Negotiable Instruments Case Digest PDF

PRELIMINARY CONSIDERATIONS
GSIS v. CA and Spouses Racho

G. R. No. L-40824, February 23, 1989
Regalado, J:
FACTS:
Spouses Racho together with Spouses Lagasca, executed a deed of
mortgage in favor of GSIS and subsequently, another deed of mortgage in
connection with two loans granted by the latter in the sums of P 11,500.00 and
P 3,000.00, respectively. A parcel of land co-owned by said mortgagor
spouses was given as security under the aforesaid two deeds. They also
executed a promissory note which states that they would be jointly and
severally liable to pay Php11,500.00 with 6% interest payable in 120 equal
monthly installments. Spouses Lagasca executed an assumption of mortgage
under which they obligated themselves to assume the obligation and to
secure the release of the mortgage covering that portion of the land
belonging to Spouses Racho. However, this undertaking was not fulfilled. Upon
failure of the mortgagors to pay, GSIS extrajudicially foreclosed the mortgage
and caused the mortgaged property to be sold at public auction. More than
two years thereafter, Spouses Racho filed a complaint against the GSIS and
the Spouses Lagasca for damages, praying that the extrajudicial foreclosure
be declared null and void. They alleged that they signed the mortgage
contracts not as sureties or guarantors for the Spouses Lagasca but they
merely gave their common property to the said co-owners who were solely
benefited by the loans from the GSIS.
ISSUE:
Can the promissory note and the mortgage deeds be considered as
negotiable instruments?
RULING:
The promissory note and the mortgage deeds are not negotiable
instruments. These documents do not comply with the fourth requisite to be
considered as such under Section 1 of the Negotiable Instruments Law
because they are neither payable to order nor to bearer. The note is payable
to a specified party, the GSIS. It cannot be said that Spouses Racho are
without liability. 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.
Kauffman v. PNB
G.R. No. 16454, September 21, 1921
Street, J:
FACTS:
George A. Kauffman was the president of the Philippine Fiber and
Produce Company, of which company George Kauffman apparently held in
his own right nearly the entire issue of capital stock. Wicks, the treasurer
thereof, presented himself in the exchange department of PNB and
requested that a telegraphic transfer of $45,000 should be made to Kauffman
He was informed that the total cost of said transfer would be P90,355.50.
Accordingly, he drew and delivered a check for that amount which states:
“Pay George A. Kauffman, New York, account Philippine Fiber Produce
Co., $45,000. (Sgd.) PHILIPPINE NATIONAL BANK, Manila.”
However, PNB’s representative in New York withheld the money from
Kauffman, in view of his reluctance to accept certain bills of the PFPC.
Kauffman demanded the money but was refused to be paid.
ISSUE:
Does Kauffman has a right of action based on Negotiable Instruments

Law?
RULING:
No. Kauffman has no right of action based on Negotiable Instrument’s
Law on the ground that it can only come into operation if there is a document
in existence of the character described in Section 1 of the said Law, and rights
properly speaking arise in respect to said instrument until it is delivered. In this
case, there was an order transmitted by PNB to its New York branch, for the
payment of a specified sum of money to Kauffman. But this order was not
made payable “to order” or “to bearer,” as required in subsection (d) of that
Act. Also, there was no delivery in the sense intended in Section 16 of the
same Law. In this connection it is unnecessary to point out that the official
receipt delivered by the bank to the purchaser of the telegraphic order, and
already set out above, cannot itself be viewed in the light of a negotiable
instrument, although it affords complete proof of the obligation actually
assumed by the bank. Kauffman, however, has remedy based on the Civil
Code, particularly on stipulations pour atrui.
Phil. Education Co. v. Soriano et al.

G.R. No. L-22405, June 30, 1971
Dizon, J:
FACTS:
Enrique Montinola sought to purchase from the Manila Post Office 10
money orders of P200.00 each, payable to E.P. Montinola with address at
Lucena, Quezon. After the postal teller had made out money orders,
Montinola offered to pay for them with a private checks. However, since they
were not generally accepted as payment of money orders, the teller advised
him to see the Chief of the Money Order Division, but instead of doing so,
Montinola managed to leave building with his own check and the 10 money
orders without the knowledge of the teller. A notice was thereafter issued to
all post offices as well as the Bank of America, about the irregularly issued
money orders and the order not to accept such orders. PECO was one of
those who received the subject money orders and encashed it with the
Bank of America. At first, it was given the money but later on, his account
was debited in pursuance of the letter given by the Chief.
ISSUE:
Is a postal money order a negotiable instrument?
RULING:
No. 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. Also, in establishing and operating a postal money order
system, the government is not engaged in commercial transactions but
merely exercises a governmental power for the public benefit.
PAL v. CA
G.R. No. L-49188, January 30, 1990
Gutierrez, J:
FACTS:
Amelia Tan filed a complaint for damages against Philippine Airlines, Inc.
(PAL). The Court rendered a judgment in favor of the former and against the
latter. PAL filed its appeal with the CA, and the appellate court affirmed the
judgment of the lower court with the modification that PAL is condemned to
pay the latter the sum of P25, 000.00 as damages and P5, 000.00 as attorney’s
fee. Judgment became final and executory and was correspondingly
entered in the case, which was remanded to the trial court for execution. The
trial court upon the motion of Amelia Tan issued an order of execution with
the corresponding writ in favor of the respondent. Said writ was duly referred
to Deputy Sheriff Reyes for enforcement.
Four months later, Amelia Tan moved for the issuance of an alias writ of
execution, stating that the judgment rendered by the lower court, and
affirmed with modification by the CA, remained unsatisfied. PAL opposed the
motion, stating that it had already fully paid its obligation to plaintiff through
the issuance of checks payable to the deputy sheriff who later did not appear
with his return and instead absconded. The CA denied the issuance of the
alias writ for being premature. PAL filed an urgent motion to quash the alias
writ of execution stating that no return of the writ had as yet been made by
Deputy Sheriff Reyes and that judgment debt had already been fully satisfied
by the former as evidenced by the cash vouchers signed and received by the
executing sheriff.
ISSUE:
Is the obligation extinguished through the issuance of checks?
RULING:
No. 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 cheek, 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. If bouncing checks had been
issued in the name of Amelia Tan and not the Sheriff's, there would have been
no payment. After dishonor of the checks, Ms. Tan could have run after other
properties of PAL. The theory is that she has received no value for what had
been awarded her. Because the checks were drawn in the name of Emilio Z.
Reyes, neither has she received anything.
Sesbreño v. CA
G.R. No. 89252, May 24, 1993
Feliciano, J:
FACTS:
Raul Sesbreño made a money market placement in the amount of
P300,000.00 with Philfinance. Philfinance issued a certificate of confirmation of
sale of Delta Motors Corp. promissory note, certificate of secruities delivery
receipt, and post-dated checks with Sesbreño as the payee and Insular Bank
as the drawee. Sesbreño sought to encash the postdated checks issued by
Philfinance. However, the checks were dishonored for having been drawn
against insufficient funds. This prompted Sesbreño to ask for the promissory
note from DMC and it was discovered that the note issued by DMC was
marked as non-negotiable. As Sesbreno failed to recover his money, he filed
case against DMC and Philfinance.
ISSUE:
Can the promissory note be considered as negotiable?
RULING:
No. The DMC promissory note was not intended to be negotiated or
otherwise transferred by Philfinance as manifested by the word
"non-negotiable" stamp across the face of the Note. The maker Delta and
payee Philfinance intended that this note would be offset against the
outstanding obligation of Philfinance represented by Philfinance PN No. 143-A
issued to Delta as payee.
It is important to bear in mind that the negotiation of a negotiable
instrument must be distinguished from the assignment or transfer of an
instrument whether that be negotiable or non-negotiable. Only an instrument
qualifying as a negotiable instrument under the relevant statute may be
negotiated either by indorsement thereof coupled with delivery, or by delivery
alone where the negotiable instrument is in bearer form. A negotiable
instrument may, however, instead of being negotiated, also be assigned or
transferred. The legal consequences of negotiation as distinguished from
assignment of a negotiable instrument are, of course, different. A
non-negotiable instrument may, obviously, not be negotiated; but it may be
assigned or transferred, absent an express prohibition against assignment or
transfer written in the face of the instrument.
Spouses Tibajia v. CA and Tan

G.R. No. 10290, June 4, 1993
Padilla, J:
FACTS:
A suit for collection of a sum of money was filed by Eden Tan against the
Spouses Tibajia. A writ of attachment was issued by the trial court and the
Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses
had been garnished by him. On appeal, the CA modified the decision by
reducing the award of moral and exemplary damages. The decision having
become final, Eden Tan filed the corresponding motion for execution and
thereafter, the garnished funds were levied upon. The Tibajia spouses
delivered to Deputy Sheriff Bolima the total money judgment in the following
form: Cashier's Check P262,750.00 and Cash amounting to P135,733.70.
However, 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.
ISSUE:
Is the check issued by Spouses Tibajia considered as legal tender?
RULING:
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 based on the
jurisprudence. The court is not, by decision, sanctioning the use of a check for
the payment of obligations over the objection of the creditor. Thus, the
petition must fail.
FORM AND INTERPRETATION OF NEGOTIABLE INSTRUMENTS
Ang Tek Lian v. CA

G.R. No. L-2516, September 25, 1950
Bengzon, J:
FACTS:
For having issued a rubber check, Ang Tek Lian was convicted of estafa in
the CFI. The CA affirmed the verdict. Knowing he had no funds therefor, Ang
Tek Lian drew the check upon the China Banking Corporation for the sum of
P4,000, payable to the order of "cash". He delivered it to Lee Hua Hong in
exchange for money which the latter handed in act. The next business day,
the check was presented by Lee Hua Hong to the drawee bank for payment,
but it was dishonored for insufficiency of funds, the balance of the deposit of
Ang Tek Lian on both dates being P335 only.
ISSUE:
Is Ang Tek Lian liable for estafa for issuing the check that is payable to the
order to “cash” and not have been indorsed by him?
RULING:
Yes. The form of the check was totally unconnected with its dishonor. The
CA declared that it was returned unsatisfied because the drawer had
insufficient funds, not because the drawer's indorsement was lacking.
Under Sec. 9 of NIL, 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. However, if the bank is not
sure of the bearer’s identity or financial solvency, it has the right to demand
identification or assurance against possible complication, such as forgery of
drawer’s signature, loss of the check by the rightful owner, raising of the
amount payable, etc. But where the bank is satisfied of the identity or
economic standing of the bearer who tenders the check for collection, it will
pay the instrument without further question; and it would incur no liability to
the drawer in thus acting.
Caltex v. CA and Security Bank

