SIAIN ENTERPRISES, vs. CUPERTINO REALTY CORP. and EDWIN R. CATACUTAN G.R. No. 170782 June 22, 2009 NACHURA, J.

: Instrument: Promissory Note Drawer: Siain Enterprises, Inc Payee: Cupertino Realty Corp.

INC.

xxx In the case at bench, the mere assertion of Siain that they did not receive the Php160,000,000.00 loan without any evidence proving the same stands no ground vis-à-vis the well settled presumption that every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and which is binding to all the parties thereto. Engr. Jose Cayanan vs. North Star Internation Travel Inc. G.R. No. 172954 DRAWER: Engr. Cayanan PAYEE: North Star International Travel Inc. ISSUE: What is the presumption of consideration under Section 24? Under theNegotiable Instruments Law, it is presumed that every party to an instrument acquires the same for a consideration or for value. As petitioner alleged that there was no consideration for the issuance of the subject checks, it devolved upon him to present convincing evidence to overthrow the presumption and prove that the checks were in fact issued without valuable consideration. Petitioner has not presented any credible evidence to rebut the presumption, as well as North Star’s assertion, that the checks were issued as payment for the US$85,000 petitioner owed. Notably, petitioner anchors his defense of lack of consideration on the fact that he did not personally receive the US$85,000 from Virginia. However, we note that in his pleadings, he never denied having instructed Virginia to remit the US$85,000 to View Sea Ventures. Evidently, Virginia sent the money upon the agreement that petitioner will give to North Star the peso equivalent of the amount remitted plus interest. FACTS: North Star International Travel Incorporated (North Star) is a corporation engaged in the travel agency business while petitioner is the owner/general manager of JEAC International Management and Contractor Services, a recruitment agency. Virginia Balagtas, the General Manager of North Star, in accommodation and upon the instruction of its client, petitioner herein, sent the amount of US$60,000 to View Sea Ventures Ltd., in Nigeria from her personal account in Citibank Makati. On March 29, 1994, Virginia again sent US$40,000 to View Sea Ventures by telegraphic transfer, with US$15,000 coming from petitioner. Likewise, on various dates, North Star extended credit to petitioner for the airplane tickets of his clients, with the total amount of such indebtedness under the credit extensions eventually reaching P510,035.47. To cover payment of the foregoing obligations, petitioner issued five checks to North Star When presented for payment, the checks were dishonored for insufficiency of funds while the other three checks were dishonored because of a stop payment order from petitioner. North Star, through its counsel, wrote petitioner informing him that the checks he issued had been dishonored. North Star demanded payment, but petitioner failed to settle his obligations. Hence, North Star instituted Criminal Case charging petitioner with violation BP 22, before the MTC. MTC found ENGR. CAYANAN GUILTY beyond reasonable doubt of Violation of BP22. RTC acquitted petitioner of the criminal charges. The RTC also held that there is no basis for the imposition of the civil liability on petitioner because the checks issued by the accused were presented beyond the period of NINETY (90) DAYS and therefore, there is no violation of the provision of Batas Pambansa Blg. 22 and the accused is not considered to have committed the offense. There being no offense committed, accused is not criminally liable and there would be no basis for the imposition of the civil liability arising from the offense. CA reversed the decision of the RTC insofar as the civil aspect is concerned and held petitioner civilly liable for the value of the subject checks. The CA ruled that although Cayanan was acquitted of the criminal charges, he may still be held civilly liable for the checks he issued since he never denied having issued the five postdated checks which were dishonored. Petitioner argues that the CA erred in holding him civilly liable to North Star for the value of the checks since North Star did not give any valuable consideration for the checks. He insists that the US$85,000 sent to View Sea Ventures was not sent for the account of North Star but for the account of Virginia as her investment. He points out that said amount was taken from Virginia’s personal dollar account in Citibank and not from North Star’s corporate account. RULING: We have held that upon issuance of a check, in the absence of evidence to the contrary, it is presumed that the same was issued for valuable consideration which may consist either in some right, interest, profit or benefit accruing to the party who

FACTS: Siain Enterprises, Inc. (Siain) is engaged in the manufacturing and retailing/wholesaling business. On the other hand, Cupertino Realty Corp. (Cupertino) is engaged in the realty business. T On April 10, 1995, Siain executed a Real Estate Mortgage over its real properties in favor of Cupertino to secure the former’s loan obligation to the latter in the amount of Php37,000,000.00. On several occasions thereafter, Siain made partial payments to in the total amount of Php7,985,039.08, thereby leaving a balance of Php29,014,960.92. On August 16, 1995, Siain and Cupertino executed an amendment of Real Estate Mortgage increasing the total loan covered by the aforesaid REM from Php37,000,000.00 to P197,000,000.00. This amendment to REM was executed preparatory to the promised release by Cupertino of additional loan proceeds to Siain in the total amount of Php160,000,000.00. However, despite the execution of the said amendment to REM and its subsequent registration with the Register of Deeds of Iloilo City and notwithstanding the clear agreement between the parties, Cupertino failed and refused to release the said additional amount for no apparent reason at all. On account of Cupertino’s unfulfilled promises, Siain repeatedly demanded from Cupertino the release and/or delivery of the said Php160,000,000.00 to the former. However, Cupertino still failed and refused and continuously fails and refuses to release and/or deliver the Php160,000,000.00 to Siain. When Siain tendered payment of the amount of Php29,014,960.92 which is the remaining balance of the Php37,000,000.00 loan subject of the REM, in order to discharge the same, Cupertino unreasonably and unjustifiably refused acceptance thereof . Worst, unknown to Siain, Cupertino was already making arrangements for the extrajudicial sale of the mortgage properties even as Siain is more than willing to pay the Php29,014,960.92 ISSUES: 1) Was there as consideration for the issuance of the promissory note? 2) What is the presumption of consideration? 3) Is this presumption provided for in the Rules of Court? RULING: 1) Yes. All the loan documents presented for evidence, on their face, unequivocally declare petitioner’s indebtedness to Cupertino: received," ; 1. Promissory Note dated April 10, 1995, prefaced with a "[f]or value 2. Mortgage likewise dated April 10, 1995 executed by petitioner to secure its P37,000,000.00 loan obligation with Cupertino. 3. Amendment to Promissory Note for P37,000,000.00 dated April 12, 1995 which tentatively sets the interest rate at seventeen percent (17%) per annum. 4. Promissory Note dated August 16, 1995, likewise prefaced with "[f]or value received," and unconditionally promising to pay Cupertino P160,000,000.00; 5. Amendment of Real Estate Mortgage also dated August 16, 1995 with a recital that the mortgagor, herein petitioner, has increased its loan payable to the mortgagee, Cupertino, from P37,000,000.00 toP197,000,000.00. Unmistakably, from the foregoing chain of transactions, a presumption has arisen that the loan documents were supported by a consideration. 2) Section 24 of the Negotiable Instruments Law provides: SEC. 24. Presumption of consideration.— Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. 3) Yes. Rule 131, Section 3 of the Rules of Court specifies that a disputable presumption is satisfactory if uncontradicted and not overcome by other evidence. Corollary thereto, paragraphs (r) and (s) thereof read: SEC. 3. Disputable presumptions.— The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: xxxx (r) That there was sufficient consideration for a contract; (s) That a negotiable instrument was given or indorsed for a sufficient consideration;

in particular. A person who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a token of his good faith. Inc. or some forbearance. What is the liability of an accomodation party under sec 29 of the NIL? 2. As petitioner alleged that there was no consideration for the issuance of the subject checks. said check was endorsed and deposited in the personal accounts of the officers of PSB in Metrobank. in fact. we note that in his pleadings. A promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date and under the conditions agreed upon by the borrower and the lender. because of absence or lack of consideration. It is also the intermediary used by the officers to perpetuate the fraud against Brondial. An accommodation party who lends his name to enable the accommodated party to obtain credit or raise money is liable on the instrument to a holder for value even if he receives no part of the consideration. petitioner Bank cannot collect from respondent Brondial. He added that there was condonation of debt and novation of the obligation. ADMIRAL filed a collection case against Co and Isip with the RTC of Quezon City Co answered the complaint alleging that the promissory note was sham and frivolous. What is a promissory note? 3. Evidently. at the time of taking the instrument. acceptor. Issues 1. Co thus became liable for the debt even if he had no direct personal interest in the obligation or did not receive any benefit therefrom. notwithstanding such holder. The note also provided for liquidated damages at the rate of 3% per month plus incidental cost of collection and/or legal fees/cost. Held: 1. 154740 April 16. Co allegedly ceded several vehicles to ADMIRAL.315.[16] Sadly. and for the purpose of lending his name to some other person. The CA. Jurisprudence is replete with rulings that in civil cases. He averred that the incorporators and officers of METRO RENT were the ones who prodded him in obtaining a loan of P500. in this case. void ab initio. CA reversed the decision. detriment. an affiliate of petitioner Perpetual Savings Bank. knew him to be only an accommodation party. Who proves payment? 4. was actually a loan made by the other officers of the Bank from the Bank itself. it devolved upon him to present convincing evidence to overthrow the presumption and prove that the checks were in fact issued without valuable consideration. with interest at the rate of 18% per annum and service charge of 10% per annum. if any. RTC dismissed the complaint on the ground that the obligation had already been paid or otherwise extinguished. 1983 and payable on or before February 23.) 5. drawer.It rejected Co’s assertion that he merely acted as an accommodation party for METRO RENT. in the event of non-payment on due date. .March 14.makes the contract. Respondent Brondial is not liable as an "accommodation maker. METRO RENT denied receiving the loan proceeds from Co. It primarily relied on the release of mortgage executed by the officers of ADMIRAL. Isip (Isip) as co-maker. a party who pleads payment as a defense has the burden of proving that such payment had. Upon appreciation of the evidence presented by the parties. respondent. and on Co’s testimony that METRO RENT already paid the loan. 4.R. The CA further held that whatever agreement Co had with METRO RENT cannot bind ADMIRAL since there is no showing that the latter was aware of the agreement. declaring that Co’s liability under the note was apparent in his express. rather than on the plaintiff to prove nonpayment. Burden of proof is the duty of a party to present evidence on the facts in issue necessary to prove the truth of his claim or defense by the amount of evidence required by law. It knew well enough that the PN issued by Brondial was without consideration since the loan she applied for was not for her consumption. The RTC and CA ruled in favor of Brondial. hence. The PN did not have any consideration when it was issued by Brondial as purported security for the loan. without receiving value therefor." Section 29 of the NIL defines the term as: x x x one who has signed the instrument as maker.. (Wa jud ko kabalo sa answer. vs. Zoilo Gabriel. transferred the amount to PSB’s account in Metrobank. thus. Isip died. By signing the note. What is the basis of such reduction under the Civil Code? Facts: On February 28. he never denied having instructed Virginia to remit the US$85. She applied for the loan in behalf of the officers and the corporation. petitioner. Court of Appeals. Is PSB a holder in due course? 2. Such a person is liable on the instrument to a holder for value. is that the bank cannot enforce or collect payment from the maker of the PN. petitioner anchors his defense of lack of consideration on the fact that he did not personally receive the US$85. secured by her PN.000. Respondent Brondial did not receive a single centavo from the loan. been made. None of its proceeds was used by her for her consumption.R. 2. Virginia sent the money upon the agreement that petitioner will give to North Star the peso equivalent of the amount remitted plus interest.13 He assumes the obligation to the other party and binds himself to pay the note on its due date. ikaw pa jud ang maningil. Accordingly.000 from Virginia. or labor. Thus. If he reneges on his promise without cause. It is the payee who can go after said accommodation party for payment. respondent Brondial. 3. Finally. waived or otherwise extinguished.000. The loan was evidenced by Promissory Note dated February 28. but these were not heeded. Is Brondial an accommodation partu under Section 29? 5. President. Brondial did not receive a single centavo from the transaction.Co failed to discharge this burden. FIRST DIVISION. No. He also claimed that the obligations. A payee and a holder not in due course. Crisanto Norofla. the party who alleges a fact has the burden of proving it. These officers of PSB are: Danilo Natividad. Can stipulated interest rates be equitably reduced? 5.00 to petitioner Henry Dela Rama Co (Co). 1983. to act. (METRO RENT). it is presumed that every party to an instrument acquires the same for a consideration or for value. Di nako makita sa case. G. Does the promissory note have consideration? 3. or indorser. 1984. Absence or lack of consideration is a valid defense against any person not a holder in due course. Instrument: Promissory note Issues: 1. Vice-President for Operations. No. Co and Isip failed to pay the loan when it became due and demandable. loss or some responsibility. let alone consented to it. 2001. In Sierra v. still. 3. The proceeds of the loan were given to the directors and officers of METRO RENT. had been paid. J. not the party accommodated. It was Brondial who merely effected the transaction. ADMIRAL was also guilty of laches in prosecuting the case. Resolution PERPETUAL SAVINGS BANK vs. The proceeds of said loan were deposited to their accounts and were ultimately redeposited in petitioner PSB’s account. 146663. It was eventually found by the RTC and CA that the loan purportedly applied by Brondial. 2008 HENRY DELA RAMA CO. ADMIRAL UNITED SAVINGS BANK. What is the effect of Section 28 of the NIL? 4. the President of PSB. is not a holder in due course and accordingly. absolute and unconditional promise to pay the loan upon maturity. PSB’s officers were responsible for the loan. He denied receiving any benefits from the loan transaction. Under theNegotiable Instruments Law. When the plaintiff alleges nonpayment. however. petitioner has not presented any credible evidence to rebut the presumption. Demands for payment were made by ADMIRAL.00) she allegedly executed in its favor. et al. She avers that she only signed the note as condition to her appointment as Senior Manager of Perpetual Capital Investments & Finance Corp. BRONDIAL. Admiral United Savings Bank (ADMIRAL) extended a loan of P500. PSB is not a holder in due course. Ikaw na gani ang gi-accommodate.) THIRD DIVISION G. Pending resolution of the case.000 petitioner owed. (The one accommodated cannot go after the accommodation party. as well as North Star’s assertion. with Leocadio O. he forfeits the sympathy and assistance of this Court and deserves instead its sharp repudiation. Brondial denied liability by claiming that she did not receive any consideration for the note. that the checks were issued as payment for the US$85. not entitled to enforce or collect payment from the maker. Instrument: Promissory Note Maker: Dolores Brondial Payee: Perpetual Savings Bank Facts The bank is suing Dolores Brondial for non-payment of a promissory note (valued P826. he argued that the case was prematurely filed and was not prosecuted against the real parties-in-interest. Co then filed a third party complaint against Metropolitan Rentals & Sales. or service given. What is the role of PSB (the party accommodated) in this transaction? Held 1. However. It was petitioner Bank who was accommodated by respondent Brondial when she executed the PN. Notably. When the check was delivered to her. Executive Vice-President. ruled that petitioner Bank as holder of the check.. who assured him of prompt payment of the loan obligation. Brondial. he was dropped from the complaint. because of absence or lack of consideration. the general rule is that the burden rests on the defendant to prove payment. the value of which was more than enough to cover the alleged obligation. the RTC and CA found that respondent Brondial was not indebted to petitioner Bank because the amounts she purportedly received were returned to and received by petitioner Bank on the very day the checks were released. Consequently. suffered or undertaken by the other side. The effect of Section 28. Then Natividad.000 to View Sea Ventures. claiming that ADMIRAL merely induced him into executing a promissory note.00 from ADMIRAL. NACHURA. 2.

