NIL - Case Digest by KCabus

NEGOTIABLE INSTRUMENTS LAW – CASE DIGEST
CASE TITLE G.R. NO./DATE PAGE

A. FORMS AND INTERPRETATION
1.REQUISITES OF NEGOTIABILITY
 Equitable Banking Corporation vs. the Honorable G.R. No. 74451/ 1
Intermediate Appellate Court and The Edward J. May 25, 1988
Nell Co.,
 Juanita Salas vs. Hon. Court of Appeals and First G.R. No. 76788/ 2
Finance & Leasing Corporation January 22, 1990
 Metropolitan Bank & Trust Company vs. Court Of G.R. No. 88866/ 3
Appeals, Golden Savings & Loan Association, Inc., February 18, 1991
Lucia Castillo, Magno Castillo and Gloria Castillo
 Caltex (Philippines), Inc. vs. Court of Appeals and G.R. No. 97753/ 4
Security Bank and Trust Company August 10, 1992
 Traders Royal Bank vs. Court of Appeals, Filriters G.R. No. 93397/ 5
Guaranty Assurance Corporation and Central Bank March 3, 1997
of the Philippines
 Philippine National Bank vs. Erlando T. Rodriguez G.R. No. 170325/ 6
and Norma Rodriguez September 26, 2008
 People of the Philippines vs. Gilbert Reyes Wagas G.R. No. 157943/ 7
September 4, 2013
2. Kinds of Negotiable Instruments
 Philippine Education Co., inc. vs. Mauricio A. G.R. No. L-22405/ 8
Soriano, et al. June 30, 1971
 Firestone Tire & Rubber Company of the G.R. No. 113236/ 9
Philippines vs. Court of Appeals and Luzon March 5, 2001
Development Bank
 Philippine National Bank vs. Erlando T. Rodriguez G.R. No. 170325/ 10
and Norma Rodriguez September 26, 2008
 Prudential Bank v. Commissioner of Internal G.R. No. 180390/ 11
Revenue (CIR) July 27, 2011
B. Completion and Delivery
 Ting Ting Pua vs. Spouses Benito Lo Bun Tiong and G.R. No. 198660/ 12
Caroline Siok Ching Teng October 23, 2013
1.Completion of Blanks
 Quirino Gonzales Logging Concessionaire, Quirino G.R. No. 129568/ 13
Gonzales and Eufemia Gonzales vs. Court of April 30, 2003
Appeals and Republic Planters Bank
2.Complete but Undelivered Instruments
 Loreto D. de la Victoria, as City Fiscal of Mandaue G.R. No. 111190/ 14
City and in his personal capacity as garnishee vs. June 27, 1995
Digested by: KCabus

Hon. Jose P. Burgos, Presiding Judge, RTC, Br. XVII,
Cebu City, and Raul H. Sesbreño
 San Miguel Corporation vs. Puzon, Jr. G.R. No. 167567/ 15
22 September 2010
 Equitable Banking Corporation vs. Special Steel G.R. No. 175350/ 16
Products, June 13, 2012 June 13, 2012
C. Signature
1.Signature of Agent
 Philippine Bank of Commerce vs. Jose M. Aruego G.R. Nos. L-25836-37/ 17
January 31, 1981
2.Forgery
 Westmont Bank (formerly Associated Banking G.R. No. 132560/ 18
Corp.) vs. Eugene Ong January 30, 2002
 Associated Bank and Conrado Cruz, vs. Hon. Court G.R. No. 89802/ 19
of Appeals, and Merle V. Reyes, doing business May 7, 1992
under the name and style "Melissa’s RTW
 Ramon K. Ilusorio vs. Court of Appeals G.R. No. 139130/ 20
November 27, 2002
 Bank of the Philippine Islands vs. Casa Montessori G.R. No. 149454/ 21
Internationale and Leonardo T. Yabut May 28, 2004
 Samsung Construction Company Philippines, Inc. G.R. NO. 129015/ 22
vs. Far East Bank and Trust Company and Court of August 13, 2004
Appeals
 Philippine National Bank vs. FF Cruz and Company G.R. No. 173259/ 23
July 25, 2011
 Philippine Commercial International Bank vs. G.R. No. 158143/ 24
Balmaceda September 21, 2011
D. Consideration
 Travel-On, Inc. vs. Court of Appeals and Arturo S. G.R. No. L-56169/ 25
Miranda June 26, 1992
 Remigio S. Ong vs. People of the Philippines and G.R. No. 139006/ 26
Court of Appeals November 27, 2000
 Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso G.R. NO. 117913/ 27
Yap, Richard Velasco and Alfonso Co vs. Court of February 1, 2002
Appeals and Philippine Bank of Communications
 Quirino Gonzales Logging Concessionaire, Quirino G. R. No. 126568/ 28
Gonzales and Eufemia Gonzales vs. Court of April 30, 2003
Appeals and Republic Planters Bank
 Cayanan v. North Star International Travel Inc G.R. No. 172954/ 29
October 5, 2011
E. Accommodation Party
Digested by: KCabus

 Ang Tiong vs. Lorenzo Ting, doing business under G.R. No. L-26767/ 30
the name & style of Prunes Preserves MFG., & February 22, 1968
Felipe Ang
 GSIS vs. Court of Appeals G.R. No. L-40824/ 31
February 23, 1989
 People vs. Maniego G.R. No.L-30910/ 32
February 27, 1987
 Town Saving and Loan Bank, Inc. vs. Court of G.R. No. 106011/ 33
Appeals June 17, 1993
 Gonzales vs. Phillippine Commercial and GR No. 180257/ 34
International Bank February 23, 2011
F. Negotiation
1. Distinguished from Assignment
 Sesbreno vs. Court of Appeals G.R. No. 89252/ 35
May 24, 1993
2. Modes of Negotiation
 Ang Tek Lian vs. Court of Appeals G.R. No. L-2516/ 36
September 25, 1950
 Caltex (Philippines), Inc. vs. Court of Appeals and G.R. No. 97753/ 37
Security Bank and Trust Company August 10, 1992
G. Rights of the Holder in Due Course
 Vicente R. De Ocampo & Co. vs. Anita Gatchalian, G.R. No. L-15126/ 38
et al. November 30, 1961
 Juanita Salas vs. Hon. Court of Appeals and First G.R. No. 76788/ 39
Finance & Leasing Corporation January 22, 1990
 Stelco Marketing Corporation vs. Court of Appeals G.R. No. 96160/ 40
and Steelweld Corporation of the Philippines, Inc., June 17, 1992
 Bataan Cigar and Cigarette Factory, Inc. vs. the G.R. No. 93048/ 41
Court of Appeals and State Investment House, Inc. March 3, 1994
 Atrium Management Corporation vs. Court of G.R. No. 109491/ 42
Appeals, et al. February 28, 2001
 Cely Yang vs. Hon. Court of Appeals, Philippine G.R. No. 138074/ 43
Commercial International Bank, Far East Bank & August 15, 2003
Trust Co., Equitable Banking Corporation, Prem
Chandiramani and Fernando David
H. Liabilities of Parties
1.Maker
 Republic Planters Bank vs. Court of Appeals G.R. No. 93073/ 44
December 21, 1992
2.Drawer
 Myron C. Papa vs. A.U. Valencia & Co., Inc., et al. G.R. No. 105188/ 45
Digested by: KCabus

January 23, 1998
 Bank of the Philippine Islands vs. Reynald R. G.R. No. 167750/ 46
Suarez March 15, 2010
3.Acceptor
 Associated Bank and Conrado Cruz, vs. Court of G.R. No. 89802/ 47
Appeals, and Merle V. Reyes, doing business May 7, 1992
 Westmont Bank (formerly Associated Banking G.R. No. 132560/ 48
Corp.) vs. Eugene Ong January 30, 2002
 Samsung Construction Company Philippines, Inc. G.R. NO. 129015/ 49
vs. Far East Bank and Trust Company and Court Of August 13, 2004
Appeals
4.Indorser
 Ang Tiong vs. Lorenzo Ting, doing business under G.R. No. L-26767/ 50
the name & style of Prunes Preserves MFG., & February 22, 1968
Felipe Ang
 Maria Tuazon vs. Heirs of Bartolome Ramos G.R. No. 156262/ 51
Jul 14, 2005
 Allied Banking Corporation vs. Bank of the G.R. No. 188363/ 52
Philippine Islands February 27, 2013
5.Warranties
I. Presentment for Payment
1. Necessity of Presentment for Payment
 International Corporate Bank vs. Gueco G.R. No. 141968/ 55
February 12, 2001
J. Notice of Dishonor
 Jaime Dico vs. Court of Appeals and People of the G.R. NO. 141669/ 56
Philippines February 28, 2005
1.Parties to Be Notified
 Lao vs. Court of Appeals G.R. No. 119178/ 57
June 20, 1997
 Ofelia Marigomen vs. People of the Philippines G.R. No. 153451/ 58
May 26, 2005
 Great Asian Sales Center Corporation and Tan G.R. No. 105774/ 59
Digested by: KCabus

Chong Lin vs. the Court of Appeals and Bancasia April 25, 2002
Finance and Investment Corporation
2.Parties Who May Give Notice and Dishonor
 Eliza T. Tan vs. People of the Philippines G.R. No. 141466/ 60
January 19, 2001
3.Effect of Notice
 Bank of the Philippine Islands vs. Reynald R. G.R. No. 167750/ 61
Suarez March 15, 2010
 James Svendsen vs. People of the Philippines G.R. NO. 175381/ 62
February 26, 2008
4.Form of Notice
 Jaime Dico vs. Court of Appeals and People of the G.R. NO. 141669/ 63
Philippines February 28, 2005
K. Discharge of Negotiable Instrument
 Bank of the Philippine Islands vs. Court of Appeals G.R. No. 112392/ 64
February 29, 2000
 Cebu International Finance Corporation vs. Court G.R. No. 123031/ 65
of Appeals ( October 12, 1999
 Anamer Salazar vs. JY Brothers Marketing G.R. No. 171998/ 66
Corporation October 20, 2010
L. Material Alteration
1.Concept
 Philippine National Bank vs. Court of Appeals, G.R. No. 107508/ 67
Capitol City Development Bank, Philippine Bank of April 25, 1996
Communications, and F. Abante Marketing
 The International Corporate Bank, Inc. vs. Court of G.R. No. 129910/ 68
Appeals and Philippine National Bank September 5, 2006
2.Effect of Material Alteration
 Metropolitan Bank and Trust Company vs. Renato G.R. No. 154469/ 69
D. Cabilzo December 6, 2006
M. Acceptance
1.Definition
 Prudential Bank, Petitioner, v. Intermediate G.R. No. 74886/ 70
Appellate Court, Philippine Rayon Mills Inc. and December 8, 1992
Anacleto R. Chi
 Philippine National Bank vs. the Court of Appeals G.R. No. L-26001/ 71
and Philippine Commercial and Industrial Bank October 29, 1968
2.Manner
 New Pacific Timber vs. Seneris G.R. No. L-41764/ 72
December 19, 1980
Digested by: KCabus

Anacleto R. Chi
N. Presentment for Acceptance
1.Time/Place/Manner of Presentment
Anacleto R. Chi
2.Effect of Failure to Make Presentment
 Myron C. Papa vs. A.U. Valencia & Co., Inc., et al. G.R. No. 105188/ 75
January 23, 1998
O. Promissory Notes
 Philippine National Bank vs. Concepcion Mining G.R. No. L16968/ 76
Company, Inc., et al. July 31, 1962
 Perla Compania De Seguros, Inc. vs. the Court of G.R. No. 96452/ 77
Appeals, Herminio Lim And Evelyn Lim May 7, 1992
 Jose L. Ponce de leon vs. Rehabilitation Finance G.R. No. L-24571/ 78
Corporation December 18, 1970
 People of the Philippines vs. Martin L. Romero G.R. No. 112985/ 79
and Ernesto C. Rodriguez April 21, 1999
 Astro Electronics Corp. and Peter Roxas vs. G.R. No. 136729/ 80
Philippine Export and Foreign Loan Guarantee September 23, 2003
Corporation
P. Checks
1.Definition
 BPI Card Corporation vs. Court of Appeals G.R. No.120639/ 81
September 25, 1998
2.Kinds
 State Investment House vs. IAC G.R. No. 72764/ 83
July 13, 1989
 People vs. Nitafan G.R. No. 75954/ 84
October 22, 199
 Tan vs. Court of Appeals G.R. No. 108555/ 85
December 20, 1994
 Teddy G. Pabugais vs. Dave Sahijiwani G.R. No. 156846/ 86
February 23, 2004
 Philippine Commercial International Bank vs. G.R. No. 158143/ 87
Balmaceda September 21, 2011
3.Presentment for Payment
Digested by: KCabus

 New Pacific Timber vs. Seneris G.R. No. L-41764/ 88
December 19, 1980
 Philippine Airlines vs. Court of Appeals G.R. No. 49188/ 89
January 30, 1990
 Bishop of Malolos vs. Intermediate Appellate G.R. No. 72110/ 90
Court November 16, 1990
 Fortunado vs. Court of Appeals G.R. No. 78556/ 91
April 25, 1991
 Tibajia, Jr. vs. Court of Appeals G.R. No. 100290/ 92
June 4, 1993
 Far East Bank & Trust Company vs. Diaz Realty, G.R. No. 138588/ 93
Inc. August 23, 2001
February 12, 2001
 Security Bank and Trust Company vs. Rizal G.R. No. 170984/ 95
Commercial Banking Corporation January 30, 2009
a. Time
February 12, 2001
b. Effect of Delay
February 12, 2001
Digested by: KCabus
Equitable Banking Corp vs IAC

G.R. No. 74451, May 25, 1988
FACTS:
In 1975, defendant Casals went to plaintiff Nell Company and bought two units of
skidders for P970T to be paid by way of a domestic letter of credit with Equitable Bank in
lieu of cash payment. Casville informed Nell Company that for the letter of credit to be
opened, Casville needs to deposit P427,300.00 with Equitable Bank and requested Nell
Company to pay the deposit in the meantime.
Nell Company agreed and sent a check for P427,300.00., payable to the order of
EQUITABLE BANKING CORPORATION A/C OF CASVILLE ENTERPRISES, INC. Plaintiff
entrusted the delivery of the check and the latter to defendant believing that no one
could encash the same as it was made payable to the defendant bank alone.
However, upon receipt of the check, defendant Casals immediately deposited it with the
defendant bank and the bank teller accepted the same for deposit in Casville’s checking
account. After depositing said check, Casals withdrew all the amount deposited.
ISSUE:
Whether or not Equitable Bank is liable to Nell Company?
RULING:
No. The subject check was equivocal and patently ambiguous. By making the check read;
"Pay to the of EQUITABLE BANKING CORPORATION A/C OF CASVILLE ENTERPRISES, INC."
the payee ceased to be indicated with reasonable certainty in contravention of Section 8
of the Negotiable Instruments Law. As worded, it could be accepted as deposit to the
account of the party named after the symbols "A/C," or payable to the Bank as trustee, or
as an agent, for Casville Enterprises, Inc., with the latter being the ultimate beneficiary.
That ambiguity is to be taken contra proferentem that is, construed against NELL who
caused the ambiguity and could have also avoided it by the exercise of a little more care.
In the last analysis, it was NELL’s own acts, which put it into the power of Casals and
Casville Enterprises to perpetuate the fraud against it and, consequently, it must bear the
loss.
1
Digested by: KCabus
Salas vs CA and Filinvest Finance & Leasing Corp.

G.R. No. 76788, Jan 22, 1990
FACTS:
Juanita Salas bought a motor vehicle from the VMS for P58,138.20 evidenced by a
promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing
Corporation which financed the purchase.
Petitioner defaulted in her installments beginning May 21, 1980 allegedly due to a
discrepancy in the engine and chassis numbers of the vehicle delivered to her and those
indicated in the sales invoice, certificate of registration and deed of chattel mortgage,
which she discovered when the vehicle figured in an accident. This prompted private
respondent to file a complaint for a sum of money against petitioner before the Regional
Trial Court which ordered the defendant to pay the plaintiff the sum of P28,414.40 with
interest thereon.
Both petitioner and private respondent appealed the aforesaid decision to the Court of
Appeals which rendered its assailed decision. Hence, this appeal.
ISSUE:
Whether or not the PN in question is a negotiable instrument?
RULING:
Yes. The questioned promissory note shows that it is a negotiable instrument, having
complied with the requisites under the law as follows: [a] it is in writing and signed by the
maker Juanita Salas; [b] it contains an unconditional promise to pay the amount of
P58,138.20; [c] it is payable at a fixed or determinable future time which is "P1,614.95
monthly for 36 months due and payable on the 21st day of each month starting March
21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to Violago Motor Sales
Corporation, or order and as such, [e] the drawee is named or indicated with certainty.
2
Digested by: KCabus
MBTC VS CA, Golden Savings

G.R. No. 88866, Feb 18, 1991
FACTS:
Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury
warrants totalling P1,755,228.37. All these warrants were subsequently indorsed by
Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account with
Metrobank. Then the latter forwarded said warrants to the Bureau of Treasury for special
clearing.
Due to Gloria’s repeated inquiries and also as an accommodation for a "valued client,"
the petitioner finally decided to allow Golden Savings to withdraw from the proceeds of
the warrants. In turn, Golden Savings subsequently allowed Gomez to make withdrawals
from his account, eventually collecting the total amount of P1,167,500.00 from the
proceeds of the apparently cleared warrants.
On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury, and demanded the refund of the amount it had
previously withdrawn.
ISSUE:
Whether or not the treasury warrants in question are negotiable instruments?
RULING:
No. A no less important consideration is the circumstance that the treasury warrants in
question are not negotiable instruments. Clearly stamped on their face is the word "non-
negotiable." Moreover, and this is of equal significance, it is indicated that they are
payable from a particular fund, to wit, Fund 501.
3
Digested by: KCabus
CALTEX vs CA and SBTC

G.R. No. 97753, Aug 10, 1992
FACTS:
On various dates, defendant issued 280 CTDs in favor of Angel dela Cruz with an
aggregate amount of P1,120,000.00. Angel delivered the CTDs to Caltex in connection
with his purchase of fuel products from the latter.
Sometime in March 1982, Angel informed the Branch Manager that he lost all the CTDs,
and executed an affidavit of loss to facilitate the replacement of CTDs. Angel obtained a
loan from the defendant and executed a notarized Deed of Assignment of Time Deposit
On November 26, 1982, defendant received a letter from Caltex formally informing it of
its decision to preterminate CTDs in question. The bank requested Caltex a copy of the
document evidencing the guarantee agreement with Angel. No copy of the requested
documents was furnished, hence defendant bank rejected the plaintiff’s demand and
claim for payment of the CTDs.
Meanwhile, the bank set-off and applied the CTDs in question to the payment of the
matured loan of Angel. This prompted Caltex to file a complaint which was dismissed on
the ground that CTDs are not negotiable.
ISSUE:
Whether or not the CTDs in question are negotiable instruments?
RULING:
Yes. Contrary to what respondent court held, the CTDs are negotiable instruments. The
documents provide that the amounts deposited shall be repayable to the depositor. And
who, according to the document, is the depositor? It 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.
4
Digested by: KCabus
Traders Royal Bank vs CA, Filriters Guaranty