G.R. No. 97753, August 10, 1992
Regalado, J:
FACTS:
Security Bank and Trust Company issued 280 certificates of time deposit
(CTDs) in favor of Angel dela Cruz who deposited with Security Bank the total
amount of P1,120,000. Dela Cruz delivered the CTDs to Caltex for his purchase
of fuel products. He informed the Branch Manager of Security Bank that he
lost all CTDs, submitted the required Affidavit of Loss and received the
replacement. Later on, Dela Cruz negotiated and obtained a loan from
Security Bank in the amount of P875,000 and executed a notarized Deed of
Assignment of Time Deposit. Mr. Aranas, the Credit Manager of Caltex went to
the Sucat branch to verify the CTDs declared lost by Dela Cruz. The Security
Bank received a letter from Caltex formally informing it of its possession of the
CTDs in question and of its decision to pre-terminate the same. Security Bank
rejected Caltex demand for payment as it failed to furnish a copy of its
agreement with Dela Cruz. Thereafter, the loan of Dela Cruz with Security
Bank matured. As such, CTD were set-off w/ the matured loan.
ISSUE:
Are the CTDs negotiable?
RULING:
Yes. All of the requisites under Section 1 of the NIL were present. The
documents provide that the amounts deposited shall be repayable to the
depositor. The depositor is considered as the bearer. If it was really the
intention of respondent bank to pay the amount to Angel Dela Cruz only, it
could have with facility so expressed that fact in clear and categorical terms
in the documents, instead of having the word "BEARER" stamped on the
space provided for the name of the depositor in each CTD. The negotiability
or non-negotiability of an instrument is determined from the writing, that is,
from the face of the instrument itself.
Equitable Banking Corp. v. IAC and The Edward J Nell Co.

G.R. No. 74551, May 25, 1988
Melencio-Herrera, J:
FACTS:
Nell Company issued a check to help Casals and Casville Enterprises
obtain a letter of credit from Equitable Banking in connection with
equipment, a garrett skidder, which Casals and Casville were buying from
Nell. Nell indicated the payee as follows: “EQUITABLE BANKING
CORPORATION A/C CASVILLE ENTERPRISES INC.” Casals deposited the check
with the bank and the bank teller accepted the same and in accordance
with customary bank practice, stamped in the check the words
“non-negotiable”. The amount was withdrawn after the deposit. This
prompted Nell to file a case against the bank, Casals and Casville. While
the instant case was being tried, Casals and Casville assigned the garrett
skidder to plaintiff which credited in favor of defendants the amount of
P450,000, as partial satisfaction of its claim against them.
ISSUE:
Is the check negotiable?
RULING:
Equitable Banking is not liable to Nell. Nell should bear the loss as it was
through its own acts, which put it into the power of Casals and Casville
Enterprises to perpetuate the fraud against it. The check wasn’t initially
non-negotiable. Neither was it cross-checked. The rubber-stamping
transversally on the face of the check was only made by the bank teller in
accordance with customary bank practice, and not by Nell as the drawer
of the check, and simply meant that thereafter the same check could no
longer be negotiated. The payee was not indicated with reasonable certainty
in contravention of Section 8. As worded, it could be accepted as deposit to
the account of the party named therein after the symbols of A/C, or payable
to the bank as trustee, or as an agent, for Casville with the latter being the
ultimate beneficiary.
Salas v. IAC and First Finance & Leasing Corp

G.R. No. 76788, January 22, 1990
Fernan, C.J:
FACTS:
Juanita Salas bought a motor vehicle from the Violago Motor Sales
Corporation as evidenced by a promissory note. This note was subsequently
endorsed to Filinvest Finance & Leasing Corporation which financed the
purchase. She defaulted in her installments. This failure to pay prompted
private respondent to initiate a case for a sum of money against Salas.
Imputing fraud, bad faith and misrepresentation against VMS for having
delivered a different vehicle to her, the latter prayed for a reversal of the trial
court's decision so that she may be absolved from the obligation under the
contract.
ISSUE:
Can the promissory note be considered as a negotiable instrument?
RULING:
Yes. A careful study of 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
It was negotiated by indorsement in writing on the instrument itself

payable to the Order of Filinvest Finance and Leasing Corporation and it is an
indorsement of the entire instrument. Under the circumstances, there appears
to be no question that Filinvest is a holder in due course.
(Treasury Warrant)
Metrobank v. CA et al.
G.R. No. 88866, February 18, 1991
Cruz,J:
FACTS:
Eduardo Gomez opened an account with Golden Savings and deposited
over a period of two months 38 treasury warrants. They were all drawn by the
Philippine Fish Marketing Authority and purportedly signed by its General
Manager and countersigned by its Auditor. Six of these were directly payable
to Gomez while the others appeared to have been indorsed by their
respective payees, followed by Gomez as second indorser. All these warrants
were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings
and deposited to its savings account in the Metrobank. More than two weeks
after the deposits, Gloria went to the Calapan branch several times to ask
whether the warrants had been cleared. She was told to wait until Metrobank
allowed Golden Savings to withdraw from the proceeds of the warrants.
Thereafter, Metrobank informed Golden Savings that 32 of the warrants had
been dishonored by the Bureau of Treasury, and demanded the refund by
Golden Savings of the amount it had previously withdrawn, to make up the
deficit in its account. However, the demand was rejected. Metrobank then
sued Golden Savings.
ISSUE:
Whether or not the treasury warrants are negotiable.
RULING:
No. Clearly stamped on the face of the treasury warrants are the words
"non-negotiable." It is also indicated that they are payable from a particular
fund. The indication of Fund as the source of the payment to be made on the
treasury warrants makes the order or promise to pay "not unconditional" and
the warrants themselves non-negotiable. Metrobank cannot contend that by
indorsing the warrants in general, Golden Savings assumed that they were
"genuine and in all respects what they purport to be," in accordance with
Section 66 of the NIL. The simple reason is that this law is not applicable to the
non-negotiable treasury warrants. The indorsement was made by Gloria
Castillo not for the purpose of guaranteeing the genuineness of the warrants
but merely to deposit them with Metrobank for clearing.
Metrobank v. Renato Cabilzo

G.R. No. 154469, December 6, 2006
Chico-Nazario,J:
FACTS:
Renato D. Cabilzo was one of Metrobank’s clients who maintained a
current account with Metrobank. On 12 November 1994, Cabilzo issued a
Metrobank Check No. 985988, payable to CASH and postdated on 24
November 1994 in the amount of P 1,000.00. The check was drawn against
Cabilzo’s account with Metrobank under current account and was paid by
Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the
check was presented to Westmont Bank for payment. Westmont Bank, in turn,
indorsed the check to Metrobank for appropriate clearing. After the entries
thereon were examined, including the availability of funds and the
authenticity of the signature of the drawer, Metrobank cleared the check for
encashment. Cabilzo’s representative was at Metrobank to make some
transaction when he was asked by a bank personnel if Cabilzo had issued a
check in the amount of P 91,000.00 to which the former replied in the negative.
Cabilzo himself called Metrobank to reiterate that he did not issue a check in
the amount of P 91,000.00 and requested that the questioned check be
returned to him for verification, to which Metrobank complied. Upon receipt
of the check, Cabilzo discovered that Metrobank Check No. 985988 which he
issued on 12 November 1994 in the amount of P 91,000.00 and the date 24
November 1994 was changed to 14 November 1994.
ISSUE:
Was there a material alteration on the instrument?
RULING:
Yes. An alteration is said to be material if it changes the effect of the
instrument. It means that an unauthorized change in an instrument that
purports to modify in any respect the obligation of a party or an unauthorized
addition of words or numbers or other change to an incomplete instrument
relating to the obligation of a party. In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of
the NIL. In this case, the check was altered so that the amount was increased
from P 1,000.00 to P91,000.00 and the date was changed from 24 November
1994 to 14 November 1994. Apparently, 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.
Indubitably, Cabilzo was not the one who made nor authorized the
alteration. Neither did he assent to the alteration by his express or implied acts.
Metrobank v. CA et al.
G.R. No. 88866, February 18, 1991
Cruz,J:
FACTS:
Eduardo Gomez opened an account with Golden Savings and deposited
over a period of two months 38 treasury warrants. They were all drawn by the
Philippine Fish Marketing Authority and purportedly signed by its General
Manager and countersigned by its Auditor. Six of these were directly payable
to Gomez while the others appeared to have been indorsed by their
respective payees, followed by Gomez as second indorser. All these warrants
were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings
and deposited to its savings account in the Metrobank. More than two weeks
after the deposits, Gloria went to the Calapan branch several times to ask
whether the warrants had been cleared. She was told to wait until Metrobank
allowed Golden Savings to withdraw from the proceeds of the warrants.
Thereafter, Metrobank informed Golden Savings that 32 of the warrants had
been dishonored by the Bureau of Treasury, and demanded the refund by
Golden Savings of the amount it had previously withdrawn, to make up the
deficit in its account. However, the demand was rejected. Metrobank then
sued Golden Savings.
ISSUE:
What is the effect of a materially altered instrument?
RULING:
Under Section 124 of the NIL, it states that: where a negotiable instrument
is materially altered without the assent of all parties liable thereon, it is avoided,
except as against a party who has himself made, authorized, and assented to
the alteration and subsequent indorsers. But when the instrument has been
materially altered and is in the hands of a holder in due course not a party to
the alteration, he may enforce the payment thereof according to its original
tenor.
Indubitably, Cabilzo was not the one who made nor authorized the
alteration. Neither did he assent to the alteration by his express or implied acts.
There is no showing that he failed to exercise such reasonable degree of
diligence required of a prudent man which could have otherwise prevented
the loss. Cabilzo was never remiss in the preparation and issuance of the
check, and there were no indicia of evidence that would prove otherwise.
Indeed, Cabilzo placed asterisks before and after the amount in words and
figures in order to forewarn the subsequent holders that nothing follows before
and after the amount indicated other than the one specified between the
asterisks.
Pay v. Palanca
G.R. No. L-29900, June 28, 1974
Fernando,J:
FACTS:
George Pay is a creditor of the late Justo Palanca who died in Manila. His
claim is based on a promissory note whereby the late Justo Palanca and Rosa
Gonzales Vda. de Carlos Palanca promised to pay him the amount of
P26,900.00, with interest thereon at the rate of 12% per annum. Pay is now
asking that Segundina Chua vda. de Palanca, surviving spouse of the late
Justo Palanca, whom he appointed as administratrix of a parcel of land. The
idea is that once said property is brought under administration, George Pay,
as creditor, can file his claim against the administratrix.
There was a refusal on the part of Segundina to be appointed as
administratrix and the property sought to be administered no longer
belonged to Justo. The promissory note is worded thus: " `For value received
from time to time since 1947, we [jointly and severally promise to] pay to Mr.
[George Pay] at his office at the China Banking Corporation the sum of
P26,900.00, with interest thereon at the rate of 12% per annum upon receipt by
either of the undersigned of cash payment from the Estate of the late Don
Carlos Palanca or upon demand.
ISSUE:
Is the promissory note payable upon demand?
RULING:
Yes. The wording of the promissory note being "upon demand," the
obligation was immediately due. However, ten years had already transpired
and as such, the action of the Pay has definitely prescribed. The obligation
being due and demandable, it would appear that the filing of the suit after
fifteen years was much too late. The prescriptive period for a written contract
is that of ten years.
People v. Wagas
G.R. No. 157943, September 4, 2013
Bersamin,J:
FACTS:
Gilbert Wagas ordered from Alberto Ligaray 200 bags of rice over the
telephone. As payment, Wagas issued a check in favor of Ligaray. When the
check was deposited it was dishonored due to insufficiency of funds. Ligaray
notified Wagas and demanded payment from the latter but Wagas refused
and failed to pay the amount, Ligaray filed a complaint for estafa before the
RTC. RTC convicted Wagas of estafa because the RTC believed that the
prosecution had proved that it was Wagas who issued the dishonored check,
despite the fact that Ligaray had never met Wagas in person.
ISSUE:
Can a check made payable to cash be negotiated by mere delivery?
RULING:
Yes. 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.
Therefore, Wagas could not be held guilty of estafa simply because he
had issued the check used to defraud Ligaray. The proof of guilt must still
clearly show that it had been Wagas as the drawer who had defrauded
Ligaray by means of the check.
PNB v. Spouses Rodriguez

