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NEGOTIABLE INSTRUMENT
Sesbreno vs CA
Sesbreno vs. Court of Appeals
GR 89252, 24 May 1993
FACTS:
Petitioner Sesbreno made a money market placement in the amount of P300,000 with the Philippine
Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to
Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note, the
Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said security
was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia
and America for P304,533.33 payable on March 13, 1981. The checks were dishonored for having
been drawn against insufficient funds. Pilipinas Bank never released the note, nor any instrument
related thereto, to Sesbreno; but Sesbreno learned that the security which was issued on April 10,
1980, maturing on 6 April 1981, has a face value of P2,300,833.33 with PhilFinance as payee and
Delta Motors as maker; and was stamped “non-negotiable” on its face. As Sesbreno was unable to
collect his investment and interest thereon, he filed an action for damages against Delta Motors and
Pilipinas Bank. Delta Motors contents that said promissory note was not intended to be negotiated or
otherwise transferred by Philfinance as manifested by the word "non-negotiable" stamped across the
face of the Note.
ISSUE:
Whether the non-negotiability of a promissory note prevents its assignment.
RULING:
A negotiable instrument, instead of being negotiated, may also be assigned or transferred. The legal
consequences of negotiation and assignment of the instrument are different. A non-negotiable
instrument may not be negotiated but may be assigned or transferred, absent an express prohibition
against assignment or transfer written in the face of the instrument. The subject promissory note,
while marked "non-negotiable," was not at the same time stamped "non-transferable" or "nonassignable." It contained no stipulation which prohibited Philfinance from assigning or transferring
such note, in whole or in part.
**A non­negotiable instrument may not be negotiated but may be assigned or transferred, absent an express
prohibition against assignment or transfer written on the face of the instrument.

Roman Catholic of Malolos v IAC
Facts:
The property subject matter of the contract consists of a parcel of land in the Province of
Bulacan, issued and registered in the name of the petitioner which it sold to the private
respondent.
On July 7, 1971, the subject contract over the land in question was executed between the
petitioner as vendor and the private respondent through its then president, Mr. Carlos F. Robes,
as vendee, stipulating for a downpayment of P23,930.00 and the balance of P100,000.00 plus
12% interest per annum to be paid within four (4) years from execution of the contract. The
contract likewise provides for cancellation, forfeiture of previous payments, and reconveyance of
the land in question in case the private respondent would fail to complete payment within the
said period.
After the expiration of the stipulated period for payment, Atty. Adalia Francisco (president of the
company who bought land) wrote the petitioner a formal request that her company be allowed to
pay the principal amount of P100,000.00 in three (3) equal installments of six (6) months each
with the first installment and the accrued interest of P24,000.00 to be paid immediately upon
approval of the said request.

and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. The private respondent wrote the petitioner requesting an extension of 30 days from said date to fully settle its account but this was still denied.00 to Barretto Realty (representing the amount of investments by Barretto Realty in the estate). he should pay P3. The IAC. Not satisfied with the said decision. Consequently. Francisco’s claim that she made a tender of payment is not worthy of credence. To settle the dispute. The tender of payment by the private respondent was not valid for failure to comply with the requisite payment in legal tender or currency stipulated within the grace period the DECISION of the IAC is hereby SET ASIDE and ANNULLED and the DECISION of the trial court is REINSTATED. wrote a reply to the private respondent stating the refusal of his client to execute the deed of absolute sale so the petitioner cancelled the contract and considered all previous payments forfeited and the land as ipso facto reconveyed.000. No.000. 2. . protesting the alleged refusal of the latter to accept tender of payment made by the former on the last day of the grace period. Francisco to present in court the certified personal check allegedly tendered as payment or.2 The petitioner formally denied the said request of the private respondent. Tomas Trinidad. No. is not legal tender. we find that both the contending parties have conflicting versions on the main question of tender of payment. . Atty. A check. Pio Barretto Realty Development Corporation vs Court of Appeals 360 SCRA 127 – Mercantile Law – Negotiable Instruments Law – Check Payments – Due Diligence in Presenting Checks for Payment Honor Moslares and Pio Barretto Realty Development Corporation are disputing over the estate of Nicolai Drepin. that should Barretto Realty buy . ISSUE: Whether or not the finding of the IAC that Atty. But the private respondent demanded the execution of a deed of absolute sale over the land in question Atty. Fernandez. by itself. What made Atty. at least. Whether or not an offer of a check is a valid tender of payment of an obligation under a contract which stipulates that the consideration of the sale is in Philippine Currency. the private respondent appealed to the IAC. Court of Appeals: Since a negotiable instrument is only a substitute for money and not money. At most. In the case of Philippine Airlines v. they entered into a Compromise Agreement by which they agreed to have the estate in dispute be sold. Francisco had sufficient available funds did tender payment for the said obligation. represented by Atty. whether a manager’s check or ordinary check. its xerox copy. Thus. that in case Moslares was able to buy the property first. operate as payment. Francisco wrote a letter directly addressed to the petitioner. The trial court considered as fatal the failure of Atty. The respondent court was therefore in error. and while the case was in court. ipso facto concluded that the latter had tendered payment. in finding that the private respondent had sufficient available funds. Francisco suddenly decide to pay plaintiff’s obligation on tender her payment. HELD: 1. when her request to extend the grace period has not yet been acted upon? Atty. The IAC reversed the decision of the trial court. sufficiency of available funds is only affirmative of the capacity or ability of the obligor to fulfill his part of the bargain. the delivery of such an instrument does not. or even bank records thereof.000.00. but granted the latter a grace period of five (5) days from the receipt of the denial to pay the total balance of P124. According to the trial court: . Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former’s obligation and demanding that the latter accept the same. From a perusal of the foregoing facts. tender of payment cannot be presumed by a mere inference from surrounding circumstances.

