6/16/2022 CASE DIGESTS

FOR
NEGOTIABLE
INSTRUMENTS
LAW

Christian John Louie R. Maquinad

2020110060
Contents
Chan Wan vs. Tan Kim__________________________________________________________________3
Metropolitan Bank and Trust Company vs. Chiok_____________________________________________5
Llorente vs. Star City Pty Limited__________________________________________________________7
Caltex, Inc. vs. Court of Appeals___________________________________________________________9
Banco De Oro Savings and Mortgage Bank vs. Equitable Banking Corporation_____________________11
Abubakar vs. Auditor General____________________________________________________________12
Metropolitan Bank and Trust Company vs. CA_______________________________________________13
PNB vs. Rodriguez_____________________________________________________________________14
Rivera vs Chua________________________________________________________________________16
Spouses Evangelista vs. Mercator Finance Corp.,____________________________________________17
Ilano vs. Hon. Espanol__________________________________________________________________18
Salas vs. Court of Appeals_______________________________________________________________20
Sesbreńo vs. Court of Appeals___________________________________________________________21
Areza vs. Express Savings Bank, Inc_______________________________________________________23
Yang vs. Court of Appeals_______________________________________________________________25
RCBC Savings Bank vs. Odrada___________________________________________________________26
Patrimonio vs. Gutierrez________________________________________________________________27
Ang vs. Associated Bank________________________________________________________________29
Far East vs. Gold Palace Jewelry__________________________________________________________31
Metropolitan Bank and Trust Co. vs. Junnel's Marketing Corp.__________________________________32
Metropolitan Bank and Trust Co. vs. Junnel's Marketing Corp.__________________________________34
BDO Unibank, Inc. vs. Lao_______________________________________________________________36
Dy vs. People_________________________________________________________________________38
Samsung Construction vs. Far East Bank and Trust Company___________________________________40
Metropolitan Bank and Trust Company vs. Cablizo___________________________________________42
Ching vs. Nicdao,______________________________________________________________________44
Bank of America vs. Philippine Racing Club_________________________________________________44
Asia Brewery, Inc. Vs. Equitable PCI Bank (now Banco De Oro, EPCI, Inc.),_________________________44
Arceo vs. People______________________________________________________________________44
Allied Banking Corporation vs. Court of Appeals_____________________________________________44
Hongkong and Shanghai Banking Corporation Limited - Philippine Branches vs. Commissioner of Internal
Revenue____________________________________________________________________________44

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Evangelista vs. Screenex, Inc.____________________________________________________________44
Villanueva vs. Nite_____________________________________________________________________44
Equitable PCI Bank vs. Ong______________________________________________________________45
Security Bank and Trust Company vs. Rizal Commercial Banking Corporation______________________45

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 Chan Wan vs. Tan Kim,
G.R. No. L-15380
September 30, 1960

FACTS:

This suit to collect eleven checks totalling P4,290.00. Such checks payable to "cash or
bearer" and drawn by defendant Tan Kim from Equitable Banking Corporation, but were
dishonoured due to insufficient funds.  In the Manila court of first instance, the plaintiff did not
take the witness stand. On the other hand, Tan Kim declared without contradiction that the
checks had been issued to two persons named Pinong and Muy for some shoes the former had
promised to make and "were intended as mere receipts"
The court declined to order payment as Tan Kim was not a holder in due course, and the
cross checks were deposited in the bank not mentioned in the crossing. 

ISSUE:
Whether or not Chan Wan is a holder in due course and that he has the right to collect
against the eleven checks.

RULING:
The Supreme Court, speaking through Justice Bengzon, ruled that “we find, on the
backs of the checks, endorsements which apparently show they had been deposited with the
China Banking Corporation and were, by the latter, presented to the drawee bank for
collection… All the crossed checks have the "clearance" endorsement of China Banking
Corporation”
The Court categorically ruled that “naturally and rightly, the lower court held him not to
be a holder in due course under the circumstances, since he knew, upon taking them up, that
the checks had already been dishonored”
Moreover, it added that “it does not follow as a legal proposition, that simply because he
was not a holder in due course Chan Wan could not recover on the checks. The Negotiable
Instruments Law does not provide that a holder who is not a holder in due course, may not in
any case, recover on the instrument.”

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 “The Negotiable Instruments Law does not provide that a holder who is not a holder in
due course, may not in any case, recover on the instrument. The only disadvantage

No table of contents entries found.of holder who is not a holder in due course is that the
negotiable instrument is subject to defense as if it were non- negotiable”

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 Metropolitan Bank and Trust Company vs. Chiok

G.R. No. 172652

November 26, 2014

FACTS:

Respondent Wilfred Chiok had been engaged in dollar trading for several years. He
usually buys dollars from Gonzalo Nuguid at the exchange rate prevailing on the date of the
sale. Chiok maintained accounts with petitioners Metropolitan Bank and Trust Company
(Metrobank) and Global Business Bank, Inc and entered into a Bills Purchase Line Agreement
(BPLA) with Asian Bank. Asian Bank "bills purchased" Security Bank & Trust Company (SBTC)
issued two Asian Bank manager’s checks, with a total value of ₱18,455,350.00 pursuant to
Chiok’s instruction and was debited from his account.

FEBTC, as the collecting bank, filed a complaint against Asian Bank before the
Philippine Clearing House Corporation (PCHC) Arbitration Committee for the collection of the
value of two Asian Bank manager’s check. On July 5, 1995, respondent Chiok bought
US$1,022,288.50 dollars from Nuguid where Chiok deposited the three manager’s checks in
Nuguid’s account with petitioner Bank of the Philippine Islands, however, he failed to deliver the
equivalent amount of the checks as agreed upon, prompting Chiok to order the stop the
payment of three checks. Thereafter, Chiok filed a Complaint for damages with application for
ex parte restraining order and/or preliminary injunction with the Regional Trial Court (RTC) of
Quezon City against the spouses Gonzalo and Marinella Nuguid, and the depositary banks,
Asian Bank and Metrobank. Thereafter, PCHC refused to assume jurisdiction and referred the
case to the RTC where it issued order directing the issuance of a writ of preliminary prohibitory
injunction. It held that Nuguid failed to prove the delivery of dollars to Chiok.