G.R. No. 170325, September 26, 2008
Reyes,J:
FACTS:
Spouses Rodriguez were engaged in the informal lending business and
had a discounting arrangement with the Philnabank Employees Savings and
Loan Association (PEMSLA), an association of PNB employees. They would
rediscount the postdated checks issued to members whenever the
association was short of funds. As was customary, the spouses would replace
the postdated checks with their own checks issued in the name of the
members. However, 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 officers carried this out by forging the indorsement of the
named payees in the checks. Rodriguez checks were deposited directly by
PEMSLA to its savings account without any indorsement from the named
payees. This was an irregular procedure made possible through the facilitation
of Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB
Branch. It became the usual practice for the parties until PNB eventually
found out about these fraudulent acts. As a result, the PEMSLA checks
deposited by the spouses were returned or dishonored for the reason
“Account Closed.” The amounts were duly debited from the Rodriguez
account. Spouses filed a civil complaint for damages against PEMSLA, the
Multi-Purpose Cooperative of Philnabankers (MCP), and PNB.
ISSUE:
Are the checks payable to order for not being issued to fictitious persons?
RULING:
No. Under Sections 8 and 9 of the NIL, the rule is that when the payee is
fictitious or not intended to be the true recipient of the proceeds, the check is
considered as a bearer instrument. In a fictitious-payee situation, the drawee
bank is absolved from liability and the drawer bears the loss. When faced with
a check payable to a fictitious payee, it is treated as a bearer instrument that
can be negotiated by delivery. The underlying theory is that one cannot
expect a fictitious payee to negotiate the check by placing his indorsement
thereon.
PNB v. Manila Oil Refining & By-Products Company

G.R. No. L-18103, June 8,1922
Malcolm,J:
FACTS:
In May 1920, the manager and treasurer of respondent executed and
delivered to PNB a promissory note whereby respondent promises to pay to
the order of PNB the amount of P61,000. It contains the following stipulations:
“Without defalcation, value received; and do hereby authorize any attorney
in the Philippines, in case this note be not paid at maturity, to appear in the
name and confess judgment for the above sum with interest, cost of suit and
attorney’s fees of 10% for collection, a release of all errors and waiver of all
rights to inquisition and appeal, and to the benefit of all laws exempting
property, real or personal, from levy or sale.” However, respondent failed to
pay on demand. Thus, PNB filed an action to recover the amount in the note,
together with the interest. Respondent claimed that the instrument is not
negotiable because the stipulations are invalid.
ISSUE:
Can the invalidity of a stipulation affect the negotiability of the
instrument?
RULING:
No. Section 5 of the NIL states that: “The negotiable character of an
instrument otherwise negotiable is not affected by a provision which (b)
authorizes a confession of judgment if the instrument be not paid at maturity.”
It also provides that nothing therein shall validate any provision or stipulation
otherwise illegal. Respondent is correct in saying that the stipulations are void.
However, the same cannot affect the negotiable character of the promissory
note.
Sesbreno v. CA, Delta Motors, and Pilipinas Bank

G.R. No. 89252, May 24, 1993
Feliciano,J:
FACTS:
Raul Sesbreño made a money market placement in the amount of
P300,000.00 with the Philippine Underwriters Finance Corporation. Philfinance
issued post-dated checks with petitioner as payee, Philfinance as drawer, and
Insular Bank of Asia and America as drawee. petitioner sought to encash the
postdated checks issued by Philfinance. However, the checks were
dishonored for having been drawn against insufficient funds. This prompted
petitioner to ask for the promissory note from DMC and it was discovered that
the note issued by DMC was marked as non-negotiable. As Sesbreno failed to
recover his money, he filed case against DMC and Philfinance.
ISSUE:
Is a non-negotiable instrument capable of assignment or transfer?
RULING:
The non-negotiability of the instrument doesn’t mean that it is
non-assignable or transferable. It may still be assigned or transferred in whole
or in part, even without the consent of the promissory note, since consent is
not necessary for the validity of the assignment. In assignment, the assignee
is merely placed in the position of the assignors and acquires the instrument
subject to all the defenses that might have been set up against the original
payee.
Traders Royal Bank v. CA, Filriters Guaranty, and Central Bank

G.R. No. 93397, March 3, 1997
Torres,J:
FACTS:
Filriters Guaranty Assurance Corporation executed a detached
assignment wherey it sold, transferred, assigned and delivered unto
Philfinance all its rights and title to Central Bank Certificates of Indebtedness
(CBCI) having an aggregate value of P3,500,000.00. Traders Royal entered
into a repurchase agreement with PhilFinance whereby, for and in
consideration of P500,000.00, PhilFinance sold, transferred and delivered to
petitioner CBCI which was among those previously acquired by PhilFinance
from Filriters. PhilFinance failed to repurchase the CBCI on the agreed date of
maturity, when the checks it issued in favor of petitioner were dishonored for
insufficient funds. Owing to the default of PhilFinance, it executed a detached
assignment in favor of petitioner to enable the latter to have its title
completed and registered in the books of the respondent. Philfinance
transferred and assigned all its rights and title in the said CBCI to petitioner and,
furthermore, it irrevocably authorize the said issuer/respondent to transfer the
said bond/certificate on the books of its fiscal agent. Petitioner prayed for the
registration by the Central Bank of the subject CBCI in its name.
ISSUE:
Is CBCI a negotiable instrument?
RULING:
No. CBCI is not a negotiable instrument due to the absence of words of
negotiability within the meaning of the NIL. A certificate of indebtedness is a
certificate of for the creation and maintenance of a permanent
improvement revolving fund. The instrument provides for a promise to pay the
registered owner Filriters. Very clearly, the instrument was only payable to
Filriters. It lacked the words of negotiability which should have served as an
expression of the consent that the instrument may be transferred by
negotiation. The language of negotiability which characterize a negotiable
paper as a credit instrument is its freedom to circulate as a substitute for
money. The transfer of the instrument from Philfinance to TRB was merely an
assignment, and is not governed by the NIL.
Firestone Tire & Rubber Company v. CA and Luzon Development Bank

G.R. No. 113236, March 5, 2001
Quisumbing,J:
FACTS:
Defendant is a banking corporation. It had as one of its client-depositors
the Fojas-Arca Enterprises Company. Fojas-Arca maintaining a special savings
account with the defendant, the latter authorized and allowed withdrawals
of funds therefrom through the medium of special withdrawal slips. Plaintiff
Firestone Tire and Fojas-Arca entered into a Franchised Dealership Agreement
whereby Fojas-Arca has the privilege to purchase on credit and sell plaintiff's
products. Fojas-Arca purchased on credit Firestone products from plaintiff and
as payment of these purchases, Fojas-Arca delivered to plaintiff 6 special
withdrawal slips drawn upon the defendant. In turn, these were deposited by
the plaintiff with its current account with the Citibank. All of them were
honored and paid by the defendant. This singular circumstance made
plaintiff relied on the fact that the succeeding special withdrawal slips drawn
upon the defendant would be equally sufficiently funded. Relying on such
confidence, plaintiff extended to Fojas-Arca other purchases on credit of its
products.
However, plaintiff was informed by Citibank that some special withdrawal
slips were dishonored and not paid for the absence of arrangement. As a
consequence, the Citibank debited plaintiff's account representing the
aggregate amount of the above-two special withdrawal slips. Under such
situation, plaintiff averred that the pecuniary losses it suffered is caused by
and directly attributable to defendant's gross negligence.
ISSUE:
Is the acceptance and payment of the special withdrawal slips without
the presentation of the depositor’s passbook gives the impression that it is a
negotiable instrument like a check?
RULING:
No. Withdrawal slips in question were non-negotiable instrument. Hence,
the rules governing the giving of immediate notice of dishonor of negotiable
instrument do not apply. The essence of negotiability which characterizes a
negotiable paper as a credit instrument lies in its freedom to circulate freely as
a substitute for money. The withdrawal slips in question lacked this character.
Citibank should have known that withdrawal slips were not negotiable
instruments. It could not expect these slips to be treated as checks by other
entities. Payment or notice of dishonor from respondent bank could not be
expected immediately, in contrast to the situation involving checks. But
having erroneously accepted them as such, Citibank and petitioner as
account-holder must bear the risks attendant to the acceptance of these
instruments.
(Non-negotiable money order)
Phil. Education Co. v. Soriano et al.

