Nego Digest Cases

Nego-d: Lim vs. Rodrigo (GR 76974, 18 November 1988)

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Lim vs. RodrigoGR 76974, 18 November 1988Third Division, Fernan (J)

Facts: Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in

payment of a certain obligation to Benito Lim. Said checks were handed to

Lim’s brother, Vicente, at Ko Hu’s office in Nueva Street, Manila for delivery

to Benito Lim in Baguio City. When presented at Lim’s depository bank in

Baguio City, the checks were dishonored for having been drawn against a

closed account. Lim filed a suit against Ko Hu for violation of BP 22 in Baguio

City.

Issue: Whether the delivery of the checks to Benito Lim’s brother is the

delivery contemplated by law (prelude to juridictional issue)

Held: The venue of the offense lies at the place where the check was

executed and delivered to the payee and that the place where a check was

written, signed or dated does not fix the place where it was executed, as

what is of decisive importance is the delivery thereof which is the final act

essential to its consummation as an obligation. The “delivery” contemplated

by law “must be to a person who takes the check as a holder,” i.e. “the

payee or indorsee of a bill or note, who is in possession of it, or the bearer

thereof.” Vicente Lim, Benito’s brother, cannot be said to have taken the

checks in the concept of a holder for he is neither the payee or indorsee

thereof. Neither could he be deemed to be Benito’s agent with respect

thereto, for he was purposely sent to Ko Hu to get certain stock certificates

and not the checks in question (This is similar to the People vs. Yabut case).

Thu 25 Mar 2004

Nego-d: Lim vs. People (GR 130038, 18 September 2000)


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Lim vs. PeopleGR 130038, 18 September 2000En Banc, Pardo (J)

Facts: Rosa Lim bought various kinds of jewelry worth P300,000 from the

store of Maria Antonia Seguan, by issuing a check payable to “cash” drawn

against MetroBank. The next day, Lim again purchased jewelry valued at

P241,668 by issuing another check payable to cash likewise drawn against

MetroBank. Seguan deposited the checks with her bank. The checks were

returned with a notice of dishonor as Lim’s accounts in said bank were

already closed. Upon demand, Lim promised to pay Seguan the amounts of

the two dishonored checks. She never did. Rosa Lim was charge for two

counts of violation of BP 22, where she was found guilty, and sentenced to 1

year imprisonment with fine (P200,000).

Issue: Whether Lim has knowledge of the insufficiency of funds when issuing

the checks.

Held: The elements of BP22 are (1) the making, drawing and issuance of any

check to apply for account or for value, (2) the knowledge of the maker,

drawer or issuer that at the time of issue he does not have sufficient funds in

or credit with the drawee bank for the payment of such check in full upon its

presentment, and (3) the subsequent dishonor of the check by the drawee

bank for insufficiency of funds or credit or dishonor for the same reason had

not the drawer, without any valid cause, ordered the bank to stop payment.

Lim never denied issuing the check. Section 2 of BP 22 creates a

presumption juris tantum that the second element prima facie exists when

the first and third elements are present. If not rebutted, it suffices to sustain

a conviction.

It must be noted that similar to the Vaca case, the Court deleted the prison

sentences imposed upon Lim, holding that the two fines imposed for each of

the violation (P200,000 each ) are appropriate and sufficient. Subsidiary

imprisonment not exceeding 6 months is provided in case of insolvency or

non-payment of the fines as decreed.

Thu 25 Mar 2004

Nego-d: Lim vs. CA (GR 107898, 19 December 1995)


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Lim vs. CAGR 107898, 19 December 1995First Division, Bellosillo (J)

Facts: Spouses Manuel and Rosita Lim are the president and treasurer,

respectively, of RIGI Built Industries Inc. RIGI had been transacting business

with Linton Commercial Company for years, the latter supplying the former

with steel plates, steel bars, flat bars and purlin sticks which the company

uses in the fabrication, installation and building of steel structures. The Lims

ordered steel plates from Linton Commercial, delivering checks to the latter’s

collector as payment. The checks were dishonored for “insufficiency of

funds” with the additional notation “payment stopped” (The Lims claimed

that the supplies delivered by Linton Commercial were not in accordance

with the specifications of purchase orders). Despite demands, the Lims

refused to make good the checks or to pay value of the deliveries.

Issue: Whether the receipt of the checks by the collector of Linton is the

issuance and delivery to the payee within the contemplation of the law (as

prelude to jurisdiction issue).

Held: “Issue” means the first delivery of the instrument complete in form to

a person who takes it as a holder. “Holder“ refers to the payee or indorsee of

a note or who is in possession of it or the bearer thereof. The issuance as

well as the delivery of the check must be to a person who takes it as a

holder. Delivery of the checks signifies transfer of possession (actual or

constructive) from one person to another with intent to transfer title thereto;

the delivery being the final act essential to its consummation as an

obligation. The collector was not the person who could take the checks as a

holder. Neither could the collector be deemed an agent of Linton Commercial

with respect to the checks because he was a mere employee.

Thu 25 Mar 2004

Nego-d: Lazaro vs. CA (GR 105461, 11 November 1993)


No Comments

Lazaro vs. CAGR 105461, 11 November 1993Second Division, Padilla (J)

Facts: Marlyn Lazaro received from Rudy Chua the amount of P90,000 as

advanced payment for deliveries of sugar, etc. Lazaro was only able to

deliver partial delivery. To refund the undelivered goods, she issued a check

for P72,000. When deposited, the check was dishonored and stamped

“account closed.” To make up for the dishonor, Lazaro indorsed a check

issued by one Lolita Soriano, payable to “Cash.” It was likewise dishonored

and marked “account closed.” Chua sent a demand letter asking for the

payment of the amount covered by the first check within days from receipt

of letter. For failure of the accused to pay the amount, Chua filed cases for

estafa and violation of BP 22.

