Case no.

1
METROPOLITAN BANK & TRUST COMPANY vs. COURT OF APPEALS, GOLDEN
SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO, GLORIA CASTILLO
(G.R. No. 88866, Feb. 18, 1991)

FACTS:
In January 1979, Eduardo Gomez opened an account with Golden & deposited treasury
warrants amounting to a total of P1.755 million. The warrants were drawn by the Philippine Fish
Marketing Authority (PFMA). Most of the said warrants appeared to have been indorsed by their
respective payees, followed by Gomez as second indorser.

Thereafter, Gloria indorsed the warrants, as cashier of Golden, to petitioner and created a
savings account wherein the warrants are to be placed. Petitioner then sent the warrants to the
Bureau of Treasury. While clearance of the warrants was pending, Gomez was not allowed to
withdraw from his account.

A week after, petitioner finally cleared the warrants since it alleged that Gloria’s persistence
“forced” them to do so. Petitioner likewise permitted Golden to withdraw from its proceeds.
Gomez had already withdrawn from Golden P1.167 million by July 16, 1979, and Golden from
petitioner P968,000 by from July 9 - 16, 1979.

On July 21, 1979 however, petitioner informed Golden that 32 of the said treasury warrants
were dishonored by the Bureau of Treasury on July 19, 1979. Petitioner thus demanded Golden
to refund the amounts it withdrew to make up the deficit in its account. Golden rejected the
demand.

Consequently, petitioner sued Golden while filing for attachment over the properties of private
respondents Castillo. Petitioner likewise debited P1.75 million from their savings account. Later,
the RTC Mindoro ruled in favor of Golden. While petitioner filed its Notice of Appeal however,
Golden likewise filed its motion for reconsideration. RTC ruled in favor of Golden and ordered
the reversal of all actions performed by petitioners against respondents. The CA affirmed said
decision upon appeal.

Petitioners thus elevated the case to the SC on a petition for review. Petitioner claimed that (1)
until such time Metrobank is actually paid, the obligation of Metrobank is that of a mere
collecting agent; (2) it was made to pay for the warrants that were already dishonored; (3)
Eduardo Gomez perpetrated the fraud; & (4) the treasury warrants involved are not and cannot
be considered negotiable instruments.

ISSUE:
Whether or not said treasury warrants are negotiable instruments.

HELD:
NO. treasury warrants are not negotiable instruments. Cleary stamped on their face is the word
“non-negotiable.” Moreover, the word “unconditional,” as provided by law referring to the
promise to pay a sum certain in money, is not evident since payment is to be sourced from a

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particular fund (secs. 1 & 3 of Act No. 2031). A treasury warrant is not within the scope of the
negotiable instruments law. A treasury warrant bears on its face the words “payable from the
appropriation for food administration. It is therefore an order for payment of “a particular fund” &
is therefore not unconditional. Being a condition sine qua non, the treasury warrant does not
conform with all the requirements for an instrument to be negotiable.

The indorsement made by Gloria was not for the purpose of guaranteeing the genuineness of
the warrants but merely to deposit it to petitioner. In fact, it was petitioner that made the
guarantee when it stamped that Metrobank guarantees all prior indorsement and/or lack thereof
at the back of the warrants.

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 Case no. 2
GOVERNMENT SERVICE INSURANCE SYSTEM vs. COURT OF APPEALS & MR.
AND MRS. ISABELO R. RACHO
(G.R. No. L-40824, Feb. 23, 1989)

FACTS:
Spouses Racho, along with Spouses Lagasca, executed 2 deeds of mortgages on Nov. 13,
1957 & April 14, 1958 over the co-owned property. Spouses Racho provided GSIS with the TCT
of their land as security under the 2 deeds and also executed a promissory note. The first deed
was executed in favor of GSIS and the other was in connection with 2 loans that were granted
by the petitioner (P11,500 & P3000).

Spouses Lagasca thereafter executed an instrument wherein they obligated themselves to

“assume the obligation towards GSIS and to secure the release of the mortgaged land” of
Spouses Racho. Spouses Lagasca however failed to fulfill their undertaking. Said failure gave
rise to GSIS to extraordinarily foreclose the mortgage and cause the property to be sold at a
public auction on Dec. 3, 1962.

Two years later, Spouses Racho filed a complaint at the CFI of QC, praying that the extrajudicial
foreclosure be declared null & void, and that they be able to recover their property, and if no
longer recoverable, to be paid for the value thereof. Spouses Racho alleged that they signed
the mortgage contracts not as sureties/guarantors pf Spouses Lagasca but that they merely
gave their share of the common property to spouses Lagasca as their co-owners. Spouses
Racho likewise contended that only spouses Lagasco benefitted from the loan.

