Mitra vs. People 623 SCRA 673 G.R. NO.

191404 (July 5, 2010) Digested by: ANM Cabreros #2 Facts: Petitioner Mitra was the treasurer and Cabrera (now deceased) was the President of Lucky Nine Credit Corporation (LNCC), a corporation engaged in money lending activities. Private respondent Felicisimo Tarcelo (Tarcelo) invested money in LNCC. As the usual practice in money placement transactions, Tarcelo was issued checks equivalent to the amounts he invested plus the interest on his investments. When Tarcelo presented the checks for payment, they were dishonored for the reason "account closed." Tarcelo made several oral demands on LNCC for the payment of said checks but he was frustrated. So he filed seven information for violation of Batas Pambansa blg. 22 (BP 22) in the amount of P925,000.00 before the MTCC. Court decided in favor if Tarcelo. So petitioners appealed to RTC contending that : They signed the seven checks in blank with no name of the payee, no amount stated and no date of maturity; that they did not know when and to whom those checks would be issued; that the seven checks were made to sign at that time; and that they signed the checks so as not to delay the transactions of LNCC because they did not regularly hold office there. Petition was still denied. Meanwhile Cabrera died. Mitra alone file a petition for review claiming among others, that there was no Notice of Dishonor on her. CA denied for lack of merit, hence this petition; ISSUE(S): 1. WON the elements of violation of BP 22 must be proved beyond reasonable doubt as against the corporation who carries the account where the subject checks were drawn before liability attaches to the signatories. 2. WON there is proper service of Notice of Dishonor and demand to pay to the petitioner and the late Cabrera. HELD: Petition DENIED. The convenience afforded by checks is damaged by unfunded checks that adversely affect confidence in commercial and banking activities, and ultimately injure public interest. 1. NO. The 3rd paragraph of sec.1 of BP 22 reads: "Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this act." This provision recognizes the reality that a corporation can only act through its officers. Hence its wording is unequivocal and mandatory that the person who actually signed the corporate check shall be held liable for violation of BP 22. This provision does not contain any condition, qualification or limitation. 2. Yes. There is no dispute that Mitra signed the checks and that the bank dishonored the checks because the account had been closed. Notice of Dishonor was properly given, but Mitra failed to pay the checks or make arrangements for their payment within 5 days from notice. (Cite elements of violation of BP22) With all the above elements duly proven, Mitra cannot escape the civil and criminal liabilities that BP 22 imposes for its breach.

PCIB vs. Balmaceda 658 SCRA 33 G.R. No. 158143 (Sept. 21, 2011) Digested by: ANM Cabreros #3 FACTS: PCIB filed an action for recovery of sum of money with damages before the RTC against Antonio Balmaceda, the Branch Manager of their Sta. Cruz, Manila Branch. Allegedly, Balmaceda took advantage of his position as Branch Manager to fraudulently obtain and encash 31 Managers checks amounting to a total of P10,782,150.00. Said complaint was later on amended where certain Rolando Ramos was impleaded as one of the recipients of a portion of the proceeds from Balmacedas alleged fraud. Checks encashed were increased to 34 and their total amount to P11,937,150.00. RTC granted the motion but Balmaceda did not file an answer. On the other hand, Ramos a say in the case at bar; In his defense, accordingly, Ramos is a reputable businessman engaged in buy and sell of fighting cock. Balmaceda was one of his clients. He admitted he sold fighting cock to the latter and received payment in return but without knowledge of the source of Balmacedas money. RTC ruled in favor of PCIB ordering Ramos to pay the misappropriated amount and its legal interest, plus moral damages. Upon appeal filed by Ramos before the CA, PCIBs negligence was raised as an issue. It could have been impossible for Balmacelda to perpetrate his fraudulent act if not for the following circumstances: 1. Taking advantage of his position as Branch Manager of the bank 2. Acting in said capacity, by instructing the bank staff to prepare the application form for the purchase of Managers checks passable to several persons 3. Forging of the signature of the clients authorized representative on their forms