Letters of Credit, Trust Receipts and Negotiable Instruments Law Case Digests

MAXWELL NICKY NOTES Tahanlangit, Maxi Dominick D.
1
COMMERCIAL LAW CASE DIGESTS Xavier University-Ateneo de Cagayan
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LETTERS OF CREDIT, TRUST RECEIPTS LAW AND including DIC No., shipping marks, name of vessel, port of shipment, port
NEGOTIABLE INSTUMENTS LAW of destination, bill of lading date, sailing and ETA dates, description of
goods, size, weight, number of packages and value of goods latest two days
I. Letters of Credit after shipment date; and (6) beneficiary's certificate certifying that (a) one
set of non-negotiable copies of documents (being those listed above) have
1. HSBC vs NSC, G.R. No. 183486 been faxed to applicant (FAX No. 5294987) latest two days after shipment
date; and (b) one set of documents including one copy each of invoice and
Facts: packing list, 3/3 original bills of lading plus one non-negotiable copy and
three original Mill Test Certificates have been sent to applicant by air
Respondent National Steel Corporation (NSC) entered into an Export Sales
courier service latest two days after shipment date.
Contract (the Contract) with Klockner East Asia Limited (Klockner) on
October 12, 1993. NSC sold 1,200 metric tons of prime cold rolled coils to The Letter of Credit was amended twice to reflect changes in the terms of
Klockner under FOB ST Iligan terms. In accordance with the requirements delivery. On November 2, 1993, the Letter of Credit was first amended to
in the Contract, Klockner applied for an irrevocable letter of credit with change the delivery terms from FOB ST Iligan to FOB ST Manila and to
HSBC in favor of NSC as the beneficiary in the amount of US$468,000. On increase the amount to US$488,400. It was subsequently amended on
October 22, 1993, HSBC issued an irrevocable and onsight letter of credit November 18, 1993 to extend the expiry and shipment date to December 8,
no. HKH 239409 (the Letter of Credit) in favor of NSC. The Letter of 1993. On November 21, 1993, NSC, through Emerald Forwarding
Credit stated that it is governed by the International Chamber of Commerce Corporation, loaded and shipped the cargo of prime cold rolled coils on
Uniform Customs and Practice for Documentary Credits, Publication No. board MV Sea Dragon under China Ocean Shipping Company Bill of
400 (UCP 400). Under UCP 400, HSBC as the issuing bank, has the Lading No. HKG 266001. The cargo arrived in Hongkong on November 25,
obligation to immediately pay NSC upon presentment of the documents 1993.
listed in the Letter of Credit. These documents are: (1) one original
commercial invoice; (2) one packing list; (3) one non-negotiable copy of NSC coursed the collection of its payment from Klockner through CityTrust
clean on board ocean bill of lading made out to order, blank endorsed Banking Corporation (CityTrust). NSC had earlier obtained a loan from
marked 'freight collect and notify applicant;' (4) copy of Mill Test CityTrust secured by the proceeds of the Letter of Credit issued by HSBC.
Certificate made out 'to whom it may concern;' (5) copy of beneficiary's
telex to applicant (Telex No. 86660 Klock HX) advising shipment details
MAXWELL NICKY NOTES Tahanlangit, Maxi Dominick D. 2
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On November 29, 1993, CityTrust sent a collection order (Collection Order) On December 7, 1993, HSBC responded to SCB-M and sent a cablegram
to HSBC respecting the collection of payment from Klockner. The where it repeated that "this bill is being handled subject to [URC] 322 as
Collection Order instructed as follows: (1) deliver documents against instructed by the collecting bank." It also informed SCB-M that it has
payment; (2) cable advice of non-payment with reason; (3) cable advice referred the matter to Klockner for payment and that it will revert upon the
payment; and (4) remit proceeds via TELEX. The Collection Order also receipt of the amount. On December 8, 1993, the Letter of Credit expired.
contained the following statement: "Subject to Uniform Rules for the
Collection of Commercial Paper Publication No. 322." Further, the On December 10, 1993, HSBC sent another cablegram to SCB-M advising
Collection Order stated that proceeds should be remitted to Standard it that Klockner had refused payment. It then informed SCB-M that it
Chartered Bank of Australia, Ltd., Offshore Branch Manila (SCB-M) which intends to return the documents to NSC with all the banking charges for its
was, in turn, in charge of remitting the amount to CityTrust. 11 On the same account. In a cablegram dated December 14, 1993, CityTrust requested
date, CityTrust also presented to HSBC the following documents: (1) Letter HSBC to inform it of Klockner's reason for refusing payment so that it may
of Credit; (2) Bill of Lading; (3) Commercial Invoice; ( 4) Packing List; (5) refer the matter to NSC. HSBC did not respond and CityTrust thus sent a
Mill Test Certificate; (6) NSC's TELEX to Klockner on shipping details; (7) follow-up cablegram to HSBC on December 17, 1993. In this cablegram,
Beneficiary's Certificate of facsimile transmittal of documents; (8) CityTrust insisted that a demand for payment must be made from Klockner
Beneficiary's Certificate of air courier transmittal of documents; and (9) since the documents "were found in compliance with LC terms and
DHL Receipt No. 669988911 and Certificate of Origin. conditions." HSBC replied on the same day stating that in accordance with
CityTrust's instruction in its Collection Order, HSBC treated the transaction
On December 2, 1993, HSBC sent a cablegram to CityTrust acknowledging as a matter under URC 322. Thus, it demanded payment from Klockner
receipt of the Collection Order. It also stated that the documents will be which unfortunately refused payment for unspecified reasons. It then noted
presented to "the drawee against payment subject to UCP 322 [Uniform that under URC 322, Klockner has no duty to provide a reason for the
Rules for Collection (URC) 322] as instructed" SCB-M then sent a refusal. Hence, HSBC requested for further instructions as to whether it
cablegram to HSBC requesting the latter to urgently remit the proceeds to should continue to press for payment or return the documents. CityTrust
its account. It further asked that HSBC inform it "if unable to pay" 14 and of responded that as advised by its client, HSBC should continue to press for
the "reasons thereof." Neither CityTrust nor SCB-M objected to HSBC's payment.
statement that the collection will be handled under the Uniform Rules for
Collection (URC 322). Klockner continued to refuse payment and HSBC notified CityTrust in a
cablegram dated January 7, 1994, that should Klockner still refuse to accept
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the bill by January 12, 1994, it will return the full set of documents to In response, CityTrust sent a cablegram to HSBC dated February 21, 1994
CityTrust with all the charges for the account of the drawer. stating that it is "no longer possible for beneficiary to wait for you to get
paid by applicant." It explained that since the documents required under the
Meanwhile, on January 12, 1994, CityTrust sent a letter to NSC stating that Letter of Credit have been properly sent to HSBC, Citytrust demanded
it executed NSC's instructions "to send, ON COLLECTION BASIS, the payment from it. CityTrust also stated, for the first time in all of its
export documents ... "CityTrust also explained that its act of sending the correspondence with HSBC, that "re your previous telexes, ICC Publication
export documents on collection basis has been its usual practice in response No. 322 is not applicable." HSBC responded in cablegram dated February
to NSC's instructions in its transactions. 28, 1994. It insisted that CityTrust sent documents which clearly stated that
the collection was being made under URC 322. Thus, in accordance with its
NSC responded to this in a letter dated January 18, 1994. NSC expressed its instructions, HSBC, in the next three months, demanded payment from
disagreement with CityTrust's contention that it sent the export documents Klockner which the latter eventually refused. Hence, HSBC stated that it
to HSBC on collection basis. It highlighted that it "negotiated with opted to return the documents. It then informed CityTrust that it considered
CityTrust the export documents pertaining to LC No. HKH 239409 of the transaction closed save for the latter's obligation to pay the handling
HSBC and it was CityTrust, which wrongfully treated the negotiation, as 'on charges.
collection basis."' NSC further claimed that CityTrust used its own mistake
as an excuse against payment under the Letter of Credit. Thus, NSC argued Disagreeing with HSBC' s position, CityTrust sent a cablegram dated March
that CityTrust remains liable under the Letter of Credit. It also stated that it 9, 1994. It insisted that HSBC should pay it in accordance with the terms of
presumes that CityTrust has preserved whatever right of reimbursement it the Letter of Credit which it issued on October 22, 1993. Under the Letter of
may have against HSBC. Credit, HSBC undertook to reimburse the presenting bank under "ICC 400
upon the presentment of all necessary documents." CityTrust also stated that
On January 13, 1994, CityTrust notified HSBC that it should continue to the reference to URC 322 in its Collection Order was merely in fine print.
press for payment and to hold on to the document until further notice. The Collection Order itself was only pro-forma. CityTrust emphasized that
the reference to URC 322 has been "obviously superseded by our specific
However, Klockner persisted in its refusal to pay. Thus, on February 17, instructions to 'deliver documents against payment/cable advice non-
1994, HSBC returned the documents to CityTrust. In a letter accompanying payment with reason/cable advice payment/remit proceeds via telex' which
the returned documents, HSBC stated that it considered itself discharged of was typed in on said form." CityTrust also claimed that the controlling
its duty under the transaction. It also asked for payment of handling charges. document is the Letter of Credit and not the mere fine print on the
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Collection Order. HSBC replied on March 10, 1994. It argued that CityTrust 1995. It claimed that CityTrust instructed it to collect payment under URC
clearly instructed it to collect payment under URC 322, thus, CityTrust can 322 and never raised that it intended to collect under the Letter of
no longer claim a contrary position three months after it made its request. Credit. HSBC prayed that in the event that the court finds it liable to NSC,
HSBC repeated that the transaction is closed except for CityTrust's CityTrust should be subrogated in its place and be made directly liable to
obligation to pay for the expenses which HSBC incurred. NSC. The RTC Makati granted the motion and admitted the third party
complaint. CityTrust filed its Answer on January 8, 1996. CityTrust denied
Meanwhile, on March 3, 1994, NSC sent a letter to HSBC where it, for the that it modified the obligation. It argued that as a mere agent, it cannot
first time, demanded payment under the Letter of Credit. On March 11, modify the terms of the Letter of Credit without the consent of all the
1994, the NSC sent another letter to HSBC through the Office of the parties. Further, it explained that the supposed instruction that the
Corporate Counsel which served as its final demand. These demands were transaction is subject to URC 322 was merely in fine print in a pro forma
made after approximately four months from the expiration of the Letter of document and was superimposed and pasted over by a large pink sticker
Credit. with different remittance instructions.
Unable to collect from HSBC, NSC filed a complaint against it for After a full-blown trial, the RTC Makati rendered a decision (RTC
collection of sum of money (Complaint) docketed as Civil Case No. 94- Decision) dated February 23, 2000. It found that HSBC is not liable to pay
2122 (Collection Case) of the RTC Makati. In its Complaint, NSC alleged NSC the amount stated in the Letter of Credit. It ruled that the applicable
that it coursed the collection of the Letter of Credit through CityTrust. law is URC 322 as it was the law which CityTrust intended to apply to the
However, notwithstanding CityTrust's complete presentation of the transaction. Under URC 322, HSBC has no liability to pay when Klockner
documents in accordance with the requirements in the Letter of Credit, refused payment.
HSBC unreasonably refused to pay its obligation in the amount of
US$485,767.93. Issue:
HSBC filed its Answer on January 6, 1995. HSBC denied any liability under The central question in this case is who among the parties bears the
the Letter of Credit. It argued in its Answer that CityTrust modified the liability to pay the amount stated in the Letter of Credit. This requires a
obligation when it stated in its Collection Order that the transaction is determination of which between UCP 400 and URC 322 governs the
subject to URC 322 and not under UCP 400. It also filed a Motion to Admit transaction. The obligations of the parties under the proper applicable rule
Attached Third-Party Complaint against CityTrust on November 21, will, in turn, determine their liability.
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Ruling: UCP 400 states that an irrevocable credit payable on sight, such as the Letter
of Credit in this case, constitutes a definite undertaking of the issuing bank
Applying this set of laws and rules, this Court rules that HSBC is liable to pay, provided that the stipulated documents are presented and that the
under the provisions of the Letter of Credit, in accordance with usage and terms and conditions of the credit are complied with. Further, UCP 400
custom as embodied in UCP 400, and under the provisions of general civil provides that an issuing bank has the obligation to examine the documents
law. with reasonable care. Thus, when CityTrust forwarded the Letter of Credit
with the attached documents to HSBC, it had the duty to make a
HSBC 's Liability determination of whether its obligation to pay arose by properly examining
the documents.
The Letter of Credit categorically stated that it is subject to UCP 400, to wit:
CityTrust's Liability
Except so far as otherwise expressly stated, this documentary credit is
subject to uniform Customs and Practice for Documentary Credits (1983 When NSC obtained the services of CityTrust in collecting under the Letter
Revision), International Chamber of Commerce Publication No. 400. of Credit, it constituted CityTrust as its agent. Article 1868 of the Civil Code
states that a contract of agency exists when a person binds himself or herself
From the moment that HSBC agreed to the terms of the Letter of Credit - "to render some service or to do something in representation or on behalf of
which states that UCP 400 applies - its actions in connection with the another, with the consent or authority of the latter." In this case, CityTrust
transaction automatically became bound by the rules set in UCP 400. Even bound itself to collect under the Letter of Credit in behalf of NSC.
assuming that URC 322 is an international custom that has been recognized
in commerce, this does not change the fact that HSBC, as the issuing bank One of the obligations of an agent is to carry out the agency in accordance
of a letter of credit, undertook certain obligations dictated by the terms of with the instructions of the principal. In ascertaining NSC's instructions to
the Letter of Credit itself and by UCP 400. In Feati, this Court applied UCP CityTrust, its letter dated January 18, 1994 is determinative. In this letter,
400 even when there is no express stipulation in the letter of credit that it NSC clearly stated that it "negotiated with CityTrust the export documents
governs the transaction. On the strength of our ruling in Feati, we have the pertaining to LC No. HKH 239409 of HSBC and it was CityTrust which
legal duty to apply UCP 400 in this case independent of the parties' wrongfully treated the negotiation as 'on collection basis." HSBC
agreement to be bound by it. persistently communicated with CityTrust and consistently repeated that it
will proceed with collection under URC 322. At no point did CityTrust
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correct HSBC or seek clarification from NSC. In insisting upon its course of De Reny Fabric Industries, Inc. (De Reny) applied for, and was granted,
action, CityTrust failed to act in accordance with the instructions given by four (4) irrevocable commercial letters of credit with the Bank of Philippine
NSC, its principal. Nevertheless while this Court recognizes that CityTrust Islands (BPI). The letter of credits was used to cover the purchase of goods
committed a breach of its obligation to NSC, this carries no implications on by De Reny from its American supplier, the J.B. Distributing Company. As
the clear liability of HSBC. As this Court already mentioned, HSBC had a each shipment arrived in the Philippines, the De Reny Fabric Industries, Inc.
separate obligation that it failed to perform by reason of acts independent of made partial payments to the Bank amounting to 12,000. Further payments
CityTrust's breach of its obligation under its contract of agency. If CityTrust were, however, subsequently discontinued by the corporation when it
has incurred any liability, it is to its principal NSC. However, NSC has not became established, as a result of a chemical test conducted by the National
raised any claim against CityTrust at any point in these proceedings. Thus, Science Development Board, that the goods that arrived in Manila were
this Court cannot make any finding of liability against CityTrust in favor of colored chalks instead of dyestuffs. The corporation also refused to take
NSC. possession of these goods, and for this reason, the Bank caused them to be
deposited with a bonded warehouse paying therefor the amount of
P12,609.64 up to the filing of its complaint with the court.
2. Bank of Philippine Islands v De Reny Fabric Industries G.R. No. L-
24821 October 16, 1970 Issue:
Doctrine: Under the terms of their Commercial Letter of Credit Whether or not De Reny fabrics is liable under the letter of Credit
Agreements with the Bank, the appellants agreed that the Bank shall
not be responsible for the “existence, character, quality, quantity,
Held:
conditions, packing, value, or delivery of the property purporting to be
represented by documents; for any difference in character, quality,
quantity, condition, or value of the property from that expressed in Even without the stipulation recited above, the appellants cannot shift the
documents. Having been positively proven as a fact, the appellants are burden of loss to the Bank on account of the violation by their vendor of its
bound by this established usage. prestation. It was uncontrovertibly proven by the Bank during the trial
below that banks, in providing financing in international business
Facts: transactions such as those entered into by the appellants, do not deal with
the property to be exported or shipped to the importer, but deal only with
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documents. The existence of a custom in international banking and In case of a notifying bank, the correspondent bank assumes no liability
financing circles negating any duty on the part of a bank to verify whether except to notify and/or transmit to the beneficiary the existence of the
what has been described in letters of credits or drafts or shipping documents letter of credit.
actually tallies with what was loaded aboard ship, having been positively
proven as a fact, the appellants are bound by this established usage. They A negotiating bank, on the other hand, is a correspondent bank which
were, after all, the ones who tapped the facilities afforded by the Bank in buys or discounts a draft under the letter of credit. Its liability is
order to engage in international business. dependent upon the stage of the negotiation. If before negotiation, it has
no liability with respect to the seller but after negotiation, a contractual
Under the terms of their Commercial Letter of Credit Agreements with the relationship will then prevail between the negotiating bank and the
Bank, the appellants agreed that the Bank shall not be responsible for the seller.
“existence, character, quality, quantity, conditions, packing, value, or
delivery of the property purporting to be represented by documents; for any In the case of a confirming bank, the correspondent bank assumes a
difference in character, quality, quantity, condition, or value of the property direct obligation to the seller and its liability is a primary one as if the
from that expressed in documents,” or for “partial or incomplete shipment, correspondent bank itself had issued the letter of credit.
or failure or omission to ship any or all of the property referred to in the
Credit,” as well as “for any deviation from instructions, delay, default or Facts:
fraud by the shipper or anyone else in connection with the property the
shippers or vendors and ourselves [purchasers] or any of us.” Having agreed Bernardo Villaluz entered into a contract of sale with Axel Christiansen in
to these terms, the appellants have, therefore, no recourse but to comply which Villaluz agreed to deliver to Christiansen 2,000 cubic meters of lauan
with their covenant. logs at $27.00 per cubic meter FOB. On the arrangements made and upon
the instructions of consignee, Hanmi Trade Development, Ltd., the Security
Pacific National Bank of Los Angeles, California issued an irrevocable
3. Feati Bank and Trust Company v Court of Appeals G.R. No. 94209 letter of credit available at sight in favor of Villaluz for the sum of
April 30, 1991 $54,000.00, the total purchase price of the lauan logs.
The letter of credit was mailed to the Feati Bank and Trust Company with
the instruction to the latter that it “forward the enclosed letter of credit to the
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beneficiary.” The letter of credit also provided that the draft to be drawn is In case of a notifying bank, the correspondent bank assumes no liability
on Security Pacific National Bank and that it be accompanied by certain except to notify and/or transmit to the beneficiary the existence of the letter
documents. The logs were thereafter loaded on a vessel but Christiansen of credit.
refused to issue the certification required in paragraph 4 of the letter of
credit, despite repeated requests by the private respondent. The logs A negotiating bank, on the other hand, is a correspondent bank which buys
however were still shipped and received by consignee, to whom or discounts a draft under the letter of credit. Its liability is dependent upon
Christiansen sold the logs. Because of the absence of the certification by the stage of the negotiation. If before negotiation, it has no liability with
Christiansen, the Feati Bank and Trust company refused to advance the respect to the seller but after negotiation, a contractual relationship will then
payment on the letter of credit until such credit lapsed. Since the demands prevail between the negotiating bank and the seller.
by Villaluz for Christiansen to execute the certification proved futile, he
filed an action for mandamus and specific performance against Christiansen In the case of a confirming bank, the correspondent bank assumes a direct
and Feati Bank and Trust Company before the Court of First Instance of obligation to the seller and its liability is a primary one as if the
Rizal. Christiansen however left the Philippines and Villaluz filed an correspondent bank itself had issued the letter of credit.
amended complaint making Feati Bank and Trust Company.
In this case, the letter merely provided that the petitioner “forward the
Issue: enclosed original credit to the beneficiary.” Considering the aforesaid
instruction to the petitioner by the issuing bank, the Security Pacific
Whether or not Feati Bank is liable for Releasing the funds to Christiansen National Bank, it is indubitable that the petitioner is only a notifying bank
and not a confirming bank as ruled by the courts below.
Held:
A notifying bank is not a privy to the contract of sale between the buyer and
In commercial transactions involving letters of credit, the functions assumed the seller, its relationship is only with that of the issuing bank and not with
by a correspondent bank are classified according to the obligations taken up the beneficiary to whom he assumes no liability. It follows therefore that
by it. The correspondent bank may be called a notifying bank, a negotiating when the petitioner refused to negotiate with the private respondent, the
bank, or a confirming bank. latter has no cause of action against the petitioner for the enforcement of his
rights under the letter.
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Since the Feati was only a notifying bank, its responsibility was solely to enjoined if in the light of the purpose of the credit the payment of the
notify and/or transmit the documentary of credit to the private respondent credit would constitute fraudulent abuse of the credit.
and its obligation ends there.
Facts:
At the most, when the petitioner extended the loan to the private respondent,
it assumed the character of a negotiating bank. Even then, the petitioner will Transfield Philippines (Transfield) entered into a turn-key contract with
still not be liable, for a negotiating bank before negotiation has no Luzon Hydro Corp. (LHC).Under the contract, Transfield were to construct
contractual relationship with the seller. Whether therefore the petitioner is a a hydro-electric plants in Benguet and Ilocos. Transfield was given the sole
notifying bank or a negotiating bank, it cannot be held liable. Absent any responsibility for the design, construction, commissioning, testing and
definitive proof that it has confirmed the letter of credit or has actually completion of the Project. The contract provides for a period for which the
negotiated with Feati, the refusal by the petitioner to accept the tender of the project is to be completed and also allows for the extension of the period
private respondent is justified. provided that the extension is based on justifiable grounds such as fortuitous
event. In order to guarantee performance by Transfield, two stand-by letters
of credit were required to be opened. During the construction of the plant,
Transfield requested for extension of time citing typhoon and various
4. Transfield Philippines vs Luzon Hydro Electric Corp. GR No 146717, disputes delaying the construction. LHC did not give due course to the
Nov 22, 2004 extension of the period prayed for but referred the matter to arbitration
committee. Because of the delay in the construction of the plant, LHC called
Doctrine: The independent nature of the letter of credit may be: (a) on the stand-by letters of credit because of default. However, the demand
independence in toto where the credit is independent from the was objected by Transfield on the ground that there is still pending
justification aspect and is a separate obligation from the underlying arbitration on their request for extension of time.
agreement like for instance a typical standby; or (b) independence may
be only as to the justification aspect like in a commercial letter of credit Issue:
or repayment standby, which is identical with the same obligations
under the underlying agreement. In both cases the payment may be Whether or not LHC can collect from the letters of credit despite the
pending arbitration case
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Ruling: called “independence principle” assures the seller or the beneficiary of