ISSUE:
Whether or not payment of manager’s and cashier’s checks are subject to the condition
that the payee thereof should comply with his obligations to the purchaser of the checks

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RULING:

The Supreme Court, speaking through Justice Leonardo-De Castro, ruled that “the legal
effects of a manager’s check and a cashier’s check are the same. A manager’s check, like a
cashier’s check, is an order of the bank to pay, drawn upon itself, committing in effect its total
resources, integrity, and honor behind its issuance. By its peculiar character and general use in
commerce, a manager’s check or a cashier’s check is regarded substantially to be as good as
the money it represents.

It added that “the RTC effectively ruled that payment of manager’s and cashier’s checks
are subject to the condition that the payee thereof complies with his obligations to the purchaser
of the checks:

The dedication of such checks pursuant to specific reciprocal undertakings between their
purchasers and payees authorizes rescission by the former to prevent substantial and material
damage to themselves, which authority includes stopping the payment of the checks.

Moreover, it seems to be fallacious to hold that the unconditional payment of manager’s and
cashier’s checks is the rule. To begin with, both manager’sand cashier’s checks are still subject
to regular clearing under the regulations of the Bangko Sentral ng Pilipinas, a fact borne out by
the BSP manual for banks and intermediaries”

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 Llorente vs. Star City Pty Limited

G.R. No. 212050

January 15, 2020
FACTS:
Star City Pty Limited (SCPL) filed a complaint for collection of sum of money with prayer
for preliminary attachment against Llorente, who was a patron of its Star City casino and
Equitable PCI Bank (EPCIB). Llorente negotiated two (2) Equitable PCI bank drafts for the total
amount of 300,000 USD in order to play in the Premium Programme of the casino.

Thereafter, SCPL received the advice of Bank of New York about the “Stop Payment
Order” (SPO) prompting it to make several demands upon Llorente who refused to pay, thus, it
sought settlement from EPCIB which denied it on the ground of the SPO by LLorente and no
notice of dishonor was given.

RTC held that Llorente (as payee of the drafts and indorser who signed on its back) and
EPCIB (as drawer of the drafts) solidarity liable for the value of the drafts. On appeal, CA denied
Llorante’s appeal but partially granted EPCIB’s discharging it from any responsibility considering
that it already paid Llorente.

ISSUE:

Whether or not EPCIB should be held liable being the drawee-acceptor.

RULING:
The Supreme Court, speaking through Justice Caguioa, ruled that EPCIB should be held
liable as a drawer and held that “both the RTC and CA correctly recognized EPCIB as the
drawer of the subject demand/bank drafts. The liability of the drawer is spelled out in Section 61
of the NIL, which provides” Added that “When the bank, as the drawer of a negotiable check,
signs the instrument its engagement is then as absolute and express as if it were written on the
check; and a dual promise is implied from the issuance of a check: 

first, that the bank upon which it is drawn will pay the amount thereof; and 

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 second, if such bank should fail to make the payment, the drawer will pay the same to
the holder.”
The Court also explains that “ However, the liability of the drawer is not primary but
secondary, particularly after acceptance because it is conditional upon proper presentment and
notice of dishonor, and, in case of a 'foreign bill of exchange, protest, unless such conditions are
excused or dispensed with.
 
Thus, under Section 84 of the NIL, when the instrument is dishonored by non-payment, an
immediate right of recourse to all parties secondarily liable thereon accrues to the holder,
subject to the provisions of the NIL.”

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 Caltex, Inc. vs. Court of Appeals

G.R. No. 97753

August 10, 1992
FACTS:
On various dates, Security Bank, a commercial institution, through its Sucat Branch
issued 280 certificates of time deposit (CTDs) in favor of one Angel dela Cruz which delivered
the certificates of time (CTDs) to Caltex in connection with his purchase of fuel products from
the latter. Thereafter, she informed Mr. Timoteo Tiangco, the Sucat Branch Manager, said that
he lost all the certificates of time deposit in dispute. 
Thereafter, Mr. Aranas, Credit Manager of plaintiff Caltex went to the defendant bank's
Sucat branch and presented for verification the CTDs declared lost by Angel dela Cruz alleging
that the same were delivered to Caltex "as security for purchases made with Caltex Philippines,
Inc." by said Dela Cruz. Security Bank received a letter from Caltex formally informing it of its
possession of the CTDs in question and of its decision to pre-terminate the same.
Security Bank was informed by Caltex of its possession of the lost certificate of time
deposit. Caltex was requested by Security Bank to furnish the former "a copy of the document
evidencing the guaranteed agreement with Ms. Angel dela Cruz.
Security Bank rejected the Caltex’s demand and claim for payment of the value of the
CTDs in a letter. Thereafter, Caltex filed a complaint praying that Security Bank be ordered to
pay the former the aggregate value of the CTDs of P1,120,000.00.

ISSUE:
Whether or not the subject certificates of deposits are non-negotiable and that Caltex
can rightfully recover on the CTD’s

RULING:
The Supreme Court ruled that “The CTDs in question undoubtedly meet the
requirements of the law for negotiability….the accepted rule is that the negotiability or non-
negotiability of an instrument is determined from the writing, that is, from the face of the
instrument itself.9 In the construction of a bill or note, the intention of the parties is to control, if it

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can be legally ascertained. 10 While the writing may be read in the light of surrounding
circumstances in order to more perfectly understand the intent and meaning of the parties, yet
as they have constituted the writing to be the only outward and visible expression of their
meaning, no other words are to be added to it or substituted in its stead. The duty of the court in
such case is to ascertain, not what the parties may have secretly intended as
contradistinguished from what their words express, but what is the meaning of the words they
have used. What the parties meant must be determined by what they said”

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 Banco De Oro Savings and Mortgage Bank vs. Equitable Banking Corporation

