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G.R. No. 167567 22 September 2010



FACTS: Puzon was a dealer of San Miguel beer products, buying

the same on credit. To ensure payment, and as a business practice,
San Miguel required Puzon to issue postdated checks equivalent to
the value of the products purchased on credit. The checks are then
returned after full payment of the value of the transaction.

Following this arrangement, Puzon purchased products to which he

issued two checks to cover the transaction. A month later, Puzon
visited San Miguel’s Sales Office to reconcile his account with the
latter. Puzon allegedly requested to see one of the checks. When he
got hold of both checks (attached to a bond paper), he immediately
left the office, bringing the check with him.

San Miguel then sent a demand letter asking for the checks back.
After being ignored, San Miguel filed a criminal complaint for theft
against Puzon. DOJ dismissed the case on the ground that the non-
payment of a debt cannot give rise to a criminal case. It also
established that the relationship between the two is one of creditor-

CA found that the postdated checks issued were merely as a security

of his purchases and not intended to be encashed. It concluded that
SMC did not acquire ownership of the checks.

San Miguel then argued that the checks’ ownership were transferred
to it because they were issued in payment of the purchases and not
merely for security.

ISSUE: Whether or not the delivery of the checks to SMC vested

it ownership over the checks.

HELD: No, the delivery of the check did not make SMC the
owner thereof. The check was not given as payment, there being no
intent to give effect to the instrument. The Negotiable Instruments
Law provides:

Sec. 12. Antedated and postdated – The

instrument is not invalid for the reason only that it is
antedated or postdated, provided this is not done for
an illegal or fraudulent purpose. The person to
whom an instrument so dated is delivered acquires
the title thereto as of the date of delivery.
(Underscoring supplied.)

“Delivery” as a term used in Sec. 12 means that the party delivering

did so for the purpose of giving effect thereto. Otherwise, it cannot be
said that there has been delivery of the negotiable instrument. Once
there is delivery, the person to whom the instrument is delivered gets
the title to the instrument completely and irrevocably.

If the subject check was given by Puzon to SMC in payment of the

obligation, the purpose of giving effect to the instrument is evident
thus title to or ownership of the check was transferred upon delivery.
However, if the check was not given as payment, there being no
intent to give effect to the instrument, then ownership of the check
was not transferred to SMC.

The evidence of SMC failed to establish that the check was given in
payment of the obligation of Puzon. There was no provisional receipt
or official receipt issued for the amount of the check. What was
issued was a receipt for the document, a "POSTDATED CHECK

February 6, 2017

MANUEL C. UBAS, SR., Petitioner

WILSON CHAN, Respondent


Facts: Petitioner filed a complainant which alleged that

respondent, "doing business under the name and style of
UNIMASTER," was indebted to him in the amount of ₱1,500,000.00,
representing the price of construction materials allegedly purchased
by respondent from him for the construction of the Macagtas Dam.

Petitioners averred that respondent had issued three (3) bank

checks, payable to "CASH" in the amount of ₱500,000.00 each, but
when petitioner presented the subject checks for encashment on the
same were dishonored due to a stop payment order. As such,
respondent was guilty of fraud in incurring the obligation.
Respondent filed an Answer with Motion to Dismiss, seeking the
dismissal of the case on the following grounds: there is no contract
that ever existed between him and petitioner and thus the check had
no consideration and the subject check were stolen from him.

Issue: 1.) Whether or not the check issued has sufficient


2.) Whether or not the theft of a check can be a valid defense to

evade obligation under the same?

Held: 1.) Yes. The Check has sufficient consideration.

Jurisprudence holds that "in a suit for a recovery of sum of money, as
here, the plaintiff-creditor [(petitioner in this case)] has the burden of
proof to show that defendant [(respondent in this case)] had not paid
[him] the amount of the contracted loan. However, it has also been
long established that where the plaintiff-creditor possesses and
submits in evidence an instrument showing the indebtedness, a
presumption that the credit has not been satisfied arises in [his] favor.
Thus, the defendant is, in appropriate instances, required to
overcome the said presumption and present evidence to prove the
fact of payment so that no judgment will be entered against him." This
presumption stems from Section 24 of the NIL, which provides that:

Section 24. Presumption of Consideration. - Every

negotiable instrument is deemed prima facie to
have been issued for a valuable consideration; and
every person whose signature appears thereon to
have become a party thereto for value.

Hence, as the RTC correctly ruled, it is presumed that the subject

checks were issued for a valid consideration, which therefore,
dispensed with the necessity of any documentary evidence to support
petitioner's monetary claim. Unless otherwise rebutted, the legal
presumption of consideration under Section 24 of the NIL stands.

