METROBANK VS.

CA
.G.R. No. 88866 February 18, 1991
Lessons Applicable: Forgery (Negotiable Instruments Law)

FACTS:
 January 1979: Eduardo Gomez opened an account with Golden Savings and deposited over a
period of 2 months 38 treasury warrants totalling P1,755,228.37. 

 all drawn by the Philippine Fish Marketing Authority and purportedly signed by its
General Manager and countersigned by its Auditor:

 6 - directly payable to Gomez 

 32 - indorsed by their respective payees, followed by Gomez as second

indorser

 June 25 - July 16, 1979: all warrants were subsequently indorsed by Gloria Castillo as Cashier
of Golden Savings and deposited to its Savings in the Metrobank branch 

 They were then sent for clearing by the branch office to the principal office of
Metrobank, which forwarded them to the Bureau of Treasury for special clearing

 More than 2 weeks after the deposits, Castillo asked if the warrants were cleared. 

 She was told to wait. 

 Gomez was also not allowed to withdraw from his account

 exasperated over Gloria's repeated inquiries and also as an accommodation for a "valued
client," Metrobank allowed Golden Savings to make the following withdrawals:

 July 9, 1979 - P508,000.00

 July 13, 1979 - P310,000.00

 July 16, 1979 - P150,000.00

 Gomez was also allowed to withdraw a total amount of P1,167,500 (latest on July 16, 1979)

 July 21, 1979: Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden
Savings of the amount it had previously withdrawn, to make up the deficit in its account. -
refused

 CA affirmed RTC: favored Golden Savings

ISSUE: W/N Metrobank can claim a refund from Golden Savings

HELD: NO. Affirmed. withdrawn must be charged not to Golden Savings but to Metrobank, which
must bear the consequences of its own negligence. But the balance of P586,589.00 should be
debited to Golden Savings, as obviously Gomez can no longer be permitted to withdraw this amount
from his deposit because of the dishonor of the warrants
 Metrobank was negligent in giving Golden Savings the impression that the treasury warrants
had been cleared and that, consequently, it was safe to allow Gomez to withdraw

 It "presumed" that the warrants had been cleared simply because of "the lapse of one
week."

 There was no reason why it should not have waited until the treasury warrants had
been cleared

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Art. 1909. — The agent is responsible not only for fraud, but also for negligence, which shall be
judged 'with more or less rigor by the courts, according to whether the agency was or was not for a
compensation.
 Golden Savings acted with due care and diligence

 Forgery cannot be presumed. It must be established by clear, positive and convincing

evidence. -here not proven

 treasury warrants in question are not negotiable instruments

 stamped on their face is the word "non-negotiable" 

 indicated that they are payable from a particular fund

CONSOLIDATED PLYWOOD V. IFC

149 SCRA 448
 

FACTS:

Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company
Industrial Products Marketing, two used tractors.  Petitioner was issued  a  sales  invoice 
for  the  two  used  tractors.    At  the  same  time,  the deed  of  sale  with  chattel 
mortgage  with  promissory  note  was  issued.  
Simultaneously, the seller assigned the deed of sale with chattel mortgage and
promissory note to respondent.  The used tractors were then delivered but  barely  14 
days  after,  the  tractors  broke  down.    The  seller  sent mechanics but the tractors
were not repaired accordingly as they were no 
longer serviceable.  Petitioner would delay the payments on the promissory notes until
the seller completes its obligation under the warranty.

Thereafter, a collection suit was filed against petitioner for the payment of the
promissory note.   
 

HELD:

It is patent that the seller is liable for the breach in warranty against the petitioner.   
This  liability  as  a  general  rule  extends  to  the  corporation  to whom it assigned its
rights and interests unless the assignee is a holder in due  course  of  the  promissory 
note  in  question,  assuming  the  note  is negotiable,  in  which  case,  the  latter’s 
rights  are  based  on  a  negotiable instrument  and  assuming  further  that    the 
petitioner’s  defense  may  not prevail against it. 
 
The  promissory  note  in  question  is  not  a  negotiable  instrument.    The promissory
note in question lacks the so-called words of negotiability.  And as such, it follows that
the respondent can never be a holder in due course but  remains  merely  an  assignee 
of  the  note  in  question.    Thus,  the petitioner  may  raise  against  the  respondents 
all  defenses  available  to  it against the seller. 
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 Development Bank of Rizal v Sima Wei; G.R. No.
85419; 09 Mar 1993; 219 SCRA 736

FACTS:
Respondent Sima Wei executed and delivered to petitioner Bank a promissory note for
the payment of a loan. He made partial payments on the note and months later issued
two crossed checks for the full payment of his account. The checks were not delivered to
petitioner Bank or to any of its representatives and later came to the possession of
respondent Lee Kian Huat, who the same to the account of respondent corporation
without petitioner’s indorsement.

ISSUE(S):
Whether or not petitioner had acquired any right or interest on the checks.

HELD:
NO. Courts have long recognized the business custom of using printed checks where
blanks are provided for the date of issuance, the name of the payee, the amount
payable and the drawer’s signature. All the drawer has to do when he wishes to issue a
check is to properly fill up the blanks and sign it. However, the mere fact that he has
done these does not give rise to any liability on his part, until and unless the check is
delivered to the payee or his representative. A negotiable instrument, of which a check
is, is not only a written evidence of a contract right but is also a species of property. Just
as a deed to a piece of land must be delivered in order to convey title to the grantee, so
must a negotiable instrument be delivered to the payee in order to evidence its
existence as a binding contract.

GEMPESAW V. CA
218 SCRA 682
 

FACTS:
Gempensaw was the owner of many grocery stores.  She paid her suppliers through  the  issuance  of 
checks  drawn  against  her  checking  account  with respondent  bank.    The  checks  were  prepared  by 
her  bookkeeper  Galang.  In the signing of the checks prepared by Galang, Gempensaw didn't bother 
herself  in  verifying  to  whom  the  checks  were  being  paid  and  if  the issuances  were  necessary.   
She didn't  even verify  the  returned  checks  of the bank when the latter notifies her of the same.  During
her two years in business,  there  were  incidents  shown  that  the  amounts  paid  for  were  in excess of
what should have been paid.  It was also shown that even if the checks were crossed, the intended payees
didn't receive the amount of the checks.    This  prompted  Gempensaw  to  demand  the  bank  to  credit 
her account for the amount of the forged checks.  The bank refused to do so and this prompted her to file
the case against the bank.     
 

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HELD:
Forgery is a real defense by the party whose signature was forged.  A party whose signature was forged
was never a party and never gave his consent to  the  instrument.    Since  his  signature  doesn’t  appear 
in  the  instrument, the same cannot be enforced against him even by a holder in due course.  The drawee
bank cannot charge the account of the drawer whose signature was forged because he never gave the
bank the order to pay. 
 
In  the  case  at  bar  the  checks  were  filled  up  by  petitioner’s  employee Galang and were later given
to her for signature.  Her signing the checks made the negotiable instruments complete.  Prior to signing
of the checks, there  was  no  valid  contract  yet.    Petitioner  completed  the  checks  by signing them
and thereafter authorized Galang to deliver the same to their respective  payees.    The  checks  were 
then  indorsed,  forged  indorsements thereon.   
 
As a rule, a drawee bank who has paid a check on which an indorsement has  been  forged  cannot  debit 
the  account  of  a  drawer  for  the  amount  of said  check.    An  exception  to  this  rule  is  when  the 
drawer  is  guilty  of negligence which causes the bank to honor such checks.  Petitioner in this case  has 
relied  solely  on  the  honesty  and  loyalty  of  her  bookkeeper  and never  bothered  to  verify  the 
accuracy  of  the  amounts  of  the  checks  she signed  the  invoices  attached  thereto.   And  though 
she  received  her  bank statements,  she  didn't  carefully  examine  the  same  to  double-check  her 
payments.  Petitioner didn't exercise reasonable diligence which eventually led to the fruition of her
bookkeeper’s fraudulent schemes.

Republic Planters Bank v CA; G.R. No. 93073; 21

Dec 1992; 216 SCRA 738
Published on 25 January 2018   in Legal Chyme  by Claudine
FACTS:
Private respondent and one other, both officers of Worldwide Garment Manufacturing,
Inc., were authorized to apply for credit facilities with petitioner Bank, which issued nine
promissory notes uniformly worded except for the dates and amountsin the following
manner:

On the right bottom margin of the promissory notes appeared the signatures of both
officers above their names with the phrase “and (in) his personal capacity” typewritten.

ISSUE(S):
Whether or not private respondent is solidarily liable on the nine promissory notes.

HELD:
YES. Where an instrument containing the words “I promise to pay” is signed by two or
more persons, they are deemed to be jointly and severally liable thereon.
An instrumentwhich begins with “I”, “We”, or “Either of us” promise to pay, when signed
by two or more persons, makes them solidarily liable. The fact that the singular pronoun
is used indicates that the promise is individual as to each other; meaning that each of
the co-signers is deemed to have made an independent singular promise to pay the
notes in full.

PHILIPPINE BANK OF COMMERCE V. ARUEGO

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 102 SCRA 530
 

FACTS:
Aruego,  on  behalf  of  World  Current  Events,  entered  into  a  Credit Agreement  with  PBCom,  for 
the  publication  of  the  company’s  periodicals.  At  every  printing  endeavor  by  the  printing  press,  a 
bill  of  exchange  is drawn against PBCom.  The instruments are signed by Aruego, without any indication
that he is an agent of World Current Events.  When he was being held liable by PBCom, he averred that he
only signed the instrument in the capacity of agent of the company. 
 
Issue: 
Whether Aruego can be held liable by the petitioner although he signed the supposed
bills of exchange only as an agent of Philippine Education Foundation Company.

HELD:
An inspection of the drafts accepted by the defendant would show nowhere that he has disclosed that he
was signing in representation of the Philippine Education Foundation Company.  He merely signed his
name.  For failure to disclose  his  principal,  Aruego  was  personally  liable  for  the  drafts  he accepted.

JAI ALAI V. BPI

66 SCRA 29
 

FACTS:

Checks were deposited by petitioner in its current account with the bank.  These  checks  were  from  a 
certain  Ramirez,  a  consistent  better  in  its games,  who  was  a  sales  agent  from  Inter-Island  Gas.   
Inter-Island  later found  out  that  of  the  forgeries  committed  in  the  checks  and  thus,  it informed all
the parties concerned.  Upon the demands on the bank as the collecting bank, it debited the account of
petitioner.  Thereafter, petitioner tried  to  issue  a  check  for  payment  of  shares  of  stock  but  such 
was dishonored for insufficient funds.  It filed a complaint against the bank. 
 ISSUE:

Whether or not the BPI had the right to debit from petitioner’s current account the value of the checks
with the forged
endorsements?

HELD:

Respondent bank acted within legal bounds when it debited the account of petitioner.    When  the 
petitioner  deposited  the  checks  to  its  account,  the relationship created was one of agency still and
not of creditor-debtor.  The bank was to collect from the drawees of the checks with the corresponding 
proceeds.   
 

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The Bank  may  have  the  proceeds  already  when  it  debited  the  account  of petitioner.  Nonetheless,
there is still no creditor-debtor relationship. 

Following Section 23, a forged signature is wholly inoperative and no right to discharge it or enforce its
payment can be acquired through or under the forged  signature  except  against  a  party  who  cannot 
invoke  its  forgery  or want  of  authority.    It  stands  to  reason  that  as  a  collecting  bank  which 
indorsed  the  checks  to  the  drawee-banks for  clearing,  should  be  liable  to the latter for
reimbursement for the indorsements on the checks had been forged prior to their delivery to the
petitioner.  The payments made by the drawee   banks   to   respondent   were   ineffective—the  
creditor-debtor relationship hadn’t been validly effected.

Republic Bank vs. Ebrada

GR L-40796, 31 July 1975
-forgery

FACTS:
Respondent Ebrada encashed a back pay check dated January 15, 1963 at Republic
Bank.  The Bureau of Treasury, which issued the check advised the bank that the alleged
indorsement of the check by one “Martin Lorenzo” was a forgery as the latter has been
dead since 14 July 1952; and requested that it be refunded he sum deducted from its
account. The bank refunded the amount to the Bureau and demanded upon Ebrada the
sum in question, who refused.