G.R. No. L-22405, June 30,1971
Dizon,J:
FACTS:
Enrique Montinola sought to purchase from the Manila Post Office 10
money orders of P200.00 each payable to E.P. Montinola. After the postal
teller had made out money orders, Montinola offered to pay for them with a
private checks were not generally accepted in payment of money orders, the
teller advised him to see the Chief of the Money Order Division, but instead of
doing so, Montinola managed to leave with his own check and the 10 money
orders without the knowledge of the teller. Upon discovery of the
disappearance of the unpaid money orders, an urgent message was sent to
all postmasters, including Bank of America which received a copy of said
notice three days later. One of the money orders was received by PECO as
part of its sales receipts. The following day it deposited the same with the Bank
of America, and one day thereafter the latter cleared it.
Mauricio A. Soriano, Chief of the Money Order Division of the Manila Post
Office notified the Bank of America that the money order had been found to
have been irregularly issued and that, in view thereof, the amount it
represented had been deducted from the bank's clearing account. PECO
requested the Postmaster General to reconsider the action taken by his office
deducting the sum of P200.00 from the clearing account of the Bank of
America, but his request was denied.
ISSUE:
Can the money order be considered as negotiable?
RULING:
No. 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, while
payment of money orders may be withheld under a variety of circumstances
It is not disputed that the Philippine postal statutes were patterned after
similar statutes in force in United States. The weight of authority in the United
States is that postal money orders are not negotiable instruments, the reason
being that in establishing and operating a postal money order system, the
government is not engaged in commercial transactions but merely exercises
a governmental power for the public benefit.
PNB v. Spouses Rodriguez

G.R. No. 170325, September 26, 2008
Reyes,J:
FACTS:
Spouses Rodriguez were engaged in the informal lending business and
had a discounting arrangement with the Philnabank Employees Savings and
Loan Association (PEMSLA), an association of PNB employees. They would
rediscount the postdated checks issued to members whenever the
association was short of funds. As was customary, the spouses would replace
the postdated checks with their own checks issued in the name of the
members. However, 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 officers carried this out by forging the indorsement of the
named payees in the checks. Rodriguez checks were deposited directly by
PEMSLA to its savings account without any indorsement from the named
payees. This was an irregular procedure made possible through the facilitation
of Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB
Branch. It became the usual practice for the parties until PNB eventually
found out about these fraudulent acts. As a result, the PEMSLA checks
deposited by the spouses were returned or dishonored for the reason
“Account Closed.” The amounts were duly debited from the Rodriguez
account. Spouses filed a civil complaint for damages against PEMSLA, the
Multi-Purpose Cooperative of Philnabankers (MCP), and PNB.
ISSUE:
Are the checks payable to order?
RULING:
Yes. As a rule, when the payee is fictitious or not intended to be the true
recipient of the proceeds, the check is considered as bearer instrument. A
check is a bill of exchange drawn on a bank payable on demand. It is either
an order or bearer instrument, pursuant to Sections 8 and 9 of the NIL. A check
that is payable to a specified payee is an order instrument. However, under
Section 9(c) of the NIL, a check payable to a specified payee may
nevertheless be considered as a bearer instrument if it is payable to the order
of a fictitious or non-existing person, and such fact is known to the person
making it so payable. In a fictitious-payee situation, the drawee bank is
absolved from liability and the drawer bears the loss. The underlying theory is
that one cannot expect a fictitious payee to negotiate the check by placing
his indorsement thereon.
Prudential Bank v. CIR

G.R. No. 180390, July 27, 2011
Del Castillo,J:
FACTS:
Prudential Bank received from the CIR a final assessment notice and a
demand letter for deficiency documentary stamp tax (DST) for the 1995
taxable year on its repurchase agreement with the BSP, purchase of treasury
bills from the BSP, and on its Savings Account Plus. Prudential Bank protested
the assessment on the ground that the documents are not subject to DST.
However, the CIR denied the protest. Thus, Prudential Bank filed a petition for
review before the CTA, but the latter affirmed the decision of the CIR.
ISSUE:
Is Prudential Bank's Savings Account Plus is subject to Documentary Stamp
Tax?
RULING:
Yes. DST is imposed on certificates of deposit bearing interest pursuant to
Section 180 of the old NIRC. Stamp tax on all loan agreements, promissory
notes, bills of exchange, drafts, instruments and securities issued by the
government or any of its instrumentalities, certificates of deposit bearing
interest and others not payable on sight or demand. On all loan agreements
signed abroad wherein the object of the contract is located or used in the
Philippines. Bills of exchange, drafts, instruments and securities issued by the
Government or any of its instrumentalities or certificates of deposits drawing
interest, or orders for the payment of any sum of money otherwise than at the
sight or on demand, or on all promissory notes, whether negotiable or
non-negotiable, except bank notes issued for circulation, and on each
renewal of any such note, there shall be collected a documentary stamp tax
of P0.30 on each Two hundred pesos, or fractional part thereof, of the face
value of any such agreement, bill of exchange, draft, certificate of deposit, or
note: Provided, however, that only one documentary stamp tax shall be
imposed on either loan agreement, or promissory note issued to secure such
loan, whichever will yield a higher tax.
Ilano v. Hon. Espanol et al.

G.R. No. 161756, December 16, 2005
Carpio-Morales,J:
FACTS:
Amelia Alonzo is a trusted employee of Victoria Ilano. During those times
that Ilano is in the Unied States for medical check-up, Alonzo was entrusted
with Ilano‘s Metrobank Check Book which contains both signed and unsigned
blank checks. A complaint for revocation/cancellation of promissory notes
and bills of exchange or checks with damages and TRO against Alonzo et al.
was filed. Ilano contends that Alonzo, by means of deceit and abuse of
confidence succeeded in procuring the promissory notes and signed blank
checks. Alonzo likewise succeeded in inducing Ilano to sign antedated
promissory notes. The RTC rendered a decision dismissing the complaint for
lack of cause of action and failure to allege the ultimate facts of the case. On
appeal, the Court of Appeals affirmed the dismissal of the complaint. Hence,
this petition.
ISSUE:
Are the checks negotiable?
RULING:
No. When petitioner filed her complaint, all the checks subject hereof
which were drawn against the same closed account were already rendered
valueless or non-negotiable. Hence, petitioner had, with respect to them, no
cause of action. On the other hand, with respect to one check which was
drawn against another account of petitioner, its validity and negotiable
character at the time the complaint was filed was not affected. Pursuant to
Section 6 of the NIL, the validity and negotiable character of an instrument
are not affected by the fact that the same is not dated.
Republic Planters Bank v. CA and Canlas

G.R. No. 93073, December 21, 1992
Campos,J:
FACTS:
Fermin Canlas, an officer of Worldwide Garment Manufacturing, Inc., was
authorized to apply for credit facilities with Republic Planters Bank, which
issued 9 promissory notes uniformly worded except for the dates and amounts.
It states: “______, after date, for value received, I/we, jointly and severally
promise to pay to the ORDER of REPUBLIC PLANTERS BANK, at its office in
Manila, Philippines, the sum of ______ PESOS, () Philippine currency”On the
right bottom margin, there appears the signature of Canlas with the phrase
“and in his personal capacity” typewritten.
Canlas contends 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. It is the contention of Republic Planters Bank that having
unconditionally signed the 9 promissory notes with Shozo Yamaguchi, jointly
and severally, defendant Canlas is solidarity liable with him on each of the
nine notes.
ISSUE:
Is Canlas personally and severally liable for the promissory notes?
RULING:
Yes. Canlas is solidarily liable on each of the promissory notes bearing his
signature. he promissory motes are negotiable instruments and must be
governed by the NIL. Persons who write their names on the face of promissory
notes are makers and are liable as such. There is no denying that Canlas is
one of the co-makers of the promissory notes. As such, he cannot escape
liability arising therefrom. The fact that the singular pronoun is used indicates
that the promise is individual as to each other and each of the co-signers is
deemed to have made an independent singular promise to pay the notes in
full.
The solidary liability of Canlas is made clearer and certain, without reason
for ambiguity, by the presence of the phrase "joint and several" as describing
the unconditional promise to pay to the order of Republic Planters Bank.
Spouses Evangelista v. Mercator Finance Corp. et al.

G.R. No. 148864, August 21, 2003
Puno,J:
FACTS:
Spouses Evangelista filed a complaint for annulment of titles against
respondents, Mercator Finance Corporation, Lydia P. Salazar, Lamecs Realty
and Development Corporation, and the Register of Deeds of Bulacan. They
claimed being the registered owners of 5 parcels of land contained in the
Real Estate Mortgage executed by them and Embassy Farms, Inc. They
alleged that they executed the REM in favor of Mercator only as officers of
Embassy Farms. They did not receive the proceeds of the loan evidenced by
a promissory note, as all of it went to Embassy Farms. Thus, they contended
that the mortgage was without any consideration as to them since they did
not personally obtain any loan or credit accommodations. There being no
principal obligation on which the mortgage rests, the REM is void. With the
void mortgage, they assailed the validity of the foreclosure proceedings
conducted by Mercator, the sale to it as the highest bidder in the public
auction, the issuance of the transfer certificates of title to it, the subsequent
sale of the same parcels of land to Salazar and the transfer of the titles to her
name, and lastly, the sale and transfer of the properties to respondent Lamecs
Realty. Mercator contended that since petitioners and Embassy Farms signed
the promissory note as co-makers, aside from the Continuing Suretyship
Agreement subsequently executed to guarantee the indebtedness of
Embassy Farms, and the succeeding promissory notes restructuring the loan,
then petitioners are jointly and severally liable with Embassy.
ISSUE:
Is the wording in the promissory note ambiguous?
RULING:
No. Courts can interpret a contract only if there is doubt in its letter. An
examination of the promissory note shows no such ambiguity. Assuming
arguendo that there is an ambiguity, Section 17 of the NIL states that where
the language of the instrument is ambiguous or there are omissions therein,
the following rules of construction apply: (g) Where an instrument containing
the word "I promise to pay" is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.
Even if petitioners intended to sign the note merely as officers of Embassy
Farms, still this does not erase the fact that they subsequently executed a
continuing suretyship agreement. A surety is bound by the same
consideration that makes the contract effective between the principal parties
thereto. Having executed the suretyship agreement, there can be no dispute
on the personal liability of petitioners.
COMPLETION AND DELIVERY
Dela Victoria v. Hon. Burgos and Sesbreño