G.R. No. L-74917

January 20, 1988
FACTS:

BDO Savings through its Visa Card Department, drew six crossed Manager's check
having an aggregate amount of P45,982.23 Pesos and payable to certain member
establishments of Visa Card.  Subsequently, the Checks were deposited with the defendant to
the credit of its depositor, a certain Aida Trencio. Accordingly, plaintiff paid the Checks; its
clearing account was debited for the value of the Checks and defendant's clearing account was
credited for the same amount.
Thereafter, BDO 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. DO presented the Checks directly to the defendant for the
purpose of claiming reimbursement from the latter. However, EBC refused to accept such direct
presentation and to reimburse the BDO for the value of the Checks.
ISSUE:
Whether or not the crossed manager’s check drawn is non-negotiable.
RULING:
The Supreme Court ruled that “while the Negotiable Instruments Law does not contain
any provision on crossed checks, it is coon practice in commercial and banking operations to
issue checks of this character, obviously in accordance with Article 541 of the Code of
Commerce. Attention is likewise called to Section 185 of the Negotiable Instruments Law:

Sec. 185. Check defined. — A check is a bill of exchange drawn on a bank payable on demand.
Except as herein otherwise provided, the provisions of this act applicable to a bill of exchange
payable on demand apply to a check”

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 Consequently, it appears that the use of the term "check" in the Articles of Incorporation
of PCHC is to be perceived as not limited to negotiable checks only, but to checks as is
generally known in use in commercial or business transactions.”

Abubakar vs. Auditor General

G.R. No. L1405

July 31, 1948
FACTS:
A treasury warrant was issued in favor of Placido Urbanes, a government employee in
the province of La Union. It was meant to augment the Food Production Campaign in the said
province. It was then negotiated by Urbanes to Benjamin Abubakar, a private individual.
When Abubakar sought to have the treasury warrant encashed, the Auditor General
denied payment because the money available for the redemption of treasury warrants does not
come within the purview of RA No. 80 appropriation and that one of the requirements of his
office had not been complied with, which it must be shown that the holders of warrants covering
payment or replenishment of cash advances for official expenditures.
Abubakar raised the defense of that he is a holder in good faith.
ISSUE:
Whether or not treasury warrant is negotiable.
RULING:

The Supreme Court ruled that “treasury warrant is not within the scope of the negotiable
instruments law. For one thing, the document bearing on its face the words "payable from the
appropriation for food administration," is actually an order for payment out of "a particular fund,"
and is not unconditional, and does not fulfill one of the essential requirements of a negotiable
instrument. (Section 3 last sentenced and section 1[b] of the Negotiable Instruments Law.)”

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 Metropolitan Bank and Trust Company vs. CA,
G.R. No. 88866
February 18, 1991
FACTS:
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. On various dates between
June 25 and July 16, 1979, all these warrants were subsequently indorsed by Gloria Castillo as
Cashier of Golden Savings. More than two weeks after the deposits, Gloria Castillo went to the
Calapan branch several times to ask whether the warrants had been cleared, later, however,
the petitioner informed her that it finally decided to allow Golden Savings to withdraw from the
proceeds of the warrants.
Thereafter, Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded refund it previously withdrawn. The
demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of
Mindoro.
ISSUE:
Whether or not such treasury warrant is negotiable.
RULING:
The Supreme Court, speaking through Justice Cruz, ruled that “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”
It held that “The total value of the 32 treasury warrants dishonored was P1,754,089.00,
from which Gomez was allowed to withdraw P1,167,500.00 before Golden Savings was notified
of the dishonor. The amount he has withdrawn must be charged not to Golden Savings but to
Metrobank, which must bear the consequences of its own negligence.”

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 PNB vs. Rodriguez

G.R. No. 170325

September 26, 2008
FACTS:
Respondents-Spouses Erlando and Norma Rodriguez were clients of petitioner
Philippine National Bank (PNB) engaged in the informal lending business and had a discounting
arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an
association of PNB employees.

PEMSL’s policy is not to approve loans of members with outstanding

debts. However, some PEMSLA officers devised to a scheme (FICTITIOUS-PAYEE) which is
taking out loans in the names of unknowing members, without the knowledge or consent of the
latter.

The PEMSLA checks issued, sans FICTITIOUS - PAYEE CHECK, for these
loans were then given to the spouses for rediscounting. For the period November 1998 to
February 1999, the spouses issued sixty-nine (69) checks in the total amount of
P2,345,804.00. 

The RTC rendered judgment in favor of spouses Rodriguez (plaintiffs). It ruled that PNB
(defendant) is liable to return the value of the checks. the CA reversed and set aside the RTC
disposition. The CA concluded that the checks were obviously meant by the spouses to be
really paid to PEMSLA.

ISSUE:

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 Whether or not the subject checks are payable to order or to bearer and who bears the
loss.

RULING:

The Supreme Court ruled that” A check that is payable to a specified payee is an order
instrument.  However, under Section 9(c) of the NIL, a check payable to a specified payee may
nevertheless be considered as a bearer instrument if it is payable to the order of a fictitious or
non-existing person, and such fact is known to the person making it so payable.

When the payee is fictitious, the check is a bearer instrument: A check made expressly
payable to a non-fictitious and existing person is not necessarily an order instrument. If the
payee is not the intended recipient of the proceeds of the check, the payee is considered a "f
ictitious" payee and the check is a bearer instrument.

Drawee bank is absolved from liability in fictitious payee: drawer bears the loss. In a
fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the
loss
The underlying theory is that one cannot expect a fictitious payee to negotiate the check by
placing his indorsement thereon. Thus, in case of controversy, the drawer of the check will bear
the loss. 

Moreover, in Fictitious payee rule: drawer bank is absolved from liability: due care is not
required. The rule protects the depositary bank and assigns the loss to the drawer of the check
who was in a better position to prevent the loss in the first place.