ISSUES:
         1)      Whether the bank can recover from Ebrada who was the last indorser of the
check with the forged indorsement.
         2)      Whether the existence of one forged signature in the check will render void
all the other negotiations of the check with respect to the other parties whose signature
are genuine.

RULING:
         1)      Republic Bank should suffer the loss when it paid the amount of the check in
question to Ebrada but it has the remedy to recover from the latter the amount it paid
to her because as last indorser of the check, she has warranted that she has good title to
it even if in fact she did not because the payee of the check was already dead 11 years
before the check was issued.
         2)      The negotiation of the check in question from Martin Lorenzo, the original
payee whose indorsement was forged, to the second indorser, should be declared of no
affect, but the negotiation of the aforesaid check from the second indorser to  the third
indorser, and from the third indorser to Ebrada who did not know of the forgery, should
be considered valid and enforceable, barring any claim of forgery.

REPUBLIC V. EBRADA

65 SCRA 680

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FACTS:

Ebrada encashed a “Back Pay Check” issued by the Bureau of Treasury at the  Republic  Bank  in  Escolta 
Manila.  The  Bureau  of  Treasury  advised  the Republic  Bank  that  the  instrument  was  forged.  It 
informed  the  bank  that the original payee of the check died 11 years before the check was issued. 
Therefore, there was a forgery of his signature.  
Ebrada  refuses  to  return  the  proceeds  of  the  check  claiming  that  she already  gave  it  to  Delia 
Dominguez.    She  also  claims  that  she  is  a  HDC (holder in due course) and that the bank is already
estopped. 
 
HELD: 
 
Ebrada  should  return  the  proceeds  of  the  check  to  Republic  Bank.  As  an indorser of the check,  she
was supposed to have warranted that she has good title to said check.  See Section 65.  
 
Section 23:  When the signature is forged or made without the authority of the person whose signature it
purports to be, it is wholly inoperative, and no right to retain the instruments, or to give a  discharge
thereof against any party thereto, can be acquired through or under such signature unless the  party 
against  whom  it  is  sought  to  enforce  such  right  is  PRECLUDED from setting up the forgery or want
of authority.  
 
It  is  only  the  negotiation  based  on  the  forged  or  unauthorized  signature 
which is inoperative. Therefore: 
 
Martin Lorenzo 
Signature inoperative 
Ramon Lorenzo 
To Dominguez:  operative 
Delia Dominguez 
To Ebrada:  operative 
Mauricia Ebrada 
 
 
Drawee bank can collect from the one who encashed the check.  If Ebrada performed  the  duty  of 
ascertaining  the  genuiness  of  the  check,  in  all probability, the forgery wouyld have been detected and
the fraud defeated. 

GREAT EASTERN LIFE V. HSBC

43 PHIL 678

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FACTS:
The  plaintiff  is  an  insurance  corporation,  which  drew  a  check  in  favor  of
Melicor.    This  was  stolen  by  Maasim,  forged  the  signature  of  Melicor  and
deposited the check to his account in PNB.  Thereafter, PNB endorsed the check to
HSBC who later debited the account of plaintiff. Plaintiff believed all along that Melicor
received the payment.  Upon knowledge of the debit HSBC did on its account, it
demanded that the same amount be credited.   
 

HELD:
The banks are liable.  The money was in deposit with the bank and it had no legal right
to pay it out to anyone except the plaintiff or its order.  

The only remedy of the bank paying a check to a person who has forged the name of
the payee is against the forger.   

MWSS V. CA
143 SCRA 20
 

FACTS:
MWSS  had  an  account  from  PNB.    Its  treasurer,  auditor,  and  General Manager are the ones
authorized to sign checks.  During a period of time, 23  checks  were  drawn  and  debited  against  the 
account  of  petitioner.  Bearing the same check numbers, the amounts stated therein were again 
debited from the account of petitioner.  The amounts drawn were deposited in the accounts of the payees
in PCIB.  It was found out though that the names stated in the drawn checks were all fictitious.  Petitioner
demanded the return of the amounts debited but the bank refused to do so.  Thus, it filed a complaint. 
 

HELD:
There  was  no  categorical  finding  that  the  23  checks  were  signed  by persons  other  than  those 
authorized  to  sign.    On  the  contrary,  the  NBI reports shows that the fraud was an “inside job” and
that the delay in the reconciliation  of  the  bank  statements  and  the  laxity  and  loss  of  records 
control  in the printing of the personalized checks facilitated the fraud.  It further doesn’t provide that the
signatures were forgeries. 
 
Forgery cannot be presumed.  It should be proven by clear, convincing and positive evidence.  This wasn’t
done in the present case. 

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The petitioner cannot invoke Section 23 because it was guilty of negligence not only before the
questioned checks but even after the same had already been negotiated.  

RAMON K. ILUSORIO v. COURT OF APPEALS. G.R. No. 139130.

November 27, 2002.
FACTS:

Ramon Ilusorio entrusted his credit cards and checkbooks and blank checks to his secretary.
Apparently, his secretary was able to encash and deposit to her personal account 17 checks drawn
against his account.

Ilusorio requested to restore to his account the value of the checks that were wrongfully encashed
but the bank refused, hence the case.

In court, the bank testified that they make sure that the sign on the check is verified. When asked by
the NBI to submit standard signs to compare, Ilusorio failed to comply. The lower held held in favor
of defendant.

ISSUE: Whether the bank was negligent in receiving the checks.

RULING:

The SC affirmed the lower court's decision. Ilusorio failed to prove that the bank was negligent on
their part as he has the burden of proof. The bank's employees did not know the secretary's modus
operandi as she was always transacting in behalf of Ilusorio.

The SC even held that it was Ilusorio who was negligent as he trusted his secretary of unusual
degree.

Ilusorio also cites Sec. 23 of the NIL that a forged check is inoperative and that he bank has no
authority to pay. While true, the case at bar falls under the exception stated in the section. The SC
held that Ilusorio is precluded from setting up the forgery, assuming there is forgery, due to his own
negligence in entrusting his secretary.

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 SAN CARLOS MINING V. BPI
59 PHIL 59
FACTS:
Wilson,  a  principal  employee  of  petitioner,  together  with  Wilson,  a messenger-
clerk, conspired to withdraw cash from the petitioner’s account through forgery of a
check, in the name of the agent authorized to sign the check. 
 
While  the  authorized  agent  of  petitioner  was  on  vacation,  Wilson  and Dolores 
sent  a  cablegram  to  China  Banking  for  the  transfer  of  $100,000.  On  the 
contract,  the  name  of  Baldwin  was  forged  and  it  was  indicated therein that a
certified check be issued.  Thereafter, this was received and 
deposited  with  the  BPI.    Upon  deposit,  an  indorsement  in  the  name  of Baldwin
was placed.  The bank account was credited.  Later, a letter was sent  to  the  bank, 
purporting  to  be  signed  by  Baldwin  asking  that  it  be withdrawn.  This was done in
supervision of Dolores.  Dolores and Wilson then was able to get the money.  This
eventually came to the knowledge of plaintiff who filed an action against China Banking
and BPI.  The trial court dismissed the case.  

ISSUE: W/N BPI was bound to inspect the checks and shall therefore be liable in case of forgery

HELD:
A bank is bound to know the signatures of its customers  and if it pays a forged check, it
must be considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was forged.   
 
There is no act  of the plaintiff that led the bank astray.  If it was in fact lulled into the
false sense of security, it was by the effrontery of Dolores, the messenger to whom it
entrusted this large sum of money. 
 
The proximate cause of the loss must therefore be due to the negligence of the bank in
honoring and cashing the two forged checks.   

PNB V. NATIONAL CITY BANK OF NY

10 | P a g e
 63 PHIL 711
 

FACTS:
Unknown persons negotiated with Motor Services Company checks, which were part of the stipulation in
payment of automobile tires purchased from the  latter’s  store.    It  purported  to  have  been  issued  by 
Pangasinan Transportation  Company.    The  said  checks  were  indorsed  at  the  back  by said unknown
persons, the Motor company believing at that time that the signatures  contained  therein  were 
genuine.    The  checks  were  later deposited  with  the  company’s  account  in  National  City  Bank  of 
NY.    The said checks were consequently cleared and PNB credited National City Bank with  the 
amounts.    Thereafter,  PNB  discovered  that  the  signatures  were forged  and  it  demanded  the 
reimbursement  of  the  amounts  for  which  it credited the other bank.   
 

HELD:
A  check  is  a  bill  of  exchange  payable  on  demand  and  only  the  rules governing  bills  of 
exchanges  payable  on  demand  are  applicable  to  it.    in view of the fact that acceptance is a step
necessary insofar as negotiable instruments  are  concerned,  it  follows  that  the  provisions  relative  to
acceptance   are   without   application   to   checks.      Acceptance   implies subsequent negotiation of
the instrument, which is not true in the case of checks  because  from  the  moment  it  is  paid,  it  is 
withdrawn  from circulation.  When the drawee banks cashes or pays a check, the cycle of negotiation  is 
terminated  and  it  is  illogical  thereafter  to  speak  of subsequent holders who can invoke the warrant
against the drawee.   
 
Further, in determining the relative rights of a drawee who under a mistake of fact, has paid, a holder who
has received such payment, upon a check to which the name of the drawer has been forged, it is only  fair
to consider the question of diligence and negligence of the parties in respect thereto.  The  responsibility 
of  the  drawee  who  pays  a  forged  check,  for  the genuineness of the drawer’s signature is absolute
only in favor of one who has not, by his own fault or negligence, contributed to the success of the 
fraud or to mislead the drawee.   
 
According  to  the  undisputed  facts,  National  City  Bank  in  purchasing  the papers in question from
unknown persons without making any inquiry as to the identity and authority of said persons negotiating
and indorsing them, acted negligently and contributed to the constructive loss of PNB in failing to detect
the forgery.  Under the circumstances of the case, if the appellee bank  is  allowed  to  recover,  there  will 
be  no  change  in  position  as  to  the injury or prejudice of the appellant. 

TRAVEL ON V. CA
210 SCRA 351

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FACTS:
Petitioner  was  a  travel  agency  involved  in  ticket  sales  on  a  commission basis  for  and  on  behalf 
of  different  airline  companies.    Miranda  has  a revolving  credit  line  with  the  company.    He 
procured  tickets  on  behalf  of others and derived commissions from it.   
 
Petitioner  filed  a  collection  suit  against  Miranda  for  the  unpaid  amount  of six  checks.    Petitioner 
alleged  that  Miranda  procured  tickets  from  them which he paid with cash and checks but the checks
were dishonored upon presentment  to  the  bank.    This  was  being  refuted  by  Miranda  by  saying 
that  he  actually  paid  for  his  obligations,  even  in  the  excess.    He  argued that  the  checks  were 
for  accommodation  purposes  only.    The  company needed to show to its Board of Directors that its
accounts receivable was in good standing.  The RTC and CA held Miranda not to be liable. 
 
ISSUE: W/N Miranda is liable for the 6 dishonored checks because there was no accomodation

HELD:
Reliance  by  the  lower  and  appellate  court  on  the  company’s  financial statements were wrong, to
see if Miranda was liable or not.  This financial statements were actually not updated to show that there
was indebtedness on  the  part  of  Miranda.    The  best  evidence  that  the  courts  should  have looked
at were the checks itself.  There is a prima facie presumption that a check  was  issued  for  valuable 
consideration  and  the  provision  puts  the burden upon the drawer to disprove this presumption. 
Miranda was unable to relieve himself of this burden. 
 
Only clear and convincing evidence and not mere self-serving evidence of drawer  can  rebut  this 
presumption.    The  company  was  entitled  to  the benefit  conferred  by  the  statutory  provision.   
Miranda failed  to  show  that the checks weren’t issued for any valuable consideration.  The checks were 
clear  by  stating  that  the  company  was  the  payee  and  not  a  mere accommodated  party.    And 
also,  notice  was  given  to  the  fact  that  the checks  were  issued  after  a  written  demand  by  the 
company  regarding Miranda’s unpaid liabilities. 

SaDaya v. Sevilla
FACTS:

1) On March 28, 1949, Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly and
severally, in favor of the Bank of the Philippine Islands, or its order, a promissory note for
P15,000.00 with interest at 8% per annum, payable on demand.

2) The entire, amount of P15,000.00, proceeds of the promissory note, was received from the bank
by Oscar Varona alone.

3) Victor Sevilla and Simeon Sadaya signed the promissory note as co-makers only as a favor to
Oscar Varona.