2.) No. The defense of theft is not a valid defense to evade

obligation under the check. Respondent's defense that the subject
checks were lost/stolen and, thus, were not actually issued to
petitioner is a factual matter already passed upon by the RTC. As
aptly pointed out by the trial court, it would have been contrary to
human nature and experience for petitioner to send respondent a
demand letter detailing the particulars of the said checks if he indeed
unlawfully obtained the same.

Section 16 of the NIL provides that when an instrument is no

longer in the possession of the person who signed it and it is
complete in its terms, "a valid and intentional delivery by him is
presumed until the contrary is proved," as in this case.

13 June 2012 G.R. No. 175350




FACTS: Special Steel Products (SSP) sells steel products.

International Copra Export Corp. (Interco) is it’s regular customer.
Jose Uy is Interco’s employee in charge of purchasing department,
and son-in-law of Interco’s majority stockholder.

In 1991, SSP sold welding electrodes to Interco. Corresponding

Sales Invoices were issued for the transactions
In payment for the welding electrodes, Interco issued 3 Equitable
checks payable to the order of SSP. Each check was crossed with
the notation “account payee only.”

The case records disclose that Uy presented each crossed check to

Equitable, claiming that he had good title over them. The records do
not identify the signatory for the checks, nor explain how Uy came
into possession of the checks.

Uy demanded the deposit of the checks to his personal accounts

with Equitable, which was allowed by Equitable on the assumption
that Uy – as the son-in-law of the majority stockholder, was acting
pursuant to Interco’s orders. Equitable also relied on his status as a
valued client.

SSP then reminded Interco of the unpaid welding electrodes. Interco

replied saying it already issued 3 checks payable to SSP.

After Interco found out about Uy’s scheme, it issued 3 more checks
covering the payment but only some of the interest amount, it not
being the cause of the delay.

SSP then filed a complaint for damages and writ of preliminary

attachment against Uy and Equitable alleging negligence on
Equitable’s part when they ignored the restrictive nature of the checks
and the subsequent depositing of the amount in Uy’s account.

Equitable moved to dismiss for lack of cause of action, maintaining

that, since Equitable and SSP did not enter into any contract, the
former cannot be liable for actual damages. Equitable further argued
that it is not liable because it accepted the 3 crossed checks in good
faith. Due to Uy’s close relations with the drawer of the checks, it had
basis to assume that the drawer authorized Uy to countermand the
original order.

The RTC ruled that the crossed checks belonged solely to the payee
named therein, SSPI. Since SSPI did not authorize anyone to receive
payment in its behalf, Uy clearly had no title to the checks and
Equitable had no right to accept the said checks from Uy. Equitable
was negligent in permitting Uy to deposit the checks in his account
without verifying Uy’s right to endorse the crossed checks.

It reiterated that banks have the duty to scrutinize the checks

deposited with it, for a determination of their genuineness and
regularity. The law holds banks to a high standard because banks
hold themselves out to the public as experts in the field.

ISSUE: Whether or not Equitable is grossly negligent when it

allowed Uy’s demands in having the checks deposited to his personal

HELD: Yes, banks have the duty to scrutinize the checks

deposited with it, for a determination of their genuineness and
regularity. The law holds banks to a high standard because banks
hold themselves out to the public as experts in the field.

The checks that Interco issued in favor of SSP were all crossed,
made payable to SSP’s order, and contained the notation “account
payee only.” This creates a reasonable expectation that the payee
alone would receive the proceeds of the checks and that diversion of
the checks would be averted. This expectation arises from the
accepted banking practice that crossed checks are intended for
deposit in the named payee’s account only and no other.

At the very least, the nature of crossed checks should place a bank
on notice that it should exercise more caution or expend more than a
cursory inquiry, to ascertain whether the payee on the check has
authorized the holder to deposit the same in a different account.
Equitable’s pretension that there is nothing under the circumstances
that rendered Uy’s title to the checks questionable is outrageous.
These are crossed checks, whose manner of discharge, in banking
practice, is restrictive and specific. Uy’s name does not appear
anywhere on the crossed checks. Equitable, not knowing the named
payee on the check, had no way of verifying for itself the alleged
genuineness of the indorsement to Uy. The checks bear nothing on
their face that supports the belief that the drawer gave the checks to
Uy. Uy’s relationship to Interco’s majority stockholder will not justify
disregarding what is clearly ordered on the checks.

(through Prescription)

November 20, 2017 G.R. No. 211564


SCREENEX, INC., represented by ALEXANDER G, YU,

Ponente: SERENO

Sometime in 1991, Evangelista obtained a loan from Screenex, Inc.

which issued two (2) checks to Evangelista. As security for the
payment of the loan, Evangelista gave two (2) open-dated checks:
both pay to the order of Screenex, Inc. From the time the checks
were issued by Evangelista, they were held in safe keeping together
with the other documents and papers of the company by Philip
Gotuaco, Sr., father-in-law of respondent Alexander Yu, until the
former's death on 19 November 2004.