Issue: Whether damage or prejudice is an element of BP 22 violation.Held:

The clear intention of the framers of BP 22 is to make the mere act of issuing

a check that is worthless malum prohibitum. The law does not require that

there be damage or prejudice to the individual complainant by reason of the

issuance of the check. The fine provided for in BP 22 was intended as an

additional penalty for the act of issuing a worthless check. BP 22 provides

that a fine of not less than but not more than double the amount of the

dishonored check may be imposed by the court.

Thu 25 Mar 2004

Nego-d: Lao vs. CA (GR 119178, 20 June 1997)


No Comments

Lao vs. CAGR 119178, 20 June 1997Third Division, Panganiban (J)

Facts: Lim Lim Lao was a junior officer of Premier Investment House in its

Binondo branch. She was authorized to sign checks for and in behalf of the

corporation. In the course of business, she met Fr. Artelijo Palijo, provincial

treasurer of the Society of the Divine Word. Fr. Palijo was authorized to

invest donations of the society and had been investing the society’s money

with Premiere. Fr. Palijo was issued checks in payment of interest for the

society’s investments. The checks were dishonored for “insufficiency of

funds.” Fr. Palijo was only able to acquire P5,000 for his efforts in demanding

the payment of the checks. Premiere, subsequently, was placed under

receivership. Fr. Palijo filed a suit against Lim Lao and his co-signatory,

Teodulo Asprec, head of operations for violation of BP 22.

Issue: Whether an employee who, as part of her regular duties, signs blank

corporate check, be held for violation of BP22.

Held: The checks co-signed by Lim Lao were signed in advance and in blank,

delivered to the head of operations, who subsequently filled in the name of

he payee, the amounts and corresponding dates of maturity; this procedure

followed in keeping with her duties as a junior officer. Though BP 22 provides

the presumption that a drawer is knowledgeable of the fact of insufficiency of

funds, such presumption may be debunked by contrary evidence. Herein,

Lim Lao does not have the power, duty or responsibility to monitor and

assess the balances against the issuance, nor to make sure that the checks

were funded. Such responsibility devolved upon the corporation’s Treasury

Department in Cubao, Quezon City. Furthermore, no notice of dishonor was

actually sent or received by Lim Lao to support the prima facie evidence of

knowledge of insufficient funds. She was thus acquitted.

Thu 25 Mar 2004

Nego-d: Kalalo vs. Luz (GR L-27782, 31 July 1970)


No Comments

Kalalo vs. LuzGR L-27782, 31 July 1970En Banc, Zaldivar (J)

Facts: On 17 November 1959, Octavio Kalalo entered into an agreement

with Alfredo Luz where he was to render engineering design services for a

fee. On 11 December 1961, Kalalo sent Luz a statement of account where

the balance due for services rendered was P59,505. On 18 May 1962, Luz

sent Kalalo a resume of fees due to the latter, and a check for P10,861.08.

Kalalo refused to accept the check as full payment of the balance of the fees

due him. On 10 August 1962, Kalalo filed a complaint containing 4 causes of

action, i.e. $28,000 (representing 20% of the amount paid to Luz in the

International Research Institute project) and the balance of P30,881.25 as

fees; P17,0000 as consequential and moral damages; P55,000 as moral

damages, attorney’s fees and litigation expenses; and P25,000 as actual

damages, attorney’s fees and litigation expenses). The trial court ruled in

favor of Kalalo. Luz filed an appeal directly with the Supreme Court raising

only questions of law.

Issue: Whether the rate of exchange of dollar to peso are those at the time

of the payment of the judgment or at the time when the research institute

project became due and demandable.

Held: Luz’ obligation to pay Kalalo the sum of US$28,000 accrued on 25

August 1961, or after the enactment of RA 529 (16 June 1950). Thus, the

provision of the statute which requires payment at the prevailing rate of

exchange when the obligation was incurred cannot be applied. RA 529 does

not provide for the rate of exchange for the payment of obligation incurred

after the enactment of the Act, and thus the rate of exchange should be that

prevailing at the time of payment. The view finds support in the ruling of the

Court in Engel vs. Velasco & Co. The trial court did not err in holding the rate

of exchange is that at the time of payment.

Thu 25 Mar 2004

Nego-d: Jimenez vs. Bucoy (GR L-10221, 28 February 1958)


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Jimenez vs. BucoyGR L-10221, 28 February 1958En Banc, Bengzon (J)

Facts: In the proceedings in the intestate of Luther Young and Pacita Young

who died in 1954 and 1952, respectively, Pacifica Jimenez presented for

payment 4 promissory notes signed by Pacita for different amounts totalling

P21,000. Acknowledging receipt by Pacita during the Japanese occupation, in

the currency then prevailing, the Administrator manifested willingness to pay

provided adjustment of the sums be made in line with the Ballantyne

schedule. The claimant objected to the adjustment insisting on full payment

in accordance with the notes. The court held that the notes should be paid in

the currency prevailing after the war, and thus entitling Jimemez to recover

P21,000 plus P2,000 as attorney’s fees. Hence, the appeal.