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 Rivera vs Chua

G.R. No. 184458

January 14, 2015

FACTS:
Rivera obtained a loan from the Spouses Chua evidenced by a Promissory Note. Three
years from the date of payment stipulated in the promissory note, Rivera, issued and delivered
to Spouses Chua two (2) checks drawn against his account at Philippine Commercial
International Bank (PCIB) but upon presentment for payment, the two checks were dishonored
for the reason “account closed”
The Spouses Chua alleged that they have repeatedly demanded payment from Rivera to
no avail. Because of Rivera’s unjustified refusal to pay, the Spouses Chua were constrained to
file a suit before the MeTC, Branch 30, Manila.
MeTC ruled against Rivera requiring him to pay the spouses Chua. On appeal, RTC
affirmed the decision. Elevated the case to the CA which further affirmed the decision.
ISSUE:
Whether or not the Promissory Note executed as evidence of loan falls under
Negiotiable Instruments Law.

RULING:

The Supreme Court ruled “that the Promissory Note executed as evidence of loan does
not fall under Negotiable Instruments Law. The instrument is still governed by the Civil Code as
to interpretation of their obligations. The Supreme Court held that the Instrument was not able to

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meet the requisites laid down by Section 1 of the Negotiable Instruments Law as the instrument
was made out to specific persons, herein respondents, the Spouses Chua, and not to order or
to bearer, or to the order of the Spouses Chua as payees.

Therefore, it is not a negotiable instrument and therefore outside the coverage of Section 70 of
the NIL which provides that presentment for payment is not necessary to charge the person
liable on the instrument, Rivera is still liable under the terms of the Promissory Note that he
issued.

Spouses Evangelista vs. Mercator Finance Corp.,

G.R. No. 148864,

August 21, 2003
FACTS:

The Plaintiffs in this case are Eduardo and Epifania Evangelista xecuted a real estate
mortgage of five parcels of land that they owned in favor of the defendant Mercator Finance
Corp. for a loan of P844,625.78. However, they failed to pay the obligation which resulted to the
foreclosure of the mortgaged properties they owned. They alleged that they only signed the
promissory notes regarding the loans in their capacities as officers of Embassy Farms and that
they did not directly benefit from the proceeds of the loan. Thus, they contend that the
foreclosure of the properties in the mortgage should be deemed invalid. On the other hand, the
defendants contended, that the Spouses Evangelista and Embassy Farms signed the
promissory notes as “Co-Makers”, they are jointly and severally liable with Embassy Farms. The
defendants also assailed that the long silence and inaction of the plaintiffs because it took them
10 years after the foreclosure and sale of the mortgaged properties. 

ISSUE:

Whether or not the plaintiffs are jointly and solidarily liable with Embassy Farms to the
payment of the loans.

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RULING:

The Supreme Court ruled that “it was provided in the promissory notes the words “I/We
jointly and severally promise to pay to the order of Mercator Finance Corporation”. The note was
signed at the bottom by Eduardo Evangelista, Epifania Evangelista and Embassy Farms (with
the signature of Eduardo Evangelista below that of Embassy Farms). There were also
evidences that the Spouses Evangelista even signed other promissory notes for the
restructuring of the loans, which contained the same provisions. the court cited Section 17 (g) of
the Negotiable Instruments Law which provides that “(g) Where an instrument containing the
word “I promise to pay” is signed by two or more persons, they are deemed to be jointly and
severally liable thereon.”

Ilano vs. Hon. Espanol

G.R. NO. 161756

December 16, 2005
FACTS:
Due to these trust and confidence reposed upon defendant ALONZO by Ilano, there
were occasions when defendant ALONZO was entrusted with Ilano METROBANK Check Book
containing either signed or unsigned blank checks, especially in those times when Ilano left for
the United States for medical check-up. Sometime in December 1999, or thereabouts,
defendant ALONZO by means of deceit and abuse of confidence succeeded in procuring
Promissory Notes and signed blank checks from Ilano who was then recuperating from illness.
Aside from the said blank checks, defendant ALONZO likewise succeeded in inducing Ilano to
sign the Promissory Notes.
The Promissory Notes and blank checks were procured thru fraud and deceit. The
consent of the [petitioner] in the issuance of the two (2) aforementioned Promissory Notes was
vitiated. To protect the rights and interest of the Ilano in the illegal actuations of the defendants,
she was forced to engage the services of counsel for which she was obliged to pay the sum of
Php 100,000.00 by way of Attorney’s fees plus the amount of Php 3,000.00 per appearance in
court.

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 RTC rendered decision dismissing the complaing for lack of cause of action. On appeal,
the CA, affirmed the dismissal of the complaint. Hence, this petition.
ISSUE:
Whether or not the blank checks and promissory notes which was procured by means of
deceit and abuse of confidence.
RULING:

The Supreme Court, speaking through Justice Carpio Morales, declared that “with
respect to above-said Check No. 0084078, however, which was drawn against another account
of petitioner, albeit the date of issue bears only the year − 1999, its validity and negotiable
character at the time the complaint was filed on March 28, 2000 was not affected. For Section 6
of the Negotiable Instruments Law provides:

Section 6. Omission; seal; particular money. – The validity and negotiable character of an
instrument are not affected by the fact that –

(a) It is not dated; or

(b) Does not specify the value given, or that any value had been given therefor; or

(c) Does not specify the place where it is drawn or the place where it is payable; or

(d) Bears a seal; or

(e) Designates a particular kind of current money in which payment is to be made.

However, even if the holder of Check No. 0084078 would have filled up the month and day of
issue thereon to be “December” and “31,” respectively, it would have, as it did, become stale six
(6) months or 180 days thereafter, following current banking practice. It is, however, with
respect to the questioned promissory notes that the present petition assumes merit.

For, petitioner‟s allegations in the complaint relative thereto, even if lacking particularity, does
not as priorly stated call for the dismissal of the complaint.