Hence. through the accused. however. viz: (1) he must be a party to the instrument. petitioner filed a demurrer to evidence. 2227. 2008 . whether intended as an indemnity or a penalty. [15] An accommodation party lends his name to enable the accommodated party to obtain credit or to raise money. PETITIONER. the stockholders and officers are not personally liable for the obligations of the corporation except only when the veil of corporate fiction is being used as a cloak or cover for fraud or illegality. A perusal of the two check return slips[11] in conjunction with the Current Account Statements[12] would show that the check for P151. Petitioner now comes before us. The antecedent facts are as follows: Petitioner Claude P. and (3) he must sign for the purpose of lending his name or credit to some other person. signing as maker. in his capacity as President and Presiding Officer of Cruiser Bus Lines and Transport Corporation. acceptor. petitioner cannot be considered liable as an accommodation party for Check No. that is. however there is insufficient evidence presented in the instant case to show the presence of the third requisite. corresponds to the value of 24 sets of tires received by Cruiser Bus Lines and Transport Corporation on August 29. 58832.00) [G. is personally and civilly liable to the private respondent for the value of the two checks. with interest at the rate of 12% per annum to be computed from the time of the filing of these cases in Court. drawer.780.[14]These situations. we acknowledge that the law allows a party to recover liquidated damages and attorney's fees under a written agreement. therefore. however there is insufficient evidence presented in the instant case to show the presence of the third requisite.. or P10. or to work injustice.005-B-2001. These were docketed as Criminal Case Nos.00. which is drawn against his personal account. 2.: DRAWER – bautista as president and presiding officer DRAWEE – Republic Planters Bank PAYEE – auto plus traders. (2) he must not receive value therefor. signing as maker. acceptor. what is an accommodation party? 2. or indorser.500 was drawn against the current account of Cruiser Bus Lines and Transport Corporation.000. however. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. which is drawn against his personal account.00 and costs of litigation which this Court hereby fixed at P5. 2008] CLAUDE P. Bautista. and for the purpose of lending his name to some other person. Nonetheless. the court sustained the interest rate of 18% per annum for being fair and reasonable. an accommodation party is liable on the instrument to a holder for value. In L. and (3) he must sign for the purpose of lending his name or credit to some other person. Private respondent adds that petitioner should also be liable for the value of the corporation check because instituting another civil action against the corporation would result in multiplicity of suits and delay. 2000. 2003. became an accommodation party. As to the awards of liquidated damages and attorney’s fees. BAUTISTA. by issuing his check to cover the obligation of the corporation.[16] The first two elements are present here. August 06. petitioner cannot be considered as an accommodation party. or indorser.00 per annum beginning February 28. Juridical entities have personalities separate and distinct from its officers and the persons composing it. shall be equitably reduced if they are iniquitous or unconscionable.000. 58832. According to private respondent. yes. as penalty for breach of contract. or indorser. 102. thus: WHEREFORE.M.R. Liquidated damages. 166405. inc.00 representing the value of the two checks. VS. On April 21.500. 58832. THIRD DIVISION G. Under Section 29[9] of the Negotiable Instruments Law. (2) he must not receive value therefor. viz: (1) he must be a party to the instrument. No. we held that a bank is only entitled to a maximum of 2% per annum service charge for amounts not over P500. Hence. The law also allows parties to a contract to stipulate on liquidated damages to be paid in case of breach. 22 merely pertains to the criminal liability of the accused and that the corporation. without receiving value therefor. Even if there has been no performance. 22 were filed with the Municipal Trial Court in Cities (MTCC) of Davao City against the petitioner. 22[3] against petitioner. Under Section 29[9] of the Negotiable Instruments Law. acceptor.dated December 15. The evidence shows that it is Cruiser Bus Lines and Transport Corporation that has obligations to Auto Plus Traders. AUTO PLUS TRADERS. Section 29 of the Negotiable Instruments Law defines an accommodation party as a person "who has signed the instrument as maker. Trial on the merits ensued. Private respondent then executed an affidavit-complaint for violation of Batas Pambansa Blg.000.[15] An accommodation party lends his name to enable the accommodated party to obtain credit or to raise money. petitioner.[8] Petitioner asserts that BP Blg. remains liable for the checks especially since there is no evidence that the debts covered by the subject checks have been paid. the MTCC granted the demurrer. Inc. 58832. 1984 until full payment of the loan obligation. Hence. Issue: 1. RESPONDENTS.[17] There is no showing of when petitioner issued the check and in what capacity. an accommodation party is one who meets all the three requisites. contrary to private respondent's contentions. without receiving value therefor. The said check. premised on reasonable doubt as to the guilt of the accused. J. or indorser. 5. through the accused is directed to pay the complainant the sum of P248. In the absence of concrete evidence it cannot just be assumed that petitioner intended to lend his name to the corporation. acceptor. Cruiser Bus Line[s] and Transport Corporation. However.00. QUISUMBING. No. Likewise. he receives no part of the consideration for the instrument but assumes liability to the other party/ies thereto. which has a separate personality from its officers.Accordingly. INCORPORATED AND COURT OF APPEALS (TWENTY-FIRST DIVISION). We. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. until the account is paid in full. The checks were subsequently dishonored. and attorney’s fees to 10% of the principal loan or P50. equity dictates that we reduce the service charge. an accommodation party is liable on the instrument to a holder for value. as an officer of the corporation. contrary to private respondent's contentions. is solely liable for the value of the two checks. ordering further Cruiser Bus Line[s] and Transport Corporation. this Court finds the award of liquidated damages and attorney’s fees by the CA exorbitant. All that the evidence shows is that petitioner signed Check No. we reduce the liquidated damages to P150.R. purchased various spare parts from private respondent Auto Plus Traders.000.200 was drawn against the current account of Claude Bautista while the check for P97. drawer. was bautista an accommodation party? 1. After all. we sustain the factual finding of the RTC. This sentiment is echoed in Article 2227 of the same Code: ART. After the presentation of the prosecution's evidence. Handicraft Manufacturing Corporation v.[13] Generally. Cruiser Bus Lines and Transport Corporation. and issued two postdated checks to cover his purchases. Inc. Hence. Private respondent alleged that petitioner issued two postdated checks: a personal check in his name for the amount of P151. an accommodation party is one who meets all the three requisites. 2000.000. do not exist in this case. petitioner cannot be considered liable as an accommodation party for Check No. All that the evidence shows is that petitioner signed Check No. liquidated damages and attorney’s fees awarded in favor of ADMIRAL. the demurrer to evidence is granted. Petitioner pleaded not guilty. modify the amount of service charge from 10% to 2%.[16] The first two elements are present here. Section 29 of the Negotiable Instruments Law defines an accommodation party as a person "who has signed the instrument as maker. two Informations for violation of BP Blg. ART. Consequently. There is no agreement that petitioner shall be held liable for the corporation's obligations in his personal capacity. raising the sole issue of whether the Court of Appeals erred in upholding the RTC's ruling that petitioner. 168274 August 20. and for the purpose of lending his name to some other person.200 and a corporation check under the account of Cruiser Bus Lines and Transport Corporation for the amount of P97. for tires.700. he cannot be held liable for the value of the two checks issued in payment for the corporation's obligation in the total amount of P248.[17] There is no showing of when petitioner issued the check and in what capacity. liquidated damages and attorney’s fees serve the same purpose. 1229." As gleaned from the text.4. 2000.dated December 15. corresponds to the value of 24 sets of tires received by Cruiser Bus Lines and Transport Corporation on August 29. Court of Appeals.00.004-B-2001 and 102. In the absence of concrete evidence it cannot just be assumed that petitioner intended to lend his name to the corporation. petitioner cannot be considered as an accommodation party. drawer.700. 2000." As gleaned from the text. he receives no part of the consideration for the instrument but assumes liability to the other party/ies thereto Likewise. The said check. drawer. to reimburse complainant the expense representing filing fees amounting to P1. Private respondent counters that petitioner should be held personally liable for both checks. (Thus. courts are empowered to reduce such penalty if the same is iniquitous or unconscionable.

in this case.053. BA Finance thereupon demanded the payment of the value of the check from Asianbank1[7] but to no avail.000. Is this not indorsement under Section 66? No. on the basis of its warranties as a general indorser. it merely presented it for payment.FAR EAST BANK & TRUST COMPANY. it could not be held liable. and because the amount in the draft was more than the value of the goods purchased. Justices Carpio-Morales.64 or the difference between the amount in the materially altered draft and the amount debited from the respondent company's account. Before receiving the draft. reversed the ruling of the trial court and awarded respondents' counterclaim. purchased from the respondent Gold Palace Jewellery Co. On August 12. the collecting bank. respondent. 179952 December 4.36. 002593 and the duly notarized and consul-authenticated affidavit of a corporate officer of the drawer. the manager of Gold Palace. and informed him that the pieces of jewelry would be released when the draft had already been cleared. Thus. therefore.J. The appellate court further ruled that the drawee bank had cleared the check. NACHURA. the RTC rendered its July 30. the drawee bank. Far East was able to debit onlyP168. thus. Yang issued Cash Invoice No. 3. vs. UOB.000. prompting it to file a complaint before the Regional Trial Court (RTC) of Makati for sum of money and damages against Asianbank and Bitanga subsequently . Far East did not own the draft. the CA. or after around three weeks. This is precisely because the said indorsement is only for purposes of collection which. Branch 64 of Makati City. consequently deposited the draft in the company's account with the aforementioned Far East branch on June 2. Jr. now merged with Metropolitan Bank and Trust Company (Metrobank). he offered Foreign Draft No. Because Gold Palace did not heed the demand. petitioner demanded from respondents the payment of P211. in fact. In the meantime. Following the bank's advice. To secure the loan he mortgaged his car to BA Finance. 2. 1998 to claim the purchased goods.00. Gold Palace was liable to Far East. 1998. will be payable to BA Finance as the mortgagee. Inc.The trial court ruled that. Far East subsequently refunded the P380.500. he failed to settle it. Respondent Julie Yang-Go. and its remedy should be against the party responsible for the alteration.A. The car was stolen. Attached to its official correspondence were Special Clearing Receipt No. Inc. Far East cannot invoke the warranty of the payee/depositor who indorsed the instrument for collection to shift the burden it brought upon itself. When Far East.00 and that it was returning the same. In their Answer.00. asked him to come back. M-069670 issued by the United Overseas Bank (Malaysia) BHD Medan Pasar. After ascertaining that the draft had been cleared.000. On appeal. and theft for a period of one year in an amount not less than the outstanding balance of mortgage obligations and that all loss. It ruled in the main that Far East failed to undergo the proceedings on the protest of the foreign draft or to notify Gold Palace of the draft's dishonor. its neighbor mall tenant. Far East only notified by phone the representatives of the respondent company.64 as actual damages. BA Finance eventually learned of the loss of the car and of Malayan Insurance’s issuance of a crossed check payable to it and Bitanga.00 to P380. Kuala Lumpur Branch (UOB). had already utilized portions of the amount.: ISSUE: What is the nature of a collecting bank? Is the indosement of a holder (Gold Palace) to collecting Back (Far East) in the nature of a restrictive indorsement? Is this not indorsement under Section 66? Facts: The instant controversy traces its roots to a transaction consummated sometime in June 1998. respondent Judy Yang. respondent Yang released the pieces of jewelry to Samuel Tagoe.‖ Without the indorsement or authority of his co-payee BA Finance. Puno. in the meantime. petitioner. J. the assistant general manager of Gold Palace. Metropolitan Bank and Trust Company (formerly Asianbank Corporation). Gold Palace neither altered the draft nor knew of the alteration.. Leonardo-De Castro. as his change. It did not in any way transfer the title of the instrument to the collecting bank. 2001 Decision in favor of Far East. under Section 36 of the NIL. This check was later presented for encashment and was. Finance Corporation and Lamberto Bitanga‖ for P224. Bitanga thus had the mortgaged car insured by Malayan Insurance Co. as represented by Judy L. identified as Samuel Tagoe. Yang. paid by the said bank. fire. but despite demands. could not debit respondent's account for the amount it refunded to the drawee bank. M-069670 had been materially altered from P300.00. and payable to the respondent company for P380.. is a restrictive indorsement. presented the draft for clearing to LBP. if any..946. It is noted at this point that the material alteration was discovered by UOB after LBP had informed it that its funds were being depleted following the encashment of the subject draft. Manila (LBP). 99296 for sum of money and damages before the Regional Trial Court (RTC). drawn against China Banking Corporation (China Bank). and Gold Palace's account with Far East was credited with the amount stated in the draft. Julie YangGo and Kho Soon Huat. 1730881 for P122. when a foreigner. LBP informed Far East that the amount in Foreign Draft No.) Instrument: Check Drawer: Malayan Insurance Drawee: China Bank Collecting Bank: Metrobank formerly Asianbank Payee: BA Finance / Lamberto Bitanga Facts: Lamberto Bitanga (Bitanga) obtained from BA Finance Corporation (BA Finance) a P329. Considering that the warranties of a general indorser as provided in Section 66 of the NIL are based upon a transfer of title and are available only to holders in due course. Without any legal right to do so. petitioner vs. but this was done without a prior written notice to the account holder. In payment of the same. 1609 to the foreigner. as the outstanding balance of its account was already inadequate.00 earlier paid by LBP. No. 2005 Decision. The check was crossed with the notation ―For Deposit Payees’ Account Only. inquired from petitioner Far East Bank & Trust Company's (Far East's) SM North EDSA Branch. respondents specifically denied the material allegations in the complaint and interposed as a defense that the complaint states no cause of actionthe subject foreign draft having been cleared and the respondent not being the party who made the material alteration. Malayan Insurance issued a check payable to the order of ―B. the collecting bank. the latter cleared the same UOB's account with LBP was debited.'s (Gold Palace's) store at SM-North EDSA several pieces of jewelry valued at P258.. respondents GR.280 loan. in the assailed March 15. 2009 First Division (C. Bitanga’s loan became past due. RULING: 1. On Bitanga’s claim. these warranties did not attach to the indorsement for deposit and collection made by Gold Palace to Far East. its assigns as its interest may appear. Far East consequently instituted Civil Case No. addressed to the Land Bank of the Philippines. GOLD PALACE JEWELLERY CO.000. and of Bitanga’s depositing it in his account at Asianbank and withdrawing the entire proceeds thereof. ordering Gold Palace to pay the former P211. Gold Palace. 1998.946. On June 26. Bersamin and Villarama. on July 20. 1998. Far East could not charge Gold Palace on its secondary liability as an indorser. but advised her not to release the pieces of jewelry until the draft had been cleared.000. Far East Check No. Considering that. Bitanga deposited the check to his account with the Asianbank Corporation (Asianbank). she issued. BA Finance Corporation and Malayan Insurance Co. The teller informed her that the same was similar to a manager's check. BA Finance on its part required Bitanga to insure the car against loss or damage by accident. withdrew the entire proceeds of the check. The foreigner eventually returned to respondent's store on June 6. under such policy or policies. Is the indosement of a holder (Gold Palace) to collecting Back (Far East) in the nature of a restrictive indorsement? Yes. the nature of the draft. What is the nature of a collecting bank? – was not discussed in the case. (Malayan Insurance). Intending to debit the amount from respondent's account. After trial on the merits. 1998.

