JUAN CASABUENA, 
Petitioner, v. HON. COURT against petitioner and Thelma Casabuena, representing
OF APPEALS and SPOUSES CIRIACO
URDANETA AND OFELIA IPIL-
URDANETA, Respondents
FACTS:
Ciriaco Urdaneta is one of the fortunate grantees of a
parcel of land purchased by the City of Manila
Urdaneta was indebted to Benin, to secure which debt
the spouses Urdaneta ceded their rights over the land
through a deed of assignment.
Urdaneta assigned his rights and interests in one-half
(1/2) of the lot to Arsenia Benin covering full payment
of his indebtedness in the amount of five hundred pesos
(P500.00).
A deed of sale with mortgage was executed,
with Urdaneta undertaking to pay the City the
amount of five thousand five hundred pesos (P5,500.00)
for a period of forty years in 480 equal installments.
After having incurred additional indebtedness in the
amount of two thousand pesos (P2,000.00), Urdaneta
executed another deed of assignment involving the
whole lot, with assignee Benin agreeing to shoulder all
obligations including the payment of amortization to the
City
The parties verbally agreed that Urdaneta could redeem
the property upon payment of the loan within three (3)
years from the date of assignment; failure to pay would
transfer physical possession of the lot to Benin for a
period of fifteen (15) years, without actual transfer of
title and ownership thereto.
Meanwhile, the administration of the property was
assigned to brothers Candido and Juan Casabuena,8 to
whom Benin had transferred her right, title and interest
for a consideration of seven thousand five hundred pesos
(P7,500.00).
Their relationship soured, however, compelling the latter
to file a complaint for ejectment against the Casabuena,
alleging that the latter stopped paying rentals on June 15,
1980 and ignored a demand letter to him.
Casabuena asserted that he did not receive copies of the
receipts issued by Tanjuakio because the tenor of the
writings therein made him appear as a tenant of the
premises paying rentals and not paying for monthly
amortizations for the construction cost of the building.
The city court12 dismissed the complaint. Affirmed by
the Regional Trial Court of Manila,13 the decision was
again affirmed by the appellate court.14 His motion for
reconsideration having been denied,15 Tanjuakio
appealed to this Court armed with a petition for review
on certiorari which, to his disappointment, was denied.
Upon learning of the litigation between petitioner and
Benin, Urdaneta asked them to vacate the property and
surrender to him possession thereof within fifteen (15)
days from notice.
Petitioners adamant refusal to comply with such demand
resulted in a complaint for ejectment and recovery of
possession of property filed by Urdaneta against him
(Casabuena), Benin and Tanjuakio
For lack of jurisdiction, the complaint was dismissed by
the city court
On November 3, 1987, they filed a complaint for
recovery of possession of the property with damages
the heirs of Candido Casabuena.
The Urdaneta spouses succeeded in having the Court
declare them as its true and lawful owners with the deed
of assignment to Benin merely serving as evidence of
Ciriacos indebtedness to her in view of the prohibition
against the sale of the land imposed by the City
government.
On appeal, the appellate court affirmed17 the findings of
the lower court.
Casabuena’s contention: Petitioner files this petition for
review on certiorari, arguing that the assignment by
Benin was made in her capacity as creditor of the
spouses, thus allowing her to transfer ownership of the
property to her assignees.
ISSUE:
WON a deed of assignment transfer ownership of the
property to the assignee
HELD: NO.
Assignment of Credit
An assignment of credit is an agreement by virtue of
which the owner of a credit, known as the assignor, by a
legal cause, transfers his credit and its accessory rights to
another, known as the assignee, who acquires the power
to enforce it to the same extent as the assignor could
have enforced it against the debtor.
Stated simply, it is the process of transferring the right of
the assignor to the assignee, who would then be allowed
to proceed against the debtor.
No transfer of ownership
The assignment involves no transfer of ownership but
merely affects the transfer of rights which the assignor
has at the time, to the assignee.
In the case of Benin
Benin having been deemed subrogated to the rights and
obligations of the spouses, she was bound by exactly the
same conditions to which the latter were bound. This
being so, she and the Casabuenas were bound to respect
the prohibition against selling the property within the
five-year period imposed by the City government.
In the case at bar, the Casabuenas merely stepped into
Benin's shoes, who was not so much an owner as a mere
assignee of the rights of her debtors. Not having
acquired any right over the land in question, it follows
that Benin conveyed nothing to defendants with respect
to the property.
As a result, notwithstanding the encumbrance of the
Bulacan lot through a deed of assignment in favor of
Benin, the spouses Urdaneta remain its owners, to the
exclusion of petitioner.
(nakalagay sa syllabus)
Section III
Transfers of Non-negotiable Credits
Art. 348, Code of Commerce
The assignor shall answer for the legality of the credit
and the capacity in which he made the transfer; but he
shall not answer for the solvency of the debtor unless
there is an express agreement to the effect.
BANCO DE ORO SAVINGS AND MORTGAGE
BANK, petitioner,
vs.
