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SECTION 1 (1) SESBRENO v CA DOCTRINE-A non-negotiable instrument may, obviously, not be negotiated; but it may be assigned or transferred absent an express prohibition against assignment or transfer written on the face of the instrument. FACTS: Raul Sesbreño made a money market transaction with Philfinance amounting to P300,000 with a maturity date 32 days later. In return Sesbreño received from Philfinance several securities; a share of a promissory note issued by Delta Motors Corp. (a respondent) to Philfinance, a certificate of securities delivery stating that the said promissory note was in possession of Pilipinas Bank (another respondent), under custodianship, and post-dated checks payable on the date of maturity of his investment with Philfinance in the amount of 304,533.33. On the date of maturity of his investment, Sesbreño sought to encash the checks given to him; they were however dishonored for having been drawn against insufficient funds. Later Philfinance approached Sesbreño delivering to him a letter stating that the promissory note (from Delta) assigned to him can be claimed from Pilipinas Bank upon his demand. Sesbreño made such demand from Pilipinas Bank and subsequently he was able to inspect the promissory note from Delta and he discovered that on the face of the instrument is stamped the words “NON NEGOTIABLE”. Later, Pilipinas Bank rejected delivering the promissory note to Sesbreño stating that they were awaiting instructions from Philfinance. ISSUE: Who is liable to pay for the amount owed to Sesbreño by Philfinance? RULING: Although the promissory note of Delta has been stamped “NON NEGOTIABLE” it was still possible to transfer ownership of the note via ASSIGNMENT (assigned or transferred). This was what was done to Sesbreño; he was assigned the amount of the promissory note of Delta up to the amount owed to him by Philfinance (304,533.33). Delta and Pilipinas Bank both refused to pay Sesbreño such amount. Delta defends itself by arguing that its promissory note with Philfinance has already been extinguished via compensation (when both parties are creditor and debtor to one another). Delta cannot be compelled to pay its debt twice. The court ruled that it is PILIPINAS BANK who should be liable to pay Sesbreño the amount for its failure/refusal to deliver the note to Sesbreño upon his demand. Such failure caused prejudice against the petitioner. Pilipinas Bank had no right to refuse delivery of the note to Sesbreño, such failure was clearly a breach of its duty as custodian. The conclusion reached by the court is of course without prejudice to the right of Pilipinas Bank to be reimbursed by Philfinance. (2) MORAN v CA DOCTRINE: A check is a bill of exchange drawn on a bank payable on demand. It is supposed to be drawn against a previous deposit of funds for ordinarily it is intended for immediate payment. FACTS: Spouses Moran owns a Petron gas station situated in Old Wack Wack. They get deliveries of gasoline from Petrophil Corp. The agreement with Petrophil states that the spouses must pay C.O.D. (cash on delivery) but due to their good credit reputation Petrophil has been accepting their payments via personal check. The spouses’ payments via check are done through the nearby Citytrust Bank. In said bank, spouses held three accounts – a Current and two Savings accounts. As a special privilege to the Spouses Moran, the bank allowed the petitioners to maintain a zero balance in their current account. The Spouses also executed a PAT (preauthorized transfer) agreement with the bank, stating that checks issued by the Spouses will be honored even if their current account contains insufficient funds as long as their savings account has sufficient balance to cover the value of the checks that they have issued. The PAT agreement covered only one of their savings account. On Dec. 12, Librada Moran issued a check for P50,000 pesos as payment for gas deliveries. On Dec. 13, Librada Moran again issued a check, this time worth P56,000, again as payment for gas deliveries by Petrophil. Petrophil then deposited the checks with their bank, PNB (collecting bank) which then presented the checks to the Philippine Clearing House Corp. The records show that On Dec. 14 the current account of the Spouses Moran had a zero balance whilst their savings account with the PAT had P26,000 and their other savings account had P43,000. On Dec. 15 George Moran went to Citytrust, as was his daily practice, to oversee their daily transactions with the bank. While there George Moran made deposits and replenished the monies in their current and savings account. On Dec 15 or 16 the Spouses Moran was informed by Petrophil that their checks had bounced and because of that they will no longer be allowed to pay on a credit basis (by check). ISSUE: W/N Citytrust is liable for damages to the Spouses Moran because their dishonor of the checks they issued caused them besmirched business and personal reputation, shame and anxiety. RULING: NO. The relationship between the bank and depositor is that of a creditor and debtor. The action for damages of the Spouses Moran hinges on whether or not the petitioners had sufficient funds in their accounts when the bank dishonored the checks in question. The answer is clearly NO. On Dec. 14 when the checks were presented for clearing the accounts of the Spouses did not contain enough money to cover the value of the two checks issued. It was only on Dec. 15 at about 10am that George Moran went to Citytrust and deposited the necessary funds to cover the checks, unfortunately it was too late to prevent the dishonor of the checks. The bank, 1


valuing the patronage of the Spouses Moran tried its very best in preventing the check from bouncing. The Bank Manager of Citytrust even made personal visits to the Spouses and to Petrophil in an attempt to present a manager’s check so that the dishonored checks could be redeemed. In addition the bank also sent a letter of apology to Petrophil on behalf of the Spouses Moran to try and restore the good credit and business reputation of the spouses. The dishonor of the checks issued by the Spouses was of their own fault, it was their responsibility to keep track of their transactions and ensure that their account with Citytrust had enough funds to cover the same. Citytrust is not liable for any damages. be said that he will not sign a document without first informing himself of its contents and consequences.

SECTION 7 (4) PAY v VDA DE PALANCA FACTS: George Pay, petitioner, is the creditor of the late Justo Palanca who died in 1963. The latter and his wife, respondent Rosa Gonzalez vda. de Palanca, issued a promissory note in 1952, in the amount of P26,900 with interest of 12% per annum. The PN contained the following: For value received from time to time since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at his office at the China Banking Corporation the sum of [Twenty Six Thousand Nine Hundred Pesos] (P26,900.00), with interest thereon at the rate of 12% per annum upon receipt by either of the undersigned of cash payment from the Estate of the late Don Carlos Palanca or upon demand'. . . ISSUE: W/N a creditor is barred by prescription in his attempt to collect on a promissory note executed more than fifteen years earlier with the debtor sued promising to pay either upon receipt by him of his share from a certain estate or upon demand HELD: YES, the creditor is barred from collecting. The SC ruling is based on Article 1179 of the Civil Code, which provides: "Every obligation, whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once." The obligation being due and demandable (payable on demand), it would appear that the filing of the suit after fifteen years was much too late. For again, according to the Civil Code, which is based on Section 43 of Act No. 190, the prescriptive period for a written contract is that of ten years. *N.B. This case was decided in 1974, but for some reason the SC cited the Civil Code provision on CONTRACTS when in fact the NIL was already effective (as of June 2, 1911). Nevertheless, the ruling is consistent with Sec. 7 (a) of the NIL, which states, “An instrument is payable on demand, where it is expressed to be payable on demand, or at sight, or on presentation...”







DOCTRINE: According to the NIL persons who write their names on the face of promissory notes are makers. FACTS: Astro Electronics Corp. was granted several loans by Philtrust amounting to P3,000,000 with interest and secured by three promissory notes. In each of the promissory notes petitioner Roxas signed twice, as President of Astro and in his personal capacity. Thereafter Phiguarantee with the consent of Astro, guaranteed in favor of Philtrust 70% of Astro’s loan subject to the condition that upon payment by Philguarantee of said amount it shall be proportionally subrogated to the rights of Philtrust against Astro. Astro failed to pay its loan despite demands, Philguarantee paid 70% of the guaranteed loan to Philtrust. Subsequently, Philguarantee filed against Astro and Roxas a complaint for payment of their debt with the RTC of Makati. Roxas disclaims any liability on the instrument alleging that he signed merely in blank, the phrases “in his official capacity” and “in his personal capacity” being fraudulently inserted without his knowledge. The court found for Philguarantee, hence this petition. ISSUE: W/N Roxas should be jointly and severally liable (solidary) with Astro for the sum awarded by the RTC. RULING: YES. The promissory notes are valid and binding against Astro and Roxas. Roxas, in signing his name aside from being President of Astro, became a co-maker of the note and therefore cannot escape any liability from arising for it. According to the NIL persons who write their names on the face of promissory notes are makers. Roxas signed the notes TWICE, he does not deny this fact and he offers no explanation why he did so. It devolves upon him to overcome the presumption that private transactions are presumed to be fair and regular and that a person takes ordinary care of his concerns. The allegations of Roxas are self-serving and are not supported by any proof. Roxas is the President of Astro and reasonably a businessman who is presumed to take ordinary care of his concerns. Absent any countervailing evidence it cannot

SECTION 8 (5) GSIS v CA FACTS: The Rachos and Lagascas loaned from GSIS 11500 pesos and 3000 pesos secured by 2 deeds of mortgage. They also executed a promissory note in which they promised to pay jointly and severally GSIS the said amounts. It must be noted that the document was worded that they “promise to pay the GSIS” The Lagascas executed an 2