Issue: Whether the amounts should be paid, peso for peso; or whether a

reduction should be made in accordance with the Ballantyne schedule.

Held: If the loan was expressly agreed to be payable only after the war, or

after liberation, or became payable after those dates, no reduction could be

effected, and peso-for-peso payment shall be ordered in Philippine currency.

The Ballantyne Conversion Table does not apply where the monetary

obligation, under the contract, was not payable during the Japanese

occupation. Herein, the debtor undertook to pay “six months after the war,”

peso for peso payment is indicated.

Thu 25 Mar 2004

Nego-d: Ibasco vs. CA (GR 117488, 5 September 1996)


No Comments

Ibasco vs. CAGR 117488, 5 September 1996Third Division, Davide Jr. (J)

Facts: The Ibasco spouses requested credit accommodation fro the supply

of ingredients in the manufacture of animal feeds from the Trivinio spouses.

Ibasco issued 3 checks for 3 deliveries of darak. The checks bounced and the

Ibasco spouses were notified of the dishonor. Ibasco instead offered a

property in Daet. The property, being across the sea, the Trivinio spouses did

not inspect the property. For the failure of the Ibasco spouses to settle their

account, the Trivinio spouses filed criminal cases against the former for

violation of BP22.

Issue: Whether the checks were for accommodation or guarantee to acquire

the benefits of the interpretation of Ministry Circular 4 of the Department of

Justice in relation to BP 22.

Held: Ministry Circular 4, issued 1 December 1981 by the Department of

Justice, provides that where a check is issued as part of an arrangement to

guarantee or secure the payment of the obligation, pre-existing or not, the

drawer is not criminally liable for either estafa or violation of BP 22. Incidents

however indicate that the checks were issued as payment and for value, and

not for accommodation (i.e. pertaining to an arrangement made a favor to

another, not upon a consideration received). as the checks failed to bear any

statement “for accommodation” and “for guarantee” to show Ibasco’s intent.

( It must be noted, however, that BP22 does not distinguish and applies even

in cases where dishonored checks were issued as a guarantee or for deposit

only. The erroneous interpretation of Ministry Circular 4 was rectified by the

repealing Ministry Circular 12, issued on 8 August 1984).

Thu 25 Mar 2004

Nego-d: Hongkong & Shanghai Bank vs.

People’s Bank and Trust (GR L-28226, 30 September 1970)


No Comments

Hongkong & Shanghai Bank vs. People’s Bank and TrustGR L-28226,

30 September 1970First Division, Fernando (J)

Facts: The Philippine Long Distance Telephone Company (PLDT) drew a

check on the Hongkong & Shanghai Banking Corporation (HSBC) in the

latter’s favor for P14,608.05, and sent it through mail. The check fell into the

hands of Florentino Changco, who was able to erase the name of the payee

and substituted his own, and deposited the altered check in his current

account with the People’s Bank and Trust Co. (PBTC). The check was cleared

by HSBC, and PBTC credited Changco the amount. The alteration was known

when the cancelled check was returned to PLDT. HSBC requested PBTC to

refund the amount, but the latter refused.

Issue: Whether HSBC can claim reimbursement from PBTC.Held: A person

who presents fro payment checks guarantees the genuineness of the check,

and the drawee bank need to concern itself with nothing but the

genuineness of the signature, and the state of the account with it of the

drawee. If at all, whatever remedy, whatever remedy HSBC has would lie not

against PBTC but as against the party responsible for changing the name of

the payee (i.e. Changco). Its failure to call the attention of PBTC as to such

alteration until after the lapse of 27 days would, in the light of Central Bank

Circular 9 (24-hour clearing house rule), negate whatever right it might have

had against PBTC.

Thu 25 Mar 2004

Nego-d: Gempesaw vs. CA (GR 92244, 9 February 1993)


No Comments

Gempesaw vs. CAGR 92244, 9 February 1993Second Division, Campos Jr.

(J)

Facts: Natividad Gempesaw issued checks, prepared by her bookkeeper, a

total of 82 checks in favor of several supplies. Most of the checks for

amounts in excess of actual obligations as shown in their corresponding

invoices. It was only after the lapse of more than 2 years did she discovered

the fraudulent manipulations of her bookkeeper. It was also learned that the

indorsements of the payee were forged, and the checks were brought to the

chief accountant of Philippine Bank of Commerce (the Drawee Bank, Buendia

Branch) who deposited them in the accounts of Alfredo Romero and Benito

Lam. Gempesaw made demand upon the bank to credit the amount charged

due the checks. The bank refused. Hence, the present action.

Issue: Who shall bear the loss resulting from the forged indorsements.

Held: As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawer’s account for the amount of said check. An exception to the rule is where the drawer is guilty of such negligence which causes the bank to honor such checks. Gempesaw did not exercise prudence in taking steps that a careful and prudent businessman would take in circumstances to discover discrepancies in her account. Her negligence was the proximate cause of her loss, and under Section 23 of the Negotiable Instruments Law, is precluded from using forgery as a defense. On the other hand, the banking rule banning acceptance of checks for deposit or cash payment with more than one indorsement unless cleared by some bank officials does not invalidate the instrument; neither does it invalidate the negotiation or transfer of said checks. The only kind of indorsement which stops the further negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation thereof, pursuant to Section 36 of the Negotiable Instruments Law. In light of any case not provided for in the Act that is to be governed by the provisions of existing legislation, pursuant to Section 196 of the Negotiable Instruments Law, the bank may be held liable for damages in accordance with Article 1170 of the Civil Code. The drawee bank, in its failure to discover the fraud committed by its employee and in contravention banking rules in allowing a chief accountant to deposit the checks bearing second indorsements, was adjudged liable to share the loss with Gempesaw on a 50:50 ratio.

