8eput

Sheri** Eduardo /olia the total one )ud5ent in the *ollo9in5 *orD (1& CashierFs Chec 9orth P232!%0.00! and Cash in the aount o* P1"!%"".%0

('otallin5 P"$,!4,".%0&. Eden 'an! re*used to accept the paent ade the 'ia)ia spouses and instead insisted that the 5arnished *unds deposited

9ith the cashier o* the R'C o* Pasi5! etro anila e 9ithdra9n to satis* the )ud5ent oli5ation. 7n 1 #anuar 1$$1! the spouses *iled a otion to li*

the 9rit o* e?ecution on the 5round that the )ud5ent det had alread een paid. 7n 2$ #anuar 1$$1! the otion 9as denied the trial court on the

5round that paent in cashierFs chec is not paent in le5al tender and that paent 9as ade a third part other than the de*endant. + otion *o

reconsideration 9as denied on , eruar 1$$1. 'herea*ter! the spouses 'ia)ia *iled a petition *or certiorari! prohiition and in)unction in the Court o*

+ppeals. 'he appellate court disissed the petition on 24 +pril 1$$1 holdin5 that paent cashierFs chec is not paent in le5al tender as reuired

Repulic +ct 2$. 'he otion *or reconsideration 9as denied on 2% a 1$$1. 'he spouses *iled the petition *or revie9.

Issue: <hether paent eans o* chec (even cashierFs chec& is considered paent in le5al tender as reuired the Civil Code! Repulic +c2$! and the Central /an +ct.

Held: +rticle 124$ o* the Civil Code 9hich provides that J'he paent o* dets in one shall e ade in the currenc stipulated! and i* it is not possile

to deliver such currenc! then in the currenc 9hich is le5al tender in the Philippines. 'he deliver o* proissor notes paale to order! or ills o*

e?chan5e or other ercantile docuents shall produce the e**ect o* paent onl 9hen the have een cashed! or 9hen throu5h the *ault o* the credito

the have een ipaired. In the eantie! the action derived *ro the ori5inal oli5ation shall e held in aeance.J Section 1 o* Repulic +ct 2$! as

aended! on the other hand! provides that JEver provision contained in! or ade 9ith respect to! an oli5ation 9hich purports to 5ive the oli5ee the

ri5ht to reuire paent in 5old or in an particular ind o* coin or currenc other than Philippine currenc or in an aount o* one o* the Philippines

easured there! shall e as it is here declared a5ainst pulic polic! null and void! and o* no e**ect! and no such provision shall e contained in! or

ade 9ith respect to! an oli5ation therea*ter incurred. Ever oli5ation hereto*ore and herea*ter incurred! 9hether or not an such provision as to

paent is contained therein or ade 9ith respect thereto! shall e dischar5ed upon paent in an coin or currenc 9hich at the tie o* paent is

le5al tender *or pulic and private dets.J +lso! Section 3" o* Repulic +ct 23! aended (Central /an +ct& 9hich provides that JChecs representin5

deposit one do not have le5al tender po9er and their acceptance in the paent o* dets! oth pulic and private! is at the option o* the creditorD

Provided! ho9ever! that a chec 9hich has een cleared and credited to the account o* the creditor shall e euivalent to a deliver to the creditor o*

cash in an aount eual to the aount credited to his account.J urther! in the recent cases o* Philippine +irlines! Inc. vs. Court o* +ppeals (GR 4$1,,!

"0 #anuar 1$$0! 1,1 SCR+ %& and Roan Catholic /ishop o* alolos! Inc. vs. Interediate +ppellate Court (GR %2110! 13 6oveer 1$$0! 1$1

SCR+ 411&! the Court held that J+ chec! 9hether a ana5erFs chec or ordinar chec! is not le5al tender! and an o**er o* a chec in paent o* a det

is not a valid tender o* paent and a e re*used receipt the oli5ee or creditor.J 'he rulin5 in these t9o (2& cases erel applies the statutor

provisions 9hich la do9n the rule that a chec is not le5al tender and that a creditor a validl re*use paent chec! 9hether it e a ana5erFs!

cashierFs or personal chec. In the ore recent case o* ortunado vs. Court o* +ppeals (GR%,3! 2 +pril 1$$1! 1$3 SCR+ 23$&! the Court stressed

that! J<e are not! this decision! sanctionin5 the use o* a chec *or the paent o* oli5ations over the o)ection o* the creditor.J



P$ilippine irlines vs& Court o ppeals

BGR 4$1,,! "0 #anuar 1$$0

En /anc! Gutierre; #r. (#&D % concur! " dissent in separate opinions 9here 4 )oined

Facts: 7n , 6oveer 1$3%! +elia 'an! under the nae and stle o* +le Printin5 Press coenced a coplaint *or daa5es e*ore the Court o*

irst Instance (CI& o* anila (Civil Case %1"0%&. +*ter trial! the CI o* anila! /ranch 1"! then presided over the late #ud5e #esus P. or*e rendered

)ud5ent on 2$ #une 1$%2! in *avor o* 'an! orderin5 Philippine +irlines! Inc. (P+L& to pa 'an the aount o* P%!000.00 as actual daa5es! 9ith le5al

interest thereon *ro 'anFs e?tra-)udicial deand ade the letter o* 20 #ul 1$3% P1,!200.00! representin5 the unreali;ed pro*it o* 10H included in

the contract price o* P200!000.00 plus le5al interest thereon *ro 20 #ul 1$3% P20!000.00 as and *or oral daa5es! 9ith le5al interest thereon *ro

20 #ul 1$3% P!000.00 daa5es as and *or attorneFs *ee 9ith costs a5ainst P+L. 7n 2, #ul 1$%2! P+L *iled its appeal 9ith the Court o* +ppeals (C+-

GR 10%$-R&. 7n " eruar 1$%%! the appellate court rendered its decision! a**irin5 ut odi*in5 the CIFs decision! orderin5 P+L to pa the su o*

P2!000.00 as daa5es and P!000.00 as attorneFs *ee. 6otice o* )ud5ent 9as sent the Court o* +ppeals to the trial court and on dates

suseuent thereto! a otion *or reconsideration 9as *iled 'an! dul opposed P+L. 7n 2" a 1$%%! the Court o* +ppeals rendered its resolution

denin5 'anFs otion *or reconsideration *or lac o* erit. 6o *urther appeal havin5 een taen the parties! the )ud5ent ecae *inal and e?ecutor

and on "1 a 1$%%! )ud5ent 9as correspondin5l entered in the case.

'he case 9as reanded to the trial court *or e?ecution and on 2 Septeer 1$%%! 'an *iled a otion prain5 *or the issuance o* a 9rit o* e?ecution o* the

)ud5ent rendered the Court o* +ppeals. 7n 11 7ctoer 1$%%! the trial court! presided over #ud5e Ricardo 8. Galano! issued its order o* e?ecution

9ith the correspondin5 9rit in *avor o* 'an. 'he 9rit 9as dul re*erred to 8eput Sheri** Eilio . Rees o* /ranch 1" o* the Court o* irst Instance o*

anila *or en*orceent. 4 onths later! on 11 eruar 1$%,! 'an oved *or the issuance o* an alias 9rit o* e?ecution statin5 that the )ud5ent rendered

the lo9er court! and a**ired 9ith odi*ication the Court o* +ppeals! reained unsatis*ied. 7n 1 arch 1$%,! P+L *iled an opposition to the otion*or the issuance o* an alias 9rit o* e?ecution statin5 that it had alread *ull paid its oli5ation to 'an throu5h the deput sheri** o* the court! Rees! as

evidenced cash vouchers properl si5ned and receipted said Eilio . Rees. 7n " arch 1$%,! the Court o* +ppeals denied the issuance o* the

alias 9rit *or ein5 preature! orderin5 the e?ecutin5 sheri** Rees to appear 9ith his return and e?plain the reason *or his *ailure to surrender the

aounts paid to hi P+L. =o9ever! the order could not e served upon 8eput Sheri** Rees 9ho had asconded or disappeared. 7n 2, arch

1$%,! otion *or the issuance o* a partial alias 9rit o* e?ecution 9as *iled 'an. 7n 1$ +pril 1$%,! 'an *iled a otion to 9ithdra9 Jotion *or Partial

+lias <rit o* E?ecutionJ 9ith Sustitute otion *or +lias <rit o* E?ecution. 7n 1 a 1$%,! the #ud5e issued an order 5rantin5 the otion! and issuin5

the alias 9rit o* e?ecution. 7n 1, a 1$%,! P+L received a cop o* the *irst alias 9rit o* e?ecution issued on the sae da directin5 Special Sheri**

#aie K. del Rosario to lev on e?ecution in the su o* P2!000.00 9ith le5al interest thereon *ro 20 #ul 1$3% 9hen 'an ade an e?tra)udicial

deand throu5h a letter. Lev 9as also ordered *or the *urther su o* P!000.00 a9arded as attorneFs *ees. 7n 2" a 1$%,! P+L *iled an ur5ent

otion to uash the alias 9rit o* e?ecution statin5 that no return o* the 9rit had as et een ade 8eput Sheri** Rees and that the )ud5ent det

had alread een *ull satis*ied P+L as evidenced the cash vouchers si5ned and receipted the server o* the 9rit o* e?ecution! 8eput Sheri**

Rees. 7n 23 a 1$%,! Special Sheri** del Rosario served a notice o* 5arnishent on the depositor an o* P+L! ar East /an and 'rust Copan!

Rosario /ranch! /inondo! anila! throu5h its ana5er and 5arnished P+LFs deposit in the said an in the total aount o* P34!40,.00 as o* 13 a

1$%,. P+L *iled the petition *or certiorari.

Issue: <hether the paent ade to the ascondin5 sheri** chec in his nae operate to satis* the )ud5ent det.

Held: Ander the initial )ud5ent! +elia 'an 9as *ound to have een 9ron5ed P+L. She *i led her coplaint in 1$3%. +*ter 10 ears o* protracted

liti5ation in the Court o* irst Instance and the Court o* +ppeals! s. 'an 9on her case. +lost 22 ears later! s. 'an has not seen a centavo o* 9hat

the courts have solenl declared as ri5ht*ull hers. 'hrou5h asolutel no *ault o* her o9n! s. 'an has een deprived o* 9hat! technicall! she should

have een paid *ro the start! e*ore 1$3%! 9ithout need o* her 5oin5 to court to en*orce her ri5hts. +nd all ecause P+L did not issue the checs

intended *or her! in her nae. Ander the peculiar circustances o* the case! the paent to the ascondin5 sheri** chec in his nae did not operate

as a satis*action o* the )ud5ent det. In 5eneral! a paent! in order to e e**ective to dischar5e an oli5ation! ust e ade to the proper person.

+rticle 1240 o* the Civil Code provides that JPaent shall e ade to the person in 9hose *avor the oli5ation has een constituted! or his successor in

interest! or an person authori;ed to receive it.J urther! +rticle 124$ o* the Civil Code provides that J'he paent o* dets in one shall e ade inthe currenc stipulated! and i* it is not possile to deliver such currenc! then in the currenc 9hich is le5al tender in the Philippines. 'he deliver o*

proissor notes paale to order! or ills o* e?chan5e or other ercantile docuents shall produce the e**ect o* paent onl 9hen the have een

cashed! or 9hen throu5h the *ault o* the creditor the have een ipaired. In the eantie! the action derived *ro the ori5inal oli5ation shall e held

in aeance.J In the asence o* an a5reeent! either e?press or iplied! paent eans the dischar5e o* a det or oli5ation in one and unless the

parties so a5ree! a detor has no ri5hts! e?cept at his o9n peril! to sustitute soethin5 in lieu o* cash as ediu o* paent o* his det. Conseuentl

unless authori;ed to do so la9 or consent o* the oli5ee! a pulic o**icer has no authorit to accept anthin5 other than one in paent o* an

oli5ation under a )ud5ent ein5 e?ecuted. Strictl speain5! the acceptance the sheri** o* P+LFs checs does not! per se! operate as a dischar5e o*

the )ud5ent det. Since a ne5otiale instruent is onl a sustitute *or one and not one! the deliver o* such an instruent does not! itsel*!

operate as paent. + chec! 9hether a ana5erFs chec or ordinar chec! is not le5al tender! and an o**er o* a chec in paent o* a det is not a

valid tender o* paent and a e re*used receipt the oli5ee or creditor. ere deliver o* checs does not dischar5e the oli5ation under a

)ud5ent. 'he oli5ation is not e?tin5uished and reains suspended until the paent coercial docuent is actuall reali;ed.



Sesbreno vs& Court o ppeals

BGR ,$22! 24 a 1$$"

'hird 8ivision! eliciano (#&D 4 concur

Facts: 7n $ eruar 1$,1! Raul SesreMo ade a one aret placeent in the aount o* P"00!000.00 9ith the Philippine Ander9riters inance

Corporation (Phil*inance&! Ceu /ranch the placeent! 9ith a ter o* "2 das! 9ould ature on 1" arch 1$,1. Phil*inance! also on $ eruar 1$,1!

issued the *ollo9in5 docuents to SesrenoD (a& the Certi*icate o* Con*iration o* Sale! J9ithout recourse!J 204$3 o* 1 8elta otors Corporation

Proissor 6ote (8C P6& 2%"1 *or a ter o* "2 das at 1%.0 H per annu (& the Certi*icate o* Securities 8eliver Receipt 13,% indicatin5 the sale

o* 8C P6 2%"1 to Sesreno! 9ith the notation that the said securit 9as in custodianship o* Pilipinas /an! as per 8enoinated Custodian Receipt

(8CR& 10,0 dated $ eruar 1$,1 and (c& post-dated checs paale on 1" arch 1$,1 (i.e.! the aturit date o* SesrenoFs investent&! 9ith

Sesreno as paee! Phil*inance as dra9er! and Insular /an o* +sia and +erica as dra9ee! in the total aount o* P"04!""."". 7n 1" arch 1$,1!

Sesreno sou5ht to encash the post-dated checs issued Phil*inance. =o9ever! the checs 9ere dishonored *or havin5 een dra9n a5ainst

insu**icient *unds. 7n 23 arch 1$,1! Phil*inance delivered to Sesreno the 8CR 10,0 issued Pilipinas /an (Pilipinas&. 7n 2 +pril 1$,1! Sesreno

approached s. Eli;aeth de :illa o* Pilipinas! aati /ranch! and handed to her a deand letter in*orin5 the an that his placeent 9ith Phil*inance

in the aount re*lected in the 8CR 10,0 had reained unpaid and outstandin5! and that he in e**ect 9as asin5 *or the phsical deliver o* the

underlin5 proissor note. Sesreno then e?ained the ori5inal o* the 8C P6 2%"1 and *oundD that the securit had een issued on 10 +pril 1$,0

that it 9ould ature on 3 +pril 1$,1 that it had a *ace value o* P2!"00!,"".""! 9ith Phil*inance as JpaeeJ and 8elta otors Corporation (8elta& as

JaerJ and that on *ace o* the proissor note 9as staped J676-6EG7'I+/LE.J Pilipinas did not deliver the 6ote! nor an certi*icate o*

participation in respect thereo*! to Sesreno. Sesreno later ade siilar deand letters! dated " #ul 1$,1 and " +u5ust 1$,1! a5ain asin5 Pilipinas

*or phsical deliver o* the ori5inal o* 8C P6 2%"1. Pilipinas alle5edl re*erred all o* SesrenoFs deand letters to Phil*inance *or 9ritten instructions!

as had een supposedl a5reed upon in a JSecurities Custodianship +5reeentJ et9een Pilipinas and Phil*inance. Phil*inance never did provide theappropriate instructions Pilipinas never released 8C P6 2%"1! nor an other instruent in respect thereo*! to petit ioner. Sesreno also ade a 9ritten

deand on 14 #ul 1$,1 upon 8elta *or the partial satis*action o* 8C P6 2%"1! e?plainin5 that Phil*inance! as paee thereo*! had assi5ned to hi said

6ote to the e?tent o* P"0%!$""."". 8elta! ho9ever! denied an liailit to Sesreno on the proissor note! and e?plained in turn that i t had previousl

a5reed 9ith Phil*inance to o**set its 8C P6 2%"1 (alon5 9ith 8C P6 2%"0& a5ainst Phil*inance P6 14"-+ issued in *avor o* 8elta. In the eantie!

Phil*inance! on 1, #une 1$,1! 9as placed under the )oint ana5eent o* the Securities and E?chan5e Coission (SEC& and the Central /an.

Pilipinas delivered to the SEC 8C P6 2%"1! 9hich to date apparentl reains in the custod o* the SEC. +s Sesreno had *ailed to collect his

investent and interest thereon! he *iled on 2, Septeer 1$,2 an action *or daa5es 9ith the Re5ional 'rial Court (R'C& o* Ceu Cit! /ranch 21!

a5ainst 8elta and Pilipinas. 'he trial court! in a decision dated +u5ust 1$,%! disissed the coplaint and counterclais *or lac o* erit and *or lac o*

cause o* action! 9ith costs a5ainst Sesreno. Sesreno appealed to the Court o* +ppeals (C+ GR C: 11$&. In a 8ecision dated 21 arch 1$,$! the

Court o* +ppeals denied the appeal. Sesreno oved *or reconsideration o* the aove 8ecision! 9ithout success. Sesreno *iled the Petition *or Revie9

on Certiorari.

Issue: <hether the arin5 Nnon-ne5otialeO in 8C P6 2%"1 prohiited Phil*inance *ro assi5nin5 or trans*errin5 the sae to Sesreno.

Held: 'he ne5otiation o* a ne5otiale instruent ust e distin5uished *ro the assi5nent or trans*er o* an instruent 9hether that e ne5otiale or

non-ne5otiale. 7nl an instruent uali*in5 as a ne5otiale instruent under the relevant statute a e ne5otiated either indorseent thereo*

coupled 9ith deliver! or deliver alone 9here the ne5otiale instruent is in earer *or. + ne5otiale instruent a! ho9ever! instead o* ein5

ne5otiated! also e assi5ned or trans*erred. 'he le5al conseuences o* ne5otiation as distin5uished *ro assi5nent o* a ne5otiale instruent are! o*

course! di**erent. + non-ne5otiale instruent a! oviousl! not e ne5otiated ut it a e assi5ned or trans*erred! asent an e?press prohiition

a5ainst assi5nent or trans*er 9ritten in the *ace o* the instruentD J'he 9ords Fnot ne5otiale!F staped on the *ace o* the ill o* ladin5! did not destro

its assi5nailit! ut the sole e**ect 9as to e?ept the ill *ro the statutor provisions relative thereto! and a ill! thou5h not ne5otiale! a e

trans*erred assi5nent the assi5nee tain5 su)ect to the euities et9een the ori5inal parties.J =erein! 8C P6 6o. 2%"1! 9hile ared Jnon-

ne5otiale!J 9as not at the sae tie staped Jnon-trans*erraleJ or Jnon-assi5nale.J It contained no stipulation 9hich prohiited Phil*inance *ro

assi5nin5 or trans*errin5! in 9hole or in part! that 6ote. urther! there is nothin5 in the letter o* a5reeent dated 10 +pril 1$,0 et9een 8elta and

Phil*inance 9hich can e reasonal construed as a prohiition upon Phil*inance assi5nin5 or trans*errin5 all or part o* 8C P6 2%"1! e*ore the

aturit thereo*. It is scarcel necessar to add that! even had this JLetter o* +5reeentJ set *orth an e?plicit prohiition o* trans*er upon Phil*inance!

such a prohiition cannot e invoed a5ainst an assi5nee or trans*eree o* the 6ote 9ho parted 9ith valuale consideration in 5ood *aith and 9ithout

notice o* such prohiition. It is not disputed that Sesreno 9as such an assi5nee or trans*eree.

[The issue whether Delta is liable for the value of the promissory to Sesbreno was resolved through Articles 1279 and 1! of the "ew #ivil #ode as to

compensation$ and Article 12%& of the same as to the assignment of creditor's rights( The #ourt held that since Sesbreno failed to notify Delta of the

assignment of the creditor's )*hilfinance+ rights at any time before the maturity date of D,# *" 27!1$ and because the record is bare of any indication

that *hilfinance had itself notified Delta of the assignment to Sesbreno$ the #ourt was compelled to uphold the defense of compensation raised by Delta

The #ourt$ however$ held that *hilfinance remained liable to Sesbreno under the terms of the assignment made by *hilfinance to Sesbreno( As to the

issue of *ilipinas- liability to Sesbreno$ on the other hand$ the #ourt held that *ilipinas must respond to Sesbreno for damages sustained by him arising

out of its breach of duty( .y failing to deliver the "ote to Sesbreno as depositor/beneficiary of the thing deposited // when *ilipinas purported to re0uire



and await the instructions of *hilfinance$ in obvious contravention of i ts undertaing under the D# to effect physical delivery of the "ote upon receipt of

3written instructions3 from Sesbre4o // *ilipinas effectively and unlawfully deprived Sesbreno of the "ote deposited with i t( 5 #ivil 6aw issues$ ,8(:



*etropolitan +an% , 'rust Company vs& Court o ppeals

BGR ,,,33! 1, eruar 1$$1

irst 8ivision! Cru; (#&D 4 concur

Facts: 'he etropolitan /an and 'rust Co. (etro/an& is a coercial an 9ith ranches throu5hout the Philippines and even aroad. Golden

Savin5s and Loan +ssociation 9as! at the tie these events happened! operatin5 in Calapan! indoro! 9ith Lucia Castillo! a5no Castillo and Gloria

Castillo as its principal o**icers. In #anuar 1$%$! a certain Eduardo Goe; opened an account 9ith Golden Savin5s and deposited over a period o* 2

onths ", treasur 9arrants 9ith a total value o* P1!%!22,."%. 'he 9ere all dra9n the Philippine ish aretin5 +uthorit and purportedl si5ned

its General ana5er and counter-si5ned its +uditor. 3 o* these 9ere directl paale to Goe; 9hile the others appeared to have een indorsed

their respective paees! *ollo9ed Goe; as second indorser. 7n various dates et9een #une 2 and #ul 13! 1$%$! all these 9arrants 9ere

suseuentl indorsed Gloria Castillo as Cashier o* Golden Savin5s and deposited to its Savin5s +ccount 24$, in the etroan ranch in Calapan!

indoro. 'he 9ere then sent *or clearin5 the ranch o**ice to the principal o**ice o* etroan! 9hich *or9arded the to the /ureau o* 'reasur *or

special clearin5. ore than 2 9ees a*ter the deposits! Gloria Castillo 9ent to the Calapan ranch several ties to as 9hether the 9arrants had een

cleared. She 9as told to 9ait. +ccordin5l! Goe; 9as ean9hile not allo9ed to 9ithdra9 *ro his account. Later! ho9ever! Je?asperatedJ over GloriaFs

repeated inuiries and also as an accoodation *or a Jvalued client!J etro/an sas it *inall decided to allo9 Golden Savin5s to 9ithdra9 *ro the

proceeds o* the 9arrants. 'he *irst 9ithdra9al 9as ade on $ #ul 1$%$! in the aount o* P0,!000.00! the second on 1" #ul 1$%$! in the aount o*

P"10!000.00! and the third on 13 #ul 1$%$! in the aount o* P10!000.00. 'he total 9ithdra9al 9as P$3,!000.00. In turn! Golden Savin5s suseuentl

allo9ed Goe; to ae 9ithdra9als *ro his o9n account! eventuall collectin5 the total aount o* P1!13%!00.00 *ro the proceeds o* the apparentl

cleared 9arrants. 'he last 9ithdra9al 9as ade on 13 #ul 1$%$. 7n 21 #ul 1$%$! etroan in*ored Golden Savin5s that "2 o* the 9arrants had

een dishonored the /ureau o* 'reasur on 1$ #ul 1$%$! and deanded the re*und Golden Savin5s o* the aount it had previousl 9ithdra9n! to

ae up the de*icit in its account. 'he deand 9as re)ected. etroan then sued Golden Savin5s in the Re5ional 'rial Court o* indoro. +*ter trial! )ud5ent 9as rendered in *avor o* Golden Savin5s! 9hich! ho9ever! *iled a otion *or reconsideration even as etroan *iled its notice o* appeal. 7n 4

6oveer 1$,3! the lo9er court odi*ied its decision! disissin5 the coplaint 9ith costs a5ainst etroan issolvin5 and li*tin5 the 9rit o*

attachent o* the properties o* Golden Savin5s and Spouses a5no Castillo and Lucia Castillo directin5 etroan to reverse its action o* deitin5

Savin5s +ccount 24$, o* the su o* P1!%4!0,$.00 and to reinstate and credit to such account such aount e?istin5 e*ore the deit 9as ade

includin5 the aount o* P,12!0""."% in *avor o* Golden Savin5s and therea*ter! to allo9 Golden Savin5s to 9ithdra9 the aount outstandin5 thereon

e*ore the deit orderin5 etroan to pa Golden Savin5s attorneFs *ees and e?penses o* liti5ation in the aount o* P200!000.00 and orderin5

etroan to pa the Spouses a5no Castillo and Lucia Castillo attorneFs *ees and e?penses o* liti5ation in the aount o* P100!000.00. 7n appeal to

the appellate court! the decision 9as a**ired! proptin5 etroan to *ile the petition *or revie9.

Issue: <hether the treasur 9arrants in uestion are ne5otiale instruents.

Held: Clearl staped on the treasur 9arrantsF *ace is the 9ord Jnon-ne5otiale.J oreover! and this is o* eual si5ni*icance! it is indicated that the are

paale *ro a particular *und! to 9it! und 01. Section 1 o* the 6e5otiale Instruents La9! provides that J+n instruent to e ne5otiale ust

con*or to the *ollo9in5 reuireentsD (a& It ust e in 9ritin5 and si5ned the aer or dra9er (& ust contain an unconditional proise or order to

pa a su certain in one (c& ust e paale on deand! or at a *i?ed or deterinale *uture tie (d& ust e paale to order or to earer and (e&

<here the instruent is addressed to a dra9ee! he ust e naed or other9ise indicated therein 9ith reasonale certaint.J Section " (<hen proise

is unconditional& thereo* provides that J+n unuali*ied order or proise to pa is unconditional 9ithin the eanin5 o* this +ct thou5h coupled 9ith (a&

+n indication o* a particular *und out o* 9hich reiurseent is to e ade or a particular account to e deited 9ith the aount or (& + stateent o*

the transaction 9hich 5ives rise to the instruent. /ut an order or proise to pa out o* a particular *und is not unconditional.J 'he indication o* und

01 as the source o* the paent to e ade on the treasur 9arrants aes the order or proise to pa Jnot unconditionalJ and the 9arrants

theselves non-ne5otiale. 'here should e no uestion that the e?ception on Section " o* the 6e5otiale Instruents La9 is applicale in the present

case. etroan cannot contend that indorsin5 the 9arrants in 5eneral! Golden Savin5s assued that the 9ere J5enuine and in all respects 9hat

the purport to e!J in accordance 9ith Section 33 o* the 6e5otiale Instruents La9. 'he siple reason is that this la9 is not applicale to the non-

ne5otiale treasur 9arrants. 'he indorseent 9as ade Gloria Castillo not *or the purpose o* 5uaranteein5 the 5enuineness o* the 9arrants ut

erel to deposit the 9ith etroan *or clearin5. It 9as in *act etroan that ade the 5uarantee 9hen it staped on the ac o* the 9arrantsD J+ll

prior indorseent andor lac o* endorseents 5uaranteed! etropolitan /an 'rust Co.! Calapan /ranch.J



ng 'e% Lian vs& Court o ppeals

BGR L-213! 2 Septeer 1$0

En /anc! /en5;on (#&D 3 concur

Facts: Kno9in5 he had no *unds there*or! +n5 'e Lian dre9 on Saturda! 13 6oveer 1$43! a chec upon the China /anin5 Corporation *or the su

o* P4!000! paale to the order o* JcashJ. =e delivered it to Lee =ua =on5 in e?chan5e *or one 9hich the latter handed in the act. 7n 1, 6oveer

1$43! the ne?t usiness da! the chec 9as presented Lee =ua =on5 to the dra9ee an *or paent! ut it 9as dishonored *or insu**icienc o*

*unds! the alance o* the deposit o* +n5 'e Lian on oth dates ein5 P"" onl. +n5 'e Lian 9as char5ed and 9as convicted o* esta*a in the Court o*

irst Instance o* anila. 'he Court o* +ppeals a**ired the verdict.

Issue: <hether indorseent is necessar *or the presentation o* a earer instruent *or paent.

Held: Ander Section $(d& o* the 6e5otiale Instruents La9! a chec dra9n paale to the order o* JcashJ is a chec paale to earer! and the an

a pa it to the person presentin5 it *or paent 9ithout the dra9erFs indorseent. + chec paale to the order o* cash is a earer instruent. <here

a chec is ade paale to the order o* Ncash!O the 9ord Ncash Ndoes not purport to e the nae o* an person! and hence the instruent is paale to

earer. 'he dra9ee an need not otain an indorseent o* the chec! ut a pa it to the person presentin5 it 9ithout an indorseent.J 7* course!

i* the an is not sure o* the earerFs identit or *inancial solvenc! it has the ri5ht to deand identi*ication andor assurance a5ainst possile

coplications! *or instance! (a& *or5er o* dra9erFs si5nature! (& loss o* the chec the ri5ht*ul o9ner! (c& raisin5 o* the aount paale! etc. 'he

an a there*ore reuire! *or its protection! that the indorseent o* the dra9er or o* soe other person no9n to it e otained. /ut 9here the

/an is satis*ied o* the identit andor the econoic standin5 o* the earer 9ho tenders the chec *or collection! it 9ill pa the instruent 9ithout *urther

uestion and it 9ould incur no liailit to the dra9er in thus actin5. + chec paale to earer is authorit *or paent to the holder. <here a chec is inthe ordinar *or! and is paale to earer! so that no indorseent is reuired! a an! to 9hich it is presented *or paent! need not have the holder

identi*ied! and is not ne5li5ent in *ailin5 to do so. Conseuentl! a dra9ee an to 9hich a earer chec is presented *or paent need not necessaril

have the holder identi*ied and ordinaril a not e char5ed 9ith ne5li5ence in *ailin5 to do so. I* the an has no reasonale cause *or suspectin5 an

irre5ularit! it 9ill e protected in pain5 a earer chec! Nno atter 9hat *acts unno9n to it a have occurred prior to the presentent.O +lthou5h a

an is entitled to pa the aount o* a earer chec 9ithout *urther inuir! it is entirel reasonale *or the an to insist that the holder 5ive satis*actor

proo* o* his identit. =erein an9a! it is si5ni*icant! and conclusive! that the *or o* the chec 9as totall unconnected 9ith its dishonor. It 9as returned

unsatis*ied ecause the dra9er had insu**icient *unds not ecause the dra9erFs indorseent 9as lacin5.



P$ilippine National +an% vs& *anila -il Reining , +y.Products Company/ Inc&

BGR L-1,10"! , #une 1$22

irst 8ivision! alcol (#&D 3 concur

Facts: 7n , a 1$20! the ana5er and the treasurer o* the anila 7il Re*inin5 /-Products Copan! Inc!. e?ecuted and delivered to the Philippine

6ational /an (P6/&! a 9ritten instruent readin5 as *ollo9sD JRE6E<+L. P31!000.00 +6IL+! P.I.! a ,! 1$20. 7n deand a*ter date 9e proise to

pa to the order o* the Philippine 6ational /an si?t-one thousand onl pesos at Philippine 6ational /an! anila! P.I. <ithout de*alcation! value

received and do here authori;e an attorne in the Philippine Islands! in case this note e not paid at aturit! to appear in nae and con*ess

)ud5ent *or the aove su 9ith interest! cost o* suit and attorneFs *ees o* ten (10& per cent *or collection! a release o* all errors and 9aiver o* all ri5hts

to inuisition and appeal! and to the ene*it o* all la9s e?eptin5 propert! real or personal! *ro lev or sale. :alue received. 6o. 8ue

+6IL+ 7IL REI6I6G />-PR78AC'S C7.! I6C.! (S5d.& :ICE6'E S7'EL7! ana5er. +6IL+ 7IL REI6I6G />-PR78AC'S C7.! I6C.!

(S5d.& R++EL L7PE. 'reasurer.J 'he anila 7il Re*inin5 /-Products Copan! Inc. *ailed to pa the proissor note on deand. P6/ rou5ht

action in the Court o* irst Instance o* anila! to recover P31!000! the aount o* the note! to5ether 9ith interest and costs. r. Elias 6. Recto! an

attorne associated 9ith P6/! entered his appearance in representation o* anila 7il! and * iled a otion con*essin5 )ud5ent. anila 7il! ho9ever! in a

s9orn declaration! o)ected stron5l to the unsolicited representation o* attorne Recto. Later! attorne +ntonio Gon;ale; appeared *or anila 7il and

*iled a deurrer! and 9hen this 9as overruled! presented an ans9er. 'he trial )ud5e rendered )ud5ent on the otion o* attorne Recto in the ters o*

the coplaint. In the Supree Court! the uestion o* *irst ipression raised in the case concerns the validit in this )urisdiction o* a provision in a

proissor note 9here in case the sae is not paid at aturit! the aer authori;es an attorne to appear and con*ess )ud5ent thereon *or the

principal aount! 9ith interest! costs! and attorneFs *ees! and 9aives all errors! ri5hts to inuisition! and appeal! and all propert e?eptions.

Issue [1]: <hether the 6e5otiale Instruents La9 (+ct 6o. 20"1& e?pressl reco5ni;ed )ud5ent notes! en*orcile under the re5ular procedure.

Held [1]: 'he 6e5otiale Instruents La9! in section ! provides that J'he ne5otiale character o* an instruent other9ise ne5otiale is not a**ected

a provision 9hich (& +uthori;es con*ession o* )ud5ent i* the instruent e not paid at aturitJ ut this provision o* la9 cannot e taen to sanction

)ud5ents con*ession! ecause it is a portion o* a uni*or la9 9hich erel provides that! in )urisdictions 9here )ud5ents notes are reco5ni;ed!

such clauses shall not a**ect the ne5otiale character o* the instruent. oreover! the sae section o* the 6e5otiale Instruents La9 concludes 9ith

these 9ordsD J/ut nothin5 in this section shall validate an provision or stipulation other9ise ille5al.J

Issue [2]: <hether provisions in notes authori;in5 attornes to appear and con*ess )ud5ents a5ainst aers should not e reco5ni;ed in Philippine

)urisdiction iplication.