RULING: YES. he was not yet a party to the instrument. the said CBCI’s were specifically under the name of FILRITERS. The Worldwide Garment Manufacturing. After 2 years. Second. hence. Inc. Negotiable Instruments Law (NIL) provides that persons who write their names on the face of promissory notes are makers and are liable as such. RTC ruled in favor of the Bank and held Yamaguchi and Canlas solidary liable. the Bank filed a complaint for the recovery of the sums of money covered by the 9 promissory notes plus attorney’s fees and penalty charges. Yamaguchi and Canlas were authorized to apply for credit facilities with Republic Planters Bank in forms of export advances and letters of credit/trust receipts accommodations. petitioner. there can be no liability on the instrument. issued 2 crossed checks each worth P500K payable to DBR with the intent of settling its account with DBR. changed its name to Pinch Manufacturing Corporation. not yet. Sima Wei. is questioning the decision of the CA which upheld the decision of the Central Bank ruling against Trader’s registration of Central Bank Certificates of Indebtedness named under FILRITERS worth 3. SECTION 9 (6) TRADER’S ROYAL BANK v CA SECTIONS 17 & 20 FACTS: Trader’s Royal Bank. Moreover. Hence his appeal. The payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him. ISSUE: W/N DBR can sue Sima Wei for the value of the checks. then signed by 2 or more persons signify that each signer makes 3
 SECTION 16 (7) DEVELOPMENT BANK OF RIZAL v SIMA WEI FACTS: Development Bank of Rizal seeks to collect from Sima Wei P1M based on a promissory note issued by the latter. ISSUE: W/N Trader’s can successfully register the transfer of the CBCI’s in its name and claim the value thereof being an instrument payable to bearer. actual or constructive. and not Pinch Manufacturing Corporation and (2) the promissory notes were blank at the time he affixed his signature. the CBCI’s were not payable to bearer. However. Without the initial delivery of the instrument from the drawer to the payee. 9 promissory notes were issued in favor of the Bank. CA affirmed the decision but excluded Canlas from liability. Inc. Also. the Rachos wanted to annul the foreclosure arguing that they haven’t received any value for the obligations and averred that they were mere accommodation parties based on the Negotiable Instrument Law. Then. For some reason. (8) REPUBLIC PLANTERS BANK v CA FACTS: Shozo Yamaguchi and Fermin Canlas were President/Chief Operating Officer and Treasurer respectively. from one person to another. eh?!). Delivery of an instrument means transfer of possession. The NIL has no applicability here since the promissory note was specifically payable to GSIS and not to its order or bearer. namely Pinch Manufacturing Corporation and Yamaguchi. their property shouldn’t be foreclosed. The sale or transfer made by purported agents of FILRITERS was not authorized by the Board of Directors of the said company. the checks were never FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . even though he was the payee. 1. who deposited it to a different account even without Sima Wei’s indorsement. In turn.NEGO CASE DIGESTS | ATTY. even assuming they were negotiable. The phrase “I Promise to pay”. ISSUE: W/N the Rachos should be exempt from liability? RULING: NO. NORIANNE TAN | 2D 2012 Assumption of Mortgage assuming the obligations of the said mortgages. This stupid small time bank on the other hand presumed regularity and credited the checks to Lee’s account (how stupid. Lastly. HELD: NO. ISSUES: W/N Canlas is solidarily liable with the other defendants. Because there was no delivery yet to DBR. HELD: NO. They were specifically registered under the name of FILRITERS and did not contain any other words such as “or to bearer”. Through Board Resolution No. of Worldwide Garment Manufacturing. the Lagascas failed to satisfy their obligation which led GSIS to foreclose on the mortgages. The Rachos’ liability is based on the Civil Code provision regarding 3rd parties to a contract securing through mortgage or pledge.. Said CBCI’s were sold to Trader’s by officers purporting to be agents of FILRITERS. Only Canlas appealed. such delivery must be intended to give effect to the instrument. The checks landed with co-respondent Lee. Inc. the transfer did not conform with Central Bank regulations regarding dealings involving CBCI’s. Canlas is solidary liable with defendants Yamaguchi and Pinch Manufacturing Corporation for the 9 promissory notes at 16% interest per annum. delivered to DBR or any of its authorized representatives. First of all the CBCI’s were not in the nature negotiable instruments.5M. arguing he was not liable because (1) an officer of Worldwide Garment Manufacturing.

By special arrangement. 23 checks were released by NWSA. Being negligent in examining the signature and ignoring the apparent irregularity on the instruments face. Inc. It was not only negligent in checking the validity of the instrument but it induced the PI Bank and Equitable Bank to pay such amounts to their depositors. However. FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . it is reasonable that it would be borne by him. contrary to 12% adjudged by the Court of Appeals. the increase in interest is not subject to nay ceiling ISSUES: W/N the Government can recover the amounts paid erroneously in consideration of the 28 treasury warrants. The 2 cases were consolidated. the notes were complete in the sense that the spaces for material particular has been filled up by the bank. the holder has prima facie authority to fill in the blanks strictly in accordance with the authority given and within a reasonable time. ruling for PNB. or else he will be personally liable to the holder. Forgery cannot be presumed. 4
 SECTION 23 (9) REPUBLIC v EQUITABLE BANK FACTS: 24 treasury warrants were deposited to Bank of Philippine Islands (PI Bank) by Corporation De los Padres Dominicos. Upon later examination only. positive and convincing evidence. 000. At the time Canlas affixed his signature. MWSS used personalized checks. Ordinarily. 4 Treasury Warrants were deposited to Equitable Bank by customers Robert Wong. After being cleared. Subsequently. CFI ruled in favor of MWSS. which was beyond the authority of the auditor of Treasury to approve. NWSA then demanded to PNB immediate restoration of the value debited against their account. Section 14 of NIL. In addition. Hence this case. which in fact. In another scenario. *The interest should only be 16. On the months of March to May. The MWSS committed negligence on their part to bar their action for the restoration of the money. RULING: NO. Canlas is primarily liable as a co-maker. The phrase “and in his personal capacity” below the signature of the makers will not affect the liability of the makers. The lower court dismissed the petition. RULING: NO. The reports. the same 23 checks were cleared and debited against the NWSA account. the Government filed 2 cases separately against PI Bank and Equitable Bank for the recovery of value represented by the 28 treasury warrants. It was cleared and the bank collected the amounts from the Treasurer. is the predecessor-in-interest of MWSS). affidavit and memorandum submitted by MWSS merely alleges the discrepancy of signatures and does not conclude the checks to be forged. which must be borne by 1 of the 2 parties alike innocent of forgery. “Where a loss. The Government has found to be negligent. Thus. Section 20 of the NIL provides that a person signing as an agent must indicate that he signs for or on behalf of a principal. After knowing the NBI report. officers of companies will not be personally liable for acts done or contracts entered if duly authorized. the Treasurer returned such warrants and demanded a refund on the ground that the warrants have been forged. which provides that where an instrument is wanting in any material particular. Lu Chiu Kau. similar to a solidary debtor. and Chung Ching. Subsequent investigation by NBI shows that these depositors were all fictitious persons. Thus. the Treasurer (of the Government) converted them into cash. it is customary procedure of commercial banks to sign promissory notes prepared by banks in printed form with blank spaces already filled up as per agreed terms of the loan. the Treasurer returned the warrants claiming they were forged. the treasury warrants where valued over P5. 6 (NAWASA/NWSA. However. it was overturned by the Court of Appeals. thus no recovery. through the Clearing Office of the Central Bank. solidary. Hence this appeal. to Pinch Garment Corporation extinguished the original corporation. can be traced to the neglect or fault of either. Equitable Bank then presented the warrants to the Central Bank. It was the Treasurer who initially cleared the 28 treasury warrants. all of them were cleared and debited against their account. Usury Law is not applicable because it is only for interests by way of compensation for the use or forbearance of money. A change in name does not make a new corporation. NORIANNE TAN | 2D 2012 an independent singular promise to pay the notes in full. the loss should be borne by the Treasury. In those same months. PI Bank then presented these warrants to the Government. it was found to be negotiable instruments with forged signatures. even if innocent of any intentional fraud through means it has succeeded. The reason being. are not applicable in this case. One of them is NWSA Account No. ISSUES: W/N MWSS can recover the amounts debited against their account. Arturo Sison and Antonio Mendoza to 2 banks. were forged. These checks were deposited by Raul Dizon. the alleged forgery of the 23 checks must be proved with clear. *Court of Appeals erred in holding that the change in name of Worldwide Garment Manufacturing. The PI Bank and Equitable Bank should not be penalized. With or without the said phrase. “ (10) MWSS v CA FACTS: Metropolitan Waterworks and Sewerage System (MWSS) has several accounts with Philippine National Bank (PNB). First. which the bank credited in favor of the Corporation.NEGO CASE DIGESTS | ATTY. Again. namely Philippine Commercial and Industrial Bank (PCIB) and Philippine Bank of Commerce (PBC).

owner of the printing press even testified that they leave the finished and unfinished checks vouchers the rack of the machine so that work could be continued the following day. because the forgers knew specifically the account number that holds sufficient amount to encash such checks. PNB should have no liability because it has taken necessary measures in the detection of forged checks. what is the extent of the bank’s warranty of the validity of all prior endorsements stamped at the back of the checks? In case the signatures are forged. • Failed to give printer specific instructions • Failed to retrieve spoiled check forms • Failed to provide any control regarding the paper • Failed to furnish PNB with samples of typewriting. the Court cites Sec. When a 5
 . The arbitration committee found for BPI and ordered Chinabank to pay. MWSA failed to provide security measures to the printing office. All these with the standard warranty of the validity of the checks. Zapaorteza. MWSS failed to reconcile the bank statements with their own records. the court relies on the PCHC’s Rules and Regulations which states “items xxx bearing a forged endorsement xxx shall be returned 24 hours after discovery xxx but in no event beyond the period prescribed by law for the filing of legal action by the returning bank xxx. (read Sec. Eligia G. 23). The said caller requested for a pre-termination of two placements worth P1. Eugenio was able to encash and deposit 17 checks to her account drawn against that of Ilusorio. BPI’s Money Market Department received a call from a female alleging to be one of their clients.I. 2. A case of estafa through falsification of commercial documents was filed against the impersonator and 4 officers of BPI by the Presidential Security Command. (12) ILUSORIO v CA FACTS: Ilusioro was a prominent business man and a creditor in good standing of Manila Banking Corporation. Due to his numerous business dealings and frequent travels he left the management of his account to his secretary Katherine Eugenio. Regarding the second issue. Upon discovering what had happened she disclaimed having pre-terminated the placements the month before and executed an affidavit that her endorsements were forged. they proceeded with the transaction. Using personalized checks. and payment made through or under such signature is ineffectual or does not discharge the instrument. check writing and print of personalized checks • Failed to send a representative to the printing office Faustino Medina. 3. the court ruled that BPI cannot claim reimbursement and instead should pay for 60% of the amount and damages and Chinabank 40%. deposited and subsequent withdrawals were made. the check was released to her. Equitable Banking Corp. That same afternoon.8M and P600K evidenced by corresponding promissory notes. Fernando. When the placements matured in November 1981. the court says that checks can be presented even beyond the next clearing but not beyond the prescriptive period for filing legal action. Ms. It actually sent a memorandum to all Current Account Bookkeepers. Later that morning. Finding that BPI was gravely negligent in ascertaining the true identity of the caller.NEGO CASE DIGESTS | ATTY. the cashier of the Treasury Dept of NWSA. MWSS is barred from setting up defense. Acting on the affidavit of Fernando BPI returned the checks to Chinabank. an account was opened in Chinabank where the checks were FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA RULING: On the first issue. ISSUE: 1) When a bank presents checks for clearing and payment. allows people known to him to enter his office while the check writer is merely on top of his table. MWSS was negligent on 3 points. it s wholly inoperative unless the party against whom it is sought to enforce is precluded from setting up the forgery. NBI reports concluded that the forged checks were an inside job. the check was picked up by a Rosemarie Fernando who claimed to be the niece Eligia and upon presentation of some identification and a letter of authorization. From September 1980 to January 1981.” Citing the case of Banco de Oro v. including MWSS. 23 of the N. The Board of Directors of Philippine Clearing House Corp. hence this appeal. the person who was supposedly in charge of verifying such accounts. MWSS failed to provide security measures over its own records. the real Eligia Fernando went to BPI to claim her earnings. After verifying the caller’s identity. 1. One of those conditions that bar setting up defense is negligence. The GENERAL RULE is to the effect a forged signature is wholly inoperative. It was the proximate cause of the failure to discover the fraud. who in turn returned it to BPI for reason “beyond clearing time”. Ongtengco. Section 23 of the Negotiable Instruments Law (NIL) provides that when a signature of an instrument is forged. The EXCEPTION to this rule is when the party relying on the forgery is precluded from setting up the forgery or want of authority. NORIANNE TAN | 2D 2012 Nonetheless.. unreasonably delayed in taking prompt deliveries of PNB bank statements and credit and debit memos. It was shown that Mr. Mr. may the drawee bank (BPI) claim reimbursement from the collecting back (Chinabank)? 2) (11) BPI v CA FACTS: In October 1981. warning them of the activities of forgery syndicates who specifically target depositors using personalized checks.L. reversed in favor of Chinabank.

