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BP 22 IS NOT UNCONSTITUTIONAL. The enactment of BP 22 is a valid exercise of the
police power and is not repugnant to the constitutional inhibition against imprisonment for debt.
The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless
check or a check that is dishonored upon its presentation for payment. It is not the non-
payment of an obligation which the law punishes. The law is not intended or designed
to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of
penal sanctions, the making of worthless checks and putting them in circulation.
Because of its deleterious effects on the public interest, the practice is proscribed by
the law. The law punishes the act not as an offense against property, but an offense against
public order.

Promissory note as a contract of adhesion. PNs can be considered a contract of
adhesion, the PNs being in standard printed form prepared by petitioner Citibank. Generally,
stipulations in a contract come about after deliberate drafting by the parties thereto, there are
certain contracts almost all the provisions of which have been drafted only by one party, usually
a corporation. Such contracts are called contracts of adhesion, because the only participation of
the party is the affixing of his signature or his "adhesion" thereto. This being the case, the terms
of such contract is to be construed strictly against the party which prepared it.

A check may be evidence of indebtedness. A check, the entries of which are in
writing, could prove a loan transaction.

Check is not a legal tender. A check is not legal tender and, therefore, cannot
constitute a valid tender of payment. Since a negotiable instrument is only a substitute for
money and not money, the delivery of such an instrument does not, by itself, operate as
payment. The obligation is not extinguished and remains suspended until the payment by
commercial document is actually realized.

Central Bank Certificate of Indebtedness is Non-Negotiable. Since the instrument
clearly stated that it was payable to Filriters, and the certificate lacked the words of negotiability
which serve as an expression of consent that the instrument may be transferred by negotiation.
Before the instruments become negotiable instruments, the instrument must conform to the
requirements under the Negotiable Instrument Law. Otherwise instrument shall not bind the


Doctrines Laid Down in Nego Cases

Rather. from the face of the instrument itself.' The definition of a certificate of deposit is all encompassing to include a savings account deposit such as ISA. ISA transactions bear a fixed term or maturity because the bank acknowledges receipt of a sum of money on deposit which the bank promises to pay the depositor. The instrument in order to be considered negotiability-i. Certificate of Time Deposits are negotiable instruments. or to some other person or his order. MLQU SCHOOL OF LAW Page 2 Doctrines Laid Down in Nego Cases . the CTA en banc ruled that a time deposit and ISA have essentially the same attributes and features. bearer or to the order of a bearer on a specified period of time. JIMENEZ VS BUCOY CAYEN CERVANCIA CABIGUEN. And according to the document. A negotiable instrument that is payable to bearer may be negotiated by mere delivery." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable specifically to him. A certificate of deposit may be payable to the depositor. The withdrawal slips lacked this character. This consent is indispensable since a maker assumes greater risk under a negotiable instrument than under a non-negotiable one. FIRESTONE TYRE AND RUBBER VS COURT OF APPEALS Withdrawal slips are non-negotiable instruments. The documents provide that the amounts deposited shall be repayable to the depositor. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute for money. to the order of the depositor. the amounts are to be repayable to the bearer of the documents or. must contain the so-called 'words of negotiability”. for that matter. The CTDs in question are negotiable instruments as they meet the requirements of the law for negotiability as provided for in Section 1 of the Negotiable Instruments Law. A time deposit transaction is covered by a certificate of deposit while petitioner's Investment Savings Account (ISA) transaction is through a passbook. the depositor is the "bearer. must be payable to 'order' or 'bearer'. whosoever may be the bearer at the time of presentment. Despite the differences in the form of any documents. Section 180 of the 1997 NIRC does not prescribed the form of a certificate of deposit. Certificate of deposit. CALTEX VS COURT OF APPEALS The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing. It explained that like time deposit. It may be any 'written acknowledgment by a bank of the receipt of money on deposit. No further act other than delivery is necessary in order to negotiate the instrument and to make the transferee a holder. CONSOLIDATED PLYWOOD VS IFC LEASING Words of Negotiability.e. that is. Section 1 of the Negotiable Instruments Law requires that a promissory note "must be payable to order or bearer. These words serve as an expression of consent that the instrument may be transferred.

