PNB v.

Picornell, 1922
Facts:
A bill of exchange was drawn by Picornell in favour of PNB, plaintiff, against the firmof Hyndman, Tavera & Ventura, now
dissolved, its only successor being the defendant Joaquin Pardo de Tavera. Said BOE was for the amount obtained by
Picornell for the purchase of bales of tobacco in Cebu by the instructions of his principal, Hyndman, Tavera & Ventura.
This instrument, together with the invoice and bill of lading of the tobacco, were delivered to the National Bank with the
understanding that the bank should not deliver them to Hyndman, Tavera & Ventura except upon payment of the bill.

The central office of PNB in Manila received the bill and the aforesaid documents annexed thereto; and presented the
bill to Hyndman, Tavera & Ventura, who accepted it.

Upon inspection by Hyndman, Tavera & Ventura of the tobacco, it wrote to Picornell, notifying him that of the tobacco
received, there was a certain portion which was of no use and was damaged.

Thereafter, Hyndman, Tavera & Ventura informed the plaintiff that it refused to pay the BOE because of the
noncompliance of the drawer Picornell.

 Hence the bank brought this instant action.

Issue:

Whether bank could recover on the drawee Hyndman, Tavera & Ventura under the subject

BOE.

Ruling:

Yes. Partial want of consideration, if it was, does not exist with respect to the bank which paid to Picornell the full value
of said bill of exchange. The bank was a holder in due course, and was such for value full and complete. The Hyndman,
Tavera & Ventura Company cannot escape liability in view of section 28 of the Negotiable Instruments Law.

As to Picornell, he warranted, as drawer of the bill, that it would be accepted upon proper presentment and paid in due
course, and as it was not paid, he became liable to the payment of its value to the holder thereof, which is the plaintiff
bank.

The fact that the tobacco was or was not of inferior quality does not affect the responsibility of Picornell, because while
it may have an effect upon the contract between him and the firm of Hyndman, Tavera, Ventura, yet it cannot have upon
the responsibility of both to the bank, upon the bill drawn and accepted as above stated.

The drawee, the Hyndman, Tavera & Ventura company, or its successors, J. Pardo de Tavera, accepted the bill and is
primarily liable for the value of the negotiable instrument, while the drawer Picornell, is secondarily liable. However, no
question has been raised about this aspect of the responsibility of the defendants.

The appellants are liable to PNB for the value of the bill of exchange
 PHILIPPINE NATIONAL BANK v. PICORNELL
G.R. No. L-18751 September 26, 1922
Romualdez, J.

Doctrine:

The payee holds a different relation: he is a stranger to the transaction between the drawer and the acceptor, and is,
therefore, in a legal sense a remote party. Hence, the drawee, by accepting the instrument, cannot escape liability.

Facts:

A bill of exchange was drawn by defendant Picornell in favor of the plaintiff, against the firm of Hyndman, Tavera &
Ventura.

Pardo de Tavera, successor to Hyndman, Tavera & Ventura, accepted the drawn instrument initially but denied payment
upon maturity thereof, alleging that the tobacco sold by Picornell was of inferior quality.

Issue:

Whether or not de Tavera can decline payment

Held:

No. The bank was a holder in due course, and was such for value full and complete. The Hyndman, Tavera & Ventura
company cannot escape liability in view of section 28 of the Negotiable Instruments Law:

. . . The drawee by acceptance becomes liable to the payee or his indorsee, and also to the drawer himself. But the
drawer and acceptor are the immediate parties to the consideration, and if the acceptance be without consideration, the
drawer cannot recover of the acceptor. The payee holds a different relation; he is a stranger to the transaction between
the drawer and the acceptor, and is, therefore, in a legal sense a remote party. In a suit by him against the acceptor, the
question as to the consideration between the drawer and the acceptor cannot be inquired into. The payee or holder
gives value to the drawer, and if he is ignorant of the equities between the drawer and the acceptor, he is in the position
on a bona fide indorsee. Hence, it is no defense to a suit against the acceptor of a draft which has been discounted, and
upon which money has been advance by the plaintiff, that the draft was accepted or the accommodation of the
drawer. . . . (3 R. C. L., pp. 1143, 1144, par, 358.)