the Court leaves the parties where it finds them. because of PNB implied acceptance. private respondent Manila Bank also instituted criminal action against Eugnio for estafa through falsification of commercial documents. Such warranties are FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA .228. 62 of the N. it cannot be denied that PNB is guilty of the same. Subsequently. On the second issue. At the same time. by not providing further specimen signatures. The bank should be familiar with the signatures of its depositors and based on the facts. deposited it to their own Metrobank account and sent it to the bank and the Bureau of Treasury for clearing. as it had. even if PCIB was negligent.I. GSIS demanded that the amount be recredited to its account claiming that the signatures were of the officers were forged. a cashier for Golden Savings. the court dismissed PNB’s action against PCI Bank for the recovery of P57. Recovery would have been possible if PNB had been a subsequent endorsee or a holder in due course subsequent to PCIB. 415. Lastly. ISSUE: 1) 2) W/n PNB may recover from PCIB based on the warranties given by the latter W/n PCIB is negligent in determining whether the checks were forged and therefore liable (15) METROPOLITAN BANK TRUST & CO v CA FACTS: Eduardo Gomez opened an account with Golden Savings and Loan Association and deposited 38 treasury warrants worth P1. Petition is denied. irrelevant to PNB’s alleged right to recover from PCIB. 23 of the N. The check was forwarded for clearing through the Central Bank. using as its defense the negligence of Gozon for leaving the checkbook in his car. Further.I. forged the signature of Gozon and encashed it. Santos and left the latter in his car along with his checkbook. to PNB. PNB was found to be negligent in ascertaining the genuineness of the signature in the check. ISSUE: 1) 2) W/n petitioner has a cause of action against Manila Bank W/n Manila Bank is barred from raising defense that the fact of forgery was not established by filing an estafa case against Eugenio. NORIANNE TAN | 2D 2012 business partner informed him of Eugenio’s activities he fired her and instituted criminal action for estafa through falsification. the party to the complaint is the People of the Philippines. (13) PNB v CA FACTS: In a case with the CFI of Manila.37. Upon payment by PNB the check ceased to be a negotiable instrument and became a mere voucher or proof of payment. ISSUE: W/N PNB is liable to recredit Gozon’s account? RULING: YES. 62) Being that they are equally at fault. (refer to Sec. Sec. Gozon wanted to recover the value the check encashed by Santos but PNB refused. instead it retained the check and paid PCIB the amount. Based on Sec 2 Rule 110 of the Rules of Court. Castillo repeatedly kept asking if the warrants were already cleared and was asked to wait. Metrobank finally allowed Golden Savings to 6
 RULING: The guarantees given by PCIB referred only to “all prior endorsements” and not to the authenticity of the signatures of GSIS’s officers. 415. implying that it had considered the check good and would honor it. Exasperated. but the latter did not return the check the next day or any other time. PNB did not return the check upon clearing. PNB’s negligence was the proximate cause of the corresponding loss. it was only appropriate for Gozon to trust his long time friend Santos that the latter wouldn’t do anything to compromise such relationship. He is precluded therefore from setting up forgery. Petitioner has the burden of proving negligence on the part of the bank for failure to detect the discrepancy in the signature. wrote 5000 pesos as its value. Hence. PNB complied however PCIB refused to reimburse PNB for the amount it had paid to Lim. the fact that Manila Bank filed a cased against Eugenio would not estop it from asserting the fact that forgery has not been clearly established. this instance case. it was bound to pay as cited on Sec.L provides for the exception that unless the party against whom it is sought to enforce such right is precluded from setting up forgery or want of authority. The said warrants were subsequently indorsed by Gloria Castillo. After two weeks. (14) PNB v QUIMPO FACTS: Gozon went to PNB with his friend. Regarding the second issue. The so-called friend was later caught by the authorities and also admitted to his crime. The Court ruled that PNB was even guilty of a greater degree of negligence because it had previous notice from GSIS that the check had been lost and that payment was requested to be stopped. Also. Petitioner requested the bank to restored to his account the value of the checks but respondent refused. Petitioner therefore cannot hold Manila Bank in estoppels for it is not the actual party to the criminal action. RULING: The Court finds that petitioner has no cause of action against Manila Bank. Santos took one check. The case originated when a certain Augusto Lim deposited in his PCIB current account a GSIS check drawn against PNB worth P57.NEGO CASE DIGESTS | ATTY.L.755. The forgery was not proven because of the petitioners own inaction. there were clear discrepancies between the signature of Gozon and the forgery of Santos.

However. ISSUE: Who should bear the loss arising from the forgery. They failed to exercise due diligence in checking the veracity of indorsements. Associated Bank is liable to PNB only to 50% of the same amount because of its liability as indorser of the checks that were deposited by Pangilinan. a treasury warrant is not subject to the Negotiable Instruments Law since it is not a negotiable instrument. On it’s face. Associated Bank or Pangilinan? HELD: The SC held that the Province and Associated Bank should bear losses in the proportion of 50-50. and guaranteed the genuineness of the said checks. On the other hand. Defendant managed to cash the check (worth around 1200 pesos). It was through Metrobank’s carelessness. NORIANNE TAN | 2D 2012 withdraw from the proceeds of the warrants and in turn.300 from PNB because of the negligence they exhibited in releasing the checks to the then already retired Pangilinan who is an unauthorized person to handle the said checks. Adena Canlas who was the Chief of the said hospital and endorsed 30 checks amounting to P203. Pangilinan deposited the checks to his personal savings account with Associated Bank which was cleared and paid for by PNB. Metrobank discovered that 32 of the 38 warrants were dishonored by the Bureau of Treasury and demanded a refund of the amount withdrawn by Golden Savings which the latter refused. the Province of Tarlac. In this specific case the court held that since the check was endorsed multiple times already it was not the responsibility of the bank to ascertain if the signatures of the previous endorsements were genuine or not. Therefore the initial endorsement must have been a forgery. Were it not for Metrobank’s clearing. The money was drawn from the account of the Province of Tarlac with PNB. For convenience: TARLAC  PNB  ASSOCIATED BANK  CANLAS & PANGILINAN The trial court ruled that 1) PNB should pay the Province of Tarlac the P203. On appeal. The Province of Tarlac. Martin Lorenzo. PNB in turn impleaded Associated Bank in the suit as a third-party defendant while Associated Bank impleaded Canlas and Pangilinan as fourth-party defendants. ISSUES: W/N Ebrada is liable to return the amount that she cashed. cashier of the Concepcion Emergency Hospital. Both banks resisted payment which led to the Province of Tarlac suing PNB. It was however discovered that the original payee. by succumbing to Castillo’s badgering.500. PNB on its part demanded reimbursement from Associated Bank. FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA 7
 . forged the signature of Dr. W/N a drawee of a check (bank) can recover from the holder (Ebrada) the money paid from a forged instrument. It was only when Metrobank gave Golden Savings the go signal that the latter allowed Gomez to make withdrawals. Golden Savings wouldn’t have allowed the withdrawals. The Province can only recover 50% of the P203. The Bank may recover from Ebrada the amount she received for the check. (17) REPUBLIC BANK v EBRADA FACTS: Mauricia T. The acts of presenting the check for payment or putting it into circulation asserts that the holder has performed his duty to ascertain the validity of the instrument. Metrobank sued Golden Savings in the RTC of Mindoro which favored Golden Savings and an appeal by the former yielded the same result. ISSUE: Whether or not Metrobank can recover the withdrawals? HELD: NO. 23 of the Negotiable Instruments Law dictates that where the signature on the negotiable instrument is forged then the negotiation of the check is without force or effect. (16) ASSOCIATED BANK v CA FACTS: Faustino Pangilinan. the warrants are stamped with the word “non-negotiable” and it is indicated that they are payable from a particular fund.167. Metrobank was negligent in giving Golden Savings the impression that the treasury warrants are cleared. The checks have a stamp of Associated Bank which reads “All prior endorsements guaranteed by Associated Bank”. Golden Savings allowed Gomez to make withdrawals from his account totalling to P1. “Everyone with even the least experience in business knows that no business man would accept a check in exchange for money or goods unless he is satisfied that the check is genuine. 2) Associated Bank should be pay the same amount to PNB and 3) dismissed the complaints against Canlas and Pangilinan. that led it to assume incorrectly that the warrants are already cleared. As an added note.” Ebrada. It was the responsibility of the holder of the check to satisfy himself that the paper is genuine. HELD: Sec. Ebrada (defendant) encashed a check at the Republic Bank.300 with legal interests. The check was issued by the Bureau of Treasury and was indorsed several times before falling into the hands of the defendant. was duty bound to ascertain if it was genuine or not before presenting it to plaintiff Bank. the CA affirmed the ruling of the trial court.300 to himself. If he is deceived he has suffered a loss of his cash or goods through his own mistake. through the Provincial Treasurer. PNB. was already dead for more than a decade.NEGO CASE DIGESTS | ATTY. upon receiving the check in question. wrote PNB to restore the various amounts debited from the current account of the Province.