the instrument may be regarded as a promissory note. (Section 3 last sentence and section CAYEN CERVANCIA CABIGUEN. if over and above the mere acknowledgment of the debt there may be collected from the words used a promise to pay it. for value received. For reference to mortgage to destroy negotiability.” are held to be promissory notes. B. For one thing." is actually an order for payment out of "a particular fund. it is indicated that they are payable from a particular fund. MLQU SCHOOL OF LAW Page 3 Doctrines Laid Down in Nego Cases .” or. ABUBAKAR VS AUDITOR GENERAL Treasury or government warrants are not negotiable instruments . Clearly stamped on their face is the word: “non-negotiable. the reason being that in establishing and operating a postal money order system. METROPOLITAN BANK AND TRUST COMPANY VS COURT OF APPEALS Treasury warrants are NON-NEGOTIABLE INSTRUMENTS. An instrument to be negotiable instrument must contain an unconditional promise or orders to pay a sum certain in money. no precise words of contract are necessary.” or. some of the restrictions imposed upon money orders by postal laws and regulations are inconsistent with the character 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. The weight of authority in the United States is that postal money orders are not negotiable instruments. the promissory note was still negotiable. Since the reference to the chattel mortgage did not make the promise to pay burdened with the terms and conditions of the chattel mortgage. the document bearing on its face the words "payable from the appropriation for food administration. a statement of the transaction which give rise to the instrument. In other words. and does not fulfill one of the essential requirements of a negotiable instrument. Section 1 of the Negotiable Instruments Law (NIL) provides that to be negotiable an instrument must contain an unconditional promise or order to pay. provided they amount. Fund 501.$325. $85 to be paid on May 5th. to wit. an indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount. U. As provided by Sec 3 of the same law provides further that an unqualified order or promise to pay is unconditional though coupled with: 1st. It is not disputed that the Philippine postal statutes were patterned after similar statutes in force in United States. But an order to promise to pay out of particular fund is not unconditional. Moreover. ELIZALDE VS BIÑAN TRANSPORT Promissory note subject to mortgage are negotiable instruments. payable on demand." and is not unconditional. the government is not engaged in commercial transactions but merely exercises a governmental power for the public benefit.” Moreover. significance being given to words of payment as indicating a promise to pay. the promise to pay must be burdened with the terms and conditions of the chattel mortgage. “Due A. “I acknowledge myself to be indebted to A in $109. to a promise to legal effect. A treasury warrant is not within the scope of the negotiable instruments law. to be paid on demand. “I O. PHILIPPINE EDUCATION VS SORIANO Postal money order is a NON-NEGOTIABLE INSTRUMENT. or 2nd. Promissory Note: To constitute a good promissory note. and this is equal significance.

Therefore. drawn in New York. it is payable here. The distinction between bearer and order instruments lies in their manner of negotiation order instrument . the following rules of construction apply: (g) Where an instrument containing the word “I promise to pay” is signed by two or more persons. The exception will cause it to bear the loss.mere delivery ANG TEK LIAN VS COURT OF APPEALS A check payable to the order of cash is a bearer instrument. the holder of a treasury warrant cannot argue that he is a holder in good faith and for value of a negotiable instrument and is entitled to the rights and privileges of a holder in due course. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others so long as the debt has not been fully collected. The drawee bank need not obtain any indorsement of the check. but may pay it to the person presenting it without any indorsement. 17. A showing of commercial bad faith on the part of the drawee bank. MLQU SCHOOL OF LAW Page 4 Doctrines Laid Down in Nego Cases .) We also know that although the amount payable is expressed in dollars — not current money here — it is still negotiable. PNB VS CONCEPCION MINING Where an instrument containing the word “I promise to pay” is signed by two or more persons. Where a check is made payable to the order of "cash". And Article 1216 of the Civil Code of the Philippines also provides as follows: ART.requires an indorsement from the payee or holder before it may be validly negotiated bearer instrument . government warrants for the payment of money are not negotiable instruments nor commercial paper.1[b] of the Negotiable Instruments Law. free from defenses PNB VS ZULUETA Draft is a Negotiable Instrument. the word cash "does not purport to be the name of any person". (See. or any transferee of the check for that matter. 1216. they are deemed to be jointly and severally liable thereon. — Where the language of the instrument is ambiguous or there are omissions therein. . they are deemed to be jointly and severally liable thereon.) In the United States. and hence the instrument is payable to bearer. SEC. The creditor may proceed against any one of the solidary debtors or some of them simultaneously. . . will work to strip it of this defense. the check is considered as a bearer instrument (Sections 8 and 9 of the NIL) EX: However. Draft is a foreign bill of exchange. because. 129 Negotiable Instruments Law. Construction where instrument is ambiguous. CAYEN CERVANCIA CABIGUEN. there is a commercial bad faith exception to the fictitious-payee rule. for it may be discharged with pesos of equivalent amount PNB VS RODRIGUEZ Bearer Instrument: GR: when the payee is fictitious or not intended to be the true recipient of the proceeds.