Barretto Realty was able to buy the property first hence it delivered a manager’s check worth P1. 1991 Cruz. The judge issued a writ of execution against Moslares and the sheriff also delivered the check to Moslares which the latter accepted. Barretto Realty filed a petition before the trial court to direct Moslares to comply with the Compromise Agreement. It relied on Metrobank to determine the validity of the warrants through its own services. the rule is otherwise if the debtor (Barretto Realty) was prejudiced by the creditor’s (Moslares’) unreasonable delay in presentment. Metrobank then sued Golden Savings. Golden Savings subsequently allowed Gomez to make withdrawals from his own account. ISSUE: Whether or not the judge was correct. Golden Savings had no clearing facilities of its own. 88866 February. No. It was. Payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. Meanwhile. Metrobank is negligent in giving Golden Savings the impression that the treasury warrants had been cleared and that. it should pay P1. The same may no longer be amended regardless of any claim or error or incorrectness (save for clerical errors only). Golden Savings might even have incurred liability for its refusal to return the money that all appearances belonged to the depositor. to make up the deficit in its account. Moslares filed a motion for reconsideration alleging that the check payment did not amount to legal tender and that he never even encashed the check. All warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings account in Metrobank branch in Calapan.: Facts: Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants. Golden Savings would not have allowed the withdrawals. Acceptance of a check implies an undertaking of due diligence in presenting it for payment. three years later.00 to Moslares (representing interest). The compromise agreement was approved by the judge (Judge Perfecto Laguio). 2. consequently. Indeed. “exasperated” over Floria repeated inquiries and also as an accommodation for a “valued” client Metrobank decided to allow Golden Savings to withdraw from proceeds of the warrants. J. who could therefore withdraw it anytime and for any reason he saw fit. Court of Appeals G. Without such assurance. Gomez is not allowed to withdraw from his account. later. The judge agreed with Moslares.000.000. to secure the clearance of the treasury warrants that Golden Savings deposited them to its account with Metrobank. Issue: 1.00 to Moslares but the latter refused to accept the same.R. If no such presentment was made. CA Metropolitan Bank & Trust Company vs.000.000. 18. Mindoro. Barretto Realty also consigned the check payment with the court. Whether or not treasury warrants are negotiable instruments Held: No. In turn. Metrobank vs. the drawer cannot be held liable irrespective of loss or injury sustained by the payee. in fact. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the amount withdraws to make up with the deficit as a result of the dishonored treasury warrants. HELD: No. Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury and demanded the refund by Golden Savings of the amount it had previously withdrawn. However.3 the property first. it was safe to allow Gomez to withdraw. They were sent for clearance. It is true that a check is not a legal tender and while delivery of a check produces the effect of payment only when it is encashed. however. The demand was rejected. There was already a final and executory order issued by the same judge three years prior. .

(d) Must be payable to order or to bearer. CA 269 SCRA 15 FACTS: Filriters through a Detached Agreement transferred ownership to Philfinance a Central Bank Certificate of Indebtedness. and this is equal significance. it is indicated that they are payable from a particular fund. No. treasury warrants. When the petitioner tried to have it registered in its name in the CB. and (e) Where the instrument is addressed to a drawee. to wit.” in accordance with Sec. xxx xxx xxx Sec. Art. on which petitioner bought the CBCI from Philfinance. an indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount. But an order or promise to pay out of a particular fund is not unconditional. — An unqualified order or promise to pay is unconditional within the meaning of this Act though coupled with — (a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount. — Form of negotiable instruments. The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay “not conditional” and the warrants themselves non-negotiable. But an order to promise to pay out of particular fund is not unconditional. 66 of NIL. The simple reason that NIL is not applicable to non negotiable instruments. 1909. The treasury warrants are not negotiable instruments. — An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer. TRADERS ROYAL BANK V. The latter agreed to repurchase the CBCI but failed to do so.” Moreover. It must be established by clear. It was only through one of its officers by which the CBCI was conveyed without authorization from the company. Golden Savings assumed that they were genuine and in all respects what they purport to be. (b) Must contain an unconditional promise or order to pay a sum certain in money. 1. HELD: . — The agent is responsible not only for fraud. or (b) A statement of the transaction which gives rise to the instrument judgment. -here not proven treasury warrants in question are not negotiable instruments  stamped on their face is the word "non-negotiable"  indicated that they are payable from a particular fund Sec. a statement of the transaction which give rise to the instrument. Clearly stamped on their face is the word: non negotiable. positive and convincing evidence. according to whether the agency was or was not for a compensation. Metrobank cannot contend that by indorsing the warrants in general. but also for negligence. When promise is unconditional. As provided by Sec 3 of NIL an unqualified order or promise to pay is unconditional though coupled with: 1 st. Petitioner and Philfinance later entered into a Repurchase agreement. which shall be judged 'with more or less rigor by the courts. Fund 501. he must be named or otherwise indicated therein with reasonable certainty.  Golden Savings acted with due care and diligence   Forgery cannot be presumed. (c) Must be payable on demand. An instrument to be negotiable instrument must contain an unconditional promise or orders to pay a sum certain in money. the latter didn't want to recognize the transfer. or 2 nd. or at a fixed or determinable future time.4 The proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit. There should be no question that the exception on Section 3 of NIL is applicable in the case at bar. 3.