Dela Rama. it is paying out with its own money and not of the depositor’s. 8
 (19) JAI ALAI CORP OF THE PHIL v BPI FACTS: Checks were deposited by petitioner in its current account with the bank. Dela Rama. Thereafter. Dela Rama is an intimate friend of the NARIC General Manager. presumption of consideration Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration. Hence . The Bank may have the proceeds already when it debited the account of petitioner. Dela Rama filed a case against Pineda for collection of the loan and P5. so he’s asking for a reimbursement through the promissory note. To stop or delay the instigation of criminal charges. The payments made by the drawee banks to respondent were ineffective— the creditor-debtor relationship hadn’t been validly effected.000 cavans of palay by the National Rice and Corn Administration (NARIC). It is believed that Atty. was presented by one Roberto Gonzaga in the Makati Branch of Far East Bank. Which was rebutted in this case.this case. RULING: NO. Being void. Section 24. Nonetheless. It stands to reason that as a collecting bank which indorsed the checks to the drawee-banks for clearing. payable to cash. It can be rebutted by proof of contrary. The terms of the note states that “This represents the case advances made by him in connection with my case for which he is my attorney-in-law.000. he contracted the services of Atty. The bank was to collect from the drawers of the checks with the corresponding proceeds. When the petitioner deposited the checks to its account. The fact that the forgery is clever is immaterial. it informed all the parties concerned. Pineda “borrowed” P 9. NORIANNE TAN | 2D 2012 (18) SAMSUNG CONSTRUCTION CO PHIL v FEBTC FACTS: Samsung Construction held an account with Far East Bank. It also relied on Sec 24 of Negotiable Instruments Law. petitioner tried to issue a check for payment of shares of stock but such was dishonored for insufficient funds. CA reversed the decision.300 from Atty. SECTION 24 (20) PINEDA v DELA RAMA FACTS: Jesus Pineda was accused of misappropriation of 11. the assistant accountant of Samsung. a consistent better in its games. The forged signature may so closely resemble the genuine as to defy detection by the depositor himself. He must account for his own actions. who was also present during the time the check was cashed. finding that Pineda was of average intelligence and fully aware when he voluntarily signed the promissory note. CA’s reliance on Sec 24 of NIL is misplaced.000 attorney’s fees. HELD: Respondent bank acted within legal bounds when it debited the account of petitioner. These checks were from a certain Ramirez. if the bank pays the check.). CFI ruled in favor or Pineda because it was believed that Pineda only signed the promissory note on the presumption that that amount was already advanced to “grease the palms” of NARIC officials (I believe Dela Rama said to Pineda that he already given pampadulas to the officials. ISSUE: W/N Pineda is liable for the promissory note executed. and every person whose signature appears theron to have become a party thereto for value The presumption is only prima facie. Sec. Following Section 23. ISSUE: W/N Far East Bank is liable to reimburse Samsung for cashing out the forged check. Later however it was discovered that no such check was ever approved by the Samsung’s head accountant. who was a sales agent from Inter-Island Gas. Jose Dela Rama. should be liable to the latter for reimbursement for the indorsements on the checks had been forged prior to their delivery to the petitioner. Atty. The check was certified to be true by Jose Sempio. This rule of liability can be stated briefly in these words: “A bank is bound to know its depositor’s signature.” The accusation of negligence on the part of Samsung was not clearly proven. there is still no creditor-debtor relationship. the president of the company also never signed any such check. It filed a complaint against the bank. a forged signature is wholly inoperative and no right to discharge it or enforce its payment can be acquired through or under the forged signature except against a party who cannot invoke its forgery or want of authority. Dr. Rodriguez. Atty. Upon the demands on the bank as the collecting bank.NEGO CASE DIGESTS | ATTY. One day a check worth 900. FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . it debited the account of petitioner. the presumption is that the ordinary course of business was followed. the relationship created was one of agency still and not of creditor-debtor. It proves that Pineda issued the note believing it was reimbursements for the “gifts” to NARIC officials subsidized by Atty. 23 of the Negotiable Instrument Law states that a forged signature makes the instrument “wholly inoperative”. he can’t be liable as it is a void contract. It was evidenced by a promissory note. And yet. If payment is made the drawee (Far East) cannot charge it to the drawer’s account (Samsung). Absence of proof to the contrary. which was drawn from the account of Samsung HELD: Far East Bank is liable for reimbursement. InterIsland later found out that of the forgeries committed in the checks and thus. Dela Rama can’t recover. Having no more money due to buying an hacienda in Mindoro.

Thus. Ong issued a postdated FEBTC check for the same amount.I sheets with an aggregate amount of P126. Being an issue of credibility of a witness. or demand the performance of the other's undertaking Whether or not the supposed cash advances reached its destination is immaterial. public order or public policy Art. It also established that the FEBTC check issued by petitioner was dishonored due to insufficiency. Art.000 and P3. It sold on 7 occasions quantities of steel bars and rolls of G.500 five days apart from a man he only known for 3 months. The check however was a company check of another corporation Steelweld Corporation of the Philippines (Steelweld) signed by its President and Vice President. good customs. In this case. Ong requested a loan from de Jesus for 130k to pay the 13th month pay of his employees. One time. It was given on the presumption that Dr. RULING: YES. it judged that the witness. the trial court is in a better position to settle such issue. It is only unlikely for Pineda to borrow P5. 1409. morals. In addition. Hence this case. 1412. Ong is liable only for 150k fine and 130k civil indemnity. The following contracts are inexistent and void from the beginning: (1) Those whose cause. The consideration – to influence public officials – is contrary to law and public policy. he retained the services of Marcial de Jesus as adviser on technical and financial matters. is credible enough to accept his testimony on the demand letter. On December 17. RYL never paid upon delivery of the materials and despite insistent demands. regardless of intent of parties. B. 22. One year later. Steelweld appealed to the CA which reversed the decision of the RTC declaring that 9
 SECTIONS 26 & 27 (21) ONG v PEOPLE FACTS: Remigio Ong is a businessman who owns Master Metal Craft.NEGO CASE DIGESTS | ATTY. to the amount of its obligations to the latter. that the encashment of the FEBTC check is not clearly established 2. relying on Sec 29 of the NIL for issuing a check for accommodation. Relyin on the previous decision and averring that it was a holder in due course. ISSUE: W/N Ong is liable for violation of B.250 was purchased by Pineda’s son and given to Atty. Prejudice or damage is not even a requisite for conviction. it being merely for accommodation purposes. In this scenario. However. 22 punishes the mere issuance. It’s the mere issuance of any kind of check. the check was issued without consideration 3. However. de Jesus. neither may recover what he has given by virtue of the contract. The trial court acquitted the defendants noting that the checks were not issued to apply on account for value. (RYL). the air-conditioning unit valued at P1.P. Thus. the court did not release Steelweld from its liabilities. The prosecution clearly established the existence of a loan and subsequent encashment of Producers Bank FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . though it is a fact that the unit never reached Dr. the following rules shall be observed: (1) When the fault is on the part of both contracting parties. The intent of the law is to curb proliferation of worthless checks and ensure stability and integrity of checks as means of payment. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. Producers Bank check was cleared and debited to Ong’s account. RYL issued a check drawn against Metrobank to Armstrong Industries.61 to RYL Construction. Said check was issued by the president of Steelweld at the request of the president of RYL as an accommodation and “only as guaranty but not to pay for anything. Dela Rama.P. the sister company and manufacturing arm of Stelco. the FEBTC check bounced due to insufficient funds. the promissory note is void ab initio and no cause of action for collection cases can arise from it. Rodriguez. It bore the endorsements of RYL and Armstrong.” Armstrong subsequently deposited the check but was dishonoured because it was DAIF*. However. Rodriguez was asking for one. Check. No proof of receipt of loan obligation) are immaterial. The CA affirmed it. 1409 and 1412 applies. Inc. NORIANNE TAN | 2D 2012 The court also added that it is unusual for a lawyer to lend money to a client who he has known for only 3 months. The photocopy of demand letter (despite no original copy) is accepted due to the fact that is has been identified and shown in court when De Jesus testified regarding about it. Art. The gravamen of offense punished by B. De Jesus obliged and produced a Producers Bank Check. Stelco subsequently filed a complaint for recovery of the value of the materials from RYL and Steelweld. To secure repayment.P 22 is the making and issuing of worthless check. Petitioner’s arguments (1. 22. with no security or interest. De Jesus filed a case against Ong. The latter filed a complaint against the pres and vp of Steelweld for violation of BP22. The Trial Court found Ong guilty of B. RYL had already been dissolved leading the trial court to rule against Steelweld and hold them liable. and also as President of Erocool Industries (another company owned by Ong). object or purpose is contrary to law. (22) STELCO MARKETING CORP v CA FACTS: Petitioner Stelco Marketing Corp (Stelco) is engaged in the distribution and sale to the public of structural steel bars.859. The court affirmed the ruling but removed the sentence of imprisonment. 1992.P. Despite the parties’ agreement that payment would be on COD basis.

The case at bar falls squarely with the definition of a holder in due course. that it was the injured party. and the CA denied its appeal. integrity. owner of Phil. indorsed to STELCO in any manner or form of payment. NORIANNE TAN | 2D 2012 STELCO was not a holder in due course and Steelweld was a stranger to the contract between STELCO and RYL. Yes. PCI Bank’s issuance of the manager’s checks to Ong cements the latter’s position as a holder for value. and binding on the bank. Phil Manufacturing Corp found an opportunity to buy textile goods from Lucilo Macaraig who had the necessary licenses but lacks sufficient funds to finance the importation. and give the cash to Macaraig since they’re the ones well acquainted with each other. however she later received a check return-slip informing her that PCI had stopped payment of the said checks in the ground of “irregular issuance”. Tan-chi was willing to finance the operation with ½ share in the profits and issued a China Bank check payable to Tan Tiong Tick worth 20. They further claim that they informed Sarande and Ong about the situation and requested that they return the checks. indorsee. encash it. Because based on the factual findings of the CFI and the CA. Further. The court reiterated that because of their peculiar character and general use in commerce. Tan Tiong Tick then would indorse the check. Upon failing to appear at the hearing.000 pesos and not directly to Macaraig since he didn’t know the latter well enough.000 given by Tan-Chi? HELD: YES. manager’s checks are regarded substantially to be as good as the money it represents (in other words it has been given value). HELD: (24) TAN TIONG TIC v PHIL. which the bank obliged to do. PCI Bank averred that the account the check was drawn against was already closed. Tan Tiong Tick didn’t merely indorse the check but also encashed it before giving the proceeds to Macaraig. Ong deposited the checks in her account with Equitable Bank. The next day. STELCO never became a holder for value since nowhere in the check was STELCO identified as payee. and honor behind its issuance. therefore respondent was a holder for value and in due course. with the 10
 FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . awarding her with damages. or depositor. damages. the trial court declared PCI Bank in default and ruled in favour of respondent. committing in effect its total resources. Tan Tiong Tick argues that his signature was merely in the capacity of a witness since Tan-Chi could’ve delivered the check directly to Macaraig. Although the RTC maintained that Steelweld was liable for issuing a check for accommodation. Respondent subsequently filed a complaint for sum of money. such possession does not give a presumption that the holder is one for value. Further. SECTION 29 SECTION 28 (23) EQUITABLE-PCIB v ONG FACTS: The case originated when a certain Warliza Sarande. The RTC denied PCI Banks M. not only was Ong a holder in due course but most especially a holder for value. Regarding the issue on consideration. and attorney’s fees after failure by PCI Bank to honor the checks despite demands. the check good. relying on the bank’s assurance that her deposits were credited. the RTC did not specify to whom it was liable. drawn upon itself. The books of account of Tan-Chi shows an entry for the liability of Tan Tiong Tick. There was no evidence that STELCO had possession before the checks were presented and dishonoured nor evidence that the checks were given to STELCO. Such acceptance implies that the check is drawn upon sufficient funds in the hands of the drawee xxx. MANUFACTURING FACTS: Ernesto Tan-Chi. through signing at the back portion of the check.NEGO CASE DIGESTS | ATTY. Despite the records showing that STELCO was in possession of the check. and the proper party to bring the action. respondent presented the same checks to PCI Bank for conversion into manager’s checks. ISSUE: W/N the Tan Tiong Tick should be liable for the 20. TanChi argues that given that Tan Tiong Tick is known to Macaraig while in his defense. a manager’s check is an order of the bank to pay.R. and Tan Tiong Tick were good business friends. the court stated that a manager’s check is one drawn by the bank’s manger upon the bank itself. as defined in section 52 of the NIL. ISSUE: W/N STELCO was a holder in due course HELD: STELCO’s reliance on the RTC’s decision in the previous criminal case is misplaced. The check becomes the primary obligation of the bank which issues it and constitutes it written promise to pay upon demand. ISSUE: W/N the RTC and CA was correct in holding that there was consideration. On the same day. Evidence shows that Armstrong was the intended payee. shall continue good. Macaraig failed to deliver the textiles which he was supposed to order which led Tan-Chi to file an action to recover the face value of the check plus interests. issued two checks to respondent Rowena Ong drawn against the former’s account with PCI Bank. Sometime in 1951. Only after said checks were dishonoured were they acquired by STELCO. The CFI and the CA found for Tan-Chi. therefore the absence of consideration. etc. Manufacturing Corp. Mere issuance of it is considered acceptance thereof.