EQUITABLE BANKING CORPORATION,
PHILIPPINE CLEARING HOUSE
CORPORATION, AND REGIONAL TRIAL
COURT OF QUEZON CITY, BRANCH XCII
(92), respondents.
FACTS:
Equitable Bank drew six crossed manager’s checks
having an aggregate amount of (P45,982.23) and
payable to certain member establishments of Visa Card.
Subsequently, the Checks were deposited with BDO to
the credit of its depositor, a certain Aida Trencio.
Following normal procedures and after stamping at the
back of the checks the usual endorsements, BDO sent
the checks for clearing through the Philippine Clearing
House Corporation (PCHC).
Accordingly, Equitable Banking paid the checks; its
clearing account was debited for the value of the checks
and BDO’s clearing account was credited for the same
amount.
Thereafter, Equitable Banking discovered that the
endorsements appearing at the back of the checks and
purporting to be that of the payees were forged and/or
unauthorized or otherwise belong to persons other than
the payees.
Equitable Banking presented the checks directly to BDO
for the purpose of claiming reimbursement from the
latter.
However, BDO refused to accept such direct
presentation and to reimburse Equitable Banking for the
value of the checks.
Equitable filed a complaint against BDO praying for
judgment to require the latter to pay the plaintiff the sum
of P45,982.23 with interest at the rate of 12% per annum
from the date of the complaint plus attorney's fees in the
amount of P10,000.00 as well as the cost of the suit.
The Arbiter rendered a decision in favor of the Equitable
Bank and against the BDO ordering the PCHC to debit
the clearing account of the defendant, and to credit the
clearing account of the plaintiff of the amount of
P45,982.23 with interest at the rate of 12% per annum
from date of the complaint and Attorney's fee in the
amount of P5,000.00.
In a motion for reconsideration filed by the petitioner,
the Board of Directors of the PCHC affirmed the
decision of the said Arbiter
BDO’s contention: Petitioner maintains that the PCHC is
not clothed with jurisdiction because the Clearing House
Rules and Regulations of PCHC cover and apply only to
checks that are genuinely negotiable.
Moreover, BDO argued that such checks are non-
negotiable instruments.
ISSUES:
1. WON only negotiable checks are within the
jurisdiction of PCHC.
2. WON BDO can escape liability by reason of forgery.
3. WON BDO is estopped from claiming that checks
under consideration are non-negotiable instruments.
HELD:
1. NO. PCHC’s jurisdiction is not limited to negotiable
checks only. The term check as used in the said Articles
of Incorporation of PCHC can only connote checks in
general use in commercial and business activities. Thus,
no distinction. Ubi lex non distinguit, nec nos
distinguere debemus. Checks are used between banks
and bankers and their customers, and are designed to
facilitate banking operations. It is of the essence to be
payable on demand, because the contract between the
banker and the customer is that the money is needed on
demand.
2. NO. A commercial bank cannot escape the liability of
an endorser of a check and which may turn out to be a
forged endorsement. Whenever any bank treats the
signature at the back of the checks as endorsements and
thus logically guarantees the same as such there can be
no doubt said bank has considered the checks as
negotiable.The collecting bank or last endorser generally
suffers the loss because it has the duty to ascertain the
genuineness of all prior endorsements considering that
the act of presenting the check for payment to the
drawee is an assertion that the party making the
presentment has done its duty to ascertain the
genuineness of the endorsements.
3. YES. BDO is estopped from raising the defense of
non-negotiability of the checks in question. It stamped
its guarantee on the back of the checks and subsequently
presented these checks for clearing and it was on the
basis of these endorsements by the petitioner that the
proceeds were credited in its clearing account.
BDO by its own acts and representation can not now
deny liability because it assumed the liabilities of an
endorser by stamping its guarantee at the back of the
checks.
BDO having stamped its guarantee of “all prior
endorsements and/or lack of endorsements” is now
estopped from claiming that the checks under
consideration are not negotiable instruments. The checks
were accepted for deposit by the petitioner stamping
thereon its guarantee, in order that it can clear the said
checks with the respondent bank. By such deliberate and
positive attitude of the petitioner it has for all legal
intents and purposes treated the said cheeks as
negotiable instruments and accordingly assumed the
warranty of the endorser when it stamped its guarantee
of prior endorsements at the back of the checks. It led
the said respondent to believe that it was acting as
endorser of the checks and on the strength of this
guarantee said respondent cleared the checks in question
and credited the account of the petitioner. Petitioner is
now barred from taking an opposite posture by claiming
that the disputed checks are not negotiable instruments
BDO is not entitled to receive payment
Nothing is more clear than that neither the
defendant's(BDO) depositor nor the defendant is entitled
to receive payment payable for the Checks. As the
checks are not payable to the defendant's depositor,
payments to persons other than payees named therein,
their successor-in-interest or any person authorized to
receive payment are not valid.