4) Payments were made on account.

5) As of June 15, 1950, the outstanding balance stood P4,850.00.

6) No payment thereafter made.

7) On October 6, 1952, the bank collected from Sadaya the foregoing balance which, together with
interest, totalled P5,416.12.

8) Varona failed to reimburse Sadaya despite repeated demands.

9) Victor Sevilla died.

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 10) Intestate estate proceedings were started in the CFI Rizal.

11) The administrator resisted the claim upon the averment that the deceased Victor Sevilla "did not
receive any amount as consideration for the promissory note," but signed it only "as surety for
Oscar Varona".

12) On June 5, 1957, the RTC issued an order admitting the claim of Simeon Sadaya in the amount of
P5,746.12, and directing the administrator to pay the same from any available funds belonging to
the estate of the deceased Victor Sevilla.

13) The Court of Appeals reversed the RTC’s decision, hence, this petition.

ISSUE: Whether petitioner Sadaya can ask the reimbursement of the 50% of P5,746.12 from the estate of
the deceased Sevilla.

RULING: NO. The SC held that surely enough, as amongst the three, the obligation of Varona and Sevilla
to Sadaya who paid can not be joint and several. For, indeed, had payment been made by Oscar Varona,
instead of Simeon Sadaya, Varona could not have had reason to seek reimbursement from either Sevilla
or Sadaya, or both. After all, the proceeds of the loan went to Varona and the other two received nothing
therefrom.

All of the foregoing postulate the following rules: (1) A joint and several accommodation maker of a
negotiable promissory note may demand from the principal debtor reimbursement for the amount that
he paid to the payee; and (2) a joint and several accommodation maker who pays on the said promissory
note may directly demand reimbursement from his co-accommodation maker without first directing his
action against the principal debtor provided that (a) he made the payment by virtue of a judicial demand,
or (b) a principal debtor is insolvent.

The Court of Appeals found that Sadaya's payment to the bank "was made voluntarily and without any
judicial demand," and that "there is an absolute absence of evidence showing that Varona is insolvent".
This combination of fact and lack of fact epitomizes the fatal distance between payment by Sadaya and
Sadaya's right to demand of Sevilla "the share which is proportionately owing from him."

Crisologo-Jose vs Court of
Appeals (1989)
Facts: Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover
Enterprises, Inc. in-charge of marketing and sales; and the president of
the said corporation was Atty. Oscar Z. Benares. Atty. Benares, in
accommodation of his clients, the spouses Jaime and Clarita Ong,
issued check against Traders Royal Bank, payable to defendant
Ernestina Crisologo-Jose. Since the check was under the account of
Mover Enterprises, Inc., the same was to be signed by its president,
Atty. Oscar Z. Benares, and the treasurer of the said corporation.
However, since at that time, the treasurer of Mover Enterprises was not
available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos,
Jr., to sign the aforesaid check. The check was issued to defendant
Ernestina Crisologo-Jose in consideration of the waiver or quitclaim by
said defendant over a certain property which the Government Service
Insurance System (GSIS) agreed to sell to the spouses Jaime and
Clarita Ong, with the understanding that upon approval by the GSIS of
the compromise agreement with the spouses Ong, the check will be
encashed accordingly. Since the compromise agreement was not
approved within the expected period of time, the aforesaid check was
13 | P a g e
replaced by Atty. Benares. This replacement check was also signed by
Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr. When
defendant deposited this replacement check with her account at
Family Savings Bank, Mayon Branch, it was dishonored for insufficiency
of funds. The petitioner filed an action against the corporation for
accommodation party.
Issue: WON the corporation can be held liable as accommodation
party?
Held: No. Accommodation party liable on the instrument to a holder
for value, although such holder at the time of taking the instrument
knew him to be only an accommodation party, does not include nor
apply to corporations which are accommodation parties.  This is
because the issue or indorsement of negotiable paper by a
corporation without consideration and for the accommodation of
another is ultra vires.  Hence, one who has taken the instrument with
knowledge of the accommodation nature thereof cannot recover
against a corporation where it is only an accommodation party. If the
form of the instrument, or the nature of the transaction, is such as to
charge the indorsee with knowledge that the issue or indorsement of
the instrument by the corporation is for the accommodation of
another, he cannot recover against the corporation thereon. By way of
exception, an officer or agent of a corporation shall have the power to
execute or indorse a negotiable paper in the name of the corporation
for the accommodation of a third person only if specifically authorized
to do so.  Corollarily, corporate officers, such as the president and
vice-president, have no power to execute for mere accommodation a
negotiable instrument of the corporation for their individual debts or
transactions arising from or in relation to matters in which the
corporation has no legitimate concern. Since such accommodation
paper cannot thus be enforced against the corporation, especially
since it is not involved in any aspect of the corporate business or
operations, the inescapable conclusion in law and in logic is that the
signatories thereof shall be personally liable therefor, as well as the
consequences arising from their acts in connection therewith.

14 | P a g e
SESBRENO VS. CA

GR 89252, 24 May 1993

FACTS
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; but
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 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.

15 | P a g e
BPI v. CA

G.R. No. 136202

January 25, 2007

Related topic: Sec. 49, NIL (Delivery without endorsement of an order instrument)

FACTS:

Salazar had in her possession three crossed checks with an aggregate amount of P267,692.50. These
checks were payable to the order of JRT Construction and Trading which was the name of Templonuevo’s
business. Despite lack of knowledge and endorsement of Templonuevo, Salazar was able to deposit the
checks in her personal savings account with BPI and encash the same. The three checks were deposited in
three different occasions over the span of eight months. A year after the last encashment, Templonuevo
protested the purportedly unauthorized encashments and demanded from BPI the aggregate amount of
the checks. BPI complied with Templonuevo’s demand. Since the money could no longer be debited from
the account of Salazar where she deposited the checks, they froze her other account with them. Later on,
BPI issued a cashier’s check in favor of Templonuevo for the aggregate amount and debited P267, 707.70
from Salazar’s account representing the aggregate amount and the bank charges for the cashier’s check.

Salazar filed a complaint against BPI. Trial court ruled in favor of her which was affirmed by CA.

Hence, this petition.

ISSUE/S:

1. Did BPI have the authority to unilaterally withdraw from Salazar’s account the amount it has previously
paid upon certain unendorsed order instrument?

HELD:

1. Yes. Records show that no prior arrangement existed between Salazar and Templonuevo regarding the
transfer of ownership of the checks. This fact is crucial as Salazar’s entitlement to the value of the
instruments is based on the assumption that she is a transferee within the contemplation of Section 49 of
the NIL. Section 49 of the NIL contemplates a situation where the payee or endorsee delivers a negotiable
instrument for value without endorsing it. The underlying premise of this provision, however, is that a
valid transfer of ownership of the negotiable instrument in question has taken place. Transferees in this
situation do not enjoy the presumption of ownership in favor of holders since they are neither payees nor
endorsees of such instruments. Mere possession of a negotiable instrument does not in itself conclusively
establish either the right of the possessor to receive payment, or of the right of one who has made
payment to be discharged from liability. Something more than mere possession is necessary to authorize
payment to such possessor.

16 | P a g e
B.A. Green, ET AL vs. M. Lopez, ET AL.
G.R. No. L-11526
January 2, 1917

Facts:
A negotiable note was issued by LOPEZ ET AL (maker) to a certain payee. After that, this
payee indorsed the note to the present holders, GREEN ET AL. The note indorsed by the payee
to GREEN ET AL said “for value received”.

LOPEZ ET AL refused to pay the note alleging that GREEN ET AL were not bona fide
holders of the note by indorsement, because they had knowledge of the existence of certain
equitable defenses which the makers were entitled to set up as against the payee of the noted,
before they acquired it by indorsement from the payee.

On the other hand, Green claims that he sent an employee to call upon the makers of
the note to inquire whether it was a good note which would be paid at maturity, and that upon
his return this employee stated that he had been informed by the makers of the note that it was
a good note duly executed by them and that it would be paid when due.

Issue: Whether or not the defendant could refuse payment on the note?- NO

Ruling:

No. The court ruled that the allegations of the defendant were either wholly false or he
failed to make himself understood resulting to the fact that no knowledge of the existence of
equitable defenses was made known to the plaintiff, the purchaser of the note.

There was nothing on the face of the note to put the purchasers on notice of the
existence of such equitable defenses. It was entirely regular in form and came into their
possession in the usual course of business. Under these circumstances the burden of proof was
manifestly upon the maker of the note to establish the fact of knowledge of the equitable
defenses before they could be permitted to rely upon such defenses as against the purchasers.

Equitable defenses of this nature can in no event defeat the right of the holders of a
negotiable note by indorsement and for valuable consideration, until and unless knowledge of
the existence of such equitable defenses is brought home to them, or until it appears that the
holders had such knowledge of the existence of defects in the instrument as to charge them
with bad faith in acquiring it under all the attendant circumstances.

The indorsement was made for a valuable consideration, the purchasers were clearly
entitles to judgment for the face value of the note.
By the decisive weight of authority in this country, where negotiable paper has been put
in circulation, and there is no infirmity or defense between the antecedent parties
thereto, a purchaser of such security is entitled to recover thereon, as against the maker,
the whole amount, irrespective of what he may have paid therefor. (146 U. S., 327.)

Fossum v. Hermanos [G.R. No. L-19461. March 28, 1923]

FACTS
Appellant was himself a party to the contract which supplied the consideration for the draft,
albeit he there acted in a representative capacity. He procured the instrument to be indorsed by
the bank and delivered to himself without the payment of value, after it was overdue, and with
full notice that, as between the original parties, the consideration had completely failed.
Petitioner invoked the “shelter rule”.
 
ISSUE
Whether or not petitioner may hide under the “shelter rule”.

17 | P a g e
 
RULING
NO. While it is true that a person who is not himself a holder in due course may yet recover
against the person primarily liable where it appears that such holder derives his title through a
holder in due course, there are exceptions. Here, the holder was party to the contract which
participated to the defect of the instrument. Hence, shelter rule finds no application here.
 

STATE INVESTMENT HOUSE V. IAC

175 SCRA 310
STATE INVESTMENT HOUSE vs. INTERMEDIATE APPELLATE COURT, ANITA PEÑA CHUA
and HARRIS CHUA

G.R. No. 72764 | 13 JULY 1989

Facts:

New Sikatuna requested for a loan from Spouses Chua.  Latter issued post-dated crossed checks in favor
of former.  Thereafter, Sikatuna sold checks to  SIHI  which  upon  deposit,  checks  were  dishonored.   
The  trial  court decided the case in favor of SIHI.   
 

ISSUE: Whether State Investment is a holder in due course and is thus entitled to hold the
spouses liable for the

dishonored crossed checks.

HELD: NO. CA judgment AFFIRMED.

RATIO:

 State Investment is not a holder in due course and cannot allege that it had no
knowledge of the transaction/arrangement between New Sikatuna and spouses Chua
because the checks in question are crossed checks. When it rediscounted the checks
knowing that it was crossed checks, it was knowingly violating the avowed intention of
crossing the check. Its failure to inquire from New Sikatuna the purpose of the crossed
checks prevents him from being considered in good faith and is thus not a holder in due
course.
 Sec. 541, NIL provides that the maker or any legal holder of a check is entitled to
indicate that such be paid to a certain banker or institution, by writing across the face
the name of said banker or institution, or only the words “and company.” Under usual
practice, crossing a check is done by placing two parallel lines diagonally on the left top
portion of the check.
 The effect of crossing a check relates to the mode of its presentment for payment. Under
Sec. 72, NIL presentment for payment is sufficient when it is made by the holder, or by
some authorized person to receive payment. Who the holder or authorized person is
depends on the instructions on the face of the check.
 In the present case, said 3 crossed checks were issued payable to New Sikatuna and only
means that the drawer had intended the same for deposit only by the rightful person
(payee named therein). It was not the payee who presented, therefore, there was no
proper presentment, and the liability did not attach to the drawer.
 In the absence of due presentment, the drawer does not become liable. No right of
recourse is available to State Investment against the drawer, Anita. It was not the proper
party authorized to make presentment of the checks.

18 | P a g e
Far East Bank & Trust vs Gold
Palace Jewellery Co, G.R. No. 168274,
August 20, 2008
Facts: In June 1998, a foreigner, identified as Samuel Tagoe, purchased from the
respondent Gold Palace Jewellery Co. several pieces of jewelry valued at P258,000.00. In
payment of the same, he offered Foreign Draft No. M-069670 issued by the United
Overseas Bank (Malaysia) addressed to the Land Bank of the Philippines, Manila (LBP),
and payable to the respondent company for P380,000.00.

