METROPOLITAN BANK & TRUST COMPANY V.
COURT OF APPEALS
February 18, 1991 | GR No. 88866 | Cruz, J. | Non-Negotiable Instruments
DIGEST MADE BY:
Dave U.
CLUE: Treasury Warrants
PETITIONER: Metropolitan Bank & Trust Company
RESPONDENTS: Court of Appeals , Golden Savings & Loan Association Inc., Lucia
Castillo, Magno Castillo, and Gloria Castillo
DOCTRINE:
In order for an instrument to be considered as negotiable, it must meet the requirement
of Section 1 of the Negotiable Instruments Law which states that:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in
money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.
RECIT- READY SUMMARY:
Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury
warrants drawn by the Philippine Fish Marketing Authority, amounting to Php
1.7million. All of these warrants where then indorsed by Gloria Castillo (cashier of
Golden Savings) to Metrobank for clearing. More than two weeks after the deposit,
Castillo went to Metrobank several times to ask if the treasury warrants have already
been cleared. Exasperated by Castillo’s multiple inquiries, Metrobank allowed the
proceeds of the Warrants to be withdrawn by Golden Savings despite the fact that the
warrants have yet to be cleared. As a result, Golden Savings was able to withdraw an
amount totaling Php 968,000 from its account with Metrobank. Gomez in turn was able
to withdraw from his Golden Savings account collecting a total amount of Php 1.16
million. Later on, Metrobank informed Golden Savings that 32 of the 38 Treasury
Warrants were dishonored by the Bureau of Treasury. It then demanded Golden
Savings to refund the amount that it had withdrawn from the bank. Golden savings
rejected the demand. Hence, the petition.
ISSUE: Are Treasury Warrants Negotiable Instruments?
Court ruled in the negative. This because under Section 1 of the NIL, an instrument is
only negotiable if there is an unconditional promise or order to pay a sum of money. In
this case, a Treasury Warrant has a conditional promise or order to pay. This is because
under the terms of a Treasury Warrant, order or promise to pay out of a particular fund.
Therefore, the instrument is not unconditional under the purview of Section 3 of the
NIL.
FACTS:
1. Eduardo Gomez opened an account with Golden Savings and deposited 38
treasury warrants drawn by the Philippine Fish Marketing Authority, amounting to
Php 1.7million. 6 of these were directly payable to Gomez, while the rest were
indorsed by their respective payees, with Gomez as the second indorser.
2. All of these warrants where then indorsed by Gloria Castillo (cashier of Golden
Savings) to Metrobank for clearing. This is because Golden Saving do no have any
clearing facilities of their own, and have to contract the services of another bank.
3. More than two weeks after the deposit, Castillo went to Metrobank several times
to ask if the treasury warrants have already been cleared. Exasperated by Castillo’s
multiple inquiries, Metrobank allowed the proceeds of the Warrants to be
withdrawn by Golden Savings despite the fact that the warrants have yet to be
cleared.
4. As a result, Golden Savings was able to withdraw an amount totaling Php 968,000
from its account with Metrobank. Gomez in turn was able to withdraw from his
Golden Savings account collecting a total amount of Php 1.16 million.
5. Later on, Metrobank informed Golden Savings that 32 of the 38 Treasury Warrants
were dishonored by the Bureau of Treasury. It then demanded Golden Savings to
refund the amount that it had withdrawn from the bank.
6. Golden savings rejected the demand. Hence, the petition.
7. Metrobank argues among others that:
a. Metrobank, according to the contractual terms on the deposit slips
allow the bank to charge back any amount erroneously credited.
b. The treasury warrants are negotiable instruments. Therefore, by
depositing the said warrants to Metrobank, Golden Savings
warranted them to be genuine and in all respects what they
purported to be in accordance to Section 66 of the Negotiable
Instruments Law.
ISSUE/S:
1. Is Metrobank entitled to a refund from Golden Savings? – NO
2. Is a Treasury Warrant a Negotiable Instrument? – NO (IMPT!)
RULING:
WHEREFORE, the challenged decision is AFFIRMED, with the modification that
Paragraph 3 of the dispositive portion of the judgment of the lower court shall be
reworded as follows:
3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter
allowing defendant Golden Savings & Loan Association, Inc. to withdraw the amount
outstanding thereon, if any, after the debit.
RATIO:
1. NO
● Court held in the negative. First, it was clear that Metrobank was clearly negligent
in giving Golden Savings the impression that the Treasury warrants have already
been cleared. Without such assurance, Golden Savings would not have allowed
the withdrawals. The reasoning that the bank was “exasperated” over the multiple
inquiries of Gloria Castillo about the clearance of the warrants is unbelievably
naïve for a bank with a long experience.
● Furthermore, the court rejected Metrobank’s claim where contractual stipulations
in the deposit slip would entitle the bank a refund over erroneous withdrawals.
Doubt may be expressed about the binding force of the conditions, considering
that they have apparently been imposed by the bank unilaterally, without the
consent of the depositor. Indeed, it could be argued that the depositor, in signing
the deposit slip, does so only to identify himself and not to agree to the conditions
set forth in the given permit at the back of the deposit slip.

2. NO

● In order for an instrument to be considered as negotiable, it must meet the

requirement of Section 1 of the Negotiable Instruments Law which states that:
o (a) It must be in writing and signed by the maker or drawer;
o (b) Must contain an unconditional promise or order to pay a sum
certain in money;
o (c) Must be payable on demand, or at a fixed or determinable future
time;
o (d) Must be payable to order or to bearer; and
o (e) Where the instrument is addressed to a drawee, he must be
named or otherwise indicated therein with reasonable certainty.
● Furthermore, for a promise to be considered unconditional, Section 3 of the
NIL states that
o Sec. 3. When promise is unconditional. — An unqualified order or
promise to pay is unconditional within the meaning of this Act
though coupled with —
▪ (a) An indication of a particular fund out of which
reimbursement is to be made or a particular account to be
debited with the amount; or
▪ (b) A statement of the transaction which gives rise to the
instrument judgment.
o But an order or promise to pay out of a particular fund is not
unconditional.
● From the pertinent provisions of the Negotiable Instruments Law, the court
held that Treasury Warrants are not Negotiable Instruments. 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. There should be no question that the exception
on Section 3 of the Negotiable Instruments Law is applicable in the case at
bar.
● Since a Treasury Warrant is not a negotiable instrument, it follows that the
provisions of the NIL will not apply.