for value. In 1955. Initially apprehensive. ruling that as accommodation parties. that the Prudencios could set up the defense of release from the real estate mortgage based on the new terms inserted by PNB.” The respondent’s story is that the General Manager of Travel-On asked respondent to write the checks because she used them as “evidence” to show the Board of Directors that the financial condition of the company was sound. Arturo Miranda (respondent) had a running credit line with said agency. HELD: The checks themselves are proof of the indebtedness of the respondent to petitioner. 29 of the Negotiable Instruments Law which states: An accommodation party is one who signed the instrument as maker. As a consequence. must meet the same requirements of a holder-in-due course.000 pesos. No such evidence was submitted by the respondent. they are liable as solidary comakers hence cannot ask to be released from the real estate mortgage.800 pesos. SECTION 30 (27) METROPOL FINANCE v SAMBOK MOTORS CO FACTS: Dr. PNB however added to the deed of assignment a condition that the credit received would be for labor and materials and extensions to the terms of payment without consent by the Prudencios.” “The rule is quite settled that a negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless otherwise contradicted by other competent evidence. before maturity.NEGO CASE DIGESTS | ATTY. approached the latter asking them to mortgage their property to secure the Company’s 10000 peso loan with PNB. Due to conflicts between PNB and the Company which led to the latter abandoning their work on the municipal building. The trial court denied their petition which was also affirmed by the CA. Respondent avers that he has no obligations to petitioner and argues that the checks that the petitioner is seeking to collect from him were for purposes of “accommodation. W/N Prudencios should be held solidarily liable? 2. notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.” The facts that all checks issued by the respondent to petitioner were presented for payment by the latter would lead to no other conclusion than that these checks were intended for enchasment. Manila which were mortgaged by them to guarantee a 1000 peso loan with PNB. A holder-in-due course is a payee who receives a negotiable promissory note. and without any notice of any infirmity from a holder. He procured tickets from Travel-On on behalf of airline passengers and derived commissions therefrom. the Company’s attorney-in-fact and a relative of the Prudencios. the Prudencios wanted the Real Estate Mortgage to be cancelled. Such a person is liable on the instrument to a holder for value. Concepcion & Tamayo Construction (Company) had a pending contract with the Bureau of Public Works (Bureau) for the construction of the municipal building in Puerto Prinsesa for 36. the respondent would still be liable considering that the petitioner is a holder for value. The argument of the respondent that the checks were merely “simulated” cannot stand without the clearest and most convincing kinds of evidence. (25) PRUDENCIO v CA (26) TRAVEL-ON v CA FACTS: Prudencios are the registered owners of land in Sampaloc. 29 of the Negotiable Instruments Law. The two questions are related and should be decided jointly since the Prudencios are considered as accommodation parties governed by Sec. There is nothing in the checks themselves or in any other document that states otherwise. Villaruel issued a promissory note to Ng Sambok Sons Motors Co. Toribio. ISSUE: W/N the checks are evidence of the liability of the respondent to the petitioner even assuming that they were for purposes of accommodation.000 payable in 12 11
 . Travel-On filed a suit to collect six (6) checks issued by the respondent totalling 115. the SC held that PNB is not a holder for value since it was an immediate party and was privy to the promissory note. and for the purpose of lending his name to some other person. Given this definition. ISSUES: 1. selling airline tickets on commission basis for and in behalf of different air-line companies. to whom it was negotiated as a complete instrument. An accommodation party will only become liable to a holder for value which for the purposes of the NIL. the Prudencios ceded to the request of the Toribio and the Company and executed an “Amendment of Real Estate”. Petitioner denies this accusation. drawer. as described in Sec. or indorser. W/N PNB is a holder-in-due course / holder for value? HELD: NO in both questions. “A check which is regular on its face is deemed prima facie to have been issued for a valuable consideration and every person whose signature appears thereon is deemed to have become a party thereto for value. NORIANNE TAN | 2D 2012 former’s accountant. without receiving value therefore. PNB dealt with the Prudencios knowing fully well that the latter signed as accommodation party. Even if the checks were for purposes of accommodation. Atty. the SC stated FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA FACTS: Travel-On (petitioner) is a travel agency. in good faith. consistently sending notices to indebtedness to the latter as evidence of such debt. in the amount of 15. acceptor. not the maker.

using Art. Sambok agreed to pay of Dr. RULING: Naptiza is not liable to pay. the check is allowed to be encashed without the necessary clearing period. However it was the further negligence of the bank in not following its own rules: not waiting for the clearance of the foreign check. Metropol notified Sambok that the promissory note has been dishonored. Villaruel defaulted in his monthly installment and so Metropol came to him to demand payment. BPI now seeks to collect the $2. 29 Negotiable Instruments Law). allowing the withdrawal to take place without the presence of the account holder in person. During the pendency of the case. Respondent claims that the withdrawal was without his permission and was done not in accordance with the bank’s own rules. with the aggregate total amounting to 1. In the normal course of her grocery business. The original deal between Chan and Naptiza was that as soon as the check was cleared both would go to the bank to withdraw the amount. contrary to its belief.2 million pesos. Dr. has been deemed insolvent. The court held that the encashment of checks without prior clearance is “contrary to normal or ordinary banking practice specially so where the drawee bank is a foreign bank and the amounts involved were large. ISSUE: W/N the forgery entitles Gempesaw to reimbursement? HELD: Partly Yes & No. the Bank should also shoulder liability. checks with second indorsements are not generally accepted and given this fact. and under the same management. ISSUE: W/N respondent Napiza is liable to pay the collecting bank BPI. Metropol demanded payment to Sambok as indorsee of the promissory note. BPI failed to exercise the “diligence of a good father of a family” in allowing the amount of a deposited check to FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA (30) GONZALES v RCBC FACTS: A foreign check worth $7500 was drawn in favor of Gonzales' mother. It is admitted that Naptiza did deliver to Chan a signed blank withdrawal slip which ultimately allowed Ramon de Guzman (Chan’s cohorts?) to withdraw the amount of the deposited check. However. The words added by Sambok does not limit his liability. negotiated and indorsed the note in favor of the plaintiff (METROPOL) with the following indorsement: “Pay to the order of Metropol Bacolod Financing and Investment Corp with recourse…” The maker. Villaruel fails to pay the note. etc. it would be Galang who would write the amounts in the check and Gempesaw would only sign the checks without ascertaining its contents.500 from Naptiza as payment to the debt that BPI incurred when the deposited check in the respondent’s account was withdrawn. The check was given to him by Henry Chan and was accepted and deposited by Naptiza by way of accommodation (Sec. allowing withdrawal without the account holder’s (respondent’s) passbook. 1170 of the Civil Code. When the plaintiff discovered that he could not pay. Sambok declares in court that it is not liable to pay until the maker of the note. The appellant. head of RCBC's retail banking acquiesced the 12
 . The SC found that Gempesaw is indeed negligent which precludes her from raising the defense of forgery. It should be noted that in the current banking system. Later Sambok Motors Company. a sister company of Ng Sambok Sons Motors Co. “Recourse” means resort to a person who is secondarily liable after the default of the person who is primarily liable. Olivia Gomez. Later on however the amount of the check was withdrawn from the account of Naptiza. be withdrawn despite the fact that it still wasn’t cleared by the drawee bank (in this case a foreign bank in NY). Sambok is still liable to pay. Gempesaw and the bank are liable 5050 for the loss. her trusted bookkeeper. Villaruel died. Gonzales is an employee of RCBC and because of this. HELD: Yes. Dr. the SC.500 in his dollar savings account with BPI. despite the check still not being cleared by the original (and foreign) drawee bank in New York. Eva Alviar. ISSUE: W/N Sambok is still liable to pay the value of the promissory note as its indorser. Dr. (29) GEMPESAW v CA FACTS: Gempesaw filed for recovery of the money value of 82 checks charged against her account due to forgery of indorsements made by Alicia Galang. in indorsing the note “with recourse” does not make itself a qualified indorser but a general indorser who is secondarily liable. crediting the amount of the check to the respondent’s account without the clearance from the foreign bank. Gempesaw filed a case with the RTC which held that Gempesaw was negligent in handling her affairs by not ascertaining the values of the payments and if indeed the payments reached the payees making forgery not a defense for her to recover.NEGO CASE DIGESTS | ATTY. said that the bank becomes also liable for damages for accepting the check with a second indorsement. The CA affirmed.” SECTION 36 (28) BPI v CA FACTS: Benjamin Naptiza (respondent) deposited a check worth $2. but rather confirm his obligation as a general indorser. NORIANNE TAN | 2D 2012 monthly installments. BPI is held to have been negligent in not following its own protocol with regard to withdrawal of amounts from deposited checks. By such indorsment. Villaruel. Sambok also failed to pay and so charges were filed. The checks were deposited in the accounts of Romero and Lam.