and sign the forms as PCIBs approving officer 4. Having an authorized office of PCIB to issue the Managers Check. CA found no sufficient evidence existed to prove that Ramos colluded with Balmaceda in the latters f raudulent manipulations. The mere fact that Balmaceda made Ramos the payee in some of the Managers checks does not suffice to prove that Ramos was complicit in Balmacedas fraudulent scheme. CA observed that other persons were also named as payees in the checks that Balmaceda acquired and encashed, and PCIB only chose to go after Ramos. Appeal was granted in CA and PCIB was ordered to pay Ramos Moral and Exemplary Damages including Attorneys fees. Hence this petition; ISSUE: Whether Ramos, who received a portion of the money that Balmaceda took from PCIB should also be held liable for the return of this money. HELD: NO. PCIB was proven to be negligent from the fact that it allowed Balmaceda to encash the Managers checks that were plainly crossed checks. Under the Negotiable Instruments Law; A crossed check is one where two parallel lines are drawn across its face or across its corner. Based on jurisprudence, the crossing of checks has the following effects; (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once to the one who has an account with the bank; and (c) the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose and he must inquire if he received the check pursuant to this purpose; otherwise, he is not a holder in due course. The crossing of a check is a warning that the check should be deposited only in the account of the payee. When a check is crossed, it is the duty of the collecting bank to ascertain that the check is only deposited to the payees account. In complete disregard of this duty, PCIBs systems allowed Balmaceda to encash 26 Managers checks which were all crossed checks, or checks payable to the "payees account only." Petition was Partially Granted in favor of Ramos. On the part of PCIB, awards for damages and Attorneys fees was modified and deleted pursuant to the provisions of Article 22 of the New Civil Code.

Tuazon vs. Heirs of Bartolome Ramos 463 SCRA 408 G.R. No. 156262 (July 14, 2005) Digested by: ANM Cabreros #4 Facts: Spouses Leonilo and Maria Tuazon purchaded a total of 8.326 cavans of rice from Bartolome Ramos. That of this quantity, only 4,437 cavans [have been paid so far], leaving unpaid 3, 889 cavans valued at P 1,211,919.00. In payment therefor, the spouses Tuazon issued [several] Traders Royal Bank Checks. When encashed, all of the checks bounced due to insufficiency of funds. Allegedly, before issuing the checks, sps. Tuazon already knew that they had no available fund to support the checks, and they failed to provide for the payment of these despite repeated demands made on them. For their part, sps. Tuazon alleged that it was Magdalena Ramos (wife of Bartolome), who owned and traded the merchandise and Maria Tuazon was merely her agent. They argued that it was Evangeline Santos who was the buyer off the rice and issue the checks to Maria Tuazon as payments therefor. According to sps. Tuazon, they were in good faith and without knowledge that the checks were not funded. Corresponding civil and criminal cases were filed by respondents against sps. Tuazon. Having passed away before trial, Bartolome Ramos was substituted by his heirs herein respondents. Contending that Evangeline Santos was an indispensable party in the case, petitioners moved to file a third-party complaint against her. Allegedly, she was primarily liable to respondents, because she was the one who had purchased the merchandise from their predecessor, as evidenced by the fact that the checks had been drawn in her name. RTC denied the motion. Petitioners were acquitted from criminal cases but not on civil liability, hence this petition; ISSUE: Who is primarily liable on checks dishonored for non-payment, the drawer or the indorser? HELD: As Indorser, Petitioner Maria Tuazon warranted that upon the presentment, the checks were to be accepted or paid, or both, according to their terms; and that in case they were dishonored, she would pay the corresponding amount. After the instrument is dishonored by non-payment, indorsers cease to be mere secondarily liable; they become principal debtors whose liabilitu becomes identical to that of the original obligor. The holder of a negotiable instrument need not even proceed against the maker before suing the indorser. In the case at bar, the indorser (Maria Tuazon) became primarily liable. PETITION DENIED.