Held [2]: #ud5ents con*ession as appeared at coon la9 9ere considered an aicale! eas! and cheap 9a to settle and secure dets. 'he

are uic reed serve to save the courtFs tie. 'ie also save tie and one o* the liti5ants and the 5overnent the e?penses that a lon5 liti5ation

entails. In one sense! instruents o* this character a e considered as special a5reeents! 9ith po9er to enter up )ud5ents on the! indin5 the

parties to the result as the theselves vie9ed it. 7n the other hand! are disadvanta5es to the coercial 9orld 9hich out9ei5h the considerations )ust

entioned. Such 9arrants o* attorne are void as a5ainst pulic polic! ecause the enlar5e the *ield *or *raud! ecause under these instruents the

proissor ar5ains a9a his ri5ht to a da in court! and ecause the e**ect o* the instruent is to strie do9n the ri5ht o* appeal accorded statute.

'he reco5nition o* such *or o* oli5ation 9ould rin5 aout a coplete reor5ani;ation o* coercial custos and practices! 9ith re*erence to short-

ter oli5ations. It can readil e seen that )ud5ent notes! instead o* resultin5 to the advanta5e o* coercial li*e the Philippines i5ht e the source

o* ause and oppression! and ae the courts involuntar parties thereto. I* the an has a eritorious case! the )ud5ent is u ltiatel certain in the

courts. 'he Court is o* the opinion thus that 9arrants o* attorne to con*ess )ud5ent are not authori;ed nor conteplated Philippine la9 and that

provisions in notes authori;in5 attornes to appear and con*ess )ud5ents a5ainst aers should not e reco5ni;ed in this )urisdiction iplication

and should onl e considered as valid 9hen 5iven e?press le5islative sanction.



Republic Planters +an% vs& Court o ppeals

BGR $"0%"! 21 8eceer 1$$2

Second 8ivision! Capos #r. (#&D 4 concur

Facts: Sho;o >aa5uchi and erin Canlas 9ere PresidentChie* 7peratin5 7**icer and 'reasurer respectivel! o* <orld9ide Garent anu*acturin5!

Inc.. / virtue o* /oard Resolution 1 dated 1 +u5ust 1$%$! Sho;o >aa5uchi and erin Canlas 9ere authori;ed to appl *or credit *acilities 9ith the

petitioner Repulic Planters /an (RP/& in the *ors o* e?port advances and letters o* credittrust receipts accoodations. Repulic Planters /an

issued nine proissor notes! each o* 9hich 9ere uni*orl 9orded in the *ollo9in5 annerD JQQQQQQQQQQQ! a*ter date! *or value received! I9e! )ointl

and severaIl proise to pa to the 7R8ER o* the REPA/LIC PL+6'ERS /+6K! at its o**ice in anila! Philippines! the su o* QQQQQQQQQQQ

PES7S(....& Philippine Currenc...J 7n the ri5ht otto ar5in o* the proissor notes appeared the si5natures o* Sho;o >aa5uchi and erin Canlas

aove their printed naes 9ith the phrase Jand (in& his personal capacitJ tpe9ritten elo9. +t the otto o* the proissor notes appearedD JPlease

credit proceeds o* this note toD JQQQQQQQQ Savin5s +ccount QQQQQQ CurrentJ! J+ccount 6o. 1"%2-002%-3J! and Jo* <7RL8<I8E G+RE6' G.

C7RP.J 'hese entries 9ere separated *ro the te?t o* the notes 9ith a old line 9hich ran hori;ontall across the pa5es. In three proissor notes! the

nae <orld9ide Garent anu*acturin5! Inc. 9as apparentl ruer staped aove the si5natures o* >aa5uchi and Canlas. 7n 20 8eceer 1$,2!

<orld9ide Garent anu*acturin5! Inc. (<GI& noted to chan5e its corporate nae to Pinch anu*acturin5 Corporation (PC&. 7n eruar 1$,2!

RP/ *iled a coplaint *or the recover o* sus o* one covered aon5 others! the nine proissor notes 9ith interest thereon! plus attorneFs *ees

and penalt char5es. 'he coplainant 9as ori5inall rou5ht a5ainst <GI inter alia! ut i t 9as later aended to drop <GI as de*endant and

sustitute PC it its place. PC and Sho;o >aa5uchi did not *ile an +ended +ns9er and *ailed to appear at the scheduled pre-trial con*erence

despite due notice. 7nl Canlas *iled an +ended +ns9er 9herein he! denied havin5 issued the proissor notes in uestion since accordin5 to hi! he

9as not an o**icer o* PC! ut instead o* <GI! and that 9hen he issued said proissor notes in ehal* o* <GI! the sae 9ere in lan! the

tpe9ritten entries not appearin5 therein prior to the tie he a**i?ed his si5nature. 7n 20 #une 1$,! 'he Re5ional 'rial Court rendered a decision in*avor o* RP/! orderin5 PC (*orerl <GI&!>aa5uchi and Canlas to pa! )ointl and severall! RP/ the *ollo9in5 sus 9ith interest thereon at 13H

per annu under % proissor notes! the su o* P"00!000.00 9ith interest *ro 2$ #anuar 1$,1 until *ull paid P40!000.00 9ith interest *ro 2%

6oveer 1$,0 P133!433.00 9hich interest *ro 2$ #anuar 1$,1 P,3!1"0."1 9ith interest *ro 2$ #anuar 1$,1 P12!%0".%0 9ith interest *ro 2%

6oveer 1$,0 P2,1!,%.$1 9ith interest *ro 2$ #anuar 1$,1 and P200!000.00 9ith interest *ro 2$ #anuar 1$,1. PC and >aa5uchi 9ere also

ordered to pa )ointl and severall! RP/ the su o* P"3%!000.00 9ith interest o* 13H per annu *ro 2$ #anuar 1$,0 under another proissor note.

PC 9as ordered to pa PR/ the su o* P140!000.00 9ith interest at 13H per annu *ro 2% 6oveer 1$,0 until *ull paid! under another

proissor note to pa the su o* P2"1!120.,1 9ith interest at 12H per annu *ro 1 #ul 1$,1! until *ull paid and the su o* P""1!,%0.$% 9ith

interest *ro 2, arch 1$,1! until *u ll paid. 'he court also ordered PC! >aa5uchi! and Canlas to pa! )ointl and severall! RP/ the su o*

P100!000.00 as and *or reasonale attorneFs *ee and the *urther su euivalent to "H per annu o* the respective principal sus *ro the dates

aove stated as penalt char5e until *ull paid! plus 1H o* the principal sus as service char5e 9ith costs a5ainst PC! et a l. ro the aove decision

onl Canlas appealed to the then Interediate Court (no9 the Court +ppeals&. =is contention 9as that inasuch as he si5ned the proissor notes in

his capacit as o**icer o* the de*unct <GI! he should not e held personall liale *or such authori;ed corporate acts that he per*ored. 'he appellatecourt a**ired the decision o* trial court e?cept that it copletel asolved Canlas *ro liailit under the proissor notes and reduced the a9ard *or

daa5es and attorneFs *ees. RP/ appealed a 9a o* a petition *or revie9 on certiorari. It is the contention o* RP/ that havin5 unconditionall si5ned

the $ proissor notes 9ith >aa5uchi! )ointl and severall! Canlas is solidarit liale 9ith >aa5uchi on each o* the nine notes.

Issue [1]: <hether erin Canlas is solidaril liale on each o* the proissor notes earin5 his si5nature.

Held [1]: erin Canlas is solidaril liale on each o* the proissor notes earin5 his si5nature. 'he proissor otes are ne5otiale instruents and

ust e 5overned the 6e5otiale Instruents La9. Ander the 6e5otiale lnstruents La9! persons 9ho 9rite their naes on the *ace o* proissor

notes are aers and are liale as such. / si5nin5 the notes! the aer proises to pa to the order o* the paee or an holder accordin5 to the tenor

thereo*. /ased on the aove provisions o* la9! there is no denin5 that Canlas is one o* the co-aers o* the proissor notes. +s such! he cannot

escape liailit arisin5 there*ro. <here an instruent containin5 the 9ords JI proise to paJ is si5ned t9o or ore persons! the are deeed to e

)ointl and severall liale thereon. +n instruent 9hich e5insJ 9ith JIJ !<eJ ! or JEither o* usJ proise to! pa! 9hen si5ned t9o or ore persons!

aes the solidaril liale. 'he *act that the sin5ular pronoun is used indicates that the proise is individual as to each other eanin5 that each o* the

co-si5ners is deeed to have ade an independent sin5ular proise to pa the notes in *ull. =erein! the solidar liailit o* Canlas is ade clearer and

certain! 9ithout reason *or ai5uit! the presence o* the phrase J)oint and severalJ as descriin5 the unconditional proise to pa to the order o*

RP/. + )oint and several note is one in 9hich the aers ind theselves oth )ointl and individuall to the paee so that all a e sued to5ether *or

its en*orceent! or the creditor a select one or ore as the o)ect o* the suit. + )oint and several oli5ation in coon la9 corresponds to a civil la9

solidar oli5ation that is! one o* several detors ound in such 9ise that each is liale *or the entire aount! and not erel *or his proportionate share

/ ain5 a )oint and several proise to pa to the order o* RP/! Canlas assued the solidar liailit o* a detor and the paee a choose to

en*orce the notes a5ainst hi alone or )ointl 9ith >aa5uchi and PC as solidar detors. +s to 9hether the interpolation o* the phrase Jand (in& his

personal capacitJ elo9 the si5natures o* the aers in the notes 9ill a**ect the liailit o* the aers! it is iaterial and 9ill not a**ect to the liailit o*

Canlas as a )oint and several detor o* the notes. <ith or 9ithout the presence o* said phrase! Canlas is priaril liale as a co-aer o* each o* the

notes and his liailit is that o* a solidar detor.



Issue [2]: <hether Canlas can avoid liailit on the proissor notes claiin5 to e a ere a5ent o* the corporation.

Held [2]: +s a 5eneral rule! o**icers or directors under the old corporate nae ear no personal liailit *or acts done or contracts entered into o**icers

o* the corporation! i* dul authori;ed. Inasuch as such o**icers acted in their capacit as a5ent o* the old corporation and the chan5e o* nae eant

onl the continuation o* the old )uridical entit! the corporation earin5 the sae nae is still ound the acts o* its a5ents i* authori;ed the /oard.

Ander the 6e5otiale Instruents La9! the liailit o* a person si5nin5 as an a5ent is speci*icall provided *or in Section 20 thereo*! 9hich provides that

JLiailit o* a person si5nin5 as a5ent and so *orth. <here the instruent contains or a person adds to his si5nature 9ords indicatin5 that he si5ns *or or

on ehal* o* a principal ! or in a representative capacit! he is not liale on the instruent i* he 9as dul authori;ed ut the ere addition o* 9ords

descriin5 hi as an a5ent! or as *illin5 a representative character! 9ithout disclosin5 his principal! does not e?ept hi *ro personal liailit. <here

the a5ent si5ns his nae ut no9here in the instruent has he disclosed the *act that he is actin5 in a representative capacit or the nae o* the thirdpart *or 9ho he i5ht have acted as a5ent! the a5ent is personall liale to tae holder o* the instruent and cannot e peritted to prove that he

9as erel actin5 as a5ent o* another and parol or e?trinsic evidence is not adissile to avoid the a5entFs personal liailit.J

Issue [3]: <hether the proissor notes 9ere delivered to Canlas in lan *or his si5nature! or 9ere incoplete instruents! to allo9 the application o*

Section 14 o* the 6e5otiale Instruents La9.

Held [3]: + care*ul e?aination o* the notes in uestion sho9s that the are the stereotpe printed *or o* proissor notes 5enerall used

coercial anin5 institutions to e si5ned their clients in otainin5 loans. Such printed notes are incoplete ecause there are lan spaces to e

*illed up on aterial particulars such as paeeFs nae! aount o* the loan! rate o* interest! date o* issue and the aturit date. 'he ters and conditions

o* the loan are printed on the note *or the orro9er-detorFs perusal. +n incoplete instruent 9hich has een delivered to the orro9er *or his

si5nature is 5overned Section 14 o* the 6e5otiale Instruents La9. Proo* that the notes 9ere si5ned in lan 9as onl the sel*-servin5 testion o*

Canlas. 'he Court chose to elieve the anFs testion that the notes 9ere *illed up e*ore the 9ere 5iven to Canlas and >aa5uchi *or their

si5natures as )oint and several proissors. or si5nin5 the notes aove their tpe9ritten naes! the ound theselves as unconditional aers. 'he

court too )udicial notice o* the custoar procedure o* coercial ans o* reuirin5 their clientele to si5n proissor notes prepared the ans in

printed *or 9ith lan spaces alread *illed up as per a5reed ters o* the loan! leavin5 the orro9ers-detors to do nothin5 ut read the ters and

conditions therein printed and to si5n as aers or co-aers. <hen the notes 9ere 5iven to Canlas *or his si5nature! the notes 9ere coplete in the

sense that the spaces *or the aterial particular had een *illed up the an as per a5reeent. 'he notes 9ere not incoplete instruents neither

9ere the 5iven to Canlas in lan as he clais. 'hus! Section 14 o* the 6e5otiaIe Instruents La9 is not applicale.



#vangelista vs& *ercator Finance Corp&

BGR 14,,34! 21 +u5ust 200"

'hird 8ivision! Puno (#&D 2 concur! 2 on o**icial leave

Facts: Spouses Eduardo /. Evan5elista and Epi*ania C. Evan5elista *iled a coplaint *or annulent o* titles a5ainst ercator inance Corp. Ldia P.

Sala;ar! Laecs Realt and 8evelopent Corporation! and the Re5ister o* 8eeds o* /ulacan. 'he spouses Evan5elista claied ein5 the re5istered

o9ners o* parcels o* land contained in the Real Estate ort5a5e e?ecuted the and Eass ars! Inc. 'he alle5ed that the e?ecuted the Rea

Estate ort5a5e in *avor o* ercator onl as o**icers o* Eass ars. 'he did not receive the proceeds o* the loan evidenced a proissor note!

as all o* it 9ent to Eass ars. 'hus! the contended that the ort5a5e 9as 9ithout an consideration as to the since the did not personall

otain an loan or credit accoodations. 'here ein5 no principal oli5ation on 9hich the ort5a5e rests! the real estate ort5a5e is void. <ith the

void ort5a5e! the assailed the validit o* the *oreclosure proceedin5s conducted ercator! the sale to it as the hi5hest idder in the pulic auction!

the issuance o* the trans*er certi*icates o* tit le to it! the suseuent sale o* the sae parcels o* land to Ldia P. Sala;ar! and the trans*er o* the titles to

her nae! and lastl! the sale and trans*er o* the properties to respondent Laecs Realt 8evelopent Corporation. ercator aditted that the

spouses Evan5elista 9ere the o9ners o* the su)ect parcels o* land. It! ho9ever! contended that on 13 eruar 1$,2! the spouses e?ecuted a

ort5a5e in *avor o* ercator *or and in consideration o* certain loans! andor other *ors o* credit accoodations otained *ro the ort5a5ee

(ercator& aountin5 to P,44!32.%, and to secure the paent o* the sae and those others that the ort5a5ee a e?tend to the ort5a5or. It

contended that since the spouses and Eass ars si5ned the proissor note as co-aers! aside *ro the Continuin5 Suretship +5reeent

suseuentl e?ecuted to 5uarantee the indetedness o* Eass ars! and the succeedin5 proissor notesB, restructurin5 the loan! then the

spouses are )ointl and severall liale 9ith Eass ars. 8ue to their *ailure to pa the oli5ation! the *oreclosure and suseuent sale o* the

ort5a5ed properties are valid. Sala;ar and Laecs asserted that the are innocent purchasers *or value and in 5ood *aith! relin5 on the validit o* the

title o* ercator. Laecs aditted the prior o9nership o* the spouses o* the su)ect parcels o* land! ut alle5ed that the are the present re5isteredo9ner. Sala;ar and Laecs lie9ise assailed the lon5 silence and inaction the spouses as it 9as onl a*ter a lapse o* alost 10 ears *ro the

*oreclosure o* the propert and the suseuent sales that the ade their clai. 'hus! Sala;ar and Laecs averred that petitioners are in estoppel and

5uilt o* laches. +*ter pre-trial! ercator oved *or suar )ud5ent on the 5round that e?cept as to the aount o* daa5es! there is no *actual issue

to e liti5ated. ercator ar5ued that petitioners had aditted in their pre-trial rie* the e?istence o* the proissor note! the continuin5 suretship

a5reeent and the suseuent proissor notes restructurin5 the loan! hence! there is no 5enuine issue re5ardin5 their liailit. 'he ort5a5e!

*oreclosure proceedin5s and the suseuent sales are valid and the coplaint ust e disissed. 'he spouses opposed the otion *or suar

)ud5ent claiin5 that ecause their personal liailit to ercator is at issue! there is a need *or a *ull-lo9n trial. 'he R'C 5ranted the otion *or

suar )ud5ent and disissed the coplaint. 'he spouses otion *or reconsideration 9as denied *or lac o* erit. 'hus! the spouses 9ent up to the

Court o* +ppeals! ut a5ain 9ere unsuccess*ul. + otion *or reconsideration the spouses 9as lie9ise denied *or lac o* erit. 'he spouses *iled the

Petition *or Revie9 on Certiorari. 'he spouses alle5e! inter alia! that there is an ai5uit in the 9ordin5 o* the proissor note and clai that since it

9as ercator 9ho provided the *or! then the ai5uit should e resolved a5ainst it.

Issue: <hether the spouses are solidaril liale 9ith Eass ars! in li5ht o* the proissor note si5ned the.

Held: 'he proissor note and the Continuin5 Suretship +5reeent prove that the spouses are solidar oli5ors 9ith Eass ars. 'he proissor

notes suseuentl e?ecuted the spouses and Eass ars! restructurin5 their loan! lie9ise prove that the spouses are solidaril liale 9ith

Eass ars. 'he spouses alle5e that there is an ai5uit in the 9ordin5 o* the proissor note and clai that since it 9as ercator 9ho provided

the *or! then the ai5uit should e resolved a5ainst it. Courts can interpret a contract onl i* there is dout in its letter. /ut! an e?aination o* the

proissor note sho9s no such ai5uit. /esides! assuin5 ar5uendo that there is an ai5uit! Section 1% o* the 6e5otiale Instruents La9 states

that J<here the lan5ua5e o* the instruent is ai5uous or there are oissions therein! the *ollo9in5 rules o* construction applD (5& <here an

instruent containin5 the 9ord FI proise to paF is si5ned t9o or ore persons! the are deeed to e )ointl and severall liale thereon.J urther!

even i* the spouses intended to si5n the note erel as o**icers o* Eass ars! still this does not erase the *act that the suseuentl e?ecuted a

continuin5 suretship a5reeent. + suret is one 9ho is solidaril liale 9ith the principal. 'he spouses cannot clai that the did not personall receive

an consideration *or the contract *or 9ell-entrenched is the rule that the consideration necessar to support a suret oli5ation need not pass directl to

the suret! a consideration ovin5 to the principal alone ein5 su**icient. + suret is ound the sae consideration that aes the contract e**ective

et9een the principal parties thereto. =avin5 e?ecuted the suretship a5reeent! there can e no dispute on the personal liailit o* the spouses.



Consolidated Plywood Industries Inc& vs& IFC Leasing and cceptance Corp&

BGR %2$"! "0 +pril 1$,%

Second 8ivision! Gutierre; #r. (#&D concur

Facts: Consolidated Pl9ood Industries Inc. (CPII& is a corporation en5a5ed in the lo55in5 usiness. It had *or its pro5ra o* lo55in5 activities *or the

ear 1$%, the openin5 o* additional roads! and siultaneous lo55in5 operations alon5 the route o* said roads! in its lo55in5 concession area at

/a5an5a! ana! and Cara5a! 8avao 7riental. or this purpose! it needed 2 additional units o* tractors. Co5ni;ant o* CPIIFs need and purpose! +tlantic

Gul* Paci*ic Copan o* anila! throu5h its sister copan and aretin5 ar! Industrial Products aretin5 (IP&! a corporation dealin5 in tractors

and other heav euipent usiness! o**ered to sell to CPII 2 JAsedJ +llis Cra9ler 'ractors! 1 an =8-21-/ and the other an =8-13-/. In order to

ascertain the e?tent o* 9or to 9hich the tractors 9ere to e e?posed! and to deterine the capailit o* the JAsedJ tractors ein5 o**ered! CPII

reuested the seller-assi5nor to inspect the )osite. +*ter conductin5 said inspection! IP assured CPII that the JAsedJ +llis Cra9ler 'ractors 9hich 9ere

ein5 o**ered 9ere *it *or the )o! and 5ave the correspondin5 9arrant o* $0 das per*orance o* the achines and availailit o* parts. <ith said

assurance and 9arrant! and relin5 on the IPFs sill and )ud5ent! CPII throu5h =enr <ee and Rodol*o '. :er5ara! president and vice-president!

respectivel! a5reed to purchase on installent said 2 units o* JAsedJ +llis Cra9ler 'ractors. It also paid the do9n paent o* P210!000.00. 7n +pril

1$%,! IP issued the sales invoice *or the 2 units o* tractors. +t the sae tie! the deed o* sale 9ith chattel ort5a5e 9ith proissor note 9as

e?ecuted. Siultaneousl 9ith the e?ecution o* the deed o* sale 9ith chattel ort5a5e 9ith proissor note! IP! eans o* a deed o* assi5nent!

assi5ned its ri5hts and interest in the chattel ort5a5e in *avor o* IC Leasin5 and +cceptance Corporation. Iediatel therea*ter! IP delivered said 2

units o* JAsedJ tractors to CPIIFs )osite and as a5reed! IP stationed its o9n echanics to supervise the operations o* the achines. /arel 14 das

had elapsed a*ter their deliver 9hen one o* the tractors roe do9n and a*ter another $ das! the other tractor lie9ise roe do9n. 7n 2 +pril 1$%,!

:er5ara *orall advised IP o* the *act that the tractors roe do9n and reuested *or IPFs usual propt attention under the 9arrant. In response to

the *oral advice :er5ara! IP sent to the )osite its echanics to conduct the necessar repairs! ut the tractors did not coe out to e 9hat theshould e a*ter the repairs 9ere undertaen ecause the units 9ere no lon5er serviceale. /ecause o* the reain5 do9n o* the tractors! the road

uildin5 and siultaneous lo55in5 operations o* CPII 9ere delaed and :er5ara advised IP that the paents o* the installents as listed in the

proissor note 9ould lie9ise e delaed until IP copletel *ul*ills its oli5ation under its 9arrant. Since the tractors 9ere no lon5er serviceale! on

% +pril 1$%$! <ee ased IP to pull out the units and have the reconditioned! and therea*ter to o**er the *or sale. 'he proceeds 9ere to e 5iven to

IC Leasin5 and the e?cess! i* an! to e divided et9een IP and CPII 9hich o**ered to ear 12 o* the reconditionin5 cost. 6o response to this letter

9as received CPII and despite several *ollo9-up calls! IP did nothin5 9ith re5ard to the reuest! until the coplaint in the case 9as *iled IC

Leasin5 a5ainst CPII! <ee! and :er5ara. 'he coplaint 9as *iled IC Leasin5 a5ainst CPII! et al. *or the recover o* the principal su o*

P1!0$"!%,$.%1! accrued interest o* P11!31,.,3 as o* 1 +u5ust 1$%$! accruin5 interest there a*ter at the rate o* 12H per annu! attorneFs *ees o*

P24$!0,1.%1 and costs o* suit. CPII! et al. *iled their aended ans9er prain5 *or the disissal o* the coplaint and asin5 the trial court to order IC

leasin5 to pa the daa5es in an aount at the sound discretion o* the court! P20!000.00 as and *or attorneFs *ees! and P!000.00 *or e?penses o*

liti5ation! aon5 others. In a decision dated 20 +pril 1$,1! the trial court rendered )ud5ent! orderin5 CPII! et al. to pa )ointl and severall in their

o**icial and personal capacities the principal su o* P1!0$"!%$,.%1 9ith accrued interest o* P11!31,.,3 as o* 1 +u5ust 1$%$ and accruin5 interesttherea*ter at the rate o* 12H per annu and attorneFs *ees euivalent to 10H o* the principal and to pa the costs o* the suit. 7n , #une 1$,1! the trial

court issued an order denin5 the otion *or reconsideration *iled CPII! et al. CPII! et al.appealed to the Interediate +ppellate Court. 7n 1% #ul

1$,! the Interediate +ppellate Court issued the decision a**irin5 in toto the decision o* the trial court. CPII et al.Fs otion *or reconsideration 9as

denied the Interediate +ppellate Court in its resolution dated 1% 7ctoer 1$,! a cop o* 9hich 9as received CPII! et al. on 21 7ctoer 1$,.

CPII! et al. *iled the petition *or certiorari under rule 4 o* the Rules o* Court.

Issue: <hether the proissor note in uestion is a ne5otiale instruent.

Held: 'he pertinent portion o* the note provides that JJ7R :+LAE RECEI:E8! I9e )ointl and severall proise to pa to the I68AS'RI+L

PR78AC'S +RKE'I6G! the su o* 76E ILLI76 6I6E'> '=REE '=7AS+68 SE:E6 =A68RE8 EIG='> 6I6E PES7S %1100 onl

(P1!0$"!%,$.%1&! Philippine Currenc! the said principal su! to e paale in 24 onthl installents startin5 #ul 1! 1$%, and ever 1th o* the onth

therea*ter until *ull paid.J Considerin5 that para5raph (d&! Section 1 o* the 6e5otiale Instruents La9 reuires that a proissor note Just e paale

to order or earer!J it cannot e denied that the proissor note in uestion is not a ne5otiale instruent. 'he instruent in order to e considered

ne5otiale ust contain the so called J9ords o* ne5otiailitJ i.e.! ust e paale to JorderJ or Jearer.J 'hese 9ords serve as an e?pression o*

consent that the instruent a e trans*erred. 'his consent is indispensale since a aer assues 5reater ris under a ne5otiale instruent than

under a non-ne5otiale one. <ithout the 9ords Jor orderJ or Jto the order o*!J the instruent is paale onl to the person desi5nated therein and is

there*ore non-ne5otiale. +n suseuent purchaser thereo* 9ill not en)o the advanta5es o* ein5 a holder o* a ne5otiale instruent! ut 9ill erel

Jstep into the shoesJ o* the person desi5nated in the instruent and 9ill thus e open to all de*enses availale a5ainst the latter. 'here*ore! considerin5

that the su)ect proissor note is not a ne5otiale instruent! it *ollo9s that IC Leasin5 can never e a holder in due course ut reains a ere

assi5nee o* the note in uestion. 'hus! CPII a raise a5ainst IC Leasin5 all de*enses availale to it as a5ainst IP. 'his ein5 so! there 9as no need

*or CPII to iplead IP 9hen i t 9as sued IC Leasin5 ecause CPIIFs de*enses appl to oth or either o* the.



Summary: "e la 0ictoria vs& +urgos (1R 222234/ 56 7une 2338)

"e la 0ictoria vs& +urgos

BGR 1111$0! 2% #une 1$$

irst 8ivision! /ellosillo (#&D 2 concur! 1 concurs in separate opinion to 9hich 1 )oined

Facts: Raul =. Sesreno *iled a coplaint *or daa5es a5ainst +ssistant Cit iscal /ienvenido 6. aanto! #r.! et al. e*ore the Re5ional 'rial Court o*

Ceu Cit. +*ter trial #ud5ent 9as rendered orderin5 aanto! et al. to pa P11!000.00 to Sesreno. 'he decision havin5 ecoe *inal and e?ecutor!

on otion o* the latter! the trial court ordered its e?ecution. 'his order 9as uestioned aanto! et al. e*ore the Court o* +ppeals. =o9ever! on 1#anuar 1$$2 a 9rit o* e?ecution 9as issued. 7n 4 eruar 1$$2 a notice o* 5arnishent 9as served on Loreto 8. de la :ictoria as Cit iscal o*

andaue Cit 9here aanto! #r.! 9as then detailed. 'he 6otice directed 8e la :ictoria not to disurse! trans*er! release or conve to an other person

e?cept to the deput sheri** concerned the salar checs! onies! or cash due or elon5in5 to aanto! #r.! under penalt o* la9. 7n 10 arch 1$$2

Sesreno *iled a otion e*ore the trial court *or e?aination o* the 5arnishees. 7n 2 a 1$$2 the petition pendin5 e*ore the Court o* +ppeals 9as

disissed. 'hus the trial court! *indin5 no ore le5al ostacle to act on the otion *or e?aination o* the 5arnishees! directed 8e la :ictoria on 4

6oveer 1$$2 to suit his report sho9in5 the aount o* the 5arnished salaries o* aanto! #r.! 9ithin 1 das *ro receipt tain5 into consideration

the provisions o* Sec. 12! pars. (*& and (i&! Rule "$ o* the Rules o* Court. 7n 24 6oveer 1$$2 Sesreno *iled a otion to reuire 8e la :ictoria to

e?plain 9h he should not e cited in contept o* court *or *ailin5 to copl 9ith the order o* 4 6oveer 1$$2. 7n the other hand! on 1$ #anuar 1$$"

8e la :ictoria oved to uash the notice o* 5arnishent claiin5 that he 9as not in possession o* an one! *unds! credit! propert or anthin5 o*

value elon5in5 to aanto! #r.! until delivered to hi. =e *urther claied that! as such! the 9ere still pulic *unds 9hich could not e su)ect to

5arnishent. 7n $ arch 1$$" the trial court denied oth otions and ordered 8e la :ictoria to iediatel copl 9ith its order o* 4 6oveer 1$$2.

It opined that the checs o* aanto! #r.! had alread een released throu5h 8e la :ictoria the 8epartent o* #ustice dul si5ned the o**icer

concerned that upon service o* the 9rit o* 5arnishent! 8e la :ictoria as custodian o* the checs 9as under oli5ation to hold the *or the )ud5ent

creditor that 8e la :ictoria ecae a virtual part to! or a *orced intervenor in! the case and the trial court here acuired )urisdiction to ind hi to i ts

orders and processes 9ith a vie9 to the coplete satis*action o* the )ud5ent and that additionall there 9as no su**icient reason *or 8e la :ictoria to

hold the checs ecause the 9ere no lon5er 5overnent *unds and presual delivered to the paee! con*oral 9ith the last sentence o* Section

13 o* the 6e5otiale Instruents La9. <ith re5ard to the contept char5e! the trial court 9as not orall convinced o* 8e la :ictoriaFs 5uilt. 7n 20 +pril

1$$" the otion *or reconsideration 9as denied. 8e la :ictoria *iled the petition.

Issue: <hether a chec still in the hands o* the aer or its dul authori;ed representative is o9ned the paee e*ore phsical deliver to the latter.

Held: Garnishent is considered as a species o* attachent *or reachin5 credits elon5in5 to the #ud5ent detor o9in5 to hi *ro a stran5er to the

liti5ation. +s +ssistant Cit iscal! the source o* the salar o* aanto! #r.! is pulic *unds. =e receives his copensation in the *or o* checs *ro the

8epartent o* #ustice throu5h 8e la :ictoria as Cit iscal o* andaue Cit and head o* o**ice. Ander Section 13 o* the 6e5otiale Instruents La9!

ever contract on a ne5otiale instruent is incoplete and revocale until deliver o* the instruent *or the purpose o* 5ivin5 e**ect thereto. +sordinaril understood! deliver eans the trans*er o* the possession o* the instruent the aer or the dra9er 9ith intent to trans*er title to the paee

and reco5ni;e hi as the holder thereo*. Inasuch as said checs had not et een delivered to aanto! #r.! the did not elon5 to hi and still had

the character o* pulic *unds. +s held in 'iro v. =ontanosas! Jthe salar chec o* a 5overnent o**icer or eploee such a s a teacher does not elon5 to

hi e*ore it is phsicall delivered to hi. Antil that tie the chec elon5s to the 5overnent. +ccordin5l! e*ore there is actual deliver o* the chec!

the paee has no po9er over it he cannot assi5n it 9ithout the consent o* the Governent.J +s a necessar conseuence o* ein5 pulic *und! the

checs a not e 5arnished to satis* the )ud5ent. 'he rationale ehind this doctrine is ovious consideration o* pulic polic. 'he Court succinctl

stated in Coissioner o* Pulic =i5h9as v. San 8ie5o that Jthe *unctions and pulic services rendered the State cannot e allo9ed to e paral;ed

or disrupted the diversion o* pulic *unds *ro their le5itiate and speci*ic o)ects! as appropriated la9.J 'he trial court e?ceeded its )urisdiction in

issuin5 the notice o* 5arnishent concernin5 the salar checs o* aanto! #r.! in the possession o* 8e la :ictoria.



"evelopment +an% o Ri9al vs& Sima ei

BGR ,41$! $ arch 1$$"


Facts: In consideration *or a loan e?tended the 8evelopent /an o* Ri;al (8/R& to Sia <ei! the latter e?ecuted and delivered to the *orer a

proissor note! en5a5in5 to pa 8/R or order the aount o* P1!,20!000.00 on or e*ore 24 #une 1$," 9ith interest at "2H per annu. Sia <ei

ade partial paents on the note! leavin5 a alance o* P1!0"2!40.02. 7n 1, 6oveer 1$,"! Sia <ei issued t9o crossed checs paale to 8/R

dra9n a5ainst China /anin5 Corporation! earin5 respectivel the serial nuers ",4$"4! *or the aount o* P0!000.00 and ",4$"! *or the aount

o* P00!000.00. 'he said checs 9ere alle5edl issued in *ull settleent o* the dra9erFs account evidenced the proissor note. 'hese t9o checs

9ere not delivered to 8/R or to an o* its authori;ed representatives. or reasons not sho9n! these checs cae into the possession o* Lee Kian =uat!