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 Salas vs. Court of Appeals

G.R. No. 76788

January 22, 1990
FACTS:
Juanita Salas bought a motor vehicle from the Violago Motor Sales Corp. (VMS) for
P58,138.20 as evidence by a promissory note which was subsequently endorsed Filinvest
Finance &Leasing Corp. (FFLC). Salas defaulted in her installments allegedly due to
discrepancies in the engine and chassis number of the vehicle delivered and discovery of
certificate of reg. and deed of mortgage.
VMS initiated for a sum of money at the RTC which held in favor of VMS. On Appeal, CA
affirmed the decision.
ISSUE:
Whether or not the promissory note is a negotiable instrument which will bar completely
all the available defenses of the petitioner against private respondent.
RULING:

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 The Supreme Court, speaking through Justice Fernan, ruled “A careful study of the
questioned promissory note shows that it is a negotiable instrument, having complied with the
requisites under the law as follows: [a] it is in writing and signed by the maker Juanita Salas; [b]
it contains an unconditional promise to pay the amount of P58,138.20; [c] it is payable at a fixed
or determinable future time which is "P1,614.95 monthly for 36 months due and payable on the
21 st day of each month starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is
payable to Violago Motor Sales Corporation, or order and as such, [e] the drawee is named or
indicated with certainty.”
Under the circumstances, there appears to be no question that Filinvest is a holder in
due course, having taken the instrument under the following conditions: [a] it is complete and
regular upon its face; [b] it became the holder thereof before it was overdue, and without notice
that it had previously been dishonored; [c] it took the same in good faith and for value; and [d]
when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or
defect in the title of VMS Corporation.”

Sesbreńo vs. Court of Appeals

G.R. No. 89252
May 24, 1993
FACTS:
Raul Sesbreño made a money market placement in the amount of P300,000.00 with the
Philippine Underwriters Finance Corporation (“PhilFinance”) the placement, with the term of
thirty-two (32) days, would mature on 13 March 1981. Philfinance issued Certificate of
Confirmation of Sale, Certificate of securities Delivery, Post-dated checks payable on 13 March
1981 with Sesbreno as payee. Sesbreno sought to encash the postdated checks issued by
Philfinance but was dishonored due to insufficiency of funds.
Sesbreno approached Ms. Elizabeth de Villa of private respondent Pilipinas, Makati
Branch, and handed her a demand letter informing the bank had remained unpaid and
outstanding, and that he in effect was asking for the physical delivery of the underlying
promissory note. Petitioner later made similar demand letters again asking private respondent

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Pilipinas for physical delivery of the original of DMC PN No. 2731. Petitioner also made a written
demand upon private respondent Delta for the partial satisfaction of DMC PN No. 2731,
explaining that Philfinance, as payee had assigned to him said Note to the extent of
P307,933.33.
To no avail, petitioner an action for damages with the Regional Trial Court of Cebu City
against Delta and Pilipinas.

ISSUE:
Whether or not non-negotiable instruments can be negotiated or transferred.
RULING:
The Supreme Court ruled that “it is important to bear in mind that the negotiation of a
negotiable instrument must be distinguished from the assignment or transfer of an instrument
whether that be negotiable or non-negotiable. Only an instrument qualifying as a negotiable
instrument under the relevant statute may be negotiated either by indorsement thereof coupled
with delivery, or by delivery alone where the negotiable instrument is in bearer form. A
negotiable instrument may, however, instead of being negotiated, also be assigned or
transferred.

A non-negotiable instrument may, obviously, not be negotiated; but it may be assigned or

transferred, absent an express prohibition against assignment or transfer written in the face of
the instrument:

The words "not negotiable," stamped on the face of the bill of lading, did not destroy its
assignability, but the sole effect was to exempt the bill from the statutory provisions relative
thereto, and a bill, though not negotiable, may be transferred by assignment; the assignee
taking subject to the equities between the original parties.

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 Areza vs. Express Savings Bank, Inc.
G.R. No. 176697
September 10, 2014
FACTS:

Cesar V. Areza and Lolita B. Areza engaged in the business of "buy and sell" of brand
new and second-hand motor vehicles. On 2 May 2000, they received an order from a certain
Gerry Mambuay (Mambuay) for the purchase of a second-hand Mitsubishi Pajero and a brand-
new Honda CRV. The buyer, Mambuay, paid petitioners with nine (9) Philippine Veterans Affairs
Office (PVAO) checks payable to different payees and drawn against the Philippine Veterans
Bank (drawee). Areza deposited the said checks in their savings account with the Bank. The
Bank, inturn, deposited the checks with its depositary bank, Equitable-PCI Bank, in

23 | P a g e
Biñan,Laguna. Equitable-PCI Bank presented the checks to the drawee, the Philippine Veterans
Bank, which honored the checks.
Potenciano informed petitioners that the checks they deposited with the Bank were
honored. He allegedly warned petitioners that the clearing of the checks pertained only to the
availability of funds and did not mean that the checks were not infirmed. Thereafter, the subject
checks were returned by PVAO to the drawee on the ground that the amount on the face of the
checks was altered from the original amount of ₱4,000.00 to ₱200,000.00
Equitable-PCI Bank initially filed a protest with the Philippine Clearing House which held
that in favor of the drawee Philippine Veterans Bank. The Bank insisted that they informed
petitioners of said development in August 2000 by furnishing them copies of the documents
given by its depositary bank. On the other hand, petitioners maintained that the Bank never
informed them of these developments.
Petitioners issued a check in the amount of ₱500,000.00. Said check was dishonored by
the Bank for the reason "Deposit Under Hold." Petitioners sent a demand letter asking the Bank
to honor their check which the bank refused and instead closed the Special Savings Account of
the petitioners with a balance of ₱1,179,659.69 and transferred said amount to their savings
account.
ISSUE:
Whether or not the drawee bank is liable and petitioners from altering the checks.
RULING:
The Supreme Court declared that “A depositary/collecting bank where a check is
deposited, and which endorses the check upon presentment with the drawee bank, is an
endorser. Under Section 66 of the Negotiable Instruments Law, an endorser warrants “that the
instrument is genuine and in all respects what it purports to be; that he has good title to it; that
all prior parties had capacity to contract; and that the instrument is at the time of his
endorsement valid and subsisting.”