Tan vs. People 500 SCRA 172 G.R. No. 145006 (August 30, 2006) Digested by: ANM Cabreros #5 FACTS: Carolyn Zaragoza (private respondent) met the accused (herein petitioner) David Tan through a common friend. They had a load transaction which was followed by another loan transaction in the amount of P1 Million, and for which she gave the accused a Metrobank check in the amount of O950,000.00 having deducted the 5% interest from said loan. Thereafter, the accused issued several PCI Bank Checks, which were deposited at her account with the City Trust Bank. The checks bounced for reason "Account Closed." She thereafter tried to contact the accused but Tan refused to talk to her. The accused was sent by her lawyer a formal demand through registered mail, for him to pay in cash the bounced/dishonored checks but to no avail. They filed a case against Tan, MTC found him guilty beyond reasonable doubt of the crime of Violation of BP 22. Petitioner filed a motion for reconsideration where he argued that no evidentiary weight should be given to the demand letter sent to him because, although included in the formal offer of evidence by the prosecution, it was not presented during trial for proper identification, hence, it should not have been admitted into evidence even if the defense failed to object to the formal offer thereof. Petitioner insisted that the prosecution did not have proof of notice of dishonor, thus, his guilt had not been proven beyond reasonable doubt. ISSUE: WON a Notice of Dishonor is indispensable in determining the guilt of a maker or drawer for intentionally issuing a check which to his knowledge is insufficient in funds. HELD: YES. Section 2 of BP 22 provides: The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank, when presented within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee. For this presumption to arise, the prosecution must prove the following: (a) the check is presented within ninety (90) days from the date of the check; (b) the drawer or maker of the check receives notice that such check has not been paid by the drawee; and (c) the drawer or maker of the check fails to pay the holder of the check the amount due thereon, or make arrangements for payment in full within five (5) banking days after receiving notice that such check has not been paid by the drawee. In other words, the presumption is brought into existence only after it is proved that the issuer had received a notice of dishonor and that within five days from receipt thereof, he failed to pay the amount of the check or to make arrangements for its payment. The presumption or prima facie evidence as provided in this section cannot arise, if such notice of nonpayment by the drawee bank is not sent to the maker or drawer, or if there is no proof as to when such notice was received by the drawer, since there would simply be no way of reckoning the crucial 5-day period. Furthermore, the notice of dishonor must be in writing; a verbal notice is not enough. Since the prosecution failed to present evidence during trial that a written demand had been sent to and received by petitioner, the second element, that the accused had knowledge of the insufficiency of funds, had not been established. PETITION PARTIALLY GRANTED.

Tan was ACQUITTED of the crime of Violation of BP 22 but ordered to pay the private complainant. Arceo vs. People 493 SCRA 204 G.R. No. 142641 (July 17, 2006) Digested by: ANM Cabreros #6 Facts: Petitioner Pacifico Arceo obtained a loan from private complainant Josefino Cenizal for a total of P150,000.00. Arceo issued in return BPI check in favor of Cenizal. Cenizal did not deposit the check immediately since Arceo promised that he would replace it with cash. He promised to pay (7) times. When his patience ran out, Cenizal encashed the check but it bounced due to insufficiency of funds. Cenizal went to the house of Arceo to inform him of the dishonor of the check but the latter is nowhere to be found. They sent Arceo a letter about the notice but still to no avail. So Cenizal filed estafa and violation of BP 22 against Arceo. The check in question and the return slip were however lost by (Cenizal) as a result of a fire that occurred near his residence. The latter executed an affidavit of loss regarding the loss of the check in question and the return slip. After trial, petitioner was found guilty as charged. Hence, this petition; ISSUE: WON presentment of the check beyond the 90-day period would exempt the drawer from his liability in the case of violation of BP 22. HELD: NO. The court ruled that the 90-day period provided in the law is not an element of the offense. Never does it discharge the petitioner his duty to maintain sufficient funds in the account within a reasonable time from the date indicated in the check. According to current banking practice, the reasonable period within which t present a check to the drawee bank is six months. Thereafter, the check becomes stale and the drawer is discharged from liability thereon to the extent of the loss caused by the delay. Thus, Cenizal's presentment of the check to the drawee bank 120 days (four months) after its issue was still within the allowed period. Petitioner was freed neither from the obligation to keep sufficient funds in his account nor from liability resulting from the dishonor of the check. PETITION DENIED