9ho deposited the checs 9ithout 8/RFs indorseent (*or5ed or other9ise& to the account o* the +sian Industrial Plastic Corporation! at the /alinta9a

ranch! Caloocan Cit! o* the Producers /an. Chen5 A! /ranch ana5er o* the /alinta9a /ranch o* Producers /an! relin5 on the assurance o*

Sason 'un5! President o* Plastic Corporation! that the transaction 9as le5al and re5ular! instructed the cashier o* Producers /an to accept the

checs *or deposit and to credit the to the account o* said Plastic Corporation! inspite o* the *act that the checs 9ere crossed and paale to 8/R and

ore no indorseent o* the latter. 7n #ul 1$,3! 8/R *iled the coplaint *or a su o* one a5ainst Sia <ei andor Lee Kian =uat! ar Chen5 A!

Sason 'un5! +sian Industrial Plastic Corporation and the Producers /an o* the Philippines! on t9o causes o* actionL (1& 'o en*orce paent o* the

alance o* P1!0"2!40.02 on a proissor note e?ecuted Sia <ei on $ #une 1$," and (2& 'o en*orce paent o* t9o checs e?ecuted Sia

<ei! paale to 8/R! and dra9n a5ainst the China /anin5 Corporation! to pa the alance due on the proissor note. E?cept *or Lee Kian =uat!

Sia <ei! et al. *iled their separate otions to 8isiss alle5in5 a coon 5round that the coplaint states no cause o* action. 'he trial court 5ranted

the otions to 8isiss. 'he Court o* +ppeals a**ired the decision! to 9hich 8/R! represented its Le5al Liuidator! *iled the Petition *or Revie9

Certiorari.

Issue: <hether 8/R! as the intended paee o* the instruent! has a cause o* action a5ainst an or all o* the de*endants! in the alternative or other9ise.

Held: 'he noral parties to a chec are the dra9er! the paee and the dra9ee an. Courts have lon5 reco5ni;ed the usiness custo o* usin5 printed

checs 9here lans are provided *or the date o* issuance! the nae o* the paee! the aount paale and the dra9erFs si5nature. +ll the dra9er has to

do 9hen he 9ishes to issue a chec is to properl *ill up the lans and si5n it. =o9ever! the ere *act that he has done these does not 5ive rise to an

liailit on his part! until and unless the chec is delivered to the paee or his representative. + ne5otiale instruent! o* 9hich a chec is! is not onl a

9ritten evidence o* a contract ri5ht ut is also a species o* propert. #ust as a deed to a piece o* land ust e delivered in order to conve title to the

5rantee! so ust a ne5otiale instruent e delivered to the paee in order to evidence its e?istence as a indin5 contract. Section 13 o* the 6e5otiale

Instruents La9! 9hich 5overns checs! provides in part that JEver contract on a ne5otiale instruent is incoplete and revocale until deliver o* the

instruent *or the purpose o* 5ivin5 e**ect thereto.J 'hus! the paee o* a ne5otiale instruent acuires no interest 9ith respect thereto until its deliver

to hi. 8eliver o* an instruent eans trans*er o* possession! actual or constructive! *ro one person to another. <ithout the initial deliver o* the

instruent *ro the dra9er to the paee! there can e no liailit on the instruent. oreover! such deliver ust e intended to 5ive e**ect to the

instruent. =erein! the t9o (2& China /an checs! nuered ",4$"4 and ",4$"! 9ere not delivered to the paee! 8/R. <ithout the deliver o* said

checs to 8/R! the *orer did not acuire an ri5ht or interest therein and cannot there*ore assert an cause o* action! *ounded on said checs! 9hether

a5ainst the dra9er Sia <ei or a5ainst the Producers /an or an o* the other respondents. Since 8/R never received the checs on 9hich it ased its

action a5ainst said respondents! it never o9ned the (the checs& nor did it acuire an interest therein. 'hus! anthin5 9hich the respondents a

have done 9ith respect to said checs could not have pre)udiced 8/R. It had no ri5ht or interest in the checs 9hich could have een violated said

respondents. 8/R has there*ore no cause o* action a5ainst said respondents! in the alternative or other9ise. I* at all! it is Sia <ei! the dra9er! 9ho

9ould have a cause o* action a5ainst her co-respondents! i* the alle5ations in the coplaint are *ound to e true.





1empesaw vs& Court o ppeals

BGR $2244. $ eruar 1$$"


Facts: 6atividad 7. Gepesa9 o9ns and operates *our 5rocer stores located at Ri;al +venue E?tension and at Second +venue! oth in Caloocan Cit

+on5 these 5roceries are 8.G. ShopperFs art and 8.G. <hole Sale art. Gepesa9 aintains a checin5 account nuered 1"-000",-1 9ith the

Caloocan Cit /ranch o* P/Co. 'o *acilitate paent o* dets to her suppliers! Gepesa9 dra9s checs a5ainst her checin5 account 9ith P/Co as

dra9ee. =er custoar practice o* issuin5 checs in paent o* her suppliers 9as as *ollo9sD 'he checs 9ere prepared and *illed up as to all aterial

particulars her trusted ooeeper! +licia Galan5! an eploee *or ore than , ears. +*ter the ooeeper prepared the checs! the copleted

checs 9ere suitted to Gepesa9 *or her si5nature! to5ether 9ith the correspondin5 invoice receipts 9hich indicate the correct oli5ations due and

paale to her suppliers. Gepesa9 si5ned each and ever chec 9ithout otherin5 to veri* the accurac o* the checs a5ainst the correspondin5

invoices ecause she reposed *ull and iplicit trust and con*idence on her ooeeper. 'he issuance and deliver o* the checs to the paees naed

therein 9ere le*t to the ooeeper. Gepesa9 aditted that she did not ae an veri*ication as to 9hether the checs 9ere actuall delivered to their

respective paees. +lthou5h P/Co noti*ied her o* all checs presented to and paid the an! Gepesa9 did not veri* the correctness o* the

returned checs! uch less chec i* the paees actuall received the checs in paent *or the supplies she received. In the course o* her usiness

operations coverin5 a period o* 2 ears! Gepesa9 issued! *ollo9in5 her usual practice! a total o* ,2 checs in *avor o* several suppliers. 'hese checs

9ere all presented the indorsees as holders thereo* to! and honored P/Co. P/Co correspondin5l deited the aounts thereo* a5ainst

Gepesa9Fs checin5 account nuered "0-000",-1. ost o* the checs 9ere *or aounts in e?cess o* her actual oli5ations to the various paees as

sho9n in their correspondin5 invoices. Practicall! all the checs issued and honored P/Co 9ere crossed checs. +side *ro the dail notice 5iven

to Gepesa9 P/Co! the latter also *urnished her 9ith a onthl stateent o* her an transactions! attachin5 thereto all the cancelled checs she

had issued and 9hich 9ere deited a5ainst her current account. It 9as onl a*ter the lapse o* ore than 2 ears that Gepesa9 *ound out aout the

*raudulent anipulations o* her ooeeper. +ll the ,2 checs 9ith *or5ed si5natures o* the paees 9ere rou5ht to Ernest L. /oon! Chie* +ccountant o*P/Co at the /uendia ranch! 9ho! 9ithout authorit there*or! accepted the all *or deposit at the /uendia ranch to the credit andor in the accounts

o* +l*redo >. Roero and /enito La. Ernest L. /oon 9as a ver close *riend o* +l*redo >. Roero. 3" out o* the ,2 checs 9ere deposited in Savin5s

+ccount 00,44- o* +l*redo >. Roero at P/CoFs /uendia ranch! and 4 checs in his Savin5s +ccount "2-,1-$ at its 7n5pin ranch. 'he rest o* the

checs 9ere deposited in +ccount 044"-4! under the nae o* /enito La at the Elcano ranch o* the respondent dra9ee /an. +out "0 o* the paees

9hose naes 9ere speci*icall 9ritten on the checs did not receive nor even see the su)ect checs and that the indorseents appearin5 at the ac

o* the checs 9ere not theirs. 'he tea o* auditors *ro the ain o**ice o* P/Co 9hich conducted periodical inspection o* the ranchesF operations

*ailed to discover! chec or stop the unauthori;ed acts o* Ernest L. /oon. +ll the deposit slips o* the ,2 checs in uestion 9ere initialed andor approved

*or deposit Ernest L. /oon! contrar to the rules o* P/Co! 9here onl a /ranch ana5er! and no other o**icial o* P/Co! a accept a second

indorseent on a chec *or deposit. 'he /ranch ana5ers o* the 7n5pin and Elcano ranches accepted the deposits ade in the /uendia ranch and

credited the accounts o* +l*redo >. Roero and /enito La in their respective ranches. 7n % 6oveer 1$,4! Gepesa9 ade a 9ritten deand on

P/Co to credit her account 9ith the one value o* the ,2 checs totallin5 P1!20,!303.,$ *or havin5 een 9ron5*ull char5ed a5ainst her account.

P/Co re*used to 5rant Gepesa9Fs deand. 7n 2" #anuar 1$,! Gepesa9 *iled a Coplaint a5ainst the Philippine /an o* Counications(P/Co& *or recover o* the one value o* ,2 checs char5ed a5ainst Gepesa9Fs account 9ith P/Co on the 5round that the paeesF indorseents

9ere *or5eries. 'he Re5ional 'rial Court! /ranch C:III o* Caloocan Cit! 9hich tried the case! rendered a decision on 1% 6oveer 1$,% disissin5

the coplaint as 9ell as P/CoFs counterclai. 7n appeal! the Court o* +ppeals in a decision rendered on 22 eruar 1$$0! a**ired the decision o*

the R'C on t9o 5rounds! nael (1& that Gepesa9Fs 5ross ne5li5ence in issuin5 the checs 9as the pro?iate cause o* the loss and (2& assuin5

that the an 9as also ne5li5ent! the loss ust nevertheless e orne the part 9hose ne5li5ence 9as the pro?iate cause o* the loss. 7n arch

1$$0! Gepesa9 *iled the petition *or revie9 under Rule 4 o* the Rules o* Court.

Issue [1]: <hether the dra9ers account a e char5ed *or checs 9here the indorseents 9ere *or5ed.

Held [1]: +s a atter o* practical si5ni*icance! proles arisin5 *ro *or5ed indorseents o* checs a 5enerall e roen into t9o tpes o* casesD (1

9here *or5er 9as accoplished a person not associated 9ith the dra9er *or e?aple a ail roer and (2& 9here the indorseent 9as *or5ed

an a5ent o* the dra9er. 'his di**erence in situations 9ould deterine the e**ect o* the dra9erFs ne5li5ence 9ith respect to *or5ed indorseents. <hile

there is no dut restin5 on the depositor to loo *or *or5ed indorseents on his cancelled checs in contrast to a dut iposed upon hi to loo *or

*or5eries o* his o9n nae! a depositor is under a dut to set up an accountin5 sste and a usiness procedure as are reasonal calculated to preven

or render di**icult the *or5er o* indorseents! particularl the depositorFs o9n eploees. +nd i* the dra9er (depositor& learns that a chec dra9n

hi has een paid under a *or5ed indorseent! the dra9er is under dut proptl to report such *act to the dra9ee an. or his ne5li5ence or *ailure

either to discover or to report proptl the *act o* such *or5er to the dra9ee! the dra9er loses his ri5ht a5ainst the dra9ee 9ho has deited his account

under the *or5ed indorseent. +s a rule! a dra9ee an 9ho has paid a chec on 9hich an indorseent has een *or5ed cannot char5e the dra9erFs

account *or the aount o* said chec. +n e?ception to this rule is 9here the dra9er is 5uilt o* such ne5li5ence 9hich causes the an to honor such a

chec or checs. I* a chec is stolen *ro the paee! it is uite ovious that the dra9er cannot possil discover the *or5ed indorseent ere

e?aination o* his cancelled chec. 'his accounts *or the rule that althou5h a depositor o9es a dut to his dra9ee an to e?aine his cancelled checs

*or *or5er o* his o9n si5nature! he has no siilar dut as to *or5ed indorseents. + di**erent situation arises 9here the indorseent 9as *or5ed an

eploee or a5ent o* the dra9er! or done 9ith the active participation o* the latter. ost o* the cases involvin5 *or5er an a5ent or eploee deal 9ith

the paeeFs indorseent. 'he dra9er and the paee o*tenties have usiness relations o* lon5 standin5. 'he continued occurrence o* usiness



transactions o* the sae nature provides the opportunit *or the a5enteploee to coit the *raud a*ter havin5 developed *ailiarit 9ith the

si5natures o* the parties. =o9ever! sooner or later! soe lea 9ill sho9 on the dra9erFs oos. It 9ill then e )ust a uestion o* tie until the *raud is

discovered. 'his is speciall true 9hen the a5ent perpetrates a series o* *or5eries as herein. 'he ne5li5ence o* a depositor 9hich 9ill prevent recover o*

an unauthori;ed paent is ased on *ailure o* the depositor to act as a prudent usinessan 9ould under the circustances. =erein! Gepesa9

relied iplicitl upon the honest and loalt o* her ooeeper! and did not even veri* the accurac o* the aounts o* the checs she si5ned a5ainst

the invoices attached thereto. +lthou5h she re5ularl received her an stateents! she apparentl did not care*ull e?aine the sae nor the chec

stus and the returned checs! and did not copare the 9ith the sales invoices. 7ther9ise! she could have easil discovered the discrepancies

et9een the checs and the docuents servin5 as ases *or the checs. <ith such discover! the suseuent *or5eries 9ould not have een

accoplished. It 9as not until 2 ears a*ter the ooeeper coenced her *raudulent schee that Gepesa9 discovered that ,2 checs 9ere

9ron5*ull char5ed to her account! at 9hich tie she noti*ied P/Co. Gepesa9Fs *ailure to ae such adeuate inuir constituted ne5li5ence 9hichresulted in the anFs honorin5 o* the suseuent checs 9ith *or5ed indorseents. Gepesa9Fs ne5li5ence 9as the pro?iate cause o* her loss. +nd

since it 9as her ne5li5ence 9hich caused P/Co to honor the *or5ed checs or prevented it *ro recoverin5 the aount it had alread paid on the

checs! Gepesa9 cannot no9 coplain should the an re*use to recredit her account 9ith the aount o* such checs. Ander Section 2" o* the 6IL!

she is no9 precluded *ro usin5 the *or5er to prevent the anFs deitin5 o* her account.

Issue [2]: <hether anin5 rules prohiitin5 the dra9ee an *ro havin5 checs 9ith ore than one indorseent invalidate the ne5otiation or trans*er

o* the said chec.

Held [2]: 'he anin5 rule annin5 acceptance o* checs *or deposit or cash paent 9ith ore than one indorseent unless cleared soe an

o**icials does not invalidate the instruent neither does it invalidate the ne5otiation or trans*er o* the said chec. In e**ect! this rule destros the

ne5otiailit o* illschecs liitin5 their ne5otiation indorseent o* onl the paee. Ander the 6e5otiale Instruents La9! the onl ind o*

indorseent 9hich stops the *urther ne5otiation o* an instruent is a restrictive indorseent 9hich prohiits the *urther ne5otiation thereo*. In this ind o

restrictive indorseent! the prohiition to trans*er or ne5otiate ust e 9ritten in e?press 9ords at the ac o* the instruent! so that an suseuent

part a e *ore9arned that it ceases to e ne5otiale. =o9ever! the restrictive indorsee acuires the ri5ht to receive paent and rin5 an action

thereon as an indorser! ut he can no lon5er trans*er his ri5hts as such indorsee 9here the *or o* the indorseent does not authori;e hi to do so.

+lthou5h the holder o* a chec cannot copel a dra9ee an to honor it ecause there is no privit et9een the! as *ar as the dra9er-depositor is

concerned! such an a not le5all re*use to honor a ne5otiale ill o* e?chan5e or a chec dra9n a5ainst it 9ith ore than one indorseent i* there

is nothin5 irre5ular 9ith the ill or chec and the dra9er has su**icient *unds. 'he dra9ee cannot e copelled to accept or pa the chec the dra9er

or an holder ecause as a dra9ee! he incurs no liailit on the chec unless he accepts it. /ut the dra9ee 9ill ae itsel* liale to a suit *or daa5es at

the instance o* the dra9er *or 9ron5*ul dishonor o* the ill or chec.



"e -campo vs& 1atc$alian

BGR L-1123! "0 6oveer 1$31

En /anc! Larador (#&D , concur! 1 concurs in result

Facts: 7n or aout , Septeer 1$"! in the evenin5! +nita C. Gatchalian 9ho 9as then interested in looin5 *or a car *or the use o* her husand and

the *ail! 9as sho9n and o**ered a car anuel Gon;ales 9ho 9as accopanied Eil a)ardo! the latter ein5 personall no9n to Gatchalian.

Gon;ales represented to Gatchalian that he 9as dul authori;ed the o9ner o* the car! 7capo Clinic! to loo *or a uer o* said car and to ne5otiate

*or and accoplish said sale. Gatchalian! *indin5 the price o* the car uoted Gon;ales to her satis*action! reuested Gon;ales to rin5 the car the da

*ollo9in5 to5ether 9ith the certi*icate o* re5istration o* the car! so that her husand 9ould e ale to see sae. 7n this reuest o* Gatchalian! Gon;ales

advised her that the o9ner o* the car 9ill not e 9illin5 to 5ive the certi*icate o* re5istration unless there is a sho9in5 that the part interested in the

purchase o* said car is read and 9illin5 to ae such purchase and that *or this purpose Gon;ales reuested Gatchalian to 5ive hi a chec 9hich 9ill

e sho9n to the o9ner as evidence o* uerFs 5ood *aith in the intention to purchase the said car! the said chec to e *or sa*eeepin5 onl o* Gon;ales

and to e returned to Gatchalian the *ollo9in5 da 9hen Gon;ales rin5s the car and the certi*icate o* re5istration. Relin5 on these representations o*

Gon;ales and 9ith this assurance that said chec 9ill e onl *or sa*eeepin5 and 9hich 9ill e returned to Gatchalian the *ollo9in5 da 9hen the car

and its certi*icate o* re5istration 9ill e rou5ht Gon;ales to Gatchalian! Gatchalian dre9 and issued a chec that Gon;ales e?ecuted and issued a

receipt *or said chec. 7n the *ailure o* Gon;ales to appear the da *ollo9in5 and on his *ailure to rin5 the car and its certi*icate o* re5istration and to

return the chec on the *ollo9in5 da as previousl a5reed upon! Gatchalian issued a JStop Paent 7rderJ on the chec 9ith the dra9ee an. <hen

Gon;ales received the chec *ro Gatchalian under the representations and conditions aove speci*ied! he delivered the sae to the 7capo Clinic! in

paent o* the *ees and e?penses arisin5 *ro the hospitali;ation o* his 9i*e. :icente R. 8e 7capo Co. *or and in consideration o* *ees and

e?penses o* hospitali;ation and the release o* the 9i*e o* Gon;ales *ro its hospital! accepted said chec! applin5 P441.% thereo* to paent o* said

*ees and e?penses and deliverin5 to Gon;ales the aount o* P1,.2 representin5 the alance on the aount o* the said chec. 'he acts o*

acceptance o* the chec and application o* its proceeds in the anner speci*ied 9ere ade 9ithout previous inuir 8e 7capo *ro Gatchalian. 8e7capo *iled 9ith the 7**ice o* the Cit iscal o* anila! a coplaint *or esta*a a5ainst Gon;ales ased on and arisin5 *ro the acts o* Gon;ales in

pain5 his oli5ations 9ith 8e 7capo and receivin5 the cash alance o* the chec and that said coplaint 9as suseuentl dropped.

8e 7capo suseuentl *iled an action *or the recover o* the value o* a chec *or P300 paale to 8e 7capo and dra9n Gatchalian. 'he Court o

irst Instance o* anila! throu5h =on. Conrado . :asue;! presidin5! sentenced Gatchalian and Gon;ales to pa 8e 7capo the su o* P300! 9ith

le5al interest *ro 10 Septeer 1$" until paid! and to pa the costs. Gatchalian! et al . appealed.

Issue [1]: <hether 8e 7capo is a holder in due course.

Held [1]: 67. Section 2! 6e5otiale Instruents La9! de*ines holder in due course as J+ holder in due course is a holder 9ho has taen the instruent

under the *ollo9in5 conditionsD (a& 'hat it is coplete and re5ular upon its *ace (& 'hat he ecae the holder o* it e*ore it 9as overdue! and 9ithout

notice that it had een previousl dishonored! i* such 9as the *act (c& 'hat he too it in 5ood *aith and *or value (d& 'hat at the tie it 9as ne5otiated to

hi he had no notice o* an in*irit in the instruent or de*ect in the title o* the person ne5otiatin5 it.J +lthou5h 8e 7capo 9as not a9are o* the

circustances under 9hich the chec 9as delivered to Gon;ales! the circustances -- such as the *act that Gatchalian had no oli5ation or liailit to

the 7capo Clinic! that the aount o* the chec did not correspond e?actl 9ith the oli5ation o* atilde Gon;ales to 8r. :. R. de 7capo and that the

chec had t9o parallel lines in the upper le*t hand corner! 9hich practice eans that the chec could onl e deposited ut a not e converted into

cash - should have put 8e 7capo to inuir as to the 9h and 9here*ore o* the possession o* the chec Gon;ales! and 9h he used it to pa

atildeFs account. It 9as paeeFs dut to ascertain *ro the holder Gon;ales 9hat the nature o* the latterFs title to the chec 9as or the nature o* his

possession. =avin5 *ailed in this respect! 8e 7capo 9as 5uilt o* 5ross ne5lect in not *indin5 out the nature o* the title and possession o* Gon;ales!

aountin5 to le5al asence o* 5ood *aith! and it a not e considered as a holder o* the chec in 5ood *aith.

Issue [2]: <hether the rule that a possessor o* the instruent is pria *acie a holder in due course applies.

Held [2]: 'he rule that a possessor o* the instruent is pria *acie a holder in due course does not appl ecause there 9as a de*ect in the title o* the

holder (anuel Gon;ales&! ecause the instruent is not paale to hi or to earer. 7n the other hand! the stipulation o* *acts -- lie the *act that thedra9er had no account 9ith the paee that the holder did not sho9 or tell the paee 9h he had the chec in his possession and 9h he 9as usin5 it *or

the paent o* his o9n personal account - sho9 that holderFs title 9as de*ective or suspicious! to sa the least. +s holderFs title 9as de*ective or

suspicious! it cannot e stated that the paee acuired the chec 9ithout no9led5e o* said de*ect in holderFs title! and *or this reason the presuption

that it is a holder in due course or that it acuired the instruent in 5ood *aith does not e?ist. +nd havin5 presented no evidence that it acuired the

chec in 5ood *aith! it (paee& cannot e considered as a holder in due course. In other 9ords! under the circustances o* the case! instead o* the

presuption that paee 9as a holder in 5ood *aith! the *act is that it acuired possession o* the instruent under circustances that should have put it

to inuir as to the title o* the holder 9ho ne5otiated the chec to it. 'he urden 9as! there*ore! placed upon it to sho9 that not9ithstandin5 the

suspicious circustances! it acuired the chec in actual 5ood *aith.



Stelco *ar%eting Corp& vs& Court o ppeals

BGR $3130! 1% #une 1$$2

Second 8ivision! 6arvasa (#&D " concur! 1 on leave

Facts: Stelco aretin5 Corporation is en5a5ed in the distriution and sale to the pulic o* structural steel ars. 7n % di**erent occasions in Septeer

and 7ctoer 1$,0! it sold to R>L Construction! Inc. uantities o* steel ars o* various si;es and rolls o* G.I. 9ire. 'hese ars and 9ire 9ere delivered at

di**erent places at the indication o* R>L Construction! Inc. 'he a55re5ate price *or the purchases 9as P123!,$.31. +lthou5h the correspondin5 invoices

issued S'ELC7 stipulated that R>L 9ould pa JC78J (cash on deliver&! the latter ade no paents *or the construction aterials thus ordered

and delivered despite insistent deands *or paent the *orer. 7n +pril 4! 1$,1! R>L 5ave to +rstron5 Industries descried S'ELC7 as its

Jsister corporationJ and Janu*acturin5 arJ a chec dra9n a5ainst etroan in the aount o* P123!12$.,3! nuered %3",0 and dated 4 +pril

1$,1. 'hat chec 9as a copan chec o* another corporation! Steel9eld Corporation o* the Philippines! si5ned its President! Peter Ra*ael Lison!

and its :ice-President! +rteio 'orres. 'he chec 9as issued Lison at the ehest o* his *riend! Roeo >. Li! President o* R>L. Roeo Li had

ased Lison *or *inancial assistance! and the latter had a5reed to 5ive Li a chec onl 9a o* accoodation! Jonl as 5uarant ut not to pa *or

anthin5.J <h the chec 9as ade out in the aount o* P123!12$.,3 is not e?plained. 'he chec 9as actuall issued in said aount o* P123!12$.,3!

and as alread stated! 9as 5iven R.>. Li to +rstron5! Industries! in paent o* an oli5ation. <hen the latter deposited the chec at its an! it

9as dishonored ecause Jdra9n a5ainst insu**icient *unds.J <hen so deposited! the chec ore t9o (2& indorseents! that o* JR>L Construction!J

*ollo9ed that o* J+rstron5 Industries.J 7n account o* the dishonor o* etroan Chec %3",0! and on coplaint o* +rstron5 Industries (throu5h a

r. >oun5&! Ra*ael Lison and +rteio 'orres 9ere char5ed in the Re5ional 'rial Court o* anila 9ith a violation o* /atas Paansa /ilan5 22. 'he

9ere acuitted in a decision rendered on 2, #une 1$,4 Jon the 5round that the chec in uestion 9as not issued the dra9er Fto appl on account *or

value!F it ein5 erel *or accoodation purposes.J 'hat )ud5ent ho9ever conditioned the acuittal 9ith the pronounceent that Jthis is not ho9ever

to release Steel9eld Corporation *ro its liailit under Sec. 2$ o* the 6e5otiale Instruents La9 *or havin5 issued it *or the accoodation o* Roeo

Li.J

Eleven onths later and soe 4 ears a*ter issuance o* the chec in a! 1$,! S'ELC7 *iled 9ith the Re5ional 'rial Court o* Caloocan Cit a

civil coplaint a5ainst oth R>L and S'EEL<EL8 *or the recover o* the value o* the steel ars and 9ire sold to and delivered to R>L in the aount o*

P123!12$.,3! plus 1,H interest *ro 20 +u5ust 1$,0 and 2H o* the total aount sou5ht to e recovered as and 9a o* attorneFs *ees. +

preliinar attachent 9as issued the trial court on the asis o* the averents o* the coplaint ut 9as shortl dissolved upon the *ilin5 o* a counter-

ond S'EEL<EL8. R>L could no lon5er e located and could not e served 9ith suons. It never appeared. 7nl S'EEL<EL8 *iled an ans9er!

under date o* 13 #ul 1$,. #ud5ent 9as rendered on 23 #une 1$,3. 'he )ud5ent sentenced Steel9eld to pa to Stelco the aount o* P123!12$.,3

9ith le5al rate o* interest *ro $ a 1$,! 9hen the case 9as instituted until *ull paid! plus another su euivalent to 2H o* the total aount due as

and *or attorneFs *ees. S'ELC7Fs otion *or reconsideration 9as denied the +ppellate 'riunalFs resolution dated 1" 6oveer 1$$0. S'ELC7

appealed.

Issue[1]: <hether the *ourth condition! i.e. as to notice! *or a holder in due course is applicale to an accoodation part.

Held [1]: J+ holder in due course!J sas the la9! Jis a holder 9ho has taen the instruent under the *ollo9in5 conditionsD (a& 'hat it is coplete and

re5ular upon its *ace (& 'hat he ecae the holder o* it e*ore it 9as overdue! and 9ithout notice that it had een previousl dishonored! i* such 9as

the *act (c& 'hat he too it in 5ood *aith and *or value (d& 'hat at the tie it 9as ne5otiated to hi! he had no notice o* an in*irit in the instruent or

de*ect in the title o* the persons ne5otiatin5 it.J +s re5ards an accoodation part (such as S'EEL<EL8&! the *ourth condition! i.e.! lac o* notice o*

an in*irit in the instruent or de*ect in title o* the persons ne5otiatin5 it! has no application. 'his is ecause Section 2$ o* the la9 aove uoted

preserves the ri5ht o* recourse o* a Jholder *or valueJ a5ainst the accoodation part not9ithstandin5 that Jsuch holder! at the tie o* tain5 the

instruent! ne9 hi to e onl an accoodation part.J

Issue [2]: <hether S'ELC7 ever ecae a holder in due course o* Chec %3",0! a earer instruent 9ithin the conteplation o* the 6e5otiale

Instruents La9.

Held [2]: 67. It never did. 'here is no evidence 9hatever that S'ELC7Fs possession o* Chec %3",0 ever dated ac to an tie e*ore theinstruentFs presentent and dishonor. 'here is no evidence 9hatsoever that the chec 9as ever 5iven to it! or indorsed to it in an anner or *or in

paent o* an oli5ation or as securit *or an oli5ation! or *or an other purpose e*ore it 9as presented *or paent. 7n the contrar! S'ELC7 never

ecae a holder *or value and that J(n&o9here in the chec itsel* does the nae o* Stelco aretin5 appear as paee! indorsee or depositor thereo*.J

<hat the record sho9s is thatD (1& the S'EEL<EL8 copan chec in uestion 9as 5iven its president to R.>. Li (2& it 9as 5iven onl 9a o*

accoodation! to e Jused as collateral *or another oli5ationJ ("& in reach o* the a5reeent! ho9ever! R.>. Li indorsed the chec to +rstron5 in

paent o* an oli5ation (4& +rstron5 deposited the chec to its account! a*ter indorsin5 it (& the chec 9as dishonored. 'he record does not sho9

an intervention or participation S'ELC7 in an anner or *or 9hatsoever in these transactions! or an counication o* an sort et9een

S'EEL<EL8 and S'ELC7! or et9een either o* the and +rstron5 Industries! at an tie e*ore the dishonor o* the chec. 'he record does sho9

that a*ter the chec had een deposited and dishonored! S'ELC7 cae into possession o* it in soe 9a! and 9as ale! several ears a*ter the

dishonor o* the chec! to 5ive it in evidence at the trial o* the civil case it had instituted a5ainst the dra9ers o* the chec (Lison and 'orres& and R>L.

Possession o* a ne5otiale instruent a*ter presentent and dishonor! or paent! is utterl inconseuential it does not ae the possessor a holder



*or value 9ithin the eanin5 o* the la9 it 5ives rise to no liailit on the part o* the aer or dra9er and indorsers. It is clear *ro the relevant

circustances that S'ELC7 cannot e deeed a holder o* the chec *or value. It does not eet t9o o* the essential reuisites prescried the

statute. It did not ecoe Jthe holder o* it e*ore it 9as overdue! and 9ithout notice that it had een previousl dishonored!J and it did not tae the chec

Jin 5ood *aith and *or value.J 6either is there an evidence 9hatever that +rstron5 Industries! to 9ho R.>. Li ne5otiated the chec! accepted the

instruent and attepted to encash it in ehal*! and as a5ent o* S'ELC7. 7n the contrar! the indications are that +rstron5 9as reall the intended

paee o* the chec and 9as the part actuall in)ured i ts dishonor it 9as a*ter all its representative (a r. >oun5& 9ho instituted the criinal

prosecution o* the dra9ers! Lison and 'orres! aleit unsuccess*ull.



+ataan Cigar and Cigarette Factory vs& Court o ppeals

BGR $"04,! " arch 1$$4

Second 8ivision! 6ocon (#&D " concur

Facts: /ataan Ci5ar Ci5arette actor! Inc. (/CCI&! a corporation involved in the anu*acturin5 o* ci5arettes! en5a5ed one o* its suppliers! Kin5 'i

Pua Geor5e (Geor5e Kin5&! to deliver 2!000 ales o* toacco lea* startin5 7ctoer 1$%,. In consideration thereo*! /CCI! on 1" #ul 1$%, issued

crossed checs post dated soetie in arch 1$%$ in the total aount o* P,20!000.00. Relin5 on the supplierFs representation that he 9ould coplete

deliver 9ithin three onths *ro 8eceer 1$%,! /CCI a5reed to purchase additional 2!00 ales o* toacco leaves! despite the supplierFs *ailure to

deliver in accordance 9ith their earlier a5reeent. +5ain /CCI issued postdated crossed checs in the total aount o* P1!100!000.00! paale

soetie in Septeer 1$%$. 8urin5 these ties! Geor5e Kin5 9as siultaneousl dealin5 9ith State Investent =ouse! Inc. (SI=I& 7n 1$ #ul 1$%,!

he sold at a discount chec 'C/' 1,23 earin5 an aount o* P134!000.00! post dated "1 arch 1$%$! dra9n /CCI! nain5 Geor5e Kin5 as

paee to SI=I. 7n 8eceer 1$ and 23! 1$%,! he a5ain sold to SI=I checs 'C/' 30,$3% 30,$3,! oth in the aount o* P100!000.00! post dated

Septeer 1 "0! 1$%$ respectivel! dra9n /CCI in *avor o* Geor5e Kin5. In as uch as Geor5e Kin5 *ailed to deliver the ales o* toacco lea* as

a5reed despite /CCIFs deand! /CCI issued on "0 arch 1$%$! a stop paent order on all checs paale to Geor5e Kin5! includin5 chec 'C/'

1,23. Suseuentl! stop paent 9as also ordered on checs 'C/'s 30,$3% 30,$3, on Septeer 14 2,! 1$%$! respectivel! due to Geor5e

Kin5Fs *ailure to deliver the toacco leaves. E**orts o* SI=I to collect *ro /CCI havin5 *ailed! it instituted the case *or collection on three unpaid checs!

nain5 onl /CCI as part de*endant. 'he trial court pronounced SI=I as havin5 a valid clai ein5 a holder in due course. It *urther said that the non-

inclusion o* Kin5 'i Pua Geor5e as part de*endant is iaterial in the case! since he! as paee! is not an indispensale part. 'he Court o* +ppeals

a**ired the decision o* the trial court. /CCI *iled the petition *or revie9.

Issue: <hether SI=I! a second indorser! a holder o* crossed checs! is a holder in due course! to e ale to collect *ro the dra9er! /CCI.