Although the subject checks are non-negotiable the

responsibility of BDO as indorser thereof remains.

Purpose of Endorsement

To receive the funds, the payee must sign, or endorse,

the back of the check. This signature, called an
endorsement, informs the bank or credit union that
whoever signed the check is the payee and wants to
accept the money.
THE PHILIPPINE BANK OF Accommodation party
COMMERCE, plaintiff-appellee,
vs. An accommodation party is one who has signed the
JOSE M. ARUEGO, defendant-appellant. instrument as maker, drawer, indorser, without receiving
value therefore and for the purpose of lending his name
FACTS: to some other person.

The Philippine Bank of Commerce instituted against Liability

Jose M. Aruego Civil Case No. 42066 for the recovery
of the total sum of about P35,000.00 with daily interest
thereon from November 17, 1959 until fully paid and
commission equivalent to 3/8% for every thirty (30)
days or fraction thereof plus attorney's fees equivalent to
10% of the total amount due and costs.
The sum sought to be recovered represents the cost of
the printing of "World Current Events," a periodical
published by the Aruego.
To facilitate the payment of the printing the Aruego
obtained a credit accommodation from the PBC.
Such person is liable on the instrument to a holder for
value, notwithstanding such holder, at the time of the
taking of the instrument knew him to be only an
accommodation party.
In lending his name to the accommodated party, the
accommodation party is in effect a surety for the latter.
He lends his name to enable the accommodated party to
obtain credit or to raise money. He receives no part of
the consideration for the instrument but assumes liability
to the other parties thereto because he wants to
accommodate another.

