A.

Definition of Consideration

Consideration! What do you mean by consideration?

Means an inducement to a contract, that is, the cause, price or impelling influence which induces a
contracting party to enter into the contract.
Note: it is different from MOTIVE which is the personal or private reasons of a party in entering into a
contract

Just like any contract, there is a cause or consideration! Why are we talking of contracts if our subject is negotiable
instrument?

A negotiable instrument is a contract. Just like a contract, a negotiable instrument has a cause or consideration.

B. Presumption of Consideration

When we issue a check, you do not see there the cause or a reason why you made a check.

But it is presumed to have a consideration. Sec 24 Presumption of Consideration!

In a bill of exchange or promissory note, you don’t usually see for value received! What does that mean?

That means the paper when issued the promissory note or the bill of exchange are presumed to receive value for
it. (You don’t need to see “I promise to pay … since I purchased blahblah!) There is a presumption of consideration!

Section 24 Presumption of consideration – Every negotiable instrument is deemed prima facie to have been issued
for a valuable consideration; and every person whose signature appears thereon to have become a party thereto
for value.

Meaning if you see the signature of the maker, it is presumed that the maker has received something of value
when he parted with this promissory note.

M->P, that means M received something! If P negotiates it to A, and this is an order promissory note, there must
be an indorsement at the back. Those who signed at the back are presumed as well to have taken the instrument
for value. You don’t need to see the specification why they parted with that instrument to know if there is a
consideration because it is already presumed.

But if we say it is presumed, that means M in the contrary can prove that there was no consideration. What if we
say M->P but he did not receive of value. There is no consideration but there is a presumption. Then it is M’s job to
prove that there is no consideration. If M cannot prove, then he will be bound to pay. If M can prove, then he will
not be compelled to pay. That is the general rule.

Reason behind this presumption of consideration? The natural tendency of persons not to give anything without
something in return.

Cases:

Cayanan vs North Star (New Case! This was not how the case was reported but still the same case!)

Check; issuance for consideration. Upon issuance of a check, in the absence of evidence to the contrary, it is
presumed that the same was issued for valuable consideration which may consist either in some right, interest,
profit or benefit accruing to the party who makes the contract, or some forbearance, detriment, loss or some
responsibility, to act, or labor, or service given, suffered or undertaken by the other side. Under the Negotiable
Instruments Law, it is presumed that every party to an instrument acquires the same for a consideration or for
value.

Engr. Jose E. Cayanan vs North Star International Travel, Inc.

G.R. No. 172954 October 5, 2011

Facts: North Star International Travel Incorporated (North Star) is a corporation engaged in the travel agency
business while petitioner is the owner/general manager of JEAC International Management and Contractor
Services, a recruitment agency.
Virginia Balagtas, the General Manager of North Star, in accommodation and upon the instruction of its
client, petitioner herein, sent the amount of US$60,000 to View Sea Ventures Ltd., in Nigeria from her personal
account in Citibank Makati. On March 29, 1994, Virginia again sent US$40,000 to View Sea Ventures by telegraphic
[4]
transfer, with US$15,000 coming from petitioner. Likewise, on various dates, North Star extended credit to
petitioner for the airplane tickets of his clients, with the total amount of such indebtedness under the credit
extensions eventually reaching P510,035.47.
To cover payment of the obligations, petitioner issued five checks to North Star. When presented for payment, the
checks in the amount of P1,500,000 and P35,000 were dishonored for insufficiency of funds while the other three
checks were dishonored because of a stop payment order from petitioner. North Star, through its counsel, wrote
petitioner informing him that the checks he issued had been dishonored. North Star demanded payment, but
petitioner failed to settle his obligations.
Hence, North Star instituted Criminal Case Nos. 166549-53 charging petitioner with violation of Batas
Pambansa Blg. 22, or the Bouncing Checks Law, before the Metropolitan Trial Court (MeTC) of Makati City. After
trial, the MeTC found petitioner guilty beyond reasonable doubt of violation of B.P. 22. On appeal, the Regional
Trial Court (RTC) acquitted petitioner of the criminal charges. The RTC also held that there is no basis for the
imposition of the civil liability on petitioner. The Court of Appeals reversed the ruling of the RTC and held
petitioner civilly liable for the value of the subject checks.