Held: 'he 6e5otiale Instruents La9 states 9hat constitutes a holder in due course! i.e. J+ holder in due course is a holder 9ho has taen the

instruent under the *ollo9in5 conditionsD (a& 'hat it is coplete and re5ular upon its *ace (& 'hat he ecae the holder o* it e*ore it 9as overdue!

and 9ithout notice that it had een previousl dishonored! i* such 9as the *act (c& 'hat he too it in 5ood *aith and *or value (d& 'hat at the t ie it 9as

ne5otiated to hi he had no notice o* an in*irit in the instruent or de*ect in the tit le o* the person ne5otiatin5 it.J Section $ o* the 6IL *urther states

that ever holder is deeed pria *acie a holder in due course. =o9ever! 9hen it is sho9n that the title o* an person 9ho has ne5otiated the instruen

9as de*ective! the urden is on the holder to prove that he or soe person under 9ho he clais! acuired the title as holder in due course. Crossin5 o

checs should put the holder on inuir and upon hi devolves the dut to ascertain the indorserFs title to the chec or the nature o* his possession.

ailin5 in this respect! the holder is declared 5uilt o* 5ross ne5li5ence aountin5 to le5al asence o* 5ood *aith! contrar to Sec. 2(c& o* the 6e5otiale

Instruents La9! and as such the consensus o* authorit is to the e**ect that the holder o* the chec is not a holder in due course. =erein! /CCIFs

de*ense in stoppin5 paent is as 5ood to SI=I as it is to Geor5e Kin5. /ecause! reall! the checs 9ere issued 9ith the intention that Geor5e Kin5

9ould suppl /CCI 9ith the ales o* toacco lea*. 'here ein5 *ailure o* consideration! SI=I is not a holder in due course. Conseuentl! /CCI cannot

e oli5ed to pa the checs.

)"ote; t does not mean$ however$ that S< could not recover from the checs( The only disadvantage of a holder who is not a holder in due course is

that the instrument is sub=ect to defenses as if it were non/negotiable( <ence$ S< can collect from the immediate indorser$ eorge >ing(+



State Investment !ouse Inc& (SI!I) vs& Intermediate ppellate Court

BGR %2%34! 1" #ul 1$,$

'hird 8ivision! ernan (C#&D " concur! 1 on leave

Facts: Shortl e*ore Septeer 1$,0! 6e9 Siatuna <ood Industries! Inc. (6S<II& reuested *or a loan *ro =arris Chua. 'he latter a5reed to 5rant

the sae su)ect to the condition that the *orer should 9ait until 8eceer 1$,0 9hen he 9ould have the one. In vie9 o* this a5reeent! +nita

Pena Chua (=arris ChuaFs 9i*e& issued " crossed checs paale to 6S<II all postdated 22 8eceer 1$,0. 'he total value o* the postdated checs

aounted to P 2$$!40.00. Suseuentl! 6S<II entered into an a5reeent 9ith State Investent =ouse! Inc. (SI=I& 9here *or and in consideration

o* the su o* Pl!04%!402.$1 under a deed o* sale! the *orer assi5ned and discounted 9ith SI=I 11 postdated checs includin5 the " postdated checs

issued PeMa Chua to 6S<II. <hen the three checs issued Pena Chua 9ere alle5edl deposited SI=I! these checs 9ere dishonored

reason o* Jinsu**icient *undsJ! Jstop paentJ and Jaccount closedJ! respectivel. SI=I claied that despite deands on PeMa Chua to ae 5ood said

checs! the latter *ailed to pa the sae necessitatin5 the *orer to *ile an action *or collection a5ainst the latter and her husand e*ore the Re5ional

'rial Court o* anila! /ranch :II (Civil Case ,2-104%&. 'he spouses Chua *iled a third part coplaint a5ainst 6S<II *or reiurseent and

indeni*ication in the event that the e held liale to SI=I. or *ailure o* 6S<II to ans9er the third part coplaint despite due service o* suons! the

latter 9as declared in de*ault. 7n "0 +pril 1$,4! the lo9er court rendered )ud5ent a5ainst the spouses! orderin5 the to pa )ointl and severall to

SI=I P 22$!40.00 9ith interest at the rate o* 12H per annu *ro 24 eruar 1$,1 until *ull paid P 2$!$4.00 as and *or attorneFs *ees and the

costs o* suit. 7n the third part coplaint! 6S<II 9as ordered to pa the spouses all aounts said spouses a pa to SI=I on account o* the case. 7n

appeal *iled the spouses (+C-GR C: 042"&! the Interediate +ppellate Court (no9 Court o* +ppeals& reversed the lo9er courtFs )ud5ent in its

decision! disissin5 the coplaint! 9ith costs a5ainst SI=I. SI=I * iled the petition *or revie9.

Issue [1]: <hether SI=I is a holder in due course as to entitle it to proceed a5ainst the spouses Chua *or the aount stated in the dishonored cross

checs.

Held [1]: 67. Section 2(c& o* the 6e5otiale Instruents La9 de*ines a holder in due course as one 9ho taes the instruent Jin 5ood *aith and *or

valueJ. 7n the other hand! Section 2(d& provides that in order that one a e a holder in due course! it is necessar that Jat the tie the instruent

9as ne5otiated to hi he had no notice o* an de*ect in the title o* the person ne5otiatin5 it.J =o9ever! under Section $ ever holder is deeed pria

*acie to e a holder in due course. +dittedl! the 6e5otiale Instruents La9 re5ulatin5 the issuance o* ne5otiale checs as 9ell as the li5hts and

liailities arisin5 there*ro! does not ention Jcrossed checsJ. /ut the Court has taen co5ni;ance o* the practice that a chec 9ith t9o parallel lines in

the upper le*t hand corner eans that it could onl e deposited and a not e converted into cash. Conseuentl! such circustance should put the

paee on inuir and upon hi devolves the dut to ascertain the holderFs title to the chec or the nature o* his possession. ailin5 in this respect! the

paee is declared 5uilt o* 5ross ne5li5ence aountin5 to le5al asence o* 5ood *aith and as such the consensus o* authorit is to the e**ect that the

holder o* the chec is not a holder in 5ood *aith. Relin5 on the rulin5 in 7capo v. Gatchalian (GR L-1123! "0 6oveer 1$31&! the Interediate

+ppellate Court (no9 Court o* +ppeals&! correctl elucidated that the e**ects o* crossin5 a chec areD the chec a not e encashed ut onl deposited

in the an the chec a e ne5otiated onl once to one 9ho has an account 9ith a an and the act o* crossin5 the chec serves as a 9arnin5 to

the holder that the chec has een issued *or a de*inite purpose so that he ust inuire i* he has received the chec pursuant to that purpose! other9ise

he is not a holder in due course. urther! the appellate court said that 9hen SI=I rediscounted the chec no9in5 that it 9as a crossed chec he 9as

no9in5l violatin5 the avo9ed intention o* crossin5 the chec that his *ailure to inuire *ro the holder! 6S<II! the purpose *or 9hich the three checs

9ere cross despite the 9arnin5 o* the crossin5! prevents hi *ro ein5 considered in 5ood *aith and thus he is not a holder in due course that ein5

not a holder in due course! SI=I 9as su)ect to personal de*enses! such as lac o* consideration et9een the spouses and 6S<II (no deposits 9ere

ade! hence no loan 9as ade! hence the three checs are 9ithout consideration as per Section 2,! 6IL& that 6S<II ne5otiated the three checs in

reach o* *aith in violation o* Section ! 6e5otiale Instruents La9! 9hich is a personal de*ense availale to the dra9er o* the chec that such

instruents are entioned in Section 41 o* the Code o* Coerce and that t'he paent ade to a person other than the aner or institution shall

not e?ept the person on 9ho it is dra9n! i* the paent 9as not correctl ade. 'he Supree Court a5reed 9ith the appellate court.

Issue [2]: <hether SI=I is a proper part authori;ed to ae presentent o* the cross checs in uestion.

Held [2]: 67. Ander usual practice! crossin5 a chec is done placin5 t9o parallel l ines dia5onall on the le*t top portion o* the chec. 'he crossin5a e special 9herein et9een the t9o parallel lines is 9ritten the nae o* a an or a usiness institution! in 9hich case the dra9ee should pa onl

9ith the intervention o* that an or copan! or crossin5 a e 5eneral 9herein et9een t9o parallel dia5onal lines are 9ritten the 9ords Jand Co.J or

none at all as in the case at ar! in 9hich case the dra9ee should not encash the sae ut erel accept the sae *or deposit. 'he e**ect there*ore o*

crossin5 a chec relates to the ode o* its presentent *or paent. Ander Section %2 o* the 6e5otiale Instruents La9! presentent *or paent to

e su**icient ust e ade (a& the holder! or soe person authori;ed to receive paent on his ehal*. +s to 9ho the holder or authori;ed person

9ill e depends on the instructions stated on the *ace o* the chec. =erein! the three su)ect checs had een crossed 5enerall and issued paale to

6S<II 9hich could onl ean that the dra9er had intended the sae *or deposit onl the ri5ht*ul person! i .e.! the paee naed therein. +pparentl! it

9as not the paee 9ho presented the sae *or paent and there*ore! there 9as no proper presentent! and the liailit did not attach to the dra9er.

'hus! in the asence o* due presentent! the dra9er did not ecoe liale. Conseuentl! no ri5ht o* recourse is availale to SI=I a5ainst the dra9er o*

the su)ect checs! Pena Chua! considerin5 that SI=I is not the proper part authori;ed to ae presentent o* the checs in uestion.



Issue [3]: <hether SI=I can still recover even i* it is not a holder in due course.

Held [3]: >ES. It does not *ollo9 that sipl ecause SI=I 9as not a holder in due course as *ound the appellate court *or havin5 taen the

instruents in uestion 9ith notice that the sae is *or deposit onl to the account o* paee naed in the su)ect checs! SI=I could not recover on the

checs. 'he 6e5otiale Instruents La9 does not provide that a holder 9ho is not a holder in due course a not in an case recover on the

instruent. =erein! SI=I a recover *ro 6S<II i* the latter has no valid e?cuse *or re*usin5 paent. 'he onl disadvanta5e o* a holder 9ho is not in

due course is that the ne5otiale instruent is su)ect to de*enses as i* it 9ere non-ne5otiale.



;ang vs& Court o ppeals

BGR 1",0%4! 1 +u5ust 200"

Second 8ivision! @uisuin5 (#&D " concur! 1 on leave

Facts: 7n or e*ore 22 8eceer 1$,%! Cel >an5 and Pre Chandiraani entered into an a5reeent 9here the latter 9as to 5ive >an5 a Philippine

Coercial International /an (PCI/& ana5erFs chec in the aount o* P4.2 illion in e?chan5e *or 2 o* >an5Fs ana5erFs checs! each in the aount

o* P2.0,% illion! oth paale to the order o* ernando 8avid. >an5 and Chandiraani a5reed that the di**erence o* P23!000.00 in the e?chan5e 9ould

e their pro*it to e divided euall et9een the. >an5 and Chandiraani also *urther a5reed that the *orer 9ould secure *ro ar East /an 'rust

Copan (E/'C& a dollar dra*t in the aount o* AST200!000.00! paale to PCI/ C8A +ccount 41$-0113-2! 9hich Chandiraani 9ould e?chan5e

*or another dollar dra*t in the sae aount to e issued =an5 Sen5 /an Ltd. o* =on5 Kon5. +ccordin5l! on 8eceer 22! 1$,%! >an5 procured (a&

Euitale /anin5 Corporation BEC/ CashierFs Chec CCPS 14-00$43% in the su o* P2!0,%!000.00! dated 22 8eceer 1$,%! paale to the order o*

ernando 8avid (& E/'C CashierFs Chec 2,%0%,! in the aount o* P2!0,%!000.00! dated 22 8eceer 1$,%! l ie9ise paale to the order o*

ernando 8avid and (c& E/'C 8ollar 8ra*t 4%%1! dra9n on Cheical /an! 6e9 >or! in the aount o* AST200!000.00! dated 22 8eceer 1$,%!

paale to PCI/ C8A +ccount 41$-0113-2. +t aout 1D00 p.. o* the sae da! >an5 5ave the a*oreentioned cashierFs checs and dollar dra*ts to

her usiness associate! +lert Lion5! to e delivered to Chandiraani Lion5Fs essen5er! 8anilo Rani5o. Rani5o 9as to eet Chandiraani at

Philippine 'rust /an! +ala +venue! aati Cit! etro anila 9here he 9ould turn over >an5Fs cashierFs checs and dollar dra*t to Chandiraani 9ho!

in turn! 9ould deliver to Rani5o a PCI/ ana5erFs chec in the su o* P4.2 illion and a =an5 Sen5 /an dollar dra*t *or AST200!000.00 in e?chan5e.

Chandiraani did not appear at the rende;vous and Rani5o alle5edl lost the t9o cashierFs checs and the dollar dra*t ou5ht >an5. Rani5o reported

the alle5ed loss o* the checs and the dollar dra*t to Lion5 at 4D"0 p.. o* 22 8eceer 1$,%. Lion5! in turn! in*ored >an5! and the loss 9as then

reported to the police. It transpired! ho9ever! that the checs and the dollar dra*t 9ere not lost! *or Chandiraani 9as ale to 5et hold o* said

instruents! 9ithout deliverin5 the e?chan5e consideration consistin5 o* the PCI/ ana5erFs chec and the =an5 Sen5 /an dollar dra*t. +t "D00 p.. o

soe 2 hours a*ter Chandiraani and Rani5o 9ere to eet in aati Cit! Chandiraani delivered to 8avid at China /anin5 Corporation ranch in Sanernando Cit! Papan5a! the (a& E/'C CashierFs Chec 2,%0%,! and the (& Euitale CashierFs Chec CCPS 14-00$43%. In e?chan5e!

Chandiraani 5ot AST"30!000.00 *ro 8avid! 9hich Chandiraani deposited in the savin5s account o* his 9i*e! Pushpa Chandiraani and his other!

Rani Renandas! 9ho held C8A +ccount 124 9ith the Anited Coconut Planters /an (ACP/& ranch in Greenhills! San #uan! etro anila.

Chandiraani also deposited E/'C 8ollar 8ra*t 4%%1! in PCI/ C8A +ccount 41$-0113-2 on the sae date. ean9hile! >an5 reuested E/'C

and EC/ to stop paent on the instruents she elieved to e lost. /oth ans coplied 9ith her reuest! ut upon the representation o* PCI/!

E/'C suseuentl li*ted the stop paent order on E/'C 8ollar 8ra*t 4%%1! thus enalin5 the holder o* PCI/ C8A +ccount 41$-0113-2 to

receive the aount o* AST200!000.00.

7n 2, 8eceer 1$,%! >an5 lod5ed a Coplaint *or in)unction and daa5es a5ainst EC/! Chandiraani! and 8avid! 9ith praer *or a teporar

restrainin5 order! 9ith the Re5ional 'rial Court o* Pasa Cit (Civil Case 4%$&. 'he Coplaint 9as suseuentl aended to include a praer *or

Euitale to return to >an5 the aount o* P2.0,% illion! 9ith interest thereon until *ull paid. 7n 12 #anuar 1$,,! >an5 *iled a separate case *or

in)unction and daa5es! 9ith praer *or a 9rit o* preliinar in)unction a5ainst E/'C! PCI/! Chandiraani and 8avid! 9ith the R'C o* Pasa Cit!

doceted as Civil Case 6o. 4$2. 'his coplaint 9as later aended to include a praer that E/'C et al return to >an5 the aount o* P2.0,% illion!

the value o* E/'C 8ollar 8ra*t 4%%1! 9ith interest at 1,H annuall until *ull paid. 7n $ eruar 1$,,! upon the *ilin5 o* a ond >an5! the trial court

issued a 9rit o* preliinar in)unction in Civil Case 6o. 4%$. + 9rit o* preliinar in)unction 9as suseuentl issued in Civil Case 4$2 also.

ean9hile! 8avid oved *or disissal o* the cases a5ainst hi and *or reconsideration o* the 7rders 5rantin5 the 9rit o* preliinar in)unction! ut

these otions 9ere denied. 8avid then elevated the atter to the Court o* +ppeals in a special civil action *or certiorari (C+-GR SP 14,4"&! 9hich 9as

disissed the appellate court. +s Civil Cases 4%$ and 4$2 arose *ro the sae set o* *acts! the t9o cases 9ere consolidated. 'he trial court then

conducted pre-trial and trial o* the t9o cases! ut the proceedin5s had to e suspended a*ter a *ire 5utted the Pasa Cit =all and destroed the records

o* the courts. +*ter the records 9ere reconstituted! the proceedin5s resued and the parties a5reed that the one in dispute e invested in 'reasur

/ills to e a9arded in *avor o* the prevailin5 side! and liitin5 the issues in the case. 7n 4 #ul 1$$! the trial court handed do9n its decision in Civil

Cases 4%$ and 4$2! in *avor o* 8avid declarin5 hi entitled to the proceeds o* the 2 cashierFs checs! to5ether 9ith the earnin5s derived there*ro

pendente lite orderin5 >an5 to pa 8avid oral daa5es in the aount o* P100!000.00 attorneFs *ees in the aount o* P100!000.00 and to pa the

costs. 'he trial court disissed the coplaint a5ainst E/'C! PCI/ and E/C 9ithout pre)udice to 9hatever action >an5 9ill *ile a5ainst Chandiraani

*or reiurseent o* the aounts received hi *ro 8avid. >an5 then oved *or reconsideration o* the R'C )ud5ent! ut the trial court denied her

otion in its 7rder o* 20 Septeer 1$$. >an5 seasonal *iled an appeal 9ith the Court o* +ppeals (C+-GR C: 2"$,&. 7n 2 arch 1$$$! the

appellate court a**ired the decision o* the trial court 9ith odi*ication and ordered >an5 to pa PCI/ the aount o* P2!000.00! as attorneFs *ees.

>an5 *iled the petition *or revie9 on certiorari.

Issue: <hether 8avid 9as a holder in due course.

Held: Ever holder o* a ne5otiale instruent is deeed pria *acie a holder in due course. =o9ever! this presuption arises onl in *avor o* a person

9ho is a holder as de*ined in Section 1$1 o* the 6e5otiale Instruents La9! eanin5 a Jpaee or indorsee o* a ill or note! 9ho is in possession o* it! o

the earer thereo*.J =erein! it is not disputed that 8avid 9as the paee o* the checs in uestion. 'he 9ei5ht o* authorit sustains the vie9 that a paee

a e a holder in due course. =ence! the presuption that he is a pria *acie holder in due course applies in his *avor. =o9ever! said presuption

a e reutted. =ence! 9hat is vital to the resolution o* this issue is 9hether 8avid too possession o* the checs under the conditions provided *or in



Section 2 o* the 6e5otiale Instruents La9. +ll the reuisites provided *or in Section 2 ust concur in 8avidFs case! other9ise he cannot e deeed

a holder in due course. >an5Fs challen5e to 8avidFs status as a holder in due course hin5es on t9o ar5uentsD (1& the lac o* proo* to sho9 that 8avid

tendered an valuale consideration *or the disputed checs and (2& 8avidFs *ailure to inuire *ro Chandiraani as to ho9 the latter acuired

possession o* the checs! thus resultin5 in 8avidFs intentional i5norance tantaount to ad *aith. In su! >an5 posits that the last t9o reuisites o*

Section 2 are issin5! there preventin5 8avid *ro ein5 considered a holder in due course. An*ortunatel *or >an5! her ar5uents on this score are

less than eritorious and *ar *ro persuasive.

Issue [a]: <hether there is lac o* proo* to sho9 that 8avid tendered an valuale consideration *or the disputed checs.

Held [a]: <ith respect to consideration! Section 24 o* the 6e5otiale Instruents La9 creates a presuption that ever part to an instruent

acuired the sae *or a consideration or *or value. 'hus! the la9 itsel* creates a presuption in 8avidFs *avor that he 5ave valuale

consideration *or the checs in uestion. In alle5in5 other9ise! >an5 has the onus to prove that 8avid 5ot hold o* the checs asent said

consideration. In other 9ords! >an5 ust present convincin5 evidence to overthro9 the presuption. 'he records! ho9ever! sho9s that >an5

*ailed to dischar5e her urden o* proo*. >an5Fs averent that 8avid did not 5ive valuale consideration 9hen he too possession o* the checs

is unsupported! devoid o* an concrete proo* to sustain it. 6ote that oth the trial court and the appellate court *ound that 8avid did not receive

the checs 5ratis! ut instead 5ave Chandiraani AST"30!000.00 as consideration *or the said instruents. actual *indin5s o* the Court o*

+ppeals are conclusive on the parties and not revie9ale the Supree Court the carr 5reat 9ei5ht 9hen the *actual *indin5s o* the trial

court are a**ired the appellate court.

Issue [b]: <hether 8avidFs *ailure to inuire *ro Chandiraani as to ho9 the latter acuired possession o* the checs! resulted in 8avidFs

intentional i5norance tantaount to ad *ait

Held [b]: >an5 *ails to point an circustance 9hich should have put 8avid on inuir as to the 9h and 9here*ore o* the possession o* the

checs Chandiraani. 8avid 9as not priv to the transaction et9een >an5 and Chandiraani. Instead! Chandiraani and 8avid had a

separate dealin5 in 9hich it 9as precisel ChandiraaniFs dut to deliver the checs to 8avid as paee. 'he evidence sho9s that

Chandiraani per*ored said tas to the letter. >an5 adits that 8avid too the step o* asin5 the ana5er o* his an to veri* *ro E/'C

and Euitale as to the 5enuineness o* the checs and onl accepted the sae a*ter ein5 assured that there 9as nothin5 9ron5 9ith said

checs. +t that tie! 8avid 9as not a9are o* an Jstop paentJ order. Ander these circustances! 8avid thus had no oli5ation to ascertain

*ro Chandiraani 9hat the nature o* the latterFs title to the checs 9as! i* an! or the nature o* his possession. 'hus! he cannot e held 5uilt

o* 5ross ne5lect aountin5 to le5al asence o* 5ood *aith! asent an sho9in5 that there 9as soethin5 aiss aout ChandiraaniFs

acuisition or possession o* the checs. 8avid did not close his ees delieratel to the nature or the particulars o* a *raud alle5edl coitted

Chandiraani upon >an5! asent an no9led5e on his part that the action in tain5 the instruents aounted to ad *aith.

Issue [c]: <hether 8avid should at least have inuired as to 9hether he 9as acuirin5 said checs *or the purpose *or 9hich the 9ere

issued! pursuant to /ataan Ci5ar Ci5arette actor! Inc. v. Court o* +ppeals.

Held [c]: >an5Fs reliance on the /ataan Ci5ar case! ho9ever! is isplaced. 'he *acts in the case are not on all *ours 9ith /ataan Ci5ar. In the

latter case! the crossed checs 9ere ne5otiated and sold at a discount the paee! 9hile herein! the paee did not ne5otiate *urther the

checs in uestion ut proptl deposited the in his an account. 'he 6e5otiale Instruents La9 is silent 9ith respect to crossed checs!

althou5h the Code o* Coerce aes re*erence to such instruents. 6onetheless! the Court has taen )udicial co5ni;ance o* the practice

that a chec 9ith t9o parallel lines in the upper le*t hand corner eans that it could onl e deposited and not converted into cash. 'he e**ects

o* crossin5 a chec! thus! relates to the ode o* paent! eanin5 that the dra9er had intended the chec *or deposit onl the ri5ht*ul

person! i.e.! the paee naed therein. In /ataan Ci5ar! the rediscountin5 o* the chec the paee no9in5l violated the avo9ed intention o*

crossin5 the chec. 'hus! in acceptin5 the cross checs and pain5 cash *or the! despite the 9arnin5 o* the crossin5! the suseuent holder

could not e considered in 5ood *aith and thus! not a holder in due course. 'he rulin5 in /ataan Ci5ar reiterates that in 8e 7capo Co. v.

Gatchalian. 'he *actual circustances in 8e 7capo and in /ataan Ci5ar are not present herein. or here! there is no dispute that the

crossed checs 9ere delivered and dul deposited 8avid! the paee naed therein! in his an account. In other 9ords! the purposeehind the crossin5 o* the checs 9as satis*ied the paee.





a have an e**ect upon the contract et9een hi and the *ir o* =ndan! 'avera! :entura! et it cannot have upon the responsiilit o* oth to the

an! upon the ill dra9n and accepted as aove stated.

)?pon the non/payment of the bill by the drawee/acceptor$ the ban had the right of recourse$ which it e@ercised$ against the drawer( [Sec( %$

"egotiable nstruments 6aw: The drawee$ the <yndman$ Tavera B 8entura company$ or its successors$ C( *ardo de Tavera$ accepted the bill and is

primarily liable for the value of the negotiable instrument$ while the drawer$ .artolome *icornell$ is secondarily liable(+



People vs& *aniegoBGR L-"0$10! 2% eruar 1$,%irst 8ivision! 6arvasa (#&D 3 concur

Facts: 'he in*oration 9hich initiated the criinal proceedin5s in the Court o* irst Instance o* Ri;al indicted " persons Lt. Ri;alino . Aa! rs.ila5ros Paintuan! and rs. #ulia '. anie5o *or the crie o* +L:ERS+'I76! coitted as *ollo9sD J'hat on or aout the period coverin5 theonth o* a! 1$% up to and includin5 the onth o* +u5ust! 1$%! in @ue;on Cit! Philippines! the aove-naed accused! conspirin5 to5ether!con*ederatin5 9ith and helpin5 one another! 9ith intent o* 5ain and 9ithout authorit o* la9! did! then and there! 9il*ull! unla9*ull and *eloniouslalverse! isappropriate and isappl pulic *unds in the aount o* P33!4"4.0 elon5in5 to the Repulic o* the Philippines! in the *ollo9in5 anner!to 9itD the accused! Lt. RI+LI67 . Aa! a dul appointed o**icer in the +red orces o* the Philippines in active dut! 9ho! durin5 the period speci*iedaove! 9as desi5nated as 8isursin5 7**icer in the 7**icer o* the Chie* o* inance! G=@! Cap urph! @ue;on Cit! and as such 9as entrusted 9ith

and had under his custod and control pulic *unds! conspirin5 and con*ederatin5 9ith his co-accused! IL+GR7S '. P+I6'A+6 and #ALI+ '.+6IEG7! did then and there! unla9*ull! 9ill*ull and *eloniousl! 9ith intent o* 5ain and 9ithout authorit o* la9! and in pursuance o* their conspirac!tae! receive! and accept *ro his said co-accused several personal checs dra9n a5ainst the Philippine 6ational /an and the /an o* the PhilippineIslands! o* 9hich the accused! IL+GR7S '. P+I6'A+6 is the dra9er and the accused! #ALI+ '. +6IEG7! is the indorser! in the total aount o*P33!4"4.0! cashin5 said checs and usin5 *or this purpose the pulic *unds entrusted to and placed under the custod and control o* the said Lt.Ri;alino . Aa! all the said accused no9in5 *ull 9ell that the said checs are 9orthless and are not covered *unds in the a*oreentioned ans!*or 9hich reason the sae 9ere dishonored and re)ected the said ans 9hen presented *or encashent! to the daa5e and pre)udice o* theRepulic o* the Philippines! in the aount o* P33!4"4.0! Philippine currenc.J 7nl Lt. Aa and rs. anie5o 9ere arrai5ned! rs. Paintuan havin5apparentl *led to the Anited States in +u5ust! 1$32. /oth Aa and anie5o entered a plea o* not 5uilt. +*ter trial )ud5ent 9as rendered the Courto* irst Instance! convictin5 Aa o* the crie o* alversation and sentenced hi to su**er the penalt o* reclusion teporal o* 12 ears! 1 da to 14ears! , onths! and a *ine o* P%!4"4.0 9hich is the aount alversed! and to su**er perpetual special disuali*ication 9hile acuittin5 anie5o utorderin5 her to pa solidaril 9ith Aa the aount o* P%!4"4.0 to the 5overnent. anie5o sou5ht reconsideration o* the )ud5ent! prain5 that shee asolved *ro civil liailit or! at the ver least! that her liailit e reduced to P43!$"4.0. 'he Court declined to ne5ate her civil liailit! ut didreduce the aount thereo* to P43!$"4.0. She appealed to the Court o* +ppeals as Aa had earlier done. AaFs appeal 9as suseuentl disissed the +ppellate Court ecause o* his *ailure to *ile rie*. 7n the other hand! anie5o suitted her rie* in due course. /ecause! in the +ppellateCourtFs vie9! anie5oFs rie* raised onl uestions o* la9! her appeal 9as later certi*ied to the Supree Court.

Issue: <hether a ere indorser a e ade liale on account o* the dishonor o* the checs indorsed her.

Held: Ander the la9! the holder or last indorsee o* a ne5otiale instruent has the ri5ht to Jen*orce paent o* the instruent *or the *ull aount thereo*a5ainst all parties liale thereon.J +on5 the Jparties liale thereonJ is an indorser o* the instruent i.e.! Ja person placin5 his si5nature upon aninstruent other9ise than as aer! dra9er! or acceptor unless he clearl indicates appropriate 9ords his intention to e ound in soe othercapacit.J Such an indorser J9ho indorses 9ithout uali*ication!J inter alia Jen5a5es that on due presentent! the instruent shall e accepted or paid!or oth! as the case a e! accordin5 to its tenor! and that i* it e dishonored! and the necessar proceedin5s on dishonor e dul taen! he 9ill pathe aount thereo* to the holder! or to an suseuent indorser 9ho a e copelled to pa it.J anie5o a also e deeed an JaccoodationpartJ in the li5ht o* the *acts! i.e.! a person J9ho has si5ned the instruent as aer! dra9er! acceptor! or indorser! 9ithout receivin5 value there*or! and*or the purpose o* lendin5 his nae to soe other person.J +s such! she is under the la9 Jliale on the instruent to a holder *or value! not9ithstandin5such holder at the tie o* tain5 the instruent ne9 her to e onl an accoodation part!J althou5h she has the ri5ht! a*ter pain5 the holder! tootain reiurseent *ro the part accoodated! Jsince the relation et9een the is in e**ect that o* principal and suret! the accoodation partein5 the suret.J



stro #lectronics Corp& vs& P$ilippine #<port and Foreign Loan 1uarantee Corporation

BGR 1"3%2$! 2" Septeer 200"

Second 8ivision! +ustria-artine; (#&D " concur! 1 concurs in result

Facts: +stro Electronics Corporation (+stro& 9as 5ranted several loans the Philippine 'rust Copan (Philtrust& aountin5 to P"!000!000.00 9ith

interest and secured three proissor notesD P6 P-24 dated 14 8eceer 1$,1 *or P300!000.00! P6 P-2, also dated 14 8eceer 1$,1 *or

P400!000.00 and P6 14%% dated 2% +u5ust 1$,1 *or P2!000!000.00. In each o* these proissor notes! it appears that Peter Ro?as si5ned t9ice! as

President o* +stro and in his personal capacit. Ro?as also si5ned a Continuin5 Suretship +5reeent in *avor o* Philtrust /an! as President o* +stro

and as suret. 'herea*ter! Philippine E?port and orei5n Loan Guarantee Corporation (Phil5uarantee&! 9ith the consent o* +stro! 5uaranteed in *avor o*

Philtrust the paent o* %0H o* +stroFs loan! su)ect to the condition that upon paent Phil5uarantee o* said aount! it shall e proportionall

suro5ated to the ri5hts o* Philtrust a5ainst +stro. +s a result o* +stroFs *ailure to pa its loan oli5ations! despite deands! Phil5uarantee paid %0H o*

the 5uaranteed loan to Philtrust. Suseuentl! Phil5uarantee *iled a5ainst +stro and Ro?as a coplaint *or su o* one 9ith the R'C o* aati. In his

+ns9er! Ro?as disclais an liailit on the instruents! alle5in5! inter alia! that he erel si5ned the sae in lan and the phrases Jin his personal

capacitJ and Jin his o**icial capacitJ 9ere *raudulentl inserted 9ithout his no9led5e. +*ter trial! the R'C rendered its decision in *avor o*

Phil5uarantee! orderin5 +stro and Ro?as to solidaril pa Phil5uarantee the su o* P"!321!1,%.2 representin5 the total oli5ation o* +stro and Ro?as in

*avor o* Phil5uarantee as o* "1 8eceer 1$,4 9ith interest at the stipulated rate o* 13H per annu and stipulated penalt char5es o* 13H per annu

coputed *ro 1 #anuar 1$, until the aount is *ull paid. 7n appeal! the Court o* +ppeals a**ired the R'C decision a5reein5 9ith the trial court that

Ro?as *ailed to e?plain satis*actoril 9h he had to si5n t9ice in the contract and there*ore the presuption that private transactions have een *air and

re5ular ust e sustained. +stro and Ro?as *iled the petition *or revie9 on certiorari.

Issue: <hether Ro?as should e )ointl and severall liale (solidar& 9ith +stro *or the su a9arded the R'C.

Held: >ES. +stroFs loan 9ith Philtrust /an is secured three proissor notes. 'hese proissor notes are valid and indin5 a5ainst +stro and

Ro?as. +s it appears on the notes! Ro?as si5ned t9iceD *irst! as president o* +stro and second! in his personal capacit. In si5nin5 his nae aside *ro

ein5 the President o* +stro! Ro?as ecae a co-aer o* the proissor notes and cannot escape an liailit arisin5 *ro it. Ander the 6e5otiale

Instruents La9! persons 9ho 9rite their naes on the *ace o* proissor notes are aers! proisin5 that the 9ill pa to the order o* the paee or

an holder accordin5 to its tenor. 'hus! even 9ithout the phrase Jpersonal capacit!J Ro?as 9ill still e priaril liale as a )oint and several detor under

the notes considerin5 that his intention to e liale as such is ani*ested the *act that he a**i?ed his si5nature on each o* the proissor notes t9ice

9hich necessaril 9ould ipl that he is undertain5 the oli5ation in t9o di**erent capacities! o**icial and personal. urther! the three proissor notes

uni*orl provideD J7R :+LAE RECEI:E8! I<e )ointl! severall and solidaril! proise to pa to P=IL'RAS' /+6K or order.J +n instruent 9hich

e5ins 9ith JIJ! J<eJ! or JEither o* usJ proise to pa! 9hen si5ned t9o or ore persons! aes the solidaril liale. +lso! the phrase J)oint and

severalJ inds the aers )ointl and individuall to the paee so that all a e sued to5ether *or its en*orceent! or the creditor a select one or

ore as the o)ect o* the suit. =avin5 si5ned under such ters! Ro?as assued the solidar liailit o* a detor and Philtrust /an a choose to

en*orce the notes a5ainst hi alone or )ointl 9ith +stro. urtherore! Ro?as is the President o* +stro and reasonal! a usinessan 9ho is presued

to tae ordinar care o* his concerns. +sent an countervailin5 evidence! it cannot e 5ainsaid that he 9ill not si5n a docuent 9ithout *irst in*orin5

hisel* o* its contents and conseuences. Clearl! he ne9 the nature o* the transactions and docuents involved as he not onl e?ecuted these notes

on t9o di**erent dates ut he also e?ecuted! and a5ain! si5ned t9ice! a JContinuin5 Suretship +5reeentJ notari;ed on "1 #ul 1$,1. Such continuin5

suretship a5reeent even re-en*orced his solidar liailit to Philtrust ecause as a suret! he ound hisel* )ointl and severall 9ith +stroFs oli5ation

Ro?as cannot no9 avoid liailit hidin5 under the convenient e?cuse that he erel si5ned the notes in lan and the phrases Jin his personal

capacitJ and Jin his o**icial capacitJ 9ere *raudulentl inserted 9ithout his no9led5e.