It is well-settled that the relationship of the depositors and the Bank or similar institution is that
of creditor-debtor. Article 1980 of the New Civil Code provides that fixed, savings and current
deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loans. The bank is the debtor, and the depositor is the creditor. The depositor
lends the bank money, and the bank agrees to pay the depositor on demand. The savings
deposit agreement between the bank and the depositor is the contract that determines the rights
and obligations of the parties.”

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 Yang vs. Court of Appeals

G.R. No. 138074

August 15, 2003
FACTS:
Cely Yang and Prem Chandiramani agreed to exchange checks. Messenger Danilo
Ranigo was ordered to meet with Chandiramani for the exchange. However, Danilo claimed that
he lost the checks and dollar draft. Thereafter, Yang requested stop payment. But the truth of
the matter is that the checks were not lost. Chandiramani got hold of the checks and dollar
drafts and negotiated the same to David and in turn, David issued him a dollar draft.
Chandiramani deposited the dollar drafts to his wife’s account.
Yand instituted a case for damages against David, Chandiramani and the banks.

25 | P a g e
ISSUE:
Whether or not David is a holder in due course.
RULING:
The Supreme Court ruled that Every holder of a negotiable instrument is deemed prima
facie a holder in due course. However, this presumption arises only in favor of a person who is a
holder as defined in Section 191 of the Negotiable Instruments Law, meaning a "payee or
indorsee of a bill or note, who is in possession of it, or the bearer thereof." In the present case, it
is not disputed that David was the payee of the checks in question. The weight of authority
sustains the view that a payee may be a holder in due course. Hence, the presumption that he
is a prima facie holder in due course applies in his favor.

RCBC Savings Bank vs. Odrada

G.R. No. 219037

October 19, 2016
FACTS:
Respondent Noel M. Odrada sold a secondhand Mitsubishi Montero to Teodoro L. Lim
for P1,510,000. As a requisite for the approval of the loan, RCBC required Lim to submit the
original copies of the Certificate of Registration (CR) and Official Receipt (OR) in his name.
Unable to produce the Montero's OR and CR, Lim requested RCBC to execute a letter
addressed to Odrada informing the latter that his application for a car loan had been approved.

26 | P a g e
 RCBC issued a letter that the balance of the loan would be delivered to Odrada upon
submission of the OR and CR. RCBC issued a letter that the balance of the loan would be
delivered to Odrada upon submission of the OR and CR. Following the letter and initial down
payment, Odrada executed a Deed of Absolute Sale. Thereafter, two manager’s check was
issued by the RCBC. Odrada did not go to the slated meeting and instead deposited the
manager's checks with International Exchange Bank. Consequently, Odrada filed a collection
suit against Lim and RCBC in the Regional Trial Court of Makati.
ISSUE:
Whether or not the drawee bank can deny payment of the manager’s check to Lim.

RULING:
The Supreme Court ruled that “as a general rule, the drawee bank is not liable until it
accepts. Prior to a bill's acceptance, no contractual relation exists between the holder and the
drawee. Acceptance, therefore, creates a privity of contract between the holder and the drawee
so much so that the latter, once it accepts, becomes the party primarily liable on the instrument.
Accordingly, acceptance is the act which triggers the operation of the liabilities of the drawee
(acceptor) under Section 62 of the Negotiable Instruments Law. Thus, once he accepts, the
drawee admits the following: (a) existence of the drawer; (b) genuineness of the drawer's
signature; (c) capacity and authority of the drawer to draw the instrument; and (d) existence of
the payee and his then capacity to endorse.

The drawee bank, as a result, has the unconditional obligation to pay a manager’s check
to a holder in due course irrespective of any available personal defenses. However, while this
Court has consistently held that a manager’s check is automatically accepted, a holder other
than a holder in due course is still subject to defenses.

Patrimonio vs. Gutierrez

G.R. No. 187769

June 4, 2014

FACTS:
Napoleon Gutierrez (Gutierrez) entered into a business venture under the name of Slam
Dunk Corporation (Slum Dunk), a production outfit that produced mini-concerts and shows
related to basketball. The petitioner pre-signed several checks to answer for the expenses of

27 | P a g e
Slam Dunk. The blank checks were entrusted to Gutierrez with the specific instruction not to fill
them out without previous notification to and approval by the petitioner. Thereafter, without the
petitioner’s knowledge and consent, Gutierrez went to Marasigan, to secure a loan in the
amount of ₱200,000.00. Gutierrez simultaneously delivered to Marasigan one of the blank
checks the petitioner pre-signed with Pilipinas Bank with the words "Cash" "Two Hundred
Thousand Pesos Only". Thereafter, Marasigan deposited the check, but it was dishonored for
the reason "ACCOUNT CLOSED." Marasigan sought recovery from Gutierrez to no avail. He
thereafter sent several demand letters to the petitioner asking for the payment of ₱200,000.00,
but his demands likewise went unheeded. Consequently, he filed a criminal case for violation of
B.P. 22 against the petitioner.
ISSUE:
 Whether respondent Gutierrez has completely filled out the subject check strictly under
the authority given by the petitioner.
RULING:
The Supreme Court, speaking through Justice Brion, declared that “The answer is
supplied by the applicable statutory provision found in Section 14 of the Negotiable Instruments
Law. This provision applies to an incomplete but delivered instrument. Under this rule, 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. It merely requires that the instrument be in the possession of a person other than the
drawer or maker and from such possession, together with the fact that the instrument is wanting
in a material particular, the law presumes agency to fill up the blanks. In order however that one
who is not a holder in due course can enforce the instrument against a party prior to the
instrument’s completion, two requisites must exist: (1) that the blank must be filled strictly in
accordance with the authority given; and (2) it must be filled up within a reasonable time. If it
was proven that the instrument had not been filled up strictly in accordance with the authority
given and within a reasonable time, the maker can set this up as a personal defense and avoid
liability. However, if the holder is a holder in due course, there is a conclusive presumption that
authority to fill it up had been given and that the same was not in excess of authority.”