Before the checks were deposited, there was a personal demand

from the family for Evangelista to settle the loan and likewise a
demand letter sent by the family lawyer.

On 25 August 2005, petitioner was charged with violation of Batas

Pambansa (BP) Blg. 22 with the Metropolitan Trial Court (MeTC) of
Makati City, Branch 61. Evangelista was acquitted by the MTC as Yu
failed to prove that the letter had actually been received by addressee
but held him liable for the value of the check.

Evangelista appealed to the RTC saying that any civil liability

attributable to Evangelista had been extinguished and/or was barred
by prescription. The RTC and CA affirmed Evangelista’s civil liability.
ISSUE: Whether or not Evangelista should be held liable for the

Held: No. Evagelista is not liable for the value of the check. A
check is discharged by any other act which will discharge a simple
contract for the payment of money.

By definition, a check is a bill of exchange drawn on a bank 'payable

on demand. It is a negotiable instrument - written and signed by a
drawer containing an unconditional order to pay on demand a sum
certain in money. It is an undertaking that the drawer will pay the
amount indicated thereon. Section 119 of the NIL, however, states
that a negotiable instrument like a check may be discharged by any
other act which will discharge a simple contract for the payment of
money, to wit:

Sec. 119. Instrument; how discharged. - A

negotiable instrument is discharged:…

(d) By any other act which will discharge a

simple contract for the payment of money;

A check therefore is subject to prescription of actions upon a written

contract. Article 1144 of the Civil Code provides:

Article 1144. The following actions must be

brought within ten years from the time the right of
action accrues:

1) Upon a written contract;

2) Upon an obligation created by law;

3) Upon a judgment. (Emphasis supplied)

Barring any extrajudicial or judicial demand that may toll the 10-year
prescription period and any evidence which may indicate any other
time when the obligation to pay is due, the cause of action based on
a check is reckoned from the date indicated on the check.

If the check is undated, however, as in the present petition, the cause

of action is reckoned from the date of the issuance of the check (the
year 1991). This is so because regardless of the omission of the date
indicated on the check, Section 17 of the Negotiable Instruments Law
instructs that an undated check is presumed dated as of the time of
its issuance.
Given the foregoing, the cause of action on the checks has become
stale, hence, time-barred. No written extrajudicial or judicial demand
was shown to have been made within 10 years which could have
tolled the period. Prescription has indeed set in.

Further, the delivery of the check produces the effect of payment

when through the fault of the creditor they have been impaired.

It is a settled rule that the creditor's possession of the evidence of

debt is proof that the debt has not been discharged by payment. It is
likewise an established tenet that a negotiable instrument is only a
substitute for money and not money, and the delivery of such an
instrument does not, by itself, operate as payment. Thus, in BPI v.
Spouses Royeca, we ruled that despite the lapse of three years from
the time the checks were issued, the obligation still subsisted and
was merely suspended until the payment by commercial document
could actually be realized.

However, payment is deemed effected and the obligation for which

the check was given as conditional payment is treated discharged, if
a period of 10 years or more has elapsed from the date indicated on
the check until the date of encashment or presentment for payment.
The failure to encash the checks within a reasonable time after issue,
or more than 10 years in this instance, not only results in the checks
becoming stale but also in the obligation to pay being deemed fulfilled
by operation of law.

Similarly in this case, we find that the delivery of the checks, despite
the subsequent failure to encash them within a period of 10 years or
more, had the effect of payment. Petitioner is considered discharged
from his obligation to pay and can no longer be pronounced civilly
liable for the amounts indicated thereon.



G.R. No. 219037, October 19, 2016


ODRADA, Respondent

Ponente: CARPIO
FACTS: Odrada sold a secondhand Mitsubishi Montero to Lim. Lim
initially paid P610,000, while the balance of P900,000 was financed
by RCBC through a car loan obtained by Lim.

When RCBC received the documents from Odrada, it issued two

manager's checks payable to Odrada. After the issuance of the
manager's checks and their turnover to Odrada but prior to the
checks' presentation, Lim notified Odrada in a letter dated 15 April
2002 that there was an issue regarding the roadworthiness of the

Thereafter, Odrada deposited the manager's checks with

International Exchange Bank (Ibank) on 16 April 2002 and
redeposited them on 19 April 2002 but the checks were dishonored
both times apparently upon Lim's instruction to RCBC.

1st ISSUE: Whether or not RCBC, the drawee bank of a manager's

check, has the option of refusing payment by interposing a personal
defense of the purchaser of the manager's check who delivered the
check to a third party.

