PHILIPPINE EDUCATION CO. INC. V. SORIANO [G.R. NO. L-22405.

JUNE 30, 1971]

Facts:
Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders
each payable to E.P. Montinola. After the postal teller had made out money orders, Montinola
offered to pay for them with a private checks were not generally accepted in payment of money
orders, the teller advised him to see the Chief of the Money Order Division, but instead of doing
so, Montinola managed to leave building with his own check and the ten(10) money orders
without the knowledge of the teller. Upon discovery of the disappearance of the unpaid money
orders, an urgent message was sent to all postmasters, and the following day notice was likewise
served upon all banks, instructing them not to pay anyone of the money orders aforesaid if
presented for payment. The Bank of America received a copy of said notice three days later. It
debited appellants account with the same amount and gave it advice thereof by means of a
debit memo.
Issue:
Whether or not postal money orders are negotiable instruments.
Ruling:
NO. Postal money orders are not negotiable instruments. Our postal statutes were
patterned after statutes in force in the United States. For this reason, ours are generally
construed in accordance with the construction given in the United States to their own postal
statutes, in the absence of any special reason justifying a departure from this policy or practice.
The weight of authority in the United States is that postal money orders are not negotiable
instruments, the reason behind this rule being 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.It is to be noted in this connection that some of the
restrictions imposed upon money orders by postal laws and regulations are inconsistent with the
character of negotiable instruments. For instance, such laws and regulations usually provide for
not more than one endorsement; payment of money orders may be withheld under a variety of
circumstances.

TIBAJIA VS. CA GR 100290, 4 JUNE 1993

Facts:
A suit for collection of sum of money was ruled in favor of Eden Tan and against the
spouses Norberto Jr. and Carmen Tibajia. After the decision was made final, Tan filed a motion for
execution and levied upon the garnished funds which were deposited by the spouses with the
cashier of the Regional Trial Court of Pasig. The spouses, however, delivered to the deputy sheriff
the total money judgment in the form of Cashiers Check (P262,750) and Cash (P135,733.70).
Tan refused the payment and insisted upon the garnished funds to satisfy the judgment
obligation. The spouses filed a motion to lift the writ of execution on the ground that the
judgment debt had already been paid. The motion was denied.
Issue:
Whether the spouses have satisfied the judgment obligation after the delivery of the
cashiers check and cash to the deputy sheriff.
Held:
A check, whether a managers check or ordinary check, is not legal tender, and an offer of
a check in payment of a debt is not a valid tender of payment and may be refused receipt by the
obligee or creditor (Philippine Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs.
Intermediate Appellate Court). The court is not, by decision, sanctioning the use of a check for
the payment of obligations over the objection of the creditor (Fortunado vs. Court of Appeals).

METROPOLITAN BANK & TRUST COMPANY VS. COURT OF APPEALS G.R. NO.
88866 FEBRUARY 18, 1991
Facts:
Eduardo Gomez opened an account with Golden Savings and Loan Association and
deposited over a period of two months 38 treasury warrants with a total value of
P1,755,228.37. All these warrants were subsequently indorsed by Gloria Castillo as Cashier of
Golden Savings and deposited to its savings account in the Metrobank branch in Calapan,
Mindoro. They were then sent for clearing by the branch office to the principal office of
Metrobank, which forwarded them to the Bureau of Treasury for special clearing. Before they
were cleared, petitioner decided to allow Golden Savings to withdraw from the proceeds of the
warrants. Golden Savings in turn subsequently allowed Gomez to make withdrawals from his own
account. Subsequently, Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded the refund by Golden Savings of the
amount it had previously withdrawn, to make up the deficit in its account. Metrobank contends
that by indorsing the warrants in general, Golden Savings assumed that they were "genuine and
in all respects what they purport to be," in accordance with Section 66 of the Negotiable
Instruments Law.
Issue:
Whether petitioner can hold Golden Savings liable as an indorser of the treasury warrants
based on the predication that the treasury warrants involved in this case are negotiable
instruments.
Ruling:
Clearly stamped on the face of the treasury warrants is the word "non-negotiable." It is
also indicated that they are payable from a particular fund, to wit, Fund 501. The indication of
Fund 501 as the source of the payment to be made on the treasury warrants makes the order or
promise to pay "not unconditional" and the warrants themselves non-negotiable. Petitioner
cannot hold Golden Savings liable as an indorser under Section 66 of the NIL for the simple
reason that this law is not applicable to the non-negotiable treasury warrants.