1arcia vs& Llamas

BGR 1412%! , 8eceer 200"

irst 8ivision! Pan5anian (#&D 4 concur

Facts: 'he case started out as a coplaint *or su o* one and daa5es 8ionisio Llaas a5ainst Roeo Garcia and Eduardo de #esus (Civil

Case @$%-"2-,%"&! the coplaint alle5ed that on 2" 8eceer 1$$3! Garcia and de #esus orro9ed P400!000.00 *ro Llaas that! on the sae da!

the e?ecuted a proissor note 9herein the ound theselves )ointl and severall to pa the loan on or e*ore 2" #anuar 1$$% 9ith a H interest

per onth that the loan has lon5 een overdue and! despite repeated deands! Garcia and de #esus have *ailed and re*used to pa it and that!

reason o* their un)usti*ied re*usal! Llaas 9as copelled to en5a5e the services o* counsel to 9ho he a5reed to pa 2H o* the su to e recovered

*ro Garcia and de #esus! plus P2!000.00 *or ever appearance in court. +nne?ed to the coplaint 9ere the proissor note and a deand letter! dated

2 a 1$$%! Llaas addressed to Garcia and de #esus. Resistin5 the coplaint! Garcia! in his ans9er! averred that he assued no liailit under the

proissor note ecause he si5ned it erel as an accoodation part *or de #esus aon5 others. 8urin5 the pre-trial con*erence! de #esus and his

la9er did not appear! nor did the *ile an pre-trial rie*. 6either did Garcia * ile a pre-trial rie*! and his counsel even ani*ested that he 9ould no lon5er

present evidence. Given this developent! the trial court 5ave Llaas perission to present his evidence e? parte a5ainst de #esus and! as re5ards

Garcia! the trial court directed Llaas to * ile a otion *or )ud5ent on the pleadin5s! and *or Garcia to *ile his coent or opposition thereto. Instead!

Llaas *iled a otion to declare Garcia in de*ault and to allo9 hi to present his evidence e? parte. ean9hile! Garcia *iled a ani*estation suittin5

his de*ense to a )ud5ent on the pleadin5s. Suseuentl! Llaas *iled a ani*estationotion to suit the case *or )ud5ent on the pleadin5s!

9ithdra9in5 in the process his previous otion. 'hereunder! he asserted that GarciaFs and de #esusF solidar liailit under the proissor note cannot

e an clearer! and that the chec issued de #esus did not dischar5e the loan since the chec ounced. 7n % #ul 1$$,! the Re5ional 'rial Court

(R'C& o* @ue;on Cit (/ranch 222& disposed o* the case! renderin5 the decision in *avor o* Llaas and orderin5 Garcia and 8e #esus to pa! )ointl and

severall! Llaas the sus o* P400!000.00 representin5 the principal aount plus H interest thereon per onth *ro 2" #anuar 1$$% until the sae

shall have een *ull paid! less the aount o* P120!000.00 representin5 interests alread paid de #esus P100!000.00 as attorneFs *ees plusappearance *ee o* P2!000.00 *or each da o* court appearance! and Cost o* this suit. 7n appeal and on 23 6oveer 2001! the Court o* +ppeals!

inso*ar as it pertains to Garcia! a**ired the decision o* the trial court su)ect to the odi*ication that the a9ard *or attorneFs *ees and cost o* suit 9as

deleted. +s to portion pertainn5 to de #esus! the Court set said portion aside and ordered the case a5ainst de #esus reanded to the court o* ori5in *or

purposes o* receivin5 e? parte LlaasF evidence a5ainst de #esus. 7n 23 #une 2002! the appellate court denied GarciaFs otion *or reconsideration.

Garcia *iled the petition *or revie9.

Issue: <hether a person! 9ho si5ned the proissor note erel as an accoodation part! 9as released as oli5or 9hen the aer a5reed to

e?tend the ter o* the oli5ation.

Held: 'he note in uestion is not a ne5otiale instruent. / its ters! the note 9as ade paale to a speci*ic person rather than to earer or to order

a reuisite *or ne5otiailit under +ct 20"1! the 6e5otiale Instruents La9 (6IL&. =ence! Garcia cannot avail hisel* o* the 6ILFs provisions on the

liailities and de*enses o* an accoodation part. /esides! a non-ne5otiale note is erel a siple contract in 9ritin5 and is evidence o* such

intan5ile ri5hts as a have een created the assent o* the parties. 'he proissor note is thus covered the 5eneral provisions o* the Civil Code

not the 6IL. Even 5rantin5 ar5uendo that the 6IL 9as applicale! still! Garcia 9ould e liale *or the proissor note. Ander +rticle 2$ o* +ct 20"1! an

accoodation part is liale *or the instruent to a holder *or value even i*! at the tie o* its tain5! the latter ne9 the *orer to e onl an

accoodation part. 'he relation et9een an accoodation part and the part accoodated is! in e**ect! one o* principal and suret the

accoodation part ein5 the suret. It is a settled rule that a suret is ound euall and asolutel 9ith the principal and is deeed an ori5inal

proisor and detor *ro the e5innin5. 'he liailit is iediate and direct.



Crisologo.7ose vs& Court o ppeals

BGR ,0$$! 1 Septeer 1$,$

Second 8ivision! Re5alado (#&D " concur! 1 too no part

Facts: In 1$,0! Ricardo S. Santos! #r. 9as the vice-president o* over Enterprises! Inc. in-char5e o* aretin5 and sales and the president o* the said

corporation 9as +tt. 7scar . /enares. 7n "0 +pril 1$,0! +tt. /enares! in accoodation o* his clients! the spouses #aie and Clarita 7n5! issued

Chec 0$"" dra9n a5ainst 'raders Roal /an! dated 14 #une 1$,0! in the aount o* P4!000.00 paale to Ernestina Crisolo5o-#ose. Since the

chec 9as under the account o* over Enterprises! Inc.! the sae 9as to e si5ned its president! +tt. 7scar . /enares! and the treasurer o* the

said corporation. =o9ever! since at that tie! the treasurer o* over Enterprises 9as not availale! +tt. /enares prevailed upon Santos to si5n the

a*oresaid chec as an alternate si5nator. Santos did si5n the chec. 'he chec 9as issued to Crisolo5o-#ose in consideration o* the 9aiver or uitclai

Crisolo5o-#ose over a certain propert 9hich the Governent Service Insurance Sste (GSIS& a5reed to sell to the clients o* +tt. /enares! the

spouses 7n5! 9ith the understandin5 that upon approval the GSIS o* the coproise a5reeent 9ith the spouses 7n5! the chec 9ill e encashed

accordin5l. =o9ever! since the coproise a5reeent 9as not approved 9ithin the e?pected period o* tie! the a*oresaid chec *or P4!000.00 9as

replaced +tt. /enares 9ith another 'raders Roal /an chec earin5 "%$2$$ dated 10 +u5ust 1$,0! in the sae aount o* P4!000.00! also

paale to Crisolo5o-#ose. 'his replaceent chec 9as also si5ned +tt. /enares and Santos <hen Crisolo5o-#ose deposited this replaceent

chec 9ith her account at ail Savin5s /an! aon /ranch! it 9as dishonored *or insu**icienc o* *unds. + suseuent redepositin5 o* the said chec

9as lie9ise dishonored the an *or the sae reason. =ence! Crisolo5o-#ose throu5h counsel 9as constrained to *ile a criinal coplaint *or

violation o* /atas Paansa 22 (/P22& 9ith the @ue;on Cit iscalFs 7**ice a5ainst +tt. /enares and Santos 'he investi5atin5 +ssistant Cit iscal!

+l*onso Llaas! accordin5l *iled an aended in*oration 9ith the court char5in5 oth /enares and Santos *or violation o* /P 22 (Criinal Case @-

14,3%& o* then Court o* irst Instance o* Ri;al! @ue;on Cit.

ean9hile! durin5 the preliinar investi5ation o* the criinal char5e a5ainst /enares and Santos! e*ore +ssistant Cit iscal Llaas! Santos tenderedcashierFs chec CC 13012 *or P4!000.00 dated 10 +pril 1$,1 to Crisolo5o-#ose! the coplainant in that criinal case. Crisolo5o-#ose re*used to

receive the cashierFs chec in paent o* the dishonored chec in the aount o* P4!000.00. =ence! Santos encashed the a*oresaid cashierFs chec

and suseuentl deposited said aount o* P4!000.00 9ith the Cler o* Court on 14 +u5ust 1$,1. Incidentall! the cashierFs chec adverted to aove

9as purchased +tt. /enares and 5iven to Santos to e applied in paent o* the dishonored chec. +*ter trial! the court a uo! holdin5 that it 9as

Jnot persuaded to elieve that consi5nation re*erred to in +rticle 123 o* the Civil Code is applicale to this case!J rendered )ud5ent disissin5 SantosF

coplaint *or consi5nation and Crisolo5o-#oseFs counterclai. 7n appeal and on , Septeer 1$,%! the appellate court reversed and set aside said

)ud5ent o* disissal and revived the coplaint *or consi5nation! directin5 the trial court to 5ive due course thereto. Crisolo5o-#ose *iled the petition.

Issue [1]: <hether Santos! as an accoodation part! is liale thereon under the 6e5otiale Instruents La9.

Held [1]: Section 2$ (Liailit o* accoodation part& o* the 6e5otiale Instruents La9 provides that J+n accoodation part is one 9ho has

si5ned the instruent as aer! dra9er! acceptor! or indorser! 9ithout receivin5 value there*or! and *or the purpose o* lendin5 his nae to soe other

person. Such a person is liale on the instruent to a holder *or value! not9ithstandin5 such holder! at the tie o* tain5 the instruent! ne9 hi to e

onl an accoodation part.J Conseuentl! to e considered an accoodation part! a person ust (1& e a part to the instruent! si5nin5 as

aer! dra9er! acceptor! or indorser! (2& not receive value there*or! and ("& si5n *or the purpose o* lendin5 his nae *or the credit o* soe other person.

/ased on the *ore5oin5 reuisites! it is not a valid de*ense that the accoodation part did not receive an valuale consideration 9hen he e?ecuted

the instruent. ro the standpoint o* contract la9! he di**ers *ro the ordinar concept o* a detor therein in the sense that he has not received an

valuale consideration *or the instruent he si5ns. 6evertheless! he is liale to a holder *or value as i* the contract 9as not *or accoodation! in

9hatever capacit such accoodation part si5ned the instruent! 9hether priaril or secondaril. 'hus! it has een held that in lendin5 his nae to

the accoodated part! the accoodation part is in e**ect a suret *or the latter.

Issue [2]: <hether over Enterprises! Inc. a e held liale on the accoodation instruent! i.e. the chec issued in *avor o* Crisolo5o-#ose.

Held [2]: 'he provision o* the 6e5otiale Instruents La9 9hich holds an accoodation part liale on the instruent to a holder *or value! althou5h

such holder at the tie o* tain5 the instruent ne9 hi to e onl an accoodation part! does not include nor appl to corporations 9hich areaccoodation parties. 'his is ecause the issue or indorseent o* ne5otiale paper a corporation 9ithout consideration and *or the accoodation

o* another is ultra vires. =ence! one 9ho has taen the instruent 9ith no9led5e o* the accoodation nature thereo* cannot recover a5ainst a

corporation 9here it is onl an accoodation part. I* the *or o* the instruent! or the nature o* the transaction! is such as to char5e the indorsee 9ith

no9led5e that the issue or indorseent o* the instruent the corporation is *or the accoodation o* another! he cannot recover a5ainst the

corporation thereon.

Issue [3]: <hether Santos! 9ho si5ned the chec in uestion in a representative capacit as vice-president o* over Enterprises Inc.! is liale thereon

under the 6e5otiale Instruents La9.

Held [3]: +n o**icer or a5ent o* a corporation shall have the po9er to e?ecute or indorse a ne5otiale paper in the nae o* the corporation *or the

accoodation o* a third person onl i* speci*icall authori;ed to do so. Corollaril! corporate o**icers! such as the president and vice-president! have no



po9er to e?ecute *or ere accoodation a ne5otiale instruent o* the corporation *or their individual dets or transactions arisin5 *ro or in relation

to atters in 9hich the corporation has no le5itiate concern. Since such accoodation paper cannot thus e en*orced a5ainst the corporation!

especiall since it is not involved in an aspect o* the corporate usiness or operations! the inescapale conclusion in la9 and in lo5ic is that the

si5natories thereo* shall e personall liale there*or! as 9ell as the conseuences arisin5 *ro their acts in connection there9ith.

Issue [4]: <hether the lac o* capacit o* the corporation asolved the si5natories o* the instruent.

Held [4]: 'he *act that *or lac o* capacit the corporation is not ound an accoodation paper does not there asolve! ut should render

personall liale! the si5natories o* said instruent 9here the *acts sho9 that the accoodation involved 9as *or their personal account! undertain5

or purpose and the creditor 9as a9are thereo*. Crisolo5o-#ose 9as evidentl char5ed 9ith the no9led5e that the chec 9as issued at the instance and*or the personal account o* +tt. /enares 9ho erel prevailed upon Santos to act as co-si5nator in accordance 9ith the arran5eent o* the

corporation 9ith its depositor an. 'hat it 9as a personal undertain5 o* said corporate o**icers 9as apparent to Crisolo5o-#ose reason o* her

personal involveent in the *inancial arran5eent and the *act that! 9hile it 9as the corporationFs chec 9hich 9as issued to her *or the aount

involved! she actuall had no transaction directl 9ith said corporation. 'here should e no le5al ostacle! there*ore! to Crisolo5o-#oseFs clais ein5

directed personall a5ainst +tt. /enares and Santos! president and vice-president! respectivel! o* over Enterprises! Inc.



Salas vs& Court o ppeals

BGR %3%,,! 22 #anuar 1$$0

'hird 8ivision! ernan (C#&D 4 concur

Facts: 7n 3 eruar 1$,0! #uanita Salas ou5ht a otor vehicle *ro the :iola5o otor Sales Corporation (:S& *or P,!1",.20 as evidenced a

proissor note. 'his note 9as suseuentl endorsed to ilinvest inance Leasin5 Corporation (ininvest& 9hich *inanced the purchase. Salas

de*aulted in her installents e5innin5 21 a 1$,0 alle5edl due to a discrepanc in the en5ine and chassis nuers o* the vehicle delivered to her

and those indicated in the sales invoice! certi*icate o* re5istration and deed o* chattel ort5a5e! 9hich *act she discovered 9hen the vehicle *i5ured in an

accident on $ a 1$,0. 'his *ailure to pa propted ilinvest to initiate Civil Case $1 *or a su o* one a5ainst Salas e*ore the Re5ional 'rial

Court o* San ernando! Papan5a. In its decision dated 10 Septeer 1$,2! the trial court rendered )ud5ent orderin5 Salas to pa Philinvest the su

o* P2,!414.40 9ith interest thereon at the rate o* 14H *ro 2 7ctoer 1$,0 until the said su is *ull paid and the *urther aount o* P1!000.00 as

attorneFs *ees. 'he court disissed SalasF counterclai. /oth Salas and ilinvest appealed the a*oresaid decision to the Court o* +ppeals. Iputin5

*raud! ad *aith and isrepresentation a5ainst :S *or havin5 delivered a di**erent vehicle to Salas! the latter praed *or a reversal o* the trial courtFs

decision so that she a e asolved *ro the oli5ation under the contract. 7n 2% 7ctoer 1$,3! the Court o* +ppeals rendered its decision! odi*in5

the trial courtFs decision. 'he appellate court ordered Salas to pa Philinvest the su o* P4!$0,."0 at 14H per annu *ro 2 7ctoer 1$,0 until *ull

paent! 9ith costs a5ainst Salas. SalasF otion *or reconsideration 9as denied. Salas *iled the petition *or revie9 on certiorari.

Issue: <hether the proissor note in uestion is a ne5otiale instruent 9hich 9ill ar copletel all the availale de*enses o* Salas a5ainst

Philinvest.

Held: SalasF liailit on the proissor note! the due e?ecution and 5enuineness o* 9hich she never denied under oath 9as! under the *actual ilieu! as

inevitale as it 9as clearl estalished. 'he records revealed that 9hat 9as involved 9as not a siple case o* assi5nent o* credit as Salas 9ould haveit appear! 9here the assi5nee erel steps into the shoes o*! is open to all de*enses availale a5ainst and can en*orce paent onl to the sae e?tent

as! the assi5nor-vendor. =erein! the asis o* ilinvestFs clai a5ainst Salas is a proissor note 9hich ears all the earars o* ne5otiailit. 'he

uestioned proissor note is a ne5otiale instruent! havin5 coplied 9ith the reuisites under the la9 as *ollo9sD Ba it is in 9ritin5 and si5ned the

aer #uanita Salas B it contains an unconditional proise to pa the aount o* P,!1",.20 Bc it is paale at a *i?ed or deterinale *uture tie

9hich is JP1!314.$ onthl *or "3 onths due and paale on the 21st da o* each onth startin5 arch 21! 1$,0 thru and inclusive o* e. 21! 1$,"J

Bd it is paale to :iola5o otor Sales Corporation! or order and as such! Be the dra9ee is naed or indicated 9ith certaint. It 9as ne5otiated

indorseent in 9ritin5 on the instruent itsel* paale to the 7rder o* ilinvest inance and Leasin5 Corporation and it is an indorseent o* the entire

instruent. Ander the circustances! there appears to e no uestion that ilinvest is a holder in due course! havin5 taen the instruent under the

*ollo9in5 conditionsD Ba it is coplete and re5ular upon its *ace B it ecae the holder thereo* e*ore it 9as overdue! and 9ithout notice that it had

previousl een dishonored Bc it too the sae in 5ood *aith and *or value and Bd 9hen it 9as ne5otiated to ilinvest! the latter had no notice o* an

in*irit in the instruent or de*ect in the title o* :S Corporation. +ccordin5l! ilinvest holds the instruent *ree *ro an de*ect o* title o* prior parties!

and *ree *ro de*enses availale to prior parties aon5 theselves! and a en*orce paent o* the instruent *or the *ull aount thereo*. 'his ein5

so! Salas cannot set up a5ainst ilinvest the de*ense o* nullit o* the contract o* sale et9een her and :S.



P$ilippine National +an% vs& Court o ppealsBGR 10%0,! 2 +pril 1$$3irst 8ivision! Kapunan (#&D 4 concur

Facts: + chec 9ith serial nuer %-"333-22"-"! dated % +u5ust 1$,1 in the aount o* P$%!30.00 9as issued the inistr o* Education Culture(no9 8epartent o* Education! Culture and Sports B8ECS& paale to . +ante aretin5. 'his chec 9as dra9n a5ainst Philippine 6ational /an(P6/&. 7n 11 +u5ust 1$,1! +ante aretin5! a client o* Capitol Cit 8evelopent /an (Capitol&! deposited the uestioned chec in i ts savin5saccount 9ith said an. In turn! Capitol deposited the sae in its account 9ith the Philippine /an o* Counications (P/Co& 9hich! in turn! sent thechec to P6/ *or clearin5. P6/ cleared the chec as 5ood and therea*ter! P/Co credited CapitolFs account *or the aount stated in the chec.=o9ever! on 1$ 7ctoer 1$,1! P6/ returned the chec to P/Co and deited P/CoFs account *or the aount covered the chec! the reason ein5that there 9as a Jaterial alterationJ o* the chec nuer. P/Co! as collectin5 a5ent o* Capitol! then proceeded to deit the latterFs account *or the

sae aount! and suseuentl! sent the chec ac to petitioner. P6/! ho9ever! returned the chec to P/Co. 7n the other hand! Capitol could not inturn! deit +ante aretin5Fs account since the latter had alread 9ithdra9n the aount o* the chec as o* 1 7ctoer 1$,1. Capitol sou5ht clari*ication*ro P/Co and deanded the re-creditin5 o* the aount. P/Co *ollo9ed suit reuestin5 an e?planation and re-creditin5 *ro P6/. Since thedeands o* Capitol 9ere not heeded! it *iled a civil suit 9ith the Re5ional trial Court o* anila a5ainst P/Co 9hich in turn! *iled a third-part coplainta5ainst P6/ *or reiurseentindenit 9ith respect to the clais o* Capitol. P6/! on its part! *iled a *ourth-part coplaint a5ainst +ante aretin5.7n " 7ctoer 1$,$ the Re5ional 'rial Court rendered its decision! orderin5 P/Co to re-credit or reiurse Capitol the aount o* P$%!30.00! plusinterest o* 12H thereto *ro 1$ 7ctoer 1$,1 until the aount is *ull paid P6/ to reiurse and indeni* P/Co *or 9hatever aount P/Co pasto Capitol . +ante aretin5 to reiurse and indeni* P6/ *or 9hatever aount P6/ pas to P/Co. 7n attorneFs *ees! the trial court orderedP/Co to pa Capitol attorneFs *ees in the aount o* P10!000.00 ut that P/Co is entitled to reiurseindeni* *ro P6/ and P6/ to e! in turnreiursed or indeni*ied . +ante aretin5 *or the sae aount. 'he court disissed the counterclais o* P/Co and P6/ 9ithoutpronounceent as to costs. +n appeal 9as interposed e*ore the Court o* +ppeals 9hich rendered its decision on 2$ +pril 1$$2! 9hich odi*ied theappealed )ud5ent e?eptin5 P/Co *ro liailit to Capitol *or attorneFs *ees and orderin5 P6/ to honor the chec *or P$%!30.00! 9ith interestas declared the trial court! and pa Capitol attorneFs *ees o* P10!000.00. +*ter the chec shall have een honored P6/! the court ordered P/Coto re-credit CapitolFs account 9ith it the aount 9ithout pronounceent as to costs. + otion *or reconsideration o* the decision 9as denied theappellate Court in its resolution dated 13 Septeer 1$$2 *or lac o* erit. P6/ *iled the petition *or revie9 on certiorari.

Issue: <hether the chan5e in the serial nuer o* the chec a e considered a chan5e that alters the e**ect o* the instruent! and thus is a aterialalteration.

Held: 'he present case is uniue in the sense that 9hat 9as altered is the serial nuer o* the chec in uestion! an ite 9hich! i t can readil eoserved! is not an essential reuisite *or ne5otiailit under Section 1 o* the 6e5otiale Instruents La9. 'he a*oreentioned alteration did not chan5ethe relations et9een the parties. 'he nae o* the dra9er and the dra9ee 9ere not altered. 'he intended paee 9as the sae. 'he su o* one dueto the paee reained the sae. 'he checFs serial nuer is not the sole indication o* its ori5in. 'he nae o* the 5overnent a5enc 9hich issued thesu)ect chec 9as proinentl printed therein. 'he checFs issuer 9as there*ore insu**icientl identi*ied! renderin5 the re*erral to the serial nuerredundant and inconseuential. I* the purpose o* the serial nuer is erel to identi* the issuin5 5overnent o**ice or a5enc! its alteration had noaterial e**ect 9hatsoever on the inte5rit o* the chec. 'he identit o* the issuin5 5overnent o**ice or a5enc 9as not chan5ed there and theaount o* the chec 9as not char5ed a5ainst the account o* the another 5overnent o**ice or a5enc 9hich had no liailit under the chec. 'he o9nerissuer o* the chec is oldl and clearl printed on its *ace! second line *ro the topD JI6IS'R> 7 E8AC+'I76 +68 CAL'ARE!J and elo9 the naeo* the paee are the ruer-staped 9ordsD Jinistr o* Educ. Culture.J 'hese 9ords are not alle5ed to have een *alsel or *raudulentl intercalatedinto the chec. 'he o9nership o* the chec is estalished 9ithout the necessit o* recourse to the serial nuer. 6either is there an proo* that theaount o* the chec 9as erroneousl char5ed a5ainst the account o* a 5overnent o**ice or a5enc other than the inistr o* Education and Culture.=ence! the alteration in the nuer o* the chec did not a**ect or chan5e the liailit o* the inistr o* Education and Culture under the chec and!

there*ore! is iaterial. 'he 5enuineness o* the aount and the si5natures therein o* then 8eput inister o* Education =erene5ildo C. 8ulao ando* the resident +uditor! Penoio C. +lvare; are not challen5ed. 6either is the authenticit o* the di**erent codes appearin5 therein uestioned. P6/! thuscannot re*use to accept the chec in uestion on the 5round that the serial nuer 9as altered! the sae ein5 an iaterial or innocent one.



ssociated +an% vs& Court o ppealsBGR 10%",2! "1 #anuar 1$$3 also *hilippine "ational .an vs( #ourt of Appeals [ 1712: Second 8ivision! Roero (#&D " concur

Facts: 'he Province o* 'arlac aintains a current account 9ith the Philippine 6ational /an (P6/& 'arlac /ranch 9here the provincial *unds aredeposited. Checs issued the Province are si5ned the Provincial 'reasurer and countersi5ned the Provincial +uditor or the Secretar o* theSan55unian5 /aan. + portion o* the *unds o* the province is allocated to the Concepcion Eer5enc =ospital. 'he allotent checs *or said5overnent hospital are dra9n to the order o* JConcepcion Eer5enc =ospital! Concepcion! 'arlacJ or J'he Chie*! Concepcion Eer5enc =ospital!Concepcion! 'arlac.J 'he checs are released the 7**ice o* the Provincial 'reasurer and received *or the hospital its adinistrative o**icer andcashier. In #anuar 1$,1! the oos o* account o* the Provincial 'reasurer 9ere post-audited the Provincial +uditor. It 9as then discovered that thehospital did not receive several allotent checs dra9n the Province. 7n 1$ eruar 1$,1! the Provincial 'reasurer reuested the ana5er o* the

P6/ to return all o* its cleared checs 9hich 9ere issued *ro 1$%% to 1$,0 in order to veri* the re5ularit o* their encashent. +*ter the checs 9eree?ained! the Provincial 'reasurer learned that "0 checs aountin5 to P20"!"00.00 9ere encashed one austo Pan5ilinan! 9ith the +ssociated/an actin5 as collectin5 an. It turned out that austo Pan5ilinan! 9ho 9as the adinistrative o**icer and cashier o* paee hospital until his retireenton 2, eruar 1$%,! collected the checs *ro the o**ice o* the Provincial 'reasurer. =e claied to e assistin5 or helpin5 the hospital *ollo9 up therelease o* the checs and had o**icial receipts. Pan5ilinan sou5ht to encash the *irst chec 9ith +ssociated /an. =o9ever! the ana5er o* +ssociated/an re*used and su55ested that Pan5ilinan deposit the chec in his personal savin5s account 9ith the sae an. Pan5ilinan 9as ale to 9ithdra9 theone 9hen the chec 9as cleared and paid the dra9ee an! P6/. +*ter *or5in5 the si5nature o* 8r. +dena Canlas 9ho 9as chie* o* the paeehospital! Pan5ilinan *ollo9ed the sae procedure *or the second chec! in the aount o* P!000.00 and dated 20 +pril 1$%,! as 9ell as *or 2, otherchecs o* various aounts and on various dates. 'he last chec ne5otiated Pan5ilinan 9as *or P,!000.00 and dated 10 eruar 1$,1. +ll thechecs ore the stap o* +ssociated /an 9hich reads J+ll prior endorseents 5uaranteed +ssociated /an.J #esus 8avid! the ana5er o* +ssociated/an! alle5ed that Pan5ilinan ade it appear that the checs 9ere paid to hi *or certain pro)ects 9ith the hospital. =e did not *ind as irre5ular the *actthat the checs 9ere not paale to Pan5ilinan ut to the Concepcion Eer5enc =ospital. <hile he aditted that his 9i*e and Pan5ilinanFs 9i*e are *irstcousins! the ana5er denied havin5 5iven Pan5ilinan pre*erential treatent on this account. 7n 23 eruar 1$,1! the Provincial 'reasurer 9rote theana5er o* the P6/ seein5 the restoration o* the various aounts deited *ro the current account o* the Province. In turn! the P6/ ana5erdeanded reiurseent *ro the +ssociated /an on 1 a 1$,1. +s oth ans resisted paent! the Province rou5ht suit a5ainst P6/ 9hich! inturn! ipleaded +ssociated /an as third-part de*endant. 'he latter then *iled a *ourth-part coplaint a5ainst +dena Canlas and austo Pan5ilinan. +*ter trial on the erits! the lo9er court rendered its decision on 21 arch 1$,,! on the asic coplaint! in *avor o* the Province and a5ainst P6/!orderin5 the latter to pa to the *orer! the su o* P20"!"00.00 9ith le5al interest thereon *ro 20 arch 1$,1 until *ull paid on the third-partcoplaint! in *avor o* P6/ and a5ainst +ssociated /an orderin5 the latter to reiurse to the *orer the aount o* P20"!"00.00 9ith le5al intereststhereon *ro 20 arch 1$,1 until *ull paid on the *ourth-part coplaint! the sae 9as ordered disissed *or lac o* cause o* action as a5ainst +denaCanlas and lac o* )urisdiction over the person o* austo Pan5ilinan as a5ainst the latter. 'he court also disissed the counterclais on the coplaint!third-part coplaint and *ourth-part coplaint! *or lac o* erit. P6/ and +ssociated /an appealed to the Court o* +ppeals. 'he appellate courta**ired the trial courtFs decision in toto on "0 Septeer 1$$2. =ence the consolidated petitions 9hich see a reversal o* the appellate courtFs decision.

Issue: <hether P6/ 9as at *ault and should solel ear the loss ecause it cleared and paid the *or5ed checs.

Held: 'he present case concerns checs paale to the order o* Concepcion Eer5enc =ospital or its Chie*. 'he 9ere properl issued and ear the5enuine si5natures o* the dra9er! the Province o* 'arlac. 'he in*irit in the uestioned checs lies in the paeeFs (Concepcion Eer5enc =ospital&indorseents 9hich are *or5eries. +t the tie o* their indorseent! the checs 9ere order instruents. Checs havin5 *or5ed indorseents should edi**erentiated *ro *or5ed checs or checs earin5 the *or5ed si5nature o* the dra9er. <here the instruent is paale to order at the tie o* the*or5er! such as the checs in the case! the si5nature o* its ri5ht*ul holder (here! the paee hospital& is essential to trans*er title to the sae instruent.<hen the holderFs indorseent is *or5ed! all parties prior to the *or5er a raise the real de*ense o* *or5er a5ainst all parties suseuent thereto. +n

indorser o* an order instruent 9arrants Jthat the instruent is 5enuine and in all respects 9hat it purports to e that he has a 5ood title to it that allprior parties had capacit to contract and that the instruent is at the tie o* his indorseent valid and susistin5.J =e cannot interpose the de*ensethat si5natures prior to hi are *or5ed. + collectin5 an 9here a chec is deposited and 9hich indorses the chec upon presentent 9ith the dra9eean! is such an indorser. So even i* the indorseent on the chec deposited the ansF client is *or5ed! the collectin5 an is ound his9arranties as an indorser and cannot set up the de*ense o* *or5er as a5ainst the dra9ee an. 'he an on 9hich a chec is dra9n! no9n as thedra9ee an! is under strict liailit to pa the chec to the order o* the paee. 'he dra9ee an is not siilarl situated as the collectin5 an ecausethe *orer aes no 9arrant as to the 5enuineness o* an indorseent. 'he dra9ee anFs dut is ut to veri* the 5enuineness o* the dra9erFssi5nature and not o* the indorseent ecause the dra9er is its client. oreover! the collectin5 an is ade liale ecause it is priv to the depositor9ho ne5otiated the chec. 'he an no9s hi! his address and histor ecause he is a client. It has taen a ris on his deposit. 'he an is also in aetter position to detect *or5er! *raud or irre5ularit in the indorseent. =ence! the dra9ee an can recover the aount paid on the chec earin5 a*or5ed indorseent *ro the collectin5 an. =o9ever! a dra9ee an has the dut to proptl in*or the presentor o* the *or5er upon discover. I* thedra9ee an delas in in*orin5 the presentor o* the *or5er! there deprivin5 said presentor o* the ri5ht to recover *ro the *or5er! the *orer isdeeed ne5li5ent and can no lon5er recover *ro the presentor. =erein! P6/! the dra9ee an! cannot deit the current account o* the Province o*'arlac ecause it paid checs 9hich ore *or5ed indorseents. =o9ever! i* the Province o* 'arlac as dra9er 9as ne5li5ent to the point o* sustantiallcontriutin5 to the loss! then the dra9ee an P6/ can char5e its account. I* oth dra9ee an-P6/ and dra9er-Province o* 'arlac 9ere ne5li5ent! theloss should e properl apportioned et9een the. 'he loss incurred dra9ee an-P6/ can e passed on to the collectin5 an-+ssociated /an9hich presented and indorsed the checs to it. +ssociated /an can! in turn! hold the *or5er! austo Pan5ilinan! liale. I* P6/ ne5li5entl delaed in

in*orin5 +ssociated /an o* the *or5er! thus deprivin5 the latter o* the opportunit to recover *ro the *or5er! it *or*eits its ri5ht to reiurseent and9ill e ade to ear the loss. 'he Court *inds that the Province o* 'arlac 9as euall ne5li5ent and should! there*ore! share the urden o* loss *ro thechecs earin5 a *or5ed indorseent. 'he Province o* 'arlac peritted austo Pan5ilinan to collect the checs 9hen the latter! havin5 alread retired*ro 5overnent service! 9as no lon5er connected 9ith the hospital. <ith the e?ception o* the *irst chec (dated 1% #anuar 1$%,&! all the checs 9ereissued and released a*ter Pan5ilinanFs retireent on 2, eruar 1$%,. +*ter nearl three ears! the 'reasurerFs o**ice 9as still releasin5 the checs tothe retired cashier. In addition! soe o* the aid allotent checs 9ere released to Pan5ilinan and the others to Eli;aeth #uco! the ne9 cashier. 'he *actthat there 9ere no9 t9o persons collectin5 the checs *or the hospital is an unistaale si5n o* an irre5ularit 9hich should have alerted eploees inthe 'reasurerFs o**ice o* the *raud ein5 coitted. 'here is also evidence indicatin5 that the provincial eploees 9ere a9are o* Pan5ilinanFsretireent and conseuent dissociation *ro the hospital. =ence! due to the ne5li5ence o* the Province o* 'arlac in releasin5 the checs to anunauthori;ed person (austo Pan5ilinan&! in allo9in5 the retired hospital cashier to receive the checs *or the paee hospital *or a period close to threeears and in not properl ascertainin5 9h the retired hospital cashier 9as collectin5 checs *or the paee hospital in addition to the hospitalFs realcashier! the Province contriuted to the loss aountin5 to P20"!"00.00 and shall e liale to the P6/ *or 0H thereo*. In e**ect! the Province o* 'arlaccan onl recover 0H o* P20"!"00.00 *ro P6/. 'he collectin5 an! +ssociated /an! shall e liale to P6/ *or 0H o* P20"!"00.00. It is liale on its9arranties as indorser o* the checs 9hich 9ere deposited austo Pan5ilinan! havin5 5uaranteed the 5enuineness o* all prior indorseents! includin5that o* the chie* o* the paee hospital! 8r. +dena Canlas. +ssociated /an 9as also reiss in its dut to ascertain the 5enuineness o* the paeeFsindorseent.