which were embezzled allegedly by and organized syndicate. There were many instances that arouse suspicion: the drawer in the check (Gatchalian) has no liability with de Ocampo . Hence this case. ISSUE: W/N Gonzales et al are liable to RCBC due to the irregular indorsements? HELD: NO. The same thing happened in 1978 and 1979. Gonzales recommended issuing a check (P600 / payable-to-bearer /cross-checked) as evidence of the buyer’s good faith. and PCIBank. Being the case. Ford filed a complaint against the officer but was dismissed because he could not be served summons as he was a “fugitive from justice”.85. After clearing.75. Please read the original as it contains too many details. HELD: NO. because the account was closed. the check was presented to Rolando Zornosa. the holder’s title is defective or suspicious. De Ocampo now demands payment for the check. The latter compelled Ford to make another payment.NEGO CASE DIGESTS | ATTY. RCBC filed a case against the other parties. he failed to exercise reasonable prudence and caution. it was discovered that an organized syndicate was behind the scam. Citibank. In 1977. Alviar-GOnzales and Gonzales in the RTC which held that Alviar and Alviar-Gonzales liable. However. it was dishonored because of irregular indorsement and ultimately. it was not the exact amount of the medical fees. which were later deposited by alleged members of the syndicate. In showing a person had knowledge of facts that his action in taking the instrument amounted to bad faith need not prove that he knows the exact fraud. The original action was instituted by Ford to recover from drawee bank Citibank and collecting bank PCIBank a sum of money for the value of several checks payable to the Commissioner of Internal Revenue. Gonzales et al's liability should only be up to the time they made their endorsement and any subsequent endorsement by RCBC should bind them. The check was presented to another RCBC employee. The presumption of good faith did not apply to de Ocampo because the defect was apparent on the instruments face – it was not payable to Gonzales or bearer.25). de Ocampo is not a holder in due course. The Court of First Instance ordered Gatchalian to pay the amount of the check to De Ocampo. and signed it with an "OK" annotation. namely Alviar. NORIANNE TAN | 2D 2012 early encashment and signed the check but only up to PhP17500. Carlos Ramos. However.270. 13
 FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . which was then credited. The bad faith here means bad faith in the commercial sense – obtaining an instrument with no questions asked or no further inquiry upon suspicion. hence it should be the one liable for their own fault. when RCBC wanted to collect from the foreign drawee bank. the check was deposited to PCIBank. it was paid to or received by the payee. However. it was cross-checked(only for deposit) but was used a payment by Gonzales.000+. ISSUE: W/N de Ocampo is a holder in due course. supervisor of the remittance section who authorized its encashment to its peso equivalent of PhP155. CIR. RCBC demanded to get the money back from Gonzales who settled the matter thru salary deduction where RCBC got 12. The circumstances should have led him to inquire on the validity of the check. negotiate and accomplish the sale by the Ocampo Clinic. which Gatchalian refused. After an investigation conducted by the NBI. De Ocampo was negligent in his acquisition of the check. It was revealed that the General Ledger Accountant of Ford recalled the checks and caused PCIBank to replace the checks with manager’s checks. SECTION 52 (31) DE OCAMPO v GATCHALIAN FACTS: Anita Gatchalian was interested in buying a car when she was offered by Manuel Gonzales to a car owned by the Ocampo Clinic. It is sufficient to show that the person had NOTICE that there was something wrong. *The Gatchalian is not obligated to pay the amount of the check to de Ocampo. It was later found out that Gonzales used the check as payment to the Vicente de Ocampo (Ocampo Clinic) for the hospitalization fees of his wife (the fees were only P441. The SC found that the irregular indorsement is due to the qualified indorsement made by Olivia Gomez. Gonzales never appeared. but failed. The failure of Gonzales to appeal resulted in Gatchalian to issue a STOP PAYMENT ORDER on the check. Hence. Gonzales claim that he was duly authorized to look for a buyer. (32) PCIB v CA SECTION 55 *What is included here is just a summary of the facts and the doctrines applicable. The defect was introduced by RCBC. Ford on the other hand subjected Citibank for reimbursement for the second assessment. Anita accepted the offer and insisted to deliver the car with the certificate of registration the next day but Gonzales advised that the owners would only comply only upon showing of interest on the part of the buyer. Ford issued a Citibank check payable to the CIR for its tax obligations for the third quarter of the said year. so he got a refund of P158. In turn. arguing that de Ocampo is not a holder in due course and that there is no negotiation of the check. The next day. Gonzales added that it will only be for safekeeping and will be returned to her the following day. FACTS: 3 cases are consolidated in this decision involving Ford. The CA affirmed. de Ocampo had the burden of proving he was a holder in due course.

When Go went to get his check from Uy. Unfortunately. Lim was gone. A few days FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . a bank employee. PCIBank’s clearing stamps enabled the checks to pass through the clearing house and therefore Citibank had no choice but to pay it. Henry Chan. Napiza. citing Jose Go. NORIANNE TAN | 2D 2012 Ford mainly impleads Citibank and PCIBank for the recovery of the sum of money. saying that only Citibank was liable. Uy had a visitor.NEGO CASE DIGESTS | ATTY. The trial court ruled in favour of Ford in declaring that Citibank and PCIBank were jointly liable. is liable to nobody but Go. This led to Associated Bank to file an interpleader. The CA however modified the decision. Go went to Associated Bank to accomplish a “STOP PAYMENT” order. (34) BPI v CA FACTS: The case originated from an action for the collection of a sum of money instituted by BPI against private respondent Napiza. HELD: No. The SC applied the doctrine of comparative negligence. There was a breach of such relationship and failed to scrutinize the checks before paying the amount to the CIR. Navarro’s client who was named for the first time. later. for safekeeping. The trial court ruled in favor of Associated Bank and Go. it has every right to refuse payment of the check when presented by the payee. Upon advise of Uy. Further that it was upon Napiza’s instruction to BPI 14
 SECTION 56 (33) MESINA v IAC FACTS: Jose Go purchased from Associated Bank a cashier’s check worth P800. At the time. and the bank knowing such. since he had an foreign currency account with BPI.000. citing both Citibank and PCIBank for failing in their respective obligations and negligence in the selection and supervision of their employees. Further. Since the bank was aware of the facts surrounding the loss of the check in question.However. Associated Bank received the missing check for clearing which it immediately dishonored. it was found to be missing. Navarro and a John Doe (for the then unknown client) as respondents. ISSUE: W/N Ford can recover from drawee bank Citibank and collecting bank PCIBank. Atty. The same check was returned for clearing after a few days which was again dishonored by the bank. he had notice of the defect of his title to the check from the very start. was able to withdraw the amount. Lorenzo Navarro demanding payment for a then undisclosed client. Mesina filed a petition for certiorari with the IAC which was also denied. PCIBank’s contention that Ford was guilty of “imputed contributory negligence” cannot prosper because it was established that the officer’s instruction to replace the checks was not in the ordinary course of business which could have prompted PCIBank to validate the check. The check was Go’s check. HELD: With regard to the 1977 case. a certain Alexander Lim. stating that he got the check from Lim for “a certain transaction” but refused to specify details and asserted that he was a holder in due course. merely accommodated the deposit of the foreign currency. After two days. Regarding the 1978 and 1979 cases. Atty. There was no “transfer from one person to another in such a manner as to constitute the transferee the holder thereof”. in order to accommodate a Henry Chan. Citibank on the other hand was held liable based on its contractual relationship with Ford. the SC held PCIBank solely liable for paying Ford on the basis of its negligence in failing to verify the authority of the Ford employee to negotiate the checks. the bank this time didn’t receive the check but a letter from a lawyer. Go left the check at the desk of the bank manager who then entrusted it to Albert Uy. Atty. BPI now seeks the recovery of the amount of the check. Uy had to answer the phone and immediately went to the CR and when he got back. The SC was able to establish the proximate cause of the loss which was the negligence of PCIBank and that one of its employees was in with the syndicate. the SC held that both Citibank and PCIBank were both liable for the sum and must share in the loss. It showed the employees lack of care and prudence required in the circumstances. ISSUE: W/N there was a valid negotiation and therefore Napiza could be held liable. they informed BPI that the check was a counterfeit. The SC held that Mesina failed to substantiate his claim as a holder in due course given that by refusing to say how and why the check was passed to him by Lim who stole the check. a cashier’s check at that. 50 days later. The general rule that a bank is liable for the fraudulent acts or representation of an officer or an agent acting within the course and apparent scope of his employment or authority was applied. as contemplated by Sec 30 of the NIL. ordering the former to issue a new cashier’s check to Go. Associated Bank then received summons for a complaint for damages from Marcelo Mesina. ISSUE: W/N Mesina is a holder in due course and should be entitled for the value of the check? HELD: NO. this petition. upon clearing with Wells Fargo in New York. Hence. Respondent indorsed and deposited a check in the amount of $2500 in his foreign currency account with BPI. through a certain Ruben Gayon.

arguing that the check was delivered by him to Sin Chin Juat Grocery and the check was only for payment by the Victory Hardware to Asian Surety & Insurance Company and not to Far East. A long line of cases also held that in the matter of forgery in endorsements. clearing items. PNB required Maguire to present photostatic copies of the check as well as a certification from the provincial treasurer. Afterwards. NORIANNE TAN | 2D 2012 employees not to allow withdrawal of the amount until the check had been cleared. the Province of Samar withdrew the money from their account and left only 740 pesos. Sumacad filed a suit for collection. 15
 SECTION 63 (36) PNB v CA: same as case under Sec 23. CA reversed it and ruled in favor of Dy Hian. The checks were sent for clearing and was thereafter cleared. Far East complied but after 1 month. The petitioner cannot now deny its liability as it assumed the liability of an indorser by stamping its guarantee at the back of the checks. the bank cannot escape liability of an indorser of a check and which may turn out to be a forged indorsement. SECTION 62 (35) SUMACAD v PROVINCE OF SAMAR FACTS: The Province of Samar during the Japanese Occupation issued a check drawn against PNB in favor of Santos worth 25000 pesos. The trial court and RTC held in favor of the Equitable and PCHC. it is the collecting bank that generally suffers the loss because it had the dutyh to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the indorsements. (37) BANCO DE ORO SAVINGS v EBC FACTS: BDO drew checks payable to member establishments. HELD: First. ISSUE: W/N presentment and notice of dishonor of the check were made within reasonable time. Before the certification. After the liberation. PNB was implicitly accepting the check provided that Maguire produce the said documents. which discharges the indorsers and drawer. BDO discovered that the indorsements in the back of the checks were forged. Petitioner is likewise estopped from raising the nonnegotiability of the checks in issue. By asking for such requirements. Further.NEGO CASE DIGESTS | ATTY. Dy Hian denies that he transacted with Far East Realty.500 payable after 1 month. SECTION 71 (38) FAR EAST REALTY INVESTMENT INC v CA FACTS: Far East Realty allege that Dy Hian Tat. Dy Hian issued a China Bank check worth P 4. Gaw Suy counter that he signed as indorser of the check only in behalf of his principal Victory Hardware. the participation of the two banks in the clearing operations is submission to the jurisdiction of the PCHC. This prompted BDO to file a complaint against Equitable and PCHC. Far East now demands payment. PNB should be held subsidiarily liable due to its implied acceptance of the check by requiring Maguire to present photostatic copies of the check as well as certification from the provincial treasurer. The check was negotiated to a certain James Maguire who then negotiated it to Violet Maguire Sumacad. BPI was held liable for its employees mistakes and admitted that they had credited the amount before it was cleared. HELD: NO. the presentment and notice of dishonor were not made within a reasonable time. the check bounced due closed account. the said check was presented for payment to the Municipal Treasurer who merely noted it but no actual payment was made. The private respondents raised defenses. However. It then demanded that Equitable credit its account but the latter refused to do so. Subsequently. Lastly. he contends that there was unreasonable delay in presenting the check. The City Court and CFI ruled in favor of Far Eastern. Hence this case. ISSUE: W/N PNB is liable for the value of the check? HELD: YES. As assurance of payment. Whenever a bank treats the signature at the back of the checks as indorsements and thus logically guarantees the same as such there can be no doubt that said bank had considered the checks as negotiable. Furthermore. No doubt transactions on non-negotiable checks are within the ambit of its jurisdiction. The articles of incorporation of PHHC extended its operation to clearing checks and other FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA .500 and promise to pay in 1 month. Although PNB can’t be compelled to pay the check due to lack of certification. the checks were deposited in Trencio’s account with Equitable. It stamped its guarantee at the back of the checks and subsequently presented it for clearing and it was in the basis of these endorsements by the petitioner that the proceeds were credited in its clearing account. PCHC has jurisdiction over the case in question. Siy Chee and Gaw Suy An requested for an accommodation loan of P4.