Bitanga alone endorsed the crossed check. Inc. ostensibly ignoring the fact that the check did not. where a check is deposited and which indorses the check upon presentment with the drawee bank. What is the effect of a collecting bank being the last indorser? Held: 1. G. . carry the indorsement of BA Finance.. MESZELLEN. sued the drawee. Said checks were deposited with the now defunct Commercial Bank and Trust Company (COMTRUST). . ALLIED paid the proceeds of said checks to COMTRUST as the collecting bank. Without Asianbank’s warranty. What is the effect of payment based on a forged indorsement? 3. for reimbursement in the event that it would be adjudged liable in the main case to pay MESZELLEN. Almost ten years later. The CA affirmed the trial court’s decision. for damages which it allegedly suffered when the value[s] of the checks were paid not to it but to some other person. petitioner. It also filed a third party complaint against Malayan Insurance. despite the lone endorsement of Bitanga. inter alia. despite the absence of authority of Bitanga’s co-payee BA Finance to endorse it on its behalf. as the collecting bank or last indorser.: Instrument: Checks Drawer: Hyatt Terraces Drawee: Allied Banking Corp Payee: Meszellen Commodities Services Inc. it bears repeating. As has been repeatedly emphasized. is an indorser." .R. alleging that. COURT OF APPEALS and BANK OF THE PHILIPPINE ISLANDS. This is because in indorsing a check to the drawee bank.2[25] 2. 1998 PANGANIBAN. in part. 1981. ALLIED. (MESZELLEN). 3.Bitanga. BPI) FACTS: Hyatt Terraces Baguio issued two crossed checks drawn against Allied Banking Corp. The RTC ruled in favor of BA Finance and held Asianbank and Bitanga solidarily liable for the full amount of the check. a party cannot invoke the jurisdiction of the courts over disputes and controversies which fall under the PCHC Rules and Regulations without first going through the arbitration processes laid out by the body. No." After the checks were cleared through the Philippine Clearing House Corporation (PCHC). COMTRUST stamped at the back thereof the warranty "All prior endorsements and/or lack of endorsements guaranteed. 38 — Arbitration Any dispute or controversy between two or more clearing participants involving any check/item cleared thru PCHC shall be submitted to the Arbitration Committee. the subject check. generally suffers the loss because it has the duty 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 prior indorsements. unless the third-party claimant has first exhausted the arbitral authority of the PCHC Arbitration Committee and obtained a decision from said body adverse to its claim. respondents. 2) Under the rules and regulations of the Philippine Clearing House Corporation (PCHC). The provisions of the Negotiable Instruments Law and underlying jurisprudential teachings on the black-letter law provide definitive justification for Asianbank’s full liability on the value of the check. the PCHC has adopted rules and regulations designed to provide member banks with a procedure whereby disputes involving the clearance of checks and other negotiable instruments undergo a process of arbitration prior to submission to the courts below. INC. ISSUES: 1) What is the mandatory recourse to the PCHC? 2) What is the exhaustion of arbitral authority of the PCHC in cases involving checks cleared under PCHC before recourse to a 3rd party complaint? RULING 1) The Clearing House Rules and Regulations. and Asianbank allowed the deposit and release of the proceeds thereof.The payment of an instrument over a missing indorsement is the equivalent of payment on a forged indorsement or an unauthorized indorsement in itself in the case of joint payees. J. a third-party complaint of one bank against another involving a check cleared through the PCHC is unavailing. private respondent argues that the trial court had no authority to admit a third-party claim that was filed by one bank against another and involved a check cleared through the Philippine Clearing House Corporation (PCHC). one who credits the proceeds of a check to the account of the indorsing payee is liable in conversion to the non-indorsing payee for the entire amount of the check. More over. Asianbank. On March 17. Hence the appeal to the SC where Asianbank now Metrobank argues that it is only liable to BA Finance for only one half of the amount covered by the check. .Section 41 of the Negotiable Instruments Law provides: Where an instrument is payable to the order of two or more payees or indorsees who are not partners. BPI filed a motion to dismiss said third party complaint grounded on the following: 1) that the court ha[d] no jurisdiction over the nature of the action. through its employee. Therefore. a collecting bank. vs. (ALLIED) in favor of appellee Meszellen Commodities Services. hence. Issue: 1. who shall within fifteen (15) days after receipt thereof file with the Arbitration Committee its written answer to such written complaint and also within the same period serve the same upon the complaining participant. before the defendant could finish presenting its evidence. Collecting Bank: Commercial Bank and Trust Company (later. all must indorse unless the one indorsing has authority to indorse for the others. a collecting bank stamps the back of the check with the phrase ―all prior endorsements and/or lack of endorsement guaranteed‖ and. Clearly.To be sure. the mere act of participation of the parties concerned in its operations in effect amounts to a manifestation of agreement by the parties to abide by its rules and regulations. the payee. assumes the warranty of an indorser. states: Sec. ALLIED BANKING CORPORATION. A favorable ruling was also rendered on Malayan Insurance holding that Malayan was not privy to the contract between BA Finance and Bitanga and noting that it is the policy of Malayan to issue checks to both the insured and the financing company. the drawee bank (China Bank in this case) would not have paid the value of Accordingly. BA Finance has a cause of action against Asianbank. 123871 August 31. for all intents and purposes. the banking business is imbued with public interest such that the highest degree of diligence and highest standards of integrity and performance are expected of banks in order to maintain the trust and confidence of the public in general in the banking sector. treats the check as a negotiable instrument. Asianbank in this case. it is entitled to the entire proceeds of the check. Asianbank. "Pursuant to its function involving the clearing of checks and other clearing items. upon written complaint of any involved participant by filing the same with the PCHC serving the same upon the other party or parties. As a consequence of such participation. Upon receipt of the above checks. it filed a third party complaint against Bank of the Philippine Islands (BPI) as successor-in-interest of COMTRUST. and 2) that the cause of action of the third party plaintiff ha[d] already prescribed. Undoubtedly. was negligent when it allowed the deposit of the crossed check. What is Section 41 of the NIL? 2. This procedure not only ensures a uniformity of rulings relating to factual disputes involving checks and other negotiable instruments but also provides a mechanism for settling minor disputes among participating and member banks which would otherwise go directly to the trial courts.

– Value is any consideration sufficient to support a simple contract. Lita Sagun. sold a car to the spouses. this petition. In the meantime. petitioner contends that the element of ―value‖ is not present. the NIL on Holder in Due Course or Article 1318 of the Civil Code on vitiated consent? Petitioner ascribes to the Court of Appeals the following errors: (1) in finding that respondent is a holder in due course. Here. BPI specifically denied the allegations in the complaint. Olvido. As payment therefor. – A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face. Ortigas Avenue. 25. spouses Cawili issued a personal check in the amount of P348. respondent. and is deemed as such whether the instrument is payable on demand or at a future time. Esmeraldo (the current possessor of the car) conveyed the same to Jose V. What constitutes a holder in due course.805. However..Thereafter. the Court of Appeals did not err in concluding that respondent is a holder in due course of the cashier’s check. Since VMSC failed to deliver the car. Section 52 of the Negotiable Instruments Law provides: SEC. No. Hence. As payment scheme. Bank of the Philippine Islands vs. Spouses Cawili then assured him that they would replace the bounced check with a cashier’s check from the Bank of the Philippine Islands (BPI). SECOND DIVISION. affirmed the trial court’s judgment. what constitutes.R. Respondent and Rodrigo Cawili went to BPI’s branch at Shaw Boulevard. July 21. FACTS: Gregorio C. 2008. what constitutes. Señeris this Court took judicial notice of the ―well-known and accepted practice in the business sector that a cashier’s check is deemed as cash. and that Roxas’ remedy was to sue Rodrigo Cawili who purchased the check. As a counterclaim. RTC ordered Bank of the Philippine Islands. is a trader. What constitutes value? SEC. VELASCO. the Court of Appeals. The Violago spouses also filed a Third Party Complaint against Avelino praying that he be held liable to them in the event that they be held liable to BA Finance. in its Decision. Furthermore. and is deemed as such whether the instrument is payable on demand or at a future time. One who claims otherwise has the onus probandi to prove that one or more of the conditions required to constitute a holder in due course are lacking.805. the branch manager. Pasig City a complaint for sum of money against BPI. Issues 1. the CA modified the decision of the RTC by absolving Avelino from indemnifying the spouses. claiming that it issued the check by mistake in good faith. endorsed thereafter to BA Finance Facts Avelino Violago. InNew Pacific Timber & Supply Co. The RTC ruled in favor of BA Finance and against the Violago spouses. every holder is presumed prima facie to be a holder in due course. the check was dishonored on the ground ―Account Closed. Section 25 of the same law states: SEC.‖ This is because the mere issuance of a cashier’s check is considered acceptance thereof.Mandaluyong City where Elma Capistrano. The spouses filed their Answer before the RTC. if such was the fact.‖ Roxas filed with the Regional Trial Court. and the recourse of BA Finance should be against VMSC. An antecedent or pre-existing debt constitutes value. a cousin of Pedro Violago and President of VMSC. since primary recourse to the PCHC does not preclude an appeal to the regional trial courts on questions of law. the bank teller. as well as for damages. the car was never delivered to the spouses. As a general rule. personally attended to them. 158262. Cebu City branch. The spouses eventually discovered that the car they purchased was already sold to a certain Esmeraldo Violago. It also declared that the spouses are entitled to be indemnified by Avelino. (b) That he became the holder of it before it was overdue and without notice that it had been previously dishonored. BPI prayed that Roxas be ordered to pay attorney’s fees and expenses of litigation. Verily. (c) That he took it in good faith and for value. In this case. The fact that it was Rodrigo who purchased the cashier’s check from petitioner will not affect respondent’s status as a holder for value since the check was delivered to him as payment for the vegetable oil he sold to spouses Cawili. 14428 in the amount of P348. the bank officers refused to encash the check and tried to retrieve it from respondent. petitioner should have paid the same upon presentment by the former. Petitioner’s contention lacks merit. He then called his lawyer who advised him to deposit the check in his (Roxas’) account at Citytrust. BA Finance filed a complaint for Replevin with Damages against the spouses before the RTC. On appeal. docketed as Civil Case No. in favor of VMSC. PEDRO AND FLORENCIA VIOLAGO vs. J SPS.We defer to the primary authority of PCHC over the present dispute. when Roxas tried to encash the check. Despite Roxas’ insistence. to pay Roxas. Was BA Finance a holder in due course? 2. Rodrigo then handed the check to Roxas in the presence of Elma. Jose executed a Chattel Mortgage over the vehicle in favor of one Generoso Lopez as security for a loan covered by a promissory note. The check becomes the primary obligation of the bank which issues it and constitutes a written promise to pay upon demand. it was dishonored by the drawee bank. . BA would pay VMSC while the spouses would pay BA Finance. JR.601 from BA Finance. the spouses executed a PN and a chattel mortgage over the car. VMSC endorsed the PN without recourse to BA Finance. – Value is any consideration sufficient to support a simple contract. they agreed that the spouses would pay the down payment and the balance will be financed by BA Finance. To secure this arrangement. InInternational Corporate Bank v. Roxas prayed that BPI be ordered to pay the amount of the check. prepared BPI Cashier’s Check No. No. Inc. 25. there is no dispute that respondent received Rodrigo Cawili’s cashier’s check as payment for the former’s vegetable oil. The fact that it was Rodrigo who purchased the cashier’s check from petitioner will not affect respondent’s status as a holder for value since the check was delivered to him as payment for the vegetable oil he sold to spouses Cawili. Having been accepted by respondent. v. because its technical expertise in this field enables it to better resolve questions of this nature. that its dishonor was due to lack of consideration. the spouses did not pay any monthly amortization to BA Finance. After receiving the amount of P209. Elma informed him that Marissa’s account was closed on that date.R. it bears emphasis that the disputed check is a cashier’s check. Despite repeated demands from VMSA and Avelino. An antecedent or pre-existing debt constitutes value. However. petitioner. BA FINANCE CORPORATION and AVELINO VIOLAGO Instrument: Promissory Notes Maker: Spouses Violago Payee: Violago Motor Sales Corporation (VMSC). 52. respondent could not be a holder in due course. Roxas. What is it that prevails. he had no notice of any infirmity in the instrument or defect in the title of person negotiating it. Branch 263. Value. Value. another cousin of Avelino. BA Finance was not a holder in due course under Section 59 of the Negotiable Instruments Law (NIL). Gregorio Roxas G. In view of the above pronouncements.50. Verily. subject to no condition whatsoever. On appeal. VMSC executed a Deed of Assignment of its rights and interests under the PN and chattel mortgage in favor of BA Finance. This promissory note was later endorsed to BA Finance. 63663. (d) That at the time it was negotiated to him. alleging that they never received the vehicle from VMSC. This is not prejudicial to the interest of any party. and (2) in holding that it (petitioner) is liable to respondent for the amount of the cashier’s check. Upon Elma’s instructions. therefore. G. the Court of Appeals did not err in concluding that respondent is a holder in due course of the cashier’s check. The following day.50. petitioner bank became liable to respondent from the moment it issued the cashier’s check. 157833 DRAWER: Spouses Cawili and BPI for manager’s check PAYEE: Greg Roxas DRAWEE: BPI ISSUES: Is Roxas a holder in due course? Yes. He delivered stocks of vegetable oil to spouses Rodrigo and Marissa Cawili. damages and cost of the suit. payable to Roxas. Spouses Gueco this Court held that a cashier’s check is really the bank’s own check and may be treated as a promissory note with the bank as the maker. Roxas returned to BPI’s branch at Shaw Boulevard to encash the cashier’s check but it was dishonored. under the above provision. drawn against the account of Marissa Cawili.