Chua vs. People 484 SCRA 161 G.R. No. 150926 & 30 (March 4, 2006) Digested by: ANM Cabreros #7 Facts: Private complainant Araceli Estigoy was engaged in buy and sell of imported goods. Appellant Anita Chua transacted with Estigoy more than twice and issued certain checks in payment of imported items. The checks were postdated drawn against Pacific Bank, Tarlac Branch. On their due dates, complainant deposited the checks in the bank but they were dishonored due to ; "drawn against insufficient funds" and/or account closed. Complainant notified appellant of the dishonor and demanded payment of the checks. Appellant failed to redeem or pay the amounts of the checks despite several demands. Appellant admitted issuing the checks but interposed the defense that she issued the checks as collateral and by way of accommodation of the complainant who requested for the checks. Chua was found guilty as charged for violation of Article 315 (2) (d) of the RPC. Hence, this petition; ISSUE: WON the transactions between the parties were purely civil in nature, i.e., they merely involved accounting and liquidation of civil obligations. HELD: NO. Article 315 (2) (d) of the RPC penalizes any person who defends another by postdating a check or issuing a check in payment of an obligation when the offender has no funds in the bank or his funds deposited therein are not sufficient to cover the amount of the check. The elements of estafa under Article 315, paragraph 2(d) of the RPC, as amended by RA 4885, are: (1) that the offender postdated or issued a check in payment of an obligation contracted at the time of the postdating or issuance; (2) that the at the time of the issuance of the check, the offender had no funds in the bank or the funds deposited were insufficient to cover the amount of the check; and,1avvphil.net (3) that the payee has been defrauded.11 All the elements of the crime of estafa under par. 2(d) of Art. 315, RPC are present in this case. The evidence showed and petitioner Chua admitted issuing the questioned checks in favor of private respondent in exchange for the imported goods she obtained from the latter. It is likewise not disputed that the checks she issued bounced or were dishonored due to insufficiency of funds and/or because her bank account had already been closed by the bank due to lack of funds. As a result, private respondent suffered damage. She had to close down her business because she could not recoup her losses due to the huge amount petitioner owed her. Petitioners defense that she issued the unfunded checks as collateral or security for the goods she got from private respondent was not worthy of credence. As correctly found by the trial court and affirmed by the CA, the amounts of the checks issued by petitioner clearly showed that they were intended as payments for the items she obtained from private respondent. Private respondent would not have parted with her goods in exchange for bum checks. It was likewise contrary to ordinary human experience and to sound business practice for petitioner to issue so many unfunded checks as "collateral" or "by way of accommodation." As an experienced businesswoman, petitioner could not have been so nave as not to know that she could be held criminally liable for issuing unfunded checks. PETITION DENIED

