FE] COMMERCIAL AV, eee NEGOTIABLE INSTRUMENTS LAW REQUISITES OF NEGOTIABILITY 1, A hired B to deliver P16.4 Billion worth of mothamphetamine hydrochloride to C. As payment, A issued a bill of exchange in the amount of P1 Million payable ta & or order with his A Bank as drawee. A was not aware of the illegal transaction between A and B. B negotiated the instrument to his business partner D who paid it for value and was a stranger to A. a. Can It be considered a nagotiable instrument? ‘Yes. The theck issued for an immoral of itlegal cause would still be 2 negotiable instrument. In agcertaining the character of the instrument, the primordial and only consideration is its compliance with Sec. 1 of the NIL. Sec, 24 provides that every negotiable instrument is deemed prima facie to have been issued for @ valuable consideration. led to. comply with the requisites of Sec. 1 of a negotiable insument; it Assuming D is abo by said new holder?. Yes, the drawer negofiated. Illegali Jo pré-signed several check ay Jehhad no Baye Se or amount, to answer for the expenses of his business, The-BMIhK Ehecks were e Gfe-His business partner, Fau, with the specific instruction not to fill thein'6y ius hotification to and approval by Jo. Pau g t ded the money for the construction of his house. Marti believed the res e) Pau P2,000,000.00. In exchange, Pau simultaneously delivered to Marti one of the blank checks Jo pre-signed with the blank portions filled out with the words “Cash”, “Twa Million Pesos Only and dated “23 May 2014", When Marti deposited the check, it was dishonored for the reason “Account Closed”. When Marti demanded payment from Jo, the latter denied authorizing the loan or the check’s negotiation and asserted that he was not a privy to the loan agreement. Decide whether Jo is liable to Marti. No, Jo is not liable. Under Sec. 14 of the Negotiable Instruments Law, if the maker or drawer delivers a pre-signed blank paper to another person for the purpose of converting it into a negotiable instrument, that person is deemed to have prima facie authority to fill it up. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, two requisites must exist: (1) that the blank must be filled strictly in accordance with the authority given; and (2) it must be filed up within a reasonable time, If it was proven that the instrument had not been filed up strielly in accordance with the authority given and within a reasonable time, the maker can set this up a8 a personal defense and avoid liabilityPeg —C COMMERCIAL LAV eee In this case, Pau exceaded his authority to fil up the blanks and use the check which was limited to the use of the checks for the operation of their business and on the condition that Jo's prior approvable be first secured. While Pau had a prima facie authority to complete the check, such prima facie authority does not extend to its use, ‘subsequent transfer ar negotiation, ence the check Is completed, Thus, only the authority to complete the check Is presumed. Thera is no evidence that Pau ever secured prior approval from Jo to fill up the biank ar to use the check, In addition, Marts knowedge that Ja is not a party or a privy to the contract of loan and correspondingly had no obligation or liability to him renders him dishonest, hence, in bad faith and therefore not a holder in due course. Accordingly, the defense of incomplete but delivered instrument under Sec. 14 of tha Negotiable Instruments law will lie against him (Patrimonio v. Gutierrez, G.R. No. 187769, June 4, 2014), MATERIAL ALTERATION Mat issued a check for P300,000 drawn against Pat Bank (drawee bank) and made payable to Marketing, Inc. or order, The check ’s account at Yats Bank (collecting Pat Bank refused to honor the bank) which then sent the c Ju Marketing, Inc. sued the a. Date: b. Sum payabl cc. Time or placerd g. Any other "No, drawee bank Oioftina s the serial number of the check, an item es Sec. 1 of the NIL. The the contemplation of the (Intemational Corp. In the instant sui drawee bank as the ke it liable for tha é to make it liable for j Cee because there is no privil gibt betweer nm,-Iric. as payee, and Pat Bank as the drawee bank. However, if thé ectbey bahivlarSa-abuse of right which causes damage not only to the issuer of the check ‘buraisp-to4 payee has @ cause of action against the drawee bank under quasi-delict 4. What is “No Erasure Rule"? Under Clearing House Operating Memorandum No. 15-460 (effective January 4, 2016), any check with erasure, alteration, and/or deficiency — even if countersigned, except for post-dated checks bearing the required bank stamp, shall no longer be eligible or acceptable for clearing TI ; Aand B are the president and vice-president of Rubber, inc., respectively. In accommodation of their top client/customer, C, they issued a check payable to D, Since the check was under the account of Rubber, Inc., the same was signed by A and Dino Guan. When D encashed the check, it was dishonored for insufficiency of funds. Hence, D filed an action against Rubber, Inc. and pointed out that the accommodation party in this case is Rubber, Inc. a. Who is an accommodation party? What is his liability to the holde:An accommodation party is One who meets all the three requisites, viz: (1) he must be a party to the: instrument, signing as maker, drawer, acceptor, or indorser, (2) he must not receive value therefor: and (3) he must sign for the purpose of lending his name or credit to some other parson. An accommodation party lends his name to enable the accommodated party to obtain credit or to raise money; he recsives no part of the consideration for the instrument but assumes liability to the other partyfies thereto. The acoommodation party is liable on the instrument to. a holder for value even though the holder, at the tima of taking the instrument, knew him or her to be maraly an accommodation party, as if the contract was not for accommodation (Eusebio Gonzales v. Phitippine Commercial & International Bank, et al., G.R. No. 180257, February 23, 2011), Gan Rubber, Inc. be held liable as accommodation party? No, D cannot hold Rubber, inc, as accommodation party. While it is true that an accammedation party is liable on the instrument to a holder for value, although such holder at the time of taking the instrument knew him to ba enly an acoommadation party (NH. See, 29), such rule does not inehude: nar apply {0 corporations which are accommodation parties. This is because the issue or indorsement, of a negotiable papar by a carporati on and for the accermmadation of another is an ultra vires act. Conseq is a real defense which may be GR. No. 40599, September 15, personal accountant, such payment. TI When the check payment arguing a. Is € correct? No, C's argumer Findorser “unless he clearly city” (Tong v. Ting, G.R. Gk of the check, makes him indicates by app No. L-26767, Febir liable as a genera against A? No, D need not p i FaiiecA belie ae gfin sud 66, par.2 of the NIL states that a general indor r = id necessary proceedings on dishonor be duly takén r to any subsequent indorser who may be compelled b. Can C claimthat: secondarily i dl pr ghslthat he must first proceed ase to be merely secondarily liable: they become principal debt a to that of the original obligor, The holder of the negotiable instru d ‘against the drawer before suing the indorser (Tuason v. Heirs of Ramos, 5 red it to Clark. In turn, Clark negotiated it by mere delivery to Jack, who endorsed it especially to Sol. Sol negotiated it by special indorsement to Tiff, who negotiated it to Simon by mere delivery. Leah did not pay. To whom are Glark, Jack, Sol, and Tiff liable? Clark negotiated the instrument by mere delivery, hence he is not secondarily liable at all. He is only liable for breach of warranty to his immediate transferee — Jack — but no such breach appears in the given problem (NIL, See. 68). Jack is secondarily liable to Sol and Tiff. A person who indorses @ bearer instrument is liable only to persons who acquire file through his indorsement (NIL, Sec. 40). In this problem, only Sol and Tiff acquired their titles through the special indorsement of Jack. Simon cannot trace his title from the indorsement of Jack, hence the latter is not liable to him.i OE ee Consequently, Sol is secondarily liable oniy ta Tiff because Tis title was derived from the indorsement of Sal. Sol is not secondarily liable to Simon hecause the latter cannot trace his tlle from the incorsement of Sol Lastly. Tiff is liable to Simon because she is an Immediate party. According to Sec. 40 of the NIL, where an Instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but the person Indorsing specielly is liable a3-indorser to only such holders as make tile