G.R. No.93397, Mar 3, 1997
FACTS:
Filriters executed a "Detached Assignment” whereby Filriters, as registered owner, sold
unto Philfinance all its rights and title to Central Bank Certificates of Indebtedness
denominated in P500k and having an aggregate value of P3.5M. The Detached
Assignment contains an express authorization executed by the transferor intended to
complete the assignment through the registration of the transfer in the name of
PhilFinance.
Meanwhile, Traders entered into a Repurchase Agreement w/ PhilFinance whereby in

consideration of P500T, PhilFinance sold a CBCI 4-year, 8th series, Serial No. D891 with a
face value of P500T. PhilFinance failed to repurchase on the agreed date of maturity
when the checks it issued in favor of petitioner were dishonored for insufficient funds.
Philfinance thus transferred all its rights and title in the CBCI to Traders. However,
respondent failed and refused to register the transfer as requested. Traders prayed for
the registration by the Central Bank of the subject CBCI in its name.
ISSUE:
Whether or not the CBCI is a negotiable instruments?
RULING:
No, the appellate court said that the CBCI is not a negotiable instrument, since the
instrument clearly stated that it was payable to Filriters, the registered owner, whose
name was inscribed thereon, and that the certificate lacked the words of negotiability
which serve as an expression of consent that the instrument may be transferred by
negotiation.
5
Digested by: KCabus
PNB vs Rodriguez
G.R. No. 170325, Sep 26, 2008
FACTS:
Respondents-Spouses Rodriguez maintained savings and checking accounts with PNB.
They were engaged in the informal lending business where they had a discounting
arrangement with the PEMSLA, an association of PNB employees. PEMSLA regularly
granted loans to its members. Sps. Rodriguez would rediscount the postdated checks
issued to members whenever the association was short of funds. Some PEMSLA officers
devised a scheme to obtain additional loans despite their outstanding loan accounts.
They took out loans in the names of unknowing members, without the knowledge or
consent of the latter. The PEMSLA checks issued for these loans were then given to the
spouses for rediscounting. The officers carried this out by forging the indorsement of the
named payees in the checks.
Petitioner PNB eventually found out about these fraudulent acts. To put a stop to this
scheme, PNB closed the current account of PEMSLA. As a result, the PEMSLA checks
deposited by the spouses were dishonored for the reason "Account Closed." Thus,
spouses Rodriguez incurred losses from the rediscounting transactions. The spouses
Rodriguez filed a civil complaint for damages against PEMSLA, the MCP, and petitioner
PNB.
ISSUE:
Whether or not the PNB is liable to return the value of the checks?
RULING:
Yes, A bank that has been remiss in its duty must suffer the consequences of its
negligence. Being issued to named payees, PNB was duty-bound by law and by banking
rules and procedure to require that the checks be properly indorsed before accepting
them for deposit and payment. In fine, PNB should be held liable for the amounts of the
checks.
6
Digested by: KCabus
People vs Gilbert Reyes Wagas

G.R. No.157943, Sep 4, 2013
FACTS:
Ligaray testified that on April 30, 1997, Wagas placed an order for 200 bags of rice over
the telephone to be paid by postdated check. Because of Wagas’ assurance that he had
the means to pay them, they accepted the order; and released the goods to Wagas in
exchange of BPI Check No. 0011003 for P200,000.00 payable to cash postdated May 8,
1997. He later deposited the check with Solid Bank, but it was dishonored due to
insufficiency of funds. He called Wagas about the matter, and despite repeated demands,
Wagas did not pay him.
In his defense, Wagas admitted having issued BPI Check No. 0011003 to Cañada, his
brother-in-law, not to Ligaray, intended as payment for a portion of Cañada’s property
that he wanted to buy, but when the sale did not push through, he did not anymore fund
the check. He denied having any telephone conversation or any dealings with Ligaray.
ISSUE:
Whether or not the check in question is payable to bearer or to order?
RULING:
The check delivered to Ligaray was made payable to cash. Under the Negotiable
Instruments Law, this type of check was payable to the bearer and could be negotiated
by mere delivery without the need of an indorsement. This rendered it highly probable
that Wagas had issued the check not to Ligaray, but to somebody else like Cañada, his
brother-in-law, who then negotiated it to Ligaray. Relevantly, Ligaray confirmed that he
did not himself see or meet Wagas at the time of the transaction and thereafter, and
expressly stated that the person who signed for and received the stocks of rice was
Cañada.
7
Digested by: KCabus
Phil Education Co. Inc. VS Mauricio Soriano. et.al.

G.R. No.L-22405, Jun 30, 1971
FACTS:
Enrique Montinola purchase from the Manila Post Office ten money orders of P200.00
each payable to E. P. Montinola and offered to pay for them with a private check. As
private checks were not generally accepted in payment, the teller advised him to see the
Chief of the Money Order Division. But instead of doing so, Montinola managed to leave
the building with his own check and the 10 money orders without the knowledge of the
teller. In view of this, an urgent message was sent to all postmasters and banks.
instructing them not to pay anyone of the money orders if presented for payment.
On April 23, 1958 money orders numbered 124688 was received by appellant as part of
its sales receipts and deposited it with the Bank of America. The latter cleared it with the
Bureau of Posts and received its face value of P200.00. On September 27, 1961, appellee
Mauricio A. Sorianon notified the Bank of America that money order No. 124688 had
been found to have been irregularly issued and that the amount it represented had been
deducted from the bank’s clearing account.
ISSUE:
Whether or not the postal money order in question is a negotiable instruments?
RULING:
No. The weight of authority in the United States is that postal money orders are not
negotiable instruments, the reason behind this rule being that, in establishing and
operating a postal money order system, the government is not engaging in commercial
transactions but merely exercises a governmental power for the public benefit.
It is to be noted in this connection that some of the restrictions imposed upon money
orders by postal laws and regulations are inconsistent with the character of negotiable
instruments. For instance, such laws and regulations usually provide for not more than
one endorsement; payment of money orders may be withheld under a variety of
circumstances.
8
Digested by: KCabus
Firestone Tire and Rubber Co. vs CA, Luzon Devt. Bank

G.R. No. 113236, Mar 5, 2001
FACTS:
Fojas-Arca maintains a special savings account with the defendant, the latter authorized
and allowed withdrawals of funds therefrom through the medium of special withdrawal
slips. In January 1978, plaintiff and Fojas-Arca entered into a "Franchised Dealership
Agreement" Pursuant to the Agreement, Fojas-Arca purchased on credit Firestone
products from plaintiff totalling P4,896,000.00 in exchange of 6 special withdrawal slips.
These were deposited by the plaintiff with its current account with the Citibank. All of
them were honored and paid by the defendant. This made plaintiff relied that the
succeeding special withdrawal slips would be sufficiently funded. Hence, it extended to
Fojas-Arca other purchases of its products on credit.
However, on December 14, 1978, plaintiff was informed by Citibank that special
withdrawal slips No. 42127 dated June 15, 1978 for P1,198,092.80 and No. 42129 dated
August 15, 1978 for P880,000.00 were dishonored for the reason ‘NO ARRANGEMENT.’
In turn, Citibank debited plaintiff’s account for P2,078,092.80 representing the aggregate
amount of the two special withdrawal slips. Plaintiff averred that the pecuniary losses it
suffered is caused by and directly attributable to defendant’s gross negligence.
ISSUE:
Whether or not Citibank and respondent bank were correct in treating the special
withdrawal slips as checks and thus not liable to Firestone?
RULING:
No. It bears stressing that Citibank could not have missed the non-negotiable nature of
the withdrawal slips. The essence of negotiability which characterizes a negotiable paper
as a credit instrument lies in its freedom to circulate freely as a substitute for money. The
withdrawal slips in question lacked this character.
Citibank was not bound to accept the withdrawal slips as a valid mode of deposit. But
having erroneously accepted them as such, Citibank must bear the risks attendant to the
acceptance of these instruments. Petitioner and Citibank could not now shift the risk and
hold private respondent liable for their admitted mistake.
9
Digested by: KCabus
PNB vs Rodriguez
G.R. No. 170325, Sep 26, 2008
FACTS:
Respondents-Spouses Rodriguez maintained savings and checking accounts with PNB.
They were engaged in the informal lending business where they had a discounting
arrangement with the PEMSLA, an association of PNB employees. PEMSLA regularly
granted loans to its members. Sps. Rodriguez would rediscount the postdated checks
issued to members whenever the association was short of funds. Some PEMSLA officers
devised a scheme to obtain additional loans despite their outstanding loan accounts.
They took out loans in the names of unknowing members, without the knowledge or
consent of the latter. The PEMSLA checks issued for these loans were then given to the
spouses for rediscounting. The officers carried this out by forging the indorsement of the
named payees in the checks.
Petitioner PNB eventually found out about these fraudulent acts. To put a stop to this
scheme, PNB closed the current account of PEMSLA. As a result, the PEMSLA checks
deposited by the spouses were dishonored for the reason "Account Closed." Thus,
spouses Rodriguez incurred losses from the rediscounting transactions. The spouses
Rodriguez filed a civil complaint for damages against PEMSLA, the MCP, and petitioner
PNB.
ISSUE:
Whether or not the subject checks are payable to order or to bearer?
RULING:
Verily, the subject checks are presumed order instruments. This is because, as found by
both lower courts, PNB failed to present sufficient evidence to defeat the claim of
respondents-spouses that the named payees were the intended recipients of the checks'
proceeds. The bank failed to satisfy a requisite condition of a fictitious-payee situation -
that the maker of the check intended for the payee to have no interest in the transaction.
10
Digested by: KCabus
Prudential Bank vs CIR

G.R. No. 180390, Jul 27, 2011
FACTS:
Petitioner Prudential Bank received from CIR a Final Assessment Notice and a Demand
Letter for deficiency DST for the taxable year 1995 on its Repurchase Agreement with the
BSP, Purchase of Treasury Bills, and on its Savings Account Plus [SAP] totalling
P18,982,734.38. Petitioner protested the assessment on the ground that the subject
matter of the assessment are not subject to DST. Thus, it filed a Petition for Review
before the CTA and was partially granted ordered the Bank to pay the reduced amount of
P6.3M for the DST on SAP. Petitioner, further, contends that its SAP is not subject to DST
because it is not included in the list of documents under Section 180 of the old NIRC, as
amended. Petitioner insists that unlike a time deposit, its SAP is evidenced by a passbook
and not by a deposit certificate. In addition, its SAP is payable on demand and not on a
fixed determinable future. Hence, this appeal
ISSUE:
Whether or not SAP is within the ambit of Sec 180 of the old NIRC, as amended?
RULING:
Yes. The fact that the SAP is evidenced by a passbook likewise cannot remove its
coverage from Section 180 of the old NIRC, as amended. A document to be considered a
certificate of deposit need not be in a specific form. Thus, a passbook issued by a bank
qualifies as a certificate of deposit drawing interest because it is considered a written
acknowledgement by a bank that it has accepted a deposit of a sum of money from a
depositor.
Although the money deposited in a SAP is payable anytime, the withdrawal of the money
before the expiration of 30 days results in the reduction of the interest rate. In the same
way, a time deposit withdrawn before its maturity results to a lower interest rate and
payment of bank charges or penalties.
11
Digested by: KCabus
Tingting Pua vs Benito

G.R. No. 198660, October 23, 2013
FACTS:
Respondent obtained a loan from the petitioner covered by 17 checks totalling
P1,975,000.00. These checks were dishonored upon presentment to the drawee bank.
Hence, petitioner demanded payment. Respondents, however, pleaded for more time
because of their financial difficulties. When their financial situation turned better,
respondents allegedly called and asked petitioner Pua for the computation of their loan
obligations. They even asked petitioner to reduce their indebtedness to P8,500,000.00.
to which Pua agreed to. Respondent then delivered to petitioner Asiatrust check no.
BND57750 of P8,500,000.00 dated March 30, 1997 with the assurance that the check
was good and demanded the return of 17 previously checks. Petitioner, however,
advised respondents that she will do so only after the encashment of Asiatrust check.
However, it was dishonored by the drawee bank. Hence, petitioner filed a complaint to
collect the money.
For the defense, respondent Caroline denied having completed check no. BND057750
and insisted that petitioner and her sister completed the check after its delivery. As for
the 17 checks issued by her in 1988, Caroline alleged that they were not intended for Pua
but were issued for the benefit of other persons.
ISSUE:
Whether or not respondent owed petitioner?
RULING:
Yes. the 17 original checks, completed and delivered to petitioner, are sufficient by
themselves to prove the existence of the loan obligation of the respondents to petitioner.
Note that respondent Caroline had not denied the genuineness of these checks. Instead,
respondents argue that they were given to various other persons and petitioner had
simply collected all these 17 checks from them in order to damage respondents’
reputation. This account is not only incredible; it runs counter to human experience, as
enshrined in Sec 16 of the NIL which provides that when an instrument is no longer in the
possession of the person who signed it and it is complete in its terms “a valid and
intentional delivery by him is presumed until the contrary is proved.”
12
Digested by: KCabus
Quirino vs CA and Republic Planter’s Bank

G.R. No. 126568, Apr 30, 2003
FACTS:
Petitioner Quirino Gonzales Logging Concessionaire (QGLC) applied for credit
accommodations with Republic Planters Bank which was granted in the amount of
P900,000.00; overdraft line of P450,000.00 and a Letter of Credit (LC) line of
P400,000.00. In 1964, the petitioners executed a PN in favor of the bank for their
advances in connection with the QGLC’s exportation of logs
In 1965, petitioners having long defaulted in the payment of their obligations, the bank
foreclosed the mortgaged. Alleging non-payment of the balance of QGLC’s obligation
after the proceeds of the foreclosure sale was applied thereto, despite repeated
demands, the bank filed a complaint for “sum of money” against the petitioners.
Petitioners admitted to have applied for credit accommodation, however, they
contended that they did not avail of any under the said credit accommodation. Also, they
denied having received the value of the PNs as they did not physically received the
tractors and equipment subject of the LCs.
The trial court decided in favor of QGLC. The CA reversed the appealed decision of the
trial court. Thus, this petition with the SC.
ISSUE:
Whether or not petitioners are liable to the bank despite signing of blank PN?
RULING:
Yes. In any case, it is no defense that the promissory notes were signed in blank as
Section 14 of the Negotiable Instruments Law concedes the prima facie authority of the
person in possession of negotiable instruments, such as the notes herein, to fill in the
blanks.
13
Digested by: KCabus
Dela Victoria vs Sesbreno

G.R. No. 111190, June 27, 1995
FACTS:
Sesbreno filed a complaint for damages against Mabanto and Rama before the RTC which
ordered the defendants to pay P11,000.00 to the plaintiff, private respondent herein. A
notice of garnishment was served on petitioner dela Victoria as City Fiscal of Manadaue
City where defendant Mabanto was then detailed. On November 4, 1992, the trial court
directed petitioner to submit his report showing the amount of the garnished salaries of
Mabanto within 15 days from receipt. On November 24, 1992, Sesbreno filed a motion
to require petitioner to explain why he should not be cited in contempt of court for
failing to comply with said order.
The petitioner moved to quash the notice of garnishment claiming that he was not in
possession of any money or anything of value belonging to Mabanto, Jr., except his salary
and RATA checks which were not yet his properties until delivered to him. He further
claimed that, as such, they were still public funds which could not be subject to
garnishment.
The trial court denied the motion and ordered petitioner to immediately comply with its
order of November 4, 1992. Hence, this appeal.
ISSUE:
Whether or not a check in the hands of the maker or its duly authorized representative is
considered owned by the payee even before physical delivery to the latter?
RULING:
No. Sec 16 of the Negotiable Instruments Law which states “where the instrument is no
longer in the possession of a party whose signature appears thereon, a valid and
intentional delivery by him is presumed”. Yet, this presumption is not conclusive because
the last portion of the provision says “until the contrary is proved.” Proof to the contrary
is in its own finding that the checks were in the custody of the petitioner-custodian of
checks. Inasmuch as said check had not yet been delivered to Mabanto, Jr., they did not
belong to him and still had the character of public funds.
14
Digested by: KCabus
San Miguel Corp. vs Puzon

G.R. No. 167567, September 22, 2010
FACTS:
Respondent Puzon, dealer of beer products of SMC for Paranaque City, purchased SMC
products on credit. To ensure payment and as a business practice, SMC required him to
issue postdated checks equivalent to the value of the products purchased on credit
before the same were released to him. Said checks were returned to Puzon when the
transactions covered by these checks were paid or settled in full.
On December 31, 2000, Puzon purchased products on credit amounting to

P11,820,327.00 covered by BPI check nos. 27904 for P309,500.00 and 27903 for
P11,510,827.00. On January 23, 2001, Puzon and his accountant, visited the SMC Sales
Office to reconcile his account with SMC. During that visit Puzon allegedly requested to
see BPI check no. 17657. But when he got hold of BPI check no. 27903 which was
attached to a bond paper together with BPI check no. 17657, he allegedly immediately
left the office with his accountant, bringing the checks with them.
SMC sent a letter to Puzon demanding the return of the said checks but Puzon ignored
the demand. Hence SMC filed a complaint against him for theft with the City Prosecutor
which recommended for the dismissal. SMC filed a petition for certiorari with the CA
which was dismissed. Thus, this appeal with the SC.
ISSUE:
Whether or not SMC acquired ownership over the BPI check no. 27903?
RULING:
No. If the subject check was given by Puzon to SMC in payment of the obligation, the
purpose of giving effect to the instrument is evident thus title to or ownership of the
check was transferred upon delivery. However, if the check was not given as payment,
there being no intent to give effect to the instrument, then ownership of the check was
not transferred to SMC.
In the present case, the evidence of SMC failed to established that the check was given in
payment of the obligation of Puzon. There was no provisional receipt or official receipt
issued for the amount of the check. What was issued was a receipt for the document, a
“POSTDATED CHECK SLIP”. Furthermore, the petitioner’s demand letter sent to
respondent states “As per company policies on receivables, all issuances are to be
covered by PDC. Notably, the term “payment” was not used instead the term “covered”
was used.
15
Digested by: KCabus
Equitable Banking Corp. vs Special Steel Products

G.R. No. 175350, June 13, 2012
FACTS:
SSPI sold welding electrodes to Interco in exchange of three checks payable to the order
of SSPI. Each check was crossed with the notation “account payee only” drawn against
Equitable. The records did not explain how Uy came into possession of these checks. But
records disclose that Uy presented each crossed check to Equitable on the day of its
issuance and demanded the deposit of the checks in his personal accounts with the bank.
Equitable acceded to Uy’s demands on the assumption that Uy was acting pursuant to
Interco’s orders. Thus, Equitable accepted the checks for deposit and Uy promptly
withdrew the proceeds of the checks.
SSPI’s eventual discovery of Uy’s scheme. Interco finally paid SSPI but refused to pay the
entire accrued interest. Hence, SSPI and its president, Pardo, filed a complaint for
damages against Uy and Equitable Bank.
ISSUE:
Whether or not Equitable is liable to SSPI?
RULING:
Yes. For its role in the conversion of the checks, which deprived SSPI of the use thereof,
Equitable is solidarily liable with Uy to compensate SSPI for the damages it suffered.
Equitable did not observe the required degree of diligence expected of a banking
institution under the existing factual circumstances. The fact that a person, other than
the named payee of the crossed check, was presenting it for deposit should have put the
bank on guard. It should have verified if the payee (SSPI) authorized the holder (Uy) to
present the same in its behalf, or indorsed it to him. Considering however, that the
named payee does not have an account with Equitable, the bank knowingly assumed the
risk of relying solely on Uy’s word that he had a good title to the three checks. Such
misplaced reliance on empty words is tantamount to gross negligence, which is the
“absence of or failure to exercise even slight care or diligence, or the entire absence of
care, evincing a thoughtless disregard of consequences without exerting any effort to
avoid them.”
16
Digested by: KCabus
Philippine Bank of Commerce vs Aruego