Nego-d: Firestone Tire and Rubber vs. Ines Chaves & Co. (GR L-17106, 19 October 1966)


No Comments

Firestone Tire and Rubber vs. Ines Chaves & Co.GR L-17106, 19

October 1966En Banc, Regala (J)

Facts: The check was intended as part of the payment of Ines Chaves’ debt.

When presented to the Security Bank and Trust Co. by Firestone, the check

was returned for insufficiency of funds. Despite repeated demands, Ines

Chaves failed to settle its account; hence, the suit.

Issue: Whether good faith is required in the issuance of a check.

Held: Everyone must in the performance of his duties, observe honesty and

good faith. Where a person issues a postdated check without funds to cover

it and informs the payee of this fact, he cannot be held guilty of estafa

because there is no deceit. Herein, there is nothing in the record to show

that Firestone knew that there were no funds when it accepted the check,

much less that Firestone agreed to take the check with knowledge of the

lack of funds. As Ines Chavez is guilty of fraud (bad faith) in the performance

of its obligation, it is liable for damages. Its conduct wanting in good faith,

the award of attorney’s fees was warranted.

Thu 25 Mar 2004

Nego-d: Dela Victoria vs. Burgos (GR 111190, 27 June 1995)


No Comments

Dela Victoria vs. BurgosGR 111190, 27 June 1995First Division, Bellosillo

(J)

Facts: Raul Sesbreno filed a complaint for damages against Assistant City

Fiscal Bienvenido Mabanto before the RTC of Cebu City. After trial, judgment

was rendered ordering Mabanto to pay Sesbreno P11,000. The decision

having become final and executory, the trial court ordered its execution

upon Sesbreno’s motion. The writ of execution was issued despite Mabanto’s

objection. A notice of garnishment was served upon Loreto de la Victoria as

City Fiscal of Mandaue City where Mabanto was then detailed. De la Victoria

moved to quash the notice of garnishment claiming that he was not in

possession of any money, funds, etc. belonging to Mabanto until delivered to

him, and as such are still public funds which could not be subject of

garnishment..

Issue: Whether the checks subject of garnishment belong to Mabanto or

whether they still belong to the government.

Held: Under Section 16 of the Negotiable Instruments Law, every contract

on a negotiable instrument is incomplete and revocable until delivery of the

instrument for the purpose of giving effect thereto. As ordinarily understood,

delivery means the transfer of the possession of the instrument by the

maker or drawer with the intent to transfer title to the payee and recognize

him as the holder thereof. Herein, the salary check of a government officer

or employee does not belong to him before it is physically delivered to him.

Inasmuch as said checks had not yet been delivered to Mabanto, they did

not belong to him and still had the character of public funds. As a necessary

consequence of being public fund, the checks may not be garnished to

satisfy the judgment.

Thu 25 Mar 2004

Nego-d: Vaca vs. CA (GR 43596, 31 October 1936)


No Comments

Vaca vs. CAGR 43596, 31 October 1936En Banc, Recto (J)

Facts: Eduardo Vaca is the president and owner of Ervine International while

Fernando Nieto, Vaca’s son-in-law, is the firm’s purchasing manager. They

issued a check for P10,000 to the General Agency for Reconnaissance,

Detection and Security (GARDS) and drawn against China Bank. When

deposited with PCIBank, the check was dishonored for insufficiency of funds.

GARDS sent a demand letter but the drawers failed to pay within the time

given (7 days from notice). A few days later, however, Vaca issued a check

to GARDS for P19,866.16, drawn against Associated Bank, replacing the

dishonored check. GARDS did not return the dishonored check. Later on,

GARDS Acting Operations Manager filed a criminal suit against Vaca and

Nieto for violation of BP 22. The trial court sentenced each to 1 year

imprisonment and to pay a fine of P10,000 and costs.

Issue [1]: Whether the drawers had knowledge of insufficient funds in

issuing the check.

Held [1]: Section 2 of BP 22 provides a presumption of knowledge of

insufficiency of funds if the drawer fails to maintain sufficient funds within 90

days after the date of the check, or to make arrangement for payment in full

by the drawee of such check within 5 days after receiving notice that such

check has not been paid by the drawee. Herein, the second check

supposedly replacing the dishonored check is actually the payment of two

separate bills, and was issued 15 days after notice. Such “replacement”

cannot negate the presumption that the drawers knew of the insufficiency of

funds.

Issue [2]: Whether the absence of damages incurred by the payee absolves

the drawers from liability.

Held [2]: The claim — that the case was simply a result of a

misunderstanding between GARDS and the drawers and that the security

agency did not suffer any damage from the dishonor of the check — is

flimsy. Even if the payee suffered no damage as a result of the issuance of

the bouncing check, the damage to the integrity of the banking system

cannot be denied. Damage to the payee is not an element of the crime

punished in BP 22.

Note: In this case, the Court recognized the contribution of Filipino

entrepreneurs to the national economy; and that to serve the ends of

criminal justice, instead of the 1 year imprisonment, a fine of double the

amount of the check involved was imposed as penalty. This was made to

redeem valuable human material and prevent unnecessary deprivation of

personal liberty and economic usefulness with due regard to the protection

of the social order.