'$e 1reat #astern Lie Insurance Co& vs& !ong%ong , S$ang$ai +an%ing Corp&BGR 1,3%! 2" +u5ust 1$22En /anc! #ohns (#&D , concur

Facts: 'he Great Eastern Li*e Insurance Co. (GELIC& is an insurance corporation! 9hile =on5on5 Shan5hai /anin5 Corp. (=S/C& and Philippine6ational /an (P6/& are anin5 corporations! and each is dul licensed to do its respective usiness in the Philippine Islands. 7n " a 1$20! GELICdre9 its chec *or P2!000 on =S/C 9ith 9ho it had an account! paale to the order o* La;aro elicor. E.. aasi *raudulentl otained possessiono* the chec! *or5ed elicorFs si5nature! as an endorser! and then personall endorsed and presented it to P6/ 9here the aount o* the chec 9asplaced to his credit. +*ter havin5 paid the chec! and on the ne?t da! P6/ endorsed the chec to =S/C! 9hich paid it! and char5ed the aount o* thechec to the account o* GELIC. In the ordinar course o* usiness! =S/C rendered a an stateent to GELIC sho9in5 that the aount o* the chec9as char5ed to its account! and no o)ection 9as then ade to the stateent. +out 4 onths a*ter the chec 9as char5ed to the account o* GELIC! it

developed that elicor! to 9ho the chec 9as ade paale! had never received it! and that his si5nature! as an endorser! 9as *or5ed aasi!9ho presented and deposited it to his private account in P6/. <ith this no9led5e! GELIC proptl ade a deand upon =S/C that it should e 5ivencredit *or the aount o* the *or5ed chec! 9hich the an re*used to do! and GELIC coenced the action to recover the P2!000 9hich 9as paid on the*or5ed chec. 7n the petition o* =S/C! P6/ 9as ade de*endant. =S/C denies an liailit! ut pras that! i* a )ud5ent should e rendered a5ainst it!in turn! it should have lie )ud5ent a5ainst P6/ 9hich denies all liailit to either part. Apon the issued ein5 )oined! a trial 9as had and )ud5ent 9asrendered a5ainst GELIC and in *avor =S/C and P6/ *ro 9hich GELIC appealed.

Issue: <hether GELIC can recover inasuch as elicors indorseent 9as *or5ed.

Held: GELICFs chec 9as dra9n on =S/C paale to the order o* elicor. In other 9ords! GELIC authori;ed and directed =S/C to pa elicor! or hisorder! P2!000. It did not authori;e or direct the an to pa the chec to an other person than elicor! or his order! and the testion is undisputed thatelicor never did part 9ith his title or endorse the chec! and never received an o* its proceeds. 6either is GELIC estopped or ound the anstateent! 9hich 9as ade to it =S/C. 'his is not a case 9here GELICFs o9n si5nature 9as *or5ed to one o* its checs. 'he *or5er 9as that o*elicor! 9ho 9as the paee o* the chec! and the le5al presuption is that the an 9ould not honor the chec 9ithout the 5enuine endorseent o*elicor. In other 9ords! 9hen GELIC received its an stateent! it had a ri5ht to assue that elicor had personall endorsed the chec! and that!other9ise! the an 9ould not have paid it. Section 2" o* the 6e5otiale Instruents La9 is suare in point. 'he one 9as on deposit in =S/C! and ithad no le5al ri5ht to pa i t out to anone e?cept GELIC or its order. =ere! GELIC ordered =S/C to pa the P2!000 to elicor! and the one 9asactuall paid to aasi and 9as never paid to elicor! and he never personall endorsed the chec! or authori;ed an one to endorse it *or hi! and thealle5ed endorseent 9as a *or5er. =ence! upon the undisputed *acts! it ust *ollo9 that =S/C has no de*ense to the present action. It is aditted thatP6/ cashed the chec upon a *or5ed si5nature! and placed the one to the credit o* aasi! 9ho 9as the *or5er. 'hat P6/ then endorsed the checand *or9arded it to =S/C 9ho it 9as paid. P6/ had no license or authorit to pa the one to aasi or anone else upon a *or5ed si5nature. It9as its le5al dut to no9 that elicorFs endorseent 9as 5enuine e*ore cashin5 the chec. Its reed is a5ainst aasi to 9ho it paid the one.'he Supree Court reversed the lo9er courtFs )ud5ent! and entered another in *avor o* GELIC and a5ainst =S/C *or P2!000! 9ith interest thereon*ro , 6oveer 1$20! at the rate o* 3H per annu! and the costs o* the action! and a correspondin5 )ud5ent 9ill e entered in *avor o* =S/C a5ainsP6/ *or the sae aount! to5ether 9ith the aount o* its costs in the action.



Republic +an% vs& #bradaBGR L-40%$3! "1 #ul 1$%irst 8ivision! artin (#&D 4 concur

Facts: 7n or aout 2% eruar 1$3"! auricia '. Erada! encashed /ac Pa Chec 0,030 dated 1 #anuar 1$3" *or P1!243.0, at the ain o**ice othe Repulic /an at Escolta! anila. 'he chec 9as issued the /ureau o* 'reasur. Repulic /an 9as later advised the said ureau that thealle5ed indorseent on the reverse side o* the a*oresaid chec the paee! Jartin Loren;oJ 9as a *or5er since the latter had alle5edl died as o* 14#ul 1$2. Repulic /an 9as then reuested the /ureau o* 'reasur to re*und the aount o* P1!243.0,. 'o recover 9hat it had re*unded to the/ureau o* 'reasur! Repulic /an ade veral and *oral deands upon Erada to account *or the su o* P1!243.0,! ut Erada re*used to do so. SoRepulic /an sued Erada e*ore the Cit Court o* anila. 7n 11 #ul 1$33! Erada *iled her ans9er denin5 the aterial alle5ations o* the coplaintand as a**irative de*enses alle5ed that she 9as a holder in due course o* the chec in uestion! or at the ver least! has acuired her ri5hts *ro a

holder in due course and there*ore entitled to the proceeds thereo*. She also alle5ed that the Repulic /an has no cause o* action a5ainst her that it isin estoppel! or so ne5li5ent as not to e entitled to recover anthin5 *ro her. 7n the sae date! Erada *iled a 'hird-Part coplaint a5ainst +delaida8oin5ue; 9ho! in turn! *iled on 14 Septeer 1$33 a ourth-Part coplaint a5ainst #ustina 'inio. 7n 21 arch 1$3%! the Cit Court o* anilarendered )ud5ent *or the Repulic /an a5ainst Erada *or Erada a5ainst 8oin5ue;! and *or 8oin5ue; a5ainst 'inio. ro the )ud5ent o* theCit Court! Erada too an appeal to the Court o* irst Instance o* anila! 9here a partial stipulation o* *acts 9as suitted. /ased on the stipulation o**acts and the docuentar evidence presented! the trial court rendered a decision! orderin5 Erada to pa Repulic /an the aount o* P1!243.0,! 9ithinterest as the le5al rate *ro the *ilin5 o* the coplaint on 13 #une 1$33! until *ull paid! plus the costs in oth instances a5ainst Erada reservin5therein the ri5ht o* Erada to *i le 9hatever clai she a have a5ainst 8oin5ue; in connection 9ith the case! as 9ell as the ri5ht o* the estate o*8oin5ue; to *ile the *ourth-part coplaint a5ainst 'inio. Erada appealed.

Issue [1]: <hether the e?istence o* one *or5ed si5nature in a ne5otiale instruent 9ill render void all the other ne5otiations o* the chec 9ith respect tothe other parties 9hose si5nature are 5enuine.

Held [1]: In the case o* /ea vs. arrel! 1" Io9a 3%0! 11" 6.<. $0! 9here a chec has several indorseents on it! it 9as held that it is onl thene5otiation ased on the *or5ed or unauthori;ed si5nature 9hich is inoperative. +pplin5 this principle to the case! it can e sa*el concluded that it isonl the ne5otiation predicated on the *or5ed indorseent that should e declared inoperative. 'his eans that the ne5otiation o* the chec in uestion*ro artin Loren;o! the ori5inal paee! to Raon R. Loren;o! the second indorser! should e declared o* no e**ect! ut the ne5otiation o* the a*oresaidchec *ro Raon R. Loren;o to +delaida 8oin5ue;! the third indorser! and *ro +delaida 8oin5ue; to Erada 9ho did not no9 o* the *or5er!should e considered valid and en*orceale! arrin5 an clai o* *or5er.

Issue [2]: <hether the dra9ee an recover *ro the one 9ho encashed the chec i*! a*ter the dra9ee an has paid the aount o* the chec to theholder thereo*! it 9as discovered that the si5nature o* the paee 9as *or5ed.

Held [2]: In the case o* State v. /road9a ut. /an! 2,2 S.<. 1$3! 1$%! it 9as held that the dra9ee o* a chec can recover *ro the holder the onepaid to hi on a *or5ed instruent. It is not supposed to e its dut to ascertain 9hether the si5natures o* the paee or indorsers are 5enuine or not.'his is ecause the indorser is supposed to 9arrant to the dra9ee that the si5natures o* the paee and previous indorsers are 5enuine! 9arrant note?tendin5 onl to holders in due course. 7ne 9ho purchases a chec or dra*t is ound to satis* hisel* that the paper is 5enuine and that indorsin5 itor presentin5 it *or paent or puttin5 it into circulation e*ore presentation he ipliedl asserts that he has per*ored his dut and the dra9ee 9ho haspaid the *or5ed chec! 9ithout actual ne5li5ence on his part! a recover the one paid *ro such ne5li5ent purchasers. In such cases the recover isperitted ecause althou5h the dra9ee 9as in a 9a ne5li5ent in *ailin5 to detect the *or5er! et i* the encasher o* the chec had per*ored his dut!the *or5er 9ould in all proailit! have een detected and the *raud de*eated. 'he reason *or allo9in5 the dra9ee an to recover *ro the encasher is

that JEver one 9ith even the least e?perience in usiness no9s that no usiness an 9ould accept a chec in e?chan5e *or one or 5oods unlesshe is satis*ied that the chec is 5enuine. =e accepts it onl ecause he has proo* that it is 5enuine! or ecause he has su**icient con*idence in thehonest and *inancial responsiilit o* the person 9ho vouches *or it. I* he is deceived he has su**ered a loss o* his cash or 5oods throu5h his o9nistae. =is o9n credulit or reclessness! or isplaced con*idence 9as the sole cause o* the loss. <h should he e peritted to shi*t the loss due tohis o9n *ault in assuin5 the ris! upon the dra9ee! sipl ecause o* the accidental circustance that the dra9ee a*ter9ards *ailed to detect the*or5er 9hen the chec 9as presentedUJ =erein! Erada! upon receivin5 the chec in uestion *ro +delaida 8oin5ue;! 9as dut-ound to ascertain9hether the chec in uestion 9as 5enuine e*ore presentin5 it to Repulic /an *or paent. =er *ailure to do so aes her liale *or the loss and theRepulic /an a recover *ro her the one she received *or the chec. =ad she per*ored the dut o* ascertainin5 the 5enuineness o* the chec!in all proailit the *or5er 9ould have een detected and the *raud de*eated. +s held in the Great Eastern Li*e Insurance Copan case! J<here achec is dra9n paale to the order o* one person and is presented to a an another and purports upon its *ace to have een dul indorsed thepaee o* the chec! it is the dut o* the an to no9 that the chec 9as dul indorsed the ori5inal paee! and 9here the /an pas the aount o* thechec to a third person! 9ho has *or5ed the si5nature o* the paee! the loss *alls upon the an 9ho cashed the chec! and its onl reed is a5ainstthe person to 9ho it paid the one.J =ence! the Repulic /an should su**er the loss 9hen it paid the aount o* the chec in uestion to Erada! utit has the reed to recover *ro the latter the aount it paid to her. +lthou5h Erada to 9ho the Repulic /an paid the chec 9as not proven to ethe author o* the supposed *or5er! et as last indorser o* the chec! she has 9arranted that she has 5ood title to it even i* in *act she did not have itecause the paee o* the chec 9as alread dead 11 ears e*ore the chec 9as issued. 'he *act that iediatel a*ter receivin5 the cash proceeds o*the chec in uestion in the aount o* P1!243.0, *ro the Repulic /an! Erada iediatel turned over said aount to 8oin5ue; 9ho in turn

handed the aount to 'inio on the sae date 9ould not e?ept her *ro liailit ecause doin5 so! she acted as an accoodation part in thechec *or 9hich she is also liale under Section 2$ o* the 6e5otiale Instruents La9.



P$ilippine National +an% vs& =uimpoBGR L-"1$4! 14 arch 1$,,irst 8ivision! Gancaco (#&D 4 concur

Facts: 7n " #ul 1$%"! rancisco S. Go;on II! 9ho 9as a depositor o* the Caloocan Cit /ranch o* the Philippine 6ational /an (P6/&! 9ent to the anin his car accopanied his *riend Ernesto Santos 9ho he le*t in the car 9hile he transacted usiness in the an. <hen Santos sa9 that Go;on le*this chec oo he too a chec there*ro! *illed it up *or the aount o* P!000.00! *or5ed the si5nature o* Go;on! and therea*ter he encashed the checin the an on the sae da. 'he account o* Go;on 9as deited the said aount. Apon receipt o* the stateent o* account *ro the an! Go;on asedthat the said aount o* P!000.00 should e returned to his account as his si5nature on the chec 9as *or5ed ut the an re*used. Apon Go;onscoplaint on 1 eruar 1$%4 Ernesto Santos 9as apprehended the police authorities and upon investi5ation he aditted that he stole the chec o*Go;on! *or5ed his si5nature and encashed the sae 9ith the /an. Go;on *i led the coplaint *or recover o* the aount o* P!000.00! plus interest!

daa5es! attorneFs *ees and costs a5ainst the an in the CI Ri;al (/ranch IC! =on. Roulo S. @uipo presidin5&. +*ter the issues 9ere )oined andthe trial on the erits ensued! a decision 9as rendered on 4 eruar 1$,0! the Court! orderin5 the an to return the aount o* P!000 9hich it hadunla9*ull 9ithheld! 9ith interest at the le5al rate *ro 22 Septeer 1$%2 until the aount is *ull delivered. 'he an 9as *urther condened to paGo;on the su o* P2!000.00 as attorneFs *ees and to pa the costs o* the suit. 'he an *iled a petition *or revie9 on certiorari.

Issue: <hether the act o* Go;on in puttin5 his checoo containin5 the *or5ed chec into the hands o* Santos 9as the pro?iate cause o* the loss!precludin5 hi *ro settin5 up the de*ense o* *or5er.

Held: 'he prie dut o* a an is to ascertain the 5enuineness o* the si5nature o* the dra9er or the depositor on the chec ein5 encashed. It ise?pected to use reasonale usiness prudence in acceptin5 and cashin5 a chec presented to it. + an is ound to no9 the si5natures o* itscustoers and i* it pas a *or5ed chec! it ust e considered as ain5 the paent out o* its o9n *unds! and cannot ordinaril chan5e the aount sopaid to the account o* the depositor 9hose nae 9as *or5ed. 'his rule is asolutel necessar to the circulation o* dra*ts and checs! and is ased uponthe presued ne5li5ence o* the dra9ee in *ailin5 to eet its oli5ation to no9 the si5nature o* its correspondent. 'here is nothin5 ineuitale in such arule. I* the paper coes to the dra9ee in the re5ular course o* usiness! and he! havin5 the opportunit ascertainin5 its character! pronounces it to evalid and pas it! it is not onl a uestion o* paent under istae! ut paent in ne5lect o* dut 9hich the coercial la9 places upon hi! and theresult o* his ne5li5ence ust rest upon hi. 'he act o* Go;on in leavin5 his checoo in the car 9hile he 9ent out *or a short 9hile can not econsidered ne5li5ence su**icient to e?cuse P6/ *ro its o9n ne5li5ence. It should e orne in ind that 9hen Go;on le*t his car! Santos! a lon5 tieclassate and *riend reained in the sae. Go;on could not have een e?pected to no9 that the said Santos 9ould reove a chec *ro hischecoo. Go;on had trust in his classate and *riend. =e had no reason to suspect that the latter 9ould reach that trust.



P$ilippine Commercial International +an% (PIC+> ormerly Insular +an% o sia and merica) vs& Court o ppealsBGR 12141"! 2$ #anuar 2001 also Eord *hilippines vs( #ourt of Appeals [ 12179:$ and Eord *hilippines v(s #itiban "(A( [ 12%: Second 8ivisionD @uisuin5 (#&D 4 concur

Facts: BGRs 12141" and 1214%$ 7n 1$ 7ctoer 1$%%! ord Philippines dre9 and issued its Citian Chec S6-04,3% -- a crossed chec in that! on its*ace 9ere t9o parallel lines and 9ritten in et9een said lines 9as the phrase JPaeeFs +ccount 7nlJ -- in the aount o* P4!%43!114.41! in *avor o* theCoissioner o* Internal Revenue as paent o* ordFs percenta5e or anu*acturerFs sales ta?es *or the third uarter o* 1$%%. 'he a*oresaid chec9as deposited 9ith the Insular /an o* +sia and +erica (I/++& and 9as suseuentl cleared at the Central /an. Apon presentent 9ith Citian6.+.! the proceeds o* the chec 9as paid to I/++ as collectin5 or depositor an. 'he proceeds o* the sae Citian chec o* ord 9as never paid toor received the paee thereo*! the Coissioner o* Internal Revenue. 'he aount o* P4!%43!114.41 9as deited in ordFs account 9ith Citian andthe chec 9as returned to ord. Apon veri*ication! ord discovered that its Citian Chec S6-04,3% in the aount o* P4!%43!114.41 9as not paid to the

Coissioner o* Internal Revenue. In separate letters dated 23 7ctoer 1$%$! addressed to Citian and I/++! ord noti*ied the latter that in case it 9ile re-assessed the /IR *or the paent o* the ta?es covered the said checs! then ord shall hold Citian and I/++ liale *or reiurseent o*the *ace value o* the sae. I/++ and Citian denied liailit and re*used to pa. In a letter dated 2, eruar 1$,0 the +ctin5 Coissioner o*Internal Revenue addressed to ord o**iciall in*orin5 the latter! aon5 others! that its chec in the aount o* P4!%43!114.41 9as not paid to the5overnent or its authori;ed a5ent and instead encashed unauthori;ed persons! hence! ord has to pa the said aount 9ithin 1 das *ro receipto* the letter. Apon advice o* ordFs la9ers! ord! on 11 arch 1$,2! paid to the /IR the aount o* P4!%43!114.41! representin5 paent o* itspercenta5e ta? *or the third uarter o* 1$%%. Said second paent o* ord in the aount o* P4!%43!114.41 9as dul received the /IR. +s aconseuence o* CitianFs re*usal to reiurse ord o* the paent it had ade *or the second tie to the /IR o* its percenta5e ta?es! ord *i led on 20#anuar 1$," its ori5inal coplaint e*ore the court. 7n 24 8eceer 1$,! I/++ 9as er5ed 9ith the Philippine Coercial International /an (PCI/9ith the latter as the survivin5 entit. It 9as learned durin5 an investi5ation the 6ational /ureau o* Investi5ation (6/I& that Citian Chec S6-04,3%9as recalled Godo*redo Rivera! the General Led5er +ccountant o* ord. =e purportedl needed to hold ac the chec ecause there 9as an error inthe coputation o* the ta? due to /IR. <ith RiveraFs instruction! PCI/ replaced the chec 9ith t9o o* its o9n ana5erFs Checs (Cs&. +lle5edeers o* a sndicate later deposited the t9o Cs 9ith the Paci*ic /anin5 Corporation (P/C&. ord! 9ith leave o* court! *iled a third-part coplainte*ore the trial court ipleadin5 P/C and Rivera! as third part de*endants. /ut the court disissed the coplaint a5ainst P/C *or lac o* cause o*action. 'he court lie9ise disissed the third-part coplaint a5ainst Rivera ecause he could not e served 9ith suons as the 6/I declared hi asa J*u5itive *ro )usticeJ. 7n 1 #une 1$,$! the trial court rendered its decision! orderin5 Citian and I/++PCI/ to solidaril pa ord the aount o*P4!%43!114.41 representin5 the *ace value o* ordFs Citian Chec S6-04,3%! 9ith interest thereon at the le5al rate startin5 20 #anuar 1$,"! the date9hen the ori5inal coplaint 9as *iled until the aount is *ull paid! plus costs orderin5 I/++PCI/ to reiurse Citian *or 9hatever aount the latterhas paid or a pa to ord 9ith costs a5ainst Citian and I/++. 6ot satis*ied 9ith the said decision! Citian and PCI/! elevated their respectivepetitions *or revie9 on certiorari to the Court o* +ppeals. 7n 2% arch 1$$! the appellate court issued its )ud5ent a**irin5 the trial courtFs decision9ith odi*ications disissin5 the coplaint in Civil Case 4$2,% inso*ar as Citian 9as concerned orderin5 I/++PCI/ to pa ord the aount o*P4!%43!114.41 representin5 the *ace value o* ordFs Citian Chec S6-04,3%! 9ith interest thereon at the le5al rate startin5 20 #anuar 1$,". the date9hen the ori5inal coplaint 9as *iled until the aount is *ull paid 9ith costs a5ainst I/++PCI/. PCI/ oved to reconsider the decision o* the Court o* +ppeals! 9hile ord *iled a Jotion *or Partial Reconsideration.J /oth otions 9ere denied *or lac o* erit. Separatel! PCI/an and ord *iled e*orethe Supre!e Court! petitions *or revie9 certiorari under Rule 4.

BGR 12,304 ord dre9 Citian Chec S6-10$% on 1$ #ul 1$%, in the aount o* P!,1!%03."% representin5 the percenta5e ta? due *or the seconduarter o* 1$%, paale to the Coissioner o* Internal Revenue. + /IR Revenue 'a? Receipt 2,34", 9as issued *or the said purpose. 7n 20 +pril1$%$! ord dre9 another Citian Chec S6-130, in the aount o* P3!"11!$1.%"! representin5 the paent o* percenta5e ta? *or the * irst uarter o*1$%$ and paale to the Coissioner o* Internal Revenue. +5ain a /IR Revenue 'a? Receipt +-13$%130 9as issued *or the said purpose. /oth checs9ere Jcrossed checsJ and contain t9o dia5onal lines on its upper le*t corner et9een 9hich 9ere 9ritten the 9ords Jpaale to the paeeFs accountonl.J 'he checs never reached the paee! CIR. 'hus! in a letter dated 2, eruar 1$,0! the /IR! Re5ion 4-/! deanded *or the said ta? paentsthe correspondin5 periods aove-entioned. +s *ar as the /IR is concerned! the said t9o /IR Revenue 'a? Receipts 9ere considered J*ae and

spuriousJ. 'his anoal 9as con*ired the 6/I upon the initiative o* the /IR. 'he *indin5s *orced ord to pa the /IR ane9! 9hile an action 9as *ileda5ainst Citian and PCI/an *or the recover o* the aount o* Citian Chec 6uers S6-10$% and 130,. 7n $ 8eceer 1$,,! Re5ional 'rialCourt o* aati! /ranch %! held dra9ee-an Citian liale *or the value o* the t9o checs 9hile asolvin5 PCI/ *ro an liailit. /oth ord andCitian appealed to the Court o* +ppeals 9hich a**ired! in toto! the decision o* the trial court. =ence! the petition *or revie9.

[1] GRs 121413 and 121479

Issue [a]: <hether the *or5er coitted the dra9er-paors con*idential eploees precludes ord *ro recoverin5 the aount o* itschecs.

Held [a]: 67. +lthou5h the eploees o* ord initiated the transactions attriutale to an or5ani;ed sndicate! their actions 9ere not thepro?iate cause o* encashin5 the checs paale to the CIR. 'he de5ree o* ordFs ne5li5ence! i* an! could not e characteri;ed as thepro?iate cause o* the in)ur to the parties. 'he /oard o* 8irectors o* ord did not con*ir the reuest o* Godo*redo Rivera to recall CitianChec S6-04,3%. RiveraFs instruction to replace the said chec 9ith PCI/Fs ana5erFs Chec 9as not in the ordinar course o* usiness

9hich could have propted PCI/ to validate the sae. +s to the preparation o* Citian Checs S6-10$% and 130,! it 9as estalished thatthese checs 9ere ade paale to the CIR. /oth 9ere crossed checs. 'hese checs 9ere apparentl turned around ordFs eploees!9ho 9ere actin5 on their o9n personal capacit. Given these circustances! the ere *act that the *or5er 9as coitted a dra9er-paorFscon*idential eploee or a5ent! 9ho virtue o* his position had unusual *acilities *or perpetratin5 the *raud and iposin5 the *or5ed paperupon the an! does not entitle the an to shi*t the loss to the dra9er-paor! in the asence o* soe circustance raisin5 estoppel a5ainstthe dra9er. 'his rule lie9ise applies to the checs *raudulentl ne5otiated or diverted the con*idential eploees 9ho hold the in theirpossession.

Issue [b]: <hether the collectin5 an (PCI/& 9as ne5li5ent in preparin5 t9o ana5ers chec to replace Citian Chec S6-04,3%! onorders o* persons esides the CIR.

Held [b]: >ES. Citian Chec S6-04,3% 9as deposited at PCI/ throu5h its Erita /ranch. It 9as coursed throu5h the ordinar anin5transaction! sent to Central Clearin5 9ith the indorseent at the ac Jall prior indorseents andor lac o* indorseents 5uaranteed!J and9as presented to Citian *or paent. 'herea*ter PCI/! instead o* reittin5 the proceeds to the CIR! prepared t9o o* its ana5erFs checs



and enaled the sndicate to encash the sae. 7n record! PCI/ *ailed to veri* the authorit o* r. Rivera to ne5otiate the checs. 'hene5lect o* PCI/ eploees to veri* 9hether his letter reuestin5 *or the replaceent o* the Citian Chec S6-04,3% 9as dul authori;ed!sho9ed lac o* care and prudence reuired in the circustances. urtherore! it 9as aditted that PCI/ is authori;ed to collect the paento* ta?paers in ehal* o* the /IR. +s an a5ent o* /IR! PCI/ is dut ound to consult its principal re5ardin5 the un9arranted instructions 5iven the paor or its a5ent. +s a5ent o* the /IR! I/++PCI/ should receive instructions onl *ro its principal /IR and not *ro an other personespeciall so 9hen that person is not no9n to I/++PCI/. It is ver iprudent on the part o* I/++PCI/ to )ust rel on the alle5ed telephonecall o* one (Rivera& and in his si5nature to the authenticit o* such si5nature considerin5 that the ord is not a client o* I/++PCI/.

[2] GR 128604

Issue [a]: <hether PCI/ is liale *or *raud (ee;;leent& coitted PCI/ eploees 9hile the checs 9ere in transit *or clearin5.

Held [a]: >ES. Even i* PCI/ had no o**icial act in the ordinar course o* usiness that 9ould attriute to it the case o* the ee;;leent o*Citian Chec 6uers S6-10$% and 130,! ecause PCI/ did not actuall receive nor hold the t9o ord checs at all that the s9itchin5operation (involvin5 the checs 9hile in transit *or Jclearin5J& 9ere the clandestine or hidden actuations per*ored the eers o* thesndicate in their o9n personal! covert and private capacit and done 9ithout the no9led5e o* PCI/ as a 5eneral rule! ho9ever! a anin5corporation is liale *or the 9ron5*ul or tortuous acts and declarations o* its o**icers or a5ents 9ithin the course and scope o* their eploent + an 9ill e held liale *or the ne5li5ence o* its o**icers or a5ents 9hen actin5 9ithin the course and scope o* their eploent. It a eliale *or the tortuous acts o* its o**icers even as re5ards that species o* tort o* 9hich alice is an essential eleent. =erein! althou5h asituation e?ist 9here the PCI/ appears also to e the victi o* the schee hatched a sndicate in 9hich its o9n ana5eent eploeeshad participated a an holdin5 out its o**icers and a5ents as 9orth o* con*idence 9ill not e peritted to pro*it the *rauds these o**icers ora5ents 9ere enaled to perpetrate in the apparent course o* their eploent nor 9ill it e peritted to shir its responsiilit *or such *raudseven thou5h no ene*it a accrue to the an there*ro. or the 5eneral rule is that a an is liale *or the *raudulent acts or representationso* an o**icer or a5ent actin5 9ithin the course and apparent scope o* his eploent or authorit. +nd i* an o**icer or eploee o* a an! inhis o**icial capacit! receives one to satis* an evidence o* indetedness lod5ed 9ith his an *or collection! the an is liale *or hisisappropriation o* such su. oreover! Section o* Central /an Circular ,0! Series o* 1$%% provides that an the*t a**ectin5 ites in

transit *or clearin5! shall e *or the account o* sendin5 an! 9hich in this case is PCI/.

Issue [b]: <hether Citian can raise the de*enses that it has no no9led5e o* an in*irit in the issuance o* the checs in uestion ad thathe endorseent o* the Paee or lac thereo* 9as 5uaranteed I/++PCI/ and thus! it has the oli5ation to honor and pa the saeaon5 others.

Held [b]: 67. Citian as dra9ee an 9as lie9ise ne5li5ent in the per*orance o* its duties. Citian *ailed to estalish that its paent o*ordFs checs 9ere ade in due course and le5all in order. +s ruled the Court o* +ppeals! Citian ust lie9ise ans9er *or the daa5esincurred ord on Citian Checs 6uers S6 10$% and 130,! ecause o* the contractual relationship e?istin5 et9een the t9o.Citian! as the dra9ee an reached its contractual oli5ation 9ith ord and such de5ree o* culpailit contriuted to the daa5e caused tothe latter. Citian should have scrutini;ed Citian Chec 6uers S6 10$% and 130, e*ore pain5 the aount o* the proceeds thereo*to the collectin5 an o* the /IR. 'he clearin5 staps at the ac o* Citian Chec S6 10$% and 130, do not ear an initials. Citian*ailed to notice and veri* the asence o* the clearin5 staps. =ad this een dul e?ained! the s9itchin5 o* the 9orthless checs to CitianChecs 10$% and 130, 9ould have een discovered in tie. or this reason! Citian had indeed *ailed to per*or 9hat 9as incuentupon it! 9hich is to ensure that the aount o* the checs should e paid onl to its desi5nated paee. 'he *act that the dra9ee an did notdiscover the irre5ularit seasonal constitutes ne5li5ence in carrin5 out the anFs dut to its depositors. 'he point is that as a usiness

a**ected 9ith pulic interest and ecause o* the nature o* its *unctions! the an is under oli5ation to treat the accounts o* its depositors 9itheticulous care! al9as havin5 in ind the *iduciar nature o* their relationship.