The RTY dismissed the case. The CA however reversed the decision ruling that spouses
Racho, although they are co-mortgagors, have only signed the deed in accommodation wherein
the GSIS required their consent to the mortgage of the entire parcel of land which was covered
with only 1 certificate of title, with full knowledge that the loans secured thereby were solely for
the benefit of appellant spouses, who, applied alone for the loan. The CA thus declared void the
extrajudicial foreclosure affecting the share of spouses Racho.

Both parties relied on sec. 29 of Act no. 2031 which provides that an “accommodation party” is
one who has signed an instrument as maker, drawer, acceptor, of indorser without receiving
value thereof but is held liable on the instrument to a holder for value, although holder for value
knew him to be only an accommodation party,

ISSUE:
Whether or not the mortgage deeds are negotiable instruments.

HELD:
No.. the deeds do not comply with the 4th requisite mandated by sec. 1 of Act no. 2041. The
deeds are neither payable to order or to bearer. In reality, the note is payable to a specified

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party (GSIS). This case is governed by the provision of the Civil Code and special laws on
mortgages.

The execution of spouses Lagasca of Assumption of Mortgage promised to exclude moreover

spouses Racho from liability, including their share of the mortgaged property. This is evinced by
the lack of payment of consideration to spouses Racho.

However, it may still not be said that spouses Racho cannot be held to some liability over the
failure of spouses Lagasca to fulfill their undertaking. It is provided for by art. 2085 of the Civil
Code that 3rd persons who are not parties to the principal obligation may still secure the
obligation by pledging/mortgaging their own property.

The mortgage therefore may not be invalidated as long as valid consent was given by the
spouses Racho with respect to their share in the property. Otherwise, if it were really the
agreement of the parties to only include a portion of the litigated property as security, the
consent of Spouses Racho wouldn’t have been required in the first place.

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 Case no. 3
FLORENTINA A. LOZANO vs. Hon. Antonio M. Martinez (Judge, RTC of Manila) &
Hon. Jose B. Flaminiano (City Fiscal of Manila)
(G.R. No. L-63419, Dec. 18, 1986)

FACTS:
Eight cases are consolidated herein. This petition contains sole issue on the constitutionality of
B.P. No. 22 (Bouncing Check Law) and the prosecution of offenses under said statute.

ISSUE:
Whether or not B.P. No. 22 is constitutional

HELD:
Yes. The High Court ruled the following:

1. The language of B.P. 22 is broad enough to cover all kinds of checks, whether
present/post-dated, and whether it was issued in payment of pre-existing obligations, or
was given in mutual or simultaneous exchange for something of value.

2. B.P. 22 punishes a person:

a. Who makes or draws & issues any check on account or for value;

b. Who, at the time of issue, knew that he did not have sufficient funds in or credit
with the drawee bank for the payment of said check in full upon presentment;

c. Whose check is subsequently dishonored by the drawee bank for insufficiency of

funds or credit

d. Or whose check would have been dishonored for the same reason had not the
drawer, without any valid reason, ordered the bank to stop payment; or

e. Who, having sufficient funds in or credit with the drawee bank when he made
payment or have drawn and issued a check, have failed to keep sufficient funds
or to maintain a credit to cover the full amount of the check if presented within a
period 90 days from the date appearing thereon.

3. An essential element of the criminal act is “knowledge” of the maker/drawer that he had
funds insufficient to cover the value of the check upon presentment.

a. There is prima facie presumption when the drawee had already refused payment
by check due to the account’s insufficient fund;

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 b. It is mitigating when, within 5 banking days from receipt of the notice of dishonor,
the maker or drawer makes arrangements for payment of check by the bank or of
the victim.

4. The gravamen of the offense is the act of making & issuing a worthless check or issuing
a check that is dishonored upon its presentation for payment. It is to prohibit the making
of worthless checks & putting them in circulation. The law punishes the act not as an
offense against property, but an offense against public order.

5. A check is:

a. A bill of exchange drawn on a bank & payable on demand;

b. An order addressed to a bank & partakes of a representation that the drawer has
funds on deposit against which the check is drawn – sufficient to ensure payment
upon presentation to the bank;

c. Not legal tender; and/or

d. A commercial instrument which has become a convenient substitute for money. It

forms part of the banking system and is thus not free from the regulatory power
of the state.

6. The constitutionality of the law is upheld, being within the authority of the legislative to
enact such a law in the exercise of police power.