Thu 25 Mar 2004

Nego-d: Vda. de Eduque vs. Ocampo (GR L-222, 26 April 1950)


No Comments

Vda. de Eduque vs. OcampoGR L-222, 26 April 1950Second Division,

Moran (CJ)

Facts: On 16 February 1935, Dr. Jose Eduque secured two loans from

Mariano Ocampo de Leon, Dona Escolastica delos Reyes and Don Jose M.

Ocampo, with amount s of P40,000 and P15,000, both payable within 20

years with interest of 5% per annum. Payment of the loans was guaranteed

by mortgage on real property. On 6 December 1943, Salvacion F. Vda de

Eduque, as administratrix of the estate of Dr. Jose Eduque, tendered

payment by means of a cashier’s check representing Japanese War notes to

Jose M. Ocampo, who refused payment. By reason of such refusal, an action

was brought and the cashier’s check was deposited in court. After trial,

judgment was rendered against Ocampo compelling him to accept the

amount, to pay the expenses of consignation, etc. Ocampo accepted the

judgment as to the second loan but appealed as to the first loan.

Issue: Whether there is a tender of payment by means of a cashier’s check

representing war notes.

Held: Japanese military notes were legal tender during the Japanese

occupation; and Ocampo impliedly accepted the consignation of the

cashier’s check when he asked the court that he be paid the amount of the

second loan (P15,000). It is a rule that a cashier’s check may constitute a

sufficient tender where no objection is made on this ground.

Thu 25 Mar 2004

Nego-d: Crystal vs. CA (GR L-35767, 18 June 1976)


No Comments

Crystal vs. CAGR L-35767, 18 June 1976Resolution of the Second Division,

Barredo (J)

Facts: The Supreme Court, in its decision of 25 February 1975, affirmed the

decision of the Court of Appeals, holding that Raymundo Crystal’s

redemption of the property acquired by Pelagia Ocang, Pacita, Teodulo,

Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de Garcia, was

invalid as the check which Crystal used in paying the redemption price has

been either dishonored or had become stale (Ergo, the value of the check

was never realized). Crystal filed a motion for reconsideration.

Issue: Whether the conflicting circumstances of the check being dishonored

and becoming stale affect the validity of the redemption sale.

Held: For a check to be dishonored upon presentment and to be stale for not

being presented at all in time are incompatible developments that have

variant legal consequences. If indeed the questioned check was dishonored,

the redemption was null and void. If it had only become state, it becomes

imperative that the circumstances that caused its non-presentment be

determined, for if it was not due to the fault of the drawer, it would be unfair

to deprive him of the rights he had acquired as redemptioner. Herein, it

appears that there is a strong showing that the check was not dishonored,

although it became stale, and that Pelagia Ocang had actually been paid the

full value thereof. The Supreme Court, thus, reconsidered its decision and

remanded the case to the trial court for further proceedings.

Thu 25 Mar 2004

Nego-d: Cruz vs. CA (GR 108738, 17 June 1994)


No Comments

Cruz vs. CAGR 108738, 17 June 1994First Division, Kapunan (J)

Facts: Andrea Mayor is engaged in the business of granting interest-bearing

loans and in rediscounting checks. Roberto Cruz, on the other hand, is

engaged in selling ready to wear clothes at the Pasay Commercial Center.

Cruz frequently borrows money from Mayor. In 1989, Cruz borrowed

P176,000 from mayor, which Mayor delivered. In turn, Cruz issued a

Premiere Bank check for the same amount. When the check matured, Mayor

presented it to the bank but was dishonored and marked “account closed.”

When notified of the dishonor, Cruz promised to pay in cash. No payment

was made, and thus the criminal action for violation of BP 22 was instituted.

Issue: Whether Cruz is liable for violating BP 22, even upon the claim that

the check was issued to serve a mere evidence of indebtedness, and not for

circulation or negotiation.

Held: A check issued as an evidence of debt, though not intended to be

presented for payment has the same effect of an ordinary check, hence, it

falls within the ambit of BP 22. When a check is presented for payment, the

drawee bank will generally accept the same regardless of whether it was

issued in payment of an obligation or merely to guarantee the said

obligation. What the law punishes is the issuance of a bouncing check, not

the purpose for which it was issued nor the term and conditions relating to

its issuance. The mere act of issuing a worthless check is malum prohibitum.

Thu 25 Mar 2004

Nego-d: Co vs. PNB (GR L-51767, 29 June 1982)


No Comments

Co vs. PNBGR L-51767, 29 June 1982Second Division, Barredo (J)

Facts: Standard Parts Manufacturing Corporation mortgaged properties to

PNB. When Standard failed to pay its obligation (P4,296,803,56 secured by

said properties), PNB extra-judicially foreclosed the mortgages. Standard,

meanwhile, transferred its rights in the mortgages to Citadel Insurance and

Surety Co., which wrote PNB its interest to redeem the Makati property (one

of the property mortgaged) for P1,621,970. PNB rejected the offer. Citadel

filed suit against PNB, where the complaint was accompanied by an RCBC

manager’s check and which was deposited under a savings bank account

with RCBC by order of the trial court.

Issue: Whether there was a valid and effective tender of payment.