G.R. No. L-25836-37, Jan 31, 1981
FACTS:
The Philippine Bank of Commerce instituted against Jose M. Aruego Civil Case No. 42066
for the recovery of P35,000.00 representing the cost of the printing of "World Current
Events." To facilitate the payment of the printing the defendant obtained a credit
accommodation from the plaintiff. Thus, for every printing of the "World Current Events,"
the printer, Encal Press and Photo-Engraving, collected the cost of printing by drawing a
draft against the plaintiff, said draft being sent later to the defendant for acceptance. The
plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said
bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and to
sell the same with the promise to turn over to the plaintiff the proceeds of the sale of
said publication for the payment of all obligations arising from the draft.
However, the defendant argues that he signed the bills of exchange in a representative
capacity, as the then President of the Philippine Education Foundation Company.
ISSUE:
Whether or not the defendant is personally liable for the drafts?
RULING:
Yes. Where an inspection of the drafts accepted by the defendant shows that nowhere
has he disclosed that he was signing as a representative of the Philippine Education
Foundation Company, and he merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD)
JOSE ARUEGO", he is personally liable for the drafts accepted by him and he may not
interpose as a defense that he signed the drafts merely as an agent of the Philippines
Education Foundation Company of which he is president.
17
Digested by: KCabus
Westmont Bank vs Eugene Ong

G.R. No. 132560, Jan 30, 2002
FACTS:
Respondent Eugene Ong maintained a current account with petitioner, Westmont Bank.
Sometime in May 1976, he sold shares of stocks through Island Securities Corporation
which was paid by 2 manager’s checks payable to Eugene Ong both dated May 4, 1976.
Before Ong could get hold of the checks, Tanlimco got hold of them, forged Ong’s
signature and deposited these with petitioner, where Tanlimco was also a depositor.
Even though Ong’s specimen signature was on file, petitioner accepted and credited both
checks to the account of Tanlimco, without verifying the ‘signature indorsements’
appearing at the back thereof. Tanlimco then immediately withdrew the money and
absconded. Ong first sought the help of Tanlimco’s family to recover the amount. Later,
he reported the incident to the Central Bank.
ISSUE:
Whether or not the respondent can recover the value of the checks forged from the
petitioner?
RULING:
Yes. Since the signature of the payee, in the case at bar, was forged to make it appear
that he had made an endorsement in favor of the forger, such signature should be
deemed as 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 recover from the collecting bank.
18
Digested by: KCabus
Associated Bank and Conrado Cruz vs CA and Merle Reyes

G.R. No. 89802, May 7, 1992
FACTS:
The private respondent had a RTW business under the firm name "Melissa’s RTW."
Among her clients are Robinson’s, Payless, Rempson, and the Corona Bazaar. These
companies issued crossed checks payable to Melissa’s RTW in payment of their
respective accounts.
When she went to these companies to collect on what she thought were still unpaid
accounts, she was informed of the issuance of the crossed checks. Further inquiry
revealed that the said checks had been deposited with the petitioner and subsequently
paid by it to Rafael Sayson, one of its "trusted depositors. Sayson had not been
authorized by the private respondent to deposit and encash the said checks. Hence,
private respondent sued the petitioners in the RTC for recovery of the total value of the
checks plus damages.
ISSUE:
Whether or not petitioner is liable to the private respondent for the value of the checkes
forged?
RULING:
Yes. The weight of authority is to the effect that "the possession of a check on a forged or
unauthorized indorsement is wrongful, and when the money is collected on the check,
the bank can be held ‘for moneys had and received.’"The proceeds are held for the
rightful owner of the payment and may be recovered by him. The position of the bank
taking the check on the forged or unauthorized indorsement is the same as if it had taken
the check and collected without indorsement at all. The act of the bank amounts to
conversion of the check.
When the Bank paid the checks so endorsed notwithstanding that title had not passed to
the endorser, it did so at its peril and became liable to the payee for the value of the
checks. This liability attached whether or not the Bank was aware of the unauthorized
endorsement.
19
Digested by: KCabus
Ilusorio vs CA, and the Manila Banking Corporation

G.R. No. 139130, Nov 27, 2002
FACTS:
Petitioner is a prominent businessman who runs about 20 corporations and goes out of
the country a number of times. As such, petitioner entrusted to his secretary, Katherine
E. Eugenio, his credit cards and his checkbook with blank checks. It was also Eugenio who
verified and reconciled the statements of said checking account.
Eugenio was able to encash and deposit to her personal account about 17 checks drawn
against the account of the petitioner at the respondent bank totalling P119,634.34.
Petitioner did not bother to check his statement of account until a business partner
apprised him that he saw Eugenio use his credit cards. Petitioner fired Eugenio
immediately, and instituted a criminal action against her. Petitioner then requested the
respondent bank to credit back and restore to its account the value of the checks which
were wrongfully encashed but respondent bank refused. Hence, petitioner filed the
instant case.
ISSUE:
Whether or not petitioner is precluded from setting-up forgery as a defense?
RULING:
Yes. While, it is a rule that when a signature is forged or made without the authority of
the person whose signature it purports to be, the check is wholly inoperative. No right to
retain the instrument, or to give a discharge therefor, or to enforce payment thereof
against any party, can be acquired through or under such signature. The rule does
provide for an exception, namely: "unless the party against whom it is sought to enforce
such right is precluded from setting up the forgery or want of authority."
In the instant case, it is the exception that applies. In our view, petitioner is precluded
from setting up the forgery, assuming there is forgery, due to his own negligence in
entrusting to his secretary his credit cards and checkbook including the verification of his
statements of account.
20
Digested by: KCabus
BPI vs Casa Montessori

G.R. No. 149454, May 28, 2004
FACTS:
Plaintiff CASA Montessori International opened Current Account with defendant BPI
designating Lebron as one of its authorized signatories. In 1991, after conducting an
investigation, plaintiff discovered that 9 of its checks had been encashed by a certain
Sonny D. Santos totalling ₱782,000.00. It turned out that ‘Sonny D. Santos’ with account
at BPI’s Greenbelt Branch was a fictitious name used by third party defendant Leonardo
T. Yabut who worked as external auditor of CASA. Yabut voluntarily admitted that he
forged the signature of Lebron and encashed the checks. Hence, plaintiff filed a
Complaint for Collection with Damages against defendant. RTC rendered its decision in
favour of the plaintiff. While modified the decision of the RTC, apportioning the loss
between BPI and CASA. Hence, this petition.
ISSUE:
Whether or not CASA is precluded from setting up forgery?
RULING:
No. In this jurisdiction, the negligence of the party invoking forgery is recognized as an
exception114 to the general rule that a forged signature is wholly inoperative.115
Contrary to BPI’s claim, however, we do not find CASA negligent in handling its financial
affairs. CASA, we stress, is not precluded from setting up forgery as a real defense.
21
Digested by: KCabus
Samsung Construction Company Phils. vs Far East Bank, CA

G.R. No. 129015, Aug 13, 2004
FACTS:
Plaintiff Samsung Construction maintained a current account with defendant FEBTC with
Jong Kyu Lee as its sole signatory. On 19 March 1992, a certain Roberto Gonzaga
presented for payment FEBTC Check No. 432100 to the Bank's branch in Bel-Air, Makati.
The check drawn against Samsung Construction's current account was payable to cash
amounting to P999,500.00. The bank teller checked if there were enough funds to cover
the check, then compared the signature on the check against specimen signature card of
Jong and asked Gonzaga to submit proof of his identity which the latter presented 3 IDs.
Thereafter, she forwarded the check to Velez and Syfu for approval. Syfu noticed that
Sempio, the assistant accountant of Samsung Construction, was also in the bank. Syfu
showed the check to Sempio, who vouched for the genuineness of Jong's signature and
confirmed the identity of Gonzaga. Sempio said that the check was for the purchase of
equipment for Samsung Construction. Relying on this, Syfu authorized the bank's
encashment of the check to Gonzaga.
Kyu, subsequently, discovered the said encashment and found out that the last blank
check was missing. He reported the matter to Jong, who then proceeded to the bank and
realized that his signature had been forged. Jong, subsequently filed for qualified theft
against Sempio and a Complaint against FEBTC for violation of Section 23 of the
Negotiable Instruments Law.
ISSUE:
Whether or not the check in question is forged?
RULING:
Yes, the forgery appears to have been made possible through the acts of Jose Sempio III
who supposedly stole the blank check and who presumably is responsible for its
encashment through a forged signature of Jong Kyu Lee. Besides, Sempio was an
employee who appears to have had dealings with the defendant Bank in behalf of the
plaintiff corporation and on the date the check was encashed, he was there to certify
that it was a genuine check issued to purchase equipment for the company.
22
Digested by: KCabus
PNB vs FF Cruz and Co

G.R. No. 173259, Jul 25, 2011
FACTS:
Respondent FFCCI opened combo and dollar savings account with petitioner PNB. Its
President Felipe and Secretary-Treasurer Angelita were the named signatories for the
said accounts. While the signatories were out of the country, applications for cashier's
and manager's checks bearing Felipe's signature were presented to and both approved
by the PNB. The first was on March 27, 1995 for P9,950,000.00 payable to a certain Gene
B. Sangalang and the other one was on April 24, 1995 for P3,260,500.31 payable to Paul
Bautista.
When Angelita returned to the country, she examined the PNB statements of account
and noticed the deductions of P9,950,000.00 and P3,260,500.31. Claiming that these
were unauthorized and fraudulently made, FFCCI requested PNB to credit back to its
account the value of the checks. PNB refused, thus FFCCI filed the instant suit for
damages against the PNB and its own accountant Caparas.
PNB averred that it exercised due diligence in handling the account of FFCCI. Trial court
ordered PNB to pay FCCI the value of the checks in question. The CA also affirmed with
modification the appealed decision. Hence, this appeal.
ISSUE:
Whether or not damages caused by the forged checks be allocated between the bank
and FFCCI?
RULING:
Yes. Pursuant to the rulings in Philippine Bank of Commerce v. Court of Appeals and The
Consolidated Bank & Trust Corporation v. Court of Appeals, where the bank's negligence
is the proximate cause of the loss and the depositor is guilty of contributory negligence,
we allocated the damages between the bank and the depositor on a 60-40 ratio.
PNB was negligent in the handling of FFCCI's combo account, specifically, with respect to
PNB's failure to detect the forgeries in the subject applications for manager's check which
could have prevented the loss. While, FFCCI is guilty of contributory negligence because it
clothed its accountant/bookkeeper Caparas with apparent authority to transact business
with PNB. In addition, FFCCI failed to timely examine its monthly statement of account
and report the discrepancy to PNB within a reasonable period of time to prevent or
recover the loss.
23
Digested by: KCabus
PCIB vs Balmaceda
G.R. No. 158143, Sep 21, 2011
FACTS:
PCIB filed an action for recovery of sum of money with damages before the RTC against
Antonio Balmaceda, the Branch Manager alleging that between 1991 and 1993,
Balmaceda, by taking advantage of his position as branch manager, fraudulently obtained
and encashed 31 Manager's checks totalling P10,782,150.00.
On February 28, 1994, PCIB moved to be allowed to file an amended complaint to

implead Rolando Ramos as one of the recipients of a portion of the proceeds from
Balmaceda's alleged fraud. The RTC granted this motion. Ramos filed an Answer denying
any knowledge of Balmaceda's scheme. According to Ramos, he is a reputable
businessman engaged in the business of buying and selling fighting cocks, and Balmaceda
was one of his clients. Ramos admitted receiving money from Balmaceda as payment for
the fighting cocks that he sold to Balmaceda, but maintained that he had no knowledge
of the source of Balmaceda's money.
ISSUE:
Whether or not Ramos should also be held liable for the return of the money to the
Bank?
RULING:
No, the evidence on record clearly shows that Balmaceda acted on his own when he
applied for the manager’s checks against the bank account of one of PCIB’s clients, as
well as when he encashed the fraudulently acquired Manager’s checks.
Mrs. Costes testified that Balmaceda committed all the acts necessary to obtain the
unauthorized Manager’s checks from filling up the application form by forging the
signature of the client’s representative, to forging the signatures of the payees in order
to encash the checks.
24
Digested by: KCabus
Travel on vs CA and Miranda

G.R. No. L-56169, Jun 26, 1992
FACTS:
Petitioner Travel-Ons a travel agency selling airline tickets on commission basis for and in
behalf of different airline companies. While, private respondent Miranda had a revolving
credit line with petitioner. He procured tickets from petitioner on behalf of airline
passengers and derived commissions therefrom.
On 14 June 1972, Travel-On filed suit to collect on 6 checks issued by private respondent
with a total face amount of P115,000.00. The complaint averred that from August 1969
to 16 January 1970, petitioner sold and delivered various airline tickets to respondent at
a total price of P278,201.57; to settle said account, private respondent paid various
amounts in cash and 6 checks which were all dishonored by the drawee bank.
In his defense, he argued that he had issued the postdated checks for purposes of
accommodation, as he had in the past accorded similar favors to petitioner.
ISSUE:
Whether or not the postdated checks are evidence of indebtedness of private
respondent to petitioner?
RULING:
Yes, these checks clearly established private respondent's indebtedness to petitioner;
that private respondent was liable thereunder.
It is important to stress that a check which is regular on its face is deemed prima facie to
have been issued for a valuable consideration and every person whose signature appears
thereon is deemed to have become a party thereto for value. 1Thus, the mere
introduction of the instrument sued on in evidence prima facie entitles the plaintiff to
recovery. Further, the rule is quite settled that a negotiable instrument is presumed to
have been given or indorsed for a sufficient consideration unless otherwise contradicted
and overcome by other competent evidence.
Private respondent was unable to rebut satisfactorily this legal presumption. It must also
be noted that those checks were issued immediately after a letter demanding payment
had been sent to private respondent by petitioner Thus, private respondent must be held
liable on the six (6) checks here involved.
25
Digested by: KCabus
Ong vs People and CA

G.R. No. 139006, Nov 27, 2000
FACTS:
Private complainant de Jesus and accused Ong are both businessmen who came to know
each other since 1988 as supplier of some companies. On December 17, 1992, Ong
requested de Jesus to be accommodated a loan of P130,000.00 which he needed to pay
the 13th month pay of his employees. Complainant De Jesus obliged by issuing Ong PB
check No. 489427 payable to Ong’s Master Metal Craft. In order to insure the repayment,
complainant required Mr. Ong to issue a post-dated check for the same amount to
become due on January 16, 1993. Ong therefore issued FEBTC Check No. 381937, dated
January 16, 1993. The loan check was encashed by Ong. Meanwhile, Ong’s FEBTC check
was deposited by de Jesus but was dishonored by FEBTC due to DAIF. De Jesus verbally
notified Ong of his bounced check several times but unacted. Thus, De Jesus filed this
case. Petitioner alleged that the subject check was not issued "on account or for value.
ISSUE:
Whether or not the question check was issued “to apply on account or for value” within
the purview of NIL?
RULING:
Yes. In actions based upon a negotiable instrument, it is unnecessary to aver or prove
consideration, for consideration is imported and presumed from the fact that it is a
negotiable instrument. The presumption exists whether the words "value received"
appear on the instrument or not
26
Digested by: KCabus
Charles Lee, et.al. vs CA and PBCom

G.R. No. 117913, Feb 1, 2002
FACTS:
Charles Lee, President of MICO applied with PBCom for a discounting loan/credit line of
P6,000,000.00 to be used in carrying out MICO’s line of business and in opening LC/TR.
On various dates, petitioners made several availments from their credit line with PBCOM
secured by REM and petitioners Surety Agreement.
For failure of petitioner MICO to pay its obligations despite repeated demands, private
respondent PBCom extrajudicially foreclosed MICO’s real estate mortgage and applied in
payment for the obligation the proceeds from the auction sale. Leaving an unpaid
balance of P5,441,663.90. and P461,600.06 representing its TR liabilities. PBCom then
demanded the settlement of these balances from petitioners-sureties who refused to
acknowledge their obligations to PBCom under the surety agreements.
Hence, PBCom filed a complaint with prayer for writ of preliminary attachment before
the RTC alleging that MICO was no longer in operation and had no properties to answer
for its obligations. PBCom further alleged that petitioner Charles Lee has disposed or
concealed his properties with intent to defraud his creditors. Petitioners denied all the
allegations of the complaint filed by respondent PBCom.
ISSUE:
Whether or not petitioner owed the respondent PBCom?
RULING:
Yes. The documents presented have not merely created a prima facie case but have
actually proved the solidary obligation of MICO and the petitioners, as sureties of MICO,
in favor of respondent PBCom. While the presumption found under the Negotiable
Instruments Law may not necessarily be applicable to trust receipts and letters of credit,
the presumption that the drafts drawn in connection with the letters of credit have
sufficient consideration. The letters of credit show that the pertinent
materials/merchandise have been received by MICO. The drafts signed by the
beneficiary/suppliers in connection with the corresponding letters of credit proved that
said suppliers were paid by PBCom for the account of MICO.
On the other hand, Petitioner MICO did not proffer a single piece of evidence, apart from
its bare denials, to support its allegation that the loan transactions, real estate mortgage,
letters of credit and trust receipts were issued allegedly without any consideration.
27
Digested by: KCabus
Quirino vs CA
G.R. No. 126568, Apr 30, 2003
FACTS:
Petitioner QGLC applied for credit accommodations with Republic Planters Bank which
was granted in the amount of P900,000.00. The petitioners executed a PN in favor of the
bank for their advances in connection with the QGLC’s exportation of logs. Petitioners
having long defaulted in the payment of their obligations, the bank foreclosed the
mortgaged. Alleging non-payment of the balance of QGLC’s obligation after the proceeds
of the foreclosure sale was applied thereto, despite repeated demands, the bank filed a
complaint for “sum of money” against the petitioners.
Petitioners admitted to have applied for credit accommodation, however, they

contended that they did not avail of any under the said credit accommodation. Also, they
denied having received the value of the PNs as they did not physically received the
tractors and equipment subject of the LCs. The trial court decided in favor of QGLC. The
CA reversed the appealed decision of the trial court. Thus, this petition with the SC.
ISSUE:
Whether or not the promissory notes are not valid despite of want of consideration?
RULING:
Yes. Petitioners’ admission of the genuineness and due execution of the promissory
notes notwithstanding, they raise want of consideration thereof. The promissory notes,
however, appear to be negotiable as they meet the requirements of Section 1 of the
Negotiable Instruments Law. Such being the case, the notes are prima facie deemed to
have been issued for consideration. It bears noting that no sufficient evidence was
adduced by petitioners to show otherwise.
28
Digested by: KCabus
Cayanan vs North Star Int’l. Travel

G.R. No. 172954, Oct 5, 2011
FACTS:
North Star is engaged in the travel agency business while petitioner is the owner/general
manager of JEAC, a recruitment agency. On Mar17, 1994, Virginia Balagtas, GM of North
Star, in accommodation and upon the instruction of the petitioner, sent an amount of
US$60,000 from her personal account in Citibank, US$40,000 by telegraphic transfer,
with US$15,000 coming from petitioner, to View Sea Ventures Ltd. in Nigeria. Likewise,
on various dates, North Star extended credit to petitioner for the airplane tickets of his
clients reaching a total of P510,035.47.
To cover payment of the foregoing obligations, petitioner issued 5 checks to North Star:
When presented for payment, the checks in the amount of P1,500,000 and P35,000 were
dishonored for DAIF while the other three checks were dishonored because of a stop
payment order from petitioner. North Star demanded payment, but petitioner failed to
settle his obligations. Hence, North Star instituted Criminal Case charging petitioner with
violation of Batas Pambansa Blg MeTC which found the pertitioner guilty. On appeal, the
RTC acquitted petitioner but the CA reversed the decision of the RTC and held petitioner
civilly liable for the value of the subject checks. Hence, this appeal.
ISSUE:
Whether or not petitioner is liable for the value of the checks to respondent?
RULING:
Yes, The subject checks, bearing petitioner's signature, speak for themselves. The fact
that petitioner himself specifically named North Star as the payee of the checks is an
admission of his liability to North Star and not to Virginia Balagtas, who as manager
merely facilitated the transfer of funds. Indeed, it is highly inconceivable that an
experienced businessman like petitioner would issue various checks in sizeable amounts
to a payee if these are without consideration. Moreover, we note that Virginia Balagtas
averred in her Affidavit that North Star caused the payment of the US$60,000 and
US$25,000 to View Sea Ventures to accommodate petitioner, which statement petitioner
failed to refute.
29
Digested by: KCabus
Ang Tiong vs Lorenzo Ting & Filepe Ang