prompt payment independent of any breach of the main contract and
Transfield’s argument that any dispute must first be resolved by the parties, precludes the issuing bank from determining whether the main contract is
whether through negotiations or arbitration, before the beneficiary is entitled actually accomplished or not. Under this principle, banks assume no liability
to call on the letter of credit in essence would convert the letter of credit into or responsibility for the form, sufficiency, accuracy, genuineness,
a mere guarantee. falsification or legal effect of any documents, or for the general and/or
particular conditions stipulated in the documents or superimposed thereon,
The independent nature of the letter of credit may be: (a) independence in nor do they assume any liability or responsibility for the description,
toto where the credit is independent from the justification aspect and is a quantity, weight, quality, condition, packing, delivery, value or existence of
separate obligation from the underlying agreement like for instance a typical the goods represented by any documents, or for the good faith or acts and/or
standby; or (b) independence may be only as to the justification aspect like omissions, solvency, performance or standing of the consignor, the carriers,
in a commercial letter of credit or repayment standby, which is identical or the insurers of the goods, or any other person whomsoever.
with the same obligations under the underlying agreement. In both cases the
payment may be enjoined if in the light of the purpose of the credit the
payment of the credit would constitute fraudulent abuse of the credit.
5. Metropolitan Waterworks and Sewerage System V. Hon. Reynaldo B.
Jurisprudence has laid down a clear distinction between a letter of credit and Daway G.R. No. 160732. June 21, 2004
a guarantee in that the settlement of a dispute between the parties is not a
pre-requisite for the release of funds under a letter of credit. In other words, The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not
the argument is incompatible with the very nature of the letter of credit. If a apply to the the standby letter of credit issued by the bank as the
letter of credit is drawable only after settlement of the dispute on the former prohibition is on the enforcement of claims against guarantors
contract entered into by the applicant and the beneficiary, there would be no or sureties of the debtors whose obligations are not solidary with the
practical and beneficial use for letters of credit in commercial transactions. debtor.
The engagement of the issuing bank is to pay the seller or beneficiary of the The concept of guarantee vis-à-vis the concept of an irrevocable letter
credit once the draft and the required documents are presented to it. The so- of credit are inconsistent with each other. The guarantee theory
destroys the independence of the bank’s responsibility from the
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contract upon which it was opened and the nature of both contracts is Citicorp pursuant to Sec 6 (b) of Rule 4 of the Interim Rules on Corporate
mutually in conflict with each other. A Standby Letter of Credit is not a Rehabilitation.
guaranty because under a Standby Letter of Credit, the bank
undertakes a primary obligation. On the other hand, a guarantor Issue:
undertakes a collateral obligation which arises only upon the debtor’s
default. A Standby Letter of Credit is a primary obligation and not an Whether or not the payment of the standby of letter of credit can be stayed
accessory contract. by filing of a petition for rehabilitation
Facts: Held: No. The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules
does not apply to the the standby letter of credit issued by the bank as the
Maynilad obtained a 20-year concession to manage, repair, refurbish, and former prohibition is on the enforcement of claims against guarantors or
upgrade existing Metropolitan Waterworks and Sewerage System (MWSS) sureties of the debtors whose obligations are not solidary with the debtor.
water delivery and sewerage services in Metro Manila’s west zone.
Maynilad, under the concession agreement undertook to pay concession fees The participating bank’s obligation under the letter of credit are solidary
and itsforeign loans. To secure its obligations, Maynilad was required under with respondent Maynilad in that it is a primary, direct, definite and an
Section 9 of the concession contract to put up a bond, bank guarantee or absolute undertaking to pay and is not conditioned on the prior exhaustion
other security acceptable to MWSS. Pursuant to this requirement, Maynilad of the debtors assets. These are the same characteristics of a surety or
arranged on for a three-year facility with a number of foreign banks led by solidary obligor. And being solidary, the claims against them can be pursued
Citicorp Intl for the issuance of an irrevocable standby letter of credit (SLC) separately from and independently of the rehabilitation case.
in the amount of $ 120 million in favor of MWSS for the full and prompt
payment of Maynilad’s obligations to MWSS. Due to devaluation of the
Issuing banks under the letters of credit are not equivalent to guarantors.
peso and other business reversals of Maynilad, MWSS filed a notice of
The concept of guarantee vis-à-vis the concept of an irrevocable letter of
early termination of the concession contract. Upon certification of the non
credit are inconsistent with each other. The guarantee theory destroys the
performance of Maynilad obligation, the MWSS moved to collect from
independence of the bank’s responsibility from the contract upon which it
Citicorp on the standby letters of credit issued. Maynilad filed for corporate
was opened and the nature of both contracts is mutually in conflict with
rehabilitation. Judge Daway stayed the payment of the letter of credit by
each other. In contracts of guarantee, the guarantor’s obligation is merely
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collateral and it arises only upon the default of the person primarily liable. Bank of America received an Irrevocable Letter of Credit issued by Bank of
On the other hand, in an irrevocable letter of credit, the bank undertakes a Ayudhya for the Account of General Chemicals Ltd., Inc. for the sale of
primary obligation. We have also defined a letter of credit as an engagement plastic ropes and agricultural files. Under the letter of credit, Bank of
by a bank or other person made at the request of a customer that the issuer America acted as an advising bank and Inter-Resin Industrial Corp. (IR)
shall honor drafts or other demands of payment upon compliance with the acted as the beneficiary. Upon receipt of the letter advice, Inter- Resin told
conditions specified in the credit. Bank of America to confirm the letter of credit.
A Standby Letter of Credit is not a guaranty because under a Standby Letter Notwithstanding such instruction, Bank of America failed to confirm the
of Credit, the bank undertakes a primary obligation. On the other hand, a letter of credit. Inter-Resin made a partial availment of the Letter of Credit
guarantor undertakes a collateral obligation which arises only upon the after presentment of the required documents to Bank of America. After
debtor’s default. A Standby Letter of Credit is a primary obligation and not confirmation of all the documents Bank of America issued a check in favor
an accessory contract. of IR. BA advised Bank of Ayudhya of IR’s availment under the letter of
credit and asked for the corresponding reimbursement. IR presented
documents for the second availment under the same letter of credit.
However, BA stopped the processing of such after they received a telex
6. Bank of America NT & SA v Court of Appeals and Francisco et. al from Bank of Ayudhya delaring that the LC fraudulent. BA sued IR for the
G.R. No. 105395 December 10, 1993 recovery of the first LC payment.
There would at least be three (3) parties: (a) the buyer, who procures The IR contended that Bank of America should have first checked the
the letter of credit and obliges himself to reimburse the issuing bank authenticity of the letter of credit with bank of Ayudhya
upon receipts of the documents of title; (b) the bank issuing the letter of
credit, which undertakes to pay the seller upon receipt of the draft and Issue:
proper document of titles and to surrender the documents to the buyer
upon reimbursement; and, (c) the seller, who in compliance with the Whether or not Bank of America may recover what it has paid under the
contract of sale ships the goods to the buyer and delivers the documents letter of credit to Inter-Resin
of title and draft to the issuing bank to recover payment.
Facts:
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Ruling: obtained, Inter-Resin, as the drawer of the draft, continues to assume a

contingent liability thereon.
Yes. Bank of America can recover what it has paid under the letter of credit
when the corresponding draft. Furthermore, bringing the letter of credit to the attention of the seller is the
primordial obligation of an advising bank. The view that Bank of America
There would at least be three (3) parties: (a) the buyer, who procures the should have first checked the authenticity of the letter of credit with bank of
letter of credit and obliges himself to reimburse the issuing bank upon Ayudhya, by using advanced mode of business communications, before
receipts of the documents of title; (b) the bank issuing the letter of credit, dispatching the same to Inter-Resin finds no real support.
which undertakes to pay the seller upon receipt of the draft and proper
document of titles and to surrender the documents to the buyer upon
reimbursement; and, (c) the seller, who in compliance with the contract of
sale ships the goods to the buyer and delivers the documents of title and 6. PNB v. San Miguel Corporation, G.R. No. 186063, January 15,
draft to the issuing bank to recover payment. 2014
The services of an advising (notifying) bank may be utilized to convey to Facts:

the seller the existence of the credit; or, of a confirming bank 16 which will
lend credence to the letter of credit issued by a lesser known issuing bank; SMC entered into an Exclusive Dealership Agreement with a certain
or, of a paying bank, which undertakes to encash the drafts drawn by the Rodolfo R. Goroza, wherein the latter was given by SMC the right to trade,
exporter. Further, instead of going to the place of the issuing bank to claim deal, market or otherwise sell its various beer products. Goroza applied for a
payment, the buyer may approach another bank, termed the negotiating credit line with SMC, but one of the requirements for the credit line was a
bank, 18 to have the draft discounted. letter of credit. Thus, Goroza applied for and was granted a letter of credit
by the PNB in the amount of two million pesos (₱2,000,000.00). Under the
Bank of America has acted independently as a negotiating bank, thus saving credit agreement, the PNB has the obligation to release the proceeds of
Inter-Resin from the hardship of presenting the documents directly to Bank Goroza's credit line to SMC upon presentation of the invoices and official
of Ayudhya to recover payment. As a negotiating bank, Bank of America has receipts of Goroza's purchases of SMC beer products to the PNB, Butuan
a right to recourse against the issuer bank and until reimbursement is Branch. On February 11, 1997, Goroza applied for an additional credit line
with the PNB. The latter granted Goroza a one (1) year revolving credit line
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in the amount not exceeding two million four hundred thousand sole ground that the RTC judgment found Goroza liable and ordered him to
pesos (₱2,400,000.00). Demands to pay the amount of three million seven pay the amount sought to be recovered by SMC. PNB's liability, if any,
hundred twenty-two thousand four hundred forty pesos and 88/100 under the letter of credit is yet to be determined
(₱3,722,440.88) were made by SMC against Goroza and PNB, but neither
of them paid. After summons, herein petitioner filed its Answer,while
Goroza did not. Upon respondent's Motion to Declare Defendant in II. Trust Receipts Law
Default,5 Goroza was declared in default.
1. People v Judge Nitafan G.R. Nos. 107964-66. February 1, 1999
Issue:
Doctrine: PD 115 is not barred by the constitutional prohibition against
Whether or not PNB is liable to SMB under the Letter of Credit. imprisonment for non-payment of debt. The Trust Receipts Law
punishes the dishonesty and abuse of confidence in the handling of
Ruling: money or goods to the prejudice of another, regardless of whether or
not the latter is the owner. The law does not seek to enforce payment of
The engagement of the issuing bank is to pay the seller or beneficiary of the the loan. There is thus no violation of the Constitutional right
credit once the draft and the required documents are presented to it. The so- imprisonment for non-payment of debts.
called "independence principle" assures the seller or the beneficiary of
prompt payment independent of any breach of the main contract and Facts:
precludes the issuing bank from determining whether the main contract is
actually accomplished or not. Under this principle, banks assume no liability Allied Banking Corporation filed an information for estafa against Betty Sia
or responsibility x x x “. In a letter of credit transaction, such as in this case, Ang, proprietess of Eckart Enterprises. The comlaint alleged that Ang
where the credit is stipulated as irrevocable, there is a definite undertaking received from the bank Goardon plastics amounting to P398,000 specified
by the issuing bank to pay the beneficiary provided that the stipulated in a trust receipt and covered by a Domestic Letter of Credit. Ang had the
documents are presented and the conditions of the credit are complied with. obligation to sell the goods and to account for the proceeds, if sold, or to
The obligation under the letter of credit is independent of the related and return the goods, if not sold, on or before 16 October 1980, or upon
originating contract. In brief, the letter of credit is separate and distinct demand. Despite repeated demands, Ang paid only P283,115. It was alleged
from the underlying transaction. PNB cannot evade responsibility on the that she misappropriated, misapplied and converted the balance to her own
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personal use and benefit. Ang filed a motion to quash the information, covered by the trust receipt itself. The second feature provides needed
alleging that violation of the trust receipt constitutes only a civil liability. financial assistance to traders in the importation or purchase of goods
Judge Nitafan granted the Motion to quash. Ang also questioned the through the use of the goods as collateral for the advancements made by the
constitutionality of PD 115, contending that it violates the constitutional bank. The title of the bank to the security is the one sought to be protected
prohibition for imprisonment for debt. and not the loan which is a separate and distinct agreement. Like BP 22, PD
115 punishes the act as an offense against public order, not against property.
Issue: The offense is punished as a mala prohibitum regardless of the existence of
intent or malice. A mere failure to deliver the proceeds of the sale or the
Whether or not PD 115 is constitutional. goods constitute a criminal offense that causes prejudice to another and,
more importantly, to the public interest.
Ruling:
2. Lee v. Court of Appeals G.R. NO. 117913. February 1, 2002
The Trust Receipts Law punishes the dishonesty and abuse of confidence in
the handling of money or goods to the prejudice of another, regardless of
Doctrine: A trust receipt is considered as a security transaction
whether or not the latter is the owner. The law does not seek to enforce
intended to aid in financing importers and retail dealers who do not
payment of the loan. There is thus no violation of the Constitutional right
have sufficient funds or resources to finance the importation or
imprisonment for non-payment of debts.
purchase of merchandise, and who may not be able to acquire credit
except through utilization, as collateral of the merchandise imported or
Section 1(b) of Article 315 states that one of the means by which to commit purchased.
estafa is “by misappropriating or converting, to the prejudice of another,
money, goods received by the offender in trust or under any other obligation Facts:
involving the duty to make delivery of or to return the same. It is the
failure of Ang to account for the balance that makes her liable for estafa.
Charles Lee, as President of MICO wrote private respondent Philippine
Bank of Communications (PBCom) requesting for a grant of a discounting
Trust receipt arrangements do not involve a simple loan transaction. Apart loan/credit line in the sum of Three Million Pesos (P3,000,000.00) for the
from a loan feature, the trust receipt arrangement has a security feature purpose of carrying out MICO’s line of business as well as to maintain its
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volume of business. On the same day, Charles Lee requested for another transactions were delivered to MICO or to any of the petitioners-sureties.
discounting loan/credit line of Three Million Pesos (P3,000,000.00) Petitioners-sureties allege that Chua Siok Suy was the beneficiary of the
from PBCom for the purpose of opening letters of credit and trust receipts. proceeds of the loans and that the latter made them sign the surety
nother loan of One Million Pesos (P1,000,000.00) was availed of by MICO agreements in blank. Thus, they maintain that they should not be held
from PBCom which was likewise later on renewed. Charles Lee, accountable for any liability that might arise therefrom.
Chua Siok Suy, Mariano Sio, Alfonso Yap and Richard Velasco, in their
personal capacities executed a Surety Agreement in favor Issue:
of PBComwhereby the petitioners jointly and severally, guaranteed the
prompt payment on due dates or at maturity of overdrafts, promissory notes, 1) Whether or not the proceeds of the loans and letters of credit transactions
discounts, drafts, letters of credit, bills of exchange, trust receipts, and other were ever delivered to MICO
obligations of every kind and nature, for which MICO may be held
accountable by PBCom. Charles Lee, in his capacity as president of MICO, 2) Whether or not the individual petitioners, as sureties, may be held liable
wrote PBCom and applied for an additional loan in the sum of Four Million under the two (2) Surety Agreements
Pesos (P4,000,000.00). The loan was intended for the expansion and
modernization of the company’s machineries. Upon approval of the said Ruling:
application for loan, MICO availed of the additional loan of Four Million
Pesos (P4,000,000.00). 1) Whether or not the proceeds of the loans and letters of credit transactions
were ever delivered to MICO
To secure the trust receipts transactions, MICO and Lee executed a real
estate mortgage in favor of PBCOM over several properties it owns. Upon The letter of credita, as well as the security agreements, have not merely
maturity of all credit availments obtained by MICO from PBCom, the latter created a prima facie case but have actually proved the solidary obligation
made a demand for payment. For failure of petitioner MICO to pay the of MICO and the petitioners, as sureties of MICO, in favor of respondent
obligations incurred despite repeated demands, PBCom.
PBCom extrajudicially foreclosed MICO’s real estate mortgage and sold the
said mortgaged properties in a public auction sale. Lee contends that the
While the presumption found under the Negotiable Instruments Law may
letters of credit, surety agreements and loan transactions did not ripen into
not necessarily be applicable to trust receipts and letters of credit, the
valid and binding contracts since no part of the proceeds of the loan
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presumption that the drafts drawn in connection with the letters of credit that Chua Siok Suy was duly authorized by its Board of Directors to borrow
have sufficient consideration. Under Section 3(r), Rule 131 of the Rules of money and obtain credit facilities in behalf of MICO from PBCom.
Court there is also a presumption that sufficient consideration was given in a
contract.
3. Colinares v CA G.R. No. 90828. September 5, 2000
Hence, petitioners should have presented credible evidence to rebut that
presumption as well as the evidence presented by private respondent Doctrine: The ownership of the merchandise continues to be vested in
PBCom. The letters of credit show that the pertinent materials/merchandise the person who had advanced payment until he has been paid in full, or
have been received by MICO. The drafts signed by the beneficiary/suppliers if the merchandise has already been sold, the proceeds of the sale
in connection with the corresponding letters of credit proved that said should be turned over to him by the importer or by his representative
suppliers were paid by PBCom for the account of MICO. On the other hand, or successor in interest.
aside from their bare denials petitioners did not present sufficient and
competent evidence to rebut the evidence of private respondent PBCom. Facts:
2) whether or not the individual petitioners, as sureties, may be held liable Melvin Colinares and Lordino Veloso (hereafter Petitioners) were
under the two (2) Surety Agreements contracted for a consideration of P40,000 by the Carmelite Sisters of
Cagayan de Oro City to renovate the latter’s convent at Camaman-an,
A perusal of the By-Laws of MICO, however, shows that the power to Cagayan de Oro City. Colinares applied for a commercial letter of credit
borrow money for the company and issue mortgages, bonds, deeds of trust with the Philippine Banking Corporation, Cagayan de Oro City branch
and negotiable instruments or securities, secured by mortgages or pledges of (hereafter PBC) in favor of CM Builders Centre. PBC approved the letter of
property belonging to the company is not confined solely to the president of credit for P22,389.80 to cover the full invoice value of the goods.
the corporation. The Board of Directors of MICO can also borrow money, Petitioners signed a pro-forma trust receipt as security.
arrange letters of credit, execute trust receipts and promissory notes on
behalf of the corporation.[35] Significantly, this power of the Board of PBC debited P6,720 from Petitioners’ marginal deposit as partial payment
Directors according to the by-laws of MICO, may be delegated to any of its of the loan. After the initial payment, the spouses defaulted. PBC wrote to
standing committee, officer or agent.[36] Hence, PBCom had every right to Petitioners demanding that the amount be paid within seven days from
rely on the Certification issued by MICO’s corporate secretary, P.B. Barrera, notice. Instead of complying with PBC’s demand, Veloso confessed that
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they lost P19,195.83 in the Carmelite Monastery Project and requested for a Whether or not the transaction of Colinares falls within the ambit of the
grace period of until 15 June 1980 to settle the account. Colinares Law on Trust Receipt
proposed that the terms of payment of the loan be modified P2,000 on or
before 3 December 1980, and P1,000 per month . Pending approval of the Ruling:
proposal, Petitioners paid P1,000 to PBC on 4 December 1980, and
thereafter P500 on 11 February 1981, 16 March 1981, and 20 April 1981. Colinares received the merchandise from CM Builders Centre on 30
Concurrently with the separate demand for attorney’s fees by PBC’s legal October 1979. On that day, ownership over the merchandise was already
counsel, PBC continued to demand payment of the balance. On 14 January transferred to Petitioners who were to use the materials for their
1983, Petitioners were charged with the violation of P.D. No. 115 (Trust construction project. It was only a day later, 31 October 1979, that they went
Receipts Law) in relation to Article 315 of the Revised Penal Code to the bank to apply for a loan to pay for the merchandise. This situation
belies what normally obtains in a pure trust receipt transaction where goods
During trial, petitioner Veloso insisted that the transaction was a “clean are owned by the bank and only released to the importer in trust subsequent
loan” as per verbal guarantee of Cayo Garcia Tuiza, PBC’s former manager. to the grant of the loan.
He and petitioner Colinares signed the documents without reading the fine
print, only learning of the trust receipt implication much later. When he The bank acquires a “security interest” in the goods as holder of a security
brought this to the attention of PBC, Mr. Tuiza assured him that the trust title for the advances it had made to the entrustee. The ownership of the
receipt was a mere formality. The Trust Receipts Law does not seek to merchandise continues to be vested in the person who had advanced
enforce payment of the loan, rather it punishes the dishonesty and abuse of payment until he has been paid in full, or if the merchandise has already
confidence in the handling of money or goods to the prejudice of another been sold, the proceeds of the sale should be turned over to him by the
regardless of whether the latter is the owner. Here, it is crystal clear that on importer or by his representative or successor in interest. To secure that the
the part of Petitioners there was neither dishonesty nor abuse of confidence bank shall be paid, it takes full title to the goods at the very beginning and
in the handling of money to the prejudice of PBC. Petitioners continually continues to hold that title as his indispensable security until the goods are
endeavored to meet their obligations, as shown by several receipts issued by sold and the vendee is called upon to pay for them; hence, the importer has
PBC acknowledging payment of the loan. never owned the goods and is not able to deliver possession. In a certain
manner, trust receipts partake of the nature of a conditional sale where the
Issue: importer becomes absolute owner of the imported merchandise as soon as
he has paid its price. There are two possible situations in a trust receipt
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transaction. The first is covered by the provision which refers to money On May 30, 1997, Asiatrust approved petitioner’s loan application.
received under the obligation involving the duty to deliver it (entregarla) to Petitioner was then required to sign several documents, among which are
the owner of the merchandise sold. The second is covered by the provision the Credit Line Agreement, Application and Agreement for Irrevocable L/C,
which refers to merchandise received under the obligation to “return” it Trust Receipt Agreements, and Promissory Notes. Though the Promissory
(devolvera) to the owner. Failure of the entrustee to turn over the proceeds Notes matured on September 18, 1997, the two (2) aforementioned Trust
of the sale of the goods, covered by the trust receipt to the entruster or to Receipt Agreements did not bear any maturity dates as they were left
return said goods if they were not disposed of in accordance with the terms unfilled or in blank by Asiatrust.
of the trust receipt shall be punishable as estafa under Article 315 (1) of the
Revised Penal Code, without need of proving intent to defraud. After petitioner received the goods, consisting of chemicals and metal plates
from his suppliers, he utilized them to fabricate the communication towers
ordered from him by his clients which were installed in three project sites,
namely: Isabel, Leyte; Panabo, Davao; and Tongonan.
3. Ng vs Court of Appeals, G.R. No. 173905, April 23, 2010
As petitioner realized difficulty in collecting from his client Islacom, he
Facts: failed to pay his loan to Asiatrust. Asiatrust then conducted a surprise ocular
inspection of petitioner’s business through Villarva S. Linga, Asiatrust’s
Sometime in the early part of 1997, petitioner Anthony Ng, then engaged in representative appraiser. Linga thereafter reported to Asiatrust that he found
the business of building and fabricating telecommunication towers under the that approximately 97% of the subject goods of the Trust Receipts were
trade name "Capitol Blacksmith and Builders," applied for a credit line of "sold-out and that only 3 % of the goods pertaining to PN No. 1963
PhP 3,000,000 with Asiatrust Development Bank, Inc. (Asiatrust). In remained." Asiatrust then endorsed petitioner’s account to its Account
support of Asiatrust’s credit investigation, petitioner voluntarily submitted Management Division for the possible restructuring of his loan. The parties
the following documents: (1) the contracts he had with Islacom, Smart, and thereafter held a series of conferences to work out the problem and to
Infocom; (2) the list of projects wherein he was commissioned by the said determine a way for petitioner to pay his debts. However, efforts towards a
telecommunication companies to build several steel towers; and (3) the settlement failed to be reached.
collectible amounts he has with the said companies.
On March 16, 1999, Remedial Account Officer Ma. Girlie C. Bernardez
filed a Complaint-Affidavit before the Office of the City Prosecutor of
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Quezon City. Consequently, on September 12, 1999, an Information for requirements of the Compromise Agreement was for petitioner to issue six
Estafa, as defined and penalized under Art. 315, par. 1(b) of the RPC in (6) postdated checks. Petitioner, in good faith, tried to comply by issuing
relation to Sec. 3, PD 115 or the Trust Receipts Law, was filed with the two or three checks, which were deposited and made good. The remaining
RTC. The said Information reads: checks, however, were not deposited as the Compromise Agreement did not
push through.
That on or about the 30th day of May 1997, in Quezon City, Philippines, the
above-named petitioner, did then and there willfully, unlawfully, and For his defense, petitioner argued that: (1) the loan was granted as his
feloniously defraud Ma. Girlie C. Bernardez by entering into a Trust Receipt working capital and that the Trust Receipt Agreements he signed with
Agreement with said complainant whereby said petitioner as entrustee Asiatrust were merely preconditions for the grant and approval of his loan;
received in trust from the said complainant various chemicals in the total (2) the Trust Receipt Agreement corresponding to Letter of Credit No. 1963
sum of P4.5 million with the obligation to hold the said chemicals in trust as and the Trust Receipt Agreement corresponding to Letter of Credit No. 1964
property of the entruster with the right to sell the same for cash and to remit were both contracts of adhesion, since the stipulations found in the
the proceeds thereof to the entruster, or to return the said chemicals if documents were prepared by Asiatrust in fine print; (3) unfortunately for
unsold; but said petitioner once in possession of the same, contrary to his petitioner, his contract worth PhP 18,000,000 with Islacom was not yet paid
aforesaid obligation under the trust receipt agreement with intent to defraud since there was a squabble as to the real ownership of the latter’s company,
did then and there misappropriated, misapplied and converted the said but Asiatrust was aware of petitioner’s receivables which were more than
amount to his own personal use and benefit and despite repeated demands sufficient to cover the obligation as shown in the various Project Listings
made upon him, said petitioner refused and failed and still refuses and fails with Islacom, Smart Communications, and Infocom; (4) prior to the Islacom
to make good of his obligation, to the damage and prejudice of the said Ma. problem, he had been faithfully paying his obligation to Asiatrust as shown
Girlie C. Bernardez in the amount of P2,971,650.00, Philippine Currency. in Official Receipt Nos. 549001, 549002, 565558, 577198, 577199, and
594986,6 thus debunking Asiatrust’s claim of fraud and bad faith against
Upon arraignment, petitioner pleaded not guilty to the charges. Thereafter, a him; (5) during the pendency of this case, petitioner even attempted to settle
full-blown trial ensued. his obligations as evidenced by the two United Coconut Planters Bank
Checks7 he issued in favor of Asiatrust; and (6) he had already paid PhP 1.8
During the pendency of the abovementioned case, conferences between million out of the PhP 2.971 million he owed as per Statement of Account
petitioner and Asiatrust’s Remedial Account Officer, Daniel Yap, were held. dated January 26, 2000.
Afterward, a Compromise Agreement was drafted by Asiatrust. One of the
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Issue: PD 115 Does Not Apply
Whether or not petitioner is liable for Estafa under Art. 315, par. 1(b) of the It must be remembered that petitioner was transparent to Asiatrust from the
RPC in relation to PD 115. very beginning that the subject goods were not being held for sale but were
to be used for the fabrication of steel communication towers in accordance
Ruling: with his contracts with Islacom, Smart, and Infocom. In these contracts, he
was commissioned to build, out of the materials received, steel
A trust receipt transaction is one where the entrustee has the obligation to communication towers, not to sell them.
deliver to the entruster the price of the sale, or if the merchandise is not
sold, to return the merchandise to the entruster. There are, therefore, two Considering that the goods in this case were never intended for sale but for
obligations in a trust receipt transaction: the first refers to money received use in the fabrication of steel communication towers, the trial court erred in
under the obligation involving the duty to turn it over (entregarla) to the ruling that the agreement is a trust receipt transaction.
owner of the merchandise sold, while the second refers to the merchandise
received under the obligation to "return" it (devolvera) to the owner.13 A Petitioner is not liable for Estafa both under the RPC and PD 115.
violation of any of these undertakings constitutes Estafa defined under Art.
315, par. 1(b) of the RPC, as provided in Sec. 13 of PD 115, viz: Goods Were Not Received in Trust
Section 13. Penalty Clause.—The failure of an entrustee to turn over the The first element of Estafa under Art. 315, par. 1(b) of the RPC requires that
proceeds of the sale of the goods, documents or instruments covered by a the money, goods or other personal property must be received by the
trust receipt to the extent of the amount owing to the entruster or as appears offender in trust or on commission, or for administration, or under any other
in the trust receipt or to return said goods, documents or instruments if they obligation involving the duty to make delivery of, or to return it. But as we
were not sold or disposed of in accordance with the terms of the trust receipt already discussed, the goods received by petitioner were not held in trust.
shall constitute the crime of estafa, punishable under the provisions of They were also not intended for sale and neither did petitioner have the duty
Article Three hundred fifteen, paragraph one (b) of Act Numbered Three to return them. They were only intended for use in the fabrication of steel
thousand eight hundred and fifteen, as amended, otherwise known as the communication towers.
Revised Penal Code.
No Misappropriation of Goods or Proceeds
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The second element of Estafa requires that there be misappropriation or