HELD: YES. Jurisprudence defines a manager's check as a check

drawn by the bank's manager upon the bank itself and accepted in
advance by the bank by the act of its issuance. It is really the bank's
own check and may be treated as a promissory note with the bank as
its maker.44

Consequently, upon its purchase, the check becomes the primary

obligation of the bank and constitutes its written promise to pay the
holder upon demand. It is similar to a cashier's check both as to
effect and use in that the bank represents that the check is drawn
against sufficient funds.47anrobleslaw

As can be gleaned in a long line of cases decided by this Court, a

manager's check is accepted by the bank upon its issuance. As
compared to an ordinary bill of exchange where acceptance occurs
after the bill is presented to the drawee, the distinct feature of a
manager's check is that it is accepted in advance. Notably, the mere
issuance of a manager's check creates a privity of contract
between the holder and the drawee bank, the latter primarily
binding itself to pay according to the tenor of its acceptance.

The drawee bank, as a result, has the unconditional obligation to pay

a manager's check to a holder in due course irrespective of any
available personal defenses. However, while this Court has
consistently held that a manager's check is automatically
accepted, a holder OTHER THAN A HOLDER IN DUE COURSE is
still subject to defenses.
2ND ISSUE: If the holder of a manager's check is not a holder in due
course, can the drawee bank interpose a personal defense of the

HELD: Yes, the drawee bank of a manager's check may interpose

personal defenses of the purchaser of the manager's check if the
holder is not a holder in due course. Accordingly, the drawee bank
may refuse to pay the manager's check by interposing a personal
defense of the purchaser. Hence, the resolution of the present case
requires a determination of the status of Odrada as holder of the
manager's checks.

Section 52 of the Negotiable Instruments Law defines a holder in due

course as one who has taken the instrument under the following
(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without
notice that it has been previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it. (Emphasis supplied)

To be a holder in due course, the law requires that a party must have
acquired the instrument in good faith and for value.

Good faith means that the person taking the instrument has acted
with due honesty with regard to the rights of the parties liable on the
instrument and that at the time he took the instrument, the holder has
no knowledge of any defect or infirmity of the instrument.70 To
constitute notice of an infirmity in the instrument or defect in the title
of the person negotiating the same, the person to whom it is
negotiated must have had actual knowledge of the infirmity or defect,
or knowledge of such facts that his action in taking the instrument
would amount to bad faith. Value, on the other hand, is defined as
any consideration sufficient to support a simple contract.

In the present case, Odrada attempted to deposit the manager's

checks on 16 April 2002, a day after Lim had informed him that there
was a serious problem with the Montero. Instead of addressing the
issue, Odrada decided to deposit the manager's checks. Odrada's
actions do not amount to good faith.
Section 58 of the Negotiable Instruments Law provides: "In the hands
of any holder other than a holder in due course, a negotiable
instrument is subject to the same defenses as if it were non-
negotiable, x x x." Since Odrada was not a holder in due course, the
instrument becomes subject to personal defenses under the
Negotiable Instruments Law. Hence, RCBC may legally act on a
countermand by Lim, the purchaser of the manager's checks.


G.R. No. 173259 July 25, 2011


INC. Respondent.


FACTS: FFCCI opened a savings/current account and dollar savings

account with PNB. Its President Felipe Cruz and Secretary-Treasurer
Angelita A. Cruz were the named signatories for the said accounts.

Later, when they returned to the country, Angelita discovered that

there were applications for cashier’s and manager’s [checks] bearing
Felipe’s [signature] and were presented to and both approved by the
PNB. Thus, FFCCI demanded PNB to credit back and restore to its
account the value of the checks.

ISSUE: Whether or not PNB is guilty of negligence.

HELD: Yes, a higher degree of diligence is imposed on banks relative

to the handling of their affairs than that of an ordinary business
enterprise. Thus, the degree of responsibility, care and
trustworthiness expected of their officials and employees is far
greater than those of ordinary officers and employees in other

In the case at bar, PNB failed to meet the high standard of diligence
required by the circumstances to prevent the fraud. In Philippine Bank
of Commerce v. Court of Appeals and The Consolidated Bank &
Trust Corporation v. Court of Appeals, where the bank’s negligence is
the proximate cause of the loss and the depositor is guilty of
contributory negligence, we allocated the damages between the bank
and the depositor on a 60-40 ratio. We apply the same ruling in this
case considering that, as shown above, PNB’s negligence is the
proximate cause of the loss while the issue as to FFCCI’s
contributory negligence has been settled with finality in G.R. No.
173278. Thus, the appellate court properly adjudged PNB to bear the
greater part of the loss consistent with these rulings.