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 Ang vs. Associated Bank

G.R. No, 146511

September 5, 2007
FACTS:
Respondent Associated Bank filed a collection suit against Antonio Ang Eng Liong and
petitioner Tomas Ang for the 2 promissory notes that they executed as principal debtor and co-
maker. Despite repeated demands for payment on Antonio Ang Eng Liong and Tomas Ang,

29 | P a g e
respectively, respondent Bank claimed that the defendants failed and refused to settle their
obligation resulting in a total indebtedness of P539,638.96. On the other hand, Antonio Ang Eng
Liong only admitted having secured a loan amounting to P80,000. He pleaded though that the
bank "be ordered to submit a more reasonable computation" considering that there had been
"no correct and reasonable statement of account" sent to him by the bank, which was allegedly
collecting excessive interest, penalty charges.
It was denied by the bank that there were extensions of time for payment accorded to
Antonio Ang Eng Liong. Furthermore, it contended that the provisions on presentment for
payment and notice of dishonor were expressly waived by Tomas Ang and that such waiver is
not against public policy pursuant to Sections 82 (c) and 109 of the NIL.
ISSUE:
Whether or not petitioner's other real and personal defenses such as successive
extensions coupled with fraudulent collusion to hide Eng Liong's default, the payee's grant of
additional burdens, coupled with the insolvency of the principal debtor, and the defense of
incomplete but delivered instrument, meritorious.
RULING:
The Supreme Court, speaking through Justice Azcuna, ruled that “the accommodation
party is liable on the instrument to a holder for value even though the holder, at the time of
taking the instrument, knew him or her to be merely an accommodation party, as if the contract
was not for accommodation. As petitioner acknowledged it to be, the relation between an
accommodation party and the accommodated party is one of principal and surety - the
accommodation party being the surety. As such, he is deemed an original promisor and debtor
from the beginning; he is considered in law as the same party as the debtor in relation to
whatever is adjudged touching the obligation of the latter since their liabilities are interwoven as
to be inseparable. Although a contract of suretyship is in essence accessory or collateral to a
valid principal obligation, the surety's liability to the creditor is immediate, primary and absolute;
he is directly and equally bound with the principal. As an equivalent of a regular party to the
undertaking, a surety becomes liable to the debt and duty of the principal obligor even without
possessing a direct or personal interest in the obligations nor does he receive any benefit
therefrom.”

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 Far East vs. Gold Palace Jewelry

G.R. No. 168274

August 20, 2008
FACTS:

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 Samuel Tagoe, purchased from the respondent Gold Palace Jewellery Co.'s (Gold
Palace's) store at SM-North EDSA several pieces of jewelry valued at P258,000.00, to pay,  he
offered Foreign Draft issued by the United Overseas Bank (Malaysia) addressed to the Land
Bank of the Philippines, Manila (LBP), and payable to the respondent company.
Yang issued Cash Invoice to the foreigner, asked him to come back, and informed him
that the pieces of jewelry would be released when the draft had already been cleared.
Thereafter, Respondent Julie Yang-Go, the manager of Gold Palace, consequently deposited
the draft in the company's account with the aforementioned Far East. When Far East, the
collecting bank, presented the draft for clearing to LBP, the drawee bank, the latter cleared the
same. Consequently, the foreigner eventually returned to respondent's store claim the
purchased goods, draft being cleared respondent Yang released the pieces of jewelry to
Samuel Tagoe. However, LBP informed Far East that the amount in Foreign Draft No. M-
069670 had been materially altered from P300.00 to P380,000.00 and that it was returning the
same. Intending to debit the amount from respondent's account, Far East subsequently
refunded the P380,000.00 earlier paid by LBP. Gold Palace, in the meantime, had already
utilized portions of the amount.
ISSUE:
Whether or not Gold Palace may be held liable for the materially altered foreign draft.
RULING:
The Supreme Court, speaking through Justice Nachura, ruled that “in this case, Gold
Palace is protected by Section 62 of the NIL, its collecting agent, Far East, should not have
debited the money paid by the drawee bank from respondent company's account. When Gold
Palace deposited the check with Far East, the latter, under the terms of the deposit and the
provisions of the NIL, became an agent of the former for the collection of the amount in the
draft. The subsequent payment by the drawee bank and the collection of the amount by the
collecting bank closed the transaction insofar as the drawee and the holder of the check or his
agent are concerned, converted the check into a mere voucher, and, as already discussed,
foreclosed the recovery by the drawee of the amount paid. This closure of the transaction is a
matter of course; otherwise, uncertainty in commercial transactions, delay and annoyance will
arise if a bank at some future time will call on the payee for the return of the money paid to him
on the check.”

Metropolitan Bank and Trust Co. vs. Junnel's Marketing Corp.

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 G.R. Nos. 235511 & 235565
June 20, 2018
FACTS:
Respondent Junnel's Marketing Corporation has a current account with Metrobank from
which it draws checks to pay its different suppliers. Among JMC's suppliers are Jardine Wines
and Spirits (Jardine) and Premiere Wines (Premiere). JMC discovered an anomaly involving
eleven (11) checks (subject checks) it had issued to the orders of Jardine and Premiere from
which had already been charged against JMC's current account but were, for some reason, not
covered by any official receipt from Jardine or Premiere.
Respondent Purificacion Delizo (Delizo), a former accountant of JMC, executed a
handwritten letter confessed that, during her time as an accountant for JMC, she stole several
company checks drawn against JMC's current account and professed that the said checks were
never given to the named payees but were forwarded by her to one Lita Bituin (Bituin). Further,
admitted that she, Bituin and an unknown bank manager colluded to cause the deposit and
encashing of the stolen checks and shared in the proceeds thereof. JMC surmised that the
subject checks are among the checks purportedly stolen by Delizo. JMC filed before the
Regional Trial Court (RTC) of Pasay City a complaint for sum of money which ruled that
Bankcom and Metrobank are liable based on a 2/3-1/3 ratio. CA agreed but said Metrobank's
liability is based on failure to ascertain that only four (4) out of the 11 subject checks were
stamped by Bankcom with the express guarantees "all prior endorsements and/or lack of
endorsement guaranteed" and "non-negotiable" as required by Section 17 of the PCHC Rules
and Regulations.
ISSUE:
Whether or not Metrobank is liable to JMC.
RULING:
The Supreme Court, speaking through Justice Velasco Jr., ruled that “accordingly, we
rule: (1) Metrobank liable to return to JMC the entire amount of the subject checks plus interest
and (2) Bankcom liable to reimburse Metrobank the same amount plus interest.”
It declared that “a drawee bank is contractually obligated to follow the explicit
instructions of its drawer-clients when paying checks issued by them. The drawer's instructions-
including the designation of the payee or to whom the check should be paid-are reflected on the
face and by the terms thereof.  When a drawee bank pays a person other than the payee named
on the check, it essentially commits a breach of its obligation and renders the payment it made
unauthorized. In such cases and under normal circumstances, the drawee bank may be held