G.R. No. L-26767, Feb 22, 1968
FACTS:
Ting issued PBC check K-81618 amounting to P4,000, payable to "cash or bearer." With
Felipe’s blank indorsement at the back thereof. The check was received by the plaintiff
Ang, presented it for payment which was dishonored by the drawee bank. The plaintiff
made written demands on both Lorenzo Ting and Felipe Ang to pay for the value of the
check but yielded no result. The petitioner then filed an action for collection of the sum
with the MTC which adjudged for the plaintif and was affirmed by the CFI. Felipe Ang
then elevated the case to the CA, which certified it to this Court because the issues raised
are purely of law.
ISSUE:
Whether or not Felipe Ang should be held liable for the value of a check in question
despite being merely an accommodation party?
RULING:
Yes. Even on the assumption that the appellant is a mere accommodation party, as he
professes to be, he is nevertheless, by the clear mandate of section 29 of the Negotiable
Instruments Law, yet "liable on the instrument to a holder for value, notwithstanding that
such holder at the time of taking the instrument knew him to be only an accommodation
party."
To paraphrase, the accommodation party is liable to a holder for value as if the contract
was not for accommodation. It is not a valid defense that the accommodation party did
not receive any valuable consideration when he executed the instrument. Nor is it correct
to say that the holder for value is not a holder in due course merely because at the time he
acquired the instrument he knew that the indorser was only an accommodation party
30
Digested by: KCabus
GSIS vs CA
G.R. No. L-40824, Feb 23, 1989
FACTS:
Private respondents Sps. Racho and Sps Lagasca executed a deed of mortgage in favor of
petitioner GSIS for the two loans totalling P14,500.00. Said loans was covered by PN and
secured by REM on a parcel of land with TCT No. 38989 co-owned by said mortgagor
spouses.
Meanwhile , Sps. Lagasca executed an Assumption of Mortgage which they obligated

themselves to assume the obligation to the GSIS and to secure the release of the
mortgage covering the portion of the land belonging to Sps. Racho. However, this
undertaking was not fulfilled. Hence, upon default in payment of the amortizations due,
GSIS extrajudicially foreclosed the mortgage and caused the mortgaged property to be
sold at public auction.
Thereafter, private respondents filed a complaint against the petitioner and the Lagasca
spouses in the CFI alleging that they signed the mortgage contracts not as sureties or
guarantors for the Lagasca spouses. The trial court dismissed the complaint but was
reversed by the respondent CA. Hence, this petition for review.
ISSUE:
Whether or not Sps. Racho is liable to GSIS despite being merely an accommodation
party?
RULING:
Yes. The factual context of this case is precisely what is contemplated in the last
paragraph of Article 2085 of the Civil Code to the effect that third persons who are not
parties to the principal obligation may secure the latter by pledging or mortgaging their
own property. So long as valid consent was given, the fact that the loans were solely for
the benefit of the Lagasca spouses would not invalidate the mortgage with respect to
private respondents’ share in the property. In consenting thereto, even assuming that
private respondents may not be assuming liability for the debt, their share in the
property shall nevertheless secure and respond for the performance of the principal
obligation. The parties to the mortgage could not have intended that the same would
apply only to the aliquot portion of the Lagasca spouses in the property, otherwise the
consent of the private respondents would not have been required.
31
Digested by: KCabus
People vs Maniego
G.R. No. L-30910, Feb 27, 1987
FACTS:
Rizalino Ubay accepted several checks totalling P66,434.50 drawn against the PNB and
BPI from his co-accused Pamintuan and Maniego as the drawer and the indorser,
respectively. Cashing said checks despite knowing fully well that the said checks are
worthless and are not covered by funds, for which reason the same were dishonored and
rejected by the said drawee banks when presented for encashment. The trial court
acquits Julia T. Maniego but both she and Rizal T. Ubay are ordered to pay jointly and
severally the amount of P57,434.50 to the government. Maniego appealed that she be
absolved from civil liability. The Court declined to negate her civil liability, but did reduce
the amount thereof to P46,934.50. She appealed to the Court of Appeals. Because,
Maniego’s brief raised only questions of law, her appeal was later certified to this Court
ISSUE:
Whether or not Maniego should be held liable for the value of the dishonored check
despite being merely an accommodation party?
RULING:
Yes. Maniego may also be deemed an "accommodation party" in the light of the facts,
i.e., a person "who has signed the instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of lending his name to some other
person." As such, she is under the law "liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the instrument knew her to be only an
accommodation party," although she has the right, after paying the holder, to obtain
reimbursement from the party accommodated, "since the relation between them is in
effect that of principal and surety, the accommodation party being the surety."
32
Digested by: KCabus
Town Savings and Loan Bank vs CA, Sps. Hipolito

G.R. No. 106011, Jun 17, 1993
FACTS:
TSLB granted sps. Hipolito application for loan amounting to P700,000.00 which was
covered by a promissory note. For failure to pay their monthly amortization, TSLB sent
notice of past due account and demands for payment but these were ignored. Hence,
TSLB instituted an action on the unpaid obligation.
Sps. Hipolito denied being personally liable on the PN which they executed. The loan was
allegedly for the account of Pilarita H. Reyes. Sps. Hipolito were mere guarantors for
Pilarita. They allegedly signed the promissory note because they were persuaded to do so
by the President of TSLB. When they received the demand letters, they confronted him
but they were told that the Bank had to observe the formality of sending notices and
demand letters. The real purpose was only to pressure Pilarita to comply with her
undertaking.
RTC held the Sps. Hipolito liable as accommodation parties on the promissory note. The
Court of Appeals reversed the appealed decision. Hence, this petition for review by TSLB.
ISSUE:
Whether or not the Sps. Hipolito are liable on the promissory note which they executed
in favor of the petitioner?
RULING:
Yes, there is no question that the private respondents signed the promissory note in
order to enable Pilarita H. Reyes to borrow the total sum of P1.4 million from TSLB. As
observed by both the trial court and the appellate court, the actual beneficiary of the
loan was Pilarita H. Reyes and no other. The Hipolitos accommodated her by signing a
promissory note for half of the loan that she applied for because TSLB may not lend any
single borrower more than the authorized limit of its loan portfolio. Under Section 29 of
the Negotiable Instruments Law, the Hipolitos are liable to the bank on the promissory
note that they signed to accommodate Pilarita.
33
Digested by: KCabus
Eusebio Gonzales vs PCIB

G.R. No. 180257, Feb 23, 2011
FACTS:
Gonzales and Sps. Panlilio obtained 3 loans from PCIB totalling P1.8M covered by
promissory notes and secured by a REM over a parcel of land with TCT No. 38012. The
PNs specified the solidary liability of Gonzales and the spouses Panlilio, although it was
the latter who received the loan proceeds of PhP 1,800,000. The spouses Panlilio
defaulted in the payment of the periodic interest dues. PCIB allegedly called the attention
of Gonzales regarding the defaults.
In the meantime, Gonzales issued a check in favor of Unson for PhP 250,000 which was
dishonored by PCIB due to the termination the Gonzales’ COHLA. As a result, Gonzalez
and Uson had a heated argument in the PCA which caused great embarrassment and
humiliation to Gonzales. Through petitioner’s counsel, he demanded PCIB the return of
the proceeds of his FCD as well as damages for the unjust dishonor of the check. PCIB
refused to heed petitioner’s demands compelled Gonzales to file the instant case for
damages with the RTC which rendered a Decision in favor of PCIB. The appealed decision
was affirmed by the CA. Hence, this petition.
ISSUE:
Whether or not Gonzalez is solidary liable with Sps Panlilio on the three PNs?
RULING:
Yes. The fact that the loans were undertaken by Gonzales when he signed as borrower or
co-borrower for the benefit of the spouses Panlilio--as shown by the fact that the
proceeds went to the spouses Panlilio who were servicing or paying the monthly dues--is
beside the point. For signing as borrower and co-borrower on the promissory notes with
the proceeds of the loans going to the spouses Panlilio, Gonzales has extended an
accommodation to said spouses. As an accommodation party, Gonzales is solidarily liable
with the spouses Panlilio for the loans.
34
Digested by: KCabus
Sesbreno vs CA
G.R. No. 89252, May 24, 1993
FACTS:
Petitioner Sesbreno made a money market placement amounting to P300,000.00 with
Philfinance. In turn, Philfinance issued to petitioner Certificate of Confirmation of Sale,
“without recourse”, No. 20496 of DMC PN No. 2731, Certificate of securities Delivery
Receipt No. 16587 with the notation that the said security was in custodianship of
Pilipinas Bank per DCR No. 10805, and Post-dated checks of P304,533.33 dated March
13, 1981
Meanwhile, petitioner presented for payment the postdated checks issued by Philfinance
but these were dishonored for DAIF. Petitioner approached Elizabeth of Pilipinas Bank
and asked for the physical delivery of the PN which was stamped “NON NEGOTIABLE” on
its face which Pilipinas refused. Likewise, petitioner also made a written demand with
Delta for the partial satisfaction of DMC PN No. 2731, explaining that Philfinance, as
payee thereof, had assigned to him said note. Delta, however, denied any liability to
petitioner on the PN.
As petitioner had failed to collect his investment and interest thereon, he filed an action
for damages against Delta and Pilipinas with the RTC which dismissed the complaint. The
appealed decision was denied by the CA. Hence, this petition for certiorari.
ISSUE:
Whether or not petitioner acquired rights on Delta’s PN marked as non-negotiable?
RULING:
Yes. DMC PN no. 2731, while marked “non-negotiable.” was not at the same time
stamped “non-transferable” or “non-assignable.” It contained no stipulation which
prohibited Philfinance from assigning or transferring, in whole or in part, that Note.
As noted, the assignment to petitioner was made on Feb 9, 1981 or from 49 days before
the “co-terminal maturity” date, that is to say, before any compensation had taken place.
Thus, we conclude that the assignment effected by Philfinance in favour of petitioner was
a valid one and that petitioner accordingly became owner of DMC PN No. 2731 to the
extent of the portion thereof assigned to him.
35
Digested by: KCabus
Ang Tek Lian vs CA

G.R. No. L-2516, Sep 25, 19950
FACTS:
Appellant went to complainant’s office and asked him to exchange with cash the check in
question amounting to P4,000.In view of this request and relying upon appellant’s
assurance that he had sufficient funds in the bank and because appellant owns the North
Bay Hotel, said complainant loaned him the sum of P4,000 in cash. However, despite
repeated efforts to notify him that the check had been dishonored by the bank, appellant
could not be located anywhere. Hence, Lee Hua Hong filed a complaint for estafa against
Ang Tek Lian.with CFI which convicted the latter. The CA affirmed the verdict. It is
argued, however, that as the check had been made payable to "cash" and had not been
endorsed by Ang Tek Lian. The only question of law for decision is whether under the
facts found, estafa had been accomplished, hence this review.
ISSUE:
Whether or not indorsement is necessary to negotiate a check payable to the order of
“cash”?
RULING:
NO. Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the
order of "cash" is a check payable to bearer, and the bank may pay it to the person
presenting it for payment without the drawer’s indorsement.
36
Digested by: KCabus
CALTEX vs CA and SBTC

G.R. No. 97753, Aug 10, 1992
FACTS:
Defendant issued 280 CTDs in favor of Angel dela Cruz with an aggregate amount of
P1,120,000.00. Angel delivered the said CTDs to Caltex in connection with his purchase of
fuel products from the latter.
Sometime in March 1982, Angel informed the Branch Manager that he lost all the CTDs,
and executed an affidavit of loss to facilitate the replacement of CTDs. Angel obtained a
loan from the defendant and executed a notarized Deed of Assignment of Time Deposit
Sometime in November 1982, Aranas, credit manager of Caltex went to the defendant
bank and presented for verification the CTDs declared loast by Angel alleging the same
were delivered to the plaintiff as security for purchases made with Caltex. However,
Caltex did not furnish the defendant of any document evidencing the guarantee
agreement with Angel. Hence defendant bank rejected the plaintiff’s demand and claim
for payment of the CTDs. Thereafter, the bank set-off and applied the time deposits in
question to the payment of the matured loan of Angel. This prompted Caltex to file a
complaint.
ISSUE:
Whether or not petitioner can rightfully recover on the CTDs?
RULING:
No. The records reveal that Angel de la Cruz delivered the CTDs amounting to
P1,120,000.00 to petitioner without informing respondent bank thereof at any time.
Unfortunately for petitioner, although the CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and agreement between it and De la Cruz, as
ultimately ascertained, requires both delivery and indorsement. For, although petitioner
seeks to deflect this fact, the CTDs were in reality delivered to it as a security for De la
Cruz’ purchases of its fuel products. Any doubt as to whether the CTDs were delivered as
payment for the fuel products or as a security has been dissipated and resolved in favor
of the latter by petitioner’s own authorized and responsible representative himself.
37
Digested by: KCabus
Ocampo vs Gatchalian
G.R. No. L-15126, Nov 30, 1961
FACTS:
Anita Gatchalian was interested in buying a car. Manuel Gonzales offered to her a car
owned by plaintiff. Gonzales represented to defendant that he was authorized by the
plaintiff to sell the car. Satisfied with the price of the car, Anita requested Manuel
Gonzales to bring the car and its certificate of registration. In return, Gonzales order
defendant to issue a check as evidence of her interest in buying the car. Gonzales
promised to return the check the next day. The failure of Gonzales to appear on the next
day prompted defendant to issue a stop payment order on the check. She found out that
Gonzales used the check to pay for his wife’s hospitalization at Ocampo’s clinic.
Meanwhile, plaintiff demands defendant for payment of the check, in which defendant
refused citing that the check is not a negotiable instrument and that the plaintiff is a not
a holder in due course. The lower court held that defendant should pay plaintiff. Hence,
this appeal.
ISSUE:
Whether or not De Ocampo is a holder in due course?
RULING:
No. In the case at bar the rule that a possessor of the instrument is prima facie a holder
in due course does not apply because there was a defect in the title of the holder
(Gonzales), because the instrument is not payable to him or to bearer.
On the other hand, the stipulation of facts indicated by the appellants in their brief, like
the fact that the drawer had no account with the payee; that the holder did not show or
tell the payee why he had the check in his possession and why he was using it for the
payment of his own personal account — show that holder’s title was defective or
suspicious, to say the least.
As holder’s title was defective or suspicious, it cannot be stated that the payee acquired
the check without knowledge of said defect in holder’s title, and for this reason the
presumption that it is a holder in due course or that it acquired the instrument in good
faith does not exist. And having presented no evidence that it acquired the check in good
faith, it (payee) cannot be considered as a holder in due course.
38
Digested by: KCabus
Salas vs CA
G.R. No. 76788, Jan 22, 1990
FACTS:
Juanita Salas bought a motor vehicle from the VMS for P58,138.20 evidenced by a
promissory note and subsequently endorsed to Filinvest Finance & Leasing Corporation
which financed the purchase.
Petitioner defaulted in her installments allegedly due to a discrepancy in the engine and
chassis numbers of the vehicle delivered against its documents. She discovered the said
discrepancy when the vehicle figured in an accident. The failure to pay prompted private
respondent to file a complaint for a sum of money against petitioner before the Regional
Trial Court which ordered the defendant to pay the plaintiff the sum of P28,414.40 with
interest thereon.
ISSUE:
Whether or not private respondent is a holder in due course?
RULING:
Yes, there appears to be no question that Filinvest is a holder in due course, having taken
the instrument under the following conditions: a) it is complete and regular upon its face;
b) it became the holder before it was overdue, and without notice that it had previously
been dishonoured; c) it took the same in good faith and for value; and d) when it was
negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or
defect in the title of VMS Corporation.
39
Digested by: KCabus
Stelco Mktg. Corp. vs CA and Steelweld

G.R. No. 96160, Jun 17,1992
FACTS:
Stelco sold to RYL Construction quantities of steel bars and rolls of G.I. wire. Although the
corresponding invoices issued by STELCO stipulated that RYL would pay "COD", the latter
made no payments for the construction materials. Instead, RYL gave to Armstrong, sister
corp of STELCO, MBTC check no 765380 in the amount of P126,129.86 dated April 4,
1981 issued by Steelweld. The check was issued by Limson only by way of
accommodation to Romeo Lim. The check was deposited and was dishonored due to
DAIF. Hence, Armstrong to file a complaint of Estafa against Rafael Limson and Artemio
Torres with RTC. The trial court acquitted the accused but held Steelweld Corporation
civilly liable for having issued the check for the accommodation of Romeo Lim.
Meanwhile, STELCO filed a civil complaint with RTC against both RYL and STEELWELD for
the recovery of the value of the steel bars and wire sold to and delivered to RYL.
ISSUE:
Whether or not STELCO is a holder for value of the check in question?
RULING:
No. The record does show that after the check had been deposited and dishonored,
STELCO came into possession of it in some way, and was able, several years after the
dishonor of the check, to give it in evidence at the trial of the civil case it had instituted
against the drawers of the check (Limson and Torres) and RYL. But, as already pointed
out, possession of a negotiable instrument after presentment and dishonor, or payment,
is utterly inconsequential; it does not make the possessor a holder for value within the
meaning of the law; it gives rise to no liability on the part of the maker or drawer and
indorsers.
It is clear from the relevant circumstances that STELCO cannot be deemed a holder of the
check for value. It does not meet two of the essential requisites prescribed by the
statute. It did not become "the holder of it before it was overdue, and without notice
that it had been previously dishonored," and it did not take the check "in good faith and
for value.
40
Digested by: KCabus
BATAAN CIGAR and CA