Furthermore. Thus. HELD: Yes. Jr. for lack of any consideration. ISSUE: Whether or not Inciong should be held liable. PBC demanded payment from the three but still no payment was made. Giving more credence to rule that there was no valid transfer or assignment to petitioner. that the two corporations have identical sets of directors. TRB then filed a petition for mandamus to compel the Central Bank to register said CBCI in TRB’s name. Inciong is considering himself as a guarantor in the promissory note. In 1979. FGAC agreed to assign said CBCI to Philippine Underwriters Finance Corporation (PUFC). The instrument provides for a promise to pay the registered owner Filriters. when the day to repurchase arrived. between PUFC and FGAC. Very clearly. Inciong was left to face the suit. PUFC acquired no valid title over the CBCI. PUFC sold said CBCI to Traders Royal Bank (TRB).5 The CBCI is not a negotiable instrument. the assignment made is a complete nullity. Jr. and is not governed by the negotiable instruments law. and that Pantanosas was released from his obligations. vs Court of Appeals 257 SCRA 578 – Mercantile Law – Negotiable Instruments in General – Signature of Makers – Guaranty In February 1983. that since it was invalid. and the freedom of negotiability is the foundation for the protection. The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. that as such. What happened was Philfinance merely borrowed CBCI from Filriters. he too should have been released. Hence. the transfer wasn't in conformity with the regulations set by the CB. These certificates are actually proof that FGAC has the required reserve investment with the Central Bank to operate as an insurer and to protect third persons from whatever liabilities FGAC may incur. Although the deed of assignment stated that the transfer was for ‘value received‘. PBC then sue the three but PBC later released Pantanosas from its obligations. The promissory note went due and it was left unpaid. This freedom in negotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a sum of money to a specified person or entity for a period of time. in accord with existing law. Naybe was able to convince Baldomero Inciong. TRB averred that PUFC is the alter ego of FGAC. that PUFC owns 90% of FGAC. TRB avers that that the veil of corporate fiction. there was really no consideration involved. Naybe left for Saudi Arabia hence can’t be issued summons and the complaint against him was subsequently dropped. the instrument was only payable to Filriters. The pertinent question then is—was the transfer of the CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB. For that he executed a promissory note in the same amount. And he was basing his argument based on Article 2080 of the Civil Code which provides that guarantors are released from their . PUFC failed to repurchase said CBCI hence TRB requested the Central Bank to have said CBCI be registered in TRB’s name. Rene Naybe took out a loan from Philippine Bank of Communications (PBC) in the amount of P50k. should be pierced because the two corporations allegedly used their separate identity to defraud TRD into buying said CBCI. and Gregorio Pantanosas to co-sign with him as co-makers. the transfer from FGAC to PUFC is not valid. In short. He argued that that since the complaint against Naybe was dropped. The transfer of the instrument from Philfinance to TRB was merely an assignment. However. Baldomero Inciong. It lacked the words of negotiability which should have served as an expression of the consent that the instrument may be transferred by negotiation. freedom of negotiability is the touchstone relating to the protection of holders in due course. Central Bank refused as it alleged that the CBCI are not negotiable. a sister corporation. Later. that payment of said CBCI to PUFC is like a payment to FGAC hence the sale between PUFC and TRB is valid. that the subsequent transfer from PUFC to TRB is likewise invalid. Said sale with TRB comes with a right to repurchase on a date certain. which the law throws around a holder in due course. ADDITIONAL FACTS: Filriters Guaranty Assurance Corporation (FGAC) is the owner of several Central Bank Certificates of Indebtedness (CBCI). so as to entitle TRB to have the CBCI registered in its name with the Central Bank? Clearly shown in the record is the fact that Philfinance’s title over CBCI is defective since it acquired the instrument from Filriters fictitiously.

As regards Naybe. Inc were authorized to apply for credit facilities with the Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted. No. Thereafter was a default on the payment of the note. He signed it as a solidary co-maker. the court decided in its favor. 1992 Lessons Applicable: Incomplete instruments to rules of construction (Negotiable Instrument Law) FACTS:  Shozo Yamaguchi (President/Chief Operating Officer) and Fermin Canlas (Treasurer) by virtue of Board Resolution of Worldwide Garment Manufacturing. Inc. may only have recourse against his co-makers. it was in blank (typewritten entries not appearing when he signed) ISSUE: W/N Fermin Canlas is solidarily liable with the other defendants. suffice it to say that the court never acquired jurisdiction over him. The choice is left to the solidary creditor (PBC) to determine against whom he will enforce collection. It is to be noted however that Inciong did not sign the promissory note as a guarantor. any one. There is a difference between a solidary co-debtor and a fiador in solidum (surety). changed its corporate name to Pinch Manufacturing Corporation  February 5. therefore. Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable. HELD: Where the promissory note expressly states that the three signatures therein are jointly and severally liable.. Consequently.  9 promissory notes with Worldwide Garment Manufacturing. was apparently rubber stamped above the signatures of Yamaguchi and Canlas were issued to Republic Planters Bank  December 20. 1982: Worldwide Garment Manufacturing. PBC proceeded against Inciong and in the action filed by the bank. retains all the other rights. some or all of them may be proceeded against for the entire obligation. Inciong. CA (1992) G. 93073 December 21. as provided by law. FACTS: A promissory note was issued by petitioner together with 2 others jointly and severally. any one or some or all of them may be proceeded against for the entire obligation—the choice is left to the solidary creditor to determine against whom he will enforce collection.6 obligations if the creditors shall release their debtors. A guarantor who binds himself in solidum with the principal debtor does not become a solidary co-debtor to all intents and purposes. Inc. The latter. the dismissal of the case against Pontanosas may not be deemed as having discharged Inciong from liability as well. while a solidary co-debtor has no other rights than those bestowed upon him. namely Pinch Manufacturing Corporation and Shozo Yamaguchi on the 9 promissory notes because they are negotiable and ruled by the Negotiable Instruments Law . 1982: Republic Planters filed a complaint for the recovery of sums of money  Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pretrial conference despite due notice  Fermin Canlas denied having issued the promissory notes as an officer of Pinch Manufacturing Corporation and when he issued said promissory notes in behalf of Worldwide Garment Manufacturing. to make them liable to PBC. Inc. Negotiable Instruments Case Digest: Republic Planters Bank V. actions and benefits which pertain to him by reason of the fiansa.R.