Marigomen vs. People 459 SCRA -G.R. No. 153451 (May 26, 2005) Digested by : ANM Cabreros #8 FACTS: Caltex Philippines, Inc. (Caltex) is engaged in the sale of gasoline and oil products to its customers, one of which was the Industrial Sugar Resources, Inc. (INSURECO). Caltex had granted a credit line to INSURECO, and the latter purchased gasoline and lubricants from Caltex through its sales representative. The finance officer of INSURECO was Ofelia Marigomen, while John V. Dalao was the assistant to the general manager. They were authorized to draw and sign checks against the account of INSURECO at the Far East Bank and Trust Company, Bacolod City Branch. Caltex had agreed for INSURECO to pay its purchases via postdated checks, which were delivered to Caltex upon the release of the purchased oil products. On due dates, Caltext presented the check for payment. However the checks were dishonored for insufficiency of funds while the others for the reason " acccount closed." Caltex, through Dalao, made verbal demands to INSURECO for the replacement of the dishonored checks with either managers checks or cash, to no avail. Caltex senr a confirmation telegram but still no reply. So Caltext filed criminal complaints for violation of BP 22 against Marigomen and Dalao. They were charged of three counts of violation of BP 22. ISSUE: WON Verbal Notice of Dishonor is sufficient for conviction in violation of BP 22 HELD: No. Notice of Dishonor must be in writing; A verbal Notice is not enough. While indeed, section 2 of BP 22 does not state that the notice of dishonor be in writing, taken in conjunction, however that with Section 3 of the law i.e, "that where there are no sufficient funds in or credit with such drawee bank, such fact shall always be explicitly stated in the notice of dishonor or refusal, "a mere oral notice or demand to pay would appear to be insufficient for conviction under the law. The court is convinced that both the spirit and letter of the Bouncing Checks law would require for the act to be punished thereunder not only that the accused has actually been notified in writing of the fact of dishonor. The consistent rule is that penal statutes have to be construed strictly against the state and liberally in favor of the accused. thus, if the drawer or make is an officer of a corporation, the Notice of Dishonor to the said corporation is not Notice to the employee or officer who drew or issued the check for and in its behalf. PETITION GRANTED

San Miguel Corporation (SMC) vs. Puzon 631 SCRA 48 G.R. No. 167567 (September 22, 2010) Digested by: ANM Cabreros #9 Facts: Respondent Bartolome Puzon, Jr. was a dealer of Beer products of petitioner San Miguel Corporation (SMC). Puzon purchased SMC products on credit. To ensure payment and as a business practice, SMC required him to issue postdated checks equivalent to the value of the products purchased on credit before the same were released to him. Said checks were returned to Puzon when the transactions covered by these checks were paid or settled in full. Again, Puzon purchased product on credit in December 31, 2000. He issued and gave SMC check nos. 27904 and 27903 (BPI) to cover said transaction. On January 23, 2001, Puzon, together with his accountant visited SMC sales office to reconcile his account with the latter. During that visit Puzon allegedly requested to see BPI check no. 17657. However, when he get hold of BPI check no. 27903 which was attached to a bond paper together with BPI check no. 17657 he allegedly immediately left the office with his accountant, bringing the checks with them. SMC sent a letter to Puzon demanding the return of the said checks. Puzon ignored them. SMC file a complaint against him for theft. Court ruled in favor of Puzon. Hence, this petition; ISSUE: Whether the checks issued by Puzon were payments for his purchases or were intended merely as security to ensure payment. HELD: "The essential elements of the crime of theft are the ff. 1. that there be a taking of personal property 2. that said property belongs to another 3. that the taking be done with intent to gain 4. that the taking be done without the consent of the owner, and; 5. that the taking be accomplished without the use of violence or intimidation against persons or force upon things." Considering that the second element is that the thing taken belongs to another, it is relevant to determine whether ownership of the subject check was transferred to petitioner. On this point the Negotiable Instruments Law provides: Section 12: Antedated and Postdated. The instrument is not invalid for the reason only that it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving effect to the instrument is evident thus title to or ownership of the check was transferred upon delivery. However, if the check was not given as payment, there being no intent to give effect to the instrument, then ownership of the check was not transferred to SMC. PETITION DENIED