G.R. No. 93048, Mar 3, 1994
FACTS:
Petitioner BCCFI, a manufacturer of cigarettes, bought from George King 4,500 bales of
tobacco leaf paid by crossed checks in the amount of 1,920,000 postdated sometime in
March 1979 and September 1979. Meanwhile, George King sold at a discount to private
respondent SIHI checks TCBT nos. 551826, 608967 & 608968 totalling P364,000.00.
Failure of George King to deliver the bales of tobacco leaf prompted BCCFI to issue a stop
payment order on all checks payable to George King. Efforts of SIHI to collect from BCCFI
having failed, it instituted the present case, naming only BCCFI as party defendant. The
trial court pronounced SIHI as having a valid claim being a holder in due course. The
appealed decision was affirmed by the CA. Hence, this review.
ISSUE:
Whether or not SIHI is a holder in due course?
RULING:
No. BCCFI’s defense in stopping payment is as good to SIHI as it is to George King.
Because, really, the checks were issued with the intention that George King would supply
BCCFI with the bales of tobacco leaf. There being failure of consideration, SIHI is not a
holder in due course. Consequently, BCCFI cannot be obliged to pay the checks.
41
Digested by: KCabus
Atrium vs CA
G.R. No. 109491, Feb 28, 2001
FACTS:
Hi-Cement Corporation through its corporate signatories issued checks in favor of E.T.
Henry and Co. Inc.. E.T. Henry and Co., Inc. In turn, the payee endorsed the 4 checks to
petitioner Atrium Management Corporation for valuable consideration. Upon
presentment for payment, the drawee bank dishonored all 4 checks because of "payment
stopped" order. Atrium, thus, instituted this action after its demand for payment of the
value of the checks was denied. The trial court ordered the corporate signatories, E.T.
Henry and Hi Cement to pay the petitioner jointly and severally, the amount of P2 million
corresponding to the value of the 4 checks, plus interest and attorney’s fees. The CA
modified the appealed decision absolving Hi-Cement Corporation from liability. Hence,
the recourse to this Court
ISSUE:
Whether or not Atrium was a holder of the checks in due course?
RULING:
No. In the instant case, the checks were crossed checks and specifically indorsed for
deposit to payee’s account only. From the beginning, Atrium was aware of the fact that
the checks were all for deposit only to payee’s account, meaning E.T. Henry. Clearly,
then, Atrium could not be considered a holder in due course.
42
Digested by: KCabus
Cely Yang vs CA
G.R. No. 138074, Aug 15, 2003
FACTS:
Petitioner Yang and private respondent Chandiramani had an agreement that the latter
will give Yang a PCIB MC of P4.2 million in exchange for 2 of Yang’s MC each in the
amount of P2.087 million both payable to the order of private respondent David.
Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the 2 checks
and the dollar draft bought by petitioner. Ranigo reported the alleged loss to Liong, who
in turn informed Yang. However, Chandiramani was able to get hold of said instruments
and same were delivered to respondent David. Meanwhile, Yang requested FEBTC and
Equitable to stop payment on the lost instruments. Both banks complied with her
request, but was later on lifted upon the representation of PCIB enabling the holder of
PCIB FCDU account to receive the amount of US$200T.
Yang lodged a Complaint for injunction and damages against Equitable, FEBTC,
Chandiramani, and David. The trial court renders judgment in favor of defendant David.
The appellate court AFFIRMS the judgment of the lower court. Hence, the instant
recourse.
ISSUE:
Whether or not respondent Fernando David is a holder in due course?
RULING:
No. While it is true that he was named the payee thereof, David failed to inquire from
Chandiramani about how the latter acquired possession of said checks. Given his failure
to do so, it cannot be said that David was unaware of any defect or infirmity in the title of
Chandiramani to the checks at the time of their negotiation. Moreover, inasmuch as the
checks were crossed, then David should have, pursuant to our ruling in Bataan Cigar &
Cigarette Factory, Inc. v. Court of Appeals, been put on guard that the checks were issued
for a definite purpose and accordingly, made inquiries to determine if he received the
checks pursuant to that purpose. His failure to do so negates the finding in the
proceedings below that he was a holder in due course.
43
Digested by: KCabus
Republic Planters Bank vs CA

G.R. No. 93073, Dec 21, 1992
FACTS:
Defendant Shozo Yamaguchi and private respondent Fermin Canlas were President/Chief
Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc.
By virtue of Board Resolution, defendant Yamaguchi and private respondent Canlas were
authorized to apply for credit facilities with the petitioner Republic Planters Bank in the
forms of export advances and LC/TR accommodations covered by 9 PNs signed by
Yamaguchi and Canlas with the phrase "and (in) his personal capacity". On December 20,
1982, Worldwide Garment Manufacturing, Inc. voted to change its corporate name to
Pinch Manufacturing
On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money
covered by the nine promissory notes. Only private respondent Fermin Canlas appealed
to the then Intermediate Appellate Court. His contention was that inasmuch as he signed
the promissory notes in his capacity as officer of the defunct Worldwide Garment
Manufacturing, Inc., he should not be held personally liable for such authorized
corporate acts that he performed.
ISSUE:
Whether or not private respondent Fermin Canlas is solidarily liable on the nine
promissory notes?
RULING:
Yes. The Promissory notes are negotiable instruments and must be governed by the NIL.
Under the NIL, persons who write their names on the face of promissory notes are
makers and are liable as such. By signing the notes, the maker promises to pay to the
order of the payee or any holder according to the tenor thereof. Based on the above
provisions of law, there is no denying that private respondent Fermin Canlas is one of the
co-makers of the promissory notes. As such, he cannot escape liability arising therefrom.
By making a joint and several promise to pay to the order of Republic Planters Bank,
private respondent Fermin Canlas assumed the solidary liability of a debtor and the
payee may choose to enforce the notes against him alone or jointly with Yamaguchi and
Pinch Manufacturing Corporation as solidary debtors.
44
Digested by: KCabus
Papa vs AU Valencia
G.R. No. 105188, January 23, 1998
FACTS:
Private respondents Valencia and Peñarroyo filed with RTC a complaint for specific
performance against petitioner Myron C. Papa, in his capacity as administrator of the
Testate Estate of one Angela M. Butte.
The trial court ordered defendant to execute a Deed of Absolute Sale in favor of plaintiff
Felix Peñarroyo covering the property in question and to deliver peaceful possession and
enjoyment of the said property to the said plaintiff, free from any liens and
encumbrances.
Petitioner appealed to the Court of Appeals alleging that the sale was never
"consummated" as he did not encash the check of P40,000.00 given by respondents
Valencia and Peñarroyo in payment of the full purchase price of the subject lot. He
maintained that what said respondents had actually paid was only the amount of
P5,000.00 as earnest money. The Court of Appeals affirmed the decision of the trial
court. Hence, this petition for review on certiorari.
ISSUE:
Whether or not the drawer is liable for the value of the check despite non-presentment
thereof?
RULING:
No. It has been held that if no presentment is made at all, the drawer cannot be held
liable irrespective of loss or injury unless presentment is otherwise excused. This is in
harmony with Article 1249 of the Civil Code under which payment by way of check or
other negotiable instrument is conditioned on its being cashed, except when through the
fault of the creditor, the instrument is impaired. The payee of a check would be a creditor
under this provision and if its non-payment is caused by his negligence, payment will be
deemed effected and the obligation for which the check was given as conditional
payment will be discharged.
45
Digested by: KCabus
BPI vs Reynald Suarez

G.R. No. 167750, Mar 15, 2010
FACTS:
Suarez had a client who planned to purchase several parcels of land in Tagaytay City, but
preferred not to deal directly with the land owners. Upon his client's instruction, Suarez
transacted with the owners of the Tagaytay properties, making it appear that he was the
buyer of the lots. For the payment, his client would deposit the money in Suarez's BPI
account and Suarez would issue checks to the sellers. Meawhile, his client deposited a
RCBC check amounting to P19,129,100 for the total consideration of the sales , in his BPI
current account.
BPI allegedly confirmed the same-day crediting of the RCBC check. Relying on this
confirmation, Suarez issued on the same day five checks of different amounts totalling
P19,129,100 to the sellers. While Suarez was in the U.S., Garaygay informed him that the
five checks were all dishonored by BPI due to DAIF. Subsequently, Suarez sent a letter to
BPI demanding an apology and the reversal of the charges debited from his account.
Claiming that BPI mishandled his account through negligence, Suarez filed with the
Regional Trial Court a complaint for damages which rendered judgment in favor of Suarez
and was affirmed by the CA. Hence, this petition.
ISSUE:
Whether or not drawer of a check dishonoured by reason of DAUD may be held liable for
estafa?
RULING:
No. DAUD means that the account has, on its face, sufficient funds but not yet available
to the drawer because the deposit, usually a check, had not yet been cleared. DAIF, on
the other hand, is a condition in which a depositor's balance is inadequate for the bank to
pay a check. In other words, in the case of DAUD, the depositor has, on its face, sufficient
funds in his account, although it is not available yet at the time the check was drawn,
whereas in DAIF, the depositor lacks sufficient funds in his account to pay the check.
Moreover, DAUD does not expose the drawer to possible prosecution for estafa and
violation of BP 22, while DAIF subjects the depositor to liability for such offenses. It is
clear therefore that, contrary to BPI's contention, DAIF differs from DAUD.
46
Digested by: KCabus

G.R. No. 89802, May 7, 1992
FACTS:
ISSUE:
Whether or not petitioner is liable for the value of the checks to the private respondent?
RULING:
Yes. When the Bank paid the checks so endorsed notwithstanding that title had not
passed to the endorser, it did so at its peril and became liable to the payee for the value
of the checks. This liability attached whether or not the Bank was aware of the
unauthorized endorsement
47
Digested by: KCabus
Westmont Bank vs Eugene Ong

G.R. No. 132560, Jan 30, 2002
FACTS:
Respondent Eugene Ong maintained a current account with petitioner, Westmont Bank.
Sometime in May 1976, he sold shares of stocks through Island Securities Corporation
which was paid by 2 manager’s checks payable to Eugene Ong both dated May 4, 1976.
Before Ong could get hold of the checks, Tanlimco got hold of them, forged Ong’s
signature and deposited these with petitioner, where Tanlimco was also a depositor.
Even though Ong’s specimen signature was on file, petitioner accepted and credited both
checks to the account of Tanlimco, without verifying the ‘signature indorsements’
appearing at the back thereof. Tanlimco then immediately withdrew the money and
absconded. Ong first sought the help of Tanlimco’s family to recover the amount. Later,
he reported the incident to the Central Bank.
ISSUE:
Whether or not petitioner is liable for the value of the check to the respondent?
RULING:
Yes. The collecting bank is liable to the payee and must bear the loss because it is its legal
duty to ascertain that the payee’s endorsement was genuine before cashing the check.
20 As a general rule, a bank or corporation who has obtained possession of a check upon
an unauthorized or forged indorsement of the payee’s signature and who collects the
amount of the check from the drawee, is liable for the proceeds thereof to the payee or
other owner, notwithstanding that the amount has been paid to the person from whom
the check was obtained.
48
Digested by: KCabus
Samsung vs Far East Bank

G.R. No. 129015, Aug 13, 2004
FACTS:
Plaintiff Samsung Construction maintained a current account with defendant FEBTC with
Jong Kyu Lee as its sole signatory. On 19 March 1992, a certain Roberto Gonzaga
presented for payment FEBTC Check No. 432100 to the Bank's branch in Bel-Air, Makati.
The check drawn against Samsung Construction's current account was payable to cash
amounting to P999,500.00. The bank teller checked if there were enough funds to cover
the check, then compared the signature on the check against specimen signature card of
Jong and asked Gonzaga to submit proof of his identity which the latter presented 3 IDs.
Thereafter, she forwarded the check to Velez and Syfu for approval. Syfu noticed that
Sempio, the assistant accountant of Samsung Construction, was also in the bank. Syfu
showed the check to Sempio, who vouched for the genuineness of Jong's signature and
confirmed the identity of Gonzaga. Sempio said that the check was for the purchase of
equipment for Samsung Construction. Relying on this, Syfu authorized the bank's
encashment of the check to Gonzaga.
Kyu, subsequently, discovered the said encashment and found out that the last blank
check was missing. He reported the matter to Jong, who then proceeded to the bank and
realized that his signature had been forged. Jong, subsequently filed for qualified theft
against Sempio and a Complaint against FEBTC for violation of Section 23 of the
Negotiable Instruments Law.
ISSUE:
Whether or not Samsung can recover the value of the check from FEBTC?
RULING:
Yes, even if the bank performed with utmost diligence, the drawer whose signature was
forged may still recover from the bank as long as he or she is not precluded from setting
up the defense of forgery. After all, Section 23 of the Negotiable Instruments Law plainly
states that no right to enforce the payment of a check can arise out of a forged signature.
Since the drawer, Samsung Construction, is not precluded by negligence from setting up
the forgery, the general rule should apply. Consequently, if a bank pays a forged check, it
must be considered as paying out of its funds and cannot charge the amount so paid to
the account of the depositor. A bank is liable, irrespective of its good faith, in paying a
forged check.
49
Digested by: KCabus
Ang Tiong vs Lorenzo Ting & Filepe Ang

G.R. No. L-26767, Feb 22, 1968
FACTS:
Ting issued PBC check K-81618 amounting to P4,000, payable to "cash or bearer." With
Felipe’s blank indorsement at the back thereof. The check was received by the plaintiff
Ang, presented it for payment which was dishonored by the drawee bank. The plaintiff
made written demands on both Lorenzo Ting and Felipe Ang to pay for the value of the
check but yielded no result. The petitioner then filed an action for collection of the sum
with the MTC which adjudged for the plaintif and was affirmed by the CFI. Felipe Ang
then elevated the case to the CA, which certified it to this Court because the issues raised
are purely of law.
ISSUE:
Whether or not Ang is liable for the value of a check in question as general indorser?
RULING:
Yes. nothing in the check in question indicates that the appellant is not a general
indorser within the purview of section 63 of the Negotiable Instruments Law which
makes "a person placing his signature upon an instrument otherwise than as maker,
drawer or acceptor" a general indorser, — "unless he clearly indicates by appropriate
words his intention to be bound in some other capacity," which he did not do. And
section 66 ordains that "every indorser who indorses without qualifications, warrants to
all subsequent holders in due course" (a) that the instrument is genuine and in all
respects what it purports to be; (b) that he has a good title to it; (c) that all prior parties
have capacity to contract; and (d) that the instrument is at the time of his indorsement
valid and subsisting.
In addition, "he engages that on due presentment, it 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."
50
Digested by: KCabus
Tuazon vs Heirs of Bartolome Ramos

G.R. No. 156262, Jul 14, 2005
FACTS:
Respondents alleged that sps. Tuazon purchased a total of 8,326 cavans of rice from
Bartolome only 4,437 cavans were paid, leaving 3,889 cavans unpaid valued at
P1,211,919.00. In payment therefor, the spouses Tuazon issued several Traders Royal
Bank checks but these were dishonored due to DAIF. Repeated demands were made on
them but yielded no result. Hence, the corresponding civil and criminal cases were filed
by respondents against Spouses Tuazon. Having passed away before the pretrial,
Bartolome Ramos was substituted by his heirs, herein respondents. Defendants argued
that it was Evangeline Santos who was the buyer of the rice and issued the checks to
Maria Tuazon as payments therefor. The checks received were, then, turned over to
Ramos without knowing that these were not funded. Since the trial court acquitted
petitioners in all three of the consolidated criminal cases, they appealed only its decision
finding them civilly liable to respondents. The CA sustained the decision of the RTC.
Hence, this Petition.
ISSUE:
Whether or not Tuazon is primary liable to the respondents despite being merely an
indorser?
RULING:
Yes, As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the
checks were to be accepted or paid, or both, according to their tenor; and that in case
they were dishonored, she would pay the corresponding amount. After an instrument is
dishonored by nonpayment, indorsers cease to be merely secondarily liable; they
become principal debtors whose liability becomes identical to that of the original obligor.
The holder of a negotiable instrument need not even proceed against the maker before
suing the indorser.
51
Digested by: KCabus
ABC vs BPI
G.R. No. 188363, Feb 27, 2013
FACTS:
ABC is guilty of contributory negligence when it accepted for deposit a post-dated check
of P1M payable to MMGI notwithstanding that said check had been cleared by the BPI
which failed to return the check within the 24-hour reglementary period. Thereafter,
MMGI’s account was closed and all the funds therein were withdrawn. Silva discovered
the debit of P1,000,000.00 from his account. In response to Silva’s complaint, respondent
credited his account with the aforesaid sum.
Respondent requested the PCHC to take custody of the check. PCHC directed the
respondent to deliver the original check and informed it of PCHC’s authority under CHOM
to split 50/50 the amount of the check subject of a “Ping-Pong” controversy. However,
petitioner filed a complaint before the Arbitration Committee, asserting that respondent
should solely bear the entire face value of the check due to its negligence.
The Arbitration Committee rendered its Decision in favor of petitioner and against the
respondent to which RTC affirmed. However, CA set aside the RTC judgment and ruled
for a 60-40 sharing of the loss as it found petitioner guilty of contributory negligence in
accepting what is clearly a post-dated check. Hence, this petition.
ISSUE:
Whether or not Respondent BPI should bear solely the value of the check in question?
RULING:
No, citing the case of PBC v CA,”while the Court found petitioner bank as the culpable
party under the doctrine of last clear chance since it had, thru its teller, the last
opportunity to avert the injury incurred by its client simply by faithfully observing its own
validation procedure, it nevertheless ruled that the plaintiff depositor (private
respondent) must share in the loss on account of its contributory negligence.” In view of
this, we believe that the demands of substantial justice are satisfied by allocating the
damage on a 60-40 ratio.
52
Digested by: KCabus

G.R. No. 89802, May 7, 1992
FACTS:
ISSUE:
Whether or not private respondent can recover the value of the check from the
petitioner?
RULING:
Yes. Assuming that Eddie Reyes did endorse the crossed checks, we hold that the Bank
would still be liable to the private respondent because he was not authorized to make
the endorsements. And even if the endorsements were forged, as alleged, the Bank
would still be liable to the private respondent for not verifying the endorser’s authority.
There is no substantial difference between an actual forging of a name to a check as an
endorsement by a person not authorized to make the signature and the affixing of a
name to a check as an endorsement by a person not authorized to endorse it.
The Bank stamped thereon its guarantee that "all prior endorsements and/or lack of
endorsements (were) guaranteed." By such deliberate and positive act, the Bank had for
all legal intents and purposes treated the said checks as negotiable instruments and,
accordingly, assumed the warranty of the endorser.
53
Digested by: KCabus

G.R. No. 89802, May 7, 1992
FACTS:
ISSUE:
Whether or not crossing check affects the mode of its presentment for payment?
RULING:
Yes. The effects therefore of crossing a check relate to the mode of its presentment for
payment. Under Sec. 72 of the Negotiable Instruments Law, presentment for payment, to
be sufficient, must be made by the holder or by some person authorized to receive
payment on his behalf. Who the holder or authorized person is depends on the
instruction stated on the face of the check.
54
Digested by: KCabus
ICB vs Gueco
G.R. No. 141968, Feb 12, 2001
FACTS:
Respondents Sps Gueco obtained a loan from the petitioner Bank to purchase a car. This
was covered by PN payable in monthly installments and secured by a chattel mortgage
over the car. When the spouses defaulted in payment of instalments, the Bank filed a civil
action for "Sum of Money of P184,000.00 with Prayer for a Writ of Replevin. After some
negotiations, the amount was reduced to P150,000.00 to which Dr. Gueco delivered a
manager’s check covering the said amount. However, the car was not released because
of his refusal to sign the Joint Motion to Dismiss which was the Bank’s standard operating
procedure to effect a compromise and to preclude future filing of claims, counterclaims
or suits for damages. This prompted Sps. Gueco to file a civil action for damages with the
MTC which dismissed the case. The appealed decision was reversed by the RTC and
affirmed by the CA. Hence, this petition for review on certiorari.
ISSUE:
Whether or not mere issuance of MC can be considered as an acceptance?
RULING:
No, the check involved is not an ordinary bill of exchange but a manager’s check. A
manager’s check is one drawn by the bank’s manager upon the bank itself. It is similar to
a cashier’s check both as to effect and use. A cashier’s check is a check of the bank’s
cashier on his own or another check. In effect, it is a bill of exchange drawn by the
cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance.
29 It is really the bank’s own check and may be treated as a promissory note with the
bank as a maker. 30 The check becomes the primary obligation of the bank which issues
it and constitutes its written promise to pay upon demand. The mere issuance of it is
considered an acceptance thereof. If treated as promissory note, the drawer would be the
maker and in which case the holder need not prove presentment for payment or present
the bill to the drawee for acceptance.
55
Digested by: KCabus
Jaime Dico vs CA and People