conversion of such money or property by the offender, or denial on his part Petitioner Land Bank of the Philippines (LBP) is a government financial
of such receipt. institution and the official depository of the Philippines. Respondents are the
officers and representatives of Asian Construction and Development
This is the very essence of Estafa under Art. 315, par. 1(b). The words Corporation (ACDC), a corporation incorporated under Philippine law and
"convert" and "misappropriated" connote an act of using or disposing of engaged in the construction business.
another’s property as if it were one’s own, or of devoting it to a purpose or
use different from that agreed upon. To misappropriate for one’s own use On June 7, 1999, LBP filed a complaint for estafa or violation of Article
includes not only conversion to one’s personal advantage, but also every 315, paragraph 1(b) of the Revised Penal Code, in relation to P.D. 115,
attempt to dispose of the property of another without a right.18 against the respondents before the City Prosecutors Office in Makati City. In
the affidavit-complaint of June 7, 1999, the LBPs Account Officer for the
Petitioner argues that there was no misappropriation or conversion on his Account Management Development, Edna L. Juan, stated that LBP
part, because his liability for the amount of the goods subject of the trust extended a credit accommodation to ACDC through the execution of an
receipts arises and becomes due only upon receipt of the proceeds of the Omnibus Credit Line Agreement (Agreement) between LBP and ACDC on
sale and not prior to the receipt of the full price of the goods. October 29, 1996. In various instances, ACDC used the Letters of
Credit/Trust Receipts Facility of the Agreement to buy construction
Petitioner is correct. Thus, assuming arguendo that the provisions of PD 115 materials. The respondents, as officers and representatives of ACDC,
apply, petitioner is not liable for Estafa because Sec. 13 of PD 115 provides executed trust receipt in connection with the construction materials, with a
that an entrustee is only liable for Estafa when he fails "to turn over the total principal amount of P52,344,096.32. The trust receipts matured, but
proceeds of the sale of the goods x x x covered by a trust receipt to the ACDC failed to return to LBP the proceeds of the construction projects or
extent of the amount owing to the entruster or as appears in the trust receipt the construction materials subject of the trust receipts. LBP sent ACDC a
in accordance with the terms of the trust receipt." demand letter, dated May 4, 1999, for the payment of its debts, including
those under the Trust Receipts Facility in the amount
of P66,425,924.39. When ACDC failed to comply with the demand letter,
4. Land Bank of the Philippines vs Perez, GR No. 166884, June 13, 2012 LBP filed the affidavit-complaint.
Facts:
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The respondents filed a joint affidavit wherein they stated that they signed Whether the disputed transactions are trust receipts
the trust receipt documents on or about the same time LBP and ACDC
executed the loan documents; their signatures were required by LBP for the Ruling:
release of the loans. The trust receipts in this case do not contain (1) a
description of the goods placed in trust, (2) their invoice values, and (3) There are two obligations in a trust receipt transaction. The first is
their maturity dates, in violation of Section 5(a) of P.D. 115. Moreover, they covered by the provision that refers to money under the obligation to
alleged that ACDC acted as a subcontractor for government projects such as deliver it (entregarla) to the owner of the merchandise sold. The second
the Metro Rail Transit, the Clark Centennial Exposition and the Quezon is covered by the provision referring to merchandise received under the
Power Plant in Mauban, Quezon. Its clients for the construction projects, obligation to return it (devolvera) to the owner.Thus, under the Trust
which were the general contractors of these projects, have not yet paid Receipts Law, intent to defraud is presumed when (1) the entrustee fails
them; thus, ACDC had yet to receive the proceeds of the materials that were to turn over the proceeds of the sale of goods covered by the trust
the subject of the trust receipts and were allegedly used for these receipt to the entruster; or (2) when the entrustee fails to return the
constructions. As there were no proceeds received from these clients, no goods under trust, if they are not disposed of in accordance with the
misappropriation thereof could have taken place. terms of the trust receipts.
On September 30, 1999, Makati Assistant City Prosecutor Amador Y. In all trust receipt transactions, both obligations on the part of the trustee
Pineda issued a Resolution[10] dismissing the complaint. He pointed out that exist in the alternative the return of the proceeds of the sale or the
the evidence presented by LBP failed to state the date when the goods return or recovery of the goods, whether raw or processed. When both
described in the letters of credit were actually released to the possession of parties enter into an agreement knowing that the return of the goods subject
the respondents. Section 4 of P.D. 115 requires that the goods covered by of the trust receipt is not possible even without any fault on the part of the
trust receipts be released to the possession of the entrustee after the latters trustee, it is not a trust receipt transaction penalized under Section 13 of P.D.
execution and delivery to the entruster of a signed trust receipt. He adds that 115; the only obligation actually agreed upon by the parties would be the
LBPs evidence also fails to show the date when the trust receipts were return of the proceeds of the sale transaction. This transaction becomes a
executed since all the trust receipts are undated. mere loan, where the borrower is obligated to pay the bank the amount spent
for the purchase of the goods.
Issue:
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Article 1371 of the Civil Code provides that [i]n order to judge the intention for the construction of an immovable property, as well as a property of the
of the contracting parties, their contemporaneous and subsequent acts shall public domain.
be principally considered. Under this provision, we can examine the
contemporaneous actions of the parties rather than rely purely on the trust
receipts that they signed in order to understand the transaction through III. Negotiable Instruments Law
their intent.
1. Metropolitan Bank v. Junnel’s Marketing Corporation, GR No.
We note in this regard that at the onset of these transactions, LBP knew that 235511, Jun 20, 2018
ACDC was in the construction business and that the materials that it sought
to buy under the letters of credit were to be used for the following projects: Facts:
the Metro Rail Transit Project and the Clark Centennial Exposition Project.
LBP had in fact authorized the delivery of the materials on the construction Respondent Junnel's Marketing Corporation (JMC) is a domestic
sites for these projects, as seen in the letters of credit it attached to its corporation engaged in the business of selling wines and liquors. It has a
complaint. Clearly, they were aware of the fact that there was no way they current account with Metrobank from which it draws checks to pay its
could recover the buildings or constructions for which the materials subject different suppliers. Among JMC's suppliers are Jardine Wines and Spirits
of the alleged trust receipts had been used.Notably, despite the allegations in (Jardine) and Premiere Wines (Premiere).
the affidavit-complaint wherein LBP sought the return of the construction
materials, its demand letter dated May 4, 1999 sought the payment of the In 2000, during an audit of its financial records, JMC discovered an
balance but failed to ask, as an alternative, for the return of the construction anomaly involving eleven (11) checks (subject checks) it had issued to the
materials or the buildings where these materials had been used. orders of Jardine and Premiere on various dates between October 1998 to
May 1999. As it was, the subject checks had already been charged against
The fact that LBP had knowingly authorized the delivery of construction JMC's current account but were, for some reason, not covered by any
materials to a construction site of two government projects, as well as official receipt from Jardine or Premiere. The subject checks, which are
unspecified construction sites, repudiates the idea that LBP intended to be all crossed checks and amounting to P1,481,292.00 in toto. Examination of
the owner of those construction materials. As a government financial the dorsal portion of the subject checks revealed that all had been deposited
institution, LBP should have been aware that the materials were to be used with Bankcom, Dau branch, under Account No. 0015-32987-7. Upon
inquiring with Jardine and Premiere, however, JMC was able to confirm that
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neither of the said suppliers owns Bankcom Account No. 0015-32987-7. 2. After stealing the subject checks, Delizo and her accomplices, Bituin
and an unknown bank manager, caused the subject checks to be
Meanwhile, on 30 April 2000, respondent Purificacion Delizo (Delizo), a deposited in Bankcom, Dau branch, under Account No. 0015-32987-
former accountant of JMC, executed a handwritten letter addressed to one 7. Bankcom, on the other hand, negligently accepted the subject
Nelvia Yusi, President of JMC. In the said letter, Delizo confessed that, checks for deposit under the said account despite the fact that they are
during her time as an accountant for JMC, she stole several company checks crossed checks payable to the orders of Jardine and Premiere and
drawn against JMC's current account. She professed that the said checks neither of them owns the concerned account.
were never given to the named payees but were forwarded by her to one
Lita Bituin (Bituin). Delizo further admitted that she, Bituin and an
unknown bank manager colluded to cause the deposit and encashing of the 3. Thereafter, Bankcom presented the subject checks for payment to
stolen checks and shared in the proceeds thereof. JMC surmised that the Metrobank which, also in negligence, decided to honor the said
subject checks are among the checks purportedly stolen by Delizo. checks even though Bankcom Account No. 0015-32987-7 belongs to
neither Jardine nor Premiere.
On 28 January 2002, JMC filed before the Regional Trial Court (RTC) of
Pasay City a complaint for sum of money against Delizo, Bankcom and On the basis of the foregoing averments, JMC prayed that Delizo, Bankcom
Metrobank. The complaint was raffled to Branch 115 and was docketed as and Metrobank be held solidarily liable in its favor for the amount of the
Civil Case No. 02-0193. In its complaint, JMC alleged that the wrongful subject checks. Delizo, Bankcom and Metrobank filed their individual
conversion of the subject checks was caused by a combination of the answers denying liability. Incorporated in Metrobank's answer, moreover, is
"tortious and felonious" scheme of Delizo and the "negligent and unlawful a cross-claim against Bankcom and Delizo wherein Metrobank asks for the
acts" of Bankcom and Metrobank, to wit: right to be reimbursed in the event it is ordered liable in favor of JMC.
Issue:
1. Delizo, by her own admission, stole the company checks of JMC.
Among these checks, as confirmed by JMC's audit, are the subject Whether Metrobank and Bankcom are absolved from their liability
checks.
Held:
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The consolidated appeals must be denied as neither Metrobank nor the presentment has done its duty to ascertain the genuineness of the
Bankcom are entitled to absolution. (1) Metrobank liable to return to JMC endorsements. If any of the warranties made by the collecting bank turns out
the entire amount of the subject checks plus interest and (2) Bankcom liable to be false, then the drawee bank may recover from it up to the amount of
to reimburse Metrobank the same amount plus interest. the check.
In cases involving the unauthorized payment of valid checks, the drawee Metrobank is liable to JMC.
bank becomes liable to the drawer for the amount of the checks but the
drawee bank, in turn, can seek reimbursement from the collecting Metrobank, as drawee bank, is liable to return to JMC the amount of the
bank. The rationale of this rule on sequence of recovery lies in the very subject checks. A drawee bank is contractually obligated to follow the
basis and nature of the liability of a drawee bank and a collecting bank in explicit instructions of its drawer-clients when paying checks issued by
said cases. As the recent case of BDO Unibank v. Lao explains that the them. The drawer's instructions-including the designation of the payee or to
liability of the drawee bank is based on its contract with the drawer and its whom the check should be paid-are reflected on the face and by the terms
duty to charge to the latter's accounts only those payables authorized by thereof. When a drawee bank pays a person other than the payee named on
him. A drawee bank is under strict liability to pay the check only to the the check, it essentially commits a breach of its obligation and renders the
payee or to the payee's order. When the drawee bank pays a person other payment it made unauthorized. In such cases and under normal
than the payee named in the check, it does not comply with the terms of the circumstances, the drawee bank may be held liable to the drawer for the
check and violates its duty to charge the drawer's account only for properly amount charged against the latter's account.
payable items. On the other hand, the liability of the collecting bank is
anchored on its guarantees as the last endorser of the check. Under Section The liability of the drawee bank to the drawer in cases of unauthorized
66 of the Negotiable Instruments Law, an endorser warrants "that the payment of checks has been regarded in jurisprudence to be strict by
instrument is genuine and in all respects what it purports to be; that he has nature. This means that once an unauthorized payment on a check has been
good title to it; that all prior parties had capacity to contract; and that the made, the resulting liability of the drawee bank to the drawer for such
instrument is at the time of his endorsement valid and subsisting." It has payment attaches even if the former had acted merely upon the guarantees
been repeatedly held that in check transactions, the collecting bank of a collecting bank. Indeed, it is only when the unauthorized payment of a
generally suffers the loss because it has the duty to ascertain the check had been caused or was attended by the fault or negligence of the
genuineness of all prior endorsements considering that the act of presenting drawer himself can the drawee bank be excused, whether wholly or
the check for payment to the drawee is an assertion that the party making partially, from being held liable to the drawer for the said payment.
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Thereafter, Robies would frequent Tobias' stall at the public market to

