1. Postal money order is not a negotiable instrument .

It is governed by postal rules andregulation and it

may only be negotiated once

PECO V. SORIANO

39 SCRA 587

FACTS:

Montinola purchased money orders from the postal office. He issued a personal check to pay for
the money orders and since it is irregular to have checks as payments, he was advised to see the Chief of
the Money Order Division. He didn’t do so but left the office with the money orders and the check. A
notice was thereafter issued to all post offices as well as the Bank of America, about the irregularly
issued money orders and the order not to accept such orders.

Plaintiff was one of those who received the subject money orders and encashed it with the Bank
of America. At first, it was given the money but later on, his account was debited in pursuance of
the letter given by the Chief.

HELD:

Postal money orders are not negotiable instruments. In establishing and operating a postal money
order system, the government is not engaged in commercial transactions but merely exercises a
governmental power for the public benefit. Moreover, some restrictions imposed money orders by

postal laws and regulations are inconsistent with the character of negotiable instruments.

2.

Case Digest

SPS. CINCO VS CA (2009)

2 Mar 2018

MANUEL GO CINCO and ARACELI S. GO CINCO vs. COURT OF APPEALS, ESTER SERVACIO and MAASIN
TRADERS LENDING CORPORATION
[G.R. No. 151903; October 9, 2009] Obligations and Contracts| Payment or Performance|

FACTS:

Manuel Cinco obtained a commercial loan from respondent MTLC. The loan was evidenced by a
promissory note and secured by a real estate mortgage. In 1989, Manuel’s outstanding obligation
amounted to 1.07M. To pay the loan, the spouse applied another loan to PNB and offered as collateral
the same properties they previously mortgaged to MTLC. The PNB approved the P1.3M loan with a
condition that it would be released on the cancellation of the mortgage in favor of MTLC. Ester, the
MTLC’S president, upon knowing that the same properties mortgaged to MTLC was used as collateral for
the PNB loan refused to sign the deed of release/cancellation and did not collect the P1.3 M loan
proceeds. As the MTLC loan was already due, Ester instituted foreclosure proceedings against the
spouses.

RTC ruled in favor of the spouses Go Cinco. It held that creditors cannot unreasonably prevent payment
or performance of obligation to the damage and prejudice of debtors who may stand liable for payment
of higher interest rates. CA reversed the RTCs decision, hence this petition.

ISSUE:

Whether the loan due the MTLC had been extinguished.

HELD:

Obligations are extinguished by payment or performance. Under Article 1232 of the Civil Code, payment
means not only the delivery of money but also the performance, in any other manner, of an obligation.

In contracts of loan, the debtor is expected to deliver the sum of money due the creditor. These
provisions must be read in relation with the other rules on payment under the Civil Code, which rules
impliedly require acceptance by the creditor of the payment in order to extinguish an obligation.
Since payment was available and was unjustifiably refused, justice and equity demand that the spouses
Go Cinco be freed from the obligation to pay interest on the outstanding amount from the time the
unjust refusal took place, they would not have been liable for any interest from the time tender of
payment was made if the payment had only been accepted.

b. Unjust Refusal Cannot be Equated to Payment

While Esters refusal was unjustified and unreasonable, we cannot agree with Manuels position that this
refusal had the effect of payment that extinguished his obligation to MTLC. Article 1256 is clear and
unequivocal on this point when it provides that

ARTICLE 1256. If the creditor to whom tender of payment has been made refuses without just cause to
accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.
[Emphasis supplied.]

In short, a refusal without just cause is not equivalent to payment; to have the effect of payment and
the consequent extinguishment of the obligation to pay, the law requires the companion acts of tender
of payment and consignation.

Tender of payment, as defined in Far East Bank and Trust Company v. Diaz Realty, Inc.,[18] is the
definitive act of offering the creditor what is due him or her, together with the demand that the creditor
accept the same. When a creditor refuses the debtors tender of payment, the law allows the
consignation of the thing or the sum due. Tender and consignation have the effect of payment, as by
consignation, the thing due is deposited and placed at the disposal of the judicial authorities for the
creditor to collect.[19]

A sad twist in this case for Manuel was that he could not avail of consignation to extinguish his
obligation to MTLC, as PNB would not release the proceeds of the loan unless and until Ester had signed
the deed of release/cancellation of mortgage, which she unjustly refused to do. Hence, to compel Ester
to accept the loan proceeds and to prevent their mortgaged properties from being foreclosed, the
spouses Go Cinco found it necessary to institute the present case for specific performance and damages.

c. Effects of Unjust Refusal

Under these circumstances, we hold that while no completed tender of payment and consignation took
place sufficient to constitute payment, the spouses Go Cinco duly established that they have legitimately
secured a means of paying off their loan with MTLC; they were only prevented from doing so by the
unjust refusal of Ester to accept the proceeds of the PNB loan through her refusal to execute the release
of the mortgage on the properties mortgaged to MTLC. In other words, MTLC and Ester in fact
prevented the spouses Go Cinco from the exercise of their right to secure payment of their loan. No
reason exists under this legal situation why we cannot compel MTLC and Ester: (1) to release the
mortgage to MTLC as a condition to the release of the proceeds of the PNB loan, upon PNBs
acknowledgment that the proceeds of the loan are ready and shall forthwith be released; and (2) to
accept the proceeds, sufficient to cover the total amount of the loan to MTLC, as payment for Manuels
loan with MTLC.

3. Treasury Warrant

- it is a government warrant for the payment of money such as that issued in favor of a public officer or
employee covering payment or replenishment of cash advances for official expenditures. (It is payable
out of a specific fund or appropriation)

ABUBAKAR V. AUDITOR GENERAL

81 PHIL. 359

FACTS:

The auditor general refuses to authorize the payment of the treasury warrant issued in the name
of Placido Urbanes, now in the hands of Benjamin Abubakar. The auditor general refuses to do
so because, first, the money available for redemption of treasury warrants was appropriated by law
and the subject warrant doesn’t fall within the purview of the law; second, one of the requirements was
not complied with, which is it must be sworn that the holders of the warrant covering payment or
replenishment

of cash advances for official expenditures received them in payment of definite government
obligations.

HELD:

Petitioner holds 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, free from defenses. But this treasury
warrant is within the scope of the Negotiable Instruments Law. For one thing, the document
bearing on its face the words “payable from the appropriation for food administration”, is actually an
order for payment out of a particular fund, and is not unconditional, and doesn’t fulfill one of the
essential requirements of a negotiable instrument.