G.R. No. 141669
FACTS:
Equitable card network filed a complaint against the petitioner Dico because the 3 checks
which he issued in its favor, and in payment of his obligation to the complainant card
network all bounced, for reason "Account Closed. The complainant sent a letter to the
Dico demanding him pay the amounts of the checks but the latter refused to comply,
hence, the filing of these cases in Court.
For his defense, Dico admits having issued the checks in question in favor of the
complainant Equitable, but due to the conflicts and inconsistencies in the billings of
Equitable, he advised the Branch Manager not to present to the bank the checks until the
said conflicts and inconsistencies in his accounts be reconciled.
MTC rendered its decision in favour of Equitable and was affirmed by RTC. The CA,
however, acquitted petitioner in one of the cases. Hence, this Petition for Review.
ISSUE:
Whether or not petitioner receive a valid notice of dishonor?
RULING:
No. Petitioner did not receive the notice of dishonour contemplated by the law. There
was no valid notice of dishonor to speak of. The term "notice of dishonor" denotes that a
check has been presented for payment and was subsequently dishonored by the drawee
bank. This means that the check must necessarily be due and demandable because only a
check that has become due can be presented for payment and subsequently be
dishonored. A postdated check cannot be dishonored if presented for payment before its
due date.
56
Digested by: KCabus
LAO vs CA
G.R. No. 119178, Jun 20, 1997
FACTS:
Petitioner Lao was authorized to sign checks for and in behalf of the corporation. While,
Palijo was authorized to invest the donations receive by the Society of the Divine Word.
The society had been investing their money with Premiere with a total of P514,484.04. In
payment of interest of their investment, Premiere issued TRB checks payable to Palijo.
These checks were signed by petitioner and Asprec. When Palijo presented these checks
for encashment, the same were dishonored due to DAIF. Ocampo, Head of the Treasury
Dept of Premiere, testified that when the checks bounced when presented with the
drawee bank she did not inform anymore the Binondo branch and petitioner Lao as the
corporation was in distress. Demands for payment were made by Palijo but yielded no
result necessitating him to file an affidavit-complaint against Petitioner Lina Lim Lao and
Teodulo Asprec for violation of B.P. 22. After due trial, the Regional Trial Court convicted
Petitioner Lao and was affirmed by the Court of Appeals. Hence, this petition.
ISSUE:
Whether or not petitioner can invoke the lack of knowledge on the insufficiency of funds
as no notice of dishonor was received by her?
RULING:
Yes. There is cogent reason for the acquittal of the accused. There can be no prima facie
evidence of knowledge of insufficiency of funds in the instant case because no notice of
dishonor was actually sent to or received by the petitioner.
The notice of dishonor may be sent by the offended party or the drawee bank. The trial
court itself found absent a personal notice of dishonor to Petitioner Lina Lim Lao by the
drawee bank based on the unrebutted testimony of Ocampo" (that the checks bounced
when presented with the drawee bank but she did not inform anymore the Binondo
branch and Lina Lim Lao as there was no need to inform them as the corporation was in
distress."
57
Digested by: KCabus
Marigomen vs People
G.R. No. 153451, May 26, 2005
FACTS:
Caltex granted a credit line to INSURECO and the latter purchased gasoline and lubricants
from Caltex through its sales representative in Negros and Bacolod. Ofelia Marigomen
and John V. Dalao were authorized to draw and sign checks against the account of
INSURECO at the Far East Bant. Caltex had agreed for INSURECO to pay its purchases via
postdated checks to be delivered to Caltex upon the release of the purchased oil
products. When Caltex presented these checks for payment, Check Nos. 3357283,
3357348 and 3357619 were dishonored due to DAIF while Check No. 3357543 was due
to "account closed." Caltex sent a confirmation telegram informing INSURECO of the
dishonor of the said checks, and again demanded their replacement, but received no
reply. Hence, Caltex filed criminal complaints for violation of B.P. Blg. 22 against
Marigomen and Dalao with the RTC. The trial court adjudged convicting Marigomen and
Dalao of the crimes charged. Upon the CA’s denial of her motion for reconsideration of
the said decision, Marigomen filed the instant Petition for Review on Certiorari.
ISSUE:
Whether or not Marigomen is liable for the checks in question despite no notice of
demand was sent to her?
RULING:
No, the prosecution failed to present any employee of the PT&T to prove that the
telegrams from the offended party were in fact transmitted to INSURECO and that the
latter received the same. Furthermore, there is no evidence on record that the petitioner
ever received the said telegrams from INSURECO, or that separate copies thereof were
transmitted to and received by the petitioner.
In fine, the respondent failed to prove the second element of the crime. Hence, the
petitioner should be acquitted of the crimes charged.
58
Digested by: KCabus
Great Asian vs Tan Chong

G.R. No. 105774, Apr 25, 2002
FACTS:
Great Asian is engaged in the business of buying and selling of household appliances.
Board of directors of Great Asian authorizes Arsenio to secure a loan and a discounting
line with Ban. Tan Chong Lin signed a Surety Agreement in favor of Ban to guarantee,
solidarily, the debts of Great Asian to Ban. Great Asian, through Arsenio, signed 4 Deeds
of Assignment, assigning to Ban 15 postdated checks. The drawee banks dishonored the
15 checks on maturity when deposited for collection by Ban, with any of the following as
reason for the dishonor: "account closed", "payment stopped", "account under
garnishment", and "DAIF." The total amount of the fifteen dishonored checks is
P1,042,005.00.
Subsequently, Ban sent a letter notifying Tan Chong Lin of the dishonor and demanding
payment from him. Neither Great Asian nor Tan Chong Lin paid Ban. Hence, Ban filed a
complaint for collection of a sum of money against Great Asian and Tan Chong Lin. The
trial court rendered its decision in favor of the plaintiff. On appeal, the CA sustained the
decision of the lower court. Hence, this petition for Review on Certiorari.
ISSUE:
Whether or not petitioner-corporation is discharged from liability for failure of the
private respondent to comply with the provisions of the Negotiable Instruments Law on
the dishonored checks?
RULING:
No, because Great Asian and Ban agreed on this specific with recourse stipulation,
despite the fact that the receivables were negotiable instruments with the endorsement
of Arsenio. The explicit with recourse stipulation against Great Asian effectively enlarges,
by agreement of the parties, the liability of Great Asian beyond that of a mere endorser
of a negotiable instrument. Thus, whether or not Ban gives notice of dishonor to Great
Asian, the latter remains liable to Ban because of the with recourse stipulation which is
independent of the warranties of an endorser under the Negotiable Instruments Law.
59
Digested by: KCabus
Eliza Tan vs People

G.R. No. 141466, Jan 19, 2001
FACTS:
Eliza, representing HDI, and Fidel, for FMF, entered into a Construction Agreement
whereby the FMF was hired by Eliza to undertake land development. The manner of
payment would be based on the accomplishment reports to be submitted by the FMF.
Eliza issued Philtrust Bank Check payable to FMF for its accomplishment for the month of
November 1992. However, upon presentment for payment subject was dishonored. Fidel
verbally notified Eliza of the dishonour and the latter promised to pay. Failing to heed his
demand for payment, Eliza was charged in court. The trial court adjudged against Eliza
Tan and this was affirmed by the CA. Hence, this appeal
ISSUE:
Whether or not petitioner is liable for the issuance of the check in question to the
respondent?
RULING:
No, the check in question was not issued without sufficient funds and was not
dishonored due to insufficiency of funds. What was stamped on the check in question
was "Payment Stopped-Funded" at the same time "DAUD" meaning drawn against
uncollected deposits. Even with uncollected deposits, the bank may honor the check at
its discretion in favor of favored clients, in which case there would be no violation of B.P.
22.10 In fact, petitioner requested the bank to stop payment of the check for a valid
reason, namely, that the account has been paid in cash.
60
Digested by: KCabus
BPI vs Reynald Suarez

G.R. No. 167750, Mar 15, 2010
FACTS:
Suarez had a client who planned to purchase several parcels of land in Tagaytay City, but
preferred not to deal directly with the land owners. Upon his client's instruction, Suarez
transacted with the owners of the Tagaytay properties, making it appear that he was the
buyer of the lots. For the payment, his client would deposit the money in Suarez's BPI
account and Suarez would issue checks to the sellers. Hence, his client deposited a RCBC
check amounting to P19,129,100 for the total consideration of the sales , in Suarez BPI
current account.
BPI allegedly confirmed the same-day crediting of the RCBC check. Relying on this
confirmation, Suarez issued on the same day five checks of different amounts totaling
P19,129,100 for the purchase of the Tagaytay properties. While Suarez was in the U.S.,
Garaygay informed him that the five checks he issued were all dishonored by BPI due to
insufficiency of funds. Subsequently, Suarez sent a letter to BPI demanding an apology
and the reversal of the charges debited from his account. Claiming that BPI mishandled
his account through negligence, Suarez filed with the Regional Trial Court a complaint for
damages which rendered judgment in favor of Suarez and was affirmed by the CA.
Hence, this petition.
ISSUE:
Whether or not BPI erroneous marking of the dishonored checks constitute negligence
thus shall be liable for compensatory damages to Suarez?
RULING:
No. Suarez failed to establish that his claimed injury was proximately caused by the
erroneous marking of DAIF on the checks. There is nothing in Suarez's testimony which
convincingly shows that the erroneous marking of DAIF on the checks proximately caused
his alleged psychological or social injuries. Suarez merely testified that he suffered
humiliation and that the prospective consolidation of the titles to the Tagaytay properties
did not materialize due to the dishonor of his checks, not due to the erroneous marking
of DAIF on his checks. Hence, Suarez had only himself to blame for his hurt feelings and
the unsuccessful transaction with his client as these were directly caused by the justified
dishonor of the checks. In short, Suarez cannot recover compensatory damages for his
own negligence
61
Digested by: KCabus
James Svendsen vs People

G.R. No. 175381, Feb 26, 2008
FACTS:
Cristina extended a loan to petitioner in the amount of P200,000. After petitioner had
partially paid his obligation, he failed to settle the balance of P380,000 inclusive of
interest. Cristina thus filed a collection suit against petitioner, which was eventually
settled when petitioner paid her P200,000 and issued in her favor an IEB check for P160T
postdated Feb 2, 1999. However, the check was dishonored due to DAIF. Cristina, by
registered mail, informed him that the check was dishonored and demands payment
thereof. Petitioner’s failure to pay, prompted Cristina to file a criminal action for estafa
against him with MeTC
ISSUE:
Whether or not petitioner is liable for violation of BP blg 22 despite absence of notice of
dishonor?
RULING:
No. The failure of the prosecution to prove the existence and receipt by petitioner of the
requisite written notice of dishonor and that he was given at least five banking days
within which to settle his account constitutes sufficient ground for his acquittal.
62
Digested by: KCabus
Jaime Dico vs CA and People

G.R. No. 141669
FACTS:
Equitable card network filed a complaint against the petitioner Dico because the 3 checks
which he issued in its favor, and in payment of his obligation to the complainant card
network all bounced, for reason "Account Closed. The complainant sent a letter to the
Dico demanding him pay the amounts of the checks but the latter refused to comply,
hence, the filing of these cases in Court.
For his defense, Dico admits having issued the checks in question in favor of the
complainant Equitable, but due to the conflicts and inconsistencies in the billings of
Equitable, he advised the Branch Manager not to present to the bank the checks until the
said conflicts and inconsistencies in his accounts be reconciled.
MTC rendered its decision in favour of Equitable and was affirmed by RTC. The CA,
however, acquitted petitioner in one of the cases. Hence, this Petition for Review.
ISSUE:
Whether or not oral notice of dishonor will suffice?
RULING:
No. A notice of dishonor received by the maker or drawer of the check is thus
indispensable before a conviction can ensue. The notice of dishonor may be sent by the
offended party or the drawee bank. The notice must be in writing. A mere oral notice to
pay a dishonored check will not suffice. The lack of a written notice is fatal for the
prosecution. In the case at bar, the petitioner did not receive the notice of dishonour
contemplated by the law. There was no valid notice of dishonor to speak of. Thus,
petitioner must, perforce, be acquitted in Criminal Case No. 38255-R.
63
Digested by: KCabus
BPI vs CA and Benjamin Napiza

G.R. No. 112392, Feb 29, 2000
FACTS:
Private respondent deposited a Continental Bank MC of $2,500.00 dated Aug 17, 1984 to
his FCDU Savings Account with the petitioner. The check belonged to Henry Chan who
requested him to deposit the check in his dollar account by way of accommodation and
for the purpose of clearing the same. In turn, he delivered to Chan a signed blank
withdrawal slip, with an agreement that when the check is cleared, both of them would
go to the bank to withdraw the said amount upon presentation of his passbook.
Meanwhile, Gayon was able to withdraw the amount of $2,541.67 from private
respondent’s FCDU Savings Account using the signed withdrawal slip.
On November 20, 1984, petitioner was informed by Wells Fargo Bank that the check
deposited by private respondent was a counterfeit check. Mr. Ariel Reyes, the manager
of petitioner, personnaly sent a telegram to private respondent regarding the dishonor of
the check. This was followed by a demand letter asking for the return of the $2,500.00. In
reply, private respondent claimed that he deposited the check "for clearing purposes"
only to accommodate Chan. Petitioner then filed a complaint against private respondent.
ISSUE:
Whether or not private respondent is liable for the value of the check in question to the
petitioner?
RULING:
No. The mere deposit of a check in private respondent’s account did not mean that the
check was already private respondent’s property. The check still had to be cleared and its
proceeds can only be withdrawn upon presentation of a passbook in accordance with the
bank’s rules and regulations. Hence, in allowing such withdrawal, petitioner assumed the
risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it
should suffer the resulting damage
64
Digested by: KCabus
Cebu International Finance Corp. vs CA, Vicente Alegre

G.R. No. 123031, October 12, 1999
FACTS:
Private respondent invested with CIFC P500,000.00 in cash. Petitioner issued a PN for
516,238.67 payable on May 27, 1991. On maturity date, CIFC issued BPI Check No.
513397 for P514,390.94 in favor of the private respondent as proceeds of his matured
investment plus interest. The check was dishonored and BPI took it for custody pending
an investigation of several counterfeit checks drawn against CIFC’s checking account.
Immediately, private respondent notified CIFC of the dishonor and demanded that he be
paid in cash. CIFC, however, refused to pay and instructed private respondent to wait for
its ongoing bank reconciliation with BPI. This prompted private respondent to file a
complaint for recovery of a sum of money against the petitioner with the RTC.
ISSUE:
Whether or not BPI Check no. 513397 was validly discharged?
RULING:
No, when the bank deducted the amount of the CHECK from CIFC’s current account, this
did not ipso facto operate as a discharge or payment of the instrument. Although the
value of the CHECK was deducted from the funds of CIFC, it was not delivered to the
payee, Vicente Alegre. Instead, BPI offset the amount against the losses it incurred from
forgeries of CIFC checks, allegedly committed by Alegre. The confiscation of the value of
the check was agreed upon by CIFC and BPI. BPI’s confiscation of Alegre’s money
constitutes garnishment without the parties going through a valid proceeding in court. In
effect, CIFC has not yet tendered a valid payment of its obligation to the private
Respondent.
65
Digested by: KCabus
Anamer Salazar vs JY Brothers Mktg. Corp.

G.R. No. 171998, Oct 20, 2010
FACTS:
Salazar with Calleja and Kallos procured from J. Y. Bros 300 cavans of rice worth
P214,000.00. As payment, Salazar negotiated and indorsed to J.Y. Bros. Prudential Bank
Check No. 067481 dated October 15, 1996 issued by Nena Timario in the amount of
P214,000.00. Relying that the check was funded, J.Y. Bros delivered the 300 cavans of
rice to Salazar. However, the check was dishonored due to "closed account." Petitioner
informed the defendant of the dishonour who in turn delivered a Solid Bank Check as
replacement. Said check was also issued by Timario and was also dishonoured due to
DAIF.
Despite the demand letter dated February 27, 1997, Salazar failed to settle the amount
due to J.Y. Bros., the latter filed a complaint against Salazar and Timario before the RTC.
The RTC ordered Salazar to pay J.Y. Brothers Marketing Corporation the sum of
P214,000.00, affirmed by the CA. Hence this petition.
ISSUE:
Whether or not respondent's acceptance of the Solid Bank check resulted to novation
which discharges the petitioner’s liability to the defendant?
RULING:
No, respondents acceptance of the Solid Bank check did not result to novation as there
was no express agreement to establish that petitioner was already discharged from his
liability to pay respondent the amount of P214,000.00 as payment for the 300 bags of
rice. As we said, novation is never presumed, there must be an express intention to
novate. In fact, when the Solid Bank check was delivered to respondent, the same was
also indorsed by petitioner which shows petitioners recognition of the existing obligation
to respondent to pay P214,000.00 subject of the replaced Prudential Bank check.
66
Digested by: KCabus
PNB vs CA, Capitol City Devt.

G.R. No. 107508, Apr 25, 1996
FACTS:
A check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of
P97,650.00 was issued by the DECS payable to F. Abante Marketing drawn against PNB.
Said check was deposited in its savings account with Capitol City Devt Bank, which in turn
deposited the same in its account with the PBCom. The latter sent the check to petitioner
for clearing. Petitioner cleared the check as good thus, PBCom credited Capitol’s account
for the amount stated in the check.
However, on October 19, 1981, petitioner returned the check to PBCom and debited its
account covering the amount of check on the ground that there was "material alteration"
of the check number. PBCom, as collecting agent of Capitol, then proceeded to debit the
latter’s account for the same amount, and subsequently, sent the check back to
petitioner.
On the other hand, Capitol could not debit the account of Abante Marketing since the
latter had already withdrawn the amount of the check. Capitol sought clarification from
PBCom and demanded the re-crediting of the amount. PBCom followed suit by
requesting an explanation and re-crediting from petitioner. Since the demands of Capitol
were not heeded, it filed a civil suit with the RTC against PBCom.
ISSUE:
Whether or not an alteration of the serial number on a check is a material alteration
under the NIL?
RULING:
No. If the purpose of the serial number is merely to identify the issuing government
office or agency, its alteration in this case had no material effect whatsoever on the
integrity of the check. The identity of the issuing government office or agency was not
changed thereby and the amount of the check was not charged against the account of
another government office or agency which had no liability under the check. The
ownership of the check is established without the necessity of recourse to the serial
number.
Hence, the alteration in the number of the check did not affect or change the liability of
the Ministry of Education and Culture under the check and, therefore, is immaterial.
67
Digested by: KCabus
International Corporate Bank vs CA and PNB