The drawee, the Hyndman, Tavera & Ventura company, or its successors, J. Pardo de Tavera, accepted the bill and is
primarily liable for the value of the negotiable instrument, while the drawer, Bartolome Picornell, is secondarily liable.

Upon the non-payment of the bill by the drawee-acceptor, the bank had the right of recourse, which it exercised by
selling the tobacco products, against the drawer (Sec. 84, Negotiable Instruments Law).

BANCO ATLANTICO vs. AUDITOR GENERALG.R. No. L-33549 January 31, 1978 FACTS:Boncan was the Finance Officer of
the Philippine Embassy in Madrid who on many occasions negotiated with Banco Atlantico checks,allegedly endorsed
to her by the embassy. On these occasions, thebank made the payment of the checks, notwithstanding the fact that
thedrawee bank has not yet cleared the checks for collection. Thiswas premised on the finding that Boncan had special
relationswith the employees of the bank. And that upon presentment to thedrawee bank, the checks were dishonored
due to non-acceptanceallegedly on the ground that the drawer has ordered
thestoppage of payment. This prompted Banco Atlantico to collect from the Philippine Embassy for the funds released to
Boncan but thelatter refused. This eventually led to filing of money claim of thebank with the Auditor General.Issue:
WON Banco Atlantico was a holder in due course.

NO.HELD:

All four conditions enumerated under Sec. 52, NIL must concur before a holder can be considered as a holder in due
course. The absence or failure to comply with any of the conditions set forth under this section will make one's title to
the instrument defective.

The check for US$90,000.00 was a demand note. When Miss Bon can the payee of this check, negotiated the same by
depositing it in her account, at the same time informing the bank in writing that it be not presented for collection until a
later date.

Banco Atlantico through its agent teller or cashier should have beenput on guard that there was something wrong with
the check.

The fact that the amount involved was quite big and it was the payeeherself who made the request that the same not be
presented for collection until a fixed date in the future was proof of a glaringinfirmity or defect in the instrument.

It loudly proclaims, "Take me at your risk." The interest of the payeewas the immediate punishment of the check of
which she was thebeneficiary and not the deferment of the presentment for collectionof the same to the drawee bank.

This being the case, Banco Atlantico was not a holder in due courseas defined by Section 52 of the N.I.L., because it was
obvious that it had knowledge of the infirmity or defect of the check. The fact that the check was honored by claimant
bank was proof not only of their gross negligence but a further manifestation of the special treatment they were
according Miss Boncan.

In view of the foregoing, the embassy as the drawer of the 3checks in question cannot be held liable. It is apparent that
the said 3 checks were (fraudulently altered) by Boncan as to their accountsand therefore wholly inoperative (note:
should be ³avoided´

NCO ATLANTICO V. AUDITOR GENERAL

81 SCRA 335
FACTS:

Boncan was the Finance Officer of the Philippine Embassy in Madrid who on many occasions negotiated with Banco
Atlantico checks, allegedly endorsed to her by the embassy. On these occasions, the bank allowed the payment of the
checks, notwithstanding the fact that the drawee bank has not yet cleared the checks for collection. This was
premised on the finding that Boncan had special relations with the employees of the bank. And that upon
presentment to the drawee bank, the checks were dishonored due to non-acceptance allegedly on the ground that
the drawer has ordered the

stoppage of payment. This prompted Banco Atlantico to collect from the Philippine Embassy for the funds released
to Boncan but the latter refused. This eventually led to filing of money claim of the bank with the Auditor
General.
HELD:

On whether or not Banco Atlantico was a holder in due course, it is not. Following the decision of the Auditor
General in denying the claim of the bank, the checks were demand notes. It should have been put on guard when
Boncan negotiated the checks with them and subsequently deposited

the same to her account. Even though it were demand notes, she instructed the bank that the same be not
presented for collection till a later date. The fact that the amount was quite big and it was the payee herself who made
the request that the same be not presented for collection until a fixed date in the future was proof of a glaring
infirmity or defect in the instrument. It loudly proclaims “Take me at your own risk.” It was obvious by then
that the bank had knowledge of the infirmity or defect of the checks. Furthermore, what it did when it allowed
payment before clearing is beyond the normal and ordinary banking practice especially when the bank involved is a
foreign bank and the amounts involved were large. Boncan wasn't even a client of the bank but was someone who had
special relations with its officers.

In view of the foregoing, the embassy as the drawer of the 3 checks in question cannot be held liable. It is
apparent that the said 3 checks were (fraudulently altered) by Boncan as to their accounts and therefore wholly
inoperative (note: should be “avoided”).

Lozano vs. Martinez

faCTS: Petitioners were charged with violation of Batas Pambansa Bilang 22 (Bouncing Check Law). They moved
seasonably to quash the informations on the ground that the acts charged did not constitute an offense, the statute
being unconstitutional. The motions were denied by the respondent trial courts, except in one case, wherein the trial
court declared the law unconstitutional and dismissed the case. The parties adversely affected thus appealed.

ISSUES:

1. Does BP 22 is violate the constitutional provision on non-imprisonment due to debt?

2. Does it impair freedom of contract?

3. Does it contravene the equal protection clause?

HELD:

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

Unlike a promissory note, a check is not a mere undertaking to pay an amount of money. It is an order addressed to a
bank and partakes of a representation that the drawer has funds on deposit against which the check is drawn, sufficient
to ensure payment upon its presentation to the bank. There is therefore an element of certainty or assurance that the
instrument will be paid upon presentation. For this reason, checks have become widely accepted as a medium of
payment in trade and commerce. Although not legal tender, checks have come to be perceived as convenient substitutes
for currency in commercial and financial transactions. The basis or foundation of such perception is confidence. If such
confidence is shaken, the usefulness of checks as currency substitutes would be greatly diminished or may become nil.
Any practice therefore tending to destroy that confidence should be deterred for the proliferation of worthless checks
can only create havoc in trade circles and the banking community.

The effects of the issuance of a worthless check transcends the private interests of the parties directly involved in the
transaction and touches the interests of the community at large. The mischief it creates is not only a wrong to the payee
or holder, but also an injury to the public. The harmful practice of putting valueless commercial papers in circulation,
multiplied a thousand fold, can very wen pollute the channels of trade and commerce, injure the banking system and
eventually hurt the welfare of society and the public interest.

2. The freedom of contract which is constitutionally protected is freedom to enter into “lawful” contracts. Contracts
which contravene public policy are not lawful. Besides, we must bear in mind that checks can not be categorized as mere
contracts. It is a commercial instrument which, in this modem day and age, has become a convenient substitute for
money; it forms part of the banking system and therefore not entirely free from the regulatory power of the state.

3. There is no substance in the claim that the statute in question denies equal protection of the laws or is discriminatory,
since it penalizes the drawer of the check, but not the payee. It is contended that the payee is just as responsible for the
crime as the drawer of the check, since without the indispensable participation of the payee by his acceptance of the
check there would be no crime. This argument is tantamount to saying that, to give equal protection, the law should
punish both the swindler and the swindled. The petitioners’ posture ignores the well-accepted meaning of the clause
“equal protection of the laws.” The clause does not preclude classification of individuals, who may be accorded different
treatment under the law as long as the classification is not unreasonable or arbitrary. (Lozano vs Martinez, G.R. No. L-
63419, December 18, 1986)

Facts: A motion to quash the charge against the petitioners for violation of the BP 22 was made, contending that no
offense was committed, as the statute is unconstitutional. Such motion was denied by the RTC. The petitioners thus
elevate the case to the Supreme Court for relief. The Solicitor General, commented that it was premature for the accused
to elevate to the Supreme Court the orders denying their motions to quash. However, the Supreme Court finds it
justifiable to intervene for the review of lower court's denial of a motion to quash.