the Bank failed to treat the account with utmost care and diligence. Tan sued Associated for damages. his suppliers and partners went back to him alleging that the checks he issued bounced for insufficiency of funds. a bank has the right to setoff—to debit from an account the amount of a check which was previously credited but subsequently dishonoured. but the latter failed to act on the matter. The RTC ruled in favour of Tan saying that there was no sufficient information regarding the debiting of the account and the dishonour of the check and that the manager was negligent in handling the account. the unreasonableness in this case is apparent. Tan.NEGO CASE DIGESTS | ATTY. 1964 . IF it is payable on demand. On appeal to the SC. which was required in a depositor-bank relationship. In 1978. Nyco endorsed the check to BA Finance which issued another check back to the former who then indorsed it to Sanshell which made use of the check. for credit accommodations as well as grant to Sanshell discounting privileges it had with BA Finance Corporation. There is no definite formula because it depends on the facts and circumstances of each case. The trial court found Fernandez and Nyco solidarily liable for roughly 65. (40) ASSOCIATED BANK v TAN FACTS: Vicente Henry Tan is a businessman and a regular depositor-creditor of the Associated Bank. approached Nyco. this time from Security Bank and Trust Company (SBTC) but yet again the check was dishonored. the dishonor of an ASSIGNED CHECK simply stresses its liability and the failure to give notice of dishonor will not discharge it from such liability since the cause of action stems from the breach of warranties based on the Deed of Assignment and not from the dishonouring of the check alone.000. thru Yao. Further. this appeal. However. the bank manager put the bank in a position that contradicts 16
 SECTION 89 (39) NYCO SALES CO v BA FINANCE CORP FACTS: Nyco Sales Corporation is engaged in the business of selling construction materials with Rufino Yao as its president and general manager. properly exercised its right to setoff. except in a bill of exchange. NORIANNE TAN | 2D 2012 Reasonable time is the time necessary under the circumstances for a reasonable prudent and diligent man to do. ISSUE: W/N the lack of notice of dishonor should discharge Nyco of its liability? HELD: NO. Generally. HELD: NO. However. conveniently. Ultimately. He made subsequent transactions and issued several checks to his business partners. Santiago and Renato Fernandez. alleging that Tan did not have a cause of action and it was within the bank’s right to debit Tan’s account as he was informed of the previous dishonour of the UCPB check he presented. But the formal notice of dishonor was made only on April 1968 (far from the 1 month period agreement). Far East complaint is dismissed. Nyco is not being held liable for both the BPI and the SBTC checks. the Fernandezes issued a new check. to the other party. which caused the lapses and inconveniences. Fernandez and Nyco failed to satisfy their obligation with BA Finance which led the latter to file legal action. in behalf of Sanshell Corporation. The check was issued on September 13. Hence. Far eastern failed to exercise prudence and diligence on what he ought to do as required by law. However. The BPI check was dishonored by the drawee bank and upon notice by BA Finance. but for what is being represented by the check which was the assignment. having regard for the rights and possibility of los. Fernandezes  Nyco  BA Finance  Nyco Sanshell The check was evidenced by a Deed of Assignment executed by Nyco in favor of BA Finance with the conformity of Sanshell. There was no justification to excuse such delay. it must be presented on the day it falls due.000. it must be presented within a reasonable time AFTER ISSUE. FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . The checks in question are mere evidences of the credit that was assigned to BA Finance by Nyco. in the case at bar. one of Nyco’s defenses was that it shouldn’t be liable for the checks since BA Finance failed to give a notice of dishonor as required by Section 89 of the NIL. ISSUE: W/N the Bank. if any. As long as the credit remains outstanding. the court affirmed the decision. Yao apparently acquiesced to the proposal which led the Fernandezes to go to him to discount a BPI post-dated check worth 60. Notice of dishonor must be made as soon as the instrument is dishonored unless there is excusable delay.000 pesos. Nyco is liable to BA Finance based on the assignment. Note: If the instrument is NOT payable on demand. As such. At the back of the Deed was a Continuing Surety Agreement which signifies the Fernandezes’ unconditional guarantee for payment of Nyco’s indebtedness.000 plus interests which was later affirmed by the CA. Associated moved to dismiss. It was presented and dishonored on March 5. where it must be presented AFTER LAST NEGOTIATION. 1960. He deposited a UCPB check amounting to 101. what the contract or duty requires should be done. It was later found out that the UCPB check was dishonoured and the amount of the check was debited from the account which was then only around 197. On appeal to the CA. through his lawyer informed the bank of take the necessary steps since he had sufficient funds.000 which was duly credited to his account which now amounted to 297. by prematurely crediting the amount to Tan’s account.

Moulic is liable to pay the amount of the checks. without prejudice for any action against Victoriano. the alleged material alteration was the alteration of the serial number of the check in issue— which is not an essential element of a negotiable instrument under Section 1. The law on mortgage. However. Therefore. But this contention has to fail. No notice of dishonor is required. Records show that the extrajudicial foreclosure by the STATE on Victoriano’s property resulted in a deficit. SECTION 185 (42) STATE INVESTMENT HOUSE. the checks cannot be retrieved because it was already negotiated to STATE. Moulic withdrew her funds from drawee bank. PNB could not return the check to PBCOM. Auction = 1M only). The check was thereafter cleared. 66 applies to the bank. HELD: An alteration is said to be material if it alters the effect of the instrument. Nora Moulic issued 2 post-dated checks (P50.NEGO CASE DIGESTS | ATTY. INC v CA FACTS: As security for pieces of jewelry to be sold on commission. Subsequent debits were made but Capitol cannot debit the account of Abante any longer for the latter had withdrawn all the money already from the account. NORIANNE TAN | 2D 2012 its obligation to its client. The name of the government agency issuing the check is clearly stated therein. In this case. The check’s serial number is not the sole indicia of its origin. Victoria had a real estate mortgage with STATE which was subsequently foreclosed). (STATE). rendering redundant the referral to its serial number. being a general indorser. The recovery of the checks by the STATE is valid (apparently. With regard to the NIL. every government office or agency is assigned checks bearing different serial numbers. This is shown when Moulic withdrew her funds from the drawee bank. petitioner PNB returned the check on account that there had been a material alteration on it. The STATE instituted the case. Thus. In conformity with 52 of NIL. Demands unheeded. ACT 3135. In this case. It should pay the same. In other words. PNB alleges that the alteration was material since it is an accepted concept that a TCAA check by its very nature is the medium of exchange of governments. they were dishonored for insufficiency of funds. Sec. 000 each) to Corazon Victoriano. Moulic cannot unilaterally discharge herself from liability. drawn against PNB. (Liability = 1. the STATE cannot be refused of payment due to failure of consideration or the check being only as security. RTC dismissed the complaint. The check was deposited by Abante in its account with Capitol and the latter consequently deposited the same with its account with PBCOM which later deposited it with petitioner for clearing.9M. So when STATE presented the check. there was no such notice. the STATE is a holder in due course. on a relevant date. does not expressly prohibit the recovery of deficit in case of foreclosure. Hence this case. as SEC 119 provides. ISSUE: W/N the STATE is a holder in due course to warrant payment of the checks. a material alteration is one which changes the items which are required to be stated under Section 1 of the NIL. SEC 114 allows no notice of dishonor when the drawer has no right to expect or require that the drawee/acceptor will honor the instrument. (c) STATE took the checks in good faith and for value. SECTION 125 (41) PNB v CA FACTS: DECS issued a check in favor of Abante Marketing containing a specific serial number. Being a holder in due course. (d) STATE was never informed that checks were merely issued for security. As a safety measure. Inc. These are not grounds for discharge of the instrument against a holder in due course. it filed an action against PBCOM and the latter filed a third-party complaint against petitioner. the allegation of no notice of dishonor by Moulic is immaterial. Thus. instrumentalities and agencies. a bank is liable for the wrongful or torturous acts and declarations of its officers or agents within the course and scope of their employment. Notice of dishonour was incumbent upon the bank to charge the depositor’s account. RULING: YES. the check’s drawer is sufficiently identified. Probably wanting to escape liability. there being no material alteration in the check committed. CA affirmed the dismissal. Victoriano negotiated the checks to State Investment House. which is to be diligent in handling of accounts. No notice is needed. Moulic failed to sell the jewelry so returned it to Victoriano. This prompted Capitol to seek reclarification from PBCOM and demanded the recrediting of its account. However. evidence proved that (a) the checks were complete and regular upon its face. (b) STATE acquired the checks before due dates. It means an unauthorized change in the instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of the party. FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA 17
 . PBCOM followed suit by doing the same against PNB. As a general rule.