G.R. No. 129910, Sep 5, 2006
FACTS:
The Ministry of Education and Culture issued 15 checks drawn against respondent which
petitioner accepted for deposit on various dates. After 24 hours from submission of the
checks to respondent for clearing, petitioner paid the value of the checks and allowed the
withdrawals of the deposits. However, on 14 October 1981, respondent returned all the
checks to petitioner without clearing them on the ground that they were materially
altered. Petitioner then instituted an action for collection of sums of money against
respondent to recover the value of the checks. The RTC dismissed both the complaint
and the counterclaim. Petitioner appealed the trial court's Decision before the Court of
Appeals. The decision appealed from is reversed and the defendant-appellee PNB is
declared liable for the value of the fifteen checks in the amount of P1,447,920.00. Hence,
the recourse to this Court.
ISSUE:
Whether or not the checks were materially altered?
RULING:
No, the alterations of the serial numbers do not constitute material alterations on the
checks. Incidentally, we agree with the petitioner's observation that the check in the PNB
case appears to belong to the same batch of checks as in the present case. The check in
the PNB case was also issued by the Ministry of Education and Culture. It was also drawn
against PNB, respondent in this case. The serial number of the check in the PNB case is 7-
3666-223-3 and it was issued on 7 August 1981.
68
Digested by: KCabus
MBTC vs CABILZO
G.R. No. 154469, Dec 6, 2006
FACTS:
Cabilzo paid Marquez his sales commission with Metrobank Check No. 985988
amounting to P1,000.00 payable to "CASH" postdated on 24 November 1994.
Subsequently, the check was presented to Westmont Bank for payment and Metrobank
cleared the check for encashment in accordance with the PCHC Rules. Upon receipt of
the check, Cabilzo discovered that Metrobank Check No. 985988 which he issued in the
amount of P1,000.00 was altered to P91,000.00 and the date 24 November 1994 was
changed to 14 November 1994. Thus, Cabilzo sent a demand letter to Metrobank to re-
credit the amount of P90,000 to his account, but the latter refused to comply.
Consequently, Cabilzo instituted a civil action for damages against Metrobank before the
RTC which rendered its decision in favor of Cabilzo. Aggrieved Metrobank appealed the
adverse decision to the Court of Appeals which affirmed with modification the Decision
of the court a quo. Hence this petition for review on certiorari.
ISSUE:
Whether or not petitioner is liable for the alterations on the subject check bearing the
authentic signature of the drawer thereof?
RULING:
Yes, since the entries altered were among those enumerated under Section 1 and 125,
namely, the sum of money payable and the date of the check, the instant controversy
therefore squarely falls within the purview of material alteration. When the drawee bank
pays a materially altered check, it violates the terms of the check, as well as its duty to
charge its client's account only for bona fide disbursements he had made.
Since the drawee bank, in the instant case, did not pay according to the original tenor of
the instrument, as directed by the drawer, then it has no right to claim reimbursement
from the drawer, much less, the right to deduct the erroneous payment it made from the
drawer's account which it was expected to treat with utmost fidelity
69
Digested by: KCabus
Prudential Bank vs IAC, Philippine Rayon Mills

G.R. No. 74886, Dec 8, 1992
FACTS:
Defendant Philippine Rayon Mills entered into a contract with Nissho Co for the
importation of textile machineries under a five-year deferred payment plan. To effect
payment for said machineries, the defendant applied for a commercial letter of credit
with the petitioner Prudential Bank in favor of Nissho. By virtue of said application, the
petitioner opened LC for $128,548.78 covered by drafts drawn and issued by Nissho,
which were all paid by the petitioner through its correspondent in Japan. As indicated on
their faces, two of these drafts were accepted by the defendant through its president,
Anacleto R. Chi, while the others were not.
Sometime in 1967, the defendant ceased business operation. The obligation of the
defendant arising from the LC/TR remained unpaid and unliquidated. Repeated formal
demands for the payment of the said trust receipt yielded no result. Hence, the present
action for the collection of the principal amountwas filed against the defendant and
Anacleto R. Chi.
The trial court rendered its decision sentencing the defendant Philippine Rayon Mills, Inc.
to pay plaintiff the sum of P153,645.22. Its motion to reconsider the decision having
been denied by the public respondent, petitioner filed the instant petition.
ISSUE:
What is Acceptance?
RULING:
The acceptance of a bill is the signification by the drawee of his assent to the order of the
drawer; this may be done in writing by the drawee in the bill itself, or in a separate
instrument.
70
Digested by: KCabus
PNB vs CA and PCIB

G.R. No. L-26001, Oct 29, 1968
FACTS:
Augusto Lim deposited in his current account with the PCIB GSIS Check No. 645915-B
amounting P57,415.00 drawn against the PNB. The check was forwarded for clearing.
PNB retained the check and paid its amount to the PCIB as well as debited it against the
account of the GSIS. However, GSIS demanded the said sum to be re-credited to its
account because the signatures of its officers on the check were forged. In turn, PNB
demanded from PCIB the refund of said sum, which the PCIB refused to do. Hence, the
present action against the PCIB, which was dismissed by the CFI, whose decision was
affirmed by the CA. Hence, this petition for review by certiorari.
ISSUE:
Whether or not clearing tantamounts to an "acceptance", in contemplation of the
Negotiable Instruments Law?
RULING:
No. In general, "acceptance", is not required for checks, for the same are payable on
demand. Indeed, "acceptance" and "payment" are, within the purview of the NIL,
essentially different things, for the former is "a promise to perform an act," whereas the
latter is the "actual performance" thereof.
In the words of the law, "the acceptance of a bill is the signification by the drawee of his
assent to the order of the drawer," which, in the case of checks, is the payment, on
demand, of a given sum of money. Upon the other hand, actual payment of the amount
of a check implies not only an assent to said order of the drawer and a recognition of the
drawee’s obligation to pay the aforementioned sum, but, also, a compliance with such
obligation.
71
Digested by: KCabus
New Pacific Timber vs Seneris

G.R. No. L-41764, Dec 19, 1980
FACTS:
Before the auction sale, petitioner deposited with the Clerk of Court the amount of
P50,000.00 in cashier’s check and P13,130.00 in cash which were both refused by private
Respondent. The sheriff proceeded with auction sale, sold the levied property to private
respondent as highest bidder in the amount of P50T, declared a deficiency of P13,130.00
and issued a certificate of sale in favour of private respondent. Petitioner filed an ex-
parte motion for the issuance of a certificate of satisfaction of judgment which was
denied in an order by the trial court. Hence, this petition.
ISSUE:
Whether or not a bank certification is equivalent to acceptance?
RULING:
Yes. Where a check is certified by the bank on which it is drawn, the certification is
equivalent to acceptance. Said certification "implies that the check is drawn upon
sufficient funds in the hands of the drawee, that they have been set apart for its
satisfaction, and that they shall be so applied whenever the check is presented for
payment. It is an understanding that the check is good then, and shall continue good, and
this agreement is as binding on the bank as its notes in circulation, a certificate of deposit
payable to the order of the depositor, or any other obligation it can assume. The object
of certifying a check, as regards both parties, is to enable the holder to use it as money.
72
Digested by: KCabus

G.R. No. 74886, Dec 8, 1992
FACTS:
importation of textile machineries under a five-year deferred payment plan. To pay for
the said machineries, the defendant applied for a commercial LC with the petitioner.
Pursuant to this, the petitioner opened LC covered by drafts drawn and issued by Nissho,
Sometime in 1967, the defendant ceased business operation. Hence, its obligation arising
from the LC/TR remained unpaid and unliquidated. Repeated formal demands for the
payment of the said trust receipt yielded no result. Hence, petitioner filed a complaint for
collection of sum of money against the defendant and Anacleto R. Chi.
ISSUE:
Whether or not presentment for acceptance of the subject drafts is necessary?
RULING:
No, there was no need for acceptance as the issued drafts are sight drafts. Presentment
for acceptance is necessary only in the cases expressly provided for in Section 143 of the
Negotiable Instruments Law (NIL). In no other case is presentment for acceptance
necessary in order to render any party to the bill liable.
73
Digested by: KCabus

G.R. No. 74886, Dec 8, 1992
FACTS:
importation of textile machineries under a five-year deferred payment plan. To pay for
the said machineries, the defendant applied for a commercial LC with the petitioner.
Pursuant to this, the petitioner opened LC covered by drafts drawn and issued by Nissho,
Sometime in 1967, the defendant ceased business operation. Hence, its obligation arising
from the LC/TR remained unpaid and unliquidated. Repeated formal demands for the
payment of the said trust receipt yielded no result. Hence, petitioner filed a complaint for
collection of sum of money against the defendant and Anacleto R. Chi.
ISSUE:
Whether or not presentment for acceptance of the drafts was indispensable to make
Philippine Rayon liable thereon?
RULING:
No. because the transaction in the case at bar stemmed from Philippine Rayon’s
application for a commercial letter of credit with the petitioner to cover the former’s
contract to purchase and import loom and textile machinery from Nissho Company, Ltd.
of Japan under a five-year deferred payment plan. Rayon immediately became liable
thereon upon petitioner’s payment thereof. Such is the essence of the letter of credit
issued by the petitioner. A different conclusion would violate the principle upon which
commercial letter of credit are founded because in such a case, both the beneficiary and
the issuer. Nissho Company Ltd. and the petitioner, respectively, would be placed at the
mercy of Philippine Rayon even if the latter had already received the imported machinery
and the petitioner had fully paid for it.
74
Digested by: KCabus
Papa vs AU Valencia
G.R. No. 105188, January 23, 1998
FACTS:
Private respondents Valencia and Peñarroyo filed with RTC a complaint for specific
performance against petitioner Myron C. Papa, in his capacity as administrator of the
Testate Estate of one Angela M. Butte.
The trial court ordered defendant to execute a Deed of Absolute Sale in favor of plaintiff
Felix Peñarroyo covering the property in question and to deliver peaceful possession and
enjoyment of the said property to the said plaintiff, free from any liens and
encumbrances.
Petitioner appealed to the Court of Appeals alleging that the sale was never
"consummated" as he did not encash the check of P40,000.00 given by respondents
Valencia and Peñarroyo in payment of the full purchase price of the subject lot. He
maintained that what said respondents had actually paid was only the amount of
P5,000.00 as earnest money. The Court of Appeals affirmed the decision of the trial
court. Hence, this petition for review on certiorari.
ISSUE:
Whether or not non-encashment of the check for a long period operates as actual
payment of the debt?
RULING:
Yes. While it is true that the delivery of a check produces the effect of payment only
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the
debtor is prejudiced by the creditor’s unreasonable delay in presentment. The
acceptance of a cheek implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss by want of such diligence, it will
be held to operate as actual payment of the debt or obligation for which it was given.
75
Digested by: KCabus
PNB vs Concepcion Mining

G.R. No. L-16968, Jul 31, 1962
FACTS:
The present action was instituted by the plaintiff to recover from the defendants the
value on the face of a PN. The defendants alleged that the co-maker of the promissory
note Don Vicente L. Legarda, died and his estate is in the process of judicial
determination. On the basis of this allegation it is prayed, as a special defense, that the
estate of said deceased Vicente L. Legarda be included as party-defendant. The court in
its decision ruled that the inclusion of said defendant is unnecessary and immaterial, in
accordance with the provisions of Article 1216 of the new Civil Code and section 17(g) of
the Negotiable Instruments Law. A motion to reconsider this decision was denied. Hence,
this appeal.
ISSUE:
Whether or not Concepcion, Vicente and Jose are solidarily liable to the petitioner on the
PN?
RULING:
Yes. the promissory note was executed jointly and severally by the same parties, namely,
Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S. Sarte, the payee of
the promissory note had the right to hold any one or any two of the signers of the
promissory note responsible for the payment of the amount of the note.
76
Digested by: KCabus
Perla Compania vs CA, Herminio Lim and Evelyn Lim

G.R. No. 96452, May 7, 1992
FACTS:
Sps Lim executed a PN in favor of Supercars, Inc. for P77,940.00 payable in monthly
installments and secured by a chattel mortgage over a red Ford Hatchback. On November
9, 1982, said vehicle was carnapped while parked at the back of Broadway Centrum.
Subsequently, private respondent filed a claim for loss with the petitioner Perla but said
claim was denied on the ground that Evelyn Lim was in possession of an expired driver’s
license at the time of the loss of said vehicle.
Consequently, petitioner FCP demanded that private respondents pay the whole balance
of the PN or to return the vehicle but the latter refused. Hence, petitioner FCP filed a
complaint against private respondents. After trial on the merits, the trial court Ordered
defendants sps Lim to pay plaintiff. The CA reversed the appealed decision. Thus, this
petition for review on certiorari.
ISSUE:
Whether or not the loss of the collateral exempted the debtors from their obligations
under the promissory note?
RULING:
No, private respondents are not relieved of their obligation to pay the former the
installments due on the promissory note on account of the loss of the automobile. The
chattel mortgage constituted over the automobile is merely an accessory contract to the
promissory note. Being the principal contract, the promissory note is unaffected by
whatever befalls the subject matter of the accessory contract. Therefore, the unpaid
balance on the promissory note should be paid, and not just the installments due and
payable before the automobile was carnapped.
77
Digested by: KCabus
Ponce de Leon vs Rehabilitation

G.R. No. L-24571, Dec 18, 1970
FACTS:
Jose Ponce De Leon and Francisco Soriano applied for a loan from the RFC for 800,
000.00. The application was approved for 495,000 covered by a promissory note payable
in monthly instalments. The loan was secured by a parcel of land owned by Soriano. Part
of the P495, 000.00 was used to pay off the previous encumbrances amounting to P135,
000.00 on the property of Soriano. The balance were released to Ponce de Leon in
various amounts from December 1951 to July 1952, still pursuant to the deed of
mortgage. De Leon and Soriano failed to pay their loan obligation. None of the
amortization and interests which had become due was paid hence, RFC initiated a
foreclosure proceeding on the mortgaged property.
In his defense, Ponce de Leon insists that the amortizations never became due because
allegedly, RFC did not complete the disbursement of the loan to him, alleging that P19,
000.00 was withheld. He also argued that on the face of the promissory note it was
written that the installments have “no fixed or determined dates of payment”. Hence,
the monthly payments were never due therefore the foreclosure is void. He insists that
the court should first determine the date of maturity of the loan.
ISSUE:
Whether Ponce de Leon’s loan is due and demandable despite the absence of an express
time for payment?
RULING:
Yes, although the date of maturity of the first installment was left blank, the promissory
note states that the "date of maturity (was) to be fixed as of the date of the last release,"
completing the delivery to the plaintiff of the sum of P495,000 lent to him by the RFC. He
now says that this sum of P495,000 has not, as yet, been fully released by the RFC. But
this is contrary to the facts of record.
At any rate, Annex A, in effect, authorized the RFC to fix the date of maturity of the
installments therein stipulated. which is allowed by the Negotiable Instruments Law and
when a promissory note expresses "no time for payment," it is deemed "payable on
demand.
78
Digested by: KCabus
People vs Romero
G.R. No. 112985, Apr 21, 1999
FACTS:
SAIDECOR is engaged in soliciting funds and investments from the public where it
guaranteed an 800% return on investment within 15 to 21 days. Investors were given
coupons containing the capital and the return on the capital collectible on the date
agreed upon. Complainant Ernesto A. Ruiz invested P150Twith SAIDECOR collection agent
Daphne Parrocho. In turn, complainant received a postdated Butuan City Rural Bank
check of P1,000,200.00 instead of the usual redeemable coupon as the return on the
investment. The check indicated P1,000,200.00 as the amount in words, but the amount
in figures was for P1,200,000.00. Complainant did not notice the discrepancy.
Consequently, the check was, dishonoured due to DAIF when presented for payment. For
their defense, Romero claimed that the corporation had a sufficient fund to cover the
value of the check in question at the time of its issuance and that the discrepancy
between the amount in words and the amount in figures in the check was the reason for
the dishonor.
ISSUE:
What is the rule under NIL when there is ambiguity on the amount?
RULING:
The rule in the Negotiable Instruments Law is that when there is ambiguity in the amount
in words and the amount in figures, it would be the amount in words that would prevail.
79
Digested by: KCabus
Astro Electronics vs Phil Export

G.R. No. 136729, Sep 23, 2003
FACTS:
Astro was granted several loans by the Philtrust amounting to P3,000,000.00 covered by
3 PN. In each of these promissory notes, it appears that petitioner Roxas signed twice, as
President of Astro and in his personal capacity. Thereafter, Philguarantee, with the
consent of Astro, guaranteed in favor of Philtrust the payment of 70% of Astro’s loan,
subject to the condition that upon payment by Philguarantee of said amount, it shall be
proportionally subrogated to the rights of Philtrust against Astro. Due to Astro’s failure to
pay its loan obligations, despite demands, Philguarantee paid 70% of the guaranteed loan
to Philtrust.
Subsequently, Philguarantee filed against Astro and Roxas a complaint for sum of money
with the RTC. In his Answer, Roxas disclaims any liability on the instruments, alleging that
he merely signed the same in blank and the phrases "in his personal capacity" and "in his
official capacity" were fraudulently inserted without his knowledge. After trial, the RTC
rendered its decision in favor of Philguarantee. On appeal, the Court of Appeals affirmed
the RTC decision. Hence, this petition for review on certiorari.
ISSUE:
Whether or not Roxas should be jointly and severally liable (solidary) with Astro on the
PNs?
RULING:
Yes. Astro’s loan with Philtrust Bank is secured by three promissory notes. These
promissory notes are valid and binding against Astro and Roxas. As it appears on the
notes, Roxas signed twice: first, as president of Astro and second, in his personal
capacity. In signing his name aside from being the President of Astro, Roxas became a co-
maker of the promissory notes and cannot escape any liability arising from it.
Under the Negotiable Instruments Law, persons who write their names on the face of
promissory notes are makers, promising that they will pay to the order of the payee or
any holder according to its tenor. Thus, even without the phrase "personal capacity,"
Roxas will still be primarily liable as a joint and several debtor under the notes
considering that his intention to be liable as such is manifested by the fact that he affixed
his signature on each of the promissory notes twice which necessarily would imply that
he is undertaking the obligation in two different capacities, official and personal.
80
Digested by: KCabus
BPI vs CA
G.R. No.120639, Sep 25, 1998
FACTS:
Private respondent Marasigan is complimentary member of BPI Express Card Corp
(BECC). It was stated in their contract that non-payment of due bill automatically
suspends his credit card. Due to some professional and personal commitments in Quezon
province, he
inadvertently failed to pay his due bill for Oct. Instead of automatically suspending the
credit card, BPI Express and Marasigan made an arrangement that Private respondent
Marasigan should pay immediately in “cash” his obligations. However, instead of paying
in cash Marasigan paid in postdated check.
Thinking that he already settled his due bill, he invited some guests at Café Adriatico and
entertained them using his credit card which was denied by the café. Felt humiliated and
embarrassed, he filed a complaint for damages against the petitioner before the RTC. For
the defense, BPI claimed that Marasigan violated their arrangement when he did not pay
in cash.
ISSUE:
Whether or not the postdated check issued by private respondent in favor of the
petitioner amounts to payment for his overdue accounts?
RULING:
No. Settled is the doctrine that a check is only a substitute for money and not money, the
delivery of such an instrument does not, by itself operate as payment. This is especially
true in the case of a postdated check. Thus, the issuance by the private respondent of
the postdated check was not effective payment. It did not comply with his obligation
under the arrangement with Miss Lorenzo. Petitioner corporation was therefore justified
in suspending his credit card.
81
Digested by: KCabus

G.R. No. 89802, May 7, 1992
FACTS:
ISSUE:
Whether or not the checks in question were issued for a definite purpose?
RULING:
Yes. The six checks in the case at bar had been crossed and issued "for payee’s account
only." This could only signify that the drawers had intended the same for deposit only by
the person indicated, to wit, Melissa’s RTW.
82
Digested by: KCabus
Investment House vs IAC

