Firestone Tire & Rubber Company of the Phils vs.

CA

Facts:
From January 14, 1978 to May 15, 1978, Fojas-Arca purchased on credit Firestone products with a total
amount of P4,896,000. In payment for the said purchases., Fojas-Arca delivered six special withdrawal slips
drawn upon Luzon Development Bank. Consequently, these were deposited by Firestone in its current
account with Citibank. Since, all of them were honored and paid, Firestone believed and relied on the fact
that succeeding withdrawal slips drawn upon the said bank would be equally funded. Relying on such
confidence and belief, Firestone extended to Fojas-Arca other purchases on credit of its products.
However, on December 14, 1978, Firestone was informed by Citibank that special withdrawal slips No. 42127
dated June 15, 1978 for P1,198,092.80 and No. 42129 dated August 15, 1978 for P880,000 were dishonored

and not paid for the reason ‘NO ARRANGEMENT’. As a consequence, Citibank debited Firestone’s account
for the total sum of P2,078,092.80. As a result, Firestone averred that it suffered pecuniary losses directly
attributable to the gross negligence of Luzon Development Bank.
The bank asserted, inter alia that the transactions mentioned by plaintiff are that of Firestone and Fojas-Arca
only, in which defendant is not involved; Vehemently, it was denied by defendant that the special withdrawal
slips were honored and treated as if it were checks, the truth being that when the special withdrawal slips
were received by defendant, it only verified whether or not the signatures therein were authentic, and whether
or not the deposit level in the passbook concurred with the savings ledger, and whether or not the deposit is
sufficient to cover the withdrawal;
if plaintiff treated the special withdrawal slips paid by Fojas-Arca as checks then plaintiff has to blame itself

for being grossly negligent in treating the withdrawal slips as check when it is clearly stated therein that the
withdrawal slips are non-negotiable; that defendant is not a privy to any of the transactions between Fojas-
Arca and plaintiff for which reason defendant is not duty bound to notify nor give notice of anything to plaintiff.

Issue: WON the withdrawal slips are negotiable instruments. [NO]

At the outset, we note that petitioner admits that the withdrawal slips in question were non-negotiable.

Hence, the rules governing the giving of immediate notice of dishonor of negotiable instruments do not apply

in this case. Petitioner itself concedes this point. Thus, respondent bank was under no obligation to give

immediate notice that it would not make payment on the subject withdrawal slips. 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.

It bears stressing that Citibank could not have missed the non-negotiable nature of the withdrawal slips. 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.

The withdrawal slips deposited with petitioner's current account with Citibank were not checks, as petitioner
admits. Citibank was not bound to accept the withdrawal slips as a valid mode of deposit . But having
erroneously accepted them as such, Citibank — and petitioner as account-holder — must bear the risks
attendant to the acceptance of these instruments. Petitioner and Citibank could not now shift the risk and hold
private respondent liable for their admitted mistake.
Equitable PCI Bank vs. Ong

Facts: On November 29, 1991, Warliza Sarande deposited in her account at Philippine Commercial
International (PCI) Bank, a PCI Bank General Santos City Branch, TCBT1 Check No. in the amount of
P225,000.00.
Upon inquiry by Serande at PCI Bank on 5 December 1991 on whether TCBT Check had been cleared, she
received an affirmative answer. Relying on this assurance, she issued two checks drawn against the

proceeds of TCBT Check.

One of these was PCI Bank Check dated December 5, 1991, for P132,000.00 which Sarande issued to
respondent Rowena Ong Owing to a business transaction. On the same day, Ong presented to PCI Bank
said Check and instead of encashing it, requested PCI Bank to convert the proceeds thereof into a manager's
check, which the PCI Bank obliged.
Whereupon, Ong was issued PCI Bank Manager's Check dated December 5, 1991 for the sum of
P132,000.00, the value of Check.
The next day, 6 December 1991, Ong deposited PCI Bank Manager's Check in her account with Equitable
Banking Corporation Davao City Branch. On December 9, 1991, she received a check return-slip informing
her that PCI Bank had stopped the payment of the said check on the ground of irregular issuance.

Despite several demands made by her to PCI Bank for the payment of the amount in PCI Bank Manager's
Check No. 10983, the same was met with refusal; thus, Ong was constrained to file a Complaint for sum of
money, damages and attorney's fees against PCI Bank.
Issue: Whether a check is negotiable instrument [YES].
Ruling: It may be true that plaintiff's PCIB Check for P132,000.00 which was paid to her by Warliza Sarande
was actually not funded but since plaintiff became a holder in due course, defendant-bank cannot interpose a
defense of want or lack of consideration because that defense is equitable or personal and cannot prosper
against a holder in due course pursuant to Section 28 of the Negotiable Instruments Law. Therefore, when
the aforementioned check was endorsed and presented by the plaintiff and certified to and accepted by
defendant-bank in the purchase of PCIB Manager's Check in the amount of P132,000.00, there was a valid

consideration.
Defendant-bank had certified plaintiff's PCIB Check and since certification is equivalent to acceptance,
defendant-bank as drawee bank is bound on the instrument upon certification and it is immaterial to such
liability in favor of the plaintiff who is a holder in due course whether the drawer (Warliza Sarande) had funds
or not with the defendant-bank or the drawer was indebted to the bank for more than the amount of the check
as the certifying bank as all the liabilities under Sec. 62 of the Negotiable Instruments Law which refers to
liability of acceptor.