Papa vs& 0alenciaBGR 101,,! 2" #anuar 1$$,irst 8ivision! Kapunan (#&D " concur

Facts: Soetie in #une 1$,2! +.A. :alencia and Co.! Inc. and eli? PeMarroo! *iled 9ith the Re5ional 'rial Court o* Pasi5! /ranch 11! a coplaint *orspeci*ic per*orance a5ainst ron C. Papa! in his capacit as adinistrator o* the 'estate Estate o* one +n5ela . /utte. 'he coplaint alle5ed that on1 #une 1$%"! ron C. Papa! actin5 as attorne-in-*act o* +n5ela . /utte! sold to PeMarroo! throu5h :alencia! a parcel o* land! consistin5 o* 2,3.30suare eters! located at corner Retiro and Cadi; Streets! La Loa! @ue;on Cit! and covered 'rans*er Certi*icate o* 'itle 2,$$" o* the Re5ister o*8eeds o* @ue;on Cit that prior to the alle5ed sale! the said propert! to5ether 9ith several other parcels o* land lie9ise o9ned /utte! had eenort5a5ed her to the +ssociated /anin5 Corporation (no9 +ssociated Citi;ens /an& that a*ter the alle5ed sale! ut e*ore the title to the su)ectpropert had een released! /utte passed a9a that despite representations ade :alencia to the an to release the title to the propert sold to

PeMarroo! the an re*used to release it unless and until all the ort5a5ed properties o* the late /utte 9ere also redeeed that in order to protect hisri5hts and interests over the propert! PeMarroo caused the annotation on the tit le o* an adverse clai as evidenced Entr 6o. PE. 311,'-2,$$"!inscried on 1, #anuar 1$%%. 'he coplaint *urther alle5ed that it 9as onl upon the release o* the title to the propert! soetie in +pril 1$%%! that:alencia and PeMarroo discovered that the ort5a5e ri5hts o* the an had een assi5ned to one 'oas L. Parpana (no9 deceased&! as specialadinistrator o* the Estate o* Raon Papa. #r.! on 12 +pril 1$%% that since then! Papa had een collectin5 onthl rentals in the aount o* P,00.00*ro the tenants o* the propert! no9in5 that said propert had alread een sold to :alencia and PeMarroo on 1 #une 1$%" that despite repeateddeands *ro said respondents! Papa re*used and *ailed to deliver the ti tle to the propert. :alencia and PeMarroo praed that Papa e ordered todeliver to PeMarroo the title to the su)ect propert ('C' 2,$$"& to turn over to the latter the su o* P%2!000.00 as accrued rentals as o* +pril 1$,2!and the onthl rental o* P,00.00 until the propert is delivered to PeMarroo to pa :alencia and PeMarroo the su o* P20!000.00 as attorneFs *eesand to pa the costs o* the suit. Apon his otion! 8el*in #ao 9as allo9ed to intervene in the case. ain5 coon cause 9ith :alencia and PeMarroo!#ao alle5ed that the su)ect lot 9hich had een sold to PeMarroo throu5h :alencia 9as in turn sold to hi on 20 +u5ust 1$%" *or the su o*P%1!00.00! upon his pain5 earnest one in the aount o* P!000.00. or his part! Papa! as adinistrator o* the 'estate Estate o* /utte! *iled a third-part coplaint a5ainst spouses +rsenio /. Rees and +anda Santos! the 9innin5 idders in pulic auction sale held the Cit 'reasurer o* @ue;onCit 9hen the estate o* /utte 9as not ale to pa the real estate ta? o* said propert. 7n 2$ #une 1$,%! the trial court rendered a decision! allo9in5 Papato redee *ro the Rees spouses and orderin5 the spouses to allo9 the *orer to redee the propert in uestion! pain5 the su o* P14!000.00plus le5al interest o* 12H thereon *ro 2 #anuar 1$,0 orderin5 Papa to e?ecute a 8eed o* +solute Sale in *avor o* PeMarroo coverin5 the propert inuestion and to deliver peace*ul possession and en)oent o* the said propert to PeMarroo! *ree *ro an liens and encurances! and that shouldthat e ipossile! *or an reason not attriutale to Papa! said Papa 9as ordered to pa to PeMarroo the su o* P4!000.00 plus le5al interest o* 12H*ro 1 #une 1$%" orderin5 PeMarroo to e?ecute and deliver to intervenor a deed o* asolute sale over the sae propert! upon the latterFs paent tothe *orer o* the alance o* the purchase price o* P%1!00.00! and that should that e ipossile! PeMarroo 9as ordered to pa #ao the su o*P!000.00 plus le5al interest o* 12H *ro 2" +u5ust 1$%" and orderin5 Papa to pa :alencia and PeMarroo the aount o* P!000.00 *or and asattorneFs *ees and liti5ation e?penses. Papa appealed the a*oresaid decision o* the trial court to the Court o* +ppeals! alle5in5 aon5 others that thesale 9as never JconsuatedJ as he did not encash the chec (in the aount o* P40!000.00& 5iven :alencia and PeMarroo in paent o* the *ullpurchase price o* the su)ect lot. =e aintained that 9hat :alencia and PeMarroo had actuall paid 9as onl the aount o* P!000.00 (in cash& asearnest one. 'he Rees spouses! lie9ise! appealed the aove decision. =o9ever! their appeal 9as disissed ecause o* *ailure to *ile theirappellantsF rie*. 7n 2% #anuar 1$$2! the Court o* +ppeals rendered a decision! a**irin5 9ith odi*ication the trial courtFs decision! orderin5 Papa todeliver to :alencia and PeMarroo the o9nerFs duplicate o* 'C' 2,$$" o* +n5ela . /utte and the peace*ul possession and en)oent o* the lot inuestion or! i* the o9nerFs duplicate certi*icate cannot e produced! to authori;e the Re5ister o* 8eeds to cancel it and issue a certi*icate o* title in thenae o* PeMarroo 9ithh costs a5ainst Papa. Papa *iled the petit ion *or revie9 on certiorari.

Issue: <hether the alle5ed sale o* the su)ect propert had een consuated! on the presuption that the chec in the aount o* P40!000 9asencashed.

Held: :alencia and PeMarroo had 5iven Papa the aounts o* P!000.00 in cash on 24 a 1$%"! and P40!000.00 in chec on 1 #une 1$%"! inpaent o* the purchase price o* the su)ect lot. Papa hisel* adits havin5 received said aounts! and havin5 issued receipts there*or. PapaFsassertion that he never encashed the a*oresaid chec is not sustantiated and is at odds 9ith his stateent in his ans9er that Jhe can no lon5er recallthe transaction 9hich is supposed to have happened 10 ears a5o.J +*ter ore than 10 ears *ro the paent in part cash and in part chec! thepresuption is that the chec had een encashed. =e even 9aived the presentation o* oral evidence. Grantin5 that Papa had never encashed thechec! his *ailure to do so *or ore than 10 ears undoutedl resulted in the ipairent o* the chec throu5h his unreasonale and une?plained dela.<hile it is true that the deliver o* a chec produces the e**ect o* paent onl 9hen it is cashed! pursuant to +rticle 124$ o* the Civil Code! the rule isother9ise i* the detor is pre)udiced the creditorFs unreasonale dela in presentent. 'he acceptance o* a chec iplies an undertain5 o* duedili5ence in presentin5 it *or paent! and i* he *ro 9ho it is received sustains loss 9ant o* such dili5ence! it 9ill e held to operate as actualpaent o* the det or oli5ation *or 9hich it 9as 5iven. It has! lie9ise! een held that i* no presentent is ade at all! the dra9er cannot e held lialeirrespective o* loss or in)ur unless presentent is other9ise e?cused. 'his is in haron 9ith +rticle 124$ o* the Civil Code under 9hich paent 9a o* chec or other ne5otiale instruent is conditioned on its ein5 cashed! e?cept 9hen throu5h the *ault o* the creditor! the instruent is ipaired.'he paee o* a chec 9ould e a creditor under this provision and i* its non-paent is caused his ne5li5ence! paent 9ill e deeed e**ected andthe oli5ation *or 9hich the chec 9as 5iven as conditional paent 9ill e dischar5ed. Considerin5 that :alencia and PeMarroo had *ul*illed their parto* the contract o* sale deliverin5 the paent o* the purchase price! the! there*ore! had the ri5ht to copel Papa to deliver to the the o9nerFsduplicate o* 'C' 2,$$" o* +n5ela . /utte and the peace*ul possession and en)oent o* the lot in uestion.



Far #ast Realty Investment Inc& vs& Court o ppealsBGR L-"34$! 7ctoer 1$,,Second 8ivision! Paras (#&D 4 concur

Facts: In its coplaint dated a $! 1$3,! *iled 9ith the Cit Court o* anila! (Civil Case 1%0,$& a5ainst 8 =ian 'at! Si Chee and Ga9 Su +n *or thecollection and paent o* P4!00.00 representin5 the *ace value o* an unpaid and dishonored chec! ar East Realt Investent Inc. (ERII& alle5ed!aon5 others! that on 1" Septeer 1$30! 8 et al. approached ERII at its o**ice in anila and ased the latter to e?tend to the an accoodationloan in the su o* P4!00.00! 9hich the needed in their usiness! and 9hich the proised to pa! )ointl and severall! in one onth tie that theproposed to pa ERII interest thereon at the rate o* 14H per annu! as in *act the delivered to ERII the China /anin5 Corporation (China/an&Chec :6-$134! dated 1" Septeer 1$30! *or P4!00.00! dra9n 8! and si5ned the at the ac o* said chec! 9ith the assurance that a*terone onth *ro 1" Septeer 1$30! the said chec 9ould e redeeed the pain5 cash in the su o* P4!00.00! or the said chec can e

presented *or paent on or iediatel a*ter one onth and said an 9ould honor the sae that! in order to accoodate 8 et al.! ERII a5reedand actuall e?tended to 8 et al. an accoodation loan in the su o* P4!00.00 under the a*oresaid conditions proposed 8 et al.! 9hich aount9as delivered to the later that on arch 1$34! the a*oresaid chec 9as presented *or paent to the China/an! ut said chec ounced and 9as nocashed said an! *or the reason that the current account o* the dra9er thereo* had alread een closed and that suseuentl! ERII deanded*ro 8 et al. the paent o* their a*oresaid loan oli5ation! ut the latter *ailed and re*used to pa not9ithstandin5 repeated deands there*or. Ga9and 8 *iled their ans9ers! 9hile on "1 arch 1$%0! Si 9as declared in de*ault. +*ter hearin5! the Cit Court o* anila rendered its decision in *avor o*ERII! orderin5 8 et al. to pa ERII! )ointl and severall! the su o* P4!00.00 9ith interest thereon at the le5al rate *ro 1" Septeer 1$30 until thesaid aount is *ull paid plus the su o* P00.00 9a o* attorneFs *ees! plus the costs o* suit. 'he decision o* the cit court 9as appealed 8 etal. to the Court o* irst Instance o* anila! 9here the case 9as heard de novo *or lac o* transcript o* steno5raphic notes taen in the cit court. +*tertrial! the Court o* irst Instance o* anila! /ranch I! rendered a decision in Civil Case ,0,"! dated 1 7ctoer 1$%1! a**irin5 the decision o* the citcourt! orderin5 8 et al. to pa! )ointl and severall! ERII the su o* P4!00.00! plus interest at the rate o* 14H per annu! *ro 1" Septeer 1$30!until *ull paid! plus the su o* P1!000.00 in the concept o* attorneFs *ees and costs o* suit. 8 et al. *iled a petition *or revie9 9ith the Court o* +ppeals7n 12 eruar 1$%"! the appellate court! *indin5 that the uestioned chec 9as not 5iven as collateral to 5uarantee a loan secured 8 et al. 9hoalle5edl cae as a 5roup to ERII on 1" Septeer 1$30! ut passed throu5h other hands e*ore reachin5 ERII and the said chec 9as notpresented 9ithin a reasonale tie and a*ter its issuance! reversed the decision o* the Court o* irst Instance. Its otion *or reconsideration havin5 eendenied! ERII *iled the petition *or revie9.

Issue: <hether presentent *or paent and notice o* dishonor o* the uestioned chec 9ere ade 9ithin reasonale tie.

Held: 67. <here the instruent is not paale on deand! presentent ust e ade on the da it *alls due. <here it is paale on deand!presentent ust e ade 9ithin a reasonale tie a*ter issue! e?cept that in the case o* a ill o* e?chan5e! presentent *or paent 9ill e su**icienti* ade 9ithin a reasonale tie a*ter the last ne5otiation thereo*. 6otice a e 5iven as soon as the is dishonored and unless dela is e?cused uste 5iven 9ithin the tie *i?ed the la9. 6o hard and *ast dearcation line can e dra9n et9een 9hat a e considered as a reasonale or anunreasonale tie! ecause Jreasonale tieJ depends upon the peculiar *acts and circustances in each case. JReasonale tieJ has een de*inedas so uch tie as is necessar under the circustances *or a reasonale prudent and dili5ent an to do! convenientl! 9hat the contract or dutreuires should e done! havin5 a re5ard *or the ri5hts and possiilit o* loss! i* an! to the other part =erein! it is ovious that presentent and noticeo* dishonor 9ere not ade 9ithin a reasonale tie. 'he chec in uestion 9as issued on 1" Septeer 1$30! ut 9as presented to the dra9ee anonl on arch 1$34! and dishonored on the sae date. +*ter dishonor the dra9ee an! a *oral notice o* dishonor 9as ade ERII throu5h aletter dated 2% +pril 1$3,. Ander these circustances! ERII undoutedl *ailed to e?ercise prudence and dili5ence on 9hat he ou5ht to do as reuired la9. ERII lie9ise *ailed to sho9 an )usti*ication *or the unreasonale dela.



ong vs& Court o ppealsBGR 11%,%! 2 eruar 2001Second 8ivision! @uisuin5 (#&D 4 concur

Facts: Luis S. <on5 9as an a5ent o* Liton5 Press Inc. (LPI&! a anu*acturer o* calendars. LPI 9ould print saple calendars! then 5ive the to a5entsto present to custoers. 'he a5ents 9ould 5et the purchase orders o* custoers and *or9ard the to LPI. +*ter printin5 the calendars! LPI 9ould shipthe calendars directl to the custoers. 'herea*ter! the a5ents 9ould coe around to collect the paents. <on5! ho9ever! had a histor o* unreittedcollections! 9hich he dul acno9led5ed in a con*iration receipt he co-si5ned 9ith his 9i*e. =ence! <on5Fs custoers 9ere reuired to issue postdatedchecs e*ore LPI 9ould accept their purchase orders. In earl 8eceer 1$,! <on5 issued 3 postdated checs totalin5 P1,!02.00! all dated "08eceer 1$, and dra9n paale to the order o* LPI. 'hese checs 9ere initiall intended to 5uarantee the calendar orders o* custoers 9ho *ailed toissue post-dated checs. =o9ever! *ollo9in5 copan polic! LPI re*used to accept the checs as 5uarantees. Instead! the parties a5reed to appl the

checs to the paent o* <on5Fs unreitted collections *or 1$,4 aountin5 to P1,!0%%.0%. LPI 9aived the P2.0% di**erence. /e*ore the aturit o* thechecs! <on5 prevailed upon LPI not to deposit the checs and proised to replace the 9ithin "0 das. =o9ever! <on5 rene5ed on his proise.=ence! on #une 1$,3! LPI deposited the checs 9ith Ri;al Coercial /anin5 Corporation (RC/C&. 'he checs 9ere returned *or the reasonJaccount closed.J 'he dishonor o* the checs 9as evidenced the RC/C return slip. 7n 20 #une 1$,3! LPI throu5h counsel noti*ied <on5 o* thedishonor. <on5 *ailed to ae arran5eents *or paent 9ithin anin5 das. 7n 3 6oveer 1$,%! <on5 9as char5ed 9ith " counts o* violation o*/P 22 under three separate In*orations *or the three checs aountin5 to P!00.00! P"!"%.00! and P3!410.00 (Criinal Case C/A-120! 120%!and 120,. Apon arrai5nent! <on5 pleaded not 5uilt. 'rial ensued. 7n "0 +u5ust 1$$0! the trial court issued its decision! *indin5 <on5 5uilt eondreasonale dout o* the o**ense o* :iolations o* Section 1 o* /P 22 in " Counts and sentencin5 <on5 to serve an iprisonent o* 4 onths *or eachcount to pa Liton5 the sus o* P!00.00! P3!410.00 and P"!"%.00 correspondin5 to the aounts indicated in +llied /anin5 Checs 33014"41!33B014"434 and 33014"43" all issued on "0 8eceer 1$, to5ether 9ith the le5al rate o* interest *ro the tie o* the *ilin5 o* the criinal char5es inCourt and pa the costs. <on5 appealed his conviction to the Court o* +ppeals. 7n 2, 7ctoer 1$$4! it a**ired the trial courtFs decision in toto. <on5*iled the petition *or revie9 on certiorari.

Issue: <hether the presuption o* no9led5e o* lac o* *unds under Section 2 o* /P 22 should not appl to <on5! as he avers that LPI deposited thechecs 1% das a*ter the "0 8eceer 1$, aturit date! and that he should not e e?pected to eep his an account active and *unded eond the$0-da period.

Held: Section 2 (Evidence o* no9led5e o* insu**icient *unds& o* /P 22 provides that J'he ain5! dra9in5 and issuance o* a chec paent o* 9hich isre*used the dra9ee ecause o* insu**icient *unds in or credit 9ith such an! 9hen presented 9ithin ninet ($0& das *ro the date o* the chec! shalle pria *acie evidence o* no9led5e o* such insu**icienc o* *unds or credit unless such aer or dra9er pas the holder thereo* the aount duethereon! or aes arran5eents *or paent in *ull the dra9ee o* such chec 9ithin *ive (& anin5 das a*ter receivin5 notice that such chec hasnot een paid the dra9ee.J +n essential eleent o* the o**ense is Jno9led5eJ on the part o* the aer or dra9er o* the chec o* the insu**icienc o*his *unds in or credit 9ith the an to cover the chec upon its presentent. Since this involves a state o* ind di**icult to estalish! the statute itsel*creates a pria *acie presuption o* such no9led5e 9here paent o* the chec Jis re*used the dra9ee ecause o* insu**icient *unds in or credit9ith such an 9hen presented 9ithin $0 das *ro the date o* the chec.J 'o iti5ate the harshness o* the la9 in its application! the statute providesthat such presuption shall not arise i* 9ithin anin5 das *ro receipt o* the notice o* dishonor! the aer or dra9er aes arran5eents *orpaent o* the chec the an or pas the holder the aount o* the chec. Contrar to <on5Fs assertions! no9here in said provision does the la9reuire a aer to aintain *unds in his an account *or onl $0 das. Rather! the clear iport o* the la9 is to estalish a pria *acie presuption o*no9led5e o* such insu**icienc o* *unds under the *ollo9in5 conditions (1& presentent 9ithin $0 das *ro date o* the chec! and (2& the dishonor o*the chec and *ailure o* the aer to ae arran5eents *or paent in *ull 9ithin anin5 das a*ter notice thereo*. 'hat the chec ust edeposited 9ithin $0 das is sipl one o* the conditions *or the pria *acie presuption o* no9led5e o* lac o* *unds to arise. It is not an eleent o* theo**ense. 6either does it dischar5e <on5 *ro his dut to aintain su**icient *unds in the account 9ithin a reasonale tie thereo*. Ander Section 1,3 o*

the 6e5otiale Instruents La9! Ja chec ust e presented *or paent 9ithin a reasonale tie a*ter its issue or the dra9er 9ill e dischar5ed *roliailit thereon to the e?tent o* the loss caused the dela.J / current anin5 practice! a chec ecoes stale a*ter ore than 3 onths! or 1,0das. LPI deposited the checs 1% das a*ter the date o* the chec. =ence said checs cannot e considered stale. 7nl the presuption o* no9led5eo* insu**icienc o* *unds 9as lost! ut such no9led5e could still e proven direct or circustantial evidence. LPI did not deposit the checs ecauseo* the reassurance o* <on5 that he 9ould issue ne9 checs. Apon his *ailure to do so! LPI 9as constrained to deposit the said checs. +*ter the checs9ere dishonored! <on5 9as dul noti*ied o* such *act ut *ailed to ae arran5eents *or *ull paent 9ithin anin5 das thereo*. 'here is su**icientevidence that <on5 had no9led5e o* the insu**icienc o* his *unds in or credit 9ith the dra9ee an at the tie o* issuance o* the checs.



'$e International Corporate +an% (now ?nion +an% o t$e P$ilippines) vs& Spouses 1uecoBGR 141$3,! 12 eruar 2001irst 8ivision! Kapunan (#&D 4 concur

Facts: Spouses rancis S. Gueco and a. Lu; E. Gueco otained a loan *ro petitioner International Corporate /an (no9 Anion /an o* thePhilippines& to purchase a car a 6issan Sentra 1300 48R! 1$,$ odel. In consideration thereo*! the Spouses e?ecuted proissor notes 9hich 9erepaale in onthl installents and chattel ort5a5e over the car to serve as securit *or the notes. 'he Spouses de*aulted in paent o* installents.Conseuentl! the /an *iled on % +u5ust 1$$ a civil action (Civil Case 3,-$& *or JSu o* one 9ith Praer *or a <rit o* ReplevinJ e*ore theetropolitan 'rial Court o* Pasa Cit! /ranch 4. 7n 2 +u5ust 1$$! 8r. rancis Gueco 9as served suons and 9as *etched the sheri** andrepresentative o* the an *or a eetin5 in the an preises. 8esi 'oas! the /anFs +ssistant :ice President deanded paent o* the aount o*P1,4!000.00 9hich represents the unpaid alance *or the car loan. +*ter soe ne5otiations and coputation! the aount 9as lo9ered to P14!000.00!

=o9ever! as a result o* the non-paent o* the reduced aount on that date! the car 9as detained inside the anFs copound. 7n 2, +u5ust 1$$! 8rGueco 9ent to the an and taled 9ith its +dinistrative Support +uto LoansCredit Card Collection =ead! #e**erson Rivera. 'he ne5otiations resultedin the *urther reduction o* the outstandin5 loan to P10!000.00. 7n 2$ +u5ust 1$$! 8r. Gueco delivered a ana5erFs chec in the aount o*P10!000.00 ut the car 9as not released ecause o* his re*usal to si5n the #oint otion to 8isiss. It is the contention o* the Gueco spouses and theircounsel that 8r. Gueco need not si5n the otion *or )oint disissal considerin5 that the had not et *iled their +ns9er. the /an! ho9ever! insisted thatthe )oint otion to disiss is standard operatin5 procedure in their an to e**ect a coproise and to preclude *uture *ilin5 o* clais! counterclais orsuits *or daa5es. +*ter several deand letters and eetin5s 9ith an representatives! the Gueco spouses initiated a civil action *or daa5es e*orethe etropolitan 'rial Court o* @ue;on Cit! /ranch "". 'he etropolitan 'rial Court disissed the coplaint *or lac o* erit. 7n appeal to the Re5ional'rial Court! /ranch 22% o* @ue;on Cit! the decision o* the etropolitan 'rial Court 9as reversed. In its decision! the R'C held that there 9as a eetin5o* the inds et9een the parties as to the reduction o* the aount o* indetedness and the release o* the car ut said a5reeent did not include thesi5nin5 o* the )oint otion to disiss as a condition sine ua non *or the e**ectivit o* the coproise. 'he court *urther ordered the an to returniediatel the su)ect car to the spouses in 5ood 9orin5 condition and to pa the spouses the su o* P0!000.00 as oral daa5es P2!000.00 ase?eplar daa5es! and P2!000.00 as attorneFs *ees! and to pa the cost o* suit. In other respect! the court a**ired the decision o* the etropolitan'rial Court /ranch "". 'he case 9as elevated to the Court o* +ppeals! 9hich on 1% eruar 2000! issued the decision! denin5 the petition *or revie9on certiorari and a**irin5 the 8ecision o* the R'C o* @ue;on Cit! /ranch 22%! in Civil Case @-$%-"11%3! in toto 9ith costs a5ainst the an. 'he an*iled the petition *or revie9 on certiorari 9ith the Supree Court.

(Shot !acts: In the eetin5 o* 2$ +u5ust 1$$! 8r. Gueco delivered a ana5erFs chec representin5 the reduced aount o* P10!000.00. Said chec9as 5iven to r. Rivera! a representative o* the an =o9ever! since 8r. Gueco re*used to si5n the )oint otion to disiss! he 9as ade to e?ecute astateent to the e**ect that he 9as 9ithholdin5 the paent o* the chec. Suseuentl! in a letter addressed to s. 8esi 'oas! vice president o* thean! dated 4 Septeer 1$$! 8r. Gueco instructed the an to disre5ard the Jhold orderJ letter and deanded the iediate release o* his car! to9hich the *orer replied that the condition o* si5nin5 the )oint otion to disiss ust e satis*ied and that the had ept the chec 9hich could eclaied 8r. Gueco antie. <hile there is controvers as to 9hether the docuent evidencin5 the order to hold paent o* the chec 9as *orallo**ered as evidence the an! it appears *ro the pleadin5s that said chec has not een encashed.&

Issue: <hether the an 9as ne5li5ent in optin5 not to deposit or use the ana5ers chec.

Held: 67. + stale chec is one 9hich has not een presented *or paent 9ithin a reasonale tie a*ter its issue. It is valueless and! there*ore! shouldnot e paid. Ander the ne5otiale instruents la9! an instruent not paale on deand ust e presented *or paent on the da it *alls due. <henthe instruent is paale on deand! presentent ust e ade 9ithin a reasonale tie a*ter its issue. In the case o* a ill o* e?chan5e! presententis su**icient i* ade 9ithin a reasonale tie a*ter the last ne5otiation thereo*. + chec ust e presented *or paent 9ithin a reasonale tie a*ter itsissue! and in deterinin5 9hat is a Jreasonale tie!J re5ard is to e had to the nature o* the instruent! the usa5e o* trade or usiness 9ith respect tosuch instruents! and the *acts o* the particular case. 'he test is 9hether the paee eploed such dili5ence as a prudent an e?ercises in his o9na**airs. 'his is ecause the nature and theor ehind the use o* a chec points to its iediate use and paailit. In a case! a chec paale ondeand 9hich 9as lon5 overdue aout t9o and a hal* (2-12& ears 9as considered a stale chec. ailure o* a paee to encash a chec *or orethan 10 ears undoutedl resulted in the chec ecoin5 stale. 'hus! even a dela o* 1 9ee or t9o (2& das! under the speci*ic circustances o* thecertain cases constituted unreasonale tie as a atter o* la9. =erein! the chec involved is not an ordinar ill o* e?chan5e ut a ana5erFs chec. +ana5erFs chec is one dra9n the anFs ana5er upon the an itsel*. It is siilar to a cashierFs chec oth as to e**ect and use. + cashierFs checis a chec o* the anFs cashier on his o9n or another chec. In e**ect! it is a ill o* e?chan5e dra9n the cashier o* a an upon the an itsel*! andaccepted in advance the act o* its issuance. It is reall the anFs o9n chec and a e treated as a proissor note 9ith the an as a aer. 'hechec ecoes the priar oli5ation o* the an 9hich issues it and constitutes its 9ritten proise to pa upon deand. 'he ere issuance o* it isconsidered an acceptance thereo*. I* treated as proissor note! the dra9er 9ould e the aer and in 9hich case the holder need not provepresentent *or paent or present the ill to the dra9ee *or acceptance. Even assuin5 that presentent is needed! *ailure to present *or paent9ithin a reasonale tie 9ill result to the dischar5e o* the dra9er onl to the e?tent o* the loss caused the dela. ailure to present on tie! thus!does not totall 9ipe out all l iailit. In *act! the le5al situation aounts to an acno9led5ent o* liailit in the su stated in the chec. In this case! theGueco spouses have not alle5ed! uch less sho9n that the or the an 9hich issued the ana5erFs chec has su**ered daa5e or loss caused thedela or non-presentent. 8e*initel! the ori5inal oli5ation to pa certainl has not een erased. It has een held that! i* the chec had ecoe stale! itecoes iperative that the circustances that caused its non-presentent e deterined. =erein! the an held on the chec and re*used to encash

the sae ecause o* the controvers surroundin5 the si5nin5 o* the )oint otion to disiss. 'he Court sa9 no ad *aith or ne5li5ence in this positiontaen the /an.



State Investment !ouse Inc& vs& Court o ppealsBGR 10113"! 11 #anuar 1$$"irst 8ivision! /ellosillo (#&D 2 concur! 1 too no part

Facts: 6ora /. oulic issued to Cora;on :ictoriano! as securit *or pieces o* )e9elr to e sold on coission! 2 post-dated Euitale /anin5Corporation checs in the aount o* P0!000 each! one dated "0 +u5ust 1$%$ and the other! "0 Septeer 1$%$. 'herea*ter! the paee ne5otiated thechecs to the State Investent =ouse Inc. (SI=I&. oulic *ailed to sell the pieces o* )e9elr! so she returned the to the paee e*ore aturit o* thechecs. 'he checs! ho9ever! could no lon5er e retrieved as the had alread een ne5otiated. Conseuentl! e*ore their aturit dates! oulic9ithdre9 her *unds *ro the dra9ee an.Apon presentent *or paent! the checs 9ere dishonored *or insu**icienc o* *unds. 7n 20 8eceer 1$%$SI=I alle5edl noti*ied oulic o* the dishonor o* the checs and reuested that it e paid in cash instead! althou5h oulic avers that no such notice 9as5iven her. 7n 3 7ctoer 1$,"! SI=I sued to recover the value o* the checs plus attorneFs *ees and e?penses o* liti5ation. In her +ns9er! oulic

contends that she incurred no oli5ation on the checs ecause the )e9elr 9as never sold and the checs 9ere ne5otiated 9ithout her no9led5e andconsent. She also instituted a 'hird-Part Coplaint a5ainst Cora;on :ictoriano! 9ho later assued *ull responsiilit *or the checs. 7n 23 a 1$,,!the trial court disissed the Coplaint as 9ell as the 'hird-Part Coplaint! and ordered SI=I to pa oulic P"!000.00 *or attorneFs *ees. SI=I elevatedthe order o* disissal to the Court o* +ppeals! ut the appellate court a**ired the trial court on the 5round that the 6otice o* 8ishonor to oulic 9asade eond the period prescried the 6e5otiale Instruents La9 and that even i * SI=I did serve such notice on oulic 9ithin the re5leentarperiod it 9ould e o* no conseuence as the checs should never have een presented *or paent. SI=I *iled the petition *or revie9.

Issue [1]: <hether the alle5ed issuance o* the post-dated checs as securit is a 5round *or the dischar5e o* the instruent as a5ainst a holder in duecourse.

Held [1]: Section 11$ o* the 6e5otiale Instruent La9 outlined the 5rounds in 9hich an instruent is dischar5ed. 'he provision states that J+ne5otiale instruent is dischar5edD (a& / paent in due course or on ehal* o* the princi<hether the post-dated checs! issued as securit! is a5round *or the dischar5e o* the instruent as a5ainst a holder in due course. pal detor (& / paent in due course the part accoodated!9here the instruent is ade or accepted *or his accoodation (c& / the intentional cancellation thereo* the holder (d& / an other act 9hich 9ildischar5e a siple contract *or the paent o* one (e& <hen the principal detor ecoes the holder o* the instruent at or a*ter aturit in his o9nri5ht.J 7viousl! 7ALIC a onl invoe para5raphs (c& and (d& as possile 5rounds *or the dischar5e o* the instruent. /ut! the intentionalcancellation conteplated under para5raph (c& is that cancellation e**ected destroin5 the instruent either tearin5 it up! urnin5 it! or 9ritin5 the9ord JcancelledJ on the instruent. 'he act o* destroin5 the instruent ust also e ade the holder o* the instruent intentionall. Since 7ALIC*ailed to 5et ac possession o* the post-dated checs! the intentional cancellation o* the said checs is alto5ether ipossile. 7n the other hand! theacts 9hich 9ill dischar5e a siple contract *or the paent o* one under para5raph (d& are deterined other e?istin5 le5islations since Section 11$does not speci* 9hat these acts are! e.5.! +rt. 12"1 o* the Civil Code 9hich enuerates the odes o* e?tin5uishin5 oli5ations. +5ain! none o* theodes outlined therein is applicale in the instant case as Section 11$ conteplates o* a situation 9here the holder o* the instruent is the creditor9hile its dra9er is the detor. =erein! the paee! Cora;on :ictoriano! 9as no lon5er 7ALICFs creditor at the tie the )e9elr 9as returned.Correspondin5l! 7ALIC a not unilaterall dischar5e hersel* *ro her liailit the ere e?pedienc o* 9ithdra9in5 her *unds *ro the dra9eean. She is thus liale as she has no le5al asis to e?cuse hersel* *ro liailit on her checs to a holder in due course.

Issue [2]: <hether the reuireent that SI=I should 5ive 6otice o* 8ishonor to 7ALIC is indispensale.

Held [2]: 'he need *or notice is not asolute there are e?ceptions under Section 114 o* the 6e5otiale Instruents La9. Section 114 (<hen notice neednot e 5iven to dra9er& provides that J6otice o* dishonor is not reuired to e 5iven to the dra9er in the *ollo9in5 casesD (a& <here the dra9er and thedra9ee are the sae person (& <hen the dra9ee is a *ictitious person or a person not havin5 capacit to contract (c& <hen the dra9er is the person

to 9ho the instruent is presented *or paent (d& <here the dra9er has no ri5ht to e?pect or reuire that the dra9ee or acceptor 9ill honor theinstruent (e& <here the dra9er had counteranded paent.J Indeed! 7ALICFS actuations leave uch to e desired. She did not retrieve thechecs 9hen she returned the )e9elr. She sipl 9ithdre9 her *unds *ro her dra9ee an and trans*erred the to another to protect hersel*. +*ter9ithdra9in5 her *unds! she could not have e?pected her checs to e honored. In other 9ords! she 9as responsile *or the dishonor o* her checs!hence! there 9as no need to serve her 6otice o* 8ishonor! 9hich is sipl rin5in5 to the no9led5e o* the dra9er or indorser o* the instruent! ei therverall or 9ritin5! the *act that a speci*ied instruent! upon proper proceedin5s taen! has not een accepted or has not een paid! and that thepart noti*ied is e?pected to pa it. In addition! the 6e5otiale Instruents La9 9as enacted *or the purpose o* *acilitatin5! not hinderin5 or haperin5transactions in coercial paper. 'hus! the said statute should not e tapered 9ith hapha;ardl or li5htl. 6or should it e rushed aside in order toeet the necessities in a sin5le case. 'he holder 9ho taes the ne5otiated paper aes a contract 9ith the parties on the *ace o* the instruent. 'hereis an iplied representation that *unds or credit are availale *or the paent o* the instruent in the an upon 9hich it is dra9n. Conseuentl! the9ithdra9al o* the one *ro the dra9ee an to avoid liailit on the checs cannot pre)udice the ri5hts o* holders in due course. =erein! such9ithdra9al renders the dra9er! oulic! liale to SI=I! a holder in due course o* the checs. SI=I could not e?pect paent as 7ALIC le*t no *unds 9iththe dra9ee an to eet her oli5ation on the checs! so that 6otice o* 8ishonor 9ould e *utile.



sia +an%ing Corporation vs& 7avier BGR 1$01! 4 +pril 1$2"irst 8ivision! +vancena (#&D 4 concur! 1 voted *or reversal! 1 too no part

Facts: 7n 10 a 1$20! Salvador /. Chaves dre9 a chec on the Philippine 6ational /an (P6/& *or P11!000 in *avor o* La Insular! a concern doin5usiness in this cit. 'his chec 9as endorsed the liited partners o* La Insular! and then deposited Salvador /. Chaves in his current account9ith +sia /anin5 Corporation. 'he deposit 9as ade on 14 #ul 1$20. 7n 2 #une 1$20! Salvador /. Chaves dre9 another chec *or P1,!%,."0 onP6/! in *avor o* La Insular. 'his chec 9as also endorsed the liited partners o* La Insular! and 9as lie9ise deposited Chaves in his currentaccount 9ith +sia /anin5! on 3 #ul 1$20. 'he aount represented oth checs 9as used Chaves a*ter the 9ere deposited in +sia /anin5! dra9in5 checs on the latter. Suseuentl these checs 9ere presented +sia /anin5 to P6/ *or paent! ut the latter re*used to pa on the5round that the dra9er! Chaves! had no *unds therein. +sia /anin5 rou5ht the action a5ainst #uan #avier! as endorser! *or the paent o* the value o*

oth checs. 'he lo9er court sentenced #avier to pa +sia /anin5 P11!000! upon the chec o* 10 a 1$20! 9ith interest thereon at $H per annu*ro 10 #ul 1$20! and P1,!%%,."4 on the chec o* 2 #une 1$20! 9ith interest thereon at $H per annu *ro +u5ust 1$20. ro this )ud5ent thede*endant appealed.