he is not liable on the instrument if he was duly authorized. amount of the loan. Fermin Canlas  one of the co-makers of the promissory notes  cannot escape liability arising therefrom   made clearer and certain.  With or without it. he is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor  A change in the corporate name does not make a new corporation. . by the presence of the phrase "joint and several" as describing the unconditional promise to pay to the order of Republic Planters Bank Severally and jointly or solidarily liable  "I promise to pay" is signed by 2 or more persons  "I" .We" . the agent is personally liable to take holder of the instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's personal liability. as before. rate of interest. or liabilities  The corporation continues. does not exempt him from personal liability. or on its property. without disclosing his principal. the liability of a person signing as an agent is specifically provided for as follows: Sec. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change of name meant only the continuation of the old juridical entity. 14.immaterial and will not affect to the liability of Fermin Canlas as a joint and several debtor of the notes. the corporation bearing the same name is still bound by the acts of its agents if authorized by the Board. Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal . but the mere addition of words describing him as an agent.  blank spaces to be filled up on material particulars such as payee's name.  An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instruments Law: Sec.  GR: officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by officers of the corporation.  EX: Under the Negotiable Instruments Law. In order. or in a representative capacity. or as filling a representative character. Blanks: when may be filled. when signed by two or more persons  "and (in) his personal capacity" below the signatures of the makers . Liability of a person signing as agent and so forth. if duly authorized.. pay. without reason for ambiguity. rights. Judgement is hereby rendered declaring private respondent Fermin Canlas jointly and severally liable on all 9 promissory notes with the following sums and at 16% interest per annum   Under the Negotiable lnstruments Law. responsible in its new name for all debts or other liabilities which it had previously contracted or incurred. and whether effected by special act or under a general law. . persons who write their names on the face of promissory notes are makers and are liable as such. has no affect on the identity of the corporation. date of issue and the maturity date. the person in possesion thereof has a prima facie authority to complete it by filling up the blanks therein. — Where the instrument is wanting in any material particular. 20.7 HELD: CA absolving Fermin Canlas is REVERSED and SET ASIDE. or "Either of us" promise to..  Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative capacity or the name of the third party for whom he might have acted as agent.  incomplete stereotype printed form of promissory notes generally used by commercial banking institutions to be signed by their clients in obtaining loans.

it must be filled up strictly in accordance with the authority given and within a reasonable time. 97753 August 10. that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion. Credit Manager of Caltex went to the Sucat branch to verify the CTDs declared lost by Angel  November 26. 1982: Mr.. V. Section 14 of the NegotiabIe Instruments Law is not applicable. 1982: Angel informed Mr.000  Angel delivered the CTDs to Caltex for his purchase of fuel products  March 18. Negotiable Instruments Case Digest: Caltex (Phils. 1982: Caltex was requested by Security Bank to furnish:  a copy of the document evidencing the guarantee agreement with Mr.120. Angel dela Cruz  the details of Mr. Thus.000 and executed a notarized Deed of Assignment of Time Deposit  November. the Sucat Branch Manager that he lost all CTDs.8 however. CA And Security Bank And Trust Co. Tiangco.  The notes were not incomplete instruments.120.) Inc. a commercial banking institution. it failed to furnish a copy of its agreement w/ Angel  April 1983. the loan of Angel dela Cruz with Security Bank matured  August 5. 1992 Lessons Applicable: Requisites of negotiability to antedated and postdated instruments (Negotiable Instrument Law) FACTS:  Security Bank and Trust Company (Security Bank).  December 8. No. through its Sucat Branch issued 280 certificates of time deposit (CTDs) in favor of Angel dela Cruz who deposited with Security Bank the total amount of P1. 1983: CTD were set-off w/ the matured loan  Caltex filed a complaint praying the bank to pay 1.R. neither were they given to private respondent Fermin Canlas in blank as he claims.000 plus 16% interest  CA affirmed RTC to dismiss complaint . Aranas. (1992) G. Angel's obligation against which Caltex proposed to apply the time deposits  Security Bank rejected Caltex demand for payment bec. 1982: Security Bank received a letter from Caltex formally informing it of its possession of the CTDs in question and of its decision to pre-terminate the same.. 1982: Angel dela Cruz negotiated and obtained a loan from Security Bank in the amount of P875. submitted the required Affidavit of Loss and received the replacement  March 25.

or at a fixed or determinable future time. NO. viz: (a) It must be in writing and signed by the maker or drawer. as ultimately ascertained. for obvious reasons. shall be governed by the Civil Code provisions on pledge of incorporeal rights: . from the face of the instrument itself 2. W/N Caltex as holder in due course can rightfully recover on the CTDs HELD: Petition is Denied and appealed decision is affirmed. instead of having the word "BEARER" stamped on the space provided for the name of the depositor in each CTD negotiability or non-negotiability of an instrument is determined from the writing. he must be named or otherwise indicated therein with reasonable certainty. 1. a valid negotiation thereof for the true purpose and agreement between it and De la Cruz. not being provided for by the Negotiable Instruments Law. requires both delivery and indorsement  CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel  products  There was no negotiation in the sense of a transfer of the legal title to the CTDs in favor of petitioner in which situation. he would be a pledgee but the requirements therefor and the effects thereof. (d) Must be payable to order or to bearer.9 ISSUE: 1. enumerates the requisites for an instrument to become negotiable. that is. Section 1 Act No. otherwise known as the Negotiable Instruments Law. mere delivery of the bearer CTDs would have sufficed. (b) Must contain an unconditional promise or order to pay a sum certain in money. 2031. it could have with facility so expressed that fact in clear and categorical terms in the documents.  As such holder of collateral security. he is deemed a holder for value to the extent of his lien. and -check (e) Where the instrument is addressed to a drawee. YES.  Where the holder has a lien on the instrument arising from contract.  although the CTDs are bearer instruments. (c) Must be payable on demand. W/N the CTDs are negotiable 2.  The documents provide that the amounts deposited shall be repayable to the depositor depositor = bearer   If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only.