Issue: Whether or not the petitioner should be civilly liable to North Star for the value of the checks

Held: Affirmative. Petitioner argues that the CA erred in holding him civilly liable to North Star for the
value of the checks since North Star did not give any valuable consideration for the checks. He insists that the
US$85,000 sent to View Sea Ventures was not sent for the account of North Star but for the account of Virginia as
her investment. He points out that said amount was taken from Virginia’s personal dollar account in Citibank and
not from North Star’s corporate account.
Respondent North Star, for its part, counters that petitioner is liable for the value of the five subject
checks as they were issued for value. Respondent insists that petitioner owes North Star plus interest.
Upon issuance of a check, in the absence of evidence to the contrary, it is presumed that the same was
issued for valuable consideration which may consist either in some right, interest, profit or benefit accruing to the
party who makes the contract, or some forbearance, detriment, loss or some responsibility, to act, or labor, or
service given, suffered or undertaken by the other side. Under the Negotiable Instruments Law, it is presumed that
every party to an instrument acquires the same for a consideration or for value. As petitioner alleged that there
was no consideration for the issuance of the subject checks, it devolved upon him to present convincing evidence
to overthrow the presumption and prove that the checks were in fact issued without valuable consideration.
Sadly, however, petitioner has not presented any credible evidence to rebut the presumption, as well as North
Star’s assertion, that the checks were issued as payment for the US$85,000 petitioner owed.
Petitioner claims that North Star did not give any valuable consideration for the checks since the money
was taken from the personal dollar account of Virginia and not the corporate funds of North Star. The contention,
however, deserves scant consideration. The subject checks, bearing petitioner’s signature, speak for
themselves. The fact that petitioner himself specifically named North Star as the payee of the checks is an
admission of his liability to North Star and not to Virginia Balagtas, who as manager merely facilitated the transfer
of funds. Indeed, it is highly inconceivable that an experienced businessman like petitioner would issue various
checks in sizeable amounts to a payee if these are without consideration.

Travel-On, Inc. vs Court of Appeals (This digest was not how the case was reported but still the same case!)
G.R. No. L-56169 June 26, 1992
-accommodation party

FACTS:
Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on behalf of airline
passengers and derived commissions therefrom. Miranda was sued by petitioner to collect on the six postdated
checks he issued which were all dishonored by the drawee banks. Miranda, however, claimed that he had already
fully paid and even overpaid his obligations and that refunds were in fact due to him. He argued that he had issued
the postdated checks not for the purpose of encashment to pay his indebtedness but for purposes of
accommodation, as he had in the past accorded similar favors to petitioner. Petitioner however urges that the
postdated checks are per se evidence of liability on the part of private respondent and further argues that even
assuming that the checks were for accommodation, private respondent is still liable thereunder considering that
petitioner is a holder for value.

ISSUE:
Whether Miranda is liable on the postdated checks he issued even assuming that said checks were issued for
accommodation only.

RULING:
There was no accommodation transaction in the case at bar. In accommodation transactions recognized by the
Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party, by issuing or
indorsing a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to
the accommodated party. The latter, in other words, receives or realizes full value which the accommodated party
then must repay to the accommodating party. But the accommodating party is bound on the check to the holder
in due course who is necessarily a third party and is not the accommodated party. In the case at bar, Travel-On
was payee of all six (6) checks, it presented these checks for payment at the drawee bank but the checks bounced.
Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced. Miranda
must be held liable on the checks involved as petitioner is entitled to the benefit of the statutory presumption that
it was a holder in due course and that the checks were supported by valuable consideration.

**In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends
his credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a
holder in due course, who gave full value therefor to the accommodated party. In the case at bar, Travel-On was
the payee of all six (6) checks, it presented these checks for payment at the drawee bank but the checks bounced.
Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.

PINEDA V. DELA RAMA (This was not how the case was reported but still the same case!)

121 SCRA 671

FACTS:
Pineda was caught in a case against the NARIC for his alleged misappropriation of many cavans of
palay. He hired Atty. Dela Rama to delay the filing of the complaint against him, on alleged representation of the
lawyer that he is a friend of the NARIC administrator.