through his indorsement. Tiff is also lable to Simon if there Is breach af warranty (NIL. Sec. 65) (OLDER IN DUE COU! 8. Alissued a negotiable promissory note to B and authorized the latter to fill up the amount in blank in the sum of P500. However, B put P5,000 in violation of the instruction. B negotiated the note to who had knowledge of the infirmity. C indorsed the note fo D who is an innocent purchaser good faith and for value, who in turn, indorses said note to E for value, but who has knowledge of the infirmity, Can E enforce the note ag A holder in due. Pefade3 ty 90k the instrut ornate eae LAUR d by Baginst A no toariy Te holder in d all the rights. 2 9. Chow and King rec deposited the che bank, Porki Bank, Pigue Bank to the say} altered from P4,000,00 ta bank inthis case? A.collecting bank is anyaai A. depositaryicollecting presentment with the Rlating a bank pair draining of ts assats (Vivas @ buguist 7, 2013), 129. Boss Bank ceased tie difficulties. Unable BSP ordered its claw untered financial ourse of business, ‘investment, Dan, the fh an exclusive option exercise its exclusive option, Boss Bank’ a Boss Bank to comply with the contract? 4 No, MM Industies ca pst to buy, Undar Sec. 30 of the GBL, the receiveniingiediately : ofthe bank for the benefit of its creditors. The bar jibe 4 @ hority to transact business in connection with the bape eneivership (Abacus Real Estate Devolopmont Corll 0, Apt 06, 2005). Upon Chad the authority to grant an is unenforceable against exclusive option to pulhagé the bank. oS § consecutive installments, y against Adam. During the prayed for the dismissal of the olvent bank, all claims against the the civil case be dismissed? prompting Faybank to iti al pendency of the civil case, Raytiaghy [nderwent civil case arguing that in cases ofp t bank should be filed in the liquictatlon’prabet 3 No, the civil case should not be dismissedFNe exclUsiyeyurisdiction of the liquidation court pertains oniy to the adjudication of claims against the bank. It does nd\obver the reverse situation where it is the bank which files a claim against another parson or legal entity (Manafo v. Court of Appeals, G.R. No. 141297, ‘October 8, 200%), TR ENDING ACT (TI 131, Renz borrowed P3,000,000 from Cappy Land Bank {CLB) secured by a real estate mortgage a collateral. Unable to pay the loan, CLB foreclosed the mortgaged properties. The balance unpaid was 2,355,000 pesos, broken down to: 1,500,000 as principal debt and 857,000 as interest. In the foreclosure sale, the mortgaged property was sold for 3.5 million pesos. The sheriff tumed over this amount to CLB, CLB remitted 560,000 to Renz. Renz demands that the full difference of 4,145,000 be remitted to him. CLB refused and contended that the bid amount Increased because it now included litigation expenses and attomey’s fees as well as Interests and penalties as recomputed. Was the deduction of other charges proper? _. Gay Bens Co.tece or lawia! CS SSS No, the deduction of the other changes. was improper. Sec. 4 of the Truth in Lending Act states that any creditor shall furnish to each person to whom credit is extended, prior to tha consunwmation cf the transaction, @ clear statement in writing setting forth, to the extent anplicabie and in accordance with rules and regulations prescribed by the Board. tha fallowing information: ox 6, The finance charge expressed in terms of poses and centavos ex Penalty charge is liquidated damages resulting from a breach which falls undlor iter (6) or finance charge. A finanog charge represents the amount to be paid by the debtor incident to the extansion of credit. A. panalty clause may bs stipulated in the agreement provided that the amount or rate of the charge and the conditions under which it Is to be paid are clearly and unequivocally stated before the contract is perfected. CLB failed to state in the disclosure statement the penatly charges, which vitiates the consent of Renz as regards the penally charges (EF! v, Spouses Yu, G.R No. 184122, January 20, 2010). SECRECY OF BANK DEPOSITS LAW 182. Explain the Rule on Secrecy Ng institutions in the Philippines divisions and h¥Cool ba examined, inquired, oF loo __ The exceptions afa2} a. When there is wri b. Impeachment ce sident, Vice President, and the Ombudsman for bn, other high crimes or litigation (LSB, In case of proseoubl 3019); f. Incase