CALTEX INC. V. COURT OF APPEALS [G.R. NO. 97753. AUGUST 10, 1992]
Facts:
On various dates, Security Bank and Trust Company (SBTC), through its Sucat Branch
issued 280 certificates of time deposit (CTD) in favor of one Angel dela Cruz who later lost them.
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND
ONLY, SECURITY BANK SUCAT OFFICE P4,000& 00 CTS Pesos, Philippine Currency, repayable to
said depositor 731 days. after date, upon presentation and surrender of this certificate, with
interest at the rate of 16% per cent per annum.
(Sgd. Illegible)
Caltex (Phils.) Inc. went to the SBTCSucat branch and presented for verification the CTDs
declared lost by Angel dela Cruz alleging that the same were delivered to herein plaintiff as
security for purchases made with Caltex Philippines, Inc. by said depositor. SBTC rejected
Caltexs demand and claim. Caltex sued SBTC but case was dismissed rationalizing that CTDs
are non-negotiable instruments.

Issue:
Whether or not Certificate of Time Deposit (CTD) is a negotiable instrument.
Ruling:
YES. The CTDs in question undoubtedly meet the requirements of the law for negotiability
under Section 1 of the Negotiable Instruments Law. The accepted rule is that the negotiability or
non-negotiability of an instrument is determined from the writing, that is, from the face of the
instrument itself. In the construction of a bill or note, the intention of the parties is to control, if it
can be legally ascertained. Here, if it was really the intention of respondent bank to pay the
amount to Angel de la Cruz only, it could have with facility so expressed that fact in clear and
categorical terms in the documents, instead of having the word BEARER stamped on the space
provided for the name of the depositor in each CTD. While the writing may be read in the light of
surrounding circumstances in order to more perfectly understand the intent and meaning of the
parties, yet as they have constituted the writing to be the only outward and visible expression of
their meaning, no other words are to be added to it or substituted in its stead.

ANG TEK LIAN VS. COURT OF APPEAL L-2516

SEPTEMBER, 1950

Facts:
Ang Tek Lian knowing that he had no funds therefor, drew a check upon China Banking
Corporation payable to the order of cash. He delivered it toLee Hua Hong in exchange for
money. The check was presented by Lee Hua hong to the drawee bank for payment, but it w3as
dishonored for insufficiency of funds. With this, Ang Tek Lian was convicted of estafa.
Issue:
Whether or not the check issued by Ang Tek Lian that is payable to the order to cash and
not have been indorsed by Ang Tek Lian, making him not guilty for the crime of estafa.
Held:
No. Under Sec. 9 of NIL a check drawn payable to the order of cash is a check payable to
bearer and the bank may pay it to the person presenting it for payment without the drawers
indorsement. However, if the bank is not sure of the bearers identity or financial solvency, it has
the right to demand identification or assurance against possible complication, such as forgery of
drawers signature, loss of the check by the rightful owner, raising of the amount payable, etc.
But where the bank is satisfied of the identity or economic standing of the bearer who tenders
the check for collection, it will pay the instrument without further question; and it would incur no
liability to the drawer in thus acting.

DEVELOPMENT BANK OF RIZAL VS. SIMA WEI G.R. NO. 85419 MARCH 9, 1993
Facts:
Development Bank of Rizal filed a complaint for a sum of money against respondents
Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic
Corporation and the Producers Bank of the Philippines for: (a) enforce payment of the
balance on a promissory note executed by Wei; (b) and enforce payment of two checks executed
by Sima Wei. In consideration for a loan extended by petitioner Bank to respondent Sima
Wei, the latter executed and delivered to the former a promissory note, engaging to pay the
petitioner Bank or order the amount of P1,820,000.00 on or before June 24, 1983 with interest at
32% per annum. Sima Wei made partial payments on the note, leaving a balance
of P1,032,450.02. On November 18, 1983, Sima Wei issued two crossed checks payable to
petitioner Bank drawn against China Banking Corporation. The said checks were allegedly
issued in full settlement of the drawer's account evidenced by the promissory note.
These two checks were not delivered to the petitioner or to any of its authorized representatives.

Instead for these checks came into the possession of respondent Lee KianHuat, who deposited
the checks without the petitioners indorsement to the account of respondent Plastic
Corporation in
Producers Bank which was afterwards credited to Plastic Corporations account.
Issues:
Whether petitioner Bank has a cause of action against any or all of the defendants, in the
alternative or otherwise
Held:
No cause of action against other defendant only against Sima Wei. A cause of action is
defined as an act or omission of one party in violation of the legal right or rights of another.
The essential elements are: (1) legal right of the plaintiff; (2) correlative obligation of the
defendant; and (3) an act or omission of the defendant in violation of said legal right. The
normal parties to a check are the drawer, the payee and the drawee bank. Courts have long
recognized the business custom of using printed checks where blanks are provided for the
date of issuance, the name of the payee, the amount payable and the drawer's signature. All the
drawer has to do when he wishes to issue a check is to properly fill up the blanks and sign it.
However, the mere fact that he has done these does not give rise to any liability on his part, until
and unless the check is delivered to the payee or his representative. A negotiable instrument,
of which a check is, is not only a written evidence of a contract right but is also a
species of property. Just as a deed to a piece of land must be delivered in order to
convey title to the grantee, so must a negotiable instrument be delivered to the
payee in order to evidence its existence as a binding contract. Section 16 of the
Negotiable Instruments Law, which governs checks, provides in part: Every contract on a
negotiable instrument is incomplete and revocable until delivery of the instrument for
the purpose of giving effect thereto. Thus, the payee of a negotiable instrument acquires no
interest
with
respect
thereto
until
its
delivery to him.
Delivery of an instrument means transfer of possession, actual orconstructive, from one person
to another. Without the initial delivery of the instrument from the drawer to the payee, there can
be no liability on the instrument. Moreover, such delivery must be intended to give effect to the
instrument.