Yang issued Cash Invoice, to the foreigner, informing him that the pieces of jewelry
would be released when the draft had already been cleared. Respondent Julie Yang-Go,
the manager of Gold Palace deposited the draft in the company’s Far East account. LBP
cleared the draft, and GoldPalace’s account with Far East was credited. The foreigner
was then able to get the goods, and because the amount in the draft was more than the
value of the goods purchased, she issued, as his change, Far East Check No. 173088 for
P122,000.00. This check was later presented for encashment and was, in fact, paid by the
said bank.

Issue: Whether or not GoldPalace can be held liable

Held: No.  Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides that
the acceptor, by accepting the instrument, engages that he will pay it according to the
tenor of his acceptance.  His actual payment of the amount in the check implies not only
his assent to the order of the drawer and a recognition of his corresponding obligation
to pay the aforementioned sum, but also, his clear compliance with that obligation. In
this case, the drawee bank cleared and paid the subject foreign draft and forwarded the
amount thereof to the collecting bank. The latter, Far East, then credited to GoldPalace’s
account the payment it received. Following the plain language of the law, the drawee,
by the said payment, recognized and complied with its obligation to pay in accordance
with the tenor of his acceptance. Stated simply, LBP was liable on its payment of
the check according to the tenor of the check at the time of payment, which was
the raised amount.

Associated Bank v CA; G.R. Nos. 107382 &

107612; 31 Jan 1996; 252 SCRA 620
19 | P a g e
FACTS:
The Province of Tarlac maintains a current account with the Philippine National Bank
(PNB) where the provincial funds – including an appropriation for
the Concepcion Emergency Hospital – are deposited. Checks are drawn against
such account payable to the order of the said hospital, released by the Provincial
Treasurer and received for the hospital by its administrative officer and cashier. Faustino
Pangilinan was the hospital’s administrative officer and cashier until his retirement in
February 28, 1978. However, it was later discovered that even after retirement
Pangilinan was able to collect and encash thirty (30) checks with petitioner Bank by
forging the endorsement of the chief of payee hospital. The Province sought from PNB
the restoration of the amounts of the checks. PNB in turn demanded reimbursement
from petitioner Bank. Both banks resisted payment.

ISSUE(S):
Whether or not petitioner Bank should bear the loss on forged indorsement.

HELD:
YES. A collecting bank which indorses a check bearing a forged endorsement and
presents it to the drawee bank guarantees all prior endorsements, including the forged
endorsement. It warrants that the instrument is genuine, and that it is valid and
subsisting at the time of his endorsement. Because the endorsement is forgery, the
collecting bank commits a breach of this warranty and will be accountable to the
drawee bank. This liability scheme operates without regard to fault on the part of the
collecting/presenting bank. Even if the latter bank was not negligent, it would still be
liable to the drawee bank because of its endorsement. Moreover, the collecting bank is
made liable because it is privy to the depositor who negotiated the check. The bank
knows him. his address and history because he is a client. It has taken a risk on his
deposit. The bank is also in a better position to detect forgery, fraud or irregularity in
the endorsement.

BANCO DE ORO SAVING V. EQUITABLE

157 SCRA 188
 

FACTS:
BDO drew  checks payable to member establishments.  Subsequently, the checks  were  deposited  in 
Trencio’s  account  with  Equitable.    The  checks were  sent  for  clearing  and  was  thereafter  cleared.   
Afterwards,  BDO discovered that the indorsements in the back of the checks were forged.  It then 
demanded  that  Equitable  credit  its  account  but  the  latter  refused  to do so.  This prompted BDO to
file a complaint against Equitable and PCHC.  The trial court and RTC held in favor of the Equitable and
PCHC.   
 
Issues:
Whether the drawee bank was negligent in failing to discover the alteration or the forgery.

HELD:
First,  PCHC  has  jurisdiction  over  the  case  in  question.    The  articles  of incorporation of PHHC
extended its operation to clearing checks and other clearing items.  No doubt transactions on non-

20 | P a g e
negotiable checks are within the ambit of its jurisdiction.  Further, the participation of the two banks in
the clearing operations is submission to the jurisdiction of the PCHC. 
 
Petitioner  is  likewise  estopped  from  raising  the  non-negotiability  of  the checks  in  issue.    It 
stamped  its  guarantee  at  the  back  of the  checks  and subsequently  presented  it  for  clearing  and 
it  was  in  the  basis  of  these endorsements  by  the  petitioner  that  the  proceeds  were  credited  in 
its 
clearing account.  The petitioner cannot now deny its liability as it assumed the  liability  of  an  indorser 
by  stamping  its  guarantee  at  the  back  of  the checks.   
 
Furthermore, the bank cannot escape liability of an indorser of a check and which may turn out to be a
forged indorsement.  Whenever a bank treats the signature at the back of the checks as indorsements and
thus logically guarantees  the  same  as  such  there  can  be  no  doubt  that  said  bank  had considered
the checks as negotiable. 
 
A   long   line   of   cases   also   held   that   in   the   matter   of   forgery   in endorsements,  it  is  the 
collecting  bank  that  generally  suffers  the  loss because  it  had  the  dutyh  to  ascertain  the 
genuineness  of  all  prior indorsements considering that the act of presenting the check for payment 
to the drawee is an assertion that the party making the presentment has done its duty to ascertain the
genuineness of the indorsements. 

Philippine National Bank vs. Seeto

G.R. No. L-4388 (August 1952)

FACTS:

On March 13, 1948, Benito Seeto presented to the Philippine National Bank at Surigao a check in the
amount of P5,000, payable to cash or bearer, and drawn by one Gan Yek Kiao against the Cebu branch of
the Philippine National Bank of Communications. After consultation with the bank employees, Seeto
made a general and unqualified endorsement of the check, which was accepted by PNB’s agency, which
paid Seeto the value of the check therefore. Upon being presented to the drawee bank for payment,
however, the check was dishonored for “insufficient funds.” PNB demanded refund from Seeto. Seeto,
however, refused, claiming that at the time of the negotiation of the check, the drawer had sufficient
funds in the drawee bank, and had not PNB delayed in forwarding the check until the drawer’s funds were
exhausted, the same would have been paid. PNB alleged that Seeto gave assurances that the drawer of
the check had sufficient funds with the bank, and that Seeto had made a general and unqualified
endorsement thereon. As evidence, PNB presented two witnesses at the trial, who testified that the check
was cashed due to assurances given by Seeto and the promise that he would refund the amount paid by
PNB should the check be dishonored.

ISSUE:

WON should parole evidence with respect to the verbal assurances made by Seeto be admitted as
evidence.

HELD:

Yes. It has been held that any prior or contemporaneous conversation in connection with a note or its
indorsement may be proved by parole evidence. An extrinsic agreement between indorser and indorsee
which cannot be embodied in the instrument without impairing its credit is provable by parole. If,
therefore, the supposed assurances that the drawer had funds and that the Seeto would refund the
amount of the check if the drawer had no funds, were the considerations or reasons that induced the
branch agency of PNB to go out of its ordinary practice of not.

21 | P a g e
International Corporate Bank vs. Sps. Gueco

G.R. No.141968 February 12, 2001

FACTS

Spouses Gueco obtained a loan from petitioner International Corporate Bank (now Union Bank
of Philippines) to purchase a car. Respondent spouses executed a promissory note in
consideration, which were payable in monthly installment and chattel mortgage over the car.

The spouses however, defaulted payment. The car was detained by the bank. When Dr. Gueco
delivered the manger’s check of P150,000, the car was not released because of his refusal to
sign the Joint Motion to Dismiss (JMD).

The bank insisted that the JMD is a standard operating procedure to effect a compromise and to
preclude future filing of claims or suits for damages. Gueco spouses filed an action against the
bank for fraud, failing to inform them regarding JMD during the meeting & for not releasing the
car if they do not sign the said motion.

ISSUE

Whether or not International Corporate Bank was guilty of fraud.

HELD

No. Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the
voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects
which naturally and necessarily arise from such act or omission. The fraud referred to in Article
1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of
obligation. The court fails to see how the act of the petitioner bank in requiring the respondent
to sign the joint motion to dismiss could constitute as fraud.

The joint motion to dismiss cannot in any way have prejudiced Dr. Gueco. The motion to dismiss
was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner against it before the
lower court would be dismissed with prejudice.

The joint motion to dismiss was but a natural consequence of the compromise agreement and
simply stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the case.
Petitioner’s act of requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be a
deliberate attempt on the part of petitioner to renege on the compromise agreement of the
parties.

METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION, plaintiff-appellee, 

vs. SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD., defendants-appellants.

FACTS:
Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd. with an
acceleration clause. Sambok Motors Company (Sambok), a sister company of Ng Sambok Sons Motors
Co., Ltd., negotiated and indorsed the note in favor of plaintiff Metropol Financing & Investment
Corporation with the following endorsement:
Pay to the order of Metropol Bacolod Financing & Investment Corporation with
recourse. Notice of Demand; Dishonor; Protest; and Presentment are hereby waived.
SAMBOK MOTORS CO.

22 | P a g e
The maker, Dr. Villaruel defaulted in the payment of his installments when they became due, so plaintiff
formally presented the promissory note for payment to him; however, he failed to pay. Plaintiff then
demanded payment from Sambok as endorsee of said note. Sambok failed to pay. Plaintiff thus filed a
complaint for collection of a sum of money. The trial court rendered its decision against Sambok Motors.
Not satisfied with the decision, the present appeal was instituted.

Appellant Sambok argues that by adding the words "with recourse" in the endorsement of the note, it
becomes a qualified endorser that being a qualified indorser, it does not warrant that if said note is
dishonored by the maker on presentment, it will pay the amount to the holder; that it only warrants the
following pursuant to Section 65 of the Negotiable Instruments Law.

ISSUE:
WON Sambok is a qualified endorser.

HELD:
NO. A qualified endorsement constitutes the endorser a mere assignor of the title to the instrument. It
may be made by adding to the endorser’s signature the words "without recourse" or any words of
similar import. 2 Such an endorsement relieves the endorser of the general obligation to pay if the
instrument is dishonored but not of the liability arising from warranties on the instrument as provided in
Section 65 of the Negotiable Instruments Law already mentioned herein. However, appellant Sambok
indorsed the note "with recourse" and even waived the notice of demand, dishonor, protest and
presentment.

"Recourse" means resort to a person who is secondarily liable after the default of the person who is
primarily liable. 3 Appellant, by indorsing the note "with recourse" does not make itself a qualified
endorser but a general endorser who is secondarily liable, because by such endorsement, it agreed that if
Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The effect of such
endorsement is that the note was indorsed without qualification. A person who indorses without
qualification engages that on due presentment, the note shall be accepted or paid, or both as the case
may be, and that if it be dishonored, he will pay the amount thereof to the holder.  4 Appellant Sambok's
intention of indorsing the note without qualification is made even more apparent by the fact that the
notice of demand, dishonor, protest and presentment were an waived. The words added by said appellant
do not limit his liability, but rather confirm his obligation as a general endorser.

23 | P a g e
Crystal v CA; G.R. No. L-35767; 18 Jun 1976; 71 SCRA 443

FACTS:

The Supreme Court, in its earlier decision affirming the Court of Appeals’ decision that Raymundo
Crystal’s redemption of the property acquired by private respondents was invalid as the check which
petitioner used in paying the redemption price has been either dishonored or had become stale.

ISSUE(S):

Whether the conflicting circumstances of the check being dishonored and becoming stale affect the
validity of the redemption sale.

HELD:

YES. For a check to be dishonored upon presentment on the one hand, and to be stale for not being
presented at all in time on the other hand are incompatible developments that naturally have variant
legal consequences. Thus, if indeed the check in question had been dishonored then there can be no
doubt that petitioner’s redemption was null and void. On the other hand, if it had only be come stale,
then it becomes imperative that the circumstances that caused its non-presentment be determined, for if
this was not due to the fault of the petitioner, then it would be unfair to deprive him of the rights he had
acquired as redemptioner, particularly, if, after all, the value of the check has otherwise been received or
realized by the party concerned.