Butuan City. a negotiable instrument is subject to the same defenses as if it were non-negotiable. 2010 EQUITABLE PCI BANK. . The NIL considers every negotiable instrument prima facie to have been issued for a valuable consideration. Cebu City. serious anxiety. exemplary damages.500. Since BA Finance is a holder in due course.00. Under the circumstances. respondent filed with the Regional Trial Court (RTC) of Cebu City a complaint against petitioner. and without notice that it had been previously dishonored. (d) BA Finance was never informed.00 as temperate damages is reasonable. respondent. Ruling: The CA ruling is set aside and the RTC ruling. now petitioner Equitable PCI Bank. (c) BA Finance. deposited the aforesaid check to its account with Solid Bank. 165339 August 23. JAMES vs.000. It is apparent that respondent suffered pecuniary loss. and names the drawees with certainty. the amount of the check was immediately debited by petitioner from respondent's account thereby leaving him with a balance of only P558. We ruled that respondent therein was entitled to recover reasonable moral damages. banks should guard against injury attributable to negligence or bad faith on its part.R. 1992. 1992. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce.864.87. Carbon Branch. and it was restored only on July 20 and August 24. The law presumes that a holder of a negotiable instrument is a holder thereof in due course. the award of exemplary damages in the amount of P50. respondent issued PCIB Check No. 2008 SVENDSEN. (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. 1992 and May 28. Inc. 1999 (the check) in the amount of P160. Cristina Reyes (Cristina) extended a loan to petitioner in the amount of P200. has an unconditional promise to pay a certain amount. RTC dismissed the complaint. No.00 is in order. from the nature of the case. The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society.Tan maintained a current and savings account with Philippine Commercial International Bank (PCIB). temperate or moderate damages. the sum of P50.: ISSUES: Are the notice of dishonor required under BP 22. The spouses argue that Article 1318 of the Civil Code should be applied since their consent was vitiated by fraud.72 in favor of Sulpicio Lines.e. –– A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face. Meanwhile. Although Jose Olvido mortgaged the vehicle to Generoso Lopez. Responsibility arising from negligence in the performance of every kind of obligation is demandable. The CA reversed the decision and directed petitioner to pay respondent the sum of P1. which are more than nominal but less than compensatory damages. The SC applied the doctrine of piercing the veil of corporate fiction in this case. banks have attained an ubiquitous presence among the people. praying for payment of losses consisting of unrealized income in the amount of P1. However. CARPIO MORALES. J. The promissory note is clearly negotiable. The law allows the grant of exemplary damages to set an example for the public good. payment made before the date specified by the drawer is clearly against the drawee bank's duty to its client. d.000. Thus. the electric power supply for the two mini-sawmills owned and operated by respondent. e. The CA was correct in finding all the requisites under Section 1 of the NIL of a negotiable instrument present: a. For this reason. the banks' negligence caused respondent to suffer mental anguish. (a) the Promissory Note. respectively. attorney's fees and litigation expenses. and. located in Talacogon. The negligence of petitioner triggered the disconnection of his electrical supply.147. respondent's balance with petitioner was P35. 275100 postdated May 30. His actions were the proximate cause of petitioners' loss. Petitioner. Thus. No. As a result of the dishonor of Check Nos. which was eventually settled when petitioner paid herP200. 1992. After clearing. While petitioner's negligence in that case may not have been attended with malice and bad faith. Inc. made payable to the order of VMSC. is complete and regular. on specific dates in the future which could be determined from the terms of the note. i. is reinstated. respectively. petitioners are liable to respondent corporation for the payment of the amount stated in the instrument.000 inclusive of interest. (b) That he became the holder of it before it was overdue. 2.59. who have come to regard them with respect and even gratitude and most of all. Agusan del Sur. the same occurred only much later when VMSC assigned its rights over the "Chattel Mortgage" by the spouses to the BA Finance. 1992 in the amount of P34. Under Article 2224 of the Civil Code of the Philippines.500. On May 14.R. signed by the Violago spouses. which temporarily halted his business operations and the consequent loss of business opportunity.in the absence of competent proof on the actual damages suffered. In the hands of one not a holder in due course. The indorsement by VMSC to BA Finance appears likewise to be valid and regular. In said case.588.864. respondent issued three checks from May 9 to May 16. (b) the Promissory Note was endorsed by the VMSC in favor of BA Finance. Court of Appeals. As such. J. acted in good faith and for value. 1992. TAN PERALTA. Sulpicio Lines. We cannot place its amount with certainty. A holder in due course. the Court held that a bank is under obligation to treat the accounts of its depositors with meticulous care whether such account consists only of a few hundred pesos or of millions of pesos.: Instrument: check Issues 1. 175381 February 26.3. The check was co-signed by one Wilhelm Bolton.000 representing interest. due to the insufficiency of evidence before Us.. however. respectively. The bank on which the check is drawn.000. After petitioner had partially paid his obligation. Article 2216 of the Civil Code instructs that assessment of damages is left to the discretion of the court according to the circumstances of each case. 275080 and 275097 which were payable to ASELCO and ANECO. holding Avelino responsible. Due to the foregoing. Thus. was cut off on June 1. Cristina thus filed a collection suit against petitioner. Held 1. petitioner. As of May 14. 1992. thus. He also prayed for payment of moral damages. Is the drawee bank that allowed payment of a postdated check before its due date that caused the dishonor of the drawer's other issued checks liable to the drawer for damages? 2.00 as actual damages. They are wrong. and may enforce payment of the instrument for the full amount thereof. embarrassment and humiliation. c. having failed in this respect. he failed to settle the balance thereof which had reached P380. 3. 1992. holds the instrument free from any defect of title of prior parties and from defenses available to prior parties among themselves. What constitutes a holder in due course. When presented for payment. 2. Avelino clearly defrauded the spouses. He cannot now hide behind the separate corporate personality of VMSC to escape from liability for the amount adjudged by the trial court in favor of petitioners. be proved with certainty. SECOND DIVISION G. On May 13. PhP209.they were dishonored for being drawn against insufficient funds. 3.601. if such was the fact. In Philippine National Bank v. the provisions of the NIL are controlling. petitioners cannot raise the defense of non-delivery of the object and nullity of the sale against the corporation. What is the liability of a drawee bank? Facts Respondent Arcelito B. What is the effect of a holder in due course? BA Finance was a holder in due course. before and at the time the Promissory Note was endorsed to it. It is in writing. It has been held that a party holding an instrument may enforce payment of the instrument for the full amount thereof. BA Finance meets all the foregoing requisites: On its face. What is the meaning of a drawee bank? 3.000 and issued in her favor an International Exchange Bank check postdated February 2. BA Finance was a holder in due course. to bear interest at 10% a month. the maker cannot set up the defense of nullity of the contract of sale. known as the drawee bank. Hence. respondent is entitled to temperate damages. vs ARCELITO B. the promissory note does not carry any legal effect despite its negotiation. Held 1. SECOND DIVISION G. confidence. that the vehicle sold to the spouses was not delivered to the latter and that VMSC had already previously sold the vehicle to Esmeraldo Violago. when it accepted the Note. b. The NIL prevails over the Civil Code in this case. who assigned his rights to the BA Finance Corporation (Cebu Branch). may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot. (c) That he took it in good faith and for value. and how is it made? Are unconscionable interest rates still allowed even when the Usury Law was already repealed? What is absence on consideration under Sec 24? FACTS: In October 1997. PEOPLE OF THE PHILIPPINES. and in Golden Ribbon. The drawee bank is under strict liability to pay to the order of the payee in accordance with the drawer’s instructions as reflected on the face and by the terms of the check. Section 52.

No settlement having been made by petitioner. June 26. 22 before the City Prosecutor’s Office of Manila. but also that the accused has actually been notified in writing of the fact of dishonor. Bolton having remained at large. CONTRARY TO LAW.. Lopez appealed to the SC contending that DBP did not issue him a notice of dishonor of the check which according to him resulted to the failure of the prosecution to establish deceit. the failure of the prosecution to prove the existence and receipt by petitioner of the requisite written notice of dishonor and that he was given at least five banking days within which to settle his account constitutes sufficient ground for his acquittal. Lopez did not have sufficient fund and /or his account was already closed with the drawee bank and that upon presentment of the check for payment the same was dishonored and refused payment by DBP. which check after having been deposited in the City of Manila. and demanding that he make it good within five (5) days from receipt thereof. By means of the following false pretenses or fraudulent acts executed prior to xxx or simultaneously with the commission of the fraud: .000. 3. Despite repeated demands by Albes. In fine.A. 2. 1998 when Efren Albes filed a complaint against Lopez after the latter issued DBP check no. PETITIONER. such fact shall always be explicitly stated in the notice of dishonor or refusal". By Judgment of December 17. People. 1999. but there must also be proof of receipt thereof that is properly authenticated. A mere oral notice or demand to pay would appear to be insufficient for conviction under the law. RULINGS: 1. 2008] FIRST DIVISION (LEONARDO-DE CASTRO. REYES the amount of the check or to make arrangement for full payment of the same within five (5) banking days after receiving said notice. 166810. as amended by R. we had the occasion to emphasize that not only must there be a written notice of dishonor or demand letters actually received by the drawer of a dishonored check. No counter-affidavit was submitted by petitioner and his co-respondent. finding the 10% per month interest rate to be unconscionable. No. 1999 before the MeTC of Manila against the two. Are the notice of dishonor required under BP 22.S. While the registry receipt. Lopez argued that no prima facie evidence of guilt would arise if there is no proof as to the date of the receipt by the drawer of the said notice since there would be no way of reckoning the crucial 3-day period from receipt of the notice of dishonor of the check within which the amount necessary to cover the check may be done as provided by par. 2 (d) of the Revised Penal Code. was presented. while Section 2 of B. through counsel. which is said to cover the letter-notice of dishonor and of demand sent to petitioner. 22 indeed does not state that the notice of dishonor be in writing. "that where there are no sufficient funds in or credit with such drawee bank. Issue: 1. the RTC affirmed the MeTC judgment and the Court of Appeals denied petitioner’s appeal.P. The CA affirmed the decision of the RTC. said accused failed to pay said CRISTINA C. as held in Domagsang vs. Stipulations authorizing such interest are contra bonos mores.What is the effect of Section 114 (d) of the NIL? Held: 1. there is no proof that he or a duly authorized agent received the same. reduced it to 12% per annum. for violation of B. i. if not against the law. Branch 5 of the Manila MeTC found petitioner guilty as charged. PEOPLE OF THE PHILIPPINES RESPONDENT [G." It was incumbent then on petitioner to prove that the check was not for a valuable consideration. and upon being presented for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for INSUFFICIENCY OF FUNDS and despite receipt of notice of such dishonor. No. Diño v. Lopez refused to pay. emphasis and underscoring supplied) The evidence for the prosecution failed to prove the second element. the Court equitably reduced them. and not mere registered receipt and/or return receipt. An Information dated April 13. And in other cases where the interest rates stipulated were even less than that involved herein. As priorly stated. In recent cases. Jardines.What is the effect of failure to receive notice of dishonor? 2. 2(d) of the Revised Penal Code as amended. Blg. Lopez was convicted of the RTC of Sorsogon of Estafa under Article 315 par. Lopez can still be convicted of estafa. thus sent a letter to petitioner by registered mail informing him that the check was dishonored by the drawee bank. In our view. Salud. REYES to apply on account or for value INTERNATIONAL EXCHANGE BANK check no. Cristina filed a complaint dated March 1. The interest rate of 10% per month agreed upon by the parties in this case being clearly excessive.P. Blg. this Court. and every person whose signature appears thereon to have become a party thereto for value. Receipts for registered letters including return receipts do not themselves prove receipt. inexistent and void from the beginning.) Instrument: Check Drawer: Jude Joby G. and in Cuaton v. What is absence on consideration under Sec 24? – was not discussed in the case.e. and how is it made? YES.P. Lopez Drawee: Development Bank of the Philippines Payee: Efren Albes Facts: Jude Joby G. they must be properly authenticated to serve as proof of receipt of the letters. the trial court never acquired jurisdiction over his person. Philippines. it was dishonored for having been Drawn Against Insufficient Funds (DAIF).00 said accused well knowing that at the time of issue she/he/they did not have sufficient funds and/or credit with the drawee bank for payment of such check in full upon its presentment. Even if Art 315 par. both the spirit and letter of the Bouncing Checks Law require for the act to be punished thereunder not only that the accused issued a check that is dishonored. Bolton. 905. 22 was thus filed on April 29. 0000009118 dated February 2. This is consistent with the rule that penal statues must be construed strictly against the state and liberally in favor of the accused. Thus. 1999 for violation of B. this must be taken in conjunction with Section 3 of the law. They are. Section 24 of the Negotiable Instruments Law provides that "Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration. 4885 penalizes estafa when committed as follows: Par. under Article 140921 of the New Civil Code. 2. unlawfully.000 knowing fully well that at the time of issue. 1999 against him and his co-signatory to the check. It was on October 6. iniquitous and unconscionable cannot thus be sustained. the accusatory portion of which reads: That sometime in December 1998 the said accused did then and there willfully. J. 2003. This he failed to discharge. Cristina. While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. V. Are unconscionable interest rates still allowed even when the Usury Law was already repealed? No. 1999 payable to CRISTINA REYES in the amount of P160. Court of Appeals. In Macalalag v.13 (Italics in the original. nothing therein grants lenders carte blanche to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. JUDE JOBY LOPEZ.When the check was presented for payment on February 9. 0859279 in the amount of P20. and feloniously and jointly make or draw and issue to CRISTINA C.R. 2(d) of the Revised Penal Code.