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 Case no. 4
ERNESTO T. PACHECO & VIRGINIA O PACHECO vs. Hon. Court of Appeals &
People of the Philippines
(G.R. No. 126670, Dec. 2, 1999)

FACTS:
Petitioner spouses are engaged in the construction business. Due to dire financial needs of
petitioner spouses who were engaged in the construction business, they secured loans from
Vicencio.    At every loan secured, the lender compelled the spouses to issue an undated check
despite the admission of spouses that their bank account has insufficient funds or as on a later
date, already closed.  Lender assured them that the issuance of the check was only evidence of
indebtedness, that it would not be presented to the bank, and it would be for formalities only. 
On the date wherein there was an unpaid balance to the loans secured by the spouses, the
lender had them place a date on two of the later checks issued.  Surprised
later on, the spouses were charged with estafa as the checks were presented for encashment
and was dishonored.

ISSUE:
Whether or not the checks were issued as negotiable instruments.

HELD:
No. the High Court held that although a check has the character of negotiability, and that it
constitutes an evidence of indebtedness, the parties may, by mutual agreement, waive the
negotiable character of the check, it may be treated simply as proof of an obligation. When in
mutual agreement with the creditor, checks may become nothing but an evidence of the loan or
security thereof, or a mere evidence of indebtedness.

From the facts provided, Mrs. Vicencio could not have been defrauded because they were
firsthand informed that petitioner debtor-spouses had no funds in their RCBC account, as was
done multiple times. There was the absence of deceit, there is no estafa. Moreover, as a former
judge, Mr. Vicencio need not ask the petitioners to place a date on the check. As holder of the
check, the Negotiable Instruments Law sanctions his signing/inserting a date on the instrument.

As the person in possession of the check, he has the prima facie authority to complete it by
filling up the blanks therein. Moreover, the negotiability of said checks would have still survived
considering that sec. 12 of Act. No. 2031 stated that the instrument is not rendered invalid by
reason only that it is antedated or post-dated. Persons are presumed to have taken care of their
business.

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Moreover, the High Court held that a check must be presented within a reasonable time from
issue. Otherwise, it would be considered a stale check after more than 6 months of non-
presentment.

Case no. 5
PHILIPPINE AIRLINES INC. vs. HON. COURT OF APPEALS, JUDGE RICARDO D.
GALANO (CFI OF MANILA), JAIME K. DEL ROSARIO (DEPUTY SHERIFF) & AMELIA
TAN
(G.R. No. L-49188, Jan. 30, 1990)

FACTS:
Amelia works under the name & style of Able Printing Press. Amelia sued petitioner for
damages and payment of 10% of her unrealized profit plus legal interest. When presented upon
appeal to the CA, the CA lessened the award ruled in favor of Amelia. Said judgment became
final and executory on May 31, 1977.

When the case was remanded to the trial court for execution on Sept. 2, 1977, Amelia filed for
the issuance of a writ of execution. Respondents judge & sheriff thus issued its order for
executing & referred for enforcement.

Four months later in February, Amelia motioned for the issuance of an alias writ of execution
since her awards were not yet satisfied. Petitioners contend however that they have fully
satisfied them, evincing the cash vouchers it issued as payment, signed and receipted by the
previous sheriff.

When the sheriff was ordered to produce the amounts paid, the same could not be fulfilled since
the sheriff disappeared/absconded. Thereafter, respondent judge cancelled Amelia’s
subsequent motions & issued an alias writ of execution against the petitioner, instating
respondent Jaime as sheriff.

Petitioner denied the order, contending that the debt had already been fully satisfied. Jaime, in
retaliation, served a notice of garnishment on the depository bank of the petitioner.
ISSUE:
Whether or not petitioner’s cash vouchers satisfied their obligation.
HELD:
NO. The High Court held that a check, whether manager’s or ordinary, is not legal tender. An
offer of a check in payment of a debt may be refused by the 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.

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Moreover, as a protective measure, the courts encourage the practice of payments by check is
provided with adequate controls to be instituted to prevent wrongful payment and illegal
withdrawal/disbursement of fund.

From the facts provided, it is indeed out of the ordinary that checks intended for a particular
payee are made out in the name of another, petitioner created a situation which permitted the
erring sheriff to personally encash the checks & misappropriate the proceeds, for the prejudice
resulted therefore, the petitioner himself must bear the fault.
Case no. 6
CALTEX (PHILIPPINES), INC. vs. COURT OF APPEALS & SECURITY BANK &
TRUST COMPANY
(G.R. No. 97753, Aug. 10, 1992)

FACTS:
Respondent bank is a commercial banking institution which issued 280 certificates of time
deposit amounting to P1.120 million to depositor Angel Dela Cruz.

Angel Dela Cruz on the other hand lost the CTDs. He was advised to submit an Affidavit of
Loss. 280 CTDs we thus issued in his favor. In reality however, Angel had already delivered the
previous CTDs to petitioner for his purchase of their fuel. With his new CTDs, Angel obtained a
loan from respondent bank and consigned his CTDs over to security to apply the proceeds
thereof upon maturity if the loan.