NORIANNE TAN | 2D 2012 SECTION 186 (43) NATIONAL BANK v SEETO FACTS: On March 13. materially altered the instrument to make it so the amount is now P 9. however he refused alleging that the drawer had sufficient funds at the time of the issuance of the check. that as an indorser. and his since then been collecting rents.. PNB sued Seeto in the CFI which found respondent liable being an indorser and on the basis of PNB’s allegations that Seeto had made oral reassurances that he will reimburse the value of said check. the land was mortgaged by Butte to Associated Banking Corporation along with other properties and after the alleged sale but prior to the property’s release by FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA . Upon such information. and if he from whom it is received sustains loss by want of such diligence. prior to the alleged sale. the CA saw the contrary and that Papa in fact encashed the check by means of a receipt. Quezon City to Felix Penarroyo. it should have been stamped as such or at least a microfilm copy. The trial court ruled in favor of Penarroyo and Valencia.240. as indorser.NEGO CASE DIGESTS | ATTY. 1948 respondent Benito Seeto presented a check in the amount of P5000 to petitioner PNB’s Surigao. the court reversed the decision of the RTC on the basis of Seeto’s argument that there was a lapse of reasonable time before the check was sent to Cebu. However. delivery. Papa refused to deliver the property which led to a suit for specific performance. said FNCB who then cleared the check and credited Republic with the stated amount. The Court held that acceptance of a check implies an undertaking of due diligence in presenting it for payment. Republic then indorsed the same. There was inexcusable delay on the part of PNB Surigao in mailing the check. It must be noted that the check was in possession of Papa for ten (10) years from the time payment was made to him. 48 of the NIL will apply in the case at bar. However. First National City Bank (FNCB). Delgado. 24 days after clearing the check. He further alleged that if check was encashed. Papa cited that according to Art 1249 of the Civil Code. It was later discovered that the mortgage rights of the Bank were transferred to one Tomas Parpana. granting that check was never encashed. acting as attorney-in-fact of Angela Butte. PNB Surigao demanded that Seeto reimburse them the value of the check. On appeal to the CA. causing the insufficiency. it will be held to operate as actual payment of the debt or obligation for which it is given. and ultimately in relation to negotiable instruments. When the check was received in Cebu on April 1948 for payment. Because of the delay. 48 is subject to the limitation provided in Sec 186. On appeal to the CA. allegedly sold a parcel of land in La Loma. On May 19. the funds of the drawer were depleted. HELD: No. Papa’s failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. When Seeto presented the check on March 13. administrator of the estate of Ramon Papa Jr. otherwise it will defeat the purpose of negotiating an instrument. Seeto made a general and unqualified indorsement of the check and PNB Surigao accepted the same and paid the amount. Sec. Reasonable time is provided in the NIL to protect the basic characteristic of an instrument. ISSUE: W/N the check was encashed and can be considered effective as payment? RULING: YES. Butte died. Delgado then indorsed and deposited in his account with Republic Bank. ISSUE: W/N Seeto. the payee. Surigao branch. its NEGOTIABILITY. (45) REPUBLIC BANK v CA FACTS: San Miguel Corp. Despite repeated demands of Penarroyo and Valencia. After more than ten (10) years from the payment in part by cash and in part by check. drew a check on its account with its bank. Finally on appeal to the SC. However. PNB Cebu dishonoured the check for being DAIF and subsequently returned the check to PNB Surigao. the presumption is that the check had been encashed. and thus respondent will be held liable secondarily. may still be held secondarily liable for the value of the check. It was proven in the CA that from the time Seeto presented the check for payment in Surigao until the date PNB Surigao mailed the check to PNB Cebu. In this case. The check was payable to one Roberto Delgado and had on its face the amount of P 240. that a check must be presented for payment within a reasonable time after its issuance. the reasonable time required by law had already lapsed. therefore he was discharged from his liability. The Bank refused to release the property despite Penarroyo’s unless and until the other mortgaged properties by Butte have been redeemed and because of this Penarroyo settled to having the title of the property annotated. but it waited until April 20. FNCB informed Republic that material alterations had been done on the 18
 (44) PAPA v AU VALENCIA & CO INC FACTS: Myron Papa. Papa averred that the sale of the property was not consummated since the PCIB check issued by Penarroyo for payment worth 40000 pesos was not encashed by him. Although PNB’s arguments are correct. with a guarantee at the back of the instrument – “all prior and/or lack of indorsement guaranteed” . On March 14. PNB Surigao should have immediately sent the check to Cebu. The check was drawn by a certain Gan Yek Kiao on March 10 and was payable to cash or bearer against the Cebu branch of the petitioner. payment of checks only produce effect once they have been encashed and he insists that he never encashed the check. The NIL requires that presentment be prompt.

000 but the car was not released due to his refusal to sign the Joint Motion to Dismiss. Payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. printed and issued by itself. Thus. and chattel mortgage as security for the loan. erasures. whether there are sufficient funds in the drawer’s account to cover checks issued. spouses Gueco obtained a loan from International Corporate Bank. The Gueco’s has not proven that they have suffered damage or loss due to the delay in presentment. and it should be able to detect alterations. (47) INTERNATIONAL CORP BANK v GUECO FACTS: In order to purchase a car (Nissan Sentra). 000 as agreed upon and International Corporate Bank is ordered to release the car. The Bank is justified in delaying presentment due to a legal controversy. payable in monthly installments. The check issued by Gueco became stale due to the Bank inaction (claiming the signing of the Joint Motion to Dismiss as a condition precedent). RULING: Both banks are part of our banking system and both are therefore subject to the regulations of the Central Bank. b. Therefore there was acceptance on the part of the original seller. The Bank simply refused because it believed that the signing of the Joint Motion to Dismiss was part of their agreement. W/N International Corporate Bank is liable for damages. Acceptance of a check implies an undertaking of due diligence in presenting it for payment. CA affirmed in favor of the Gueco’s. the drawer cannot be held liable irrespective of loss or injury sustained by the payee. Both alleged that they tendered payment by issuing checks from their respective accounts. NO. Pio Barretto and Mosrales both claim interest on the said parcels of land. The issue then was who between Pio Barretto Realty and Mosrales was the first buyer. The RTC ruled in favour of Pio Barretto and even ordered the sheriff to receive the payment of PBR for consignment. The stale check. There was no fraud on the part of the bank. The refusal to release the car was not done with intent to cause prejudice. In fact. the rule is otherwise if the debtor was prejudiced by the creditor's unreasonable delay in presentment. RULING: a. Every bank that issues check for the use of its customers should know whether or not the drawer’s signature thereon is genuine. while delivery of a check produces the effect of payment only when it is encashed. 000. from the decision of the RTC. b. The remedy of the drawee bank (FNCB) that negligently clears a forged and/or altered check for payment is against the party responsible for the forgery or alteration. (46) PIO BARRETTO REALTY DEV CORP v CA FACTS This case involves a double sale on several parcels of land. having failure to present it within a reasonable time. ISSUE: a. HELD: Yes. NORIANNE TAN | 2D 2012 instrument. for these instruments are prepared. RTC reversed and favored Gueco. In the case at bar. The bank alleges that among the conditions of the compromise was the signing of the Joint Motion to Dismiss. the document was not shown to Gueco in the negotiation meeting. The spouses defaulted in their payment of installments. the Bank should not be liable for damages. W/N International Corporate Bank should shoulder the loss due to a stale check. Hence this case. it has control of the drawer’s account. However. They issued promissory notes. ISSUE: W/N that cashier's or manager's checks are deemed cash or as good as the money they represent. Both parties originally executed a Compromise agreement. By then Delgado had already withdrawn is account from Republic. The CA ruled that Mosrales had a better right because Pio Barretto’s tendering of checks were not valid tender of payment. MTC dismissed the case filed by spouses Gueco. NO. If no such presentment was made. which gave both parties the option to buy. Gueco delivered a manager’s check amounting to P150. the 24 hour regulation on clearing House Operations being one of those regulations. Sec 186 of the NIL provides that failure to present within a reasonable time will result discharge ONLY to the extent of LOSS caused by delay. is valueless and cannot be paid. a compromise was reached and the amount was lowered to P150. But after some negotiations. the payment was consigned in court and the TCT’s were already transferred in the name of PBR. ISSUE: W/N the collecting bank (Republic) is protected by the 24 hour clearing house rule. 000. The bank demanded P184. FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA 19
 . There was no deliberate attempt to cause prejudice. otherwise it bears the loss. Bank filed a civil action with replevin in MTC. Spouses Gueco is ordered to pay P150. The court agrees that there was not sufficient evidence to prove that the signing of the Joint Motion to Dismiss is a condition included in their agreement.NEGO CASE DIGESTS | ATTY. with the latter claiming that he was the first buyer of the same. or superimpositions thereon.

Payless Department Store and Corona Bazaar. Merle Reyes has a right of action against Associated Bank. CA affirmed the decision. he deposited the check in his account with RCBC Binondo. It is regarded substantially to be good as the money it represents. However. The CA revered the decision and absolved RCBC from liability. which in turn could use the collecting bank. assumed the warranty of the endorser. It was with the bank’s failure of its duty to check and countercheck the transaction for possible errors. It was discovered that the checks were deposited in the Associated Bank under the account of Rafael Sayson. which in turn could sue their respective drawee banks. when the bank paid the checks. it should have noticed the error and corrected it. The Trial Court ruled in favor of Tan. FRANCISCO | GAVINO | PEREZ | RASO | DE LUZURIAGA 20
 . The usage of the wrong deposit slip was not the proximate cause of the clearing fiasco. Thus. it did not and outright accepted the check. RTC ruled in favor of Reyes. she has a cause of action against the drawer stores. the checks were accepted for deposit by the Bank in the account of Sayson. RCBC is liable for moral damages of P100. the payee is allowed direct recourse against the collecting bank. However. (49) TAN v CA FACTS: Ramon Tan. it did so at peril and became liable to the payee for the value of the check. However. RCBC should have accepted the cashier’s check of PCIB. Reyes then sued the Associated Bank for the recovery of the amount. It is the duty of the Bank to check and determine transactions. This is not meant to enrich the petitioner but to alleviate the moral suffering he has undergone. The 6 checks that were issued by the stores were crosschecks. Having suffered shame and humiliation in the business community. Associated Bank challaged the suit. There was no implied instruction from Tan (to clear the check with the Central Bank) arising from the wrong deposit slip. As the check passed through several bank personnel. The position of the bank taking the check on the forged / unauthorized indorsement is the same as it had taken the check and collected without indorsement at all. Thus. having 2 parallel lines diagonally on left top with words “for payee’s account only”. he used the wrong deposit slip (local instead of regional). 000. Thus. it stamped thereon that it guaranteed all prior endorsements and/or lack of endorsements. ISSUE: W/N RCBC is liable for damages RULING: YES. arguing that Reyes has no cause of action against them. The bank is still liable for moral damages due to its negligence. ISSUE: W/N Reyes has a cause of action against Associated Bank. The act of the bank amounts to conversion of the check. Hence this case. Thus. it should be held liable for damages. when he issued 2 checks. Nevertheless. She deals with several stores.NEGO CASE DIGESTS | ATTY. not even his husband. a trader-businessman and community leader in Puerto Princesa. The bank should have exercised due diligence and verified if Sayson was authorized by the payee. Thus. A depositor does not have sufficient knowledge of banking procedures as much as bankers do. 000 from PCIB. he instituted a case against the bank. A cashier’s check is a primary obligation of the issuing bank and accepted in advance by its mere issue. RCBC’s defense that immediate payment without awaiting clearance of a cashier’s check is discretionary is unavailing. this is immaterial because Merle Reyes did not authorize anyone else to accept and deposit the check. Reyes never acquired the checks. To simplify proceedings. Puerto Princesa. NORIANNE TAN | 2D 2012 SECTION 189 (48) ASSOCIATED BANK v CA FACTS: Merle Reyes is engaged in the business of RTW garments under the name “Melissa’s RTW”. In this case. Tan was not informed of this transaction until 42 days later. as she did not authorize anyone else. However. When in Manila. who was not authorized by Reyes. They contest that Reyes should have instituted the case against the stores / drawers. In addition. Sec 72 of the NIL states that presentment for payment must be made by the holder or by some person authorized to receive payment. secured a Cashier’s Check amounting P30. These stores issued in payment of their respective accounts crossed checks (6 TOTAL) payable to Melissa RTW. Having no proof that Reyes received the checks. among them are Robinson’s Department Store. they were dishonored due to insufficiency of funds. RCBC erroneously sent the check for clearing. By this positive and deliberate act of the bank. saying that she has a cause of action against the bank. The bank interposed a defense. which was returned for having missent / misrouted. Moral damages can be recovered despite the fact that there was no bad faith or malice by the bank. RULING: YES. Hence this case. RCBC debited the amount from the account of Tan. alleging that it was the husband of Reyes that endorsed the check to Sayson. only Reyes could deposit the check.