It is not disputed by Lopez that. were dishonored . within five banking days thereafter.785. September. which was agreed upon by the parties to amount to P10 Million Pesos. (2) at the time of postdating or issuance of said check. the offender has no funds in the bank or the funds deposited are not sufficient to cover the amount of the check. as found by the CA. PETITIONER. PCIB thereupon issued the Usance LC in favor of the supplier.142. the first five representing a total amount of P3. and thereupon take possession of the Trust Property and/or such proceeds as may then have been realized therefrom. and any drawer or indorser to whom such notice is not given is discharged. April 23. the receipt by the drawer of the notice of dishonor is not an element of the offense. or simultaneous with. In order to create such presumption. Lopez is not entitled to be given a notice of dishonor. covered by Trust Receipts with PCIB as entruster and MTT as entrustee. which was to mature in October 1991.428. 1991. October. the issuance of the bad check.855. Of the 14 checks. at the time of issuance. Respecting the second element of the crime. failed to satisfy the amount of the check or arrange for its payment. The drawer of the dishonored check is given three days from receipt of the notice of dishonor to cover the amount of the check. 2008 CARPIO MORALES. ordered the bank to stop payment. PCIB proceed with filing a case against MTT and latter was adjudged to be guilty of nine counts of BP 22.R. RESPONDENT. 152666. and have the goods sold and the proceeds of such sale applied. shall be prima facieevidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon. MARCIANO TAN. while the false pretense or fraudulent act must be committed prior to. when a negotiable instrument has been dishonored by non-acceptance or non-payment. MTT thus issued five checks postdated August. drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank. are as follows: (1) the offender has postdated or issued a check in payment of an obligation contracted at the time of the postdating or issuance.10. By virtue of Sec.the subject of the nine informations at bar MTT. the drawee bank for the payment of the check in full upon its presentment.70 or in the total amount of P4. PHILIPPINE COMMERCIAL INTERNATIONAL BANK. the first to start on February 28. 3. it must be shown that the drawer or maker received a notice of dishonor and. the evidence shows that Lopez had actual notice of the dishonor of the check because he was verbally notified by the Albes and notice whether written or verbal was a surplusage and totally unnecessary considering that almost two (2) months before the issuance of the check. hence. in the total amount of P1.66 and another check in January 1991 for P716. notice of dishonor must be given to the drawer and each indorser. PCIB soon demanded settlement of this dishonored check from MTT. or upon default in. from Daewoo Corporation of Seoul. Under these circumstances. 114 (d). The presumption or prima facie evidence of guilt only dispenses with the presentation of evidence of deceit if such notification is received and the drawer of the check failed to deposit the amount necessary to cover his check within three (3) days from receipt of the notice of dishonor of the check. and 2. he had no right to expect or require the drawee bank to honor his check. ISSUES: 1) 2) 3) 4) 5) What is the element of ―knowledge of insufficient fund‖ in BP 22? How does BP 22 create the presumption of knowledge? What is the remedy for the person liable to escape liability? Was payment maid when buses were surrendered? Does payment obliterate criminal liability? However. or issuing a check in payment of an obligation when the offender had no funds in the bank. or credit with.583. the Entruster may cancel this trust.666. the prosecution must prove that the accused knew. draws or issues any check to apply to account or for value.333 were cleared but not the last one dated January 1991. The absence of proof as to receipt of the written notice of dishonor notwithstanding. in accordance with the provisions of Section 7 of the Trust Receipts Law. and (3) the payee has been defrauded. and December 1990 each for P716. the notice of dishonor would have served no useful purpose as no deposit could be made in a closed bank account. when Lopez issued the check in question on March 23. (Note Sec 89 of NIL: To whom notice of dishonor must be given. In the event the Entrustee defaults in his/its obligations or breaches or fails to comply with the terms and conditions of this Trust Receipt.d) By postdating a check.666. 1998. The above-quoted provision creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present 3) It is provided by law that the making. those dated May 15. Moreover. November. only the first five were honored. or his funds deposited therein were not sufficient to cover the amount of the check. The failure of the drawer of the check to deposit the amount necessary to cover his check within three (3) days from receipt of notice from the bank and/or payee or holder that said check has been dishonored for lack or insufficiency of funds shall be prima facie evidence of deceit constituting false pretense or fraudulent act. breach of or noncompliance with the obligation evidenced by Annex A hereof or the agreement under which the Entruster issued the letter of credit under the terms of which the Trust Property was purchased ("events of default"). otherwise. The other nine. 2) The element of "knowledge" involves a state of mind that obviously would be difficult to establish.42.000. a prima facie presumption of deceit arises. MTT thus issued 14 postdated checks of P198.300. having suffered financial reverses. The accused makes. applied for a 360-day Usance Letter of Credit (LC) with respondent Philippine Commercial International Bank (PCIB) for the importation of four tourist buses with . or makes arrangements for payment in full by the drawee of such check 3. he knew that his current account with the DBP was a closed account as early as January 27. the statute creates a prima facie presumption of knowledge on the insufficiency of funds or credit coincidental with the attendance of the two other elements. Since Lopez's bank account was already closed even before the issuance of the subject check. The accused knows at the time of the issuance that he or she does not have sufficient funds in. 7 of the Trust Receipt reading. the proceeds of which totaled P992.78. Nonetheless. Damage and deceit are essential elements of the offense and must be established with satisfactory proof to warrant conviction. Of the six checks that MTT issued to PCIB. or it would have been dishonored for the same reason had not the drawer. of which petitioner was executive vice-president. when presented within ninety (90) days from the date of the check. 1991 et seq. without any valid reason. 7. as defined in the above quoted provision of law. Korea (the supplier). The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit. availed of provision No. G. payable every 15 days. 1998. J. that he does not have sufficient funds or credit for the full payment of the check upon its presentment.Except as herein otherwise provided. Lopez’s current account was already closed. The presumption indulged in by law does not preclude the presentation of other evidence to prove deceit. By settled jurisprudence. Ables "called" up Lopez to inform him of the dishonor of the check. the elements of the crime of estafa.: Instrument: Check Drawer: Master Tours and Travel Drawee: not indicated Payee: PCIB FACTS: Master Tours and Travel (MTT). VS. The tourist buses arrived in October 1990 and were delivered to MTT. No.) RULING: 1) The elements of violation of BP 22 are: 1.

under Article 315 of the Revised Penal Code. novation must be explicitly stated and declared in unequivocal terms as novation is never presumed.00. Salazar negotiated and indorsed to J. 66 and 29 of the Negotiable Instruments Law. 300 cavans of rice worthP214. also indorsed by petitioner as payment for the 300 cavans of rice bought from respondent. BROTHERS MARKETING CORPORATION G. The test of incompatibility is whether or not the two obligations can stand together. in this instance.Y. (2) an agreement of all parties concerned to a new contract. found that petitioner was considered an indorser of the checks paid to respondent and considered her as an accommodation indorser.Y. but not the criminal. (3) the extinguishment of the old obligation. RTC dismissed the case against Anamer D. he or she may no longer be indicted for such violation. (d) By any other act which will discharge a simple contract for the payment of money. much less delivered it to petitioner. The test of incompatibility is whether they can stand together..Y. in keeping with jurisprudence. There are only two ways which indicate the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same. the undisputed claim of petitioner of a mistaken agreement to pay the exchange differential (which the same checks represented) aside. in replacement of the dishonored Prudential Bank check. notwithstanding that such holder at the time of the taking of the instrument knew her only to be an accommodation party. creating a new one in its stead. and such check was a negotiable order instrument. the latter charged Salazar and Timario with the crime of estafa before the RTC. the acts of the parties must clearly demonstrate their intent to dissolve the old obligation as the moving consideration for the emergence of the new one. It is a general rule that only a full payment at the time of its presentment orduring the five-day grace period could exonerate one from criminal liability under B. that respondent's acceptance of the Solid Bank check. applying Sections 63. a freelance sales agent. However. who was liable on the instrument to a holder for value. – A negotiable instrument is discharged: (a) By payment in due course by or on behalf of the principal debtor. Salazar failed to settle the amount due J.g.000. The presumption is not conclusive. adds other obligations not incompatible with the old ones or the new contract merely supplements the old one. Salazar accompanied the two to J. amounted to novation that discharged the latter check. First. Bros. Secondly. This kind of novation presupposes a confluence of four essential requisites: (1) a previous valid obligation. Salazar contends that the issuance of the Solid Bank check and the acceptance thereof by the respondent. a condition that rendered such check non-negotiable. No. 067481 dated October 15.Y. Kallos and Salazar delivered to J.Y.000. Implied novation necessitates that the incompatibility between the old and new obligation be total on every point such that the old obligation is completely superceded by the new one. J. parted with 300 cavans of rice to Salazar. in cases where it is implied.000. (b) By payment in due course by the party accommodated.P1. they are incompatible and the latter obligation novates the first. What are the elements of Novation? Novation is done by the substitution or change of the obligation by a subsequent one which extinguishes the first." and since she had never been the holder of the check. 1996 again issued by Nena Jaucian Timario in the amount ofP214. J.000. the substitution of a nonnegotiable Solid Bank check for a negotiable Prudential Bank check was an essential change which had the effect of discharging from the obligation whoever may be the endorser of the negotiable check. There was payment when the buses were surrenderd. 1996 issued by Nena Jaucian Timario in the amount of P214.Y. (Emphasis ours) And.785. Bros.00 was payable to the order of respondent. PA365704 dated October 29.. second. As a consequence. notwithstanding its eventual dishonor by the drawee bank. each one having an independent existence. 22 and that subsequent payments can only affect the civil. there must be an express intention to novate.Y. and fix the amount of the bail bond for her provisional liberty at 59. Prudential Bank Check No.00 pesos. Instrument. When despite the demand letter dated February 27. Anamer Salazar. the estimated value of which was "about P6. RULING: We find no merit in this petition. which was later replaced by a Solid Bank check issued by Timario. The obligation to pay a sum of money is not novated by an instrument that expressly recognizes the old. Therefore. The CA." Informed of the dishonor of the check. PCIB already exacted its proverbial pound of flesh by receiving and keeping in possession the four buses-trust properties surrendered by petitioner in about mid 1991 and March 1992 pursuant to Section 7 of the Trust Receipts Law. the Court then considers such payment of the dishonored checks to have obliterated the criminal liability of petitioner. Salazar with Calleja and Kallos procured from J. If the maker or drawer pays. which meant that such check was only for deposit in payee’s account. (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right. 1997. petitioner's signing of her name on the face of the dorsal side of the check did not produce the technical effect of an indorsement arising from negotiation. and that a check is a contract which is susceptible to a novation just like any other contract. CA found that petitioner indorsed the Prudential Bank check. either by changing the object or principal conditions. liability. upon presentment. The RTC concluded that the absence of negotiability rendered nugatory the obligation arising from the technical act of indorsing a check and. Therefore. On that assurance. Y. under Article 1231 of the Civil Code. Calleja.00. It is a complete defense that would lie regardless of the strength of the evidence presented by the prosecution. obligations are extinguished: xxxx (6) By novation. Petitioner's claim that respondent's acceptance of the Solid Bank check which replaced the dishonoured Prudential bank check resulted to novation which discharged the latter check is unmeritorious. Bros. In the .000. On October 15. the old and the new obligations must be incompatible on every point. that since the Solid Bank check was a crossed check. a change in interest rates or an extension of time to pay. Bros. the drawer or indorser of the Prudential Bank check would have incurred in the issuance thereof in the amount of P214. Novation is merely modificatory where the change brought about by any subsequent agreement is merely incidental to the main obligation (e. It then found that petitioner’s liability should be limited to the allegation in the amended information that "she endorsed and negotiated said check. the check was dishonored due to "closed account. where the instrument is made or accepted for his accommodation. changes only the terms of payment. ANAMER SALAZAR vs. was approached by Isagani Calleja and Jess Kallos.) FACTS: J. rice and other commodities.000. The RTC found that the Prudential Bank check drawn by Timario for the amount of P214. the new agreement will not have the effect of October 20. as it may be rebutted by full payment.75 -. MTT was able to pay for the dishonored checks even prior to the transmittal and receipt of the letter of demand. that petitioner was not the payee appearing in the check. or by subrogating a third person in the rights of the creditor. if she knew a supplier of rice. In the case at bar.Y. thus. the subsequent obligation would also extinguish the first. for short) is a corporation engaged in the business of selling sugar. Bros. a replacement cross Solid Bank Check No. Answering in the positive. BROTHERS ISSUES: How are instruments discharged under Section 119(d) in relation to Article 1231(6) of the Civil Code? SECTION 119. if they cannot and are irreconcilable. 1992 letter of demand 5) Yes. how discharged. An extinctive novation would thus have the twin effects of. If they cannot. just the same. As payment. Blg. first. was more than fully satisfied prior to the transmittal and receipt of the July 9. each one having its independent existence.00 with the assurance that the check is good as cash. had the effect of novation. Extinctive novation is never presumed.P.Y. Salazar. and that the ultimate effect of such substitution was to extinguish the obligation arising from the issuance of the Prudential Bank check. however. The RTC ruled that after the Prudential Bank check was dishonored. it was replaced by a Solid Bank check which. but respondent who had not endorsed the check.within five (5) banking days after receiving notice that such check has not been paid by the drawee. Bros. Let an alias (bench) warrant of arrest without expiry dated issue for her apprehension. extinguishing an existing obligation and. had the effect of erasing whatever criminal responsibility. The payment made through the surrender of the buses obliterated MTT’s criminal liability. 171998 DRAWER: Nena Timario INDORSER: SALAZAR PAYEE: J.6 million. 4) Yes." It thus appears that the total amount of the dishonored checks . Nena Jaucian Timario.00 but which.. much being dependent on the nature of the change and the intention of the parties. or makes arrangement with the drawee bank for the payment of the amount due within the five-day period from notice of the dishonor. 2010 extinguishing the first but would merely supplement it or supplant some but not all of its provisions. (c) By the intentional cancellation thereof by the holder. Brothers Marketing (J. and (4) the birth of a valid new obligation. Bros. Novation may: Either be extinctive or modificatory. bounced due to insufficient funds. was also subsequently dishonored. In the present case. 1996.R. or by substituting the person of the debtor.855.