G.R. No. 111190 June 27, 1995
Bellosillo,J:
FACTS:
Raul Sesbreño filed a complaint for damages against Assistant City Fiscals
Bienvenido N. Mabanto, Jr., and Dario D. Rama, Jr. After trial judgment was
rendered ordering the defendants to pay P11,000.00 to Sesbreño. The
decision having become final and executory, on motion of the latter, the trial
court ordered its execution. A notice of garnishment was served on Loreto D.
de la Victoria as City Fiscal of Mandaue City where defendant Mabanto, Jr.,
was then detailed. The notice directed petitioner not to disburse, transfer,
release or convey to any other person except to the deputy sheriff concerned
the salary checks or other checks, monies, or cash due or belonging to
Mabanto, Jr., under penalty of law. Sesbreño filed a motion before the trial
court for examination of the garnishees.
ISSUE:
Can the salary of a government employee be garnished?
RULING:
No. The salary of a government employee does not belong to him until the
same is physically delivered to him. Accordingly, before there is actual
delivery of the check, the payee has no power over it. Moreover, there was
no sufficient reason for petitioner to hold the checks because they were no
longer government funds and presumably delivered to the payee,
conformably with the last sentence of Sec. 16 of the NIL. As Assistant City Fiscal,
the source of the salary of Mabanto, Jr., is public funds. He receives his
compensation in the form of checks from the Department of Justice through
petitioner as City Fiscal of Mandaue City and head of office. Under Sec. 16,
every contract on a negotiable instrument is incomplete and revocable until
delivery of the instrument for the purpose of giving effect thereto.
Ting Ting Pua v. Spouses Benito Lo Bun Tiong and Caroline Siok Ching Teng
G.R. No. 198660, October 23, 2013
Velasco, Jr.,J:
FACTS:
A complaint for sum of money was filed by the petitioner against the Sps.
Tiong for the amount of Php 8,500,00.00 covered by a check given by the
latter as payment of the loans obtained from her. It was petitioner’s sister,
Lilian, who vouched for the spouses’ ability to pay so that when the spouses
approached her, she immediately acceded and lent money to them without
requiring any collateral except post-dated checks bearing the borrowed
amounts. The spouses then issued 17 checks. These checks were dishonored
upon presentment to the drawee bank. The spouses asked petitioner to
reduce their indebtedness. The spouses then delivered to petitioner a check
bearing the reduced amount with the assurance that the check was good
and demanded the return of the 17 previously dishonored checks. Petitioner,
however, refused to return the bad checks and advised respondents that she
will do so only after the encashment of the latest issued check but such was
also dishonored when it was presented by petitioner to the drawee bank. For
the defense, the spouses categorically denied obtaining a loan from
petitioner.
ISSUE:
Are the checks delivered to petitioner to pay for the spouses’ loan
obligation considered as consideration?
RULING:
Yes. The Court has expressly recognized that a check “constitutes an
evidence of indebtedness” and is a veritable “proof of an obligation.” In fact,
a check functions more than a promissory note since it not only contains an
undertaking to pay an amount of money but is an “order addressed to a
bank and partakes of a representation that the drawer has funds on deposit
against which the check is drawn, sufficient to ensure payment upon its
presentation to the bank.”
Under Section 24 of the NIL, every negotiable instrument is deemed prima
facie to have been issued for a valuable consideration and every person
whose signature appears thereon to have become a party for value.
Consequently, 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.
Quirino Gonzales Logging Concessionaire v. CA and Republic Planters Bank

G.R. No. 126568, April 30, 2003
Carpio-Morales,J:
FACTS:
In the expansion of its logging business, petitioner applied for credit
accommodations with respondent Republic Bank, later as Republic Planters
Bank. The Bank approved QGLC’s application granting credit line of
P900,000.00 broken into overdraft line of P500,000.00 which was later reduced
to P 450,000.00 and a letter of Credit line of P400,000.00. In separate
transactions, petitioners, to secure certain advances from the Bank in
connection with QGLC’s exportation of logs, executed a promissory note in
1964 in favor of the Bank. They were to execute 3 more promissory notes in
1967. Petitioners having long defaulted in the payment of their obligations
under the credit line, the Bank foreclosed the mortgage and bought the
properties covered thereby, it being the highest bidder in the auction sale
held in the same year. Ownership over the properties was later consolidated
in the Bank on account of which new titles thereto were issued to it.
ISSUE:
Can the promissory notes be considered as invalid for want of
consideration?
RULING:
No, the promissory notes are valid. The promissory notes appear to be
negotiable as they meet the requirements of Section 1 of the NIL. 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.
It is no defense that the promissory notes were signed in blank as Section
14 of the NIL concedes the prima facie authority of the person in possession of
negotiable instruments, such as the notes herein, to fill in the blanks.
DBP v. Sima Wei et al.

G.R. No. 85419, March 9, 1993
Campos,J:
FACTS:
In consideration for a loan extended by DBP to Sima Wei, the latter
executed and delivered to the former a promissory note, engaging to pay
DBP or order the amount of P1,820,000.00 on or before June 24, 1983 with
interest at 32% per annum. Sima Wei made partial payments. Sima Wei issued
two crossed checks payable to DBP drawn against China Banking
Corporation. Said checks were allegedly issued in full settlement of the
drawer's account evidenced by the promissory note. These two checks were
not delivered to the petitioner-payee or to any of its authorized
representatives. These checks came into the possession of respondent Lee
Kian Huat, who deposited the checks without the petitioner-payee's
indorsement to the account of respondent Plastic Corporation. Cheng Uy,
Branch Manager of the Balintawak branch of Producers Bank, relying on the
assurance of respondent Samson Tung, President of Plastic Corporation, that
the transaction was legal and regular, instructed the cashier of Producers
Bank to accept the checks for deposit and to credit them to the account of
said Plastic Corporation, inspite of the fact that the checks were crossed and
payable to petitioner Bank and bore no indorsement of the latter. Hence,
petitioner filed the complaint.
ISSUE:
Does DBP have a cause of action against all of the respondents?
RULING:
No. DBP did not acquire any right or interest over the checks. The normal
parties to a check are the drawer, the payee and the drawee bank. A
negotiable instrument, of which a check is, is not only a written evidence of a
contract right but is also a species of property. Section 16 of the NIL which
governs checks provides that every contract on a negotiable instrument is
incomplete and revocable until delivery of the instrument for the purpose of
giving effect thereto. Thus, the payee of a negotiable instrument acquires no
interest with respect thereto until its delivery to him. Without the initial delivery
of the instrument from the drawer to the payee, there can be no liability on
the instrument.
Equitable Banking Corp. v. Special Steel Products

G.R. No. 175350, June 13, 2012
Del Castillo,J:
FACTS:
Augusto L. Pardo is SSPI’s President and majority stockholder. International
Copra Export Corporation (Interco) is its regular customer. Jose Isidoro Uy is an
Interco employee, in charge of the purchasing department, and the
son-in-law of its majority stockholder. Equitable Banking Corporation is the
depository bank of Interco and of Uy. SSPI sold welding electrodes to Interco,
as evidenced by sales invoices. The invoices provided that Interco would pay
interest at the rate of 36% per annum in case of delay. As payment for the
above welding electrodes, Interco issued three checks payable to the order
of SSPI. Each check was crossed with the notation “account payee only” and
was drawn against Equitable. The records do not identify the signatory for
these three checks, or explain how Uy, Interco’s purchasing officer, came into
possession of these checks. The records only disclose that Uy presented each
crossed check to Equitable on the day of its issuance and claimed that he
had good title thereto. He demanded the deposit of the checks in his
personal accounts in Equitable.
ISSUE:
Was the payment made by Equitable proper?
RULING:
No. The checks that Interco issued in favor of SSPI were all crossed, made
payable to SSPI’s order, and contained the notation “account payee only.”
This creates a reasonable expectation that the payee alone would receive
the proceeds of the checks and that diversion of the checks would be
averted. This expectation arises from the accepted banking practice that
crossed checks are intended for deposit in the named payee’s account only
and no other.
Equitable did not observe the required degree of diligence expected of a
banking institution under the existing factual circumstances. Equitable’s
pretension that there is nothing under the circumstances that rendered Uy’s
title to the checks questionable is outrageous. These are crossed checks,
whose manner of discharge, in banking practice, is restrictive and specific.
Equitable, not knowing the named payee on the check, had no way of
verifying for itself the alleged genuineness of the indorsement to Uy. The
checks bear nothing on their face that supports the belief that the drawer
gave the checks to Uy. Uy’s relationship to Interco’s majority stockholder will
not justify disregarding what is clearly ordered on the checks.
Dela Victoria v. Hon. Burgos and Sesbreño

G.R. No. 111190 June 27, 1995
Bellosillo,J:
FACTS:
Raul Sesbreño filed a complaint for damages against Assistant City Fiscals
Bienvenido N. Mabanto, Jr., and Dario D. Rama, Jr. After trial judgment was
rendered ordering the defendants to pay P11,000.00 to Sesbreño. The
decision having become final and executory, on motion of the latter, the trial
court ordered its execution. A notice of garnishment was served on Loreto D.
de la Victoria as City Fiscal of Mandaue City where defendant Mabanto, Jr.,
was then detailed. The notice directed petitioner not to disburse, transfer,
release or convey to any other person except to the deputy sheriff concerned
the salary checks or other checks, monies, or cash due or belonging to
Mabanto, Jr., under penalty of law. Sesbreño filed a motion before the trial
court for examination of the garnishees.
ISSUE:
Can the checks be garnished to satisfy the judgment?
RULING:
No. As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is
public funds. He receives his compensation in the form of checks from the
Department of Justice through petitioner as City Fiscal of Mandaue City and
head of office. Under Sec. 16 of the NIL, every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto.
As a necessary consequence of being public fund, the checks may not
be garnished to satisfy the judgment. The rationale behind this doctrine is
obvious consideration of public policy. The Court find no difficulty in
concluding that the trial court exceeded its jurisdiction in issuing the notice of
garnishment concerning the salary checks of Mabanto, Jr., in the possession
of petitioner.
San Miguel Corp. v. Puzon

G.R. No. 167567, September 22, 2010
Del Castillo,J:
FACTS:
Bartolome V. Puzon, Jr., owner of Bartenmyk Enterprises, was a dealer
of beer products of petitioner San Miguel Corporation for Parañaque City.
Puzon 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. Puzon,
together with his accountant, visited the SMC Sales Office in Parañaque
City to reconcile his account with SMC. During that visit Puzon allegedly
requested to see BPI check. However, when he got hold of it which was
attached to a bond paper together with another check, he 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. Puzon
ignored the demand hence SMC filed a complaint against him for theft.
ISSUE:
Was ownership of the postdated checks transferred to SMC?
RULING:
No. Since the checks were issued to cover the credit purchases not as
payment. 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.
Furthermore, the petitioner's demand letter sent to respondent states
"As per company policies on receivables, all issuances are to be covered
by post-dated checks. However, you have deviated from this policy by
forcibly taking away the check you have issued to us to cover the
December issuance." Notably, the term "payment" was not used instead
the terms "covered" and "cover" were used.
SIGNATURE
Francisco v. CA, Herby Commercial & Construction Corporation, Ong