ISSUE: Whether or not De La Victoria is correct. No. evidenced by negotiable instruments. Art.000.00 . may also be pledged. every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. (2003) G. Judge Burgos ordered De La Victoria. Sebreño won and he was awarded the payment of damages. . 1625. As ordinarily understood. to hold the checks and convey them to Sebreño instead. Incorporeal rights.2003 Lessons Applicable: Promissory notes and checks (Negotiable Instruments Law) FACTS:  Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting P3M w/ interest and secured by 3 promissory notes:  December 14. De La Victoria assailed the order as he said that the paychecks and the amount thereon are not yet the property of Mabanto because they are not yet delivered to him. of Cebu City. right or action shall produce no effect as against third persons. delivery means the transfer of the possession of the instrument by the maker or drawer with intent to transfer title to the payee and recognize him as the holder thereof.R. 1981: P600. 2096.00  December 14. or the instrument is recorded in the Registry of Property in case the assignment involves real property. An assignment of credit. 1981: P400. A pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument. V. unless it appears in a public instrument. Art. .000.10 Art. Loreto De La Victoria vs Jose Burgos 245 SCRA 374 – Mercantile Law – Negotiable Instruments Law – Delivery of Negotiable Instruments – Paychecks of Public Officers Raul Sebreño filed a complaint for damages against Fiscal Bienvenido Mabanto Jr. The instrument proving the right pledged shall be delivered to the creditor. and the checks due to the foregoing cannot be the proper subject of garnishment. . must be indorsed. 136729 September 23 . custodian of the paychecks of Mabanto. the checks are still part of the public funds. HELD: Yes. Export And Foreign Loan Guarantee Corp. Phil. that since there is no delivery of the checks to Mabanto. 2095. and if negotiable. Under Section 16 of the Negotiable Instruments Law. Negotiable Instruments Case Digest: Astro Electronics Corp.

00 Roxas signed twice the promissory notes  as President of Astro  in his personal capacity  Roxas also signed a Continuing Surety ship Agreement in favor of Philtrust Bank. as President of Astro and as surety  Philguarantee.000. subject to the condition that upon payment by Philguanrantee. official and personal. promise to pay to PHILTRUST BANK or order.  3 promissory notes uniformly provide: FOR VALUE RECEIVED.000. it is subrogated to the rights of Philtrust to demand for and collect payment from both Roxas and Astro since it already paid the value of 70% of roxas and Astro Electronics Corp. I/We jointly..11   August 27. We.  Subsequently. Roxas will still be primarily liable as a joint and several debtor under the notes considering that his intention to be liable as such is manifested by the fact that he affixed his signature on each of the promissory notes twice which necessarily would imply that he is undertaking the obligation in 2 different capacities. then he should have signed only once CA affirmed RTC ISSUE: W/N Roxas should be jointly and severally liable with Astro HELD: YES. 1981: P2. who substitutes him in all his rights  Philguarantee has all the right to proceed against petitioner.  even without the phrase personal capacity. it shall be proportionally subrogated to the rights of Philtrust against Astro  Upon Astros failure to pay. with the consent of Astro.s loan obligation . when signed by two or more persons = solidarily liable  Subrogation is the transfer of all the rights of the creditor to a third person. or Either of us promise to pay. persons who write their names on the face of promissory notes are makers.  begins with I.promising that they will pay to the order of the payee or any holder according to its tenor.. guaranteed in favor of Philtrust the payment of 70% of Astros loan. CA affirmed  Under the Negotiable Instruments Law. severally and solidarily. Philguarantee paid 70% of the guaranteed loan to Philtrust. Philguarantee filed against Astro and Roxas a complaint for sum of money with the RTC  Roxas: alleged that he merely signed the same in blank and the phrases in his personal capacity and in his official capacity were fraudulently inserted without his knowledge    RTC: favored Philguarantee holding Astro and Roxas jointly and severally liable if Roxas really intended to sign the instruments merely in his capacity as President of Astro.

Ong (Ong) President and General Manager of Herby Commercial & Construction Corporation (HCCC).R. No.R. AFRDC executed a Deed of Assignment in favor of HCCC to enable the it to collect payments directly from the GSIS.  February 10. 1999 Lessons Applicable: Forgery (Negotiable Instruments Law) FACTS:  June 23. the GSIS and AFRDC put up an Executive Committee Account with the Insular Bank of Asia & America (IBAA) of P4M from which checks would be issued and co-signed by petitioner Francisco and the GSIS Vice-President Armando Diaz (Diaz). SIMA WEI. 1977: Adalia Francisco (Francisco) president of A. CA (1999) G. AFRDC and the GSIS for the collection of the unpaid balance under the Land Development and Construction . Negotiable Instruments Case Digest: Francisco V. No. Francisco Realty & Development Corporation (AFRDC) and Jaime C. RULING: No.  HCCC was to be paid on turn-key basis (basis of the completed houses and developed lands delivered to and accepted by AFRDC and the GSIS)  To facilitate payment. These two checks however were not delivered to the petitioner-payee or to any of its authorized representatives but instead came into the possession of respondent Lee Kian Huat.12  Roxas acquiescence is not necessary for subrogation to take place because the instant case is one of the legal subrogation that occurs by operation of law.00. G. Inspite of the fact that the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter. the Branch Manager of Producers Bank authorized the acceptance of the checks for deposit and credited them to the account of said Plastic Corporation.820. became the transferee of all the rights of Philtrust as against Roxas and Astro because the guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor DEVELOPMENT BANK OF RIZAL vs.  Furthermore. Section 16 of the NIL provides that every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. who deposited the checks without the petitioner-payee's indorsement to the account of respondent Plastic Corporation with Producers Bank. 1993 --complete undelivered FACTS: Respondent Sima Wei executed and delivered to petitioner Bank a promissory note engaging to pay the petitioner Bank or order the amount of P1. ISSUE: Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks. Petitioner however has a right of action against Sima Wei for the balance due on the promissory note. 116320 November 29. A negotiable instrument must be delivered to the payee in order to evidence its existence as a binding contract. 1978: HCCC filed a complaint w/ the RTC against Francisco.000. Thus. and without need of the debtors knowledge  Philguarantee. entered into a contract where HCCC agreed to undertake the construction of 35 housing units and the development of 35 hectares of land. the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him. Sima Wei subsequently issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation in full settlement of the drawer's account evidenced by the promissory note. ET AL. 85419 March 9. Without the initial delivery of the instrument from the drawer to the payee. there can be no liability on the instrument. as guarantor.