Issue: <hether #aviers liailit as endorsed o* the checs in uestion 9as e?tin5uished.

Held: Section ,$ o* the 6e5otiale Instruents La9 (+ct 6o. 20"1& provides that! 9hen a ne5otiale instruent is dishonored *or non-acceptance ornon-paent! notice thereo* ust e 5iven to the dra9er and o* each o* the endorsers! and those 9ho are not noti*ied that the docuent 9asdishonored. 'hen! under the 5eneral principle o* the la9 o* procedure! it 9ill e incuent upon +sia /anin5! 9ho sees to en*orce #avi9eFs liailitupon these checs as endorser! to estalish said liailit provin5 that notice 9as 5iven to #avier 9ithin the tie! and in the anner! reuired thela9 that the checs in uestion had een dishonored. I* these *acts are not proven! +sia /anin5 has not su**icientl estalished #avierFs liailit. 'here isno proo* in the record tendin5 to sho9 that plainti** 5ave an notice 9hatsoever to the de*endant that the checs in uestion had een dishonored! andthere*ore it has not estalished its cause o* action. 'he Supree Court reversed the )ud5ent appealed *ro and asolved #avier *ro the coplaint9ithout special pronounceent as to costs.



Nyco Sales Corporation vs& + Finance Corp&BGR %13$4! 13 +u5ust 1$$1Second 8ivision! Paras (#&D 4 concur

Facts: 6co Sales Corporation 9hose president and 5eneral ana5er is Ru*ino >ao! is en5a5ed in the usiness o* sellin5 construction aterials 9ithprincipal o**ice in 8avao Cit. Soetie in 1$%,! the rothers Santia5o and Renato ernande;! oth actin5 in ehal* o* Sanshell Corporation!approached Ru*ino >ao *or credit accoodation. 'he reuested 6co! thru >ao! to 5rant Sanshell discountin5 privile5es 9hich 6co had 9ith /+inance Corporation. >ao apparentl acuiesced! hence on or aout 1 6oveer 1$%,! the ernande;es 9ent to >ao *or the purpose o* discountin5SanshellFs post-dated chec 9hich 9as a /PI-8avao /ranch Chec 4$$34, dated 1% eruar 1$%$ *or the aount o* P30!000.00. 'he said chec 9aspaale to 6co. ollo9in5 the discountin5 process a5reed upon! 6co! thru >ao! endorsed the chec in *avor o* /+ inance. 'herea*ter! /+ inanceissued a chec paale to 6co 9hich endorsed it in *avor o* Sanshell. Sanshell then ade use o* andor ne5otiated the chec. +ccopanin5 the

e?chan5e o* checs 9as a 8eed o* +ssi5nent e?ecuted 6co in *avor o* /+ inance 9ith the con*orit o* Sanshell. 6co 9as represented Ru*ino >ao! 9hile Sanshell 9as represented the ernande; rothers. Ander the said 8eed! the su)ect o* the discountin5 9as the a*orecited chec. +the ac thereo* and o* ever deed o* assi5nent 9as the Continuin5 Suretship +5reeent 9here the ernande;es unconditionall 5uaranteed to/+ inance the *ull! *aith*ul and propt paent and dischar5e o* an and all indetedness o* 6co. 'he /PI chec! ho9ever! 9as dishonored thedra9ee an upon presentent *or paent. /+ inance iediatel reported the atter to the ernande;es 9ho thereupon issued a sustitute checdated 1$ eruar 1$%$ *or the sae aount in *avor o* /+ inance. It 9as a Securit /an and 'rust Copan chec earin5 the nuer 1,"1%!9hich 9as a5ain dishonored 9hen it 9as presented *or paent. 8espite repeated deands! 6co and the ernande;es *ailed to settle the oli5ation9ith /+ inance! thus proptin5 the latter to institute an action in court. 6co and the ernande;es! despite havin5 een served 9ith suons andcopies o* the coplaint! *ailed to *ile their ans9er and 9ere conseuentl declared in de*ault. 7n 13 a 1$,0! the lo9er court ruled in *avor o* /+inance orderin5 the to pa the *orer )ointl and severall! the su o* P3!"3.3% plus 14H interest per annu *ro 1 #ul 1$%$ and attorneFs *eesin the aount o* P"!000.00 as 9ell as the costs o* suit. 6co! ho9ever! oved to set aside the order o* de*ault! to have its ans9er aditted and to eale to iplead Sanshell. 'he praer 9as 5ranted throu5h an order dated 2" #une 1$,0! 9herein the decision o* the court 9as set aside onl as re5ards6co. 'rial ensued once ore until the court reached a second decision! orderin5 6co to pa /+ inance P30!000.00 as principal oli5ation! plusinterest thereon at the rate o* 14H per annu *ro 1 eruar 1$%$ until *ull paid the aount o* P10!000.00 as and *or attorneFs *ees and one-third(1"& o* the costs o* the suit. <ith respect to the ernande;es! the decision o* 13 a 1$,0 stood. 7n appeal! the appellate court also upheld /+inance ut odi*ied the lo9er courtFs decision orderin5 that the interest should run *ro 1$ eruar 1$%$ until paid and not *ro 1 eruar 1$%$.6coFs suseuent otion *or reconsideration 9as denied. 6co *iled the petition *or revie9 on certiorari.

Issue: <hether 6co 9as actuall dischar5ed o* its liailit over the S/'C chec 9hen /+ inance *ailed to 5ive it a notice o* dishonor.

Held: 67. 6coFs pretension that it had not een noti*ied o* the *act o* dishonor is elied not onl the *oral deand letter ut also the *indin5s o*the trial court that Ru*ino >ao o* 6co and the ernande; /rothers o* Sanshell had *reuent contacts e*ore! durin5 and a*ter the dishonor. oreiportantl! it *ails to reali;e that *or as lon5 as the credit reains outstandin5! it shall continue to e liale to /+ inance as its assi5nor. 'he dishonor oan assi5ned chec sipl stresses its liailit and the *ailure to 5ive a notice o* dishonor 9ill not dischar5e it *ro such liailit. 'his is ecause thecause o* action stes *ro the reach o* the 9arranties eodied in the 8eed o* +ssi5nent! and not *ro the dishonorin5 o* the chec alone.



New Paciic 'imber , Supply Company vs& SenerisBGR L-41%34! 1$ 8eceer 1$,0Second 8ivision! Concepcion #r. (#&D 4 concur

Facts: 6e9 Paci*ic 'ier Suppl Copan! Inc. (6P'SCI& is the de*endant in a coplaint *or collection o* a su o* one *iled Ricardo +. 'on5.7n 1$ #ul 1$%4! a coproise )ud5ent 9as rendered #ud5e +lerto :. Seneris in accordance 9ith an aicale settleent entered into theparties the ters and conditions o* 9hich are (1& that 6P'SCI 9ill pa to 'on5 the aount o* P4!00.00 at 3H interest per annu to e reconed *ro2 +u5ust 1$%2 (2& that 6P'SCI 9ill pa to 'on5 the aount o* P3!000.00 as attorneFs *ees *or 9hich P!000.00 had een acno9led5ed received 'on5 under Consolidated /an and 'rust Corporation Chec 13-1"022 aountin5 to P!000.00 havin5 a alance o* P1!000.00 ("& that the entireaount o* P4!00.00 plus interest! plus the alance o* P1!000.00 *or attorneFs *ees 9ill e paid 6P'SCI to 'on5 9ithin onths *ro 1$ #ul 1$%4and (4& that *ailure on the part o* 6P'SCI to copl 9ith an o* the conditions! a 9rit o* e?ecution a e issued the Court *or the satis*action o* the

oli5ation. or *ailure o* 6P'SCI to copl 9ith his )ud5ent oli5ation! #ud5e Seneris! upon otion o* 'on5! issued an order *or the issuance o* a 9rito* e?ecution on 21 8eceer 1$%4. +ccordin5l! 9rit o* e?ecution 9as issued *or the aount o* P3"!1"0.00 pursuant to 9hich! the E?-7**icio Sheri**(=ai S. +dul9ahid& levied upon personal properties o* 6P'SCI! i.e. a unit o* +erican Lathe 24J! 1 Anit o* +erican Lathe 1,J Cracer <heeler! and1 Anit Roc*ord Shaper 24J and set the auction sale thereo* on 1 #anuar 1$%. 'he auction sale 9as then postponed on the *ollo9in5 da! 13 #anuar1$% at 10D00 a.. In the course o* the proceedin5s! 8eput Sheri** Castro sold the levied properties ite ite to 'on5 as the hi5hest idder in theaount o* P0!000.00. +s a result thereo*! the E?-7**icio Sheri** declared a de*icienc o* P1"!1"0.00. 'herea*ter! on 13 #anuar 1$%! the E?-7**icioSheri** issued a JSheri**Fs Certi*icate o* SaleJ in *avor o* 'on5 *or the total aount o* P0!000.00 onl. Suseuentl! on 1% #anuar 1$%! 6P'SCI *iledan e?-parte otion *or issuance o* certi*icate o* satis*action o* )ud5ent. 'his otion 9as denied #ud5e Seneris in his order dated 2, +u5ust 1$%. Invie9 thereo*! 6P'SCI *iled the petition *or certiorari 9ith preliinar in)unction.

Issue: <hether 'on5 can validl re*use acceptance o* the paent o* the )ud5ent oli5ation ade 6P'SCI consistin5 o* P0!000.00 in CashierFsChec and P1"!1"0.00 in cash 9hich it deposited 9ith the E?-7**icio Sheri** e*ore the date o* the scheduled auction sale.

Held: 'he chec deposited 6P'SCI in the aount o* P0!000.00 is not an ordinar chec ut a CashierFs Chec o* the Euitale /anin5Corporation! a an o* 5ood standin5 and reputation. +s testi*ied to the E?-7**icio Sheri** 9ith 9ho it has een deposited! it is a certi*ied crossedchec. It is a 9ell-no9n and accepted practice in the usiness sector that a CashierFs Chec is deeed as cash. oreover! since the said chec hadeen certi*ied the dra9ee an! the certi*ication! the *unds represented the chec are trans*erred *ro the credit o* the aer to that o* thepaee or holder! and *or all intents and purposes! the latter ecoes the depositor o* the dra9ee an! 9ith ri5hts and duties o* one in such situation.<here a chec is certi*ied the an on 9hich it is dra9n! the certi*ication is euivalent to acceptance. Said certi*ication Jiplies that the chec isdra9n upon su**icient *unds in the hands o* the dra9ee! that the have een set apart *or its satis*action! and that the shall e so applied 9henever thechec is presented *or paent. It is an understandin5 that the chec is 5ood then! and shall continue 5ood! and this a5reeent is as indin5 on thean as its notes in circulation! a certi*icate o* deposit paale to the order o* the depositor! or an other oli5ation it can assue. 'he o)ect o* certi*in5a chec! as re5ards oth parties! is to enale the holder to use it as one.J <hen the holder procures the chec to e certi*ied! Jthe chec operates asan assi5nent o* a part o* the *unds to the creditorsJ. =ence! the e?ception to the rule enunciated under Section 3" o* the Central /an +ct to the e**ectJthat a chec 9hich has een cleared and credited to the account o* the creditor shall e euivalent to a deliver to the creditor in cash in an aounteual to the aount credited to his accountJ shall appl in the present case. Considerin5 that the 9hole aount deposited 6P'SCI consistin5 o*CashierFs Chec o* P0!000.00 and P1"!1"0.00 in cash covers the )ud5ent oli5ation o* P3"!000.00 as entioned in the 9rit o* e?ecution! then! theCourt sees no valid reason *or 'on5 to have re*used acceptance o* the paent o* the oli5ation in his *avor. 'he auction sale! there*ore! 9as uncalled*or. 6P'SCIFs otion *or the issuance o* a certi*icate o* satis*action o* )ud5ent is clearl eritorious and #ud5e Seneris 5ravel aused his discretion innot 5rantin5 the sae under the circustances.



P$ilippine National +an% vs& National City +an% o New ;or%BGR 4"$3! "1 7ctoer 1$"3En /anc! Recto (#&D 3 concur

Facts: 7n +pril % and $! 1$""! an unno9n person or persons ne5otiated 9ith otor Service Copan! Inc. (SCI&! t9o checs in paent *orautooile tires purchased *ro SCIFs stores! purportin5 to have een issued the FPan5asinan 'ransportation Co.! Inc. (Pantranco& #.L. Klar!ana5er and 'reasurerF! a5ainst the Philippine 6ational /an (P6/& and in *avor o* the International +uto Repair Shop! *or P144.0 and P21.%. Saidchecs 9ere indorsed said unno9n persons in the anner indicated at the ac thereo*! the SCI! elievin5 at the tie that the si5natures o* #.L.Klar! ana5er and 'reasurer o* Pantranco on oth checs 9ere 5enuine. 'he checs 9ere then indorsed *or deposit SCI at the 6ational Cit /ano* 6e9 >or and the *orer 9as accordin5l credited 9ith the aounts thereo*! or P144.0 and P21.%. 7n +pril , and 10! 1$""! the said checs 9erecleared at the clearin5 house and P6/ credited the 6ational Cit /an *or the aounts thereo*! elievin5 at the t ie that the si5natures o* the dra9er

9ere 5enuine! that the paee is an e?istin5 entit and the endorseents at the an thereo* re5ular and 5enuine. 'he P6/ then *ound out that thepurported si5natures o* #.L. Klar! as ana5er and 'reasurer o* Pantranco 9ere *or5ed 9hen so in*ored the said Copan! and it accordin5ldeanded *ro the 6ational Cit /an and SCI and the reiurseent o* the aounts *or 9hich it credited the 6ational Cit /an at the clearin5house and *or 9hich the latter credited SCI! ut SCI and 6ational Cit /an re*used! and continue to re*use! to ae such reiurseents.Pantranco o)ected to have the proceeds o* said chec deducted *ro their deposit. P6/ *iled the case in the unicipal court o* anila a5ainst 6ationalCit /an and SCI. Apon P6/Fs otion! the case 9as disissed e*ore trial as to the 6ational Cit /an. + decision 9as therea*ter rendered 5ivin5P6/ )ud5ent *or the total aount o* P"30.2! 9ith interest and costs. ro this decision SCI appealed.

Issue [1]: <hether the paent o* the checs in uestion ade the dra9ee an constitutes an JacceptanceJ! and! conseuentl! the case should e5overned the provisions o* section 32 o* the 6e5otiale Instruents La9.

Held [1]: + chec is a ill o* e?chan5e paale on deand and onl the rules 5overnin5 ills o* e?chan5e paale on deand are applicale to it!accordin5 to section 1, o* the 6e5otiale Instruents La9. In vie9 o* the *act that acceptance is a step unnecessar in so *ar as ills o* e?chan5epaale on deand are concerned! it *ollo9s that the provisions relative to JacceptanceJ are 9ithout application to checs. +cceptance iplies! in e**ect!suseuent ne5otiation o* the instruent! 9hich is not true in case o* the paent o* a chec ecause *ro the oent a chec is paid it is 9ithdra9n*ro circulation. 'he 9arrant estalished section 32! is in *avor o* holders o* the instruent a*ter its acceptance. <hen the dra9ee an cashes orpas a chec! the ccle o* ne5otiation is terinated! and it is illo5ical therea*ter to spea o* suseuent holders 9ho can invoe the 9arrant provided insection 32 a5ainst the dra9ee. oreover! accordin5 to section 1$1! JacceptanceJ eans Jan acceptance copleted deliver or noti*icationJ and thisconcept is entirel incopatile 9ith paent! ecause 9hen paent is ade the chec is retained the an! and there is no such thin5 as deliveror noti*ication to the part receivin5 the paent. 'here can e no such thin5 as JacceptanceJ in the ordinar sense o* the ter. + chec ein5 paaleiediatel and on deand! the an can *ul* ill its dut to the depositor onl pain5 the aount deanded. 'he holder has no ri5ht to deand *rothe an anthin5 ut paent o* the chec! and the an has no ri5ht! as a5ainst the dra9er! to do anthin5 ut pa it. + chec is not an instruent9hich in the ordinar course o* usiness calls *or acceptance. 'he holder can never clai acceptance as his le5al ri5ht. =e can present *or paent!and onl *or paent.

Issue [2]: <hether the la9 or usiness practice prevents the presentation o* checs *or acceptance e*ore the are paid.

Held [2]: 'here is nothin5 in the la9 or in usiness practice a5ainst the presentation o* checs *or acceptance! e*ore the are paid! in 9hich case thereis a Jcerti*icationJ euivalent to JacceptanceJ accordin5 to section 1,%! 9hich provides that J9here a chec is certi*ied the an on 9hich it is dra9n!the certi*ication is euivalent to an acceptanceJ! and it is then that the 9arrant under section 32 e?ists. 'his certi*ication or acceptance consists in thesi5ni*ication the dra9ee o* his assent to the order o* the dra9er! 9hich ust not e?press that the dra9ee 9ill per*or his proise an other eans

than the paent o* one. <hen the holder o* a chec procures it to e accepted or certi*ied! the dra9er 9ill per*or his proise an other eansthan the paent o* one. <hen the holder o* a chec procedures it to e accepted or certi*ied! the dra9er and all indorsers are dischar5ed *roliailit thereon! and then the chec operates as an assi5nent o* a part o* the *unds to the credit o* the dra9er 9ith the an. 'here is nothin5 in thenature o* the chec 9hich intrinsicall precludes its acceptance! in lie anner and 9ith lie e**ect as a ill o* e?chan5e or dra*t a e accepted. 'hean a accept i* it chooses and it is *reuentl induced convenience! the e?i5encies o* usiness! or the desire to oli5e custoers!voluntaril to incur the oli5ation. 'he act 9hich the an places itsel* under oli5ation to pa to the holder the su called *or a chec ust e thee?pressed proise or undertain5 o* the an si5ni*in5 its intent to assue the oli5ation! or soe act *ro 9hich the la9 9ill iperativel ipl suchvalid proise or undertain5. 'he ost ordinar *or 9hich such an act assues is the acceptance the an o* the chec! or! as it is perhaps oreo*ten called! the certi*in5 o* the chec.

Issue [3]: <hether SCIFs ne5li5ence in purchasin5 the checs in uestion is such as to 5ive P6/ the ri5ht to recover upon said checs! and on theother hand! 9hether P6/ 9as not itsel* ne5li5ent! e?cept *or its constructive *ault in no9 no9in5 the si5nature o* the dra9er and detectin5 the *or5er.

Held [3]: Chec nuer 3"%02"-8 9as dated 3 +pril 1$""! 9hereas chec nuer 3"%020-8 and is dated % +pril 1$"". 'here*ore! the later chec!9hich is prior in nuer to the *orer chec! is ho9ever! issued on a later date. 'his circustance ust have aroused at least the curiosit o* SCI.SCI *urther accepted the t9o checs *ro unno9n persons. urtherore! chec 3"%02"-8 9as indorsed a sua5ent o* the a5ent o* the paee!

International +uto Repair Shop. SCI ade no inuir 9hatsoever as to the e?tent o* the authorit o* these unno9n persons. Chec 3"%020-8! aside*ro havin5 een indorsed a supposed a5ent o* the International +uto Repair Shop is crossed 5enerall. 'he e?istence o* t9o parallel linestransversall dra9n on the *ace o* this chec 9as a 9arnin5 that the chec could onl e collected throu5h a anin5 institution. >et SCI accepted thechec in paent *or erchandise. 'he *acts o* case do not ae it one et9een t9o euall innocent persons! the dra9ee an and the holder.Section 2" o* the 6e5otiale Instruents +ct provides that J9hen a si5nature is *or5ed or ade 9ithout the authorit o* the person 9hose si5nature itpurports to e! it is 9holl inoperative! and no ri5ht to retain the instruent! or to 5ive a dischar5e there*or! or to en*orce paent thereo* a5ainst anpart thereto! can e acuired throu5h or under such si5nature! unless the part a5ainst 9ho it is sou5ht to en*orce such ri5ht is precluded *ro settin5up the *or5er or 9ant o* authorit.J It not appearin5 that P6/ did not 9arrant to CSI the 5enuineness o* the checs in uestion! its acceptancethereo*! nor did it per*or an act 9hich 9ould have induced SCI to elieve in the 5enuineness o* said instruents e*ore SCI purchased the *orvalue! it can not e said that P6/ is precluded *ro settin5 up the *or5er and! there*ore! SCI is not entitled to retain the aount o* the *or5ed checpaid to it P6/.

Issue [4]: <hether the dra9ee an should e allo9ed recover! as SCIFs position 9ould not ecoe 9orse than i* the dra9ee had re*used thepaent o* these checs upon their presentation.



Held [4]: + dra9ee o* a chec! 9ho is deceived a *or5er o* the dra9erFs si5nature a recover the paent ac! unless his istae has placed aninnocent holder o* the paper in a 9orse position than he 9ould have een in i* the discover o* the *or5er had een ade on presentation. or5erieso*ten deceived the ee o* the ost cautions e?perts and 9hen a an has een so deceived! it is a harsh rule 9hich copels it to su**er althou5h noone has su**ered its ein5 deceived. =erein! SCI has lost nothin5 anthin5 9hich the dra9ee has done. It had in its hands soe *or5ed 9orthlesspapers. It did not purchase or acuire these papers ecause o* an representation ade to it the dra9ee. It purchased the *ro unno9n personsand under suspicious circustances. It had no valid title to the! ecause the persons *ro 9ho it received the did not have such title. SCI couldnot have copelled the dra9ee to pa the! and the dra9ee could have re*used paent had it een ale to detect the *or5er. / ain5 a re*und!SCI 9ould onl e returnin5 9hat it had received 9ithout an title or ri5ht. +nd 9hen CSI pas ac the one it has received it 9ill e entitled tohave restored to it the *or5ed papers it parted 9ith. 'here is no 5ood reason 9h the accidental paent ade P6/ should inure to the ene*it o*SCI. I* there 9ere in)ur to CSI said in)ur 9as caused not the *ailure o* P6/ to detect the *or5er ut the ver ne5li5ence o* CSI inpurchasin5 coercial papers *ro unno9n persons 9ithout ain5 inuir as to their 5enuineness.

)The court held in the case )1+ That where a chec is accepted or certified by the ban on which it is drawn$ the ban is estopped to deny thegenuineness of the drawer's signature and his capacity to issue the instrumentF )2+ That if a drawee ban pays a forged chec which was previouslyaccepted or certified by the said ban it cannot recover from a holder who did not participate in the forgery and did not have actual notice thereofF )!+That the payment of a chec does not include or imply its acceptance in the sense that this word is used in section 2 of the "egotiable nstruments6awF )+ That in the case of the payment of a forged chec$ even without former acceptance$ the drawee can not recover from a holder in due course nochargeable with any act of negligence or disregard of dutyF )&+ That to entitle the holder of a forged chec to retain the money obtained thereon$ theremust be a showing that the duty to ascertain the genuineness of the signature rested entirely upon the drawee$ and that the constructive negligence ofsuch drawee in failing to detect the forgery was not affected by any disregard of duty on the part of the holder$ or by failure of any precaution which$ fromhis implied assertion in presenting the chec as a sufficient voucher$ the drawee had the right to believe he had taenF )+ That in the absence of actualfault on the part of the drawee$ his constructive fault in not nowing the signature of the drawer and detecting the forgery will not preclude his recoveryfrom one who too the chec under circumstances of suspicion and without proper precaution$ or whose conduct has been such as to mislead thedrawee or induce him to pay the chec without the usual scrutiny or other precautions against mistae or fraudF )7+ That one who purchases a chec ordraft is bound to satisfy himself that the paper is genuine$ and that by indorsing it or presenting it for payment or putting it into circulation before

presentation he impliedly asserts that he performed his dutyF )%+ That while the foregoing rule$ chosen from a welter of decisions on the issue as thecorrect one$ will not hinder the circulation of two recogniGed mediums of e@change by which the great bul of business is carried on$ namely$ drafts andchecs$ on the other hand$ it will encourage and demand prudent business methods on the part of those receiving such mediums of e@changeF )9+ That

it being a matter of record in the present case$ that *". is no more chargeable with the nowledge of the drawer's signature than ,#S is$ as thedrawer was as much the customer of ,S# as of *".$ the presumption that a drawee ban is bound to now more than any indorser the signaturenature of its depositor does not holdF )1+ that according to the undisputed facts of the case ,S# in purchasing the papers in 0uestion from unnown

persons without maing any in0uiry as to the identity and authority of the said persons negotiating and indorsing them$ acted negligently and contributedto *".'s constructive negligence in failing to detect the forgeryF and )11+ that under the circumstances of the case$ if *". is allowed to recover$ therewill be no change of position as to the in=ury or pre=udice of ,#S(+



*oran vs& CBGR 10,"3! % arch 1$$4Second 8ivision! Re5alado (#&D 4 concur

Facts: Geor5e and Lirada oran are the o9ners o* the <ac-<ac Petron 5asoline station located at Sha9 /oulevard! corner 7ld <ac-<ac Road!andaluon5! etro anila. 'he re5ularl purchased ul *uel and other related products *ro Petrophil Corporation on cash on deliver (C78& asis.7rders *or ul *uel and other related products 9ere ade telephone and paents 9ere e**ected personal checs upon deliver. 'he oransaintained " )oint accounts! nael 1 current account ("%-00033-%& and 2 savin5s accounts! (10"%002",% and 10"%001"%2& 9ith the Sha9 /oulevardranch o* Cittrust /anin5 Corporation. +s a special privile5e to the orans! 9ho it considered as valued clients! the an allo9ed the to aintain a;ero alance in their current account. 'rans*ers *ro Savin5s +ccount 10"%002",% to their current account could e ade onl 9ith their priorauthori;ation! ut the 5ave 9ritten authorit to Cittrust to autoaticall trans*er *unds *ro their Savin5s +ccount 10"%001"%2 to their Current +ccount

"%-00033-% at an tie 9henever the *unds in their current account 9ere insu**icient to eet 9ithdra9als *ro said current account. Such arran5eent*or autoatic trans*er o* *unds 9as called a pre-authori;ed trans*er (P+'& a5reeent. 7n 12 8eceer 1$,"! the orans! throu5h Lirada! dre9 achec (Cittrust 041$30& *or P0!%3.00 paale to Petrophil Corporation. 'he ne?t da! 1" 8eceer 1$,"! the orans! a5ain throu5h Lirada! issuedanother chec (Cittrust 041$32& in the aount o* P3!0$0.00 in *avor o* the sae corporation. 'he total su o* the t9o checs 9as P103!333.00. 7n14 8eceer 1$,"! Petrophil deposited the t9o a*oreentioned checs to its account 9ith the Pandacan ranch o* the Philippine 6ational /an (P6/&!the collectin5 an. In turn! P6/ Pandacan ranch presented the *or clearin5 9ith the Philippine Clearin5 =ouse Corporation in the a*ternoon o* thesae da. 'he records sho9 that on 14 8eceer 1$,"! Current +ccount "%-00033-% had a ;ero alance! 9hile Savin5s +ccount 10"%001"%2 (covered the P+'& had an availale alance o* P23!104."0 and Savin5s +ccount 10"%002",% had an availale alance o* P4"!23,."$. +t aout 10 a.. o* the*ollo9in5 da! 1 8eceer 1$,"! Geor5e oran 9ent to the an! as 9as his re5ular practice! to personall oversee their dail transactions 9ith thean. =e deposited in their Savin5s +ccount 10"%002",% the aounts o* P10!,%4., and P3!%4.2! , and he lie9ise deposited in their Savin5s +ccount 10"%001"%2 the aounts o* P!$00.00! P"!100.00 and "0.00. 'he aount o* P40!000.00 9as then trans*erred hi *ro Savin5 +ccount10"%002",% to their current account eans o* a pro *ora 9ithdra9al *or (a deit eorandu&! 9hich 9as provided the an! authori;in5 thelatter to ae the necessar trans*er. +t the sae tie! the aount o* P33!333.00 9as trans*erred *ro Savin5s +ccount 10"%001"%2 to the saecurrent account throu5h the pre-authori;ed trans*er (P+'& a5reeent. Soetie on 8eceer 1 or 13! 1$," Geor5e oran 9as in*ored his 9i*eLirada! that Petrophil re*used to deliver their orders on a credit asis ecause the t9o checs the had previousl issued 9ere dishonored uponpresentent *or paent. +pparentl! the an dishonored the checs due to Jinsu**icienc o* *unds.J 'he non-deliver o* 5asoline *orced the orans toteporaril stop usiness operations! alle5edl causin5 the to su**er loss o* earnin5s. In addition! Petrophil cancelled their credit accoodation!*orcin5 the to pa *or their purchases in cash. Geor5e oran! *urious and upset! deanded an e?planation *ro Raul 8ia;! the ranch ana5er.ailin5 to 5et a su**icient e?planation! he taled to a certain :illareal! a an o**icer! 9ho alle5edl told hi that + /elen Ra5odo! the custoer serviceo**icer! had coitted a J5rave errorJ. 7n 8eceer 13 or 1%! 1$,"! 8ia; 9ent to the oran residence to 5et the si5natures o* the petitioners on anapplication *or a ana5erFs chec so that the dishonored checs could e redeeed. 8ia; then 9ent to Petrophil to personall present the checs inpaent *or the t9o dishonored checs. In a chance eetin5 around a or #une! 1$,4! Geor5e oran learned *ro one Constancio a5no! creditana5er o* Petrophil! that the latter received *ro Cittrust! throu5h 8ia;! a letter dated 13 8eceer 1$,"! noti*in5 the that the t9o checs 9ereJinadvertentl dishonored . . . due to operational error.J Said letter 9as received Petrophil on 4 #anuar 1$,4. 7n 24 #ul 1$,4! or a little over si?onths a*ter the incident! petitioners! throu5h counsel! 9rote Cittrust claiin5 that the anFs dishonor o* the checs caused the esirched usinessand personal reputation! shae and an?iet! hence the 9ere conteplatin5 the *ilin5 o* the necessar le5al actions unless the an issued acerti*ication clearin5 their nae and paid the P1!000!000.00 as oral daa5es. 'he an did not act *avoral on their deands! hence the orans*iled a coplaint *or daa5es on , Septeer 1$,4! 9ith the R'C Pasi5 (/ranch 1$! Civil Case 14$&. In turn! Cittrust *iled a counterclai *ordaa5es! alle5in5 that the case *iled a5ainst it 9as un*ounded and un)ust. +*ter trial! a decision dated $ 7ctoer 1$,$ 9as rendered the trial courtdisissin5 oth the coplaint and the counterclai. 7n appeal! the Court o* +ppeals rendered )ud5ent in C+-GR C: 200$ on $ 7ctoer 1$,$a**irin5 the decision o* the trial court.

Issue [1]: <hether a an is not liale *or its re*usal to pa a chec on account o* insu**icient *unds! ut 9herein a deposit a e ade later in the da.

Held [1]: i?ed savin5s and current deposits o* one in ans and siilar institutions shall e 5overned the provisions concernin5 siple loan. Inother 9ords! the relationship et9een the an and the depositor is that o* a detor and creditor. / virtue o* the contract o* deposit et9een the anerand its depositor! the aner a5rees to pa checs dra9n the depositor provided that said depositor has one in the hands o* the an. =ence!9here the an possesses *unds o* a depositor! it is ound to honor his checs to the e?tent o* the aount o* his deposits. 'he *ailure o* a an to pathe chec o* a erchant or a trader! 9hen the deposit is su**icient! entitles the dra9er to sustantial daa5es 9ithout an proo* o* actual daa5es.Conversel! a an is not liale *or its re*usal to pa a chec on account o* insu**icient *unds! not9ithstandin5 the *act that a deposit a e ade later inthe da. /e*ore a an depositor a aintain a suit to recover a speci*ic aount *ro his an! he ust *irst sho9 that he had on deposit su**icient*unds to eet his deand.

Issue [2]: <hether the Spouses oran had su**icient *unds in their accounts 9hen the an dishonored the checs in uestion.

Held [2]: 'he availale alance on 14 8eceer 1$," 9as used the an in deterinin5 9hether or not there 9as su**icient cash deposited to *undthe t9o checs! althou5h 9hat 9as staped on the dorsal side o* the t9o checs in uestion 9as J8+I12-1-,"!J since 1 8eceer 1$," 9as theactual date 9hen the checs 9ere processed. <hen the oransF checs 9ere dishonored due to insu**icienc o* *unds! the availale alance o* Savin5s

+ccount 10"%001"%2! 9hich 9as the su)ect o* the P+' a5reeent! 9as not enou5h to cover either o* the t9o checs. 7n 14 8eceer 1$,"! 9henP6/! Pandacan ranch presented the checs *or collection! the availale alance *or Savin5s +ccount 10"%001"%2 9as onl P23!104."0 9hile Current +ccount "%-0003-% had no availale alance. It 9as onl on 1 8eceer 1$," at around 10D00 a.. that the necessar *unds 9ere deposited! 9hichun*ortunatel 9as too late to prevent the dishonor o* the checs.

Issue [3]: <hether the an is reuired to 5ive notice e*ore dishonorin5 checs dra9n upon insu**icient *unds

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Nego Cases Summary