Philippine Education Co vs Soriano

FACTS: In April 1958, a certain Enrique Montinola was purchasing ten money orders from the Manila
Post Office. Each money order was worth P200.00. Montinola offered to pay the money orders via a
private check but the cashier told him he cannot pay via a private check. But still somehow,
Montinola was able to leave the post office with the money orders without him paying for them.

Days later, the missing money orders were discovered. Meanwhile, the Philippine Education Co., Inc.
(PECI) presented one of the missing postal money orders before the Bank of America. The money
order was initially credited and so P200.00 was deposited in PECIs account with the bank. But then
later the post office, through Mauricio Soriano (Chief of the Money Order Division of the Post Office),
advised the bank that the money order was irregularly issued hence the P200.00 was debited back
from PECIs account.

PECI is now invoking that the money order was duly negotiated to them and thus they are entitled to
the amount it represents.

ISSUE: Whether or not postal money orders are negotiable instruments.

HELD: No. Postal money orders are not negotiable instruments. The rationale behind this rule is the
fact that in establishing and operating a postal money order system, the government is not engaging
in commercial transactions but merely exercises a governmental power for the public benefit. In fact,
postal money orders are subject to a lot of restrictions limiting their negotiability. Particularly in this
case, as far back as 1948, there was already an agreement between Bank of America and the Manila
Post Office, that in case the post office would have an adverse claim against any Bank of America
depositor involving postal money orders issued by the post office, all amounts cleared in relation
thereto shall be refunded back to the post offices account with the bank this in itself is already a
limitation in the negotiability and nature of the postal money orders issued by the post office because
of the special conditions attached.
Caltex v CA

FACTS: In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs) from Security Bank and
Trust Company for the formers deposit with the said bank amounting to P1,120,000.00. The said
CTDs are couched in the following manner:

This is to Certify that B E A R E R has deposited in this Bank the sum of _______ Pesos, Philippine
Currency, repayable to said depositor _____ days. after date, upon presentation and surrender of this
certificate, with interest at the rate of ___ % per cent per annum.

Angel de la Cruz subsequently delivered the CTDs to Caltex in connection with the purchase of fuel
products from Caltex.

In March 1982, Angel de la Cruz advised Security Bank that he lost the CTDs. He executed an affidavit
of loss and submitted it to the bank. The bank then issued another set of CTDs. In the same month,
Angel de la Cruz acquired a loan of P875,000.00 and he used his time deposits as collateral.

In November 1982, a representative from Caltex went to Security Bank to present the CTDs
(delivered by de la Cruz) for verification. Caltex advised Security Bank that de la Cruz delivered
Caltex the CTDs as security for purchases he made with the latter. Security Bank refused to accept the
CTDs and instead required Caltex to present documents proving the agreement made by de la Cruz
with Caltex. Caltex however failed to produce said documents.

In April 1983, de la Cruz loan with Security bank matured and no payment was made by de la Cruz.
Security Bank eventually set-off the time deposit to pay off the loan.

Caltex sued Security Bank to compel the bank to pay off the CTDs. Security Bank argued that the
CTDs are not negotiable instruments even though the word bearer is written on their face because
the word bearer contained therein refer to depositor and only the depositor can encash the CTDs
and no one else.

ISSUE: Whether or not the certificates of time deposit are negotiable.

HELD: Yes. The CTDs indicate that they are payable to the bearer; that there is an implication that the
depositor is the bearer but as to who the depositor is, no one knows. It does not say on its face that
the depositor is Angel de la Cruz. If it was really the intention of respondent bank to pay the amount
to Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical
terms in the documents, instead of having the word BEARER stamped on the space provided for the
name of the depositor in each CTD. On the wordings of the documents, therefore, the amounts
deposited are repayable to whoever may be the bearer thereof.

Thus, de la Cruz is the depositor insofar as the bank is concerned, but obviously other parties not
privy to the transaction between them would not be in a position to know that the depositor is not
the bearer stated in the CTDs.