should indicate that he is merely signing in behalf of the principal and must disclose the name of his principal. at the dorsal portion of the said checks to make it appear that HCCC had indorsed the checks. ISSUE: W/N Francisco can sign Ongs name on the checks and it was not forgery HELD: NO.dismmised by the Assistant City Fiscal  According to Francisco. 1979: Ong filed complaints charging Francisco with estafa thru falsification of commercial documents .  As a means of repayment. Ong allegedly issued a Certification authorizing Francisco to collect HCCCs receivables from the GSIS     RTC: favored Ong and against IBAA and Francisco November 21.475.89 for completed and delivered housing units and land development.00 in full satisfaction of its claims against IBAA.  Sometime in 1979: Ong discovered that Diaz and Francisco had executed and signed 7 checks drawn against the IBAA and payable to HCCC but were never delivered to HCCC  GSIS gave Francisco custody of the checks since she promised that she would deliver the same to HCCC. she agreed to grant HCCC the loans in the total amount of P585K and covered by 18 promissory notes in order to obviate the risk of the non-completion of the project.  Francisco forged the signature of Ong. Francisco then indorsed the checks for a second time by signing her name at the back of the checks and deposited the checks in her IBAA savings account  June 7. including the questioned checks. in any event.  Francisco had custody of the checks.13 Contract in the amount of P515. wherein HCCC acknowledged receipt of the amount of P370.493. without his knowledge or consent. authorized to sign Ongs name on the checks by virtue of the Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS. CA affirmed RTC Francisco claims that she was. when so signing. 1989: IBAA and HCCC entered into a Compromise Agreement which was approved by the trial court. Francisco should have signed her own name and expressly indicated that she was signing as an agent of HCCC . otherwise he shall be held personally liable  Instead of signing Ongs name. as proven by the check vouchers bearing her uncontested signature  Francisco forged the signature of Ong on the checks to make it appear as if Ong had indorsed said checks  The Negotiable Instruments Law provides that where any person is under obligation to indorse in a representative capacity. he may indorse in such terms as to negative personal liability  An agent. without prejudice to the right of IBAA to pursue its claims against Francisco.

were . when the check was deposited with PCIB. The check represents Ford’s tax payment for the third quarter of 1977. In an investigation. The forged signature may so closely resemble the genuine as to defy detection by the depositor himself. it was found that these checks were embezzled by the same syndicate to which Rivera was a member.14 (18)SAMSUNG CONSTRUCTION CO PHIL v FEBTC FACTS: Samsung Construction held an account with Far East Bank. No.114. PCIB. through high end manipulation. Citibank cleared the check and paid PCIB P4.311. 128604 (Ford vs Citibank and PCIB and CA). it is paying out with its own money and not of the depositor’s. The check was certified to be true by Jose Sempio. replaced the check with two of its manager’s checks.R. 121479 (Ford vs CA and Citibank and PCIB). was presented by one Roberto Gonzaga in the Makati Branch of Far East Bank. No. The said check was however presented to PCIB and PCIB accepted the same. Again.73 respectively. the assistant accountant of Samsung. and G. It was established that an employee of PCIB.114. ISSUE: W/N Far East Bank is liable to reimburse Samsung for cashing out the forged check. also a member of the syndicate. the president of the company also never signed any such check. who was also present during the time the check was cashed. On the face of the check was written “Payee’s account only” which means that the check cannot be encashed and can only be deposited with the CIR’s savings account (which is with Metrobank).R.000. No.R. if the bank pays the check.41 in favor of the Commissioner of the Internal Revenue (CIR). CIR later informed Ford that it never received the tax payment.706. 121413 (PCIB vs CA and Ford and Citibank).” The accusation of negligence on the part of Samsung was not clearly proven. If payment is made the drawee (Far East) cannot charge it to the drawer’s account (Samsung). This rule of liability can be stated briefly in these words: “A bank is bound to know its depositor’s signature. The fact that the forgery is clever is immaterial.37 and P6. Ford drew two checks in the amounts of P5.41. 23 of the Negotiable Instrument Law states that a forged signature makes the instrument “wholly inoperative”. Philippine Commercial International Bank vs Court of Appeals (2001) 350 SCRA 446 – Mercantile Law – Negotiable Instruments Law – Rights of the Holder – What Constitutes a Holder in Due Course – Negligence of the Collecting Bank and the Drawee Bank There are three cases consolidated here: G.R. 121479 In October 1977.851.591. An investigation ensued and it was discovered that Ford’s accountant Godofredo Rivera.R. G. 128604 In July 1978 and in April 1979. No. as instructed by Rivera. G. Both checks are again for tax payments.746. Rivera and the other members became fugitives of justice. which was drawn from the account of Samsung HELD: Far East Bank is liable for reimbursement. 121413/G.R. No. One day a check worth 900. Thereafter. PCIB then indorsed the check for clearing to Citibank. Both checks are for “Payee’s account only” or for the CIR’s bank savings account only with Metrobank. Ford Philippines drew a Citibank check in the amount of P4. Absence of proof to the contrary.746. Later however it was discovered that no such check was ever approved by the Samsung’s head accountant. It was further discovered that Rivera was actually a member of a syndicate and the manager’s checks were subsequently deposited with the Pacific Banking Corporation by other members of the syndicate. these checks never reached the CIR. the presumption is that the ordinary course of business was followed. payable to cash. Sec. No. And yet. created a PCIB account under a fictitious name upon which the two checks. recalled the check since there was allegedly an error in the computation of the tax to be paid. G.