Paulino Gullas v. PNB (G.R. No. L-

43191)

Facts:
Petitioner Gullas maintains a current account with herein respondent PNB. He together
with one Pedro Lopez signed as endorsers of a Warrant issued by the US Veterans
Bureau payable to the order of one Francisco Bacos. PNB cashed the check but was
subsequently dishonored by the Insular Treasurer. PNB then sent notices to petitioner
which could not be delivered to him at the time because he was in Manila. PNB in the
letter informed the petitioner the outstanding balance on his account was applied to
the part payment of the dishonored check. Upon petitioner’s return, he received the
notice of dishonor and immediately paid the unpaid balance of the warrant. As a
consequence of these, petitioner was inconvenienced when his insurance was not paid
due to lack of funds and was publicized widely at his area to his mortification.

Issue:
Whether or not PNB has the right to apply petitioner’s deposit to his debt to the bank.

24 | P a g e
Ruling: NO.
As a general rule, a bank has a right of set off of the deposits in its hands for the
payment of any indebtedness to it on the part of a depositor. The Civil Code contains
provisions regarding compensation (set off) and deposit. The portions of Philippine law
provide that compensation shall take place when two persons are reciprocally creditor
and debtor of each other. In this connection, it has been held that the relation existing
between a depositor and a bank is that of creditor and debtor.
Starting, therefore, from the premise that the Philippine National Bank had with respect
to the deposit of Gullas a right of set off, we next consider if that remedy was enforced
properly. The fact we believe is undeniable that prior to the mailing of notice of
dishonor, and without waiting for any action by Gullas, the bank made use of the money
standing in his account to make good for the treasury warrant.
Gullas was merely an indorser and had issued in good faith. As to an indorser, the
situation is different and notice should actually have been given him in order that he
might protect his interests. We accordingly are of the opinion that the action of the
bank was prejudicial to Gullas.

Tomas Ang v. Associated Bank and Antonio Ang Eng Liong

G.R. No. 146511 – September 5, 2007

Facts:

 Tomas Ang and Antonio Ang Eng Liong obtained a loan of P50,000 and P30,000 on
October 3 and 9,1978 respectively evidenced by 2 promissory notes and was agreed that
the loan would be payable, jointly and severally on January 31, 1979 and December 8,
1978 respectively.
 Despite repeated demands for payment, the defendants failed and refused to settle their
obligation.
 Petitioner Tomas Ang contends the bank knew that he did not receive any valuable
consideration for affixing his signatures on the notes but merely lent his name as an
accommodation party and thus should not be held liable.

Issue:

Whether the bank could proceed against Tomas Ang for the payment of the loan.

Ruling:

Yes. The accommodation party is liable on the instrument to a holder for value even though the
holder, at the time of taking the instrument, knew him or her to be merely an accommodation
party, as if the contract was not for accommodation.

25 | P a g e
 MONTINOLA V. PNB
88 PHIL 178

Facts: In May 1942, Ubaldo Laya, as provincial treasurer of Misamis Oriental issued a P100,000.00
Philippine National Bank (PNB) check to Mariano Ramos. The said check was to be used by Ramos, as
disbursing officer of the US forces at that time, for military purposes.

On the back of the check, Ramos wrote:

Pay to the order of Enrique P. Montinola P30,000 only. The balance to be deposited in the Philippine
National Bank to the credit of M. V. Ramos.

Before Ramos can encash the check, he was made a prisoner of war by the invading Japanese forces.
When he got free in December 1944, he needed some cash for himself and so he went to a certain
Enrique Montinola and made arrangements. In consideration thereof, Montinola promised to pay 85,000
in Japanese notes (that time peso notes are valued higher). However, he was only able to pay 45k in
Japanese notes to Ramos.

Later, Montinola sought to have the check encashed but PNB dishonored the check. It appears that there
was an insertion made. Under the signature of Laya, the words “Agent, Philippine National Bank” was
inserted, thus making it appear that Laya disbursed the check as an agent of PNB and not as provincial
treasurer of Misamis Oriental

ISSUE:

Whether or not the material alteration discharges the instrument?

HELD:

The words "Agent, Phil. National Bank" now appearing on  the face of the check  were  added  or  placed 
in  the  instrument  after  it  was  issued  by  the Provincial  Treasurer  Laya  to  Ramos.  The  check  was 
issued  by  only  as Provincial Treasurer and as an official of the Government, which was under obligation 
to  provide  the  USAFE  with  advance  funds,  and not  as  agent  of the bank, which had no such
obligation.  The addition of those words was made  after  the  check  had  been  transferred  by  Ramos 
to  Montinola.  The insertion  of  the  words  "Agent,  Phil.  National  Bank,"  which  converts  the bank
from a mere drawee to a drawer and therefore  changes its liability, constitutes  a  material  alteration  of 
the  instrument  without  the  consent  of the parties liable thereon, and so discharges the instrument

METROPOLITAN BANK v. FIRST NATIONAL CITY BANK, GR No. 55079, 1982-11-19

Facts:
Check... for P50,000.00, payable to CASH, drawn by Joaquin Cunanan & Company on First
National City Bank (FNCB for brevity) was deposited with Metropolitan Bank and Trust
Company (Metro Bank for short) by a certain Salvador Sales.
Earlier that day, Sales had opened a current account with Metro Bank depositing P500.00 in
cash.
All prior endorsements and/or
Lack of endorsements Guaranteed.
The check was cleared the same day. Private respondent paid petitioner through clearing
the amount of P50.000.00, and Sales was credited with the said amount in his deposit with
Metro Bank.

26 | P a g e
Sales... he withdrew P32,100.00. Then... he withdrew the balance of P17,920.00 and closed
his account with Metro Bank.
nine (9) days later, FNCB returned cancelled Check... to drawer Joaquin Cunanan &
Company,... That same day, the company notified FNCB that the check had been altered.
The... actual amount of P50.00 was raised to P50,000.00... and over the name of the payee,
Manila Polo Club, was superimposed the word CASH.
FNCB notified Metro Bank of the alteration by telephone,... FNCB wrote Metro Bank asking
for reimbursement of the amount of P50,000.00. The latter did not oblige
Metro Bank was adamant in its refusal.
FNCB filed in the Court of First Instance of Manila
Civil Case... against Metro Bank for recovery of the amount of P50,000.00.
Trial Court rendered its Decision ordering Metro Bank to reimburse FNCB the amount of
P50,000.00
Petitioner appealed said Decision
, respondent Appellate Court
Petitioner came to this instance on appeal by Certiorari,... Metro Bank invokes this 24-hour
regulation of the Central Bank as its defense. FNCB on the other hand, relies on the
guarantee of all previous indorsements made by Metro Bank which guarantee had allegedly
misled FNCB into believing that the check in question was regular and the... payee's
indorsements genuine
Issues:
which bank is liable for the payment of the altered check, the drawee bank (FNCB) or the
collecting bank (Metro Bank)?
Ruling:
In this case, the check was not returned to Metro Bank, in accordance with the 24-hour
clearing house period, but was cleared by FNCB. Failure of FNCB, therefore, to call the
attention of Metro Bank to the alteration of the check in question until after the lapse of
nine days,... negates whatever right it might have had against Metro Bank in the light of the
said Central Bank Circular.
Its remedy lies not against Metro Bank, but against the party responsible for the changing
the name of the payee... and the amount on the face of the check.
Once that 24-hour period is over, the liability on such an indorsement has ceased. This
being so, Plaintiff Bank has no! made out a case for relief."
, Metro Bank cannot be held liable for the payment of the altered check.
Moreover, FNCB did not deny the allegation of Metro Bank that before it allowed the
withdrawal of the balance of P17,920.00 by Salvador Sales, Metro Bank withheld payment
and first verified, through its Assistant Cashier Federico Uy, the regularity and genuineness
of the check... deposit from Marcelo Mirasol, Department Officer of FNCB, because its
(Metro Bank) attention was called by the fast movement of the account. Only upon being
assured that the same is 'not unusual' did Metro Bank allow the withdrawal of the balance.

.
State Investment House vs. CA
GR 101163
11 January 1993
First Division, Bellosillo (J)

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Facts:

Nora B. Moulic issued to Corazon Victoriano checks, as security for pieces of jewelry sold on
commission. Victoriano negotiated the checks to the State Investment House Inc. (SIHI). Moulic
failed to sell the pieces of jewelry, so he returned them to the payee before the maturity of the
checks. The checks, however, could not be retrieved as they had already been negotiated. Before
the check’s maturity dates, Moulic withdrew her funds from the drawee bank. Upon presentment
of the checks for payment, they were dishonored for insufficiency of funds. SIHI sued to recover
the value of the checks.

Issue:

Whether the personal defense of failure or absence of consideration is available, or conversely,

whether SIHI is a holder in due course.

Held:

On their faces, the post-dated checks were complete and regular; SIHI bought the checks from
the payee (Victoriano) before their due dates; SIHI took the checks in good faith and for value,
albeit at a discounted price; and SIHI was never informed not made aware that the checks were
merely issued to payee as security and not for value. Complying with the requisites of Section
52 of the Negotiable Instruments Law, SIHI is a holder in due course. As such, it holds the
instruments free from any defect of title of prior parties, and from defenses available to prior
parties among themselves. SIHI may enforce full payment of the checks. The defense of failure
or absence of consideration is not available as SIHI was not privy to the purpose for which the
checks were issued. That the post-dated checks were merely issued as security is not a ground
for the discharge of the instrument as against a holder in due course. It is not one of the
grounds outlined in Section 119 of the NegotiableInstrument Law, for the instrument to be
discharged. It must be noted that the drawing and negotiation of a check have certain effects
aside from the transfer of title or the incurring of liability in regard to the instrument by the
transferor. The holder who takes the negotiated paper makes a contract with the parties on the
face of the instrument. There is an implied representation that funds or credit are available for
the payment of the instrument in the bank upon which it is drawn. Consequently, the withdrawal
of the money from the drawee bank to avoid liability on the checks cannot prejudice the rights
of holders in due course. The drawer, Moulic, is liable to the holder in due course, SIHI.

NEW PACIFIC TIMBER & SUPPLY CO. INC. VS. SENERIS

10 SCRA 686

FACTS: Petitioner, New Pacific Timber & Supply Co. Inc. was the defendant in a complaint for
collection of money filed by private respondent, Ricardo A. Tong. In this complaint, respondent
Judge rendered a compromise judgment based on the amicable settlement entered by the
parties wherein petitioner will pay to private respondent P54,500.00 at 6% interest per annum
and P6,000.00 as attorney’s fee of which P5,000.00 has been paid. Upon failure of the petitioner
to pay the judgment obligation, a writ of execution worth P63,130.00 was issued levied on the
personal properties of the petitioner. Before the date of the auction sale, petitioner deposited
with the Clerk of Court in his capacity as the Ex-Officio Sheriff P50,000.00 in Cashier’s Check of
the Equitable Banking Corporation and P13,130.00 in cash for a total of
P63,130.00. Private respondent refused to accept the check and the cash and requested for the
auction sale to proceed. The properties were sold for P50,000.00 to the highest bidder with a
deficiency of P13,130.00. Petitioner subsequently filed an ex-parte motion for issuance of
certificate of satisfaction of judgment which was denied by the respondent Judge.

ISSUE: Can the check be considered a valid payment of the judgment obligation?