Held: The unequivocal tender of redemption was made, through a

manager’s check of RCBC (a well-known, big and reputable banking

institution) for the amount it believed it should pay as redemption price. PNB

rejected it on the sole and only ground that it considered the amount

insufficient. Redemption was made on time, i.e. 1 year from the date

appearing as the date of the registration of the certificate of sale. Tender by

manager’s check was not inefficacious as the Court has already sanctioned

redemption by check (See Javellana vs. Mirasol).

Thu 25 Mar 2004

Nego-d: Clark vs. Sellner (GR 16477, 22 November 1921)


No Comments

Clark vs. SellnerGR 16477, 22 November 1921First Division, Romualdez (J)

Facts: George Sellner, with WH Clarke and John Mave, signed a note in favor

of RN Clark dated 1 July 1914 in Manila for the amount of P12,000. The note

matured, but its amount was not paid. Action was filed in court. Sellner’s

counsel allege that Sellner did not receive anything of value for the

transaction, that the instrumnet was not presented to sellner for payment,

and that Sellner, being an accommodation party is not liable unless the note

is negotiated, which was allegedly not done.

Issue: Whether Sellner is an accommodation party liable for the note.

Held: Sellner, as one of the signers of the note, is one of the joint and

several debtors on the note, and as such he is liable under Section 60 of the

Negotiable Instruments Law/ Sellner lent his name, not to the creditor, but to

those who signed with him placing himself with respect to the creditor in the

same position and with the same liability as the said signers; and thus is a

joint surety rather than an accommodation party. As to the presentment for

payment, such action is not necessary in order to charge the person

primarily liable, as is Sellner (Section 70, Negotiable Instruments Law).

Thu 25 Mar 2004

Nego-d: City Trust Banking vs. CA (GR 92591, 30 April 1991)


No Comments

City Trust Banking vs. CAGR 92591, 30 April 1991Third Division, Gutierrez

Jr. (J)

Facts: William Samara purchased from Citytrust Bank Draft 23681 for US$

40,000 the payee being Thai International Airways and the corresponding

drawee bank in the United States is Marine Midland. Samara executed a

stop-payment order of the bank draft instructing Citytrust to inform Marine

Midland about the order through telex. Marine Midland noted the order, and

thus Citytrust credited Samara’s account. Seven months later, Citytrust re-

debited Samara’s account upon discovery that Marine Midland had already

debited Citytrust’s account.

Issue: Who shall be liable for the amount.

Held: Citytrust and Marine Midland were not in privity with each other in a

transaction involving payment through a bank draft. A bank draft is a bill of

exchange drawn by a bank upon its correspondent bank issued at the

solicitation of a stranger who purchases and pays therefor. It is an order for

payment of money. Citytrust was the drawer of the draft through which it

ordered Marine Midland, the drawee bank, to pay Thai Airways. The drawee

bank acting as payor bank is solely liable for acts not done in accordance

with the instructions of the drawer bank or the purchaser of the draft. The

drawee bank has the burden of proof that it did not so violate. Meanwhile,

the drawer, if sued by the purchaser of the draft, is liable for the act of

debiting the customer’s account despite an instruction to stop payment. The

drawer has the duty to prove that he complied with the order to inform the

drawee.

Thu 25 Mar 2004

Nego-d: Caram Resources vs. Contreras (AM MTJ0830849, 26 October 1994)


No Comments

Caram Resources vs. ContrerasAM MTJ0830849, 26 October 1994First

Division, Davide Jr. (J)

Facts: Teresita Dizon obtained a loan from Caram Resources payable in

installments. She issued a promissory note and postdated BPI checks, four of

which were dishonored when presented to the bank as the account against

which they were drawn had been closed. Caram charged Dizon for violation

of BP22, but where Judge Contreras acquitted Dizon on the ground of

reasonable doubt. Subsequently, Caram charged Judge Maximo Contreras

with gross ignorance of the law and gross misconduct committed in Dizon’s

criminal case.

Issue: Whether malice is an essential element in BP 22.

Held: In the 4 criminal cases before Judge Contreras, Dizon as accused admitted that a loan was granted to her and in connection therewith she executed a promissory note wherein she bound herself to pay the loan in 12 installments. She issued the postdated checks to cover the installments as they fall due. The checks were drawn against her BPI current account, which she closed in the same months she obtained the loan, so that when the checks were presented for payment they were dishonored. Malice and intent in issuing a worthless check are immaterial. The offense is committed by the

very fact of its performance, i.e. the mere act of issuing a worthless check. The offense is malum prohibitum. An act may not be considered by society as inherently wrong, hence, not malum in se, but because of the harm that it inflicts on the community, it can be outlawed and criminally punished as malum prohibitum, pursuant to the State’s exercise of police power.

Nego-d: Caltex (Philippines) Inc. vs. CA (GR 97753, 10 August 1992)


No Comments

Caltex (Philippines) Inc. vs. CAGR 97753, 10 August 1992Second

Division, Regalado (J)

Facts: On various dates, Security Bank and Trust Co. (SEBTC), through its

Sucat branch, issued 280 certificates of time deposit (CTD) in favor of one

Angel dela Cruz who deposited with the bank the aggregate amount of P1.12

million. Anger de la Cruz delivered the CTDs to Caltex in connection with his

purchase of fuel products from the latter. Subsequently, dela Cruz informed

the bank that he lost all the CTDs, and thus executed an affidavit of loss to

facilitate the issuance of the replacement CTDs. De la Cruz was able to

obtain a loan of P875,000 from the bank, and in turn, he executed a

notarized Deed of Assignment of Time Deposit in favor of the bank.