What is material alteration? 2. a material alteration is one which changes the items which are required to be stated under Section 1 of the NIL. we found no reversible error committed by the CA in holding petitioner liable as an accommodation indorser for the payment of the dishonored Prudential Bank check. since there was an essential change in the circumstance of each check.000. In other words. which replaced the dishonored Prudential Bank check. But when an instrument has been materially altered and is in the hands of a holder in due course. since the two checks − Prudential and Solid Bank checks − were precisely for the purpose of paying the amount of P214.i. 2006. there was no substantial change in the object or principal condition of the obligation of petitioner as the indorser of the check to pay the amount of P214. Vitug opines that "an innocent alteration (generally. a nonnegotiable check being a crossed check. We have taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and could not be converted into cash. The check's issuer was therefore sufficiently identified. J THE INTERNATIONAL CORPORATE BANK.R. The checks were NOT materially altered for an alteration of a Serial Number is Not Material. Among the different types of checks issued by a drawer is the crossed check. . the same was again dishonored. PNB. rendering the referral to the serial number redundant and inconsequential.: Instrument: Check Issues: 1. After the entries thereon were examined. Red Arrow Trading. Wintrade Marketing.000. 985988. the effect of crossing a check relates to the mode of payment.000. Cabilzo issued a Metrobank Check No. the check was presented to Westmont Bank for payment. 125. The name of the drawer and the drawee were not altered. CABILZO. not a party to the alteration.00. i. Material alterations are provided for under Sections 124 and 125 of the NIL. such is inapplicable to this case.00 and requested that the questioned check be returned to him for verification.. 1. (b) The sum payable. J. a negotiable check. authorized.00 subject of the replaced Prudential Bank check. Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some transaction when he was asked by a bank personnel if Cabilzo had issued a check in the amount of P91. THIRD DIVISION.000. As succinctly found by the CA. As we said. except as against a party who has himself made.e. the CA reversed itself. Since the immediate cause of ICB’s loss was the lack of caution of its personnel. Metrobank cleared the check for encashment in accordance with the Philippine Clearing House Corporation (PCHC) Rules. changes on items other than those required to be stated under Sec..R. with legal interest from the time of filing of the complaint until full payment. In this case. In fact. Antonio Lisan. What is the doctrine of equitable estoppel? 4. or any other change or addition which alters the effect of the instrument in any respect. respondent. the CA reversed the ruling of the RTC. in turn. The sum of money due to the payee remained the same The check's serial number is not the sole indication of its origin. It would appear that respondent accepted the Solid Bank check to give petitioner the chance to pay her obligation. vs. which replaced the Prudential Bank check. as his sales commission. 129910. G. although the Code of Commerce makes reference to such instruments. Inc. The Negotiable Instruments Law is silent with respect to crossed checks. Subsequently. ABC Trading. 124. there was no express agreement that BA Finance's acceptance of the SBTC check will discharge Nyco from liability. On the afternoon of the same date. SEC. which replaced the dishonored Prudential Bank check. the same was also indorsed by petitioner which shows petitioner’s recognition of the existing obligation to respondent to pay P214. payable to "CASH" and postdated on 24 November 1994 in the amount of One Thousand Pesos (P1. CHICO-NAZARIO. Until the rule is repealed or amended. . did not result to novation as there was no express agreement to establish that petitioner was already discharged from his liability to pay respondent the amount of P214. Thus.00. Indeed. it is avoided. 154469 December 6. (c) The time or place of payment. Thus.000. The case at the bench is unique in the sense that what was altered is the serial number of the check in question. It held that although banking practice has it that the presumption of clearance is conclusive when it comes to the application of the 24-hour clearing period. The RTC dismissed the complaint holding that PNB cannot be faulted for the delay in clearing the checks considering the ingenuity in which the alterations were effected.e. Palmares. The aforementioned alteration did not change the relations between the parties.instant case. is a new obligation in lieu of the old obligation arising from the issuance of the Prudential Bank check. when the Solid Bank check was delivered to respondent. (d) The number or the relations of the parties. effect of. The check was drawn against Cabilzo’s Account with Metrobank Pasong Tamo Branch under Current Account No. but the holder may enforce it only according to its original tenor. ICB paid the value of the checks and allowed the withdrawals of the deposits. 2. N. It held that its prior Decision failed to appreciate that the rule on the return of altered checks within 24 hours from the discovery of the alteration had been duly passed by the Central Bank and accepted by the members of the banking system.I. It means an unauthorized change in an 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 a party. is a material alteration. is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. (e) The medium or currency in which payment is to be made. Romero D.000. meaning that the drawer had intended the check for deposit only by the rightful person. After 24 hours from submission of the checks to PNB for clearing. 618044873-3 and was paid by Cabilzo to a certain Mr. On MFR by PNB. The trial court observed that there was no attempt from ICB to verify the status of the checks before it paid the value of the checks or allowed withdrawal of the deposits. including the availability of funds and the authenticity of the signature of the drawer. The alterations in the checks were made on their serial numbers. The drawee bank could still be held liable in certain instances. Even if the return of the check/s in question is done within 24 hours after discovery if it can be shown that the drawee bank had been patently negligent in the performance of its verification function.000. Ace Enterprises.00 as payment for the 300 bags of rice. The intended payee was the same. The change in the mode of paying the obligation was not a change in any of the objects or principal condition of the contract for novation to take place. Neither is there incompatibility because both checks were given precisely to terminate a single obligation arising from Nyco's sale of credit to BA Finance. On appeal. the obligation which was secured by the Prudential Bank check was not extinguished and the Prudential Bank check was not discharged. PNB is liable to ICB for the value of the checks. Marquez. vs. to wit: SEC. 2006 METROPOLITAN BANK AND TRUST COMPANY. What is the effect of payment made under a materially altered instrument? 3. Thus. On 16 November 1994. September 5. Moreover. However." Justice Jose C. indorsed the check to Metrobank for appropriate clearing. Ruling Thus.L. Inc.00). Issues 1. INC. the trial court held that ICB is not entitled to recover the value of the checks from PNB. he may enforce payment thereof according to its original tenor. the rule has to be applied. RENATO D. No. In his book entitled "Pandect of Commercial Law and Jurisprudence. thus. PNB returned all the checks to ICB without clearing them on the ground that they were materially altered. ICB instituted an action for collection of sums of money against PNB to recover the value of the checks. the payee named therein. Golden City Trading. an item which. was presented for payment..00 to which the former replied in the negative. No. — Any alteration which changes: (a) The date. to which Metrobank complied. the name of the government agency which issued the subject check was prominently printed therein. respondent’s acceptance of the Solid Bank check. COURT OF APPEALS and PHILIPPINE NATIONAL BANK Instrument: (15) Checks Drawer: Ministry of Education and Culture Drawee: PNB Payees: Trade Factors. Considering that when the Solid Bank check. respondent’s acceptance of the Solid Bank check did not result to any incompatibility. — Where a negotiable instrument is materially altered without the assent of all parties liable thereon. Inc. As novation speaks of two distinct obligations. it can readily be observed. or which adds a place of payment where no place of payment is specified. the same being an immaterial or innocent one. or assented to the alteration and subsequent indorsers. the credit obtained from the purchase of the 300 bags of rice from respondent. Westmont Bank. What is the degree of diligence required of a bank? Facts On 12 November 1994. Petitioner also contends that the acceptance of the Solid Bank check. CARPIO. What constitutes a material alteration. FIRST DIVISION G. Cabilzo himself called Metrobank to reiterate that he did not issue a check in the amount of P91. What is a material alteration? 2. An alteration is said to be material if it alters the effect of the instrument.) and spoliation (alterations done by a stranger) will not avoid the instrument. there must be an express intention to novate. either for principal or interest. Golden Enterprises Facts The Ministry of Education and Culture issued 15 checks drawn against PNB which ICB accepted for deposit on various dates. petitioners. thus cannot refuse to accept the check in question on the ground that the serial number was altered. the same principle may not be applied to the 24-hour period vis-a-vis material alterations to the extent that the drawee bank which returns materially altered checks within 24 hours after discovery would be conclusively relieved of any liability thereon. Held Were the checks materially altered? 1. novation is never presumed. Alteration of instrument.