G.R. No. 116320, November 29, 1999
Gonzaga-Reyes,J:
FACTS:
A. Fransisco Realty and Development and Herby Commercial and
Construction Corporation entered into a Land Development and
Construction Contract. Fransisco was the president of AFRDC while Ong was
the president of HCCC. It was agreed upon that HCCC would undertake the
construction of housing units and the development of a large parcel of land.
The payment would be on a turnkey basis. To facilitate the payment, AFDRC
executed a Deed of Assignment to enable the HCCC to collect payments
from the GSIS. Further, they opened an account with a bank from which
checks would be issued by Fransisco and the GSIS president. HCCC later on
filed a complaint for the unpaid balance in pursuance to its agreement with
AFRDC. However, an amicable settlement ensued, which was embodied in a
MOA.
A year later, it was found out that Diaz and Fransisco had drawn checks
payable to Ong. Ong denied accepting said checks and it was further found
out that Diaz entrusted the checks to Fransisco who later forged the signature
of Ong, showing that he indorsed the checks to her and then she deposited
the checks to her personal savings account. This incident prompted Ong to
file a complaint against Fransisco.
ISSUE:
Is Francisco authorized to Ong’s name on the checks?
RULING:
No. The NIL provides that where any person is under obligation to indorse
in a representative capacity, he may indorse in such terms as to negative
personal liability. An agent, when so signing, should indicate that he is merely
signing in behalf of the principal and must disclose the name of his principal;
otherwise he shall be held personally liable. Even assuming that Francisco was
authorized by HCCC to sign Ong's name, still, Francisco did not indorse the
instrument in accordance with law. Instead of signing Ong's name, Francisco
should have signed her own name and expressly indicated that she was
signing as an agent of HCCC. Thus, the Certification cannot be used by
Francisco to validate her act of forgery.
Every person who, contrary to law, wilfully or negligently causes damage
to another, shall indemnify the latter for the same. Due to her forgery of Ong's
signature which enabled her to deposit the checks in her own account,
Francisco deprived HCCC of the money due it from the GSIS pursuant to the
Land Development and Construction Contract.
SIGNATURE
Philippine Bank of Commerce v. Aruego

G.R. Nos. L-25836-37, January 31, 1981
Fernandez,J:
FACTS:
Jose Aruego obtained a credit accommodation from the Philippine Bank
of Commerce to facilitate the payment of printing of “World Current Events”,
the periodical he is publishing. Thus, for every printing of the periodical, 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. As an added security for the payment of the
amounts advanced to Encal Press and Photo-Engraving, 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 to answer for the payment of all
obligations arising from the draft. The Philippine Bank of Commerce instituted
an action against Aruego to recover the cost of printing of the latter’s
periodical. Aruego however argues that he signed the supposed bills of
exchange only as an agent of the Philippine Education Foundation Company
where he is president.
ISSUE:
Can Aruego be held liable by petitioner although he signed the supposed
bills of exchange only as an agent of Philippine Education Foundation
Company?
RULING:
Yes. Aruego did not disclose in any of the drafts that he accepted that he
was signing as representative of the Philippine Education Foundation
Company. Section 20 of the NIL provides that “where the instrument contains
or a person adds to his signature words indicating that he signs for or on behalf
of a principal or in a representative capacity, he is not liable on the instrument
if he was duly authorized, but the mere addition of words describing him as an
agent or as filing a representative character, without disclosing his principal,
does not exempt him from personal liability." In this case, 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. He merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD)
JOSE ARGUEGO For failure to disclose his principal, Aruego is personally liable
for the drafts he accepted.
SIGNATURE
Associated Bank and Cruz v. CA and Reyes

G.R. No. 89802, May 7, 1992
Cruz,J:
FACTS:
Merle Reyes is engaged in the business of ready-to-wear garments under
the firm name "Melissa's RTW." She deals with, among other customers,
Robinson's Department Store, Payless Department Store, Rempson
Department Store, and the Corona Bazaar. These companies issued in
payment of their respective accounts crossed checks payable to Melissa's
RTW. 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
Associated Bank and subsequently paid by it to one Rafael Sayson, one of its
alleged trusted depositors. In the words of its branch manager and
co-petitioner, Conrado Cruz, Sayson had not been authorized by the private
respondent to deposit and encash the said checks. Reyes sued the petitioners
for recovery of the total value of the checks plus damages.
Petitioners contended that Reyes had no cause of action against them
and should have proceeded instead against the companies that issued the
checks.
ISSUE:
Is the bank negligent and therefore liable for the value of the checks?
RULING:
Yes. The possession of a check on a forged and unauthorized indorsement
is wrongful, and when the money is collected on the check, the bank can be
held liable. The act of the bank in taking the check on the forged and
unauthorized indorsement is the same as if it had taken the check and
collected without indorsement at all. The same amounts to conversion of the
check. When petitioner Bank paid the checks so indorsed, it did so at its own
risk and thus became liable to the payee for the value thereof. This liability
attached regardless of the knowledge of the Bank of the unauthoirzed
indorsement.
SIGNATURE
BPI v. Casa Montessori Int’l and Yabut

G.R. No. 149454, May 28, 2004
Panganiban,J:
FACTS:
Casa Montessori International opened a current account with BPI. In 1991,
Casa discovered that nine of its checks had been encashed by a certain
Sonny D. Santos since 1990 in the total amount of P782,000.00. It turned out
that Santos was a fictitious name used by third party defendant Leonardo T.
Yabut who worked as external auditor of CASA. He voluntarily admitted that
he forged the signature of Ms. Lebron and encashed the checks. Casa filed
the a complaint for collection with damages against BPI praying that the
latter be ordered to reinstate the amount in the current and savings accounts
of Casa with interest at 6% per annum.
ISSUE:
Was there a forgery provided under the NIL?
RULING:
Yes. There was forgery of the drawers signature on the check. A forged
signature is a real or absolute defense, and a person whose signature on a
negotiable instrument is forged is deemed to have never become a party
thereto and to have never consented to the contract that allegedly gave rise
to it. The counterfeiting of any writing, consisting in the signing of anothers
name with intent to defraud, is forgery.
Negligence is attributable to BPI alone. A banking business is impressed
with public interest, of paramount importance thereto is the trust and
confidence of the public in general. BPI, despite claims of following its
signature verification procedure, still failed to detect the eight instances of
forgery. Its negligence consisted in the omission of that degree of diligence
required of a bank. Thus, BPI is liable for the value of the forged checks.
SIGNATURE
BDO v. Equitable Banking Corp. et al.

G.R. No. 74917, January 20, 1988
Gancayco,J:
FACTS:
Equitable Bank drew six crossed manager’s checks payable to certain
member establishments of Visa Card. They were subsequently deposited to
BDO to the credit of its depositor. Following normal procedures and after
stamping at the back of the checks the usual indorsements, BDO sent the
checks for clearing through the Philippine Clearing House Corp. Thereafter,
Equitable paid the checks and its clearing account was debited for the value
of the checks. BDO’s account was cedited for the same amount. Thereafter,
Equitable discovered that the indorsements appearing at the back of the
checks purporting to be that of the payees were forged or unauthorized,
belonging to persons other than the payees. As such, Equitable presented the
checks directly to BDO for the purpose of claiming reimbursement from the
latter. However, BDO refused to accept the same and to reimburse Equitable
for the value of the checks.
ISSUE:
Can BDO still claim that the checks under consideration are
non-negotiable?
RULING:
No. Having stamped its guarantee of all prior indorsements or lack of
indorsements, BDO can no longer claim that the checks are not negotiable.
By such deliberate act of BDO, it has for all legal intents and purposes treated
said chcks as negotiable and accordingly assumed the warranty of the
indorser when it stamped its guarantee of prior indorsements at the back of
the checks. It led Equitable to believe that it was acting as indorser of the
checks and on the strength of this guarantee, the latter cleared the checks in
question and credited the account of BDO. Thus, BDO is now barred from
taking an opposite position by claiming that the disputed checks are not
negotiable intsruments.
SIGNATURE
Citibank, N.A. v. Sabeniano

G.R. No. 156132, October 12, 2006
Chico-Nazario,J:
FACTS:
Modesta Sabeniano is a client of Citibank and FNCB Finance. She
obtained a loan of Php 200,000 from Citibank. This loan was followed with
several other loans – some were paid, while some were not. These loans were
secured by Sabeniano’s money market placements with FNCB Finance
through a Deed of Assignment plus a Declaration of Pledge which states that
all present and future fiduciary placements held in her personal and/or joint
name with Citibank Switzerland, will secure all claims that Citibank may have
or, in the future, acquire against her. Since Sabeniano failed to pay her
obligations to Citibank, the latter sent demand letters to request payment. Still
failing to pay, Citibank executed the Deeds of Assignment and used the
proceeds of Sabeniano’s money market placement from FNCB Finance and
her deposits with Citibank.
Since the loan remains unpaid, Citibank proceeded to execute the
Declaration of Pledge and remitted a total of $149,632.99 from Sabeniano’s
Citibank-Geneva accounts to off-set the loan. Sabeniano then filed a
complaint against Citibank for damages and specific performance. She also
contended that her signatures were forged in the loan transactions.
ISSUE:
Whether or not the signatures of Sabeniano were forged.
RULING:
No. Although respondent attempted to raise suspicion as to the
authenticity of her signatures on certain documents, these were nothing more
than naked allegations with no corroborating evidence. Moreover, even her
own allegations were replete with inconsistencies. She could not even
establish in what manner or under what circumstances the fraud or forgery
was committed. Mr. Pujeda, the officer who was previously in charge of loans
and placements, confirmed that the signatures on the PNs were verified
against respondent's specimen signature with the bank. Hence, the Court
finds that the preponderance of evidence supports the existence of the
respondent's loans.
SIGNATURE
Gempesaw v. CA and Phil. Bank of Commerce

G.R. No. 92244, February 9, 1993
Campos,J:
FACTS:
Natividad Gempesaw issued checks, prepared by her bookkeeper, a
total of 82 checks in favor of several supplies. Most of the checks for amounts
in excess of actual obligations are shown in their corresponding invoices. It
was only after the lapse of more than 2 years did she discovered the
fraudulent manipulations of her bookkeeper. It was also learned that the
indorsements of the payee were forged, and the checks were brought to the
chief accountant of Philippine Bank of Commerce, the drawee bank, who
deposited them in the accounts of Alfredo Romero and Benito Lam.
Gempesaw made demand upon the bank to credit the amount charged
due the checks. However, the bank refused.
ISSUE:
Who bears the loss resulting from the forged indorsements?
RULING:
Both Gempesaw and Phil. Bank of Commerce shall bear the loss on a
50:50 ratio. As a rule, a drawee bank who has paid a check on which an
indorsement has been forged cannot charge the drawer’s account for the
amount of said check. An exception to the rule is where the drawer is guilty of
such negligence which causes the bank to honor such checks.
Gempesaw did not exercise prudence in taking steps that a careful and
prudent businessman would take in circumstances to discover discrepancies
in her account. Her negligence was the proximate cause of her loss, and
under Section 23 of the NIL, is precluded from using forgery as a defense. On
the other hand, the banking rule banning acceptance of checks for deposit
or cash payment with more than one indorsement unless cleared by some
bank officials does not invalidate the instrument. Neither does it invalidate the
negotiation or transfer of said checks. The only kind of indorsement which
stops the further negotiation of an instrument is a restrictive indorsement which
prohibits the further negotiation thereof, pursuant to Section 36 of the NIL.
Thus, pursuant to Section 196 of the NIL, the bank may be held liable for
damages in accordance with Article 1170 of the Civil Code.
SIGNATURE
Jai-Alai Corp. v. BPI