and not having possession over the same since possession thereof remains in the borrower. lends his money to the borrower on security of the goods which the borrower is privileged to sell. or for a special purpose only. must be made either by or under the authority of the party making. Delivery. RCBC VS HI-TRI DEVELOPMENT A managers or a cashier’s check is procured from the bank by allocating a particular amount of funds to be debited from the depositors account or by directly paying or depositing to the bank the value of the check to be drawn. It is a security agreement pursuant to which a bank acquires a security interest in the goods. when effectual. the check is deemed accepted in advance. does not tender it to the intended payee. presentment of the check to the bank for payment did not occur. and there can be no such thing as security interest that secures no obligation. of the merchandise imported or purchased. with itself as the drawee. the delivery may be shown to have been conditional. It secures a debt. Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. we find the following provision on undelivered instruments under the Negotiable Instruments Law applicable: Sec. and who may not be able to acquire credit except through utilization. and not for the purpose of transferring the property in the instrument. As between immediate parties and as regards a remote party other than a holder in due course. GO VS METROPOLITAN BANK AND TRUST COMPANY A trust receipt is considered a security transaction designed to provide financial assistance to importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise. as collateral. having no prior title to the goods on which the lien is to be constituted. clear of the lien. every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. MLQU SCHOOL OF LAW Page 5 Doctrines Laid Down in Nego Cases . Since the bank issues the check in its name. with an agreement to pay all or part of the proceeds of the sale to the lender. NOTE: Since there was no delivery.DE LA VICTORIA VS BURGOS DELIVERY of the instrument. It is a document in which is expressed a security transaction where the lender. Under Section 16 of the Negotiable Instruments Law. and. a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. or fails to make an effective delivery. when presumed. as the case may be. in order to be effectual. in such case. As ordinarily understood. In case the procurer of the managers or cashier’s check retains custody of the instrument. SAN MIGUEL CORPORATION VS PUZON JR. But where the instrument is in the hands of a holder in due course. the delivery. CAYEN CERVANCIA CABIGUEN. accepting. Issuance of a managers check does not ipso facto work as an automatic transfer of funds to the account of the payee. or indorsing. And where the instrument is no longer in the possession of a party whose signature appears thereon. An order to debit the account of respondents was never made. 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. a valid and intentional delivery by him is presumed until the contrary is proved. drawing. 16.

if the transferor had legal title. and the transferee acquires in addition. It bears stressing that the above transaction is an equitable assignment and the transferee acquires the instrument subject to defenses and equities available among prior parties. signed or dated does not necessarily fix or determine the place where they were executed. The collector is not a holder or an agent. It is the delivery that is important. is that a valid transfer of ownership of the negotiable instrument in question has taken place. Although Linton sent a collector who received the checks from the Lims at their place of business. Negotiable instruments are negotiated by transfer to one person or another in such a manner as to constitute the transferee the holder thereof. The issuance and delivery of the check must be to a person who takes it as a holder. he was just an employee. An undelivered bill is unoperative. it cannot be said that there has been delivery of the negotiable instrument. Thus. Antedated and postdated The instrument is not invalid for the reason only that it is antedated or postdated. The underlying premise of this provision. thus: Transfer without indorsement. LIM VS COURT OF APPEALS Under sec 191 of the Negotiable Instruments Law: ISSUE = 1ST delivery of the instrument complete in form to a person who takes it as a holder HOLDER = payee or indorsee of a bill/note who is in possession of it or the bearer The place where the bills were written. the right to have the indorsement of the transferor and also the right. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. to maintain legal action against the maker or acceptor or other party liable to the transferor. however. effect of. Otherwise. BPI VS COURT OF APPEALS Section 49 of the Negotiable Instruments Law contemplates a situation whereby the payee or indorsee delivers a negotiable instrument for value without indorsing it. MLQU SCHOOL OF LAW Page 6 Doctrines Laid Down in Nego Cases . the negotiation takes effect as of the time when the indorsement is actually made. the right to have the indorsement of the transferor. DELIVERY: Note however that delivery as the term is used in the aforementioned provision means that the party delivering did so for the purpose of giving effect thereto. the checks were actually issued and delivered to Linton in Navotas. as holder of the legal title. in addition. the transfer vests in the transferee such title as the transferor had therein. But for the purpose of determining whether the transferee is a holder in due course. It is the final act essential to its consummation of an obligation. Once there is delivery. provided this is not done for an illegal or fraudulent purpose.Where the holder of an instrument payable to his order transfers it for value without indorsing it. 12. the person to whom the instrument is delivered gets the title to the instrument completely and irrevocably. If payable to bearer it is negotiated by delivery. Negotiable Instrument Law Sec. the transferee acquires such title and. If payable to order it is negotiated by the indorsement completed by delivery GEMPESAW VS COURT OF APPEALS CAYEN CERVANCIA CABIGUEN.

A forged signature is wholly inoperative. However. Although rights may exist between and among parties subsequent to the forged instrument. Forgery is a real defense by the party whose signature was forged. Since his signature doesn’t appear in the instrument. the law makes an exception to these rules where party is precluded from setting up forgery as a defense. no one can gain title to the instrument through such forged indorsement. Forgery as a real defense. the same cannot be enforced against him even by a holder in due course. not one of the can acquire rights against parties prior to the forgery. Such forged instrument cuts-off the rights of all subsequent parties as against parties prior to the forgery. Such indorsement prevents any subsequent party from acquiring any right as against parties prior to the forgery. MLQU SCHOOL OF LAW Page 7 Doctrines Laid Down in Nego Cases . A party whose signature was forged was never a party and never gave his consent to the instrument. CAYEN CERVANCIA CABIGUEN. The drawee bank cannot charge the account of the drawer whose signature was forged because he never gave the bank the order to pay.