Equitable PCI Bank vs. Tan 628 SCRA 52 G.R. No. 165339 (Aug. 23, 2010) Digested by: ANM Cabreros #10 Facts: Respondent Arcelito B. Tan maintained a current and savings acccount with Philippine Commercial International Bank (PCIB), now petitioner EQUITABLE PCI BANK. Tan issued checks postdated May 30, 1992 in favor of Sulpicio Lines. The latter deposited said check to its own account. After clearing, the amount of the check was immediately debited by PCIB from Tan's account thereby leaving him with a balance of only P558.87. Meanwhile, Tan issued another three checks dated May 9, 1992 and May 16, 1992 to electric cooperatives ASECO and ANECO payable in cash for P10,000.00. The issue started when, those three checks were dishonored by PCIB for being drawn against insufficient funds. As a result of the dishonor of checks, the electric power supply to Tan's businesses were cut off causing him moral and exemplary damages. So he filed a complaint against PCIB praying payment for his losses. In its defense, petitioner denied that the check was postdated May 30, 1992. Upon CA review it was found out that the date was written as 5/3/0/92. ISSUE: WON date of PCIB check no. 275100 is May 3, 1992 as contended by respondents. HELD: There was negligence on the part of PCIB. The court found that the check was indeed postdated May 30, 1992 and not May 3, 1992 as urged by appellee. The first bar (/) which separates the numbers "5" and "30" and the second bar (/) which further separates the number "30" from the year 1992 appear to have been done in heavy, well-defined and bold strokes, clearly indicating the date of the check as "5/30/1992" which obviously means May 30, 1992. On the other hand, the alleged bar (/) which appellee points out as allegedly separating the numbers "3" and "0," thereby leading it to read the date as May 3, 1992, is not actually a bar or a slant but appears to be more of an unintentional marking or line done with a very light stroke. The presence of the figure "0" after the number "3" is quite significant. In fact, a close examination thereof would unerringly show that the said number zero or "0" is connected to the preceeding number "3." In other words, the drawer of the check wrote the figures "30" in one continuous stroke, thereby contradicting appellees theory that the number "3" is separated from the figure "0" by a b ar. Besides, appellees theory that the date of the check is May 3, 1992 is clearly untenable considering the presence of the figure "0" after "3" and another bar before the year 1992. And if we were to accept appellees theory that what we find to be an unintentional mark or line between the figures "3" and "0" is a bar separating the two numbers, the date of the check would then appear as "5/3/0/1992, which is simply absurd. Therefore, petitioner indeed, prematurely debited the amount of the check from Tan's account before its due date. PCIB is civilly liable in this case.

Gonzales vs. PCIB 644 SCRA 18 G.R. No. 180257 (Feb. 23, 2011) Digested by: ANM Cabreros #11 Facts: Petitioner Eusebio Gonzales was a client of PCIB. Said bank granted Gonzales a credit line through the execution of a Credit-on-hand Loan Agreement (COALA), in which the aggregate amount of the account of Gonzales with PCIB served as collateral for and his availment limit under credit line. Gonzales drew from the said credit line through the issuance of a check. At the institution of the instant case, Gonzales has a Foreign Currency Deposit (FCD) of USD 8, 715.72 with PCIB Sometime in 1995, spouses Gonzales together with spouses Panlilio obtained a loan worth P1,800,000.00 with PCIB. They executed a Promissory Note specifying their solidary liability. However, it was the sps. Panlilio who received the loan proceeds of P 1,800,000.00. After sometime, sps. Panlilio defaulted in payment of the periodic interest dues from PCIB. PCIB allegedly called the attention of Gonzales. Meanwhile, Gonzales issued a check in favor of one named Rene Unson. But said checks were dishonored due to the termination by PCIB of the COHLA bought by the default of sps. Panlilio. Even Gonzales; FCD was frozen. Gonzales then carried the entire burden as against PCIB and Unson. ISSUE: Whether PCIB properly dishonored the check of Gonzales drawn against the COHLA he had with the bank. HELD: No. There was no proper notice to Gonzales of the default and delinquency of the Php 1,800,000.00 Loan. It must be borne in mind that while solidarily liable with the sps. Panlilio on the Php 1,800,000.00 load covered by the promissory notes, Gonzales is only an accommodation party and as such only lent his name and credit to sps. Panlilio. While not exonerating his solidary liability, Gonzales has a right to be properly apprised of the default or delinquency of the loan precisely because he is cosignatory of the promissory notes and of his solidary liability. PCIB was grossly negligent in not giving prior notice to Gonzales about its course of action to suspend, terminate, or revoke the credit line, thereby violating the clear stipulation in the COHLA.