G.R. No. L-29432, August 6,1975
Castro,J:
FACTS:
Ten checks with a total face value of P8,030.58 were deposited by the
petitioner in its current account with the respondent bank. All the foregoing
checks, which were acquired by petitioner from one Antonio J. Ramirez, a
sales agent of the Inter-Island Gas and a regular bettor at jai-alai games, were,
upon deposit, temporarily credited to the petitioner's account in accordance
with the clause printed on the deposit slips issued by the respondent bank.
Later on, after Ramirez had resigned from the Inter-Island Gas and after the
checks had been submitted to inter-bank clearing, the Inter-Island Gas
discovered that all the indorsements made on the checks as well as the
rubber stamp impression were forgeries. In due time, the Inter-Island Gas
advised the petitioner, the respondent, the drawers and the drawee-banks of
the said checks about the forgeries. Meanwhile, the drawers of the checks
demanded reimbursement from the drawee-banks, which in turn demanded
from the respondent, as collecting bank, the return of the amounts they had
paid. When the drawee-banks returned the checks to the respondent, the
latter paid their value which the former in turn paid to the Inter-Island Gas. The
respondent, for its part, debited the petitioner's current account and
forwarded to the latter the checks containing the forged indorsements, which
the petitioner, however, refused to accept.
ISSUE:
Did BPI validly debit from petitioner’s account the value of the checks with
the forged indorsements?
RULING:
Yes. BPI acted within legal bounds when it debited the petitioner's
account. The payments made by the drawee-banks to the respondent on
account of the said checks were ineffective. The relationship of creditor and
debtor between the petitioner and the respondent had not been validly
effected, the checks not having been properly and legitimately converted
into cash.
Respondent had acted promptly after being informed that the
indorsements on the checks were forged. Moreover, having received the
checks merely for collection and deposit, the respondent cannot be
expected to know or ascertain the genuineness of all prior indorsements on
the said checks. Indeed, having itself indorsed them to the respondent, the
petitioner is deemed to have given the warranty prescribed in Section 66 of
the NIL that every single one of those checks "is genuine and in all respects
what it purports to be." Respondent which relied upon the petitioner's
warranty should not be held liable for the resulting loss.
SIGNATURE
Metrobank v. The First National City Bank

G.R. No. L-55079, November 19, 1982
Melencio-Herrera,J:
FACTS:
A check dated July 8, 1964 for P50,000.00, payable to CASH, drawn by
Joaquin Cunanan & Company on FNCB was deposited with Metrobank by a
certain Salvador Sales. Earlier that day, Sales had opened a current account
with Metrobank depositing P500.00 in cash. Metro Bank immediately sent the
cash check to the Clearing House of the Central Bank. The check was
cleared the same day. FNCB paid Metrobank through clearing the amount of
P50,000.00, and Sales was credited with the said amount in his deposit with
Metrobank. Nine days later, FNCB returned cancelled said check to drawer
Joaquin Cunanan & Company, together with the monthly statement of the
company's account with FNCB. That same day, the company notified FNCB
that the check had been altered. The actual amount of P50.00 was raised to
P50,000.00, and over the name of the payee, Manila Polo Club, was
superimposed the word CASH. FNCB wrote Metrobank asking for
reimbursement of the amount of P50,000.00. The latter did not oblige, so FNCB
reiterated its request. However, Metrobank was adamant in its refusal.
ISSUE:
Which bank is liable for the payment of the altered check, FNCB as the
drawee bank or Metrobank as the collecting bank?
RULING:
Metrobank can not be held liable for the payment of the altered check.
Since both parties are part of banking system, and both are subject to the
regulations of the Central Bank, they are bound by the 24-hour clearing house
rule of the Central Bank. The check was not returned to Metrobank in
accordance with the 24-hour clearing house period, but was cleared by
FNCB. Failure of FNCB, therefore, to call the attention of Metrobank to the
alteration of the check in question until after the lapse of nine days, negates
whatever right it might have had against Metrobank. Its remedy lies not
against Metrobank, but against the party responsible for the changing the
name of the payee and the amount on the face of the check.
SIGNATURE
Metropolitan Waterworks and Sewerage System v. CA

G.R. No. L-62943, July 14, 1986
Gutierrez,J:
FACTS:
MWSS is a GOCC created under RA No. 6234 as the successor-in- interest
of the defunct NWSA. PNB is the depository bank of MWSS. Among the several
accounts of NWSA with PNB is NWSA Account No. 6 and the authorized
signature for said account were those of MWSS treasurer Sanchez, its auditor
Aguilar, and its acting General Manager Recio. By special arrangement with
the PNB, the MWSS used personalized checks in drawing from this account.
These checks were printed for MWSS by its printer, F. Mesina Enterprises.
Twenty-three checks were prepared, processed, issued and released by
NWSA, all of which were paid and cleared by PNB and debited by PNB.
The foregoing checks were deposited by the payees Dizon, Sison and
Mendoza in their respective current accounts with PCIB and PBC. Thru the
Central Bank Clearing, these checks were presented for payment by PBC and
PCIB to the defendant PNB, and paid. At the time of their presentation to PNB
these checks bear the standard indorsement which reads 'all prior
indorsement and/or lack of endorsement guaranteed.' However,
investigation conducted by the NBI showed that Raul Dizon, Arturo Sison and
Antonio Mendoza were all fictitious persons. Hence, NWSA addressed a letter
to PNB requesting the immediate restoration to its Account No. 6, but the
latter refused.
ISSUE:
Was there forgery of the signatures on the checks?
RULING:
No. There is no express and categorical finding in these documents that
the 23 questioned checks were indeed signed by persons other than the
authorized MWSS signatories. The NBI Reports relied upon by the petitioner are
inadequate to sustain its allegations of forgery. These reports did not touch on
the inherent qualities of the signatures which are indispensable in the
determination of the existence of forgery. There must be conclusive findings
that there is a variance in the inherent characteristics of the signatures and
that they were written by two or more different persons.
Forgery cannot be presumed. It must be established by clear, positive,
and convincing evidence. This was not done in this case. MWSS is barred from
setting up the defense of forgery under Section 23 of the NIL because it was
guilty of negligence not only before the questioned checks were negotiated
but even after the same had already been negotiated.
SIGNATURE
PCIB v. CA, Ford Philippines, and Citibank

G.R. No. 121413, January 29, 2001
Quisumbing,J:
FACTS:
The consolidated petitions arose from the action filed by BIR against
Citibank and PCIBfor the recovery of the amount of Citibank checks. Said
checks, both crossed checks were alleged to have been negotiated
fraudulently by an organized syndicate between and among two employees
of Ford and PCIB officers. It was established that instead of paying the crossed
checks, the checks were diverted and encashed for the eventual distribution
among the members of the syndicate. It was found that the manager of PCIB,
Castro, received the Citibank checks. He passed the checks to a
co-conspirator, an assistant manager of PCIB who helped him open a
Checking account of a fictitious person. Castro deposited a worthless Bank of
America Check in exactly the same amount of Ford checks. The syndicate
tampered with the checks and succeeded in replacing the worthless checks
and the eventual encashment of Citibank checks. They apparently
performed their activities using facilities in their official capacity or authority
but for their personal and private gain or benefit.
The evidence on record shows that Citibank as drawee bank was likewise
negligent in the performance of its duties. Citibank failed to establish that its
payment of Fords checks were made in due course and legally in order. It
likewise appears that although the employees of Ford initiated the
transactions attributable to an organized syndicate, their actions were not the
proximate cause of encashing the checks.
ISSUE:
Does Ford have the right to recover from PCIB as the collecting bank
and Citibank as the drawee bank the value of the checks intended as
payment to the CIR?
RULING:
Yes. There was no evidence presented confirming the conscious
participation of PCIB in the embezzlement. However, a banking corporation is
liable for the wrongful or tortuous acts and declarations of its officers or agents
within the course and scope of their employment. A bank will be held liable
for the negligence of its officers or agents when acting within the course and
scope of their employment. It may be liable for the tortuous acts of its officers.
Citibank must likewise answer for the damages incurred by Ford on
Citibank checks because of the contractual relationship existing between the
two. Citibank, as the drawee bank breached its contractual obligation with
Ford and such degree of culpability contributed to the damage caused to
the latter. Therefore, PCIB and Citibank are thus liable for and must share the
loss on a 50:50 ratio.
SIGNATURE
PCIB v. Balmaceda and Ramos

G.R. No. 158143, September 21, 2011
Brion,J:
FACTS:
PCIB filed an action for recovery of sum of money with damages against
Balmaceda, its branch manager. PCIB alleged that Balmaceda, by taking
advantage of his position, fraudulently obtained and encashed 31 Manager’s
checks in the total amount of ₱10,782,150.00. PCIB impleaded Ramos as one
of the recipients of a portion of the proceeds from Balmaceda’s alleged fraud.
PCIB also increased the number of fraudulently obtained and encashed
Manager’s checks to 34, in the total amount of ₱11,937,150.00. Since
Balmaceda did not file an Answer, he was declared in default. On the other
hand, 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:
Did Ramos conspire with Balmaceda in perpetrating the latter’s scheme
to defraud the Bank?
RULING:
No. All that PCIB’s evidence proves is that Balmaceda used Ramos’ name
as a payee when he filled up the application forms for the Manager’s checks.
But, the mere fact that Balmaceda made Ramos the payee on some of the
Manager’s checks is not enough basis to conclude that Ramos was complicit
in Balmaceda’s fraud.
On the other hand, PCIB is itself negligent when it allowed Balmaceda to
encash the Manager’s checks that were plainly crossed checks. A crossed
check is one where two parallel lines are drawn across its face or across its
corner. 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 26 Manager’s checks which were all crossed
checks, or checks payable to the "payee’s account only."
SIGNATURE
PNB v. F.F. Cruz and Company, Inc.