to engage in paying the checks according to the tenor of the acceptance which is to deliver the payment to the “payee’s account only”. Ford has no knowledge and did not authorize such. The checks which were drawn against Ford’s account with Citibank clearly states that they are payable to the CIR only yet Citibank delivered said payments to PCIB. 128604 PCIB and Citibank are liable for the amount of the checks on a 50-50 basis.15 deposited. which it deposited to PCIB as payment and was debited from their Citibank account. the amount was withdrawn from the fictitious account by syndicate members. As a general rule. one of the checks issued by petitioner was withdrawn from PCIB for alleged mistake in the amount to be paid. according to the NBI report. ISSUE: What are the liabilities of each party? HELD: G. It failed to ascertain whether or not Rivera can validly recall the check and have them be replaced with PCIB’s manager’s checks as in fact. that PCIB and Citibank are not the only negligent parties. But the Supreme Court ruled that in the consolidated cases. . No. No. PCIB unwittingly endorsed the checks to Citibank which the latter cleared. Hence. this mitigates the liability of PCIB and Citibank hence the rate of interest.114. Citibank is likewise liable because it was negligent in the performance of its obligations with respect to its agreement with Ford. G. The Supreme Court cited Section 62 of the Negotiable Instruments Law which mandates the Citibank. Philippine Commercial International Bank vs Court of Appeals (2001) FACTS: Ford Philippines filed actions to recover from the drawee bank Citibank and collecting bank PCIB the value of several checks payable to the Commissioner of Internal Revenue which were embezzled allegedly by an organized syndicate. 121479 PCIB is liable for the amount of the check (P4. without requiring proof as to the identity of persons presenting it. It later on found out that the payment wasn’t received by the Commissioner. or making inquiries with regard to them.R. But this negligence is not the proximate cause of the loss but is merely contributory. cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party.41). PCIB is liable for the fraudulent act of its employee who set up the savings account under a fictitious name. A bank (in this case PCIB) which cashes a check drawn upon another bank (in this case Citibank). No.746. Citibank however argues that the checks were indorsed by PCIB to Citibank and that the latter has nothing to do but to pay it. 121413/G.R. a bank is liable for the negligent or tortuous act of its employees within the course and apparent scope of their employment or authority. PCIB is liable for the amount of the embezzled check. with which PCIB and Citibank is to pay Ford. which were allegedly stolen by the syndicate and deposited in their own account. Ford is also negligent for failing to examine its passbook in a timely manner which could have avoided further loss. Upon clearing.R. as a collecting bank has been negligent in verifying the authority of Rivera to negotiate the check. Meanwhile. This was replaced with manager’s check by PCIB. PCIB. Hence. What prompted this action was the drawing of a check by Ford. Nevertheless. as an acceptor of the checks. is lowered from 12% to 6% per annum.

107612 January 31. it is vital to show that the negotiation is made by the perpetrator in breach of faith amounting to fraud. It failed to establish its payments of Ford’s checks were made in due course and legally in order. The person negotiating the checks must have gone beyond the authority given by his principal. It appears although the employees of Ford initiated the transactions attributable to the organized syndicate. Tarlac" or "The Chief. doesn’t entitle the bank to shift the loss to the drawer-payor. who by virtue of his position had unusual facilities for perpetrating the fraud and imposing the forged paper upon the bank. through their own negligence.R.  A portion of the funds of the province is allocated to the Concepcion Emergency Hospital  drawn to the order of "Concepcion Emergency Hospital. Negotiable Instruments Case Digest: Associated Bank V. It should be resolved if Ford is guilty of the imputed contributory negligence that would defeat its claim for reimbursement. the checks were diverted and encashed for the eventual distribution among members of the syndicate. Note: not only PCIB but also Citibank is responsible for negligence. Concepcion Emergency Hospital. The degree of Ford’s negligence couldn’t be characterized as the proximate cause of the injury to parties. No. ISSUE: Has Ford the right to recover the value of the checks intended as payment to CIR? HELD: The checks were drawn against the drawee bank but the title of the person negotiating the same was allegedly defective because the instrument was obtained by fraud and unlawful means. Citibank was negligent in the performance of its duties as a drawee bank. It was established that instead paying the Commissioner. Concepcion. he may set up the personal defense to escape liability and recover from other parties who. Concepcion. 1996 Lessons Applicable: Forgery (Negotiable Instruments Law) FACTS:  The Province of Tarlac maintains a current account with the Philippine National Bank (PNB) Tarlac Branch where the provincial funds are deposited.  Checks issued by the Province are signed by the Provincial Treasurer and countersigned by the Provincial Auditor or the Secretary of the Sangguniang Bayan. and the proceeds of the checks were not remitted to the payee. 107382/G.16 The trial court decided in favor of Ford."  The checks are released by the Office of the Provincial Treasurer and received for the hospital by its administrative officer and cashier. . CA (1996) G. in the absence of some circumstance raising estoppel against the drawer. their actions were not the proximate cause of encashing the checks payable to CIR. No. bearing in mind that its employees were among the members of the syndicate. The mere fact that the forgery was committed by a drawer-payor’s confidential employee or agent. Tarlac. If the principal could prove that there was no negligence in the performance of his duties.R. Pursuant to this. allowed the commission of the crime.