However, Caltex may not encash the CTDs because although the CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and agreement between Caltex and De la Cruz, requires both
delivery and indorsement. As discerned from the testimony of Caltex representative, the CTDs were
delivered to them by de la Cruz merely for guarantee or security and not as payment.
Metrobank vs CA

FACTS: Gomez opened an account with Golden Savings bank and deposited 38 treasury
warrants. All these warrants were indorsed by the cashier of Golden Savings, and deposited it
to the savings account in a Metrobank branch. They were sent later on for clearing by the
branch office to the principal office of Metrobank, which forwarded them to the Bureau of
Treasury for special clearing. On persistent inquiries on whether the warrants have been
cleared, the branch manager allowed withdrawal of the warrants, only to find out later on that
the treasury warrants have been dishonored.

ISSUE: Whether or not the treasury warrants are negotiable instruments?

HELD:
The treasury warrants were not negotiable instruments. Clearly, it is indicated that it was non-
negotiable and of equal significance is the indication that they are payable from a particular
fund, Fund 501. This indication as the source of payment to be made on the treasury warrant
makes the promise to pay conditional and the warrants themselves non-negotiable.

Metrobank then cannot contend that by indorsing the warrants in general, GS assumed that they
were genuine and in all respects what they purport it to be, in accordance to Section 66 of the NIL.
The simple reason is that the law isnt applicable to the non-negotiable treasury warrants. The
indorsement was made for the purpose of merely depositing them with Metrobank for
clearing. It was in fact Metrobank which stamped on the back of the warrants: All prior
indorsements and/or lack of endorsements guaranteed
Sesbreno v CA

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 "non-
assignable." It contained no stipulation which prohibited Philfinance from assigning or transferring
such note, in whole or in part.

**A non-negotiable 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.
Firestone Tires v CA

FACTS:
Fojas Arca and Firestone Tire entered into a franchising agreement wherein the former had the
privilege to purchase on credit the latters products. In paying for these products, the former could
pay through special withdrawal slips. In turn, Firestone would deposit these slips with Citibank.
Citibank would then honor and pay the slips. Citibank automatically credits the account of
Firestone then merely waited for the same to be honored and paid by Luzon Development
Bank. As this was the circumstances,
Firestone believed in the sufficient funding of the slips until there was a time that Citibank
informed it that one of the slips was dishonored. It wrote then a demand letter to Fojas Arca
for the payment and damages but the latter refused to pay, prompting Firestone to file an action
against
it.

HELD:
The withdrawal slips, at the outset, are non-negotiable. Hence, the rule on immediate notice of
dishonor is non-applicable to the case at hand. Thus, the bank was under no obligation to give
immediate notice that it wouldn't make payment on the subject withdrawal slips. Citibank
should have known that withdrawal slips are not negotiable instruments. It couldn't expect
then the slips be treated like checks by other entities. Payment or notice of dishonor from
respondent bank couldn't be expected immediately in contrast to the situation involving checks.

In the case at bar, Citibank relied on the fact that LDB honored and paid the withdrawal slips which
made it automatically credit the account of Firestone with the amount of the subject
withdrawal slips then merely waited for LDB to honor and pay the same. It bears stressing though
that Citibank couldn't have missed the non-negotiable character of the slips. The essence of
negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom
to be a substitute for money. The withdrawal slips in question lacked this character.

The withdrawal slips deposited were not checks as Firestone admits and Citibank generally was
not bound to accept the withdrawal slips as a valid mode of deposit. Nonetheless, Citibank
erroneously accepted the same as such and thus, must bear the risks attendant to the
acceptance of the instruments. Firestone and Citibank could not now shift the risk to LDB for their
committed mistake.
Ang Tek Lian vs CA

FACTS: In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He
said that he meant to withdraw from the bank but the banks already closed. In exchange, he gave Lee
Hua a check which is payable to the order of cash. The next day, Lee Hua presented the check for
payment but it was dishonored due to insufficiency of funds. Lee Hua eventually sued Ang Tek Lian.
In his defense, Ang Tek Lian argued that he did not indorse the check to Lee Hua and that when the
latter accepted the check without Ang tek Lians indorsement, he had done so fully aware of the risk
he was running thereby.

ISSUE: Whether or not Ang Tek Lian is correct.

HELD: No. Under the Negotiable Instruments Law (sec. 9 [d]), a check drawn payable to the order of
cash is a check payable to bearer hence a bearer instrument, and the bank may pay it to the person
presenting it for payment without the drawers indorsement. Where a check is made payable to the
order of cash, the word cash does not purport to be the name of any person, and hence the
instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but
may pay it to the person presenting it without any indorsement.