In the present case, it is apparent that Metrobank had breached JMC's deliver the interest earned by her deposit accounts in the amount of Php
instructions when it paid the value of the subject checks to Bankcom for the 2,000.00. In turn, Tobias would hand over her passbook to Robies for
benefit of a certain Account No. 0015-32987-7. The payment to Account updating. The passbook would be returned the following day with
No. 0015-32987-7 was unauthorized as it was established that the said typewritten entries but without the corresponding counter signatures.
account does not belong to Jardine or Premiere, the payees of the subject Tobias was later offered by Robies to sign-up in petitioner's back-to-back
checks, or to their indorsees. In addition, causal or concurring negligence on scheme which is supposedly offered only to petitioner's most valued clients.
the part of JMC had not been proven. Under such circumstances, Metrobank Under the scheme, the depositors authorize the bank to use their bank
is clearly liable to return to JMC the amount of the subject checks. deposits and invest the same in different business ventures that yield high
interest. Robies allegedly promised that the interest previously earned by
Tobias would be doubled and assured her that he will do all the paper work.
2. City State Savings vs. Tobias, G.R. No. 227990, March 07, 2018 Lured by the attractive offer, Tobias signed the pertinent documents without
reading its contents and invested a total of Php 1,800,000.00 to petitioner
Facts: through Robies. Later, Tobias became sickly, thus she included her daughter
and herein respondent Shellidie Valdez (hereinafter referred to as Valdez), as
Rolando Robles (hereinafter referred to as Robles), a certified public co-depositor in her accounts with the petitioner.
accountant, has been employed with Citystate Savings Bank (hereinafter
referred to as the petitioner) since July 1998 then as Accountant-trainee for In 2005, Robies failed to remit to respondents the interest as scheduled.
its Chino Roces Branch. On September 6, 2000, Robies was promoted as Respondents tried to reach Robies but he can no longer be found; their calls
acting manager for petitioner's Baliuag, Bulacan branch, and eventually as were also left unanswered. In a meeting with Robies' siblings, it was
manager. Sometime in 2002, respondent Teresita Tobias (hereinafter disclosed to the respondents that Robies withdrew the money and
referred to as Tobias), a meat vendor at the Baliuag Public Market, was appropriated it for personal use. Robies later talked to the respondents,
introduced by her youngest son to Robies, branch manager of petitioner's promised that he would return the money by installments and pleaded that
Baliuag, Bulacan branch. Robies persuaded Tobias to open an account with they do not report the incident to the petitioner. Robies however reneged on
the petitioner, and thereafter to place her money in some high interest rate his promise. Petitioner also refused to make arrangements for the return of
mechanism, to which the latter yielded. respondents' money despite several demands. On January 8, 2007,
respondents filed a Complaint for sum of money and damages. against
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Robles and the petitioner. In their Complaint, respondents alleged that of the bank or in the course of dealings of the officers in their representative
Robles committed fraud in the performance of his duties as branch manager capacity but not for acts outside the scope of their authority. A bank holding
when he lured Tobias in signing several pieces of blank documents, under out its officers and agent as worthy of confidence will not be permitted to
the assurance as bank manager of petitioner, everything was in order. profit by the frauds they may thus be enabled to perpetuate in the apparent
scope of their employment; nor will it be permitted to shirk its responsibility
Issue: for such frauds, even though no benefit may accrue to the bank therefrom.
Accordingly, a banking corporation is liable to innocent third persons
Whether the doctrine of apparent authority applies in the case at bar. where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in
Held: the particular case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other
The business of banking is one imbued with public interest. As such, person, for his own ultimate benefit.
banking institutions are obliged to exercise the highest degree of diligence
as well as high standards of integrity and performance in all its transactions. Application of these principles in especially necessary because banks have a
The law expressly imposes upon the banks a fiduciary duty towards its fiduciary relationship with the public and their stability depends on the
client and to treat in this regard the accounts of its depositors with confidence of the people in their honesty and efficiency. Such faith will be
meticulous care. The contract between the bank and its depositor is eroded where banks do not exercise strict care in the selection and
governed by the provisions of the Civil Code on simple loan or mutuum, supervision of its employees, resulting in prejudice to their depositors.
with the bank as the debtor and the depositor as the creditor. In light of
these, banking institutions may be held liable for damages for failure to
exercise the diligence required of it resulting to contractual breach or where 3. Equitable PCI Bank vs Tan, GR No. 165339, August 23, 2010
the act or omission complained of constitutes an actionable tort.
Facts:
The principal is liable for obligations contracted by the agent. The agent's
apparent representation yields to the principal's true representation and the Respondent Arcelito B.Tan maintained a current and savings account with
contract is considered as entered into between the principal and the third Philippine Commercial International Bank (PCIB), now petitioner Equitable
person. A bank is liable for wrongful acts of its officers done in the interests PCI Bank. On May 13, 1992, respondent issued PCIB Check No. 275100
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postdated May 30, 1992 in the amount of P34,588.72 in favor of Sulpicio consisting of unrealized income in the amount of P1,864,500.00. He also
Lines, Inc. As of May 14, 1992, respondent's balance with petitioner prayed for payment of moral damages, exemplary damages, attorney's fees
was P35,147.59. On May 14, 1992, Sulpicio Lines, Inc. deposited the and litigation expenses.
aforesaid check to its account with Solid Bank, Carbon Branch, Cebu City.
After clearing, the amount of the check was immediately debited by Respondent claimed that Check No. 275100 was a postdated check in
petitioner from respondent's account thereby leaving him with a balance of payment of Bills of Lading Nos. 15, 16 and 17, and that his account with
only P558.87. petitioner would have had sufficient funds to cover payment of the three
other checks were it not for the negligence of petitioner in immediately
Meanwhile, respondent issued three checks from May 9 to May 16, 1992, debiting from his account Check No. 275100, in the amount of P34,588.72,
specifically, PCIB Check No. 275080 dated May 9, 1992, payable to Agusan even as the said check was postdated to May 30, 1992. As a consequence of
del Sur Electric Cooperative Inc. (ASELCO) for the amount of P6,427.68; petitioner's error, which brought about the dishonor of the two checks paid
PCIB Check No. 275097 dated May 10, 1992 payable to Agusan del Norte to ASELCO and ANECO, the electric supply to his two mini-sawmills was
Electric Cooperative Inc., (ANECO) for the amount of P6,472.01; and PCIB cut off, the business operations thereof were stopped, and purchase orders
Check No. 314104 dated May 16, 1992 payable in cash for the amount were not duly served causing tremendous losses to him.
of P10,000.00. When presented for payment, PCIB Check Nos. 275080,
275097 and 314014 were dishonored for being drawn against insufficient In its defense, petitioner denied that the questioned check was postdated
funds. May 30, 1992 and claimed that it was a current check dated May 3, 1992. It
alleged further that the disconnection of the electric supply to respondent's
As a result of the dishonor of Check Nos. 275080 and 275097 which were sawmills was not due to the dishonor of the checks, but for other reasons not
payable to ASELCO and ANECO, respectively, the electric power supply attributable to the bank.
for the two mini-sawmills owned and operated by respondent, located in
Talacogon, Agusan del Sur; and in Golden Ribbon, Butuan City, was cut off After trial, the RTC, in its Decision dated June 21, 1993, ruled in favor of
on June 1, 1992 and May 28, 1992, respectively, and it was restored only on petitioner and dismissed the complaint.
July 20 and August 24, 1992, respectively.
Issue :
Due to the foregoing, respondent filed with the Regional Trial Court (RTC)
of Cebu City a complaint against petitioner, praying for payment of losses Whether Tan is entitled to damages
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the loss is not respondent's manner of writing the date of the check, as it was
Held: very clear that he intended Check No. 275100 to be dated May 30, 1992 and
not May 3, 1992. The proximate cause is petitioners own negligence in
As a business affected with public interest and because of the nature of its debiting the account of the respondent prior to the date as appearing in the
functions, the bank is under obligation to treat the accounts of its depositors check, which resulted in the subsequent dishonor of several checks issued
with meticulous care, always having in mind the fiduciary nature of their by the respondent and the disconnection by ASELCO and ANECO of his
relationship. electric supply.
The diligence required of banks, therefore, is more than that of a good father The bank on which the check is drawn, known as the drawee bank, is under
of a family. In every case, the depositor expects the bank to treat his account strict liability to pay to the order of the payee in accordance with the
with the utmost fidelity, whether such account consists only of a few drawers instructions as reflected on the face and by the terms of the check.
hundred pesos or of millions. The bank must record every single transaction Thus, payment made before the date specified by the drawer is clearly
accurately, down to the last centavo, and as promptly as possible. This has against the drawee bank's duty to its client.
to be done if the account is to reflect at any given time the amount of money
the depositor can dispose of as he sees fit, confident that the bank will
deliver it as and to whomever he directs. From the foregoing, it is clear that 4. San Miguel Corporation vs Bartolome, GR No. 167567, September
petitioner bank did not exercise the degree of diligence that it ought to have 22, 2010
exercised in dealing with its client.
Facts:
With respect to the third issue, petitioner submits that respondent's way of
writing the date on Check No. 275100 was the proximate cause of the Bartolome V. Puzon, Jr., was a dealer of beer products of petitioner San
dishonor of his three other checks. Contrary to petitioners view, the Court Miguel Corporation (SMC). Puzon purchased SMC products on credit. To
finds that its negligence is the proximate cause of respondents loss. ensure payment and as a business practice, SMC required him to issue
postdated checks equivalent to the value of the products purchased on credit
Proximate cause is that cause which, in a natural and continuous sequence, before the same were released to him. Said checks were returned to Puzon
unbroken by any efficient intervening cause, produces the injury, and when the transactions covered by these checks were paid or settled in
without which the result would not have occurred. The proximate cause of full. On December 2000, Puzon purchased products on credit and issued
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two BPI checks. to cover the said transaction. Check Nos. 27904 (for The instrument is not invalid for the reason only that it is antedated or
P309,500.00) and 27903 (forP11,510,827.00) postdated, provided this is not done for an illegal or fraudulent purpose.
The person to whom an instrument so dated is delivered acquires the
On January 23, 2001, Puzon, together with his accountant, visited the SMC title thereto as of the date of delivery.
Sales Office to reconcile his account with SMC. During that visit Puzon
allegedly requested to see BPI Check No. 17657. However, when he got Note however that delivery as the term is used in the aforementioned
hold of BPI Check No. 27903 which was attached to a bond paper together provision means that the party delivering did so for the purpose of
with BPI Check No. 17657 he allegedly immediately left the office with his giving effect thereto. Otherwise, it cannot be said that there has been
accountant, bringing the checks with them. SMC sent a letter to Puzon delivery of the negotiable instrument. Once there is delivery, the person
demanding the return of the said checks. Puzon ignored the demand to whom the instrument is delivered gets the title to the instrument
hence SMC filed a complaint against him for theft with the City completely and irrevocably.
Prosecutor’s Office of Parañaque City.
Issue:
4. Salazar vs J.Y Brothers Marketing Corporation
Whether or not the delivery of the checks to SMC vested the latter G.R. No. 171998 October 20, 2010
ownership over the checks.
Facts:
Held:
J.Y. Brothers Marketing (J.Y. Bros., for short) is a corporation engaged in
No, the delivery of the checks did not make SMC the owner thereof. The the business of selling sugar, rice and other commodities. On October 15,
check was not given as payment, there being no intent to give effect to the 1996, Anamer Salazar, a freelance sales agent, was approached by Isagani
instrument, then ownership of the check was not transferred to SMC. Sec 12 Calleja and Jess Kallos, if she knew a supplier of rice. Answering in the
of the Negotiable Instruments Law provides: Sec. 12. Antedated positive, Salazar accompanied the two to J.Y. Bros. As a consequence,
and postdated Salazar with Calleja and Kallos procured from J. Y. Bros. 300 cavans of rice
– worth P214,000.00. As payment, Salazar negotiated and indorsed to J.Y.
Bros. Prudential Bank Check No. 067481 dated October 15, 1996 issued by
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Nena Jaucian Timario in the amount of P214,000.00 with the assurance that
the check is good as cash. On that assurance, J.Y. Bros. parted with 300 (a) By payment in due course by or on behalf of the principal debtor;
cavans of rice to Salazar. However, upon presentment, the check was (b) By payment in due course by the party accommodated, where the
dishonored due to closed account. Informed of the dishonor of the check, instrument is made or accepted for his accommodation;
Calleja, Kallos and Salazar delivered to J.Y. Bros. a replacement cross Solid (c) By the intentional cancellation thereof by the holder;
Bank Check No. PA365704 dated October 29, 1996 again issued by Nena (d) By any other act which will discharge a simple contract for the
Jaucian Timario in the amount of P214,000.00 but which, just the same, payment of money;
bounced due to insufficient funds. When despite the demand letter dated (e) When the principal debtor becomes the holder of the instrument at or
February 27, 1997, Salazar failed to settle the amount due J.Y. Bros., the after maturity in his own right.
latter charged Salazar and Timario with the crime of estafa before the
Regional Trial Court of Legaspi City, docketed as Criminal Case No. 7474. And, under Article 1231 of the Civil Code, obligations are extinguished:
Issue: xxxx
Whether or not the issuance of the Solidbank crossed check discharged

