BPI vs ROYECA (GR No.

176664)

FACTS: Spouses Royeca executed and delivered a promissory note to Toyota Shaw and to secure the
payment of this promissory note, they executed a Chattel mortgage over a motor vehicle. However, Toyota
transferred the title and rights of this vehicle to Far East Bank and Trust Company (FEBTC). FEBTC filed a
Complaint for Replevin and Damages against the Royecas for refusing to pay the monthly amortizations.

ISSUES: 1. WON Royecas were able to prove full payment of their obligation

2. WON tender of checks constitutes payment.

HELD: 1. NO. As a general rule, one who pleads payment has the burden of proving it. The debtor
(Royecas) has the burden of showing with legal certainty that the obligation has been discharged by
payment. Acknowledgment Receipt was the only proof that Royecas delivered the checks for payment. It
was not a sufficient proof of payment. Moreover, Royecas had to present proof, not only that they delivered
the checks to the petitioner, but also that the checks were encashed. They failed to do so. Had the checks
been actually encashed, they could have easily produced the cancelled checks as evidence to prove the
same. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of
payment.

2. NO. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a
negotiable instrument is only a substitute for money and not money, the delivery of such an instrument
does not, by itself, operate as payment. The obligation is not extinguished and remains suspended until
the payment by commercial document is actually realized. Preponderance of evidence: evidence which is
more convincing to the court as worthy of belief than that which is offered in opposition thereto.
Firestone Tire & rubber Co. vs. Court of Appeals
GR No. 113236 March 5, 2001
Quisumbing, J.:

Facts:
Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon
Development Bank, the latter authorized and allowed withdrawals of funds though the medium
of special withdrawal slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit
with FirestoneTire & Rubber Company, in payment Fojas-Arca delivered a 6 special withdrawal
slips. In turn, these were deposited by the Firsestone to its bank account in Citibank. With this,
relying on such confidence and belief Firestone extended to Fojas-Arca other purchase on credit
of its products but several withdrawal slips were dishonored and not paid. As a consequence,
Citibank debited the plaintiff’s account representing the aggregate amount of the two dishonored
special withdrawal slips. Fojas-Arca averred that the pecuniary losses it suffered are a caused by
and directly attributes to defendant’s gross negligence as a result Fojas-Arca filed a complaint.

Issue:
Whether or not the acceptance and payment of the special withdrawal slips without the
presentation of the depositor’s passbook thereby giving the impression that it is a negotiable
instrument like a check.

Held:
No. Withdrawal slips in question were non negotiable instrument. Hence, the rules
governing the giving immediate notice of dishonor of negotiable instrument do not apply. The
essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its
freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this
character.
Cebu Financial vs CA and Alegre
GR No. 123031, 12 October 1999
316 SCRA 488

FACTS
Vicente Alegre invested with Cebu International Finance Corporation (CIFC)
P500,000 in cash. CIFC issued promissory note which covered private
respondent’s placement. CIFC issued BPI Check No. 513397 (the Check) in
favor of private respondent as proceeds of his matured investment. Mrs.
Alegre deposited the Check with RCBC but BPI dishonoured it, annotating
therein that the “Check is subject of an investigation”. BPI took possession
of the Check pending investigation of several counterfeit checks drawn
against CIFC’s checking account. Private respondent demanded from CIFC
that he be paid in cash but the latter refused. Private respondent Alegre filed
a case for recovery of a sum of money against CIFC.

CIFC asserts that since BPI accepted the instrument, the bank became
primarily liable for the payment of the Check. When BPI offset the value of
the Check against the losses from the forged cheks allegedly committed by
private respondent, the Check was deemed paid.

ISSUE
Whether or not petitioner CIFC is discharged from the liability of paying the
value of the Check.

HELD
The Court held in the negative. In a money market transaction, the investor
is a lender who loans his money to a borrower through a middleman or
dealer. A check is not legal tender, and therefore cannot constitute valid
tender of payment. Since a negotiable instrument is only substitute for
money and not money, the delivery of such an instrument does not by itself,
operate as payment. Mere delivery of checks does not discharge the
obligation under a judgment. The obligation is not extinguished and remains
suspended until the payment by commercial document is actually realized.
(Article 1249)
Papa v Valencia
G.R. No. 105188 January 23, 1998
Art. 1249 – Payment of debts in money shall be made in currency.

Facts:
 The respondents filed with the RTC Pasig a complaint for specific performance
against petitioner to deliver the title and turn over the accrued rentals.
 The petitioner, acting as attorney-in-fact of Angela M. Butte, sold to Peñarroyo
through Valencia, a parcel of land, which was mortgaged to the Associated Banking
Corporation, together with several other parcels of land.
 The bank refused to release it unless and until all the mortgaged properties were
also redeemed.
 Respondents discovered that petitioner had been collecting monthly rentals from
the tenants of the property, knowing that said property had already been sold to
Peñarroyo.
 On appeal, the petitioner argued that alleged sale of the subject property had not
been consummated because he did not encashed the check (in the amount of
P40,000.00), which did not produce the effect of payment as in Art. 1249 of the Civil
Code.

Issue:
WoN the delivery of a check produces the effect of payment only when it is
cashed.

Held:
No, the Court holds that while it is true that the delivery of a check produces the
effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the
rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in
presentment.
Art. 1249 of the Civil Code provides, in part, that payment by checks shall
produce the effect of payment only when they have been cashed or when through the
fault of the creditor they have been impaired.
In the instant case, the acceptance of a check implies an undertaking of due
diligence in presenting it for payment, and if he from whom it is received sustains loss
by want of such diligence, it will be held to operate as actual payment of the debt or
obligation for which it was given. It has, likewise, been held that if no presentment is
made at all, the drawer cannot be held liable irrespective of loss or injury 12 unless
presentment is otherwise excused. Granting that petitioner had never encashed the check, his
failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay.
Thus, the petition for review is DENIED.
 RAUL SESBREÑO vs. CA,
DELTA MOTORS CORPORATION AND PILIPINAS BANK
G.R. No. 89252 May 24, 1993

On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000 with the
Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to
Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note (2731),
the Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said
security was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of
Asia and America for P304,533.33 payable on 13 March 1981. The checks were dishonored for having
been drawn against insufficient funds. Pilipinas Bank never released the note, nor any instrument related
thereto, to Sesbreno. Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April
1981, has a face value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker, and was
stamped “non-negotiable” on its face. As Sesbreno was unable to collect his investment and interest
thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.

Issue: Whether or not non-negotiability of a promissory note prevents its assignment.

Held: Only an instrument qualifying as a negotiable instrument under the relevant statute may be
negotiated either by indorsement thereof coupled with delivery, or by delivery alone if it is in bearer form.
A negotiable instrument, instead of being negotiated, may also be assigned or transferred. The legal
consequences of negotiation and assignment of the instrument are different. A negotiable instrument may
not be negotiated but may be assigned or transferred, absent an express prohibition against assignment or
transfer written in the face of the instrument. Herein, there was no prohibition stipulated.