METROPOL VS. SAMBOK GR NO. L-39641 FEBRUARY 28, 1983

Facts:
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd.
Payable in 12 equal monthly installments with interest. It is further provided that in case on nonpayment of any of the installments, the total principal sum then remaining unpaid shall become
due and payable with an additional interest. Sambok Motors co., a sister company of Ng Sambok
Sons negotiated and indorsed the note in favor of Metropol Financing & investment Corporation.
Villaruel defaulted in the payment, upon presentment of the promissory note he failed to pay the
promissory note as demanded, hence Ng Sambok Sons Motors Co., Ltd. notified Sambok as
indorsee that the promissory note has been dishonored and demanded payment. Sambok failed
to pay. Ng Sambok Sons filed a complaint for the collection of sum of money. During the
pendency of the case Villaruel died. Sambok argues that by adding the words with recourse in
the indorsement of the note, it becomes a qualified indorser, thus, it does not warrant that in
case that the maker failed to pay upon presentment it will pay the amount to the holder.
Issue:
Whether or not Sambok Motors Co is a qualified indorser, thus it is not liable upon the
failure of payment of the maker.
Held:

No. A qualified indorserment constitutes the indorser a mere assignor of the title to the
instrument. It may be made by adding to the indorsers signature the words without recourse
or any words of similar import. Such indorsement relieves the indorser of the general obligation
to pay if the instrument is dishonored but not of the liability arising from warranties on the
instrument as provided by section 65 of NIL. However, Sambok indorsed the note with
recourse and even waived the notice of demand, dishonor, protest and presentment.
Recourse means resort to a person who is secondarily liable after the default of the person who is
primarily liable. Sambok by indorsing the note with recourse does not make itself a qualified
indorser but a general indorser who is secondarily liable, because by such indorsement, it agreed
that if Villaruel fails to pay the not the holder can go after it. The effect of such indorsement is
that the note was indorsed witout qualification. A person who indorses without qualification
engages that on due presentment, the note shall be accepted or paid, or both as the case
maybe, and that if it be dishonored, he will pay the amount thereof to the holder. The words
added by Sambok do not limit his liability, but rather confirm his obligation as general indorser.

VICENTE R. DE OCAMPO V. GATCHALIAN (1961)

Facts:
Sept 8 1953 evening, Anita C. Gatchalian was looking for a car for the use of her husband
and the family and Manuel Gonzales who was accompanied by Emil Fajardois (personally known
to Anita) offered her a car Manuel Gonzales represented to defendant Anita that he was duly
authorized by Ocampo Clinic, the owner of the car, to look for a buyer and negotiate for
and accomplish the sale, but which facts were not known to Ocampo. September 9 1953, Anita
requested Manuel to bring the car the day following together with the certificate ofregistration of
the car so that her husband would be able to see same Manuel Gonzales told her that unless
there is a showing that the party interested in the purchase is ready he cannot bring
the certificate of registration Anita gave him a check which will be shown to the owner as
evidence of buyer's GF in the intention to purchase, it being for safekeeping only of Manuel and
to be returned for the hospitalization of the wife of Manuel, he paid the check to Ocampo clinic
P441.75 - payment of said fees and expenses. P158.25 -given to Manual as balance. Next Day,
Manual did not appear so Anita issued a stop payment order. Anita filed with the Office of the
City Fiscal of Manila, a complaint for estafa against Manuel. Appeal Manuel contends that the
check is not a negotiable instrument, under the facts and circumstances stated in the stipulation
of facts - no delivery (Section 16, Negotiable Instruments Law) because only for safekeeping
(conditional delivery). Ocampo is not a holder in due course no negotiation prior to acquiring the
check. Manuel could have inquired why a person would use the check of another to pay his own
debt, Gatchalian being personally acquainted with V. R. de Ocampo
Issues:
A. Whether or not Ocampo is a holder in due course
B. Whether or not prima facie holder in due course applies - NO
Held:
A. NO Sec. 191: holder - payee or indorsee of a bill or note, who is in possession of it, or the
bearer. Sec. 52 holder in due course - holder who has taken the instrument under the ff
conditions:
1. That it is complete and regular on its face
2. That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, it such was the fact.