Thus, for every printing of the "World Current Events,"
the printer, Encal Press and Photo Engraving, collected
the cost of printing by drawing a draft against the PBC,
said draft being sent later to Aruego for acceptance.
Aruego’s contention: Aruego contends that he signed the
drafts only as an accommodation party and as such,
should be made liable only after showing that the
drawer(the printer Encal Press and Photo Engraving) is
incapable of paying.
Moreover, Aruego stated that unlike real bills of
exchange, where payment of the face value is advanced
to the drawer only upon acceptance of the same by the
drawee, in the case in question, payment for the
supposed bills of exchange were made before
acceptance; so that in effect, although these documents
are labelled bills of exchange, legally they are not bills
of exchange but mere instruments evidencing
indebtedness of the drawee who received the face value
thereof, with him as only additional security of the same.
In the instant case, Aruego signed as a drawee/acceptor.
Under the Negotiable Instrument Law, a drawee is
primarily liable. Thus, he should not have signed as an
acceptor/drawee because in doing so, he became
primarily and personally liable for the drafts.
3. NO. For failure to disclose his principal, Aruego is
personally liable for the drafts he accepted. Section 20 of
the Negotiable Instruments Law 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.”

ISSUES:

1. WON the drafts may be considered negotiable bills of

exchange.

2. WON an accommodation party is liable/Aruego is

liable

3. WON Aruego may be held liable only as an agent.

HELD:

1. YES. Under the Negotiable Instruments Law, a bill of

exchange is an unconditional order in writing addressed
by one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum
certain in money to order or to bearer. As long as a
commercial paper conforms with the definition of a bill
of exchange, that paper is considered a bill of exchange.
The nature of acceptance is important only in the
determination of the kind of liabilities of the parties
involved, but not in the determination of whether a
commercial paper is a bill of exchange or not.

2. YES.
METROPOLITAN BANK & TRUST
COMPANY, petitioner,
vs.
COURT OF APPEALS, GOLDEN SAVINGS &
LOAN ASSOCIATION, INC., LUCIA CASTILLO,
MAGNO CASTILLO and GLORIA
CASTILLO, respondents.
FACTS:
A certain Eduardo Gomez opened an account with
Golden Savings and deposited over a period of two
months 38 treasury warrants with a total value of
P1,755,228.37.
They were all drawn by the Philippine Fish Marketing
Authority and purportedly signed by its General
Manager and countersigned by its Auditor.
All these warrants were subsequently indorsed by Gloria
Castillo as Cashier of Golden Savings and deposited to
its Savings Account No. 2498 in the Metrobank branch
in Calapan, Mindoro. They were then sent for clearing
by the branch office to the principal office of Metrobank,
which forwarded them to the Bureau of Treasury for
special clearing.
The indication of Fund 501 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 Negotiable
Instruments Law. The simple reason is that this law is
not applicable to the non-negotiable treasury warrants.
2. YES. Metrobank was indeed negligent in giving
Golden Savings the impression that the treasury warrants
had been cleared and that, consequently, it was safe to
allow Gomez to withdraw the proceeds thereof from his
account with it. Without such assurance, Golden Savings
would not have allowed the withdrawals; with such
assurance, there was no reason not to allow the
withdrawal. However, withdrawals released after the
notice of the dishonor may be debited as it will result to
unjust enrichment.

Metropolitan Bank allowed Golden Savings to withdraw

thrice from uncleared treasury warrants as the former
was exasperated over persistent inquiries of the latter
after one week.

Metrobank informed Golden Savings that 32 of the

warrants had been dishonored by the Bureau of Treasury
on July 19, 1979, and demanded the refund by Golden
Savings of the amount it had previously withdrawn, to
make up the deficit in its account.

The demand was rejected. Metrobank then sued Golden

Savings in the Regional Trial Court of Mindoro

Tria court and appellate court ruled in favor of Golden

Savings.

Metrobank’s contention: The treasury warrants involved

in this case are negotiable instruments. And 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
Negotiable Instruments Law.

ISSUES:

1. WON the treasury warrants are negotiable instruments

2. WON Metrobank’s negligence would bar them from

recovery.

HELD:

1. NO. A no less important consideration is the

circumstance that the treasury warrants in question are
not negotiable instruments. Clearly stamped on their face
is the word "non-negotiable." Moreover, and this is of
equal significance, it is indicated that they are payable
from a particular fund, to wit, Fund 501.