petitioner from liability. (6) By novation.
Held: Petitioner’s claim that respondent’s acceptance of the Solid Bank check
which replaced the dishonored Prudential bank check resulted to novation
No. The obligation to pay a sum of money is not novated by an instrument which discharged the latter check is unmeritorious.
that expressly recognizes the old, changes only the terms of payment, adds
other obligations not incompatible with the old ones or the new contract In this case, respondents acceptance of the Solid Bank check, which
merely supplements the old one. replaced the dishonored Prudential Bank check, did not result to novation as
there was no express agreement to establish that petitioner was already
Section 119 of the Negotiable Instrument Law provides, thus: discharged from his liability to pay respondent the amount of P 214,000.00
as payment for the 300 bags of rice. As we said, novation is never
SECTION 119. Instrument; how discharged. A negotiable instrument is presumed, there must be an express intention to novate. In fact, when the
discharged: Solid Bank check was delivered to respondent, the same was also indorsed
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by petitioner which shows petitioners recognition of the existing obligation received the proceeds of 1.8M. The monthly interest dues were paid by the
to respondent to pay P 214,000.00 subject of the replaced Prudential Bank spouses Panlilio through auto debit from their PCIB account. however, they
check. defaulted in the payment because their PCIB account had insufficient
deposits.
Gonzales issued a check to Rene Unson worth 250K drawn against his
credit line but said check was subsequently dishonored due to termination of
6. Gonzales vs PCIB, GR No. 180257, February 23, 2011 gonzales’ credit line because of the unpaid period interest dues from the
loans. PCIB also froze the foreign currency deposit account of Gonzales.
Facts:
Issue:
Gonzales was a client of PCIB. He was granted a credit line by the bank
through a Credit-On-Hand-Loan Agreement (COHLA). He drew from the
Whether or not Gonzales is liable for the three promissory notes covering
credit line through a check and said credit line was secured by a collateral in
PHP1.8M loan he made with spouses Panlilio?
the form of his accounts with PCIB which was a foreign currency deposit
worth USD 8000.
Held:
He obtained below loans from PCIB:
Yes. Gonzales was an accommodation party of the loan. An accommodation
party is one who meets all the three requisites according to Sec 29 of NIL:
1. obtained with his wife- P500K
2. obtained with spouses Panlilio – P1M, P300K 1. he must be a party to the instrument, signing as a maker, drawer, acceptor,
or indorser
the above loans (total: 1.8M) were covered by 3 promissory notes and were
secured by a real estage mortgage on a land co-owned by Gonzales and 2. he must not receive value therefor
spouses Panlilio. the promissory notes states the solidary liability of
Gonzales andspouses Panlilio. However, it was the spouses Panlilio who
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3. he must sign for the purpose of lending his name or credit to some other Sentral ng Pilipinas [BSP], Purchase of Treasury Bills from the BSP, and on its
person. Savings Account Plus [SAP] product, in the amount of P18,982,734.38
an accommodation party lends his name to enable the accommodated partyy Petitioner protested the assessment on the ground that the documents subject
to obtain credit or raise money. He receives no part but assumed liability. matter of the assessment are not subject to DST. However, respondent denied the
protest on December 28, 2001.
The relation between an accommodation party is one of principal and surety,
the AP being the surety. As such, he is deemed an original promisor and Thus, petitioner filed a Petition for Review before the CTA which was raffled to
debtor from the beginning. he is considered in law as the same party as the its First Division and docketed as CTA Case No. 6396.
debtor in relation to whatever is adjudged toruching the obligation of the
latter since their liabilities are interwoven. Issue:
Lastly, the solidary nature of the loan was expressly stated in the promissory Whether or not petitioner’s Savings Account Plus with a higher interest is subject
notes which state: “…the undersigned JOINTLY AND SEVERALLY to documentary stamps tax.
promise to pay xx”.
Held:
Savings Plus Deposit Account, which has the following features:

7. Prudential Bank vs. CIR, GR No. 180390, July 27, 2011
1. Amount deposited is withdrawable anytime;
Facts:
2. The same is evidenced by a passbook;
Petitioner Prudential Bank is a banking corporation organized and existing under
Philippine law. On July 23, 1999, petitioner received from the respondent
3. The rate of interest offered is the prevailing market rate, provided
Commissioner of Internal Revenue (CIR) a Final Assessment Notice No. ST-
the depositor would maintain his minimum balance in thirty (30)
DST-95-0042-99 and a Demand Letter for deficiency Documentary Stamp Tax
days at the minimum, and should he withdraw before the period,
(DST) for the taxable year 1995 on its Repurchase Agreement with the Bangko
his deposit would earn the regular savings deposit rate;
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accounts. The said signatories on separate but coeval dates left for and
returned from the Unites States of America, Felipe on March 18, 1995 until
is subject to DST as it is essentially the same as the Special/Super Savings June 10, 1995 while Angelita followed him on March 29, 1995 and returned
Deposit Account, which are considered certificates of deposit drawing interests. ahead on May 9, 1995.
Similarly, in this case, although the money deposited in a SAP is payable anytime,
the withdrawal of the money before the expiration of 30 days results in the While they were thus out of the country, applications for cashier's and
reduction of the interest rate. In the same way, a time deposit withdrawn before its manager's [checks] bearing Felipe's [signature] were presented to and both
maturity results to a lower interest rate and payment of bank charges or penalties. approved by the PNB. The first was on March 27, 1995 for P9,950,000.00
payable to a certain Gene B. Sangalang and the other one was on April 24,
The fact that the SAP is evidenced by a passbook likewise cannot remove 1995 for P3,260,500.31 payable to one Paul Bautista. The amounts of these
its coverage from Section 180 of the old NIRC, as amended. A document to be checks were then debited by the PNB against the combo account of
considered a certificate of deposit need not be in a specific form. Thus, a passbook [FFCCI].
issued by a bank qualifies as a certificate of deposit drawing interest because it is
considered a written acknowledgement by a bank that it has accepted a deposit of When Angelita returned to the country, she had occasion to examine the
a sum of money from a depositor. PNB statements of account of [FFCCI] for the months of February to
August 1995 and she noticed the deductions of P9,950,000.00 and
P3,260,500.31. Claiming that these were unauthorized and fraudulently
8. Philippine National Bank vs. F.F. Cruz, GR No. 173259, July 25, 2011 made, [FFCCI] requested PNB to credit back and restore to its account the
value of the checks. PNB refused, and thus constrained [FFCCI] filed the
Facts: instant suit for damages against the PNB and its own accountant Aurea
Caparas (or Caparas).
In its complaint, it is alleged that [respondent F.F. Cruz & Co., Inc.]
(hereinafter FFCCI) opened savings/current or so-called combo account No. In its traverse, PNB averred lack of cause of action. It alleged that it
0219-830-146 and dollar savings account No. 0219-0502-458-6 with exercised due diligence in handling the account of [FFCCI]. The
[petitioner Philippine National Bank] (hereinafter PNB) at its Timog Avenue applications for manager's check have passed through the standard bank
Branch. Its President Felipe Cruz (or Felipe) and Secretary-Treasurer procedures and it was only after finding no infirmity that these were given
Angelita A. Cruz (or Angelita) were the named signatories for the said due course. In fact, it was no less than Caparas, the accountant of [FFCCI],
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who confirmed the regularity of the transaction. The delay of [FFCCI] in the account analyst. However, PNB did not present the account analyst to
picking up and going over the bank statements was the proximate cause of explain his or her failure to sign the box for signature and balance
its self-proclaimed injury. Had [FFCCI] been conscientious in this regard, verification of the subject applications for manager's check, thus, casting
the alleged chicanery would have been detected early on and Caparas doubt as to whether he or she did indeed verify the signatures thereon.
effectively prevented from absconding with its millions. It prayed for the Third, we cannot fault the appellate court for not giving weight to the
dismissal of the complaint. testimonies of Gallego and San Diego considering that the latter are
naturally interested in exculpating themselves from any liability arising
Issue: from the failure to detect the forgeries in the subject transactions. Fourth,
Gallego admitted that PNB's employees received training on detecting
Whether the Court of Appeals seriously erred when it found PNB guilty of forgeries from the National Bureau of Investigation. However, Emmanuel
negligence. Guzman, then NBI senior document examiner, testified, as an expert
witness, that the forged signatures in the subject applications for manager's
Held: check contained noticeable and significant differences from the genuine
signatures of FFCCI's authorized signatories and that the forgeries should
PNB is guilty of negligence. have been detected or observed by a trained signature verifier of any bank.
Preliminarily, in G.R. No. 173278, we resolved with finality that FFCCI is PNB was negligent in the handling of FFCCI's combo account, specifically,
guilty of contributory negligence, thus, making it partly liable for the loss with respect to PNB's failure to detect the forgeries in the subject
(i.e., as to 40% thereof) arising from the unauthorized withdrawal of applications for manager's check which could have prevented the loss. As
P13,210,500.31 from its combo account. The case before us is, thus, limited we have often ruled, the banking business is impressed with public trust. A
to PNB's alleged negligence in the subject transactions which the appellate higher degree of diligence is imposed on banks relative to the handling of
court found to be the proximate cause of the loss, thus, making it liable for their affairs than that of an ordinary business enterprise. Thus, the degree of
the greater part of the loss. responsibility, care and trustworthiness expected of their officials and
employees is far greater than those of ordinary officers and employees in
First, oral testimony is not as reliable as documentary evidence. Second, other enterprises. In the case at bar, PNB failed to meet the high standard of
PNB's own witness, San Diego, testified that in the verification process, the diligence required by the circumstances to prevent the fraud. In Philippine
principal duty to determine the genuineness of the signature devolved upon Bank of Commerce v. Court of Appeals and The Consolidated Bank & Trust
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Corporation v. Court of Appeals, where the bank's negligence is the found that Balmaceda, took undue advantage of his position and authority as
proximate cause of the loss and the depositor is guilty of contributory branch manager and Ramos acted in collusion with Balmaceda. On appeal,
negligence, we allocated the damages between the bank and the depositor the CA dismissed the complaint against Ramos, holding that no sufficient
on a 60-40 ratio. We apply the same ruling in this case considering that, as evidence existed to prove that Ramos colluded with Balmaceda in the
shown above, PNB's negligence is the proximate cause of the loss while the latter’s fraudulent manipulations and thus CA SET ASIDE the Decision of
issue as to FFCCI's contributory negligence has been settled with finality in the trial court insofar as Ramos is concerned. Hence this petition for review
G.R. No. 173278. Thus, the appellate court properly adjudged PNB to bear on certiorari, filed by the Philippine Commercial International Bank.
the greater part of the loss consistent with these rulings.
Issue:
9. PCIB vs. Balmaceda, G.R. No. 158143 September 21, 2011 Whether or not Ramos who received a portion of the money that Balmaceda
took from PCIB, should also be held liable for the return of this money to
Facts: the Bank.
PCIB filed an action for recovery of sum of money with damages before the Held:
RTC against Antonio Balmaceda, the Branch Manager of its Sta. Cruz,
Manila branch. In its complaint, PCIB alleged that between 1991 and 1993, No, Ramos is not liable. The Supreme Court PARTIALLY GRANTED the
Balmaceda, by taking advantage of his position as branch manager, petition and AFFIRMED the decision of the Court of Appeals dated with the
fraudulently obtained and encashed 31 Manager’s checks. PCIB then moved MODIFICATION that the award of moral and exemplary damages in favor
to be allowed to file an amended complaint to implead Rolando Ramos as of Rolando N. Ramos is DELETED. PCIB, as plaintiff, had to prove, by
one of the recipients of a portion of the proceeds from Balmaceda’s alleged preponderance of evidence, its positive assertion that Ramos conspired with
fraud. PCIB also increased the number of fraudulently obtained and Balmaceda in perpetrating the latter’s scheme to defraud the Bank. All that
encashed Manager’s checks to 34 in which the RTC granted. PCIB’s evidence proves is that Balmaceda used Ramos’ name as a payee
when he filled up the application forms for the Manager’s checks. But, as
Since Balmaceda did not file an Answer, he was declared in default. On the the CA correctly observed, the mere fact that Balmaceda made Ramos the
other hand, Ramos filed an Answer denying any knowledge of Balmaceda’s payee on some of the Manager’s checks is not enough basis to conclude that
scheme. The RTC then issued a decision in favor of PCIB, where the RTC Ramos was complicit in Balmaceda’s fraud; a number of other people were
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made payees on the other Manager’s checks yet PCIB never alleged them to result.
be liable, nor did the Bank adduce any other evidence pointing to Ramos’
participation that would justify his separate treatment from the others. Also,
while Ramos is Balmaceda’s brother-in-law, their relationship is not 10. Cayanan vs. North Star International Travel Inc., GR No. 172954,
sufficient, by itself, to render Ramos liable, absent concrete proof of his October 5, 2011
actual participation in the fraudulent scheme.
The party carrying the burden of proof must establish his case by a Facts:
preponderance of evidence, or evidence, which, to the court, is more worthy
of belief than the evidence, offered in opposition. In Encinas v. National North Star extended credit to Cayanan for air tickets of clients
Bookstore, Inc., defined "preponderance of evidence" in the following -P510,034.47, and for payment to View Sea Ventures of the amounts of
manner: "Preponderance of evidence" is the weight, credit, and value of the $60,000 which came from respondent General Manager ‘s (Virginia)
aggregate evidence on either side and is usually considered to be personal account (ordered by Cayanan), and another $40,000 by telegraphic
synonymous with the term "greater weight of the evidence" or transfer with $15,000 from petitioner. Cayanan then issued 3 checks
"greater weight of the credible evidence." Preponderance of evidence is a drawn from Republic Planters Bank (RPB) and 2 checks from PCIB. When
phrase, which, in the last analysis, means probability of the truth. It is drawn for payment, the checks from PCIB amounting to 1.5M and 35,000
evidence, which is more convincing to the court as worthy of belief than were dishonored for insufficiency of funds while the 3 checks from RPB
that which is offered in opposition thereto. were dishonored due to a stop payment by Cayanan. Upon demand for
payment, Cayanan failed to settle. 5 violations of BP 22 were filed by North
Ramos’ participation in Balmaceda’s scheme was not proven by PCIB by Star in MeTC. which found Cayanan Guilty. On Appeal, the RTC acquitted
preponderance of evidence. Given that PCIB failed to establish Ramos’ him. The CA, however, held Cayanan civilly liable. The Supreme Court
participation in Balmaceda’s scheme, it was not even necessary for Ramos held that Cayanan’s defense that there was no consideration for the issuance
to provide an explanation for the money he received from Balmaceda. Even of checks could not hold as he has not presented credible evidence to rebut
if the evidence adduced by the plaintiff appears stronger than that presented presumption that the checks were issued for a valuable consideration.
by the defendant, a judgment cannot be entered in the plaintiff’s favor if his
evidence still does not suffice to sustain his cause of action; to reiterate, a Issue:
preponderance of evidence as defined must be established to achieve this
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1. Whether or not the checks issued by Cayanan were for valuable consideration. Having failed to settle his obligation (loan) under the checks, the appellate
court was correct in holding petitioner liable to pay the value of the five
2. Whether or not Cayanan is liable to North Star for the value of the checks. checks he issued in favor of North Star.
Held:
1. Yes, checks were issued for a valuable consideration. Cayanan has not 11. Allied Bank vs. BPI, GR No. 188363, February 27, 2013
presented credible evidence to rebut the presumption that checks were
issued for a valuable consideration. Facts:
Contrary to petitioners claims that North Star did not give On October 10, 2002, a check in the amount of P1,000,000.00 payable to
any valuable consideration for the checks since the US$85,000 was taken “Mateo Mgt. Group International” (MMGI) was presented for deposit and
from the personal dollar account of Virginia and not the corporate funds of accepted at petitioner’s Kawit Branch. The check, post-dated “Oct. 9,
North Star, the fact that petitioner himself specifically named North Star as 2003”, was drawn against the account of Marciano Silva, Jr. (Silva) with
the payee of the checks is an admission of his liability to North Star and not respondent Bank of the Philippine Islands (BPI) Bel-Air Branch. Upon
to Virginia Balagtas. Also, his defense that dollars sent to View Sea in receipt, petitioner sent the check for clearing to respondent through the
Nigeria was Virginia’s own investment could not hold as she only remitted Philippine Clearing House Corporation (PCHC).
such money due to Cayanan’s request/ instructions – this he never denied. It
was him who had business transactions with View Sea and not Virginia. The check was cleared by respondent and petitioner credited the account of
Transaction between North Star and Cayanan was actually in the nature of a loan, and MMGI with P1,000,000.00. On October 22, 2002, MMGI’s account was
checks were issued as payment of such hence there was no absence of consideration for closed and all the funds therein were withdrawn. A month later, Silva
the issuance of checks. discovered the debit of P1,000,000.00 from his account. In response to
Silva’s complaint, respondent credited his account with the aforesaid sum.
2. Yes, Cayanan is liable.
On March 21, 2003, respondent returned a photocopy of the check to
petitioner for the reason: “Postdated.” Petitioner, however, refused to accept
and sent back to respondent a photocopy of the check. Thereafter, the check,
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or more accurately, the Charge Slip, was tossed several times from situation of the parties does not involve a “Ping-Pong” controversy since the
petitioner to respondent, and back to petitioner, until on May 6, 2003, subject check was neither returned within the reglementary time or through
respondent requested the PCHC to take custody of the check. Acting on the the PCHC return window, nor coursed through the clearing facilities of the
request, PCHC directed the respondent to deliver the original check and PCHC.
informed it of PCHC’s authority under Clearing House Operating Memo
(CHOM) No. 279 dated 06 September 1996 to split 50/50 the amount of the As to respondent’s direct presentation of a photocopy of the subject check, it
check subject of a “Ping-Pong” controversy which shall be implemented was declared to be without legal basis because Section 21.1 of the CHRR
thru the issuance of Debit Adjustment Tickets against the outward demands 2000 does not apply to post-dated checks. The Arbitration Committee
of the banks involved. PCHC likewise encouraged respondent to submit the further noted that respondent not only failed to return the check within the
controversy for resolution thru the PCHC Arbitration Mechanism. 24-hour reglementary period, it also failed to institute any formal complaint
within the contemplation of Section 20.3 and it appears that respondent was
However, it was petitioner who filed a complaint before the Arbitration already contented with the 50-50 split initially implemented by the PCHC.
Committee, asserting that respondent should solely bear the entire face Finding both parties negligent in the performance of their duties, the
value of the check due to its negligence in failing to return the check to Committee applied the doctrine of “Last Clear Chance” and ruled that the
petitioner within the 24-hour reglementary period as provided in Section loss should be shouldered by respondent alone.
20.1 of the Clearing House Rules and Regulations (CHRR) 2000. Petitioner
prayed that respondent be ordered to reimburse the sum of P500,000.00 Issues:
with 12% interest per annum, and to pay attorney’s fees and other
arbitration expenses. 1. Whether the doctrine of last clear chance applies in this case; and
In its Answer with Counterclaims, respondent charged petitioner with gross 2. Whether the 60-40 apportionment of loss ordered by the CA was
negligence for accepting the post-dated check in the first place. It contended justified.
that petitioner’s admitted negligence was the sole and proximate cause of
the loss. Held:
On December 8, 2004, the Arbitration Committee rendered its Decision in The doctrine of last clear chance, stated broadly, is that the negligence of the
favor of petitioner and against the respondent. First, it ruled that the plaintiff does not preclude a recovery for the negligence of the defendant
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where it appears that the defendant, by exercising reasonable care and In the interest of fairness, however, we believe it is proper to consider
prudence, might have avoided injurious consequences to the plaintiff respondent’s own negligence to mitigate petitioner’s liability. Article
notwithstanding the plaintiff’s negligence. The doctrine necessarily assumes 2179 of the Civil Code provides:
negligence on the part of the defendant and contributory negligence on the
part of the plaintiff, and does not apply except upon that assumption. Stated x x x x
differently, the antecedent negligence of the plaintiff does not preclude him
from recovering damages caused by the supervening negligence of the Explaining this provision in Lambert v. Heirs of Ray Castillon, the Court
defendant, who had the last fair chance to prevent the impending harm by held:
the exercise of due diligence. Moreover, in situations where the doctrine has
been applied, it was defendant’s failure to exercise such ordinary care,
having the last clear chance to avoid loss or injury, which was the proximate “The underlying precept on contributory negligence is that a plaintiff who is
cause of the occurrence of such loss or injury. partly responsible for his own injury should not be entitled to recover
damages in full but must bear the consequences of his own negligence. The
In this case, the evidence clearly shows that the proximate cause of the defendant must thus be held liable only for the damages actually caused by
unwarranted encashment of the subject check was the negligence of his negligence. xxx xxx xxx”
respondent who cleared a post-dated check sent to it thru the PCHC clearing
facility without observing its own verification procedure. As correctly found xxxx
by the PCHC and upheld by the RTC, if only respondent exercised ordinary
care in the clearing process, it could have easily noticed the glaring defect Following established jurisprudential precedents, we believe the allocation
upon seeing the date written on the face of the check “Oct. 9, 2003”. of sixty percent (60%) of the actual damages involved in this case
Respondent could have then promptly returned the check and with the check (represented by the amount of the checks with legal interest) to petitioner is
thus dishonored, petitioner would have not credited the amount thereof to proper under the premises. Respondent should, in light of its contributory
the payee’s account. Thus, notwithstanding the antecedent negligence of the negligence, bear forty percent (40%) of its own loss.
petitioner in accepting the post-dated check for deposit, it can seek
reimbursement from respondent the amount credited to the payee’s account
covering the check.
12. Equitable Banking Corporation vs. Special Steel Products, GR No.
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175350, June 13, 2012 The due dates for these invoices were March 16, 1991 (for the first sales
invoice) and May 11, 1991 (for the others). The invoices provided that
Facts: Interco would pay interest at the rate of 36% per annum in case of delay.
Respondent Special Steel Products, Inc. (SSPI) is a private domestic In payment for the above welding electrodes, Interco issued three checks
corporation selling steel products. Its co-respondent Augusto L. Pardo payable to the order of SSPI on July 10, 1991,10 July 16, 1991,11 and July
(Pardo) is SSPI’s President and majority stockholder. 29, 1991.12 Each check was crossed with the notation "account payee only"
and was drawn against Equitable. The records do not identify the signatory
International Copra Export Corporation (Interco) is its regular customer. for these three checks, or explain how Uy, Interco’s purchasing officer,
came into possession of these checks.
Jose Isidoro Uy, alias Jolly Uy (Uy), is an Interco employee, in charge of the
purchasing department, and the son-in-law of its majority stockholder. The records only disclose that Uy presented each crossed check to Equitable
on the day of its issuance and claimed that he had good title thereto. He
Petitioner Equitable Banking Corporation (Equitable or bank) is a private demanded the deposit of the checks in his personal accounts in Equitable,
domestic corporation engaged in banking and is the depository bank of Account No. 18841-2 and Account No. 03474-0.14
Interco and of Uy.
Equitable acceded to Uy’s demands on the assumption that Uy, as the son-
In 1991, SSPI sold welding electrodes to Interco, as evidenced by the in-law of Interco’s majority stockholder, was acting pursuant to Interco’s
following sales invoices: orders. The bank also relied on Uy’s status as a valued client. Thus,
Equitable accepted the checks for deposit in Uy’s personal accounts17 and
Sales Invoice No. 65042 dated February 14, 1991 for ₱325,976.347 stamped "ALL PRIOR ENDORSEMENT AND/OR LACK OF
ENDORSEMENT GUARANTEED" on their dorsal portion. Uy promptly
Sales Invoice No. 65842 dated April 11, 1991 for ₱345,412.808
withdrew the proceeds of the checks.
Sales Invoice No. 65843 dated April 11, 1991 for ₱313,845.849
In October 1991, SSPI reminded Interco of the unpaid welding electrodes,
amounting to ₱985,234.98.19 It reiterated its demand on January 14,
1992.20 SSPI explained its immediate need for payment as it was
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experiencing some financial crisis of its own. Interco replied that it had and earned money from them. Thus, the plaintiffs prayed for an award of
already issued three checks payable to SSPI and drawn against Equitable. actual damages consisting of the unrealized interest income from the
SSPI denied receipt of these checks. proceeds of the checks for the two-year period that the defendants withheld
the proceeds from them (from July 1991 up to June 1993).
On August 6, 1992, SSPI requested information from Equitable regarding
the three checks. The bank refused to give any information invoking the In his personal capacity, Pardo claimed an award of ₱3 million as moral
confidentiality of deposits. damages from the defendants. He allegedly suffered hypertension, anxiety,
and sleepless nights for fear that the government would charge him for tax
The records do not disclose the circumstances surrounding Interco’s and evasion or money laundering. He maintained that defendants’ actions
SSPI’s eventual discovery of Uy’s scheme. Nevertheless, it was determined amounted to money laundering and that it unfairly implicated his company
that Uy, not SSPI, received the proceeds of the three checks that were in the scheme. As for his fear of tax evasion, Pardo explained that the
payable to SSPI. Thus, on June 30, 1993 (twenty-three months after the Bureau of Internal Revenue might notice a discrepancy between the
issuance of the three checks), Interco finally paid the value of the three financial reports of Interco (which might have reported the checks as SSPI’s
checks to SSPI, plus a portion of the accrued interests. Interco refused to income in 1991) and those of SSPI (which reported the income only in
pay the entire accrued interest of ₱767,345.64 on the ground that it was not 1993). Since Uy and Equitable were responsible for Pardo’s worries, they
responsible for the delay. Thus, SSPI was unable to collect ₱437,040.35 (at should compensate him jointly and severally therefor. SSPI and Pardo also
the contracted rate of 36% per annum) in interest income. prayed for exemplary damages and attorney’s fees.
SSPI and its president, Pardo, filed a complaint for damages with In support of their application for preliminary attachment, the plaintiffs
application for a writ of preliminary attachment against Uy and Equitable alleged that the defendants are guilty of fraud in incurring the obligation
Bank. The complaint alleged that the three crossed checks, all payable to the upon which the action was brought and that there is no sufficient security
order of SSPI and with the notation "account payee only," could be for the claim sought to be enforced in this action.
deposited and encashed by SSPI only. However, due to Uy’s fraudulent
representations, and Equitable’s indispensable connivance or gross The trial court granted plaintiffs’ application. It issued the writ of
negligence, the restrictive nature of the checks was ignored and the checks preliminary attachment on September 20, 1993,28 upon the filing of
were deposited in Uy’s account. Had the defendants not diverted the three plaintiffs’ bond for ₱500,000.00. The sheriff served and implemented the
checks in July 1991, the plaintiffs could have used them in their business writ against the personal properties of both defendants.
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Upon Equitable’s motion and filing of a counter-bond, however, the trial Meanwhile, Uy answered that the checks were negotiated to him; that he is
court eventually discharged the attachment against it. a holder for value of the checks and that he has a good title thereto. He did
not, however, explain how he obtained the checks, from whom he obtained
Equitable then argued for the dismissal of the complaint for lack of cause of his title, and the value for which he received them. During trial, Uy did not
action. It maintained that interest income is due only when it is expressly present any evidence but adopted Equitable’s evidence as his own.
stipulated in writing. Since Equitable and SSPI did not enter into any
contract, Equitable is not liable for damages, in the form of unobtained Issue:
interest income, to SSPI. Moreover, SSPI’s acceptance of Interco’s payment
on the sales invoices is a waiver or extinction of SSPI’s cause of action Whether SSPI has a cause of action against Equitable for quasi-delict
based on the three checks.
Held:
Equitable further argued that it is not liable to SSPI because it accepted the
three crossed checks in good faith. Equitable averred that, due to Uy’s close This case involves a complaint for damages based on quasi-delict. SSPI
relations with the drawer of the checks, the bank had basis to assume that asserts that it did not receive prompt payment from Interco in July 1991
the drawer authorized Uy to countermand the original order stated in the because of Uy’s wilful and illegal conversion of the checks payable to SSPI,
check (that it can only be deposited in the named payee’s account). Since and of Equitable’s gross negligence, which facilitated Uy’s actions. The
only Uy is responsible for the fraudulent conversion of the checks, he combined actions of the defendants deprived SSPI of interest income on the
should reimburse Equitable for any amounts that it may be made liable to said moneys from July 1991 until June 1993. Thus, SSPI claims damages in
plaintiffs. the form of interest income for the said period from the parties who wilfully
or negligently withheld its money from it.
The bank counter-claimed that SSPI is liable to it in damages for the
wrongful and malicious attachment of Equitable’s personal properties. The Equitable argues that SSPI cannot assert a right against the bank based on
bank maintained that SSPI knew that the allegation of fraud against the bank the undelivered checks. It cites provisions from the Negotiable Instruments
is a falsehood. Further, the bank is financially capable to meet the plaintiffs’ Law and the case of Development Bank of Rizal v. Sima Wei to argue that a
claim should the latter receive a favorable judgment. SSPI was aware that payee, who did not receive the check, cannot require the drawee bank to pay
the preliminary attachment against the bank was unnecessary, and intended it the sum stated on the checks.
only to humiliate or destroy the bank’s reputation.
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Equitable’s argument is misplaced and beside the point. SSPI’s cause of attributable to negligence or bad faith on its part. As repeatedly emphasized,
action is not based on the three checks. SSPI does not ask Equitable or Uy since the banking business is impressed with public interest, the trust and
to deliver to it the proceeds of the checks as the rightful payee. SSPI does confidence of the public in it is of paramount importance. Consequently, the
not assert a right based on the undelivered checks or for breach of contract. highest degree of diligence is expected, and high standards of integrity and
Instead, it asserts a cause of action based on quasi-delict. A quasi-delict is an performance are required of it.
act or omission, there being fault or negligence, which causes damage to
another. Quasi-delicts exist even without a contractual relation between the Equitable did not observe the required degree of diligence expected of a
parties. The courts below correctly ruled that SSPI has a cause of action for banking institution under the existing factual circumstances.
quasi-delict against Equitable.
The fact that a person, other than the named payee of the crossed check, was
The checks that Interco issued in favor of SSPI were all crossed, made presenting it for deposit should have put the bank on guard. It should have
payable to SSPI’s order, and contained the notation "account payee only." verified if the payee (SSPI) authorized the holder (Uy) to present the same
This creates a reasonable expectation that the payee alone would receive the in its behalf, or indorsed it to him. Considering however, that the named
proceeds of the checks and that diversion of the checks would be averted. payee does not have an account with Equitable (hence, the latter has no
This expectation arises from the accepted banking practice that crossed specimen signature of SSPI by which to judge the genuineness of its
checks are intended for deposit in the named payee’s account only and no indorsement to Uy), the bank knowingly assumed the risk of relying solely
other. At the very least, the nature of crossed checks should place a bank on on Uy’s word that he had a good title to the three checks. Such misplaced
notice that it should exercise more caution or expend more than a cursory reliance on empty words is tantamount to gross negligence, which is the
inquiry, to ascertain whether the payee on the check has authorized the absence of or failure to exercise even slight care or diligence, or the entire
holder to deposit the same in a different account. It is well to remember that absence of care, evincing a thoughtless disregard of consequences without
the banking system has become an indispensable institution in the modern exerting any effort to avoid them.
world and plays a vital role in the economic life of every civilized society.
Whether as mere passive entities for the safe-keeping and saving of money
or as active instruments of business and commerce, banks have attained an
[sic] ubiquitous presence among the people, who have come to regard them 13. People vs. Wagas, GR No. 157943, September 4, 2013
with respect and even gratitude and, above all, trust and confidence. In this
Facts:
connection, it is important that banks should guard against injury
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Gilbert Wagas ordered from Alberto Ligaray 200 bags of rice over the punishes is the fraud or deceit, not the mere issuance of the worthless check.
telephone. As payment, Wagas issued a check in favor of Ligaray. When the Wagas could not be held guilty of estafa simply because he had issued the
check was deposited it was dishonored due to insufficiency of funds. check used to defraud Ligaray. The proof of guilt must still clearly show
Ligaray notified Wagas and demanded payment from the latter but Wagas that it had been Wagas as the drawer who had defrauded Ligaray by means
refused and failed to pay the amount, Ligaray filed a complaint for estafa of the check.
before the RTC. RTC convicted Wagas of estafa because the RTC believed
that the prosecution had proved that it was Wagas who issued the
dishonored check, despite the fact that Ligaray had never met Wagas in
person. Hence, this direct appeal. 14. Ting Ting Pua vs. Spouses Benito, GR No. 198660, October 23, 2013
Issue: Facts:
Whether or not Wagas is guilty beyond reasonable doubt

