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Commercial Cases (July 23, 2012)

Commercial Cases (July 23, 2012)

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Published by: Jane Garcia-Comilang on Jul 26, 2012
Copyright:Attribution Non-commercial


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Roberto Dino vs. Maria Luisa Judal-LootFacts
: Petitioner was induced to lend a syndicate P3,000,000.00 to be secured by a real estatemortgage on several parcels of land situated in Canjulao, Lapu-lapu City. Upon scrutinizing thedocuments involving the properties, petitioner discovered that the documents covered rightsover government properties. Realizing he had been deceived, petitioner advised Metrobank tostop payment of his checks. However, only the payment of Check No. C-MA- 142119406-CAwas ordered stopped. The other two checks were already encashed by the payees.Meanwhile, Check No. C-MA- 142119406-CA (a cross-check) was negotiated and indorsed torespondents by petitioner in exchange for cash in the sum of P948,000.00, which respondentsborrowed from Metrobank and charged against their credit line. Drawee bank, Metrobank,Cebu-Mabolo Branch, which is also their depositary bank, answered that the checks weresuffiiently funded. However, the same was dishonored by the drawee bank when they tried todeposit it for reason “PAYMENT STOPPED.” Respondents filed a collection suit againstpetitioner and Lobitana before the trial court.The trial court ruled in favor of respondents and declared them due course holders of thesubject check, since there was no privity between respondents and defendants. CA affirmed butmodified the trial court’s decision by deleting the award of interest, moral damages, attorney’sfees and litigation expenses. The Court of Appeals opined that petitioner “was only exercising(although incorrectly), what he perceived to be his right to stop the payment of the check whichhe rediscounted.” The Court of Appeals ruled that petitioner acted in good faith in ordering thestoppage of payment of the subject check and thus, he must not be made liable for thoseamounts.
: WON The respondents were holders in due course?
: PETITION GRANTED. Section 52 of the Negotiable Instruments Law defines a holder indue course, thus: A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it hasbeen previously dishonored, if such was the fact;(c) That he took it in good faith and for value;(d) That at the time it was negotiated to him, he had no notice of any infirmity in theinstrument or defect in the title of the person negotiating it.In the case of a crossed check, as in this case, the following principles must additionally beconsidered: A crossed check (a) may not be encashed but only deposited in the bank; (b) maybe negotiated only once — to one who has an account with a bank; and (c) warns the holder that it has been issued for a definite purpose so that the holder thereof must inquire if he hasreceived the check pursuant to that purpose; otherwise, he is not a holder in due course.Based on the foregoing, respondents had the duty to ascertain the indorser’s, in this caseLobitana’s, title to the check or the nature of her possession. This respondents failed to do.Respondents’ verification from Metrobank on the funding of the check does not amount todetermination of Lobitana’s title to the check. Failing in this respect, respondents are guilty of gross negligence amounting to legal absence of good faith,[15] contrary to Section 52(c) of theNegotiable Instruments Law. Hence, respondents are not deemed holders in due course of thesubject check.However, the fact that respondents are not holders in due course does not automatically meanthat they cannot recover on the check. The Negotiable Instruments Law does not provide that aholder who is not a holder in due course may not in any case recover on the instrument. Theonly disadvantage of a holder who is not in due course is that the negotiable instrument issubject to defenses as if it were non-negotiable. Among such defenses is the absence or failureof consideration,[ which petitioner sufficiently established in this case. Petitioner issued thesubject check supposedly for a loan in favor of Consing’s group, who turned out to be asyndicate defrauding gullible individuals. Since there is in fact no valid loan to speak of, there isno consideration for the issuance of the check. Consequently, petitioner cannot be obliged topay the face value of the check.
Metropolitan Bank and Trust Company, etc. vs. BA Finance Corporation
: Lamberto Bitanga (Bitanga) obtained from respondent BA Finance Corporation (BAFinance) a P329,280 loan to secure which, he mortgaged his car to respondent BA Finance.Bitanga thus had the mortgaged car insured by respondent Malayan Insurance Co., Inc.(Malayan Insurance). The car was stolen. On Bitanga’s claim, Malayan Insurance issued acheck payable to the order of “B.A. Finance Corporationand Lamberto Bitanga” for P224,500,drawn against China Banking Corporation (China Bank). The check was crossed with thenotation “For Deposit Payees’ Account Only. Without the indorsement or authority of his co-payee BA Finance, Bitanga deposited the check to his account with the Asianbank Corporation(Asianbank), now merged with herein petitioner Metropolitan Bank and Trust Company(Metrobank). Bitanga subsequently withdrew the entire proceeds of the check.In the meantime, Bitanga’s loan became past due, but despite demands, he failed to settle it.BA Finance eventually learned of the loss of the car and of Malayan Insurance’s issuance of acrossed check payable to it and Bitanga, and of Bitanga’s depositing it in his account at Asianbank and withdrawing the entire proceeds thereof. BA Finance thereupon demanded thepayment of the value of the check from Asianbank but to no avail, prompting it to file a complaintbefore the Regional Trial Court (RTC) of Makati for sum of money and damages against Asianbank and Bitanga,[8]alleging that, inter alia, it is entitled to the entire proceeds of thecheck. The trial court, holding that Asianbank was negligent in allowing Bitanga to deposit thecheck to his account and to withdraw the proceeds thereof, without his co-payee BA Financehaving either indorsed it or authorized him to indorse it in its behalf,[16] found Asianbank andBitanga jointly and severally liable to BA Finance following Section 41 of the NegotiableInstruments Law andAssociated Bank v. Court of Appeals.
: Is petitioner liable for the full amount of the check?
:Petitioner, at all events, argue that its liability to BA Finance should only be one-half of theamount covered by the check as there is no indication in the check that Bitanga and BA Financeare solidary creditors to thus make them presumptively joint creditors. Argument is flaweed. Theprovisions of the Negotiable Instruments Law and underlying jurisprudential teachings on theblack-letter law provide definitive justification for petitioner’s full liability on the value of thecheck.To be sure, a collecting bank, Asianbank in this case, where a check is deposited and whichindorses the check upon presentment with the drawee bank, is an indorser.[31] This is because

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