possible. PRODUCERS BANK OF THE vs. a demand or notice of default is not required to fix the surety's liability. 985988 which he issued on 12 November 1994 in the amount of P1. It means that an unauthorized change in an 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 a party.000. a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law. Consequently.16 He cannot complain that the creditor has not notified him in the absence of a special agreement to that effect in the contract of suretyship. which is what is involved in this case. In the present case. No. the Bank of the Philippine Islands. Respondent. On account of his negligence in the preparation and issuance of the check. NARI GIDWANI.18 It is a cardinal rule that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties. Cabilzo demanded that Metrobank re-credit the amount of P91.00 for the account of Shin Sung Commercial Co. Ltd. Korea. Hence. he may enforce the payment thereof according to its original tenor. According to respondents. either by omission or commission. Cabilzo placed asterisks before and after the amount in words and figures in order to forewarn the subsequent holders that nothing follows before and after the amount indicated other than the one specified between the asterisks.11 Nothing can stop the parties from establishing stipulations. There are well-defined distinctions between the contract of an indorser and that of a guarantor/surety of a commercial paper. As to the other respondents.19 In the present case. Cabilzo was never remiss in the preparation and issuance of the check. SECOND DIVISION G. to be jointly and severally obligated with respondent G. Negligence is not presumed but must be proven by the one who alleges it. it is obvious that Metrobank was remiss in that duty and violated that relationship. Ltd. be held jointly and severally liable under the Letters of Guaranty and Surety. it violates the terms of the check. particularly charcoal briquettes. the bank is under obligation to treat the accounts of its depositors with meticulous care. always having in mind the fiduciary nature of their relationship. we must stress that obligations arising from contracts have the force of law between the parties and should be complied with in good faith.00 to his account. without prejudice. authorized.Can respondents. made the fraudulent insertion of the amount and figures thereon. which according to Metrobank. INC. The application was supported by Letter of Credit No. there can be no mistaking about respondents' intent. since there was no protest made upon dishonor of the export bill. however. in the amount of US$23. was the proximate cause of the loss. – Where a negotiable instrument is materially altered without the assent of all parties liable thereon. Westmont Bank indorsed the check as the an unqualified indorser. providing as it did that "… the sureties hereby guaranteejointly and severally the punctual payment of any and all such credit accommodations. 4.00 and the date 24 November 1994 was changed to 14 November 1994. by virtue of which it assumed the liability of a general indorser. Alteration of instrument. also located in Seoul. Metrobank. Unless the bill is promptly presented for payment at maturity and due notice of dishonor given to the indorser within a reasonable time.G. binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. terms and conditions as they may deem convenient. or public policy. as indorsers were discharged under Section 152 of the Negotiable Instruments Law. No. to the outcome of the case between Metrobank and Westmont Bank which was pending before another tribunal.00 to Cabilzo’s account. G. as well as its duty to charge its client’s account only for bona fide disbursements he had made. is misplaced. he will be discharged from liability thereon. TINGA. loans.14 The liability of a guarantor/surety is broader than that of an indorser. If a person binds himself solidarily with the principal debtor. was the cause of injury. Cabilzo was not the one who made nor authorized the alteration. EXCELSA INDUSTRIES. By guaranty a person. The doctrine of equitable estoppel states that when one of the two innocent persons. not to be overlooked is the fact that. respondent applied for a packing credit line or a credit export advance with petitioner Producers Bank of the Philippines. Chapter 3. of Seoul. The CA rendered decision similarly finding Metrobank liable for the amount of the check. among others. is not pertinent to this case. Sportswear... Respondents claim that the petitioner did not protest13 upon dishonor of the export bill by Chekiang First Bank. they even waived notice of dishonor as stipulated in their Letters of Guarantee. as sureties. misleading. Repeated verbal demands followed but Metrobank still failed to re-credit the amount of P91. Cabilzo instituted a civil action for damages against Metrobank. 152071 May 8. if not the utmost diligence. For one. As to respondent Alcron.: ALLIED BANKING CORPORATION. public order. 2047 states. In such case the contract is called a suretyship. Kwang Ju Bank. The appropriate degree of diligence required of a bank must be a high degree of diligence. instruments. Sometime in January 1987. the literal meaning of its stipulation shall control. Inc. 2047. In other words. clauses. Art. expressly contemplated a solidary obligation. Neither did he assent to the alteration by his express or implied acts. Since the drawee bank. Metrobank. J. An alteration is said to be material if it changes the effect of the instrument. 2009 PHILIPPINES.L. the provisions of Section 4.000. Indubitably. In this case. it is bound by the Letter of Guaranty executed by its representative Hans-Joachim Schloer. is a manufacturer and exporter of fuel products. Cabilzo cannot thereafter claim indemnity by virtue of the doctrine of equitable estoppel. Title I of this Book shall be observed. effect of. Metrobank claimed that as a collecting bank and the last indorser. except where required by the provisions of the contract of suretyship. Art. 2047 of the New Civil Code is pertinent.000. morals. Held 1. warranted that the instrument is genuine and in all respect what it purports to be.12 Here.) HELD: 1. G.000.000. Westmont Bank should be held liable for the value of the check. RTC in favor of Cablizo. must suffer a loss. and thus. and assented to the alteration and subsequent indorsers.. in the instant case. Petitioner. in turn. called the guarantor.R. refused reasoning that it has to refer the matter first to its Legal Division for appropriate action. Korea issued the letter of credit through its correspondent bank.. except as against a party who has himself made. Ltd.COURT OF APPEALS. no protest on the export bill is necessary to charge all the respondents jointly and severally liable with G. But when the instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration. Metrobank cannot asseverate that Cabilzo was negligent and this negligence was the proximate cause of the loss in the absence of even a scintilla proof to buttress such claim. At the same time.00 was altered to P91. 2. in their capacity as guarantors and surety. The contract of indorsement is primarily that of transfer. The point is that as a business affected with public interest and because of the nature of its functions. it is avoided. 3. which. then it has no right to claim reimbursement from the drawer. vs. the Letters of Guaranty and Surety clearly show that respondents undertook and bound themselves as guarantors and surety to pay the full amount of the export bill.Upon receipt of the check. a banking institution duly organized and existing under Philippines laws. 125851. Indeed. did not pay according to the original tenor of the instrument. Cabilzo discovered that Metrobank Check No. Section 152 of the Negotiable Instruments Law pertaining to indorsers. it must be borne by the one whose erroneous conduct. and there were no indicia of evidence that would prove otherwise. … which is/are now or may hereafter become due or owing … by the borrower". the right to deduct the erroneous payment it made from the drawer’s account which it was expected to treat with utmost fidelity. M3411610NS2970 dated 14 October 1986. while the contract of guaranty is that of personal security. each guiltless of any intentional or moral wrong. In addition. all of them. T. good customs.R. World Development Corporation was the original beneficiary .15 On the other hand. Section 124. claimed that Cabilzo was partly responsible in leaving spaces on the check. (When the drawee bank pays a materially altered check. in the absence of protest on the bill in accordance with Section 152 of the NIL ISSUE: What is the effect of failure to comply with Section 89 and 152 of the NIL on the liability of respondent when he signed a separate undertaking and promised to pay on demand the full amount of draft? FACTS: Respondent Excelsa Industries. As correctly ruled by the appellate court. Metrobank’s representation that it is an innocent party is flimsy and evidently. 2006. There is no showing that he failed to exercise such reasonable degree of diligence required of a prudent man which could have otherwise prevented the loss.G. provided they are not contrary to law. much less. July 11. Drawer: GGS Payee: ALLIED Drawee: Chekiang First Bank Ltd Issue: 1. Sportswear since the respondents held themselves liable upon demand in case the instrument was dishonored and on the surety. SPORTSWEAR MANUFACTURING CORPORATION. At this juncture.G. SPOUSES LETICIA AND LEON DE VILLA AND ALCRON INTERNATIONAL LTD. the "Suretyship Agreement" they executed. relied on by respondents. as an alternative fuel source. however. Metrobank’s reliance on this dictum. as directed by the drawer.17 Therefore. Art.

.36 to Rogelio S.000. Philippine Currency. On 12 June 1989. Petitioner purchased the drafts and export documents by paying respondent the peso equivalent of the drawings. and/or appended hereto. an officer of the City Treasurer’s Business License . On 18 December 1997. notified petitioner through cable that the Korean buyer refused to pay respondent’s export documents on account of typographical discrepancies.. It bears stressing that it is a separate contract from the sight draft. plus all charges and expenses whatsoever incurred in connection therewith. by reason. whichever is higher) allowed by the Central Bank with interest at the rate prevailing today from the date of negotiation. the Court held that the drawer can still be made liable under the letter of undertaking even if he is discharged due to the bank’s failure to protest the nonacceptance of the drafts.R. can still be made liable under the letter of undertaking. Respondent agreed to purchase the draft and credit petitioner its value upon the undertaking that he will reimburse the amount in case the sight draft is dishonored. The Court explained.000.00 in principal remained outstanding. Jr. petitioner moved for the extrajudicial foreclosure on the real estate mortgage over respondent’s properties. together with all the buildings and improvements now existing or which may hereafter be erected or constructed thereon. which you may suffer arising from. respectively. respondent may not escape its liability under the separate undertakings. where the drawer therein also executed a separate letter of undertaking in consideration for the bank’s negotiation of its sight drafts. ISSUE: What is the effect of failure to comply with Section 89 and 152 of the NIL on the liability of respondent when he signed a separate undertaking and promised to pay on demand the full amount of draft? RULING: Much of the discussion has revolved around who should be liable for the dishonor of the draft and export documents. Toledo . respondent held itself liable if the drafts were not accepted.00 was outstanding at the time of the approval of the packing credit line. as well as those that the MORTGAGEE may hereafter extend to the MORTGAGOR. Respondent sent another letter dated 08 September 1987.00. Petitioner demanded from respondent the payment of the peso equivalent of the export documents.000. which provided that the same secured the payment of not only the loans already obtained but also the export advances. overdraft and/or other credit accommodations on this date obtained from the MORTGAGEE. 173930 September 15. petitioner correctly exercised its right to foreclose the real estate mortgage. The Office of the Ombudsman dropped the charges against Perez and referred the case to the Office of the Court Administrator. The liability of petitioner under the letter of undertaking is direct and primary. Peralta. Kwang Ju Bank. and not of collecting. to defend and hold you free and harmless from any and all actions. the RTC concluded that petitioner had no obligation to return the export documents and respondent could not expect their return prior to the payment of the export advances because the drafts and export documents were the evidence that respondent received export advances from petitioner.000. the issuing bank or any endorser thereof. informed petitioner that it would be returning the export documents on account of the nonacceptance by the importer. Liability subsists on it even if the sight draft was dishonored for non-acceptance or non-payment. of which P110. Ltd. Bersamin and Abad) Instrument: Check Drawer: Medical Center Trading Corporation Drawee: Not mentioned in the case Payee: City Treasurer of Manila Facts: Liberty M.205. of the Negotiable Instruments Law. Petitioner approved respondent’s application for a packing credit line in the amount of P300. and to pay on demand all damages actual or compensatory including attorney’s fees. The consideration for the letter of undertaking was petitioner’s promise to pay respondent the value of the sight draft if it was dishonored for any reason by the Bank of Seoul. the RTC rendered a decision upholding the validity of the extrajudicial foreclosure. of which about P96.585. and that such draft(s) will be accepted and paid in accordance with its/their tenor. we hereby warrant that the said draft(s) and accompanying documents thereon are valid. jointly and severally. Furthermore. the parcel(s) of land which is/are described in the list inserted on the back of this document. LIBERTY TOLEDO. or on account of your negotiating the above draft(s) because of the following discrepancies or reasons or any other discrepancy or reason whatever.739. and a certain John Doe with the Office of the Ombudsman. As a result. Due to respondent’s failure to heed the demand. Taguinod of the Medical Center Trading Corporation verified with the Office of the City Treasurer of Manila the authenticity of their 1st Quarter 2000 Municipal License Receipt. Liza Perez. On 24 April 1987. respondent had obtained a loan from petitioner in the form of a bill discounted and secured credit accommodation in the amount of P200. claims and demands whatsoever. respondent instituted an action for the annulment of the extrajudicial foreclosure with prayer for preliminary injunction and damages against petitioner and the Register of Deeds of Marikina. nor proceed in any way against the drawee.00) Pesos. and to secure the payment of the same. ECHANO. We further undertake and agree. The controversy stemmed when on August 8. In a letter 05 October 1987. Respondent executed the corresponding promissory notes evidencing the indebtedness. before making a demand on us for the payment of the whole or any unpaid balance of the draft(s). It is independent from his liability under the sight draft. whose obligation consisted only of receiving. costs and other awards or be adjudged to pay. On 05 December 1986. respondent G. On 17 March 1987. Reyes (Reyes). plus interest and other charges. The purchase was subject to the conditions laid down in two separate undertakings by respondent dated 17 March 1987 and 10 April 1987. The bank would certainly not have agreed to grant petitioner an advance export payment were it not for the letter of undertaking. Velasco. You shall neither be obliged to contest or dispute any refusal to accept or to pay the whole or any part of the above draft(s).petitioner vs. Kwang Ju Bank. petitioner executed an affidavit of consolidation over the foreclosed properties after respondent failed to redeem the same. SALVADOR O. Kwang Ju Bank. reiterating the same assurance. and also of the other due and unpaid loans.of the letter of credit. Upon learning about the Korean importer’s non-payment.(Emphasis supplied) In Velasquez v. The two undertakings signed by respondent are similarly-worded and contained respondent’s express warranties.79. Rogelio Reyes. T. 2010 Second Division (Justices Carpio.00. World transferred to respondent all its rights and obligations under the said letter of credit. 2000 Laurence V. The loan was secured by a real estate mortgage dated 05 December 1986 over respondent’s properties. informing the latter that respondent had brought the matter before the Korea Trade Court and that it was ready to liquidate its past due account with petitioner. the Court of Appeals rendered the assailed decision. the Register of Deeds of Marikina issued new certificates of title in the name of petitioner. He claimed that he entrusted a January 18. Prior to the application for the packing credit line. the Philippine perso equivalent converted at the prevailing selling rate (or selling rate prevailing at the date you negotiate our draft. considering that respondent executed undertakings warranting that the drafts and accompanying documents were genuine and accurately represented the facts stated therein and would be accepted and paid in accordance with their tenor. in case of suit.000. 2000 manager’s check for P55. respondent presented for negotiation to petitioner drafts drawn under the letter of credit and the corresponding export documents in consideration for its drawings in the amounts of US$5. however. The RTC also found that by its admission.76 and US$4. On 17 November 1989. the principal of all of which is hereby fixed at FIVE HUNDRED THOUSAND PESOS ONLY (P500. Ltd. the export proceeds for the purpose of converting into Philippine currency and remitting the same to respondent. for value received. JR. On 30 May 2001. free from all liens and encumbrances. genuine and accurately represent the facts stated therein. notwithstanding petitioner’s alleged failure to comply with the requirements of notice of dishonor and protest under Sections 89 and 152. The RTC held that petitioner. Ltd. the real estate mortgage contained the following clause: For and in consideration of those certain loans. respondent had other loan obligations obtained from petitioner which were due and demandable. including interest and expenses or any other obligation owing to the MORTGAGEE. returned to petitioner the export documents. thus: Petitioner. respondent sent petitioner a letter dated 27 July 1987. Significantly. cannot be considered as respondent’s agent. In the two undertakings executed by respondent as a condition for the negotiation of the drafts. its successors or assigns.L. No. Thus. of which the MORTGAGOR declares that he/it is the absolute owner. The RTC also held that petitioner cannot be presumed to have received the export proceeds. the MORTGAGOR does hereby transfer and convey by way of mortgage unto the MORTGAGEE. to wit: In consideration of your negotiating the above described draft(s). Solidbank Corporation. hence. where respondent promised to pay on demand the full amount of the drafts. reversing the RTC’s decision. We hereby undertake to pay on demand the full amount of the above draft(s) or any unpaid balance thereof. City Treasurer of the City of Manila filed charges of grave misconduct and conduct prejudicial to the service against Salvado Echano.