METROPOLITAN BANK AND TRUST COMPANY (MBTC) vs. Cabilzo G.R. No. 154469 510 SCRA 259 (December 6, 2006) Digested by: ANM Cabreros #12 FACTS: Herein respondent Cabilzo is one of MBTC's clients who maintained a current account with the latter. On 12 November 1994, Cabilzo issued a Metrobank Check payable to "CASH" and postdated on November 24, 1994 in the amount of One Thousand Pesos (P1,000.00). The check was drawn against Cabilzos Account with Metrobank and was paid by Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the check was presented to Westmont Bank for payment. Westmont Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the entries thereon were examined, including the availability of funds and the authenticity of the signature of the drawer, Metrobank cleared the check for encashment. On November 16, 1994, Cabilzos representative was at Metrobank to make some transaction when he was asked by a bank personne l if Cabilzo had issued a check in the amount of P91,000.00 to which the former replied in the negative. On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he did not issue a check in the amount of P91,000.00 and requested that the questioned check be returned to him for verification, to which Metrobank complied. Upon receipt of the check, Cabilzo discovered that Metrobank Check which he issued on 12 November 1994 in the amount of P1,000.00 was altered to P91,000.00 and the date 24 November 1994 was changed to 14 November 1994. Hence, Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his account. Metrobank, however, refused reasoning that it has to refer the matter first to its Legal Division for appropriate action. Repeated verbal demands followed but Metrobank still failed to re-credit the amount of P91,000.00 to Cabilzos account. Cabilzo instituted a civil action for damages against Metrobank before the RTC of Manila Cabilzo prayed that in addition to his claim for reimbursement, actual and moral damages plus costs of the suit be awarded in his favor. RTC ruled in favor of Cabilzo stressing the fiduciary nature of the relationship between the bank and its clients and the negligence of the drawee bank in failing to detect an apparent alteration on the check. CA affirmed, hence this petition; ISSUE: WON Drawee bank is primarily liable for THE ALTERATIONS ON THE SUBJECT CHECK BEARING THE AUTHENTIC SIGNATURE OF THE DRAWER THEREOF. HELD: Yes. The court resolved the issue by determining first what constitutes a material alteration. An alteration is said to be material if it changes the effect of the instrument. Material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law. Section 1 of the Negotiable Instruments Law provides: Section 1. Form of negotiable instruments. - An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand or at a fixed determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. Also pertinent is the following provision in the Negotiable Instrument Law which states: Section 125. What constitutes material alteration. Any alteration which changes: (a) The date; (b) The sum payable, either for principal or interest; (c) The time or place of payment; (d) The number or the relation of the parties; (e) The medium or currency in which payment is to be made; Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect is a material alteration. In the case at bar, the check was altered so that the amount was increased from P1,000.00 to P91,000.00 and the date was changed from 24 November 1994 to 14 November 1994. Apparently, since the entries altered were among those enumerated under Section 1 and 125, namely, the sum of money payable and the date of the check, the instant controversy therefore squarely falls within the purview of material alteration. Having laid the premise that the present petition is a case of material alteration, it is now necessary to determine the effect of a materially altered instrument, as well as the rights and obligations of the parties thereunder. The following provision of the Negotiable Instrument Law will shed us some light in threshing out this issue: Section 124. Alteration of instrument; effect of. Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, and assented to the alteration and subsequent indorsers. But when the instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he may enforce the payment thereof according to its original tenor. Cabilzo was not the one who made nor authorized the alteration. Neither did he assent to the alteration by his express or implied acts. There is no showing that he failed to exercise such reasonable degree of diligence required of a prudent man which could have otherwise prevented the loss. As correctly ruled by the appellate court, Cabilzo was never remiss in the preparation and issuance of the check, and there were no indicia of evidence that would prove otherwise. Indeed, Cabilzo placed asterisks before and after the amount in words and figures in order to forewarn the subsequent holders that nothing follows before and after the amount indicated other than the one specified between the asterisks. PETITION DENIED

