39 SCRA 587 Commercial Law Negotiable Instruments Law Postal Money

Orders Not Negotiable Instruments

In April 1958, a certain Enrique Montinola was purchasing ten money orders from
the Manila Post Office. Each money order was worth P200.00. Montinola offered to
pay the money orders via a private check but the cashier told him he cannot pay via
aprivate check. But still somehow, Montinola was able to leave the post office with
the money orders without him paying for them.
Days later, the missing money orders were discovered. Meanwhile, the Philippine
Education Co., Inc. (PECI) presented one of the missing postal money orders before
the Bank of America. The money order was initially credited and so P200.00 was
deposited in PECIs account with the bank. But then later the post office, through
Mauricio Soriano (Chief of the Money Order Division of the Post Office), advised the
bank that the money order was irregularly issued hence the P200.00 was debited
back from PECIs account.
PECI is now invoking that the money order was duly negotiated to them and thus
they are entitled to the amount it represents.
ISSUE: Whether or not postal money orders are negotiable instruments.
HELD: No. Postal money orders are not negotiable instruments. The rationale
behind this rule is the fact that in establishing and operating a postal money order
system, the government is not engaging in commercial transactions but merely
exercises a governmental power for the public benefit. In fact, postal money orders
are subject to a lot of restrictions limiting their negotiability. Particularly in this case,
as far back as 1948, there was already an agreement between Bank of America and
the Manila Post Office, that in case the post office would have an adverse claim
against any Bank of America depositor involving postal money orders issued by the
post office, all amounts cleared in relation thereto shall be refunded back to the
post offices account with the bank this in itself is already a limitation in the
negotiability and nature of the postal money orders issued by the post office
because of the special conditions attached.