The controversy arose from a Complaint for a Sum of Money filed by
Held: petitioner Pua against respondent-spouses Benito Lo Bun Tiong Benito) and
Caroline Siok Ching Teng Caroline). During trial, petitioner Pua clarified
No. The Supreme Court acquitted Wagas. The check delivered to Ligaray that the PhP 8,500,000 check was given by respondents to pay the loans
was made payable to cash. Under the Negotiable Instruments Law, this type they obtained from her under a compounded interest agreement on various
of check was payable to the bearer and could be negotiated by mere delivery dates in 1988. In all, respondents issued 17 checks for a total amount of PhP
without the need of an indorsement. This rendered it highly probable that 1,975,000. These checks were dishonored upon presentment to the drawee
Wagas had issued the check not to Ligaray, but to somebody else like bank.
Cañada, his brother-in-law, who then negotiated it to Ligaray. Relevantly,
Ligaray confirmed that he did not himself see or meet Wagas at the time of As a result of the dishonor, petitioner demanded payment. Respondents,
the transaction and thereafter, and expressly stated that the person who however, pleaded for more time because of their financial difficulties.
signed for and received the stocks of rice was Cañada. Petitioner Pua obliged and simply reminded the respondents of their
indebtedness from time to time. Sometime in September 1996, when their
It bears stressing that the accused, to be guilty of estafa as charged, must financial situation turned better, respondents called and asked petitioner Pua
have used the check in order to defraud the complainant. What the law
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for the computation of their loan obligations. Hence, petitioner handed them their bitter separation, respondent Caroline alleged that she forgot about the
a computation dated which showed that, at the agreed 2% compounded five (5) pre-signed checks she left with Lilian.
interest rate per month, the amount of the loan payable to petitioner rose to
PhP 13,218,544.20. On receiving the computation, the respondents asked After trial, the RTC issued its Decision dated January 31, 2006 in favor of
petitioner to reduce their indebtedness to PhP 8,500,000. Wanting to get petitioner. In holding thus, the RTC stated that the possession by petitioner
paid the soonest possible time, petitioner Pua agreed to the lowered amount. of the checks signed by Caroline, under the Negotiable Instruments Law,
raises the presumption that they were issued and delivered for a valuable
Respondents then delivered to petitioner Asiatrust Check bearing the consideration. On the other hand, the court a quo discounted the testimony
reduced amount of PhP 8,500,000. In turn, respondents demanded the return for the defense completely denying respondents’ loan obligation to Pua.
of the previously dishonored checks. Petitioner, however, refused to return
the bad checks and advised respondents that she will do so only after the Issues:
encashment.
1. Whether or not respondents should be held liable
Like the 17 checks, however, it was also dishonored when it was presented
by petitioner to the drawee bank. Hence, as claimed by petitioner, she 2. Whether or not the said checks are covered by the Negotiable Instruments
decided to file a complaint to collect the money owed her by respondents. Law
For the defense, both respondents Caroline and Benito testified along with Held:
Rosa Dela Cruz Tuazon (Tuazon), who was the OIC-Manager of Asiatrust-
Binondo Branch in 1997. Respondents categorically denied obtaining a loan Yes. In Pacheco v. Court of Appeals, this Court has expressly recognized
from petitioner. Respondent Caroline, in particular, narrated that, in August that a check “constitutes an evidence of indebtedness”and is a veritable
1995, she and petitioner’s sister, Lilian, forged a partnership that operated a “proof of an obligation.” Hence, it can be used “in lieu of and for the same
mahjong business. purpose as a promissory note.”In fact, in the seminal case of Lozano v.
Martinez, We pointed out that a check functions more than a promissory
In March 1996, however, respondent Caroline and Lilian had a serious note since it not only contains an undertaking to pay an amount of money
disagreement that resulted in the dissolution of their partnership and the but is an “order addressed to a bank and partakes of a representation that the
cessation of their business. In the haste of the dissolution and as a result of drawer has funds on deposit against which the check is drawn, sufficient to
ensure payment upon its presentation to the bank.”This Court reiterated this
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rule in the relatively recent Lim v. Mindanao Wines and Liquour Galleria Patrimonio pre-signed several checks to answer for the expenses of Slam
stating that “a check, the entries of which are in writing, could prove a loan Dunk. Although signed, these checks had no payee’s name, date or amount.
transaction.”This very same principle underpins Section 24 of the The blank checks were entrusted to Gutierrez with the specific instruction
Negotiable Instruments Law (NIL): not to fill them out without previous notification to and approval by the
petitioner.
Section 24. Presumption of consideration. – Every negotiable instrument is
deemed prima facie to have been issued for a valuable consideration; and Without the petitioner’s knowledge and consent, Gutierrez went to
every person whose signature appears thereon to have become a party for Marasigan to secure a loan in the amount of P200,000.00 on the excuse that
value. the petitioner needed the money for the construction of his house. In
addition to the payment of the principal, Gutierrez assured Marasigan that
The 17 original checks, completed and delivered to petitioner, are he would be paid an interest of 5% per month.
sufficient by themselves to prove the existence of the loan obligation of
the respondents to petitioner. Sec. 16 of the NIL provides that when an Marasigan acceded to Gutierrez’ request and gave him P200,000.00.
instrument is no longer in the possession of the person who signed it Gutierrez simultaneously delivered to Marasigan one of the blank checks
and it is complete in its terms “a valid and intentional delivery by him is the petitioner pre-signed with Pilipinas Bank with the blank portions filled
presumed until the contrary is proved. out with the words “Cash” “Two Hundred Thousand Pesos Only”, and the
amount of “P200,000.00.”
Marasigan deposited the check but it was dishonored for the reason
15. Patrimonio vs Gutierrez, GR No. 187769, June 4, 2014 “ACCOUNT CLOSED.” It was later revealed that petitioner’s account with
the bank had been closed.
Facts:
Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent
The petitioner and the respondent Gutierrez entered into a business venture several demand letters to the petitioner asking for the payment of
under the name of Slam Dunk Corporation, a production outfit that P200,000.00, but his demands likewise went unheeded. Consequently, he
produced mini-concerts and shows related to basketball. filed a criminal case for violation of B.P. 22 against the petitioner.
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RTC— in favor of Marasigan. It found that the petitioner, in issuing the pre- In order however that one who is not a holder in due course can enforce the
signed blank checks, had the intention of issuing a negotiable instrument, instrument against a party prior to the instrument’s completion, two
albeit with specific instructions to Gutierrez not to negotiate or issue the requisites must exist: (1) that the blank must be filled strictly in accordance
check without his approval. RTC declared Marasigan as a holder in due with the authority given; and (2) it must be filled up within a reasonable
course and accordingly dismissed the petitioner’s complaint for declaration time. If it was proven that the instrument had not been filled up strictly in
of nullity of the loan. It ordered the petitioner to pay Marasigan the face accordance with the authority given and within a reasonable time, the maker
value of the check with a right to claim reimbursement from Gutierrez. CA can set this up as a personal defense and avoid liability.
— affirmed the RTC ruling.
Section 52(c) of the NIL states that a holder in due course is one who takes
Issue: the instrument “in good faith and for value.” It also provides in Section
52(d) that in order that one may be a holder in due course, it is necessary
Whether or not Marasigan is a holder in due course thus may hold that at the time it was negotiated to him he had no notice of any infirmity in
Patrimonio liable the instrument or defect in the title of the person negotiating it.
Acquisition in good faith means taking without knowledge or notice of

Held: equities of any sort which could beset up against a prior holder of the
instrument. It means that he does not have any knowledge of fact which
No. Section 14 of the Negotiable Instruments Law provides for when blanks would render it dishonest for him to take a negotiable paper. The absence of
may be filled. This provision applies to an incomplete but delivered the defense, when the instrument was taken, is the essential element of good
instrument. Under this rule, if the maker or drawer delivers a pre-signed faith.
blank paper to another person for the purpose of converting it into a
negotiable instrument, that person is deemed to have prima facie In order to show that the defendant had “knowledge of such facts that his
authority to fill it up. It merely requires that the instrument be in the action in taking the instrument amounted to bad faith,” it is not necessary to
possession of a person other than the drawer or maker and from such prove that the defendant knew the exact fraud that was practiced upon the
possession, together with the fact that the instrument is wanting in a plaintiff by the defendant’s assignor, it being sufficient to show that the
material particular, the law presumes agency to fill up the blanks. defendant had notice that there was something wrong about his assignor’s
acquisition of title, although he did not have notice of the particular wrong
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that was committed. In the present case, Marasigan’s knowledge that the had capacity to contract; and that the instrument is at the time of his
petitioner is not a party or a privy to the contract of loan, and endorsement valid and subsisting.
correspondingly had no obligation or liability to him, renders him dishonest,
hence, in bad faith. It is well-settled that the relationship of the depositors and the Bank or
similar institution is that of creditor-debtor. Article 1980 of the New
Yet, it does not follow that simply because he is not a holder in due course, Civil Code provides that fixed, savings and current deposits of money in
Marasigan is already totally barred from recovery. banks and similar institutions shall be governed by the provisions
concerning simple loans. The bank is the debtor and the depositor is the
Notably, Gutierrez was only authorized to use the check for business creditor. The depositor lends the bank money and the bank agrees to
expenses; thus, he exceeded the authority when he used the check to pay the pay the depositor on demand. The savings deposit agreement between
loan he supposedly contracted for the construction of petitioner’s house. the bank and the depositor is the contract that determines the rights
This is a clear violation of the petitioner’s instruction to use the checks for and obligations of the parties.
the expenses of Slam Dunk. It cannot therefore be validly concluded that the
check was completed strictly in accordance with the authority given by the Facts:
petitioner.
Petitioners received an order for the purchase of a motor vehicle from Gerry
Mambuay where the latter paid petitioners with nine (9) Philippine Veterans
Affairs Office (PVAO) checks payable to different payees and drawn against
16. Areza vs Express Savings Bank, Inc., GR No. 176697, September 10, the Philippine Veterans Bank (drawee), each valued at Two Hundred
2014 Thousand Pesos (₱200,000.00). Petitioners deposited the said checks in
their savings account with the Express Savings Bank which, in turn,
Doctrines: deposited the checks with its depositary bank, Equitable-PCI Bank and the
latter presented the checks to the drawee, the Philippine Veterans Bank,
A depositary/collecting bank where a check is deposited, and which which honored the checks. However, the subject checks were returned by
endorses the check upon presentment with the drawee bank, is an PVAO to the drawee on the ground that the amount on the face of the checks
endorser. Under Section 66 of the Negotiable Instruments Law, an was altered from the original amount of ₱4,000.00 to ₱200,000.00. After
endorser warrants “that the instrument is genuine and in all respects informing Express Savings Bank that the drawee dishonored the checks,
what it purports to be; that he has good title to it; that all prior parties
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Equitable-PCI Bank debited the deposit account of ESB in the amount of While manager’s and cashier’s checks are still subject to clearing, they
P1.8M. Express Savings Bank then withdrew the amount of P1.8M cannot be countermanded for being drawn against a closed account, for
representing the returned checks from petitioners saving account. being drawn against insufficient funds, or for similar reasons such as a
condition not appearing on the face of the check.
Issue:
Facts:
Whether or not Express Savings Bank had the right to debit ₱1,800,000.00
from petitioners’ accounts. On July 5, 1995, respondent Wilfred N. Chiok (Chiok) bought
US$1,022,288.50 dollars from Gonzalo B. Nuguid (Nuguid) where Chiok
Held: deposited the three manager’s checks (Asian Bank MC Nos. 025935 and
025939, and Metrobank CC No. 003380), with an aggregate value
No, Express Savings Bank cannot debit the savings account of petitioners. A of ₱26,068,350.00 in Nuguid’s account with petitioner Bank of the
depositary/collecting bank where a check is deposited, and which endorses Philippine Islands (BPI). Nuguid, however, failed to deliver the dollar
the check upon presentment with the drawee bank, is an endorser. Under equivalent of the three checks as agreed upon, prompting Chiok to
Section 66 of the Negotiable Instruments Law, an endorser warrants “that request that payment on the three checks be stopped. On the following
the instrument is genuine and in all respects what it purports to be; that day, July 6, 1995, Chiok filed a Complaint for damages with application for
he has good title to it; that all prior parties had capacity to contract; ex parte restraining order and/or preliminary injunction with the Regional
and that the instrument is at the time of his endorsement valid and Trial Court (RTC) of Quezon City against the spouses Gonzalo and
subsisting.” As collecting bank, Express Savings Bank is liable for the Marinella Nuguid, and the depositary banks, Asian Bank and Metrobank.
amount of the materially altered checks. It cannot further pass the liability On July 25, 1995, the RTC issued an Order directing the issuance of a writ
back to the petitioners absent any showing in the negligence on the part of of preliminary prohibitory injunction. When checks were presented for
the petitioners which substantially contributed to the loss from alteration. payment, Asian Bank refused to honor MC Nos. 025935 and 025939 in
deference to the TRO.
Issue:
17. MBTC vs. Chiok, GR No. 175394, November 26, 2014
Doctrine:
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Whether or not payment of manager’s and cashier’s checks are subject to

the condition that the payee thereof should comply with his obligations to
the purchaser of the checks.
Held:
No. A manager’s check, like a cashier’s check, is an order of the bank to

pay, drawn upon itself, committing in effect its total resources, integrity,
and honor behind its issuance. By its peculiar character and general use in
commerce, a manager’s check or a cashier’s check is regarded substantially
to be as good as the money it represents. While manager’s and cashier’s
checks are still subject to clearing, they cannot be countermanded for
being drawn against a closed account, for being drawn against
insufficient funds, or for similar reasons such as a condition not
appearing on the face of the check. Long standing and accepted banking
practices do not countenance the countermanding of manager’s and
cashier’s checks on the basis of a mere allegation of failure of the payee to
comply with its obligations towards the purchaser. Therefore, when Nuguid
failed to deliver the agreed amount to Chiok, the latter had a cause of action
against Nuguid to ask for the rescission of their contract; but, Chiok did not
have a cause of action against Metrobank and Global Bank that would allow
him to rescind the contracts of sale of the manager’s or cashier’s checks,
which would have resulted in the crediting of the amounts thereof back to
his accounts.

Letters of Credit, Trust Receipts and Negotiable Instruments Law Case Digests

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Letters of Credit, Trust Receipts and Negotiable Instruments Law Case Digests

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MAXWELL NICKY NOTES Tahanlangit, Maxi Dominick D.

Ruling: called “independence principle” assures the seller or the beneficiary of

Ruling: obtained, Inter-Resin, as the drawer of the draft, continues to assume a

The services of an advising (notifying) bank may be utilized to convey to Facts:

Issue: PD 115 Does Not Apply

The second element of Estafa requires that there be misappropriation or

Thereafter, Robies would frequent Tobias' stall at the public market to

Whether or not the issuance of the Solidbank crossed check discharged

Savings Plus Deposit Account, which has the following features:

Whether or not Wagas is guilty beyond reasonable doubt

Acquisition in good faith means taking without knowledge or notice of

Whether or not payment of manager’s and cashier’s checks are subject to

No. A manager’s check, like a cashier’s check, is an order of the bank to

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