Pineda then issued a promissory note in favor of dela Rama to pay for the advances that the lawyer made to the
administrator to delay the filing of the complaint. Dela Rama on the other hand contended that the promissory
note was for the loan advanced to Pineda by him. Dela Rama filed an action against Pineda for the collection of
the amount of the note.

HELD:

The presumption that a negotiable instrument was issued for valuable consideration is a rebuttable
presumption. It can be rebutted by proof to the contrary.

In the case at bar, the claims of dela Rama that the promissory note was for a loan advanced to Pineda is
unbelievable. The grant of a loan by a lawyer to a moneyed client and whom he has known for only 3 months
cannot be relied on. Pineda had actually just purchased numerous properties. It is highly illogical that he would
loan from dela Rama P9500 for 5 days apart.

Furthermore, the note was void ab initio because the consideration given was to influence the
administrator to delay charges against Pineda. The consideration was void for being against law and public
policy.

(Bathan Comments: If it is an illegal consideration that is equal to an absence of consideration, then you cannot
compel issuer for that instrument because he receive no value for it.)

C. Valuable Consideration

Section 25. Value, what constitutes. – Value is any consideration sufficient to support a simple contract. An
antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on
demand or at a future time.

This is not just any consideration! Not just love or affection! These are not sufficient to support a single a contract!
(Bathan: Musugot ka nga imu rang consideration kay love? Answer: ______ ) In this case, while there is a
consideration but it is not a valuable consideration.

Question: Does that valuable consideration need to adequate or sufficient? i.e ang maker nihimo og promissory
note for 50k, dapat ba nga madawat niya kay worth 50k pud?

Answer: Not necessarily, for as long as it is a valuable consideration. The consideration might be inadequate but it
is still considered a valuable consideration. If the maker issues a promissory note for 10k and the items he
purchased from Miss Bathan is only worth 4k, there is still a valuable consideration.

Case:

BPI vs. Roxas (This was not how the case was actually reported but still the same case!)

FACTS:

• January 9, 1981: Security Bank and Trust Company (SBTC) issued a manager’s check for P 8M, payable to
"CASH," as proceeds of the loan granted to Guidon Construction and Development Corporation (GCDC)
 o deposited by Continental Manufacturing Corporation (CMC) in its Current Account with Rizal
Commercial Banking Corporation (RCBC)

Immediately, RCBC honored the P8M check and allowed CMC to withdraw
• January 12, 1981: GCDC issued a "Stop Payment Order" to SBTC claiming that the P 8M check was
released to a 3rd party by mistake
o SBTC dishonored and returned the manager’s check to RCBC
• February 13, 1981: RCBC filed a complaint for damages against SBTC with CFI then transferred to RTC
• Following the rules of the Philippine Clearing House, RCBC and SBTC stopped returning the checks to each
other.
o By way of a temporary arrangement pending resolution of the case, the P 8 M check was equally
divided between RCBC and SBTC
• May 9, 2000: RTC in favor of RCBC
• CA: affirmed with modification RTC decision by adding interest

ISSUE: W/N SBTC should be held liable for its manager's check

HELD: YES. CA affirmed.

• At the outset, it must be noted that the questioned check issued by SBTC is not just an ordinary check but
a manager’s check.
o manager’s check

one drawn by a bank’s manager upon the bank itself

same footing as a certified check which is deemed to have been accepted by the bank
that certified it

As the bank’s own check, a manager’s check becomes the primary obligation of
the bank and is accepted in advance by the act of its issuance
• RCBC, in immediately crediting the amount of P8 million to CMC’s account, relied on the integrity and
honor of the check as it is regarded in commercial transactions
• July 9, 1980 Memorandum: banks were given the discretion to allow immediate drawings on uncollected
deposits of manager’s checks, among others
• important that banks should guard against injury attributable to negligence or bad faith on its part
o banking business is impressed with public interest, the trust and confidence of the public in it is
of paramount importance
o highest degree of diligence is expected, and high standards of integrity and performance are
required of it