Medical Center Trading Corporation intended it to be deposited to the account of the payee only. It is like a cashier’s check and certified check both as to effect and use. J. a stenographer in the Office of the Clerk of Court. PCIB’s systems allowed Balmaceda to encash 26 Manager’s checks which were all crossed checks. and thus.000 euros (roughly equivalent to P2. the crossing of a check is a warning that the check should be deposited only in the account of the payee. Dela Paz arrived in Manila. BALMACEDA and ROLANDO N. 2008. Dela Paz. (b) the check may be negotiated only once — to the one who has an account with the bank. by taking advantage of his position as branch manager. A crossed check has the effect of limiting the payment of the check to payee’s account only. It operates as an assignment of funds represented by the check to the credit of the payee or holder. This definition is taken from the NIL book.Division in payment of his company’s business tax. or checks payable to the ―payee’s account only. Issue: 1. He also issued the subject receipt. Gen.000. With this kind of record. ISSUE: What is a crossed check? RULING: A crossed check is one where two parallel lines are drawn across its face or across its corner.R.6 The Moscow incident would reflect on our country’s compliance with the obligations required of state-parties under these conventions. A manager’s check is one drawn by the bank’s manager upon the bank itself. Regional Trial Court (RTC) of Manila. Balmaceda. 2008. No. (Note: the meaning of manager’s check is not being discussed in the case. Toledo. RAMOS G. As it turned out Liza E. Dela Paz. in the commercial world. and (c) the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose and he must inquire if he received the check pursuant to this purpose.) and MARIA FE C. then comptroller and special disbursing officer of the PNP. otherwise. Perez (Perez). On October 11. fraudulently obtained and encashed 31 Manager’s checks in the total amount of Ten Million Seven Hundred Eighty Two Thousand One Hundred Fifty Pesos (P10. Gen. a Philippine delegation of eight (8) senior Philippine National Police (PNP) officers arrived in Moscow. Echano. cannot be used as the basis of any investigation involving them relative to the Moscow incident.What is a manager’s check? Held: 1. This made the court to decide that Balmaceda’s guilt in taking advantage of his authority and position as the branch manager to commit these acts. not solely on the weakness or lapses of individual employees. he was also found to have in his possession 45.00). In other words. is regarded substantially to be as good as the money it represents. On appeal the CA affirmed the decision of the Ombudsman. Dela Paz was apprehended by the local authorities at the Moscow airport departure area for failure to declare in written form the 105. Petitioners were detained in Moscow for questioning. Russia to attend the 77th General Assembly Session of the International Criminal Police Organization (ICPO)INTERPOL in St. 2011 BRION. 2009 ISSUE: Effect of Article 14(2) of the United Nations Convent5ion against corruption as well as Article 17(1) and (2) of the United Nations Convention against Transnational Organized Crime on “movement of cash and appropriate negotiable instruments”? Philippines is a state-party to the United Nations Convention Against Corruption and the United Nations Convention Against Transnational Organized Crime. . 2008. 2. the crossing of a check has the following effects: (a) the check may not be encashed but only deposited in the bank.00). RULING: The petition must inevitably fail. She also found that the City did not receive the manager’s check nor was it deposited to its account with the Land Bank of the Philippines-YMCA Branch. SPOUSES PNP DIRECTOR ELISEO D. JR.: Instrument: Checks FACTS: On September 10. After a few days. the respondent Committee can properly inquire into this matter.R. With the delegation was Gen. Section 13. PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. Petitioners argue that respondent Committee is devoid of any jurisdiction to investigate the Moscow incident as the matter does not involve state to state relations as provided in paragraph 12. G. PCIB filed an action for recovery of sum of money with damages before the RTC against Antonio Balmaceda. FACTS: On October 6. integrity and honor behind the check. Based on jurisprudence. They further claim that respondent Committee violated the same Senate Rules when it issued the warrant of arrest without the required signatures of the majority of the members of respondent Committee. committing its total resources. Gen. ANTONIO B.782. When a check is crossed. it is the duty of the collecting bank to ascertain that the check is only deposited to the payee’s account. Hence the appeal to the SC by Echano. this circumstance cannot be used to excuse the manner the Bank – through its employees –handled its clients’ bank accounts and thereby ignored established bank procedures at the branch manager’s mere order. Dela Paz and the PNP delegation were allowed to return to the Philippines. Jr. deposited the check in her personal account with the Land Bank-Taft Avenue Branch. A manager’s check is the same as a cashier’s check). The deposit was approved by petitioner Salvador O. After investigation. It is payable either to the person who purchases the check from the bank. a depositor to the amount. Both the RTC and the CA found Balmaceda guilty. In its complaint. the holder need not prove presentment for payment or present the bill to the drawee for acceptance. The mere fact that a manager’s check does not bear the payee’s signature at the back does not negate deposit thereof in payee’s account. Echano denied the allegations contending that he was unaware that Perez had been able to deposit in her accounts second endorsed checks that were payable to the City of Manila.000 found in his luggage. Reyes photocopied the check and signed the photocopy as proof that he received it. blame must be imputed on the Bank itself and its systems. particularly as to the source and purpose of the funds discovered in Moscow as this would involve the Philippines’ commitments under these conventions.150. In the case at bar. The Ombudsman found Echano and Reyes guilty of the charges. 2008. Acting Branch Cashier of the Land Bank-Taft Avenue Branch. DELA PAZ (Ret. A manager’s check issued on request of a depositor is the substantial equivalent of a certified check and the deposit represented by the check passes to the credit of the checkholder who is therefore. SENATE COMMITTEE ON FOREIGN RELATIONS and the SENATE SERGEANT-AT-ARMS JOSE BALAJADIA. Cruz. DELA PAZ vs. It is really the bank’s own check and may be treated as a promissory note with the bank as the maker and therefore. No. the Branch Manager of its Sta. he is not a holder in due course. however. They likewise assail the very same Senate Rules because the same were not published as required by the Constitution. which. a few days after Mrs. Therfore. Rule 10 of the Senate Rules of Procedure (Senate Rules). The dorsal portion of the check showed Perez’s signature and a signature of an unidentified person who was supposedly the first endorser. 184849 February 13. The two conventions contain provisions dealing with the movement of considerable foreign currency across borders. It is imperative to note that 26 of these checks are crossed checks. Gen. the City Treasurer of Manila. September 21. 158143.What is the effect of a crossed check? 2. Liberty M. namely. the City Treasurer of Manila. 1993. Thus. Awaiting them were subpoenae earlier issued by respondent Committee for the investigation it was to conduct on the Moscow incident. was to retire from the PNP on October 9.970. discovered that the receipt was spurious since its validation imprint was copied from the official validation imprint of a Municipal License Receipt issued to Co Siu Kheng. (Echano). It is in effect a bill of exchange drawn by the manager of the bank upon the bank itself. It is a primary obligation of the issuing bank and accepted in advance by the act of its issuance. or to the person who is to cash it. This lapse is made all the more glaring by Balmaceda’s repetition of his modus operandi 33 more times in a period of over one year by the Bank’s own estimation. the cost of the proceeding were adjudged against PCIB. Hence it is not subject to countermand by the payee after indorsement and has the same legal effect as a certificate of deposit or a certified check. Dela Paz. but the Russian government confiscated the euros. In the case at bar. PCIB alleged that between 1991 and 1993. Petersburg from October 6-10. In addition. Manila branch.

The civil aspect of the case was naturally an action for collection of Sammy's obligation to PDCP. He may pursue either of the three but not all or a combination of them. — . thus. September 29. . respectively. SPOUSES SIMON YAP AND MILAGROS GUEVARRA vs. Later however. Thus. When Sammy defaulted on the payment of his loan. The arrest order issued against the petitioners has been rendered ineffectual. when Sammy was sued for six counts of violation of BP 22. No. Hence. 1993 and May 3. the creditor may opt to sue the debtor for violation of BP 22 if the checks securing the obligation bounce. PDCP could have still foreclosed on the mortgage or filed a collection suit. on motion of Sammy and without objection from the public prosecutor and PDCP. To bar PDCP from foreclosing on petitioners' property for the balance of the indebtedness would be to penalize PDCP for the act of Sammy. petitioners argue that. Sammy issued a promissory note and six postdated checks in favor of PDCP as additional securities for the loan. enforcement of the checks under the Negotiable Instruments Law and/or BP 22. It is not so much that the debtor should be imprisoned for issuing a bad check.e. PDCP was deemed to have waived its right to foreclose on the property of petitioners when it elected to sue Sammy for violation of BP 22. First. (b) The criminal action for violation of [BP] 22 shall be deemed to include the corresponding civil action.9 Consequently. there was no longer any necessity to implement the order of arrest. the order for her arrest was effectively withdrawn. PDCP presented the six checks to the drawee bank but the said checks were dishonored. the respondent Committee can properly inquire into this matter. in the same hearing. and on any matter of public interest on its own initiative or brought to its attention by any of its members.) Instrument: Check Drawer: Sammy Yap Drawee: Not stated Payee: PDCP Facts Sammy Yap obtained a P2 million loan from PDCP Development Bank. even the mortgaged property itself. PDCP has not yet effectively availed of and fully exhausted its remedy. The RTC ruled in favor of petitioners. Dela Paz for humanitarian considerations. The two conventions contain provisions dealing with the movement of considerable foreign currency across borders. 1993. a collection suit. Thus. No reservation to file such civil action separately shall be allowed. i. the alternative remedies of foreclosure of mortgage and collection suit were not barred even if a suit for BP 22 had been filed earlier. Institution of criminal and civil actions. In this petition. This prompted PDCP to file a complaint against Sammy for six counts of violation of BP 22. the BP 22 cases were provisionally dismissed. It held that PDCP had three options when Sammy defaulted in the payment of his loan: enforcement of the promissory note in a collection case. under Section 1 (b). Senator Santiago granted the motion of Gen. In this case. Rule 111 of the Rules of Court both provide that the criminal action for violation of BP 22 shall be deemed to necessarily include the corresponding civil action. In the legislative inquiry held on November 15. x x x Sad to say. not to force a debtor to pay his debt. Furthermore. Second. Pursuant to paragraph 36. Dela Paz to dispense with the presence of Mrs. like foreclosure of mortgage. The purpose of BP 22 was to punish the act of issuing a worthless check. the creditor has three options against the debtor and the exercise of one will bar the exercise of the others. executed a thirdparty mortgage on their land and warehouse. no judgment of conviction (which could have declared the criminal and civil liability of Sammy) was rendered because Sammy moved for the provisional dismissal of the case. or foreclosure of mortgage. Thus. Lastly. Dela Paz. Rule 111 of the Rules of Court: Section 1. PDCP filed an application for extrajudicial foreclosure of mortgage on the property of petitioners which served as principal security for Sammy's loan. its branches. In case the debt is not fully satisfied. holding that PDCP was not barred from exercising its right to foreclose on the property of petitioners despite suing Sammy for violation of BP 22. This will open up all the properties of the debtor to attachment and execution. x x x Also. Thus. the creditor may opt to foreclose on the mortgaged property. Dela Paz voluntarily appeared and answered the questions propounded by the Committee members. The remedies were alternative and the choice of one excluded the others. petitioners Simon Yap and Milagros Guevarra. PDCP was prevented from recovering the whole amount by Sammy himself. . PDCP should not be allowed to pursue another. Second. Pertinent portions of Circular 57-97 provide: 1. this is so specially because a conviction for BP 22 does not necessarily result in imprisonment. 2008. is that the private complainant in a BP 22 case cannot opt to file the civil case necessarily arising from the BP 22 case nor reserve the same. Circular 57-97 (and Section 1 (b). Rule 10 of the Senate Rules. subdivisions and instrumentalities. other than the mortgaged property. The Moscow incident would reflect on our country’s compliance with the obligations required of state-parties under these conventions. PDCP should have been deemed to have simultaneously filed for collection of the amount represented by the checks. Having submitted himself to the jurisdiction of the Senate Committees. 169889. Petitioners filed in the RTC a complaint for injunction (with prayer for the issuance of a temporary restraining order/preliminary injunction) against PDCP seeking to stop the foreclosure sale on the ground that PDCP waived its right to foreclose the mortgage on their property when it filed the BP 22 cases against Sammy. A creditor's principal purpose in suing the debtor for BP 22 is to be able to collect his debt. misfeasance and nonfeasance in office by officers and employees of the government. Section 13. As security. Pursuant to the petition of PDCP for extrajudicial foreclosure. This was reversed by the CA. we state the rule at present. agencies. In sum. in which case. We take judicial notice of the fact that the Philippines is a state-party to the United Nations Convention Against Corruption and the United Nations Convention Against Transnational Organized Crime. prior to the effectivity of Circular 57-97. the extrajudicial sale was set and the publication requirements were complied with. 2009. Circular 57-97 and Section 1 (b). It is. INC. Issue What is the effect of Circular 57-97 now Rule 111 section 1 (b) on criminal actions involving violations of BP 22 and its corresponding civil action? Held The effect of the circular. as embedded into the Rules. . PDCP clearly elected a remedy.The matter affects Philippine international obligations. Sammy's parents. Gen. who had with him millions which may have been sourced from public funds. If the debtor fails (or unjustly refuses) to pay his debt when it falls due and the debt is secured by a mortgage and by a check. The criminal action for violation of [BP] 22 shall be deemed to necessarily include the corresponding civil action.R. unless a judgment of conviction had already been rendered in the BP 22 case finding the accused debtor criminally liable and ordering him to pay the amount of the check(s). That would not only be illogical and absurd but would also violate elementary rules of justice and fair play. and no reservation to file such civil action separately shall be allowed or recognized. No reservation to file such civil action separately shall be allowed or recognized. beyond cavil that the Blue Ribbon Committee can investigate Gen. FIRST e-BANK CORPORATION (previously known as PDCP DEVELOPMENT BANK. the Blue Ribbon Committee may conduct investigations on all matters relating to malfeasance. are again opened up for the satisfaction of the deficiency. jointly by the respondent Committee and the Senate Blue Ribbon Committee. Thereafter. a retired PNP general and member of the official PNP delegation to the INTERPOL Conference in Russia.. In other words. G. he may sue the debtor for deficiency judgment (not a collection case for the whole indebtedness). it is undisputed that the BP 22 cases were provisionally dismissed at Sammy's instance. particularly as to the source and purpose of the funds discovered in Moscow as this would involve the Philippines’ commitments under these conventions. Rule 111 of the Rules of Court) was not yet in force when PDCP sued Sammy for violation of BP 22 and when it filed a petition for extrajudicial foreclosure on the mortgaged property of petitioners on February 8. all the properties of the debtor. the creditor may file a collection suit against the debtor.

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