Gonzales vs. RCBC 508 SCRA G.R. No. 156294 (November 29, 2006) Digested by: ANM Cabreros #13 Facts: Gonzales was an employee of Rizal Commercial Banking Corporation (or RCBC) as New Accounts Clerk in the Retail Banking Department at its Head Office. A foreign check in the amount of $7,500 was drawn by Dr. Don Zapanta against the drawee bank Wilshire Center Bank, N.A., of Los Angeles, California, U.S.A., and payable to Gonzales mother, defendant Eva Alviar (or Alviar). Alviar then endorsed this check. Since RCBC gives special accommodations to its employees to receive the checks value without awaiting the clearing period, Gonzales presented the foreign check to Olivia Gomez, the RCBCs Head of Retail Banking. After examining this, Olivia Gomez requested Gonzales to endorse it which she did. Olivia Gomez then acquiesced to the early encashment of the check and signed the check but indicated thereon her authority of "up to P17,500.00 only". Afterwards, Olivia Gomez directed Gonzales to present the check to RCBC employee Carlos Ramos and procure his signature. After inspecting the check, Carlos Ramos also signed it with an "ok" annotation. After getting the said signatures Gonzales presented the check to Rolando Zornosa, Supervisor of the Remittance section of the Foreign Department of the RCBC Head Office, who after scrutinizing the entries and signatures therein authorized its encashment. Gonzales then received its peso equivalent of P155,270.85. RCBC then tried to collect the amount of the check with the drawee bank by the latter through its correspondent bank, the First Interstate Bank of California, on two occasions dishonored the check because of "END. IRREG" or irregular indorsement. Insisting, RCBC again sent the check to the drawee bank, but this time the check was returned due to "account closed". Unable to collect, RCBC demanded from Gonzales the payment of the peso equivalent of the check that she received. Gonzales settled the matter by agreeing that payment be made thru salary deduction. RCBC sent a demand letter to Alviar for the payment of her obligation but this fell on deaf ears as RCBC did not receive any response from Alviar. Taking further action to collect, RCBC then conveyed the matter to its counsel and on June 16, 1988, a letter was sent to Gonzales reminding her of her liability as an indorser of the subject check and that for her to avoid litigation she has to fulfill her commitment to settle her obligation as assured in her said letter. On July 1988 Gonzales resigned from RCBC. What had been deducted from her salary was only P12,822.20 covering ten months. RCBC filed a complaint in RTC. The court ruled against defendant EVA. P. ALVIAR as principal debtor and defendants MELVA THERESA ALVIAR GONZLAES as guarantor. Issue: WON General Indorser is primarily liable to subsequent holder in due course. HELD: There is no doubt in the mind of the Court that a subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith. Eva Alviars and the petitioners liability to subsequent holders of the foreign check is governed by the Negotiable Instruments Law as follows: Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all subsequent holders in due course; (a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and (b) That the instrument is, at the time of his indorsement, valid and subsisting; And, in addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. The matters and things mentioned in subdivisions (a), (b) and (c) of Section 65 are the following: (a) That the instrument is genuine and in all respects what it purports to be; (b) That he has a good title to it; (c) That all prior parties had capacity to contract; Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor of subsequent endorsers extend only to the state of the instrument at the time of their endorsements, specifically, that the instrument is genuine and in all respects what it purports to be; that they have good title thereto; that all prior parties had capacity to contract; and that the instrument, at the time of their endorsements, is valid and subsisting. This provision, however, cannot be used by the party which introduced a defect on the instrument, such as respondent RCBC in this case, which qualifiedly endorsed the same, to hold prior endorsers liable on the instrument because it results in the absurd situation whereby a subsequent party may render an instrument useless and inutile and let innocent parties bear the loss while he himself gets away scot-free. It cannot be over-stressed that had it not been for the qualified endorsement ("up to P17,500.00 only") of Olivia Gomez, who is the employee of RCBC, there would have been no reason for the dishonor of the check, and full payment by drawee bank therefor would have taken place as a matter of course. Section 66 of the Negotiable Instruments Law which further states that the general endorser additionally engages that, on due presentment, the instrument shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent endorser who may be compelled to pay it, must be read in the light of the rule in equity requiring that those who come to court should come with clean hands. The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for "irregular endorsement" must not be the irregular endorser himself who gave cause for the dishonor. Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the instrument defective and later claim from prior endorsers who have no knowledge or participation in causing or introducing said defect to the instrument, which thereby caused its dishonor. Petitioners counterclaim is GRANTED