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NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES


Page 184 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
OCTOBER 1 OCTOBER 1- -6, 2007 6, 2007

Sec. 187. Certification of check; effect of. - Where a check is
certified by the bank on which it is drawn, the certification is
equivalent to an acceptance.

CERTIFICATION OF CHECK
! A certification is an agreement whereby the bank against whom a
check is drawn, undertakes to pay it at any future time when
presented for payment
! But a bank is not obligated to the depositor to certify checks
! And the drawee is not liable to the holder for refusal of the bank to
certify the fcheck
! The refusal of the bank doesnt dispense with the requirement of
presentment for payment since a check is of right presentable only for
payment at the bank on which it is drawn

FORM OF CERTIFICATION
! No particular form is required but it must be in writing
! The usual method is by stamping on the check the word certified and
underneath it the signature of the cashier, or by writing upon the
check the word good with the date of certification and signature of
the officer of the bank having the express or implied authority to
certify checks, has been held to be a sufficient certification
! The letters OK with the initials of the cashier of a bank doesnt
constitute a sufficient certification under modern banking practice

EFFECT OF CERTIFICATION
1. Equivalent to acceptance and is the operative act that makes the
drawee bank liable
2. It operates as an assignment of the funds of the drawer in the
hands of the drawee bank
3. If obtained by the holder, it discharges the persons secondarily
liable

CERTIFICATION EQUIVALENT TO ACCEPTANCE
! Certification is equivalent to acceptance in the drawee bank is bound
on the instrument upon certification
! And it is immaterial to such liability in favor of a holder in due course
whether the drawer had funds or not in the bank or the drawer was
indebted to the bank for more than the amount of the check
! The certifying bank has all the liabilities of an acceptor under Section
62

IMPLICATION OF CERTIFICATION FURTHER EXPLAINED
! The bank virtually says that the check is good and we have the
mo0ney of the drawer here ready to pay it. We will pay it now if you
will receive it. The holder says no, I will not take the money; you may
now certify the check and retain the money for me until this check is
presented. The law will not permit a check, when due, to be thus
presented, and the money to be left with the bank for the
accommodation of the holder without discharging the drawer. The
money being due and the check presented, it is his fault if the holder
declines to receive the payment, and for his own convenience has the
money appropriated to that check subject to its future presentment at
any time within the statute of limitations.

FUNCTIONS OF CERTIFIED CHECKS
! Although a check doesnt call for acceptance and the holder can
present it only for payment, the certification of checks is a means in
constant and extensive use in the business of banking and its effects
and consequences are regulated by the law merchant. Checks drawn
against banks, thus marked and certified, enter largely into the
commercial and financial transactions of the country; they pass from
hand to hand, in the payment of balances from one house and one
bank to another. In the great commercial centers, they make up no
inconsiderable portion of the circulation and thus perform a useful,
valuable and an almost indispensable office

PURPOSE OF PROCURING CHECKS TO BE CERTIFIED
! To impart strength and credit to the paper by acknowledgment from
the certifying bank that the drawer has funds therein sufficient to
cover the check and securing the engagement of the bank that the
check will be paid upon presentation
! When a check is certified, it ceases to possess the character, or to
perform its functions, of a check, and represents so much money on
deposit, payable to the holder on demand.
! The check becomes a basis for credit and an easy mode of passing
money from hand to hadn and answers the purposes of money

PAYMENT NEITHER INCLUDES NOR IMPLIES ACCEPTANCE
! Acceptance and payment are entirely different. If the drawee accepts
the paper after seeing it, and then permits it to go into circulation as
genuine, on all the principles of estoppel, he ought to be prevented
from setting up forgery to defeat liability to one who has taken the
paper on the faith of the acceptance or certification