Thereafter, Caltex presented for verification the CTDs (which were declared

lost by de la Cruz) with the bank. Caltex formally informed the bank of its

possession of the CTDs and its decision to preterminate the same. The bank

rejected Caltex’ claim and demand, after Caltex failed to furnish copy of the

requested documents evidencing the guarantee agreement, etc. In 1983, de

la Cruz’ loan matured and the bank set-off and applied the time deposits as

payment for the loan. Caltex filed the complaint, but which was dismissed.

Issue [1]: Whether the Certificates of Time Deposit (CTDs) are negotiable

instruments.

Held [1]: The CTDs in question meet the requirements of the law for

negotiability. Contrary to the lower court’s findings, the CTDs are negotiable

instruments (Section 1). Negotiability or non-negotiability of an instrument is

determined from the writing, i.e. from the face of the instrument itself. The

documents provided that the amounts deposited shall be repayable to the

depositor. The amounts are to be repayable to the bearer of the documents,

i.e. whosoever may be the bearer at the time of presentment.Issue [2]:

Whether the CTDs’ negotiation require delivery only.

Held [2]: Although the CTDs are bearer instruments, a valid negotiation

thereof for the true purpose and agreement between it (Caltex) and de la

Cruz requires both delivery and indorsement; as the CTDs were delivered to

it as security for dela Cruz’ purchases of its fuel products, and not for

payment. Herein, there was no negotiation in the sense of a transfer of title,

or legal title, to the CTDs in which situation mere delivery of the bearer CTDs

would have sufficed. The delivery thereof as security for the fuel purchases

at most constitutes Caltex as a holder for value by reason of his lien.

Accordingly, a negotiation for such purpose cannot be effected by mere

delivery of the instrument since the terms thereof and the subsequent

disposition of such security, in the event of non-payment of the principal

obligation, must be contractually provided for.

Wed 24 Mar 2004

Nego-d: Bataan Cigar and Cigarette Factory vs. CA (GR 93048, 3 March 1994)


No Comments

Bataan Cigar and Cigarette Factory vs. CAGR 93048, 3 March 1994

Second Division, Nocon (J)

Facts: Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its

suppliers, Kim Tim Pua George (George King), to deliver bales of tobacco

leaf. In consideration thereof, BCCFI issued postdated cross checks to King.

King sold the checks, at a discount, to the State Investment House Inc. (SIHI).

As King failed to deliver the bales of tobacco leaf despite demand, BCCFI

issued stop payment orders on the checks. Efforts by SIHI to collect from

BCCFI failed. SIHI filed suit.

Issue: Whether SIHI can recover the value of the checks, premised on the

issue whether SIHI is a holder in due course.

Held: The facts of the case are on all fours to the case of SIHI vs.

Intermediate Appellate Court. The crossing of the checks should put the

holder on inquiry and upon him devolves the duty to ascertain the indorser’s

title to the check or the nature of his possession. Failing in this respect, the

holder is declared guilty of gross negligence amounting to legal absence of

good faith, contrary to Section 52 (c) of the Negotiable Instruments Law, and

as such the consensus of authority is to the effect that the holder of the

check is not a holder in due course. BCCFI cannot be obliged to pay the

checks as there is a failure of consideration (King being unable to supply the

bales of tobacco leaf, for which the checks were intended for). Still, SIHI — a

holder not in due course — can collect from the immediate indorser, George

King. Such is the disadvantage of a holder not in due course, i.e. the

instrument is subject to defenses as if it were non-negotiable.

Wed 24 Mar 2004

Nego-d: Associated Bank vs. CA (GR 107382, 31 January 1996)


No Comments

Associated Bank vs. CAGR 107382, 31 January 1996Second Division,

Romero (J)

Facts: The Province of Tarlac maintains a current account with the Philippine

National Bank (PNB Tarlac Branch) where the provincial funds are deposited.

Portions of the funds were allocated to the Concepcion Emergency Hospital.

Checks were issued to it and were received by the hospital’s administrative

officer and cashier (Fausto Pangilinan). Pangilinan, through the help of

Associated Bank but after forging the signature of the hospital’s chief (Adena

Canlas), was able to deposit the checks in his personal account. All the

checks bore the stamp “All prior endorsement guaranteed Associated Bank.”

Through post-audit, the province discovered that the hospital did not receive

several allotted checks, and sought the restoration of the debited amounts

from PNB. In turn, PNB demanded reimbursement from Associated Bank.

Both banks resisted payment. Hence, the present action.

Issue: Who shall bear the loss resulting from the forged checks.

Held: PNB is not negligent as it is not required to return the check to the

collecting bank within 24 hours as the banks involved are covered by Central

Bank Circular 580 and not the rules of the Philippine Clearing House.

Associated Bank, and not PNB, is the one duty-bound to warrant the

instrument as genuine, valid and subsisting at the time of indorsement

pursuant to Section 66 of the Negotiable Instruments Law. The stamp

guaranteeing prior indorsement is not an empty rubric; the collecting bank is

held accountable for checks deposited by its customers. However, due to the

fact that the Province of Tarlac is equally negligent in permitting Pangilinan

to collect the checks when he was no longer connected with the hospital, it

shares the burden of loss from the checks bearing a forged indorsement.

Therefore, the Province can only recover 50% of the amount from the

drawee bank (PNB), and the collecting bank (Associated Bank) is liable to

PNB for 50% of the same amount.