RULING: Yes. It is to be emphasized that it is a well-known and accepted practice in the business

28 | P a g e
 sector that a Cashier’s Check is deemed cash. Moreover, since the check has been certified by
the drawee bank, this certification implies that the check is sufficiently funded in the drawee
bank and the funds will be applied whenever the check is presented for payment. The object of
certifying a check is to enable the holder to use it as money. When the holder procures the
check to be certified, it operates as an assignment of a part of the funds to the creditors. Hence,
the exception provided in Section 63 of the Central Bank Act which states that checks which
have been cleared and credited to the account of the creditor shall be equivalent to a delivery
to the creditor in cash the amount equal to that which is credited to his account. The Cashier’s
Check and the cash are valid payment of the obligation of the petitioner. The private
respondent has no valid reason to refuse the acceptance of the check and cash as full payment
of the obligation

TIBAJIA vs. CA and EDEN TAN 

G.R. No. 100290 June 4, 1993

FACTS

 A suit for collection of a sum of money filed by Eden Tan against the Tibajia spouses
 A writ of attachment was issued by the trial court
 The Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses had been
garnished by him.
 Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment in check
 Private respondent refused to accept the payment made by the Tibajia spouses and instead
insisted that the garnished funds deposited be withdrawn to satisfy the judgment obligation.
 Petitioners filed a motion to lift the writ of execution on the ground that the judgment debt had
already been paid
 Motion was denied by the trial court on the ground that payment in cashier's check is not
payment in legal tender and that payment was made by a third party other than the defendant
ISSUE
 WHETHER OR NOT THE BPI CASHIER'S CHECK TENDERED BY PETITIONERS FOR PAYMENT OF
THE JUDGMENT DEBT, IS "LEGAL TENDER"
RULING
 The provisions of law applicable to the case at bar are the following:
           a. Article 1249 of the Civil Code which provides:
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents
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 meantime, the action derived from the original obligation shall be held in abeyance.;
          b. Section 1 of Republic Act No. 529, as amended, which provides:
Sec. 1. Every provision contained in, or made with respect to, any obligation which purports to give the
obligee the right to require payment in gold or in any particular kind of coin or currency other than
Philippine currency or in an amount of money of the Philippines measured thereby, shall be as it is hereby
declared against public policy null and void, and of no effect, and no such provision shall be contained in,
or made with respect to, any obligation thereafter incurred. Every obligation heretofore and hereafter
incurred, whether or not any such provision as to payment is contained therein or made with respect
thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal
tender for public and private debts
Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides:
Sec. 63. Legal character — Checks representing deposit money do not have legal tender power and their
acceptance in the payment of debts, both public and private, is at the option of the creditor:  Provided,
however, that a check which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account.
In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals  4 and Roman Catholic Bishop of
Malolos, Inc. vs. Intermediate Appellate Court, 5 this Court held that —
A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor.

29 | P a g e
 WESTMONT BANK V. ONG
373 SCRA 212
 

FACTS:
Ong  was  supposed  to  be  the  payee  of  the  checks  issued  by  Island Securities.  Ong has a current
account with petitioner bank.  He opted to sell  his  shares  of  stock  through  Island  Securities.    The 
company  in  turn issued checks in favor of Ong but unfortunately, the latter wasn't able to receive any. 
His signatures were forged by Tamlinco and the checks were deposited  in  his  own  account  with 
petitioner.    Ong  then  sought  to  collect the money from the family of Tamlinco first before filing a
complaint with the Central Bank.  As his efforts were futile to recover his money, he filed an  action 
against  the  petitioner.    The  trial  and  appellate  court  decided  in favor of Ong. 
 

ISSUE
Whether or not respondent Ong may still recover from petitioner.

HELD:
Since  the  signature  of  the  payee  was  forged,  such  signature  should  be deemed  inoperative  and 
ineffectual.    Petitioner,  as  the  collecting  bank, grossly erred in making payment by virtue of said
forged  signature.  The payee, herein respondent, should therefore be allowed to collect from the
collecting bank. 
It should be liable for the loss because it is its legal duty to ascertain that the  payee’s  endorsement  was 
genuine  before  cashing  the  check.    As  a general rule, a bank or corporation who has obtained
possession of a check with an unauthorized or forged indorsement of the payee’s signature and who
collects the amount of the check other from the drawee, is liable for the proceeds thereof to the payee or
the other owner, notwithstanding that the  amount  has  been  paid  to  the  person  from  whom  the 
check  was obtained.   

VIOLET MCGUIRE SUMACAD, ET AL. vs. THE PROVINCE

OF SAMAR, THE PHILIPPINE NATIONAL BANK
[G.R. No. L-8155. October 23, 1956.]

Facts: While the province of Samar was still occupied by Japanese military forces, a
check was issued by said province to Paulino M. Santos (then the postmaster of
Borongan) for the sum of P25,000, drawn against the Philippine National Bank Cebu
Branch. The payee negotiated the check with James McGuire, an American citizen and
30 | P a g e
resident of the municipality of Borongan. James McGuire presented the check to the
municipal treasurer of Borongan for payment, but the latter (who merely noted it) was
not able or did not choose to pay the same.

James McGuire wrote letters to the Bureau of Posts seeking payment of the check, which
were in turn referred to the PNB. As of this date the province of Samar still had a
deposit of P84,287.47 in the PNB. PNB requested James McGuire to present the check to
the provincial treasurer and the provincial auditor for certification. Before the check
could be certified by the authorities concerned as being in order and entitled to priority
of payment, the province of Samar, withdraw the amount of P83,504.07, leaving a
balance of only P743.43.

In the meantime, James McGuire transferred his rights to the check to the herein
Plaintiffs who, unable to cash it.

Issue: WON defendants herein are solidarily liable to pay the check.

Held: The obligation of the Appellant bank is merely subsidiary. An implied

acceptance of the check by the Appellant bank was thereby created. The request by
the Appellant bank from the Bureau of Posts for photostatic copies of the check and the
subsequent requirement by it for its presentation by James McGuire to the provincial
treasurer and the provincial auditor for certification, would be an empty gesture if the
Appellant did not thereby mean to assume the obligation of paying the check and
holding sufficient deposit of the drawer for the purpose. Even so, Appellant’s resulting
obligation is merely subsidiary, the province of Samar being primarily liable to pay the
check.

Allied Banking Corp. V. Lim Sio Wan (2008)

Facts

Nov. 14, 1983 - respondent Lim deposited with petitioner Allied a money market placement of
P1,152,597.35 for a term of 31 days to mature on December 15, 1983 On Dec. 5, 1983, a person claiming
to be Lim called up an officer of Allied, and instructed to pre-terminate Lim’s money market placement, to
issue a manager’s check representing the proceeds of the placement, and to give the check to one
Deborah Dee Santos who would pick up the check

On December 5, 1983 (the same date that Allied received the phone call instructing to pre-terminate
Lim’s placement), the Allied manager’s check in the name of Lim was deposited with Metrobank in the
account of FCC, purportedly representing the proceeds of FCC’s money market placement with Producers
Bank.

CA modified the RTC’s decision. It ordered Allied to pay 60% and Metrobank 40% of the amount of
P1,158,648.49 plus 12% interest until fully paid

Issue/s

WON Metrobank should be ultimately liable as guarantor of all endorsement on the check, it being the
collecting bank.-NO

Ruling:

Pursuant to Sec. 66 in relation to Sec. 65 of the NIL, the warranty “that the instrument is genuine and in all
respects what it purports to be” covers all the defects in the instrument affecting the validity thereof,

31 | P a g e
including a forged indorsement. Thus, the last indorser will be liable for the amount indicated in the
negotiable instrument even if a previous indorsement was forged.

CIR vs. BPI G.R. No. 134062

FACTS: In October 28, 1988, petitioner assessed BPI of deficiency percentage and documentary
stamp tax for the year 1986, in the total amount of P129,488,056.63. A letter reply by respondent w
as sent on December 10, 1988 stating among other: ... we shall inform you the taxpayer’s decision on
w hether to pay of protest the assessment, CTA ruled that BPI failed to protest on time under Sec
270 of NIRC of 1986.

ISSUE: Whether or not the assessments issued to BPI for deficiency percentage and documentary
stamp taxes for 1986 had already become final and un-appealable.

RULING:
 In merely notifying BPI of his findings. CIR relied on the provisions of the former Section 270 prior
to its amendment by RA 8424. The sentence “the taxpayers shall be informed in w riting of the law
and the facts on w hich the assessment is made…” Was not in the old Section 270 but w as only later
on inserted in the renumbered Section 228 in 1997. Tax assessments by tax examiners are presumed
correct and are made in good faith. The taxpayer has the duty to prove otherw ise. In the absence of
proof of any irregularities in the performance of duties, an assessment duly made by BIR examiner
and approved by his superior officers w ill not be distributed. All presumptions are in favor of the
correctness of tax assessments.

TRANSFIELD PHILIPPINES, INC

vs.
LUZON HYDRO CORPORATION, AUSTRALIA and NEW ZEALAND BANKING GROUP LIMITED and
SECURITY BANK CORPORATION,

Facts: Transfield Philippines (Transfield) entered into a turn-key contract with Luzon Hydro Corp.
(LHC).Under the contract, Transfield were to construct a hydro-electric plants in Benguet and Ilocos.
Transfield was given the sole responsibility for the design, construction, commissioning, testing and
completion of the Project. The contract provides for a period for which the project is to be completed and
also allows for the extension of the period 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 disputes delaying the construction. LHC did not give due course to the
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 on the stand-by letters of credit because of default. However,
the demand was objected by Transfield on the ground that there is still pending arbitration on their
request for extension of time.

Issue: Whether or not LHC can collect from the letters of credit despite the pending arbitration case

Held: Transfield’s argument that any dispute must first be resolved by the parties, whether through
negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit in essence
would convert the letter of credit into a mere guarantee.

The independent nature of the letter of credit may be: (a) independence in toto where the credit is
independent from the justification aspect and is a separate obligation from the underlying 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 or repayment standby, which is identical 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.

SIA vs. PEOPLE

32 | P a g e
G.R. No. L-30896

April 28, 1983

FACTS:

Petitioner, Jose O. Sia, was the president and general manager of Metal Manufacturing of the
Philippines (MEMAP). He was convicted of estafa for his failure to return the cold rolled steel sheets or
account for the proceeds of those which were sold, to Continental Bank, herein complainant. Petitioner
contended that he cannot be made liable for the crime charged as he only acted for and in behalf of
MEMAP as its president.

ISSUE:

Whether petitioner could be held liable for estafa.

RULING:

The Court ruled in the negative.

The case of People vs. Tan Boon Kong (54 Phil. 607) provides for the general principle that for
crimes committed by a corporation, the responsible officers thereof would personally bear the criminal
liability as a corporation is an artificial person, an abstract being. However, the Court ruled that such
principle is not applicable in this case because the act alleged to be a crime is not in the performance of
an act directly ordained by law to be performed by the corporation. The act is imposed by agreement of
parties, as a practice observed in the usual pursuit of a business or a commercial transaction. The offense
may arise, if at all, from the peculiar terms and condition agreed upon by the parties to the transaction,
not by direct provision of the law. In the absence of an express provision of law making the petitioner
liable for the criminal offense committed by the corporation of which he is a president as in fact there is
no such provisions in the Revised Penal Code under which petitioner is being prosecuted, the existence of
a criminal liability on his part may not be said to be beyond any doubt. In all criminal prosecutions, the
existence of criminal liability for which the accused is made answerable must be clear and certain. Further,
the civil liability imposed by the trust receipt is exclusively on the Metal Company. Speaking of such
liability alone, the petitioner was never intended to be equally liable as the corporation. Without being
made so liable personally as the corporation is, there would then be no basis for holding him criminally
liable, for any violation of the trust receipt.

MAGELLAN MANUFACTURING MARKETING CORPORATION vs. COURT OF APPEALS

FACTS: Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of
Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. Through its
president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent to ship the anahaw fans
through Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of
lading and that transhipment is not allowed under the letter of credit. appellant MMMC paid F.E. Zuellig
the freight charges and secured a copy of the bill of lading which was presented to Allied Bank However,
when appellant's president James Cu, went back to the bank later, he was informed that the payment was
refused by the buyer allegedly because there was no on-board bill of lading, and there was a
transhipment of goods. As a result of the refusal of the buyer to accept, upon appellant's request, the
anahaw fans were shipped back to Manila by appellees, for which the latter demanded from appellant
payment of P246,043.43. Appellant abandoned the whole cargo and asked appellees for damages.

33 | P a g e
ISSUE: WON MMMMC should be liable for P52k when it exercised its option of Abandonment.

SUPREME COURT: No. Private respondents belatedly informed petitioner of the arrival of its goods in
Manila and that if it wished to take delivery of the cargo it would have to pay P52k. Private respondents
unequivocally offered petitioner the option of paying the shipping and demurrage charges in order to
take delivery of the goods or of abandoning the same so that private respondents could sell them at
public auction and thereafter apply the proceeds in payment of the shipping and other chargesBy
analogy, this can also apply to maritime transportation. Further, with much more reason can petitioner in
the instant case properly abandon the goods, not only because of the unreasonable delay in its delivery
but because of the option which was categorically granted to and exercised by it as a means of settling its
liability for the cost and expenses of reshipment. And, said choice having been duly communicated, the
same is binding upon the parties on legal and equitable considerations of estoppel.