Issue: Whether or not BP 22 is constitutional as it is a proper exercise of police power of the State.

Held: The enactment of BP 22 a valid exercise of the police power and is not repugnant to the constitutional inhibition
against imprisonment for debt.

The offense punished by BP 22 is the act of making and issuing a worthless check or a check that is dishonored upon its
presentation for payment. It is not the non-payment of an obligation which the law punishes. The law is not intended or
designed to coerce a debtor to pay his debt.

The law punishes the act not as an offense against property, but an offense against public order. The thrust of the law is
to prohibit, under pain of penal sanctions, the making of worthless checks and putting them in circulation. An act may
not be considered by society as inherently wrong, hence, not malum in se but because of the harm that it inflicts on the
community, it can be outlawed and criminally punished as malum prohibitum. The state can do this in the exercise of its
police power.
 People vs. itafan

Facts:

Private respondent K.T. Lim was charged with violation of B.P. 22. He moved to quash the Information of the ground that
the facts charged did not constitute a felony as B.P. 22 was unconstitutional and that the check he issued was a
memorandum check which was in the nature of a promissory note, perforce, civil in nature. Judge Nitafan, ruling that B.P.
22 on which the Information was based was unconstitutional, issued the questioned Order quashing the Information.
Hence, the appeal.

Issue:

Is a memorandum check within the coverage of B.P. 22?

Held:

A memorandum check is in the form of an ordinary check, with the word "memorandum", "memo" or "mem" written
across its face, signifying that the maker or drawer engages to pay the bona fide holder absolutely, without any condition
concerning its presentment. Such a check is an evidence of debt against the drawer, and although may not be intended
to be presented, has the same effect as an ordinary check, and if passed to the third person, will be valid in his hands like
any other check.

A memorandum check comes within the meaning of Sec. 185 of the Negotiable Instruments Law which defines a check
as "a bill of exchange drawn on a bank payable on demand. A memorandum check, upon presentment, is generally
accepted by the bank. Hence it does not matter whether the check issued is in the nature of a memorandum as evidence
of indebtedness or whether it was issued is partial fulfillment of a pre-existing obligation, for what the law punishes is
the issuance itself of a bouncing check and not the purpose for which it was issuance. The mere act of issuing a
worthless check, whether as a deposit, as a guarantee, or even as an evidence of a pre-existing debt, is malum
prohibitum.

A memorandum check may carry with it the understanding that it is not be presented at the bank but will be redeemed
by the maker himself when the loan fall due. However, with the promulgation of B.P. 22, such understanding or private
arrangement may no longer prevail to exempt it from penal sanction imposed by the law. To require that the agreement
surrounding the issuance of check be first looked into and thereafter exempt such issuance from the punitive provision
of B.P. 22 on the basis of such agreement or understanding would frustrate the very purpose for which the law was
enacted — to stem the proliferation of unfunded checks. After having effectively reduced the incidence of worthless
checks changing hands, the country will once again experience the limitless circulation of bouncing checks in the guise of
memorandum checks if such checks will be considered exempt from the operation of B.P. 22. It is common practice in
commercial transactions to require debtors to issue checks on which creditors must rely as guarantee of payment. To
determine the reasons for which checks are issued, or the terms and conditions for their issuance, will greatly erode the
faith the public responses in the stability and commercial value of checks as currency substitutes, and bring about havoc
in trade and in banking communities. (People vs. Judge Nitafan, G.R. No. 75954, October 22, 1992)