Wed 24 Mar 2004

Nego-d: Associated Bank vs. CA (GR 89802, 7 May 1992)


No Comments

Associated Bank vs. CAGR 89802, 7 May 1992First Division, Cruz (J)

Facts: Melissa’s RTW’s customers issued cross checks payable to Melissa’s

RTW, which its proprietor Merle Reyes did not receive. It was learned that the

checks had been deposited with the Associated Bank by one Rafael Sayson.

Sayson was not authorized by Reyes to deposit and encash said checks.

Reyes filed an action for the recovery of the total value of the checks plus

damages.

Issue: Whether the bank was negligent for the loss.

Held: Crossing a check means that the drawee bank should not encash the

check but merely accept it for deposit, that the check may be negotiated

only once by one who has an account in a bank, and that the check serves as

warning that it was issued for a definite purpose so that he must inquire if he

has received the check pursuant to that purpose. The effect, thus, relate to

the mode of its presentment for payment, in accordance with Section 72 of

the Negotiable Instruments Law. The bank paid the checks notwithstanding

that title had not passed to the indorser, as the checks had been crossed and

issued “for payee’s account only.” It does did so in its own peril and became

liable to the payee for the value of the checks. The failure of the bank to

make an inquiry as to Sayson’s authority was a breach of its duty. The bank

is negligent and is thus liable to Reyes.

Wed 24 Mar 2004

Nego-d: Arrieta vs. National Rice & Corn Corporation (GR L-15645, 31 January 1964)


No Comments

Arrieta vs. National Rice & Corn Corporation (NARIC)GR L-15645, 31

January 1964En Banc, Regala (J)

Facts: On 19 May 1952, Paz and Vitaliado Arrieta participated in the public

bidding called by NARIC for the supply of 20,000 metric tons of Burmese rice.

Ad her bid of $203 per metric ton was the lowest, she was awarded the

contract for the same. As a result of the delay in the opening of the letter of

credit by NARIC, the allocation of Arrieta’s supplier in Rangoon was cancelled

and the 5% deposit amounting to an equivalent of P200,000 was forfeited.

Arrieta endeavored but failed to restore the cancelled Burmese rice

allocation, and thus offered Thailand rice instead. Such offer was rejected by

NARIC. Subsequently, Arrieta sent a letter to NARIC, demanding

compensation for the damages caused her in the sum of US$286,000

representing unrealized profit. The demand having been rejected, she

instituted the case.

Issue: Whether the rate of exchange to be applied in the conversion is that

prevailing at the time of breach, or at the time the obligation was incurred,

or on the promulgation of the decision.

Held: As pronounced in Eastboard Navigation vs. Ismael, if there is any

agreement to pay an obligation in the currency other than Philippine legal

tender, the same is null and void as contrary to public policy (RA 529), and

the most that could be demanded is to pay said obligation in Philippine

currency to be measured in the prevailing rate of exchange at the time the

obligation was incurred. Herein, the rate of exchange to be applied is that of

1 July 1952, when the contract was executed.

Wed 24 Mar 2004

Nego-d: Ang Tiong vs. Ting (GR L-26767, 22 February 1968)


No Comments

Ang Tiong vs. TingGR L-26767, 22 February 1968En Banc, Castro (J)

Facts: Lorenzo Ting issued a check for P4,000 payable to “cash or bearer.”

With Felipe Ang’s signature (indorsement in blank) at the back thereof, the

instrument was received by Ang Tiong who thereafter presented it to the

bank for payment. The drawee bank dishonored it. Ang Tiong made written

demands on both Ting and Ang to make good the amount represented by

the check. These demands unheeded. Ang Tiong filed suit for collection. The

trial court adjudged for Ang Tiong. Only Ang appealed, maintaining that he is

only an accommodation party.

Issue: Whether Felipe Ang is an accommodation party.

Held: Felipe Ang is a general indorser (Section 63, Negotiable Instruments

Law), in the absence of any indication by appropriate words his intention to

be bound in some other capacity. Even on the assumption that Ang is a mere

accommodation party, he is liable on the instrument to a holder for value

notwithstanding that such holder at the time of taking the instrument knew

him to be only an accommodation party (Section 29, Negotiable Instruments

Law). Assuming further that Ang is an accommodation indorser, the fact that

Ang may obtain security from the maker to protect himself against the

danger of insolvency of the latter cannot in any manner affect his liability to

Ang Tiong, as the said remedy is a matter of concern exclusively between an

accommodation indorser and an accommodated party. The liability of Felipe

Ang remains primary and unconditional.

Wed 24 Mar 2004

Nego-d: Abubakar vs. Auditor General (GR L-1405, 31 July 1948)


No Comments

Abubakar vs. Auditor GeneralGR L-1405, 31 July 1948First Division,

Bengzon (J)

Facts: Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes

on 10 December 1941 for P1,000, but is now in the hands of Benjamin

Abubakar. The Auditor refused to authorize the payment of the treasury

warrant. Abubakar contends he is a holder in good faith and for value and

thus, entitled to the rights and privileges of a holder in due course.

Issue: Whether Abubakar is a holder in due course.

Held: A treasury warrant is not a negotiable instrument; it being an order for

payment out of a “particular fund”, and is not unconditional and does not

fulfill one of the essential requirements of a negotiable instrument.

Therefore, a holder of a treasury warrant cannot argue that he is a holder in

good faith and for value of a negotiable instrument and thus entitled to the

rights and privileges of a holder in due course, free from defenses.

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