Ponce v CA; G.R. No. L-

49494; 31 May 1979; 90
SCRA 533
FACTS:
Private respondent and two others executed a promissory note in favor of petitioner
payable in Philippine currency without interest as well as stipulations in case of non-
payment. Upon the failure of the debtors to comply with the terms of the note,
petitioners filed a complaint for the recovery of the principal sum, plus interest
and damages. Private respondent argued that the contract under consideration involved
the payment of US dollars and was, therefore, illegal; and that under the in pari delicto
rule, since both parties are guilty of violating the law, neither can recover.

ISSUE(S):
Whether or not petitioners can still recover.

HELD:
YES. Even if the intention of the parties was really to provide for payment of the
obligation would be made in dollars, petitioners can still recover the dollar amount in its
peso equivalent. What is prohibited by RA No. 529 is the payment of an obligation in
dollars, meaning that a creditor cannot oblige the debtor to pay him in dollars, even if
the loan were given in said currency. In such a case, the indemnity to be allowed should
be expressed in Philippine currency on the bases of the current rate of exchange at the
time of payment.

34 | P a g e
 Kalalo v Luz; G.R. No. L-
27782; 31 Jul 1970; 34
SCRA 337
FACTS:
Parties entered into an agreement where plaintiff-appellee would render engineering
design services to defendant-appellant for fees. The fees agreed upon were percentages
of appellant’s fee. One of the projects they worked on was for the International Rice
Research Institute where appellee stood to receive $28,000, or 20% of the $140,000 that
was paid to appellant.

ISSUE(S):
Whether or not appellant may be compelled to pay in US dollars.

HELD:
NO. Payment in dollars is prohibited by RA 529, a law enacted prior to the forging of
the parties’ agreement. The law requires that obligations incurred prior to its enactment
and that entail payment in a particular kind of coin or currency other than the Philippine
currency shall be discharged in Philippine currency measured at the prevailing rate of
exchange at the time the obligation was incurred. RA 529 does not provide the rate of
exchange for the payment of obligations incurred after the enactment of said Act. The
logical conclusion, therefore, is that the rate of exchange should be that prevailing at
the time of payment.

BANCO 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. 
 
issue: WON Banco Atlantico was a holder in due course. NO.

35 | P a g e
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”).  

VICENTE R. DE OCAMPO & CO. v. ANITA GATCHALIAN.

November 30, 1961.
FACTS:

Anita Gatchalian was interested in buying a car. Manuel Gonzales offered to her a car owned by
plaintiff. Gonzales claimed that he was authorized by the plaintiff to sell the car. Gonzales order
defendant to issue a cross-check to comply on showing interest in buying the car. Gonzales
promised to return the check the next day.

When Gonzales never appeared after, defendant issue a stop payment order on the check. She found
out that Gonzales used the check as payment to plaintiff's clinic for his wife's fees. Plaintiff now
demands defendant for payment of the check, in which defendant refused citing that plaintiff is a
not a holder in due course.

The lower court held that defendant should pay plaintiff.

ISSUE: Whether or not De Ocampo is a holder in due course.

RULING:

The SC held that plaintiff is a not a holder in due course. There were obvious instances to show that
the check was negligently acquired like plaintiff having no liability with defendant and that the check
was crossed. Plaintiff failed to exercise prudence and caution. Plaintiff should have asked questions
to further inquire upon suspicion.

The presumption of good faith did not apply to plaintiff because the defect was apparent on the
instruments face – it was not payable to defendant or bearer.

36 | P a g e
 PNB vs. Quimpo
[G.R. No. L-53194. March 14, 1988.]

FACTS: On 3 July 1973, Francisco S. Gozon II, who was a depositor of the Caloocan City Branch of the
PNB, went to the bank in his car accompanied by his friend Ernesto Santos whom he left in the car
while he transacted business in the bank. When Santos saw that Gozon left his check book he took a
check therefrom, filled it up for the amount of P5,000.00, forged the signature of Gozon, and
thereafter he encashed the check in the bank on the same day. The account of Gozon was debited the
said amount. Upon receipt of the statement of account from the bank, Gozon asked that the said
amount of P5,000.00 should be returned to his account as his signature on the check was forged but
the bank refused. Upon Gozon’s complaint on 1 February 1974 Ernesto Santos was apprehended by
the police authorities and upon investigation he admitted that he stole the check of Gozon, forged
his signature and encashed the same with the Bank.

Hence Gozon filed the complaint for recovery of the amount of P5,000.00, plus interest, damages,
attorney's fees and costs against the bank in the CFI Rizal (Branch XIC, Hon. Romulo S. Quimpo
presiding). After the issues were joined and the trial on the merits ensued, a decision was rendered on
4 February 1980, ordering the bank to return the amount of P5,000 which it had unlawfully withheld,
with interest at the legal rate from 22 September 1972 until the amount is fully delivered. The bank
was further condemned to pay Gozon the sum of P2,000.00 as attorney's fees and to pay the costs of
the suit. The bank filed a petition for review on certiorari.

ISSUE: W/N PNB is Liable.

HELD: A bank is bound to know the signatures of its customers; and if it pays a forged check, it must
be considered as making the payment out of its own funds, and cannot ordinarily change the amount
so paid to the account of the depositor whose name was forged (San Carlos Milling Co. vs. Bank of
the P.I., 59 Phil. 59).

The rule is absolutely necessary to the circulation of drafts and checks, and is based upon the
presumed negligence of the drawee in failing to meet its obligation to know the signature of its
correspondent. There is nothing inequitable in such a rule. If the paper comes to the drawee in the
regular course of business, and he, having the opportunity ascertaining its character, pronounces it to
be valid and pays it, it is not only a question of payment under mistake, but payment in neglect of
duty which the commercial law places upon him, and the result of his negligence must rest upon him
(12 ALR, 1901, citing many cases found in I Agbayani, supra).

A comparison of the signature on the forged check with Gozon's exemplar signatures found in the
PNB Form 35-A would immediately show the negligence of the employees of the bank. Even a not
too careful comparison would immediately arrest one's attention and direct it to the graceful lines of
Gozon’ss exemplar signatures in the bank form. The formation of the first letter 'F' in the exemplars,
which could be regarded as artistic, is completely different from the way the same letter is formed in
the check. That alone should have alerted a more careful and prudent signature verifier.

The Supreme Court dismissed the petition for lack of merit, with costs against the bank.

37 | P a g e
 Metropolitan
Waterworks v CA; G.R.
No. L-62943; 14 Jul 1986;
143 SCRA 20
FACTS:
By special arrangement with respondent bank (PNB), Metropolitan Waterworks and
Sewerage System (MWSS) used personalize checks in drawing from one of its accounts
with PNB. MWSS released twenty-three checks which were deposited in the respective
accounts of Raul Dizon, Arturo Sison and Antonio Mendoza with different banks. It was
later found that the three depositors were all fictitious persons.

ISSUE(S):
Whether or not petitioner is barred from setting up the defense of forgery under
Section 23 of the Negotiable Instruments Law.

HELD:
YES. The petitioner was using its own personalized checks, instead of the official PNB
Commercial blank checks. In the exercise of this special privilege, however, the
petitioner failed to provide the needed security measures. Moreover, petitioner also did
not furnish the respondent bank with samples of checks, pens, and inks or took other
precautionary measures with the latter to safeguard its interests. The petitioner’s failure
to reconcile its bank statements with its own records facilitated the fraudulent
encashment. Even if the twenty-three (23) checks in question are considered forgeries,
considering the petitioner’s gross negligence, it is barred from setting up the defense of
forgery under Section 23 of the Negotiable Instruments Law.

38 | P a g e
 REPUBLIC BANK V. CA
196 SCRA 100
 

FACTS:
SMC issued a dividend check in favor of Delgado and the check was drawn against FBTC.  Delgado was
able to alter the check, increased the amount of  the  same  and  deposited  it  with  his  account  in 
Republic  Bank.    RB indorsed it with FBTC.  The SMC notified FBTC of the alterations made and
demanded  for  reimbursement.    Republic  Bank  then  didn't  want  to reimburse.  The trial court held it
liable. 
 

ISSUE:
Whether petitioner Republic Bank as the collecting bank should bear the loss resulting from the altered
check.

HELD:
The 24-hour clearing rule is a valid rule applicable to commercial banks.  It is  true  that  when  an 
indorsement  is  forged,  the  collecting  bank  or  last indorser,   as   a   general   rule,   bears   the  
loss.      But   the   unqualified endorsement of the collecting bank of the checks should be read together 
with  the  24-hour  regulation  on  clearing  house  operation.    Thus,  when  a drawee bank fails to return
the forged check to the collecting bank within the 24-hour clearing rule, the collecting bank is absolved
from liability. 

Caltex (Phils.) Inc. V. CA And Security Bank And

Trust Co. (1992)
39 | P a g e
FACTS:
Security Bank and Trust Co. issued 280 certificates of time deposit (CTD) in favor of one
Mr. Angel dela Cruz who deposited with the bank P1.12 million.  Dela Cruz delivered the
CTDs to  Caltex in connection with his purchase of fuel products from the latter. 
Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus executed
an affidavit of loss to facilitate the issuance of the replacement CTDs.  When Caltex
presented said CTDs for verification with the bank and formally informed the bank of its
decision to preterminate the same, the bank rejected Caltex’ claim and demand as
Caltex failed to furnish copies of certain requested documents.  In 1983, dela Cruz’ loan
matured and the bank set-off and applied the time deposits as payment for the loan.
Caltex filed a complaint which was dismissed on the ground that the subject certificates
of deposit are non-negotiable.

ISSUE:
Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.

RULING:
The CTDs in question are negotiable instruments as they meet the requirements of the
law for negotiability as provided for in Section 1 of the Negotiable Instruments Law. 
The documents provide that the amounts deposited shall be repayable to the depositor.
And according to the document, the depositor is the "bearer." The documents do not
say that the depositor is Angel de la Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of
presentment.  However, petitioner cannot recover on the CTDs.   Although the CTDs are
bearer instruments, a valid negotiation thereof for the true purpose and agreement
between it and dela Cruz, as ultimately ascertained, requires both delivery and
indorsement.  In this case, there was no indorsement as  the CTDs were delivered not as
payment but only as a security for dela Cruz' fuel purchases.

**The accepted rule is that the negotiability or non-negotiability of an instrument is

determined from the writing, that is, from the face of the instrument itself.  The CTDs in
question are negotiable instruments as they meet the requirements of the law for
negotiability as provided for in Section 1 of the Negotiable Instruments Law.  The
documents provide that the amounts deposited shall be repayable to the depositor.
And according to the document, the depositor is the "bearer." The documents do not
say that the depositor is Angel de la Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of
presentment.

Republic Bank vs. Ebrada

GR L-40796, 31 July 1975
-forgery

FACTS:
Respondent Ebrada encashed a back pay check dated January 15, 1963 at Republic
Bank.  The Bureau of Treasury, which issued the check advised the bank that the alleged
indorsement of the check by one “Martin Lorenzo” was a forgery as the latter has been
dead since 14 July 1952; and requested that it be refunded he sum deducted from its
account. The bank refunded the amount to the Bureau and demanded upon Ebrada the
sum in question, who refused.

ISSUES:

40 | P a g e
         1)      Whether the bank can recover from Ebrada who was the last indorser of the
check with the forged indorsement.
         2)      Whether the existence of one forged signature in the check will render void
all the other negotiations of the check with respect to the other parties whose signature
are genuine.

RULING:
         1)      Republic Bank should suffer the loss when it paid the amount of the check in
question to Ebrada but it has the remedy to recover from the latter the amount it paid
to her because as last indorser of the check, she has warranted that she has good title to
it even if in fact she did not because the payee of the check was already dead 11 years
before the check was issued.
         2)      The negotiation of the check in question from Martin Lorenzo, the original
payee whose indorsement was forged, to the second indorser, should be declared of no
affect, but the negotiation of the aforesaid check from the second indorser to  the third
indorser, and from the third indorser to Ebrada who did not know of the forgery, should
be considered valid and enforceable, barring any claim of forgery.

ANG TIONG V. TING        

22 SCRA 713
 

FACTS:
Ting issued a PBCom check payable to cash or bearer.  This was indorsed by Ang at the back and it was
received by plaintiff.  Upon encashment of the  check,  the  same  was  dishonored.    Plaintiff  moved 
that  the  two  make good  the  value  of  the  check  but  despite  demands,  he  was  unheeded,
prompting him to file a complaint.  The trial court decided in his favor.   
 