of inquiry a tax compromise’ (Mii 9. Upon onder of a competent cou h (orcaimd i. DOSRI loans and peat; éxaming f |. Account of a foreign tral s Kade liable for damages to the : i ih of BRM a, @3423-August 21, 1997): k ‘ffigetsbeSferfne and gather information on the ( G3th’s-frrancial institution in connection with anl-terorism case under he Huger AchReAeME-0872). |. Examination of deposits of persons char G.R. No. 157294-95, November 30, 133, The creditors of Soba, Inc., a corporation which was declared insolvent signed a compromise agreement which contains a walver of confidentiality of Soba’s bank accounts. ls the walver valid? No. itis void, The existence of a waiver must be positively demonstrated since a waiver by implication is not normally countenanced. The norm is that a waiver must not only be voluntary, but must have been made knowingly, inleligenily, and with sufficient awareness of the relevant circumstances and likely consequences. ‘There was no weitten consent given by Soba or its representative that Soba is waiving the confidentiality of its bank deposits. Soba is nol bound by the said provision since it was withoul the express consent of ‘Soba who was not a party and signatory to the said agreement (Do/la Adela Export Intemational, Inc. v. Trade and investment Development Corporation, G.R. No, 201931, February 11, 2015). San Bea Coutor or Law 46 S017 Ceuvenitern Rae Oeceaeinve ©134, Lorena won the case against ABC Co. for a collection of sum of money. Seeking ta gamish the bank deposit of ABC Go., the RTC of Manila issued a notice of garnishment to SBS Bank to inquire about the existence of ABC Co.'s account In their Bank. The Bank Manager refused to disclose any information invoking the Secrecy of Bank Deposits Law. Was the Bank manager correct? No, the bank manager was incorrect. The prohibition against examination of or inquiry into a bank deposit under the Bank Secrecy Law does not preclude its being gamished to insure satisfaction of a judgment. The inquiry was merely whether or not the bank account existed for the purpose of gamishing the said Account for satistaction of judgment. The inguiry of the existence of the deposit is purely incidental to the execution process (China Banking Corporation v. Ortega, G.R, No, L-34964, January 31, 1973). 135. Lla received an Order from the Ombudsman to produce several bank documents tor purposes of inspection ia camere relative to various accounts maintained at LSS Bank where Lia is the branch manager. The accounts to be inspected are Invelved in a case pending with the Ombudsman. May the bank manager refuse to comply with the order of the Ombudsman? ‘Yes, the bank manager may refuse to comply with the order of tha Grebudsman. Before an in camera inspection must be a pending case before & Jurisdiction er of the per i ink porsonnal e 2 gich inspection may fesSimbudsman is nat 136, What is the relatio ‘The relationship betwa governed by the Conditions constitute, dB pw recovered where the Geferidant ¥. Armauit, G-R. No ent, Such terms and oral damages may be 137. DEX Corp. and A, a savings account ama bank solely in his Im the Philippine Daposit itShall be presumed to belong more natural persons hold (000 fram PDIG (PDIC Act, Sac entirely to the juridical ont Sigh). 138. BA has a time deposit with PB-Bam lonetary Board issued a resolution placing PB Bank under receiverstiip-“After thet of such Resolution but before the receipt thereof by PB Bank on May 26, 1937,8 Bank pre-terminating his time deposits and re-depositing the funds inte 28 new ubder the names of several co-depositors. Of the new time deposits, BA pre-terminated 8 and withdrew the value thereof. When a cl was: made on the remaining 20 time deposits, the PDIG rejected the claim on the ground that they were not deposits made in the usual course of business. Did PDIC validly reject the claim? Na, PDIG did not validly reject the claim. PB Bank and its client should be given the benefit of the doubt that they were not aware that the Monetary Board resolution had been passed. Mere conjectures that PB Bank had actual knowledge of its impending closure do not suffice. The resolution could not thus have nullified the transactions that were entered into prior to the receipt of the Resolution by PB Bank (Phulppines Deposi Insurance Camp. v. CA, ot. al, G.R. No. 126911, Apri 30, 2003).