Petitioner thereafter went to the bank and presented the “lost CTDs” alleging that the same
were delivered to it as security for Angel’s purchases, respondent bank requested proof of said
allegation, when petitioner failed to supply the same, respondent bank demanded and claimed
the total value of the CTDs. Corollarily, the loan matured and respondent bank applied the
CTDs as payment. Petitioner thus demanded respondent to pay the aggregate value of the time
deposits, plus interest.

ISSUE:
Whether or not CTDs are negotiable instruments.

Whether or not petitioner became a holder in due course of the CTDs.

HELD:
Yes, the CTDs conform to the requisites provided for by sec. 1 of Act no. 2031. The negotiability
or non-negotiability of an instrument is determined from the writing, or from the face of the
instrument itself. The intention of the parties, if legally ascertained, is controlling. Moreover, a
CTD provide that the amounts deposited shall be repayable to the depositor.

From the facts provided relative to the instrument, it appears that the depositor is the bearer of
the same. It is therefore payable to whomever the bearer is at the timer of presentment. Also,
the High Court held that the petitioner can no longer recover on the CTDs. The CTDs were
merely delivered to the petitioner by Angel as security for Angel’s purchases of its fuel products.

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“Bearer” instruments, for the valid negotiation thereof, requires both delivery and indorsement.
Moreover, the character of the transaction is to be determined by their intention, regardless of
what language was used or what the form of the transfer was.

An instrument is negotiated when it is transferred from one person to another in such a manner
as to constitute the transferee as the holder thereof. A holder may be the payee or indorsee of a
bill or note who is in possession of it, or the bearer thereof. Where the holder has a lien on the
instrument arising from the contract, he is deemed a holder for value to the extent of his lien.
Case no. 7
THE HONGKONG & SHANGHAI BANKING CORPORATION LIMITED – PHILIPPINE
BRANCHES vs. COMMISSIONER OF INTERNAL REVENUE
(G.R. No. 166018, June 4, 2014)

FACTS:

Petitioner performs custodial services on behalf of its investor-clients with respect to their
passive investments in the Philippines, such as shares of stocks in domestic corporations. As a
custodian bank, it serves the collection/payment agent with respect to dividends and other
income derived from its investor-clients’ passive investments. Petitioner likewise pays
Documentary Stamp Tax amounting to at least P19.5 million & P32.904 million.

BIR Commissioner Beethoven Rualo issued BIR ruling to the effect that instructions or advises
from abroad on the management of funds located in the Philippines which do not involve
transfer of funds from abroad are not subject to DST.

Base on the said ruling, petitioner filed an administrative claim for the refund of their DST
payment. After their claim was denied, petitioner filed a complaint at the CTA, which ordered for
their refund. The CTA held that the electronic instructions (SWIFT) sent by the clients of
petitioner cannot be considered as negotiable instruments as they lack the feature of
negotiability, the ability to be transferred. These instructions therefore are mere memoranda.

On appeal, the CA reversed CTA decision & ruled that the instructions are subject to DST. The
CA ruled that the imposition of DST is not on the exchange or order for payment of money but
on the acceptance/payment of the said bill or order. It further ruled that what is vital to the valid
imposition of DST is the existence of the requirement of acceptance/payment by the drawee
(HSBC) of the order of payment from its investor/clients & that the order was drawn from a
foreign country & payable in the PHL. Lastly, the CA held that the DST was exacted on HSBC’s
exercise of its privilege under tits drawee-drawer relationship with its client-investors through the
execution of a specific instrument, which, in the case at bar, is the acceptance of the order for
payment of money.

ISSUE:
Whether or not SWIFT is a negotiable instrument subject to payment of DST.

HELD:

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No. The High Court held that SWIFT messages are not negotiable instruments as they lack the
feature of negotiability which is the ability to be transferred. SWIFT messages are mere
memoranda of the transaction consisting of the actual debiting of the investor-client’s-payor’s
local or foreign currency account in the Philippines. SWIFT messages are not signed by the
investor-clients as supposed drawers of a bill of exchange; (2) they do not contain an
unconditional order to pay a sum certain in money as the payment is supposed to come from a
specific fund or account of the investor-clients; & (3) SWIFT messages are not payable to order
or to bearer but to a specifically designated 3td party.

The High Court further ruled that a bill of exchange is an unconditional order in writing
addressed by 1 person to another, signed by the person giving it, requiring the person to whom
it addressed to pay on demand or at a fixed or determinable future time a sum certain money to
order or to bearer.

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