ISSUE:

W/N Ang is an accomodating indorser and not a general indorser

HELD:
Even  on  the  assumption  that  the  appellant  was  an  accommodation indorser, as he professes to be,
he is nevertheless by the clear mandate of section 29, liable on the instrument to a holder for value,
notwithstanding that such  holder at the time of taking the instrument knew him to be an
accommodation  party.    And  assuming  that  he  was  an  accommodation party,  he  may  obtain 
security  from  the  maker  to  protect  himself  against the danger of insolvency of the latter but this
doesn't affect his liability to the appellee, as the said remedy is a matter of recourse between him and the
maker.  

PHILIPPINE BANK OF COMMERCE V. ARUEGO

102 SCRA 530

41 | P a g e
 

FACTS:
Aruego,  on  behalf  of  World  Current  Events,  entered  into  a  Credit Agreement  with  PBCom,  for 
the  publication  of  the  company’s  periodicals.  At  every  printing  endeavor  by  the  printing  press,  a 
bill  of  exchange  is drawn against PBCom.  The instruments are signed by Aruego, without any indication
that he is an agent of World Current Events.  When he was being held liable by PBCom, he averred that he
only signed the instrument in the capacity of agent of the company. 
 
Issue: 
Whether Aruego can be held liable by the petitioner although he signed the supposed
bills of exchange only as an agent of Philippine Education Foundation Company.

HELD:
An inspection of the drafts accepted by the defendant would show nowhere that he has disclosed that he
was signing in representation of the Philippine Education Foundation Company.  He merely signed his
name.  For failure to disclose  his  principal,  Aruego  was  personally  liable  for  the  drafts  he accepted.

CLARK V. SELINER

42 | P a g e
42 PHIL 384
FACTS:

Sellner with two other persons, signed a promissory note solidarily binding themselves  to  pay  to  the 
order  of  R.N  Clark.    The  note  matured  but  the amount  wasn't  paid.    The  defendant  alleges  that 
he  didn't  receive  any amount  of  the  debt;  that  the  instrument  wasn't  presented  to  him  for
payment  and  being  an  accommodation  party,  he  is  not  liable  unless  the note is negotiated, which
wasn't done.  

ISSUE

Whether or not defendant is liable as accommodation party.

HELD:

On the first issue, the liability of Sellner as one of the signers of the note, is not dependent on whether he
has  or has not, received  any part of the debt.    The  defendant  is  really  and  expressly  one  of  the 
joint  and  several debtors of the note and as such he is liable under the provisions of Section 60 of the
Negotiable Instruments Law.  

As to the presentment for payment, such action is not necessary  in order to charge the person primarily 
liable, as is the defendant Sellner.

As to whether or not Sellner is an accommodation party, it should be taken into account that by putting
his signature to the note, he lent his name, not to the creditor, but to those who signed with him placing
him in the same position and with the same liability as the said signers.  It should be noted that  the 
phrase”without  receiving  value  therefore”  as  used  in  section  29 means “without receiving value by
virtue of the instrument” and not, as it apparently is supposed to mean, “without receiving payment for
lending his name.”  It is immaterial as far as the creditor is concerned, whether one of the signers has or
has not received anything in payment for the use of his name.  In this case, the legal situation of Sellner is
that of a joint surety who  upon  the  maturity  of  the  note,  pay  the  debt,  demand  the  collateral
security and dispose of it to his benefit.  As to the plaintiff, he is a holder for value.

MAULINI V. SERRANO

43 | P a g e
 28 PHIL 640

FACTS:
This is an appeal from a judgment of the Court of First Instance of the city of  Manila  in  favor  of  the 
plaintiff  for  the  sum  of  P3,000,  with  interest thereon  at  the  rate  of  11⁄2  per  cent  month  from 
September  5,  1912, together with the costs. 
 
The  action  was  brought  by  the plaintiff  upon  the  contract  of  indorsement alleged to have been
made in his favor by the defendant upon the following promissory note: 
 
3,000.    
 
 
         Due 5th of September, 1912. 
We  jointly  and  severally  agree  to  pay  to  the  order  of  Don  Antonio  G. 
Serrano  on  or  before  the  5th  day  of  September,  1912,  the  sum  of  three 
thousand  pesos  (P3,000)  for  value  received  for  commercial  operations. 
Notice  and  protest  renounced.  If  the  sum  herein  mentioned  is  not 
completely  paid  on  the  5th  day  of  September,  1912,  this  instrument  will 
draw interest at the rate of 11⁄2 per cent per month from the date when 
due  until  the  date  of  its  complete  payment.  The  makers  hereof  agree  to 
pay the additional sum of P500 as attorney's fees in case of failure to pay 
the note. 
 
Manila, June 5, 1912. 
 
(Sgd.) For Padern, Moreno & Co., by F. Moreno, member of the firm. For 
Jose Padern, by F. Moreno. Angel Gimenez. 
 
The note was indorsed on the back as follows: 
 
Pay  note  to  the  order  of  Don  Fernando  Maulini,  value  received.  Manila, 
June 5, 1912. (Sgd.) A.G. Serrano. 
 

ISSUE

Whether or not appellant is an accommodation indorser with regard to plaintiff-appellee

Maulini.

HELD:
1.    The  accommodation  to  which  reference  is  made  in  Section  29  is not one to the person who
takes the note but one to the maker or indorser of the note.  It is true, that in the case at bar, it was an 
accommodation to the plaintiff, in the popular sense, to have the defendant  indorse  the  note;  but  it 
wasn't  the  accommodation described in the law but rather a mere favor to him and one which in   no  
way   bound   Serrano.      In   cases   of   accommodation indorsement,   the   indorser   makes   the  
indorsement   for   the accommodation  of the maker.  Such an indorsement is generally for the purpose
of better securing the payment of the note—that is, he lends his name to the maker and not the holder.

2.    Parol  evidence  is  admissible  for  the  purposes  named.    The prohibiton against parol evidence is
to prevent alteration, change, modification, or contradiction of the term of a written instrument,
admittedly existing, by the use of some parol evidence except in cases specifically named in the action. 
The case at bar is not one where the evidence offered varies, alters, modifies, or contradicts the  terms  of 

44 | P a g e
the  indorsement  admittedly  existing.    The  evidence was not offered for that purpose.  The purpose
was to show that the  contract  of  indorsement  ever  existed;  that  the  minds  of  the parties never met
on the terms of such contract; that they never mutually agreed to enter into such contract; and that there
never 
existed  a  consideration  upon  which  such  an  agreement  could  be founded.  

JOSE VELASCO v. TAN LIUAN &

CO
G.R. No. 17230 March 17, 1922
FACTS
The defendant Tan Liuan and Co. executed to the defendant Aw Yong Chiow Soo four certainpromissory
notes: The first, for P12,000, dated February 18th, the second, for P16,000, dated February23d, the third,
for P38,000, dated March 17th, and the fourth, for P21,000, dated March 27th, all in theyear 1919, and
each payable six months after its respective date.On March 17, 1919, the defendant Aw Yong Chiow Soo
drew a bill of exchange or sight draft, forP33,500 Yen on Jing Kee and Co., 2 Kaisandori 5-Chone, Kobe, in
favor of the Philippine National Bank,which at first it refused to cash. The plaintiff Jose Velasco was then
induced to, and did, endorse it, andthe bank cashed the draft, no part of which plaintiff received, and it is
claimed that all of the money waspaid to Tan Liauan and Co. In the ordinary course of business, the draft
was dishonored when presented,and later the plaintiff was requested to, and did, personally execute to
the Philippine National Bank hispromissory note, for the amount of the draft, interest and expenses.The
complaints alleges the execution of the notes by the defendant Tan Liuan and Co. to thedefendant Aw
Yong Chiow Soo. That the defendant Aw Yong Chiow Soo indorsed the notes to the plaintiff;that at their
maturity they were duly presented to Tan Liuan and Co.; and that payment was refused, ofwhich refusal
the defendant Aw Yong Chiow Soo was duly notified. For answer, Aw Yong Chiow Soo makesa general
denial, and, as a further and separate defense, alleges the drawing of the sight draft, and that itwas an
accommodation only, and that, conforming to the agreement, it was duly indorsed by the plaintiff,and Aw
Yong Chiow So delivered the money to the defendant Tan Liuan.
RULING
The lower court rendered judgment against the defendants Tan Liuan and Co. and Tan Liuan andUy Tengpiao, for the full
amount of the notes, from which the plaintiff should only receive a sufficientamount to fully compensate
him as an indorser of the draft and that, if collected, the remainder, if any,should be paid to Aw Yong
Chiow Soo against whom judgment was rendered should be defendant TanLiuan and Co. fail to pay the
judgment.
ISSUE
Whether or Not Aw Yong Chiow is liable for the unqualified indorsement made to the plaintiff,Jose
Velasco in the event that Tan Liuan Co should fail to pay.

Philippine National Bank v. Maza and Mecenas

[G.R. No. L-24224. November 3, 1925]
45 | P a g e
FACTS:
Maza and Macenas executed a total of five promissory notes.  These were not paid at maturity.  And to
recover the amounts stated on the face of the promissory  notes,  PNB  initiated  an  action  against  the 
two.  The  special defense  posed  by  the  two  is  that  the  promissory  notes  were  delivered  to 
them  in  blank  by  a  certain  Enchaus  and  were  made  to  sign  the  notes  so that the latter could
secure a loan from the bank.  They also alleged that they never negotiated the notes with the bank nor
have they received any value  thereof.    They  also  prayed  that  Enchaus  be  impleaded  in  the 
complaint  but  such  was  denied.    The  trial  court  then  held in  favor  of  the bank.  

ISSUE

Whether or not appellants are liable as accommodation parties.

RULING

YES. As accommodation parties, the defendants having signed the instruments without receiving value
therefor and for the purpose of lending their names to some other person, are still liable on the
instruments. The law now is that the accommodation party can claim no benefit as such, but he is liable
according to the face of his undertaking, the same as if he were himself financially interested in the
transaction

AMERICAN BANK V. MACONDRAY- Forged

Indorsements
4 PHIL 695
American Bank v. Macondray, 1905

Facts:

A bill of exchange was drawn by V.S. Wolff against F. H. TAYLOR & Co., payable to
himself. The defendant, certified that the signature, V. S. Wolff, to said bill of
exchange was genuine. , The same was indorsed to American Bank in the US and later
on was protested because F. H. TAYLOR & Co. could not be found nor its
representative after diligent search.

American Bank then claims the right to recover from defendant upon the theory that
the defendant guaranteed the payment of said bill of exchange.

Defendant denies that part of the statement which appears in his alleged
endorsement, "Payment guaranteed. Protest, demand, and notice of nonpayment
waived," as this was added to said endorsement after the signature of Macondray &
Co. had been affixed to said endorsement.

Issue: Whether Macondray & Co. is liable upon said bill of exchange as an endorser.

HELD:

46 | P a g e
An  examination  of  the  alleged  indorsement  of  Macondray  &  Co.  which appeared  upon  the  said 
bill  of exchange  at  the  time  of  the  trial,  and  the indorsement  of  said  company  at  the  time  of 
the  protest  of  said  bill  of exchange, shows beyond peradventure of doubt that the contention of the
defendant is true, and that part of the indorsement which  says "Payment guaranteed.  Protest,  demand, 
and  notice  of  nonpayment  waived"  was added by some person after the signature of the defendant,
Macondray & Co., and after the protest of said bill. The indorsement made by Macondray &  Co.  was 
changed,  after  said  indorsement  by  said  company,  by  adding thereto the statement "Payment
guaranteed. Protest, demand, and notice of  nonpayment  waived,"  and  that  the  indorsement  actually 
made  by Macondray & Co. was in the following form:

V. S. Wolff. The signature is O. K. Macondray & Co.

The  liability  of  an  indorser  of  a  bill  of  exchange,  after  due  protest  and notice  of  nonpayment 
and  dishonor,  is  the  same  as  that  of  the  original obligors on such a contract, and any material
alteration in the terms of this contract by the holder of the same, without the consent of the obligor, will
relieve such obligor from all liability thereon.

The original indrosement then of the company was for the purpose only of assuring the American Bank
that the signature of Wolff was genuine—that is to say, that the person whom he represented himself to
be.  It was an indorsement for identification of the person only and not for the purpose of incurring
liability to the payment of such bill of exchange.

47 | P a g e