3. That he took it in good faith and for value.

4. That at the time it was negotiated to him he had no notice of any infirmity in
the instrument or defect in the title of the person negotiating it circumstances the amount
of the check did not correspond exactly with the obligation of Matilde Gonzales to Dr. V. R.
de Ocampo check had two parallel lines in the upper left hand corner, which practice
means that the check could only be deposited but may not be converted into cash. It
was payee's duty to ascertain from the holder Manuel what the nature of his title to the
check was or the nature of his possession. failure. Guilty of gross neglect and legal
absence of GF. In order to show that the defendant had 'knowledge of such facts that his
action in taking the instrument amounted to BF it is not necessary to prove that the
defendant knew the exact fraud. It is sufficient that the buyer of a note had notice or
knowledge that the note was in some way tainted with fraud
B. NO Sec. 59 every holder is deemed prima facie to be a holder in due course a possessor of
the instrument is prima facie a holder in due course does not apply because there was a
defect in the title of the holder (Manuel Gonzales) because the instrument is not payable to
him or to bearer. Suspicious circumstance

MEDINA VS IAC (GR NO. L-70145) NOVEMBER 13, 1986

Facts:
Jose Go purchased from Associated Bank a cashier's check for P800,000.00. Unfortunately,
he left said check on the top of the desk of the bank manager when he left the bank. The bank
manager entrusted the check for safekeeping to a bank official, a certain Albert Uy. While Uy
went to the men's room, the check was stolen by his visitor in the person of Alexander
Lim. Upon discovering that the check was lost, Jose Go accomplished a "STOP PAYMENT"
order. Two days later, Associated Bank received the lost check for clearing from Prudential
Bank. After dishonoring the same check twice, Associated Bank received summons and copy of
a complaint for damages of Marcelo Mesina who was in possession of the lost check and is
demanding payment. Petitioner claims that a cashier's check cannot be countermanded in the
hands of a holder in due course.
Issue:
Whether or not petitioner can collect on the stolen check on the ground that he is a holder
in due course
Ruling:
No. Petitioner failed to substantiate his claim that he is a holder in due course and for
consideration or value as shown by the established facts of the case. Admittedly, petitioner
became the holder of the cashier's check as endorsed by Alexander Lim who stole the check. He
refused to say how and why it was passed to him. He had therefore notice of the defect of his
title over the check from the start. The holder of a cashier's check who is not a holder in due
course cannot enforce such check against the issuing bank which dishonors the same.

CRISOLOGO VS CA
Facts:
The president of Movers Enterprises, to accommodate its clients Spouses Ong,
issued a check in favor of petitioner Crisologo-Jose. This was in consideration of a quit
claim by petitioner over a parcel of land, which the GSIS agreed to sell to spouses Ong, with
the understanding that upon approval of the compromise agreement, the check will be
encashed accordingly. As the compromise agreement wasn't approved during the expected
period of time, the aforesaid check was replaced with another one for the same value. Upon
deposit though of the checks by petitioner, it was dishonored. This prompted the petitioner
to file a case against Atty. Bernares and Santos for violation of BP22. Meanwhile, during the

preliminary investigation, Santos tried to tender a cashiers check for the value of the
dishonored check but petitioner refused to accept such. This was consigned by Santos with the
clerk of court and he instituted charges against petitioner. The trial court held that consignation
wasn't applicable to the case at bar but was reversed by the CA.
Held:
Petitioner averred that it is not Santos who is the accommodation party to the instrument
but the corporation itself. But assuming arguendo that the corporation is the accommodation
party, it cannot be held liable to the check issued in favor of petitioner.
The rule on accommodation party
doesn't include or apply to corporations which are accommodation parties. This is because the
issue or indorsement of another is ultra vires. Hence, one who has taken the instrument with
knowledge of the accommodation nature thereof cannot recover against a corporation
where it is only an accommodation party. If the form of the instrument, or the nature of the
transaction, is such as to charge the indorsee with the knowledge that the issue or
indorsement of the instrument by the corporation is for the accommodation of another,
he
cannot
recover
against
the
corporation
thereon.
By way of exception, an officer or agent of a corporation shall have the power to
execute or indorse a negotiable paper in the name of the corporation for the
accommodation of a third party only is specifically authorized to do so.
Corollarily,
corporate officers have no power to execute for mere accommodation a negotiable
instrument of the corporation for their individual debts and transactions arising from or
in relation to matters in which the corporation has no legitimate concern. Since such
accommodation paper cannot be enforced against the corporation, the signatories
thereof shall be personally liable therefore, as well as the consequences arising from their acts in
connection therewith.