G.R. No. 173259, July 25, 2011
Del Castillo,J:
FACTS:
FFCCI opened savings/current account and dollar savings account with
PNB. Its President Felipe Cruz and Secretary-Treasurer Angelita A. Cruz were
the named signatories for the said accounts. The said signatories on separate
dates left for and returned from the USA. While they 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, payable to a certain
Gene B. Sangalang and the other one was payable to one Paul Bautista. The
amounts of these checks were then debited by the PNB against the combo
account of FFCCI.
When Angelita returned to the country, she examined the PNB statements
of account and she noticed the deductions. Claiming that these were
unauthorized and fraudulently made, FFCCI requested PNB to credit back
and restore to its account the value of the checks. PNB refused, and thus
constrained FFCCI filed the instant suit for damages against the PNB and its
own accountant Aurea Caparas.
ISSUE:
Is PNB liable for damages for its negligence?
RULING:
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. As expert witness,
the NBI senior document examiner testified that the forged signatures in the
subject applications for manager’s check contained noticeable and
significant differences from the genuine signatures of FFCCI’s authorized
signatories and that the forgeries should have been detected or observed by
a trained signature verifier of any bank.
The banking business is impressed with public trust. A higher degree of
diligence is imposed on banks relative to the handling of their affairs than that
of an ordinary business enterprise. PNB failed to meet the high standard of
diligence required by the circumstances to prevent the fraud.
SIGNATURE
PNB v. Hon. Quimpo and Gozon

G.R. No. L-53194, March 14, 1988
Gancayco,J:
FACTS:
Francisco S. Gozon II, who was a depositor of PNB, went to the bank in his
car accompanied by his friend Ernesto Santos whom he left in the car while
he transacted business in the bank. When Santos saw that Gozon left his
check book he took a check therefrom, filled it up for the amount of P5,000.00,
forged the signature of Gozon, and thereafter he encashed the check in the
bank on the same day. The account of Gozon was debited the said amount.
Upon receipt of the statement of account from the bank, Gozon asked that
the said amount of P5,000.00 should be returned to his account as his
signature on the check was forged but the bank refused. Upon complaint,
Ernesto Santos was apprehended by the police authorities and upon
investigation he admitted that he stole the check of Gozon, forged his
signature and encashed the same with the Bank. Hence, Gozon filed the
complaint for recovery of the amount plus interest, and damages against
PNB.
ISSUE:
Is PNB liable to pay damages due to its negligence?
RULING:
Yes. A bank is bound to know the signatures of its customers, and if it pays
a forged check, it must be considered as making the payment out of its own
funds, and cannot ordinarily change the amount so paid to the account of
the depositor whose name was forged. The prime duty of a bank is to
ascertain the genuineness of the signature of the drawer or the depositor on
the check being encashed. It is expected to use reasonable business
prudence in accepting and cashing a check presented to it. The trial court
found that a comparison of the signature on the forged check and the
sample signatures of private respondent show marked differences as the
graceful lines in the sample signature which is completely different from those
of the signature on the forged check. Obviously, PNB was negligent in
encashing said forged check without carefully examining the signature which
shows marked variation from the genuine signature of Gozon.
SIGNATURE
Ilusorio v. CA and Manila Banking Corp.

G.R. No. 139130, November 27, 2002
Quisumbing,J:
FACTS:
Petitioner is a prominent businessman who was the Managing Director of
Multinational Investment Bancorporation and the Chairman and/or President
of several other corporations. He was a depositor in good standing of Manila
Banking Corporation, under current checking account. As he was then
running about 20 corporations, and was going out of the country a number of
times, petitioner entrusted to his secretary, 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. 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 for estafa thru falsification before the Office of the
Provincial Fiscal of Rizal. Private respondent also lodged a complaint for
estafa thru falsification of commercial documents against Eugenio on the
basis of petitioner’s statement that his signatures in the checks were forged.
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:
Does Ilusorio have a cause of action against Manila Banking?
RULING:
No. To be entitled to damages, petitioner has the burden of proving
negligence on the part of the bank for failure to detect the discrepancy in the
signatures on the checks. It is incumbent upon petitioner to establish the fact
of forgery, by submitting his specimen signatures and comparing them with
those on the questioned checks. However, he failed to submit additional
specimen signatures as requested by the NBI from which to draw a conclusive
finding regarding forgery. The burden to prove forgery was upon the plaintiff,
which burden he failed to discharge.
The bank’s employees ialso did not have a hint as to Eugenio’s modus
operandi because she was a regular customer of the bank, having been
designated by petitioner himself to transact in his behalf. According to the CA,
the employees of the bank exercised due diligence in the performance of
their duties.
SIGNATURE
Republic Bank v. CA and First National City Bank

G.R. No. 42725, April 22, 1991
Grino-Aquino,J:
FACTS:
San Miguel Corporation drew a dividend check on its account in FNCB in
favor of J. Roberto C. Delgado, a stockholder. After the check had been
delivered to Delgado, the amount on its face was fraudulently and without
authority of the drawer, SMC, altered by increasing it from P240 to P9,240. The
check was indorsed and deposited by Delgado in his account with Republic
Bank. Republic accepted the check for deposit without ascertaining its
genuineness and regularity. Later, Republic endorsed the check to FNCB by
stamping on the back of the check "all prior and/or lack of indorsement
guaranteed" and presented it to FNCB for payment through the Central Bank
Clearing House. Believing the check was genuine, and relying on the
guaranty and endorsement of Republic appearing on the back of the check,
FNCB paid P9,240 to Republic.
SMC notified FNCB of the material alteration. FNCB lost no time in
recrediting P9,240 to SMC. FNCB informed Republic in writing of the alteration
and the forgery of the endorsement of J. Roberto C. Delgado. By then,
Delgado had already withdrawn his account from Republic. FNCB
demanded that Republic refund the P9,240 on the basis of the latter’s
endorsement and guaranty. Republic refused, claiming there was delay in
giving it notice of the alteration.
ISSUE:
Is Republic, as the collecting bank, protected by the 24-hour clearing
house rule found in CB Circular No. 9 from liability to refund the amount paid
by FNCB as the drawee bank?
RULING:
Yes. When an endorsement is forged, the collecting bank or last endorser,
as a general rule, bears the loss, but the unqualified endorsement of the
collecting bank on the check should be read together with the 24-hour
regulation on clearing house operation. Thus, when the drawee bank fails to
return a forged or altered check to the collecting bank within the 24-hour
clearing period, the collecting bank is absolved from liability. The CA erred in
laying upon Republic, instead of on FNCB the drawee bank, the burden of loss
for the payment of the altered SMC check, the fraudulent character of which
FNCB failed to detect and warn Republic about, within the 24-hour clearing
house rule. Thus, Republic is absolved from liability to refund to the First
National City Bank the sum of P9,240.
SIGNATURE
Republic Bank v. Ebrada

G.R. No. L-40796, July 31, 1975
Martin,J:
FACTS:
Mauricia T. Ebrada encashed back pay check at the main office of the
Republic Bank.. The check was issued by the Bureau of Treasury. Republic
Bank was later advised by the said Bureau that the alleged indorsement on
the reverse side of the aforesaid check by the payee, Martin Lorenzo was a
forgery since the latter had allegedly died. Bank was then requested by the
Bureau to refund the amount of P1,246.08. To recover what it had refunded,
Bank made verbal and formal demands upon defendant Ebrada to account
for money, but said defendant refused to do so. Hence, Bank sued defendant
Ebrada. Ebrada denied the material allegations of the complaint and as
affirmative defenses, she alleged that she was a holder in due course of the
check in question, or at the very least, has acquired her rights from a holder in
due course and therefore entitled to the proceeds thereof. She also alleged
that the Bank has no cause of action against her as it is already in estoppel, or
so negligent as not to be entitled to recover anything from her.
ISSUE:
Can Republic Bank recover from the last indorser?
RULING:
Yes. According to Section 23 of the NIL, where the signature on a
negotiable instrument is forged, the negotiation of the check is without force
or effect. However, following the ruling in Beam vs. Farrel, where a check has
several indorsements on it, only the negotiation based on the forged or
unauthorized signature which is inoperative. The last indorser, Ebrada, was
duty-bound to ascertain whether the check was genuine before presenting it
to the bank for payment. Her failure to do so makes her liable for the loss and
the Bank may recover from her the money she received for the check. Had
she performed her duty, the forgery would have been detected and fraud
defeated. Even if she turned over the amount to Dominguez immediately
after receiving the cash proceeds of the check, she is liable as an
accommodation party under Section 29 of the NIL.

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PRELIMINARY CONSIDERATIONS

GSIS v. CA and Spouses Racho

Does Kauffman has a right of action based on Negotiable Instruments

Phil. Education Co. v. Soriano et al.

Spouses Tibajia v. CA and Tan

Ang Tek Lian v. CA

Caltex v. CA and Security Bank

Equitable Banking Corp. v. IAC and The Edward J Nell Co.

Salas v. IAC and First Finance & Leasing Corp

It was negotiated by indorsement in writing on the instrument itself

Metrobank v. Renato Cabilzo

PNB v. Spouses Rodriguez

PNB v. Manila Oil Refining & By-Products Company

Sesbreno v. CA, Delta Motors, and Pilipinas Bank

Traders Royal Bank v. CA, Filriters Guaranty, and Central Bank

Firestone Tire & Rubber Company v. CA and Luzon Development Bank

Phil. Education Co. v. Soriano et al.

PNB v. Spouses Rodriguez

Prudential Bank v. CIR

Ilano v. Hon. Espanol et al.

Republic Planters Bank v. CA and Canlas

Spouses Evangelista v. Mercator Finance Corp. et al.

Dela Victoria v. Hon. Burgos and Sesbreño

Quirino Gonzales Logging Concessionaire v. CA and Republic Planters Bank

DBP v. Sima Wei et al.

Equitable Banking Corp. v. Special Steel Products

Dela Victoria v. Hon. Burgos and Sesbreño

San Miguel Corp. v. Puzon

Francisco v. CA, Herby Commercial & Construction Corporation, Ong

Philippine Bank of Commerce v. Aruego

Associated Bank and Cruz v. CA and Reyes

BPI v. Casa Montessori Int’l and Yabut

BDO v. Equitable Banking Corp. et al.

Citibank, N.A. v. Sabeniano

Gempesaw v. CA and Phil. Bank of Commerce

Jai-Alai Corp. v. BPI

Metrobank v. The First National City Bank

Metropolitan Waterworks and Sewerage System v. CA

PCIB v. CA, Ford Philippines, and Citibank

PCIB v. Balmaceda and Ramos

PNB v. F.F. Cruz and Company, Inc.

PNB v. Hon. Quimpo and Gozon

Ilusorio v. CA and Manila Banking Corp.

Republic Bank v. CA and First National City Bank

Republic Bank v. Ebrada

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