G.R. No. 72764, Jul 13, 1989
FACTS:
New Sikatuna requested for a loan from private respondent Harris. The latter agreed to
grant the same subject to the condition that the former should wait until December 1980
when he would have the money. Pursuant to this agreement, private respondent-wife,
Anita issued 3 crossed checks payable to New Sikatuna all postdated December 22, 1980
totalling P299,450.00. Subsequently, New Sikatuna Wood assigned and discounted with
petitioner 11 postdated checks including the 3 postdated checks for P1,047,402.91 under
a deed of sale. When the three checks issued by private respondent were allegedly
deposited by petitioner, these checks were dishonored by reason of "DAIF", "SPO" and
"account closed", respectively. No payment was made despite demands on private
respondent necessitating the petitioner to file an action for collection against the latter
and her husband Harris before the RTC. The lower court rendered its judgment in favor
of the plaintiff. The CA reverse and set aside the appealed judgment. Hence, this petition.
ISSUE:
Whether or not petitioner can collect from the private respondent the value of the
checks in question?
RULING:
No. The three subject checks in the case at bar had been crossed generally and issued
payable to New Sikatuna which could only mean that the drawer had intended the same
for deposit only by the rightful person, i.e., the payee named therein. Apparently, it was
not the payee who presented the same for payment and therefore, there was no proper
presentment, and the liability did not attach to the drawer. Thus, in the absence of due
presentment, the drawer did not become liable. Consequently, no right of recourse is
available to petitioner against the drawer of the subject checks, private respondent wife,
considering that petitioner is not the proper party authorized to make presentment of
the checks in question.
83
Digested by: KCabus
People vs Nitafan
G.R. No. 75954, Oct 22, 1992
FACTS:
Private respondent K.T. Lim was charged before respondent court with violation of B.P.
22. Private respondent moved to quash the Information on the ground that the facts
charged did not constitute a felony as B.P. 22 was unconstitutional and that the check he
issued was a memorandum check which was in the nature of a promissory note,
perforce, civil in nature. Respondent judge, ruling that B.P. 22 on which the Information
was based was unconstitutional, issued the questioned Order quashing the Information.
Hence, this petition for review on certiorari filed by the Solicitor General.
ISSUE:
Whether or not a memorandum check partakes of the nature of a promissory note?
RULING:
No. A memorandum check is in the form of an ordinary check, with the word
"memorandum", "memo" or "mem" written across its face, signifying that the maker or
drawer engages to pay the bona fide holder absolutely, without any condition concerning
its presentment. Such a check is an evidence of debt against the drawer, and although
may not be intended to be presented, has the same effect as an ordinary check, and if
passed to a third person, will be valid in his hands like any other check.
84
Digested by: KCabus
Tan vs CA
G.R. No. 108555, Dec 20, 1994
FACTS:
Petitioner Tan had a Current Account with respondent bank, to avoid carrying cash while
enroute to Manila, he secured a Cashier’s Check from the PCIB for P30,000.00 payable to
his order. He deposited the check in his account with RCBC Binondo. On the same day,
RCBC erroneously sent the same cashier’s check for clearing to the Central Bank which
was returned for having been "missent" or "misrouted." The next day, RCBC debited the
amount covered by the same cashier’s check from the account of the petitioner.
Respondent bank at this time had not informed the petitioner of its action which the
latter claims he learned of only 42 days after March 16.
Meanwhile, relying on the common knowledge that a cashier’s check was as good as
cash, petitioner issued 2 personal checks both dated March 18 payable to Go Lac for
P5,5000.00 and MS Development Trading Corporation for P6,053.70, both were
dishonoured due to DAIF. Petitioner, alleging to have suffered humiliation and loss of
face in the business sector due to the bounced checks, filed a complaint against RCBC for
damages in the RTC. In its defense, RCBC disowning any negligence, put the blame for the
"misrouting" on the petitioner for using the wrong check deposit slip.
The trial court rendered a decision in petitioner’s favour. The Court of Appeals REVERSED
the appealed decision. Petitioner now seeks to reverse the decision of the Court of
Appeals and affirm that of the lower court. Hence, this petition.
ISSUE:
Whether or not petitioner’s reliance on the layman’s perception that a cashier’s check is
as good as cash is valid?
RULING:
Yes, what was presented for deposit in the instant cases was not just an ordinary check
but a cashier’s check payable to the account of the depositor himself. A cashier’s check is
a primary obligation of the issuing bank and accepted in advance by its mere issuance. By
its very nature, a cashier’s check is the bank’s order to pay drawn upon itself, committing
in effect its total resources, integrity and honor behind the check. A cashier’s check by its
peculiar character and general use in the commercial world is regarded substantially to
be as good as the money which it represents. In this case, therefore, PCIB by issuing the
check created an unconditional credit in favor of any collecting bank.
85
Digested by: KCabus
Teddy Pabugais vs Sahijwani

G.R. No. 156846, Feb 23, 2004
FACTS:
Petitioner Pabugais for P15,487,500.00 agreed to sell to respondent Sahijwani a 1,239
sqm lot. Respondent paid petitioner P600,000.00 as reservation fee and the balance of
P14,887,500.00 to be paid within 60 days from the execution of the contract and the
delivery of the documents relative to the sale. The parties further agreed that failure on
the part of respondent to pay the balance of the purchase price entitles petitioner to
forfeit the P600,000.00 reservation fee; while non-delivery by the latter of the necessary
documents obliges him to return to respondent the said reservation fee.Petitioner failed
to deliver the required documents. Pursuant to their agreement, he returned to
respondent the reservation fee by way of FEBTC Check which was dishonored.
Thereafter, petitioner wrote a letter to respondent saying that he is consigning the

amount tendered with the Regional Trial Court. However, the RTC declared the
consignation invalid because the managers check allegedly offered by petitioner was not
legal tender, hence, there was no valid tender of payment. Petitioners motion to
withdraw the amount consigned was denied by the Court of Appeals and affirmed the
decision of the RTC. Hence, this Petition for Review on Certiorari.
ISSUE:
Whether or not payment by way of Manager’s Check is valid?
RULING:
Yes. While it is true that in general, a managers check is not legal tender, the creditor has
the option of refusing or accepting it. Payment in check by the debtor may be acceptable
as valid, if no prompt objection to said payment is made. Consequently, petitioners
tender of payment in the form of managers check is valid.
86
Digested by: KCabus
PCIB vs Balmaceda
G.R. No. 158143, Sep 21, 2011
FACTS:
PCIB filed an action for recovery of sum of money with damages before the RTC against
Antonio Balmaceda, the Branch Manager alleging that between 1991 and 1993,
Balmaceda, took advantage of his position as branch manager, fraudulently obtained and
encashed 31 Manager's checks totalling P10,782,150.00. Further, PCIB moved to implead
Ramos as one of the recipients of a portion of the proceeds from Balmaceda's alleged
fraud. The RTC granted this motion. Ramos, in his defense, denied any knowledge of
Balmaceda's scheme.
ISSUE:
Whether or not the bank can recover portion of the Manager’s Checks in question from
Ramos?
RULING:
No. PCIB's negligence is the fact that it allowed Balmaceda to encash the Manager's
checks that were plainly crossed checks. Based on jurisprudence, the crossing of a check
is a warning that the check should be deposited only in the account of the payee. When a
check is crossed, it is the duty of the collecting bank to ascertain that the check is only
deposited to the payee's account. In complete disregard of this duty, PCIB's systems
allowed Balmaceda to encash Manager's checks which were all crossed checks, or checks
payable to the "payee's account only."
87
Digested by: KCabus
New pacific Timber vs Seneris

G.R. No. L-41764, Dec 19, 1980
FACTS:
Before the auction sale, petitioner deposited with the Clerk of Court the amount of
P50,000.00 in cashier’s check and P13,130.00 in cash which were both refused by private
Respondent. The sheriff proceeded with auction sale. Petitioner filed an ex-parte motion
for the issuance of a certificate of satisfaction of judgment which was denied in an order
by the trial court. Hence, this petition.
ISSUE:
Whether or not private respondent refusal of payment tendered by the petitioner is
valid?
RULING:
No, because the check deposited by the petitioner in the amount of P50,000.00 is not an
ordinary check but a Cashier’s Check of the Equitable Banking Corporation, a bank of
good standing and reputation. As testified to by the Ex-Officio Sheriff with whom it has
been deposited, it is a certified crossed check. It is a well-known and accepted practice in
the business sector that a Cashier’s Check is deemed as cash. Hence, the exception to the
rule enunciate under Section 63 of the Central Bank Act to the effect "that a check which
has been cleared and credited to the account of the creditor shall be equivalent to a
delivery to the creditor in cash in an amount equal to the amount credited to his
account" shall apply in this case. Considering that the whole amount deposited by the
petitioner consisting of Cashier’s Check of P50,000.00 and P13,130.00 in cash covers the
judgment obligation of P63,000.00 as mentioned in the writ of execution, then, we see
no valid reason for the private respondent to have refused acceptance of the payment of
the obligation in his favor. The auction sale, therefore, was uncalled for.
88
Digested by: KCabus
PAL vs CA
G.R. No. 49188, Jan 30, 1990
FACTS:
The petition involving the alias writ of execution7, when respondent Amelia Tan, under
the name and style of Able Printing Press commenced a complaint for damages before
the CFI which rendered judgment against the petitioner. The CA affirmed with
modification the appealed decision. Respondent Amelia Tan moved for the issuance of an
alias writ of execution stating that the judgment rendered remained unsatisfied. The
petitioner, for their defense, claimed that it had already fully paid its obligation to
plaintiff through the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced
by cash vouchers. However, the order could not be served upon Deputy Sheriff Reyes
who had absconded or disappeared. Hence, this petition for certiorari filed by the PAL.
ISSUE:
Whether or not petitioner’s payment to the sheriff by way of check payable therefor
extinguishes its judgment debt to the private respondent?
RULING:
No. The payment made by the petitioner to the absconding sheriff was not in cash or
legal tender but in checks. The checks were not payable to Amelia Tan or Able Printing
Press but to the absconding sheriff.
Since a negotiable instrument is only a substitute for money and not money, the delivery
of such an instrument does not, by itself, operate as payment. 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. Mere delivery of checks does not discharge the obligation under a
judgment. The obligation is not extinguished and remains suspended until the payment
by commercial document is actually realized.
89
Digested by: KCabus
Bishop vs IAC
G.R. No. 72110, Nov 16, 1990
FACTS:
The subject contract over the land in question was executed between the petitioner as
vendor and the private respondent as vendee with a downpayment of P23,930.00 and
the balance of P100,000.00 payable within 4 years from execution of the contract. After
the expiration of the stipulated period for payment, Atty. Francisco requested from the
petitioner that they be allowed to pay the balance in 3 equal installments of 6 months
each with the first installment. The petitioner formally denied the said request, but
granted the private respondent a grace period of 5 to pay its total balance, otherwise,
the provisions of the contract regarding cancellation, forfeiture, and reconveyance would
be implemented. Private respondent protested the alleged petitioner’s refusal to accept
its tender of payment and demanded the execution of a deed of absolute sale, otherwise,
judicial action would be resorted to. In their reply, petitioner’s claimed that their refusal
to execute the deed of absolute sale was due to private respondent’s failure to pay its full
obligation. Moreover, the petitioner denied that the private respondent had made any
tender of payment within the grace period. In view of this alleged breach of contract, the
petitioner cancelled the contract and considered all previous payments forfeited and the
land as ipso facto reconveyed.
ISSUE:
Whether or not an offer of a check to settle an obligation is a valid tender of payment?
RULING:
No. the case of the private respondent still cannot succeed in view of the fact that the
latter used a certified personal check which is not legal tender nor the currency
stipulated, and therefore, cannot constitute valid tender of payment.
90
Digested by: KCabus
Fortunado vs CA
G.R. No. 78556, Apr 25, 1991
FACTS:
The RTC rendered judgment ordered Bautista to pay damages to the Alfaro. Pursuant to
the said judgment, respondent Campano, City Sheriff, levied upon two parcels of land
covered by TCT Nos. T-7625 and T-14133. The latter lot had already been purchased by
respondent National Steel Corporation but had not yet been registered in its name.After
due notice, these lots were sold at public auction to the petitioners as the only bidder.
NSC gave notice to the sheriff of its intention to redeem the lot covered by TCT No.
T14133 and issued to the sheriff PNB Check covering the redemption price of the lot
covered by TCT No. T-14133. The sheriff acknowledged receipt of the check as
redemption money for the two parcels of land and issued a certificate of redemption in
favor of NSC and Bautista. Thereafter, Sheriff’s notified the petitioners’ counsel of the
deposit of the PNB check. The said counsel told the sheriff that he was rejecting the
check because it was not legal tender and was not intended for payment but merely for
deposit. Meanwhile, the petitioner requested the sheriff to issue a final deed of sale over
the two lots since no valid redemption had been effected. They contended that the check
issued by NSC, not being legal tender, could not be considered payment of the
redemption price. The respondent court rejected the petitioner’s contention and denied
the petitioners’ motion for reconsideration. Hence, this appeal by certiorari.
ISSUE:
Whether or not tender of check is sufficient to compel redemption?
RULING:
Yes. a check may be used for the exercise of the right of redemption, the same being a
right and not an obligation. The tender of a check is sufficient to compel redemption but
is not in itself a payment that relieves the redemptioner from his liability to pay the
redemption price. In other words, while we hold that the private respondents properly
exercised their right of redemption, they remain liable, of course, for the payment of the
redemption price.
91
Digested by: KCabus
Tibajia vs CA
G.R. No. 100290, Jun 4, 1993
FACTS:
Case No. 54863 was a suit for collection of a sum of money filed by Tan against the
Tibajia spouses. The RTC adjudged in favor of the plaintiff Tan and this was affirmed by
the CA with modification. The decision having become final, Tan filed a motion for
execution. On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Bolima
the total money judgment in Cashier’s Check P262,750.00 and Cash 135,733.70
Private respondent Tan, refused to accept the payment made by the Tibajia spouses and
instead insisted that the garnished funds deposited with the cashier of the RTC be
withdrawn to satisfy the judgment obligation. Meanwhile, Petitioners filed a motion to
lift the writ of execution on the ground that the judgment debt had already been paid.
The motion was denied by the trial court. The appellate court dismissed the petition
holding that payment by cashier’s check is not payment in legal tender. Hence, this
petition for review
ISSUE:
Whether or not payment by means of check (even by cashier’s check) is considered
payment in legal tender as required by the Civil Code, Republic Act No. 529, and the
Central Bank Act?
RULING:
No, as held in PAL vs CA and Roman Catholic Bishop of Malolos vs IAC, a check is not legal
tender and that a creditor may validly refuse payment by check, whether it be a
manager’s, cashier’s or personal check.
92
Digested by: KCabus
Far East Bank vs Diaz

G.R. No. 138588, Aug 23, 2001
FACTS:
Diaz Realty got a loan from the PaBC which was secured by a REM over two parcels of
land owned by the plaintiff Diaz Realty. When the Central Bank closed PaBC and placed it
under receivership, petitioner FEBTC purchased respondent’s account from PaBC. The
latter was notified of the transaction hence, Antonio Diaz, president of Diaz Realty,
inquired from petitioner on the status and the amount of its obligation. He was informed
that the obligation summed up to P1,447,142.03. Thereafter, petitioner received from
respondent an Interbank, Check No. 81399841 dated November 13, 1988, bearing the
amount of P1,450,000, with the notation "Re: Full Payment of Pacific Bank Account now
turned over to Far East Bank." The check was subsequently cleared and honored by
Interbank. However, the petitioner refused to release the mortgage thus, respondent
instituted the present case to compel the bank to acknowledge the tender of payment,
accept payment and cancel the mortgage. The trial court rendered its decision in favour
of Diaz and this was sustained by the CA. Hence, this petition for review on Certiorari.
ISSUE:
Whether or not tender of payment made by respondent extinguished its obligation from
the petitioner?
RULING:
Yes, In the present case, petitioner bank did not refuse respondent’s check. On the
contrary, it accepted the check which, it insisted, was a deposit. As earlier stated, the
check proved to be fully funded and was in fact honored by the drawee bank Moreover,
petitioner was in possession of the money for several months.
True, jurisprudence holds that, in general, a check does not constitute legal tender, and
that a creditor may validly refuse it. It must be emphasized, however, that this dictum
does not prevent a creditor from accepting a check as payment. In other words, the
creditor has the option and the discretion of refusing or accepting it
Thus, by accepting the tendered check and converting it into money, petitioner is
presumed to have accepted it as payment. To hold otherwise would be inequitable and
unfair to the obligor.
93
Digested by: KCabus
ICB vs Gueco
G.R. No. 141968, Feb 12, 2001
FACTS:
ISSUE:
Whether or not mere issuance of MC constitute acceptance thereof?
RULING:
Yes, the check involved is not an ordinary bill of exchange but a manager’s check. A
manager’s check is one drawn by the bank’s manager upon the bank itself. It is similar to
a cashier’s check both as to effect and use. A cashier’s check is a check of the bank’s
cashier on his own or another check. In effect, it is a bill of exchange drawn by the
cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance.
29 It is really the bank’s own check and may be treated as a promissory note with the
bank as a maker. 30 The check becomes the primary obligation of the bank which issues
it and constitutes its written promise to pay upon demand. The mere issuance of it is
considered an acceptance thereof. If treated as promissory note, the drawer would be the
maker and in which case the holder need not prove presentment for payment or present
the bill to the drawee for acceptance.
94
Digested by: KCabus
SBC vs RCBC
G.R. No. 170984, Jan 30, 2009
FACTS:
SBTC issued a manager's check for P8 million, payable to "CASH," as proceeds of the loan
granted to GCDC. On the same day, the P8-million check, along with other checks, was
deposited by CMC in its Current Account with RCBC. Immediately, RCBC honored the P8-
million check and allowed CMC to withdraw the same. On the next banking day, GCDC
issued a "Stop Payment Order" to SBTC, claiming that the P8-million check was released
to a third party by mistake. Consequently, SBTC dishonored and returned the manager's
check to RCBC. Thereafter, the check was returned back and forth between the two
banks, resulting in automatic debits and credits in each bank's clearing balance.
Consequently, RCBC filed a complaint for damages against SBTC with the RTC which
rendered a Decision in favor of RCBC. On appeal, the Court of Appeals affirmed with
modification. Hence, this Petition for Review on Certiorari
ISSUE:
Whether or not SBTC is liable for the Manager’s check it issued?
RULING:
Yes, At the outset, it must be noted that the questioned check issued by SBTC is not just
an ordinary check but a manager's check. A manager's check is one drawn by a bank's
manager upon the bank itself. It stands on the same footing as a certified check, which is
deemed to have been accepted by the bank that certified it. As the bank's own check, a
manager's check becomes the primary obligation of the bank and is accepted in advance
by the act of its issuance.
In this case, RCBC, in immediately crediting the amount of P8 million to CMC's account,
relied on the integrity and honor of the check as it is regarded in commercial
transactions. Where the questioned check, which was payable to "Cash," appeared
regular on its face, and the bank found nothing unusual in the transaction, as the drawer
usually issued checks in big amounts made payable to cash, RCBC cannot be faulted in
paying the value of the questioned check.
In our considered view, SBTC cannot escape liability by invoking Monetary Board
Resolution No. 2202 dated December 21, 1979.
95
Digested by: KCabus
ICB vs Gueco
G.R. No. 141968, Feb 12, 2001
FACTS:
ISSUE:
Whether or not petitioner’s delay in the presentment for payment is valid?
RULING:
Yes. A stale check is one which has not been presented for payment within a reasonable
time after its issue. It is valueless and, therefore, should not be paid. It has been held that,
if the check had become stale, it becomes imperative that the circumstances that caused
its non-presentment be determined. 33 In the case at bar, there is no doubt that the
petitioner bank held on the check and refused to encash the same because of the
controversy surrounding the signing of the joint motion to dismiss. We see no bad faith or
negligence in this position taken by the Bank.
96
Digested by: KCabus
ICB vs Gueco
G.R. No. 141968, Feb 12, 2001
FACTS:
ISSUE:
Whether or not petitioner’s delay in the presentment for payment absolves Sps gueco of
their obligation?
RULING:
No. Even assuming that presentment is needed, failure to present for payment within a
reasonable time will result to the discharge of the drawer only to the extent of the loss
caused by the delay. Failure to present on time, thus, does not totally wipe out all
liability. In fact, the legal situation amounts to an acknowledgment of liability in the sum
stated in the check. In this case, the Gueco spouses have not alleged, much less shown
that they or the bank which issued the manager’s check has suffered damage or loss
caused by the delay or non-presentment. Definitely, the original obligation to pay
certainly has not been erased.
97

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