by their acts. silence or negligence are estopped from setting up the defense of forgery.300 were encashed by Fausto Pangilinan. it was discovered that the hospital did not receive several allotment checks  February 19. collected the questioned checks from the office of the Provincial Treasurer sought to encash the 1st check with Associated Bank   Jesus David. persons negotiating by delivery and acceptors are warrantors of the genuineness of the signatures on the instrument .300 Sec. PARTIALLY GRANTED.  All the checks bore the stamp of Associated Bank which reads "All prior endorsements guaranteed ASSOCIATED BANK.  CA affrimed RTC: Associated to reimburse PNB and ordering PNB to pay Province of Tarlac ISSUE: W/N PNB and Associated Bank should be held liable HELD: YES. 23. Pangilinan followed the same procedure for the other checks.  Indorsers.  GR  A forged signature. or to enforce payment thereof against any party thereto.17  January 1981:Upon post-audit by the Provincial Auditor. manager of Associated Bank refused and suggested that Pangilinan deposit the check in his personal savings account with the same bank  Pangilinan was able to withdraw the money when the check was cleared and paid by the drawee bank. The collecting bank. is wholly inoperative and no one can gain title to the instrument through it. shall be liable to PNB for 50% of P203. can be acquired through or under such signature unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. 1978. — When a signature is forged or made without authority of the person whose signature it purports to be. FORGED SIGNATURE.  PNB did not return the questioned checks within twenty-four hours. Adena Canlas who was chief of the payee hospital. PNB. Associated Bank. with the Associated Bank acting as collecting bank. it is wholly inoperative."  Parties who warrant or admit the genuineness of the signature in question and those who. but several days later  After forging the signature of Dr. EFFECT OF.  EX: where "a party against whom it is sought to enforce a right is precluded from setting up the forgery or want of authority. 1981: After the checks were examined. whether it be that of the drawer or the payee. or to give a discharge therefor.  A person whose signature to an instrument was forged was never a party and never consented to the contract which allegedly gave rise to such instrument. and no right to retain the instrument. are precluded from using this defense. Fausto Pangilinan   administrative officer and cashier of payee hospital until his retirement on February 28. they learned that 30 checks of P203.

the payee hospital) is essential to transfer title to the same instrument. the collecting bank is bound by his warranties as an indorser and cannot set up the defense of forgery as against the drawee bank. When the holder's indorsement is forged all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto.   Payment under a forged indorsement is not to the drawer's order. the signature of its rightful holder (here.  An indorser of an order instrument warrants "that the instrument is genuine and in all respects what it purports to be.  GR: drawee bank may not debit the drawer's account and is not entitled to indemnification from the drawer . Section 23 of the PCHC Rules deleted the requirement that items bearing a forged endorsement should be returned within twenty-four hours. the former is deemed negligent and can no longer recover from the presentor  Under Section 4(c) of CB Circular No. the drawee bank canseek reimbursement or a return of the amount it paid from the presentor bank or person  However. then such loss from the forgery can be apportioned between the negligent drawer and the negligent bank  In cases involving a forged check. thereby depriving said presentor of the right to recover from the forger. a drawee bank has the duty to promptly inform the presentor of the forgery upon discovery.risk of loss must perforce fall on the drawee bank EX:   if the drawee bank can prove a failure by the customer/drawer to exercise ordinary care that substantially contributed to the making of the forged signature. when the indorsement is a forgery. . The drawer's instructions are reflected on the face and by the terms of the check. and that the instrument is at the time of his indorsement valid and subsisting  A collecting bank where a check is deposited and which indorses the check upon presentment with the drawee bank = indorser  So even if the indorsement on the check deposited by the banks's client is forged. 580. the signature of the payee or holder is unnecessary to pass title to the instrument. Hence.18  In bearer instruments. If the drawee bank delays in informing the presentor of the forgery. where the drawer's signature is forged. 25 The risk of loss must perforce fall on the drawee bank. that all prior parties had capacity to contract. that he has a good title to it. then is that the drawee bank may not debit the drawer's account and is not entitled to indemnification from the drawer. known as the drawee bank. only the person whose signature is forged can raise the defense of forgery against a holder in due course  In order instruments. the drawer is precluded from asserting the forgery  If at the same time the drawee bank was also negligent to the point of substantially contributing to the loss. is under strict liability to pay the check to the order of the payee.  The bank on which a check is drawn. the drawer can recover from the drawee bank.  In cases involving checks with forged indorsements. items bearing a forged endorsement shall be returned within twenty-Sour (24) hours after discovery of the forgery but in no event beyond the period fixed or provided by law for filing of a legal action by the returning bank.

by reason of the statutory warranty of a general indorser in section 66 of the Negotiable Instruments Law. the checks were indorsed by the collecting bank (Associated Bank) to the drawee bank (PNB)  The stamp guaranteeing prior indorsements is not an empty rubric which a bank must fulfill for the sake of convenience  It is within the bank's discretion to receive a check for no banking institution would consciously or deliberately accept a check bearing a forged indorsement. a collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements. . but several days later.19  Since PNB did not return the questioned checks within twenty-four hours. When a check is deposited with the collecting bank.  More importantly. Associated Bank alleges that PNB should be considered negligent and not entitled to reimbursement of the amount it paid on the checks. it takes a risk on its depositor. including the forged indorsement  In this case.