An order or promise to pay out of a particular fund is

not unconditional.
IN THE MATTER OF THE INTESTATE ESTATE
OF JUSTO PALANCA, Deceased, GEORGE
PAY, petitioner-appellant,
vs.
SEGUNDINA CHUA VDA. DE
PALANCA, oppositor-appellee.
FACTS:
George Pay is a creditor of the Late Justo Palanca who
died in Manila on July 3, 1963. The claim of the
petitioner is based on a promissory note dated January
30, 1952, whereby the late Justo Palanca and Rosa
Gonzales Vda. de Carlos Palanca promised to pay
George Pay the amount of P26,900.00, with interest
thereon at the rate of 12% per annum.
Pay filed a petition to the trial court praying that
respondent Segundina, the surviving spouse of the late
Justo Palanca, be appointed as administratrix of a
residential dwelling at Taft Avenue, Manila, in the name
of Justo Palanca, and assessed at P41,800.00. The idea is
that once said property is brought under administration,
George Pay, as creditor, can file his claim against the
administratrix.
The lower court dismissed the petition due to the
following:
1) Segundina refuses to be appointed as administratrix;
2) the property sought to be administered no longer
belonged to the debtor, the late Justo Palanca; and
3) the rights of Pay had already prescribed considering
that Pay himself admitted expressly that he was relying
on the wording "upon demand."; thus the 10-yr
prescriptive period applies and has, by the time of the
filing of the petition, lapsed.
Furthermore, when the “lower court inquired whether
any cash payment has been received by either of the
signers of this promissory note from the Estate of the
late Carlos Palanca. Petitioner informed that he does not
insist on this provision but that petitioner is only
claiming on his right under the promissory note.”
The promissory note, dated January 30, 1952, 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'. . . .
As stated, this promissory note is signed by Rosa
Gonzales Vda. de Carlos Palanca and Justo Palanca."
Pay appealed to the SC, assailing the correctness of the
rulings of the lower court as to the effect of the refusal of
the surviving spouse of the late Justo Palanca to be
appointed as administratrix, as to the property sought to
be administered no longer belonging to the debtor, the
late Justo Palanca, and as to the rights of petitioner-
creditor having already prescribed.
The promissory note indicated payment “upon demand”.
Pay relied on this to mean that prescription would not lie
unless there is demand from them. The petition was filed
fifteen years after its issuance.
ISSUE:
WON Pay is barred by prescription in his attempt to
collect on a promissory note executed more than 15
years earlier with the debtor sued promising to pay either
upon receipt by him of his share from a certain estate or
upon demand (the basis for the action being the latter
alternative)
HELD: YES.
From the manner in which the promissory note was
executed, it would appear that petitioner was hopeful
that the satisfaction of his credit could he realized either
through the debtor sued receiving cash payment from the
estate of the late Carlos Palanca presumptively as one of
the heirs, or, as expressed therein, "upon demand." There
is nothing in the record that would indicate whether or
not the first alternative was fulfilled. What is undeniable
is that on August 26, 1967, more than 15 years after the
execution of the promissory note on January 30, 1952,
this petition was filed. The defense interposed was
prescription. Its merit is rather obvious.
Article 1179 of the Civil Code provides: "Every
obligation whose performance does not depend upon a
future or uncertain event, or upon a past event unknown
to the parties, is demandable at once." This used to be
Article 1113 of the Spanish Civil Code of 1889. As far
back as Floriano v. Delgado, 5 a 1908 decision, it has
been applied according to its express language.
The obligation being due and demandable, it would
appear that the filing of the suit after 15 years was much
too late. For again, according to the Civil Code, which is
based on Section 43 of Act No. 190, the prescriptive
period for a written contract is that of 10 years.
This is another instance where this Court has
consistently adhered to the express language of the
applicable norm. There is no necessity therefore of
passing upon the other legal questions as to whether or
not it did suffice for the petition to fail just because the
surviving spouse refuses to be made administratrix, or
just because the estate was left with no other property.