33 | P a g e
liable to the drawer for the amount charged against the latter's account. The liability of the
drawee bank to the drawer in cases of unauthorized payment of checks has been regarded in
jurispn1dence to be strict by nature.”
It added that “while Metrobank's reliance upon the guarantees of Bankcom does not
excuse it from being liable to JMC, such reliance does enable Metrobank to seek
reimbursement from Bankcom-the collecting bank.

A collecting or presenting bank-i.e., the bank that receives a check for deposit and that presents
the same to the drawee bank for payment-is an indorser of such check. When a collecting bank
presents a check to the drawee bank for payment, the former thereby assumes the same
warranties assumed by an indorser of a negotiable instrument pursuant to Section 66 of the
Negotiable Instruments Law. These warranties are: (1) that the instrument is genuine and in all
respects what it purports to be; (2) that the indorser has good title to it; (3) that all prior parties
had capacity to contract; and (4) that the instrument is, at the time of the indorsement, valid and
subsisting. If any of the foregoing warranties turns out to be false, a collecting hank becomes
liable to the drawee bank for payments made under such false warranty.

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 Metropolitan Bank and Trust Co. vs. Junnel's Marketing Corp.

G.R. No. 232044

August 27, 2020
FACTS:
JunnePs Marketing Corporation (JMC) is a depositor of Metropolitan Bank & Trust Co.
against which it draws company checks. JMC wrote 8 checks payable to various payees. In an
audit conducted by JMC, the above checks were found to be stolen and encashed found their
way to the Pasay City branch of Asiatrust Bank where they were deposited to Zenaida
Casquero’s account. On the other hand, Casquero allegedly received the checks from a certain
Virginia Rosales as payment for the use of her credit line which contains indorsement at the
back by the payees. AUB then required Casquero to sign a Deed of Undertaking, where she
assumed full responsibility for the correctness, genuineness and validity of all the checks and of
the indorsement appearing thereon. Thereafter, the checks were presented to Metrobank, which
cleared and authorized the payment thereof.
Purificacion Delizo (Delizo) confessed that she stole several company checks drawn
against JMC's Metrobank current account but testified that it were never delivered to the named
payee but were instead given to a certain Lita Bituin and an unidentified bank manager with
whom Delizo colluded and connived in encashing said checks, and shared in the proceeds
thereof.
ISSUE:
Whether or not the drawee bank, Metrobank herein, be ordered to pay respondent JMC.
RULING:
The Supreme Court, speaking through Justice Reyes Jr., declared that “we agree with
the appellate court that in cases of unauthorized payment of checks to persons other than the
named payee therein or his order, the drawee bank is liable to the drawer for the amount of the
checks. In turn, the drawee bank may seek reimbursement from the collecting bank. This rule is
already embedded in our jurisprudence.”
Metrobank is Liable to JMC

The drawee bank, or the bank on which a check is drawn, is bound by its contractual obligation
to its client, the drawer, to pay the check only to the payee or to the payee's order. The drawee
bank is duty-bound to follow strictly the instructions of its client, which is reflected on the face of,
and by the terms of, the check. When the drawee bank pays a person other than the named
payee on the check, the drawee bank violates its contractual obligation to its client. Thus, it shall

35 | P a g e
be held liable for the amount charged to the drawer's account. When an unauthorized payment
on the checks is made, the liability of Metrobank to JMC attaches even if it merely acted upon
the guarantee of the collecting bank.
A crossed check is one where two parallel lines are drawn across its face or across its
corner, and carries with it the following effects: (a) the check may not be encashed but only
deposited in the bank; (b) the check may be negotiated only once to the one who has an
account with the bank; and (c) the act of crossing the check serves as a warning to the holder
that the cheek has been issued for a definite purpose and he must inquire if he received the
check pursuant to this purpose; otherwise, he is not a holder in due course. The crossing of a
check, thus, means that the check should be deposited only in the account of the payee.”

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 BDO Unibank, Inc. vs. Lao

G.R. No. 227005

June 19, 2017
FACTS:
Respondent Engineer Selwyn S. Lao (Lao) filed before the RTC a complaint for
collection of sum of money against Equitable Banking Corporation. Lao alleged that entered into
a transaction with Everlink, through its authorized representative Wu, under which, Everlink
would supply him with "HCG sanitary wares"; and that for the down payment, he issued two (2)
Equitable crossed checks payable to Everlink. Furthermore, it averred, hat when the checks
were encashed, he contacted Everlink for the immediate delivery of the sanitary wares, but the
latter failed to perform its obligation. However, later on, Lao learned that the checks were
deposited in two different bank accounts at respondent International Exchange Bank.
Consequently, Lao was prompted to file a complaint against Everlink and Wu for their failure to
comply with their obligation and against BDO for allowing the encashment of the two (2) checks.
On the other hand, BDO asserted that it had no obligation to ascertain the owner of the
accounts to which the checks were deposited because the instruction to deposit the said checks
to the payee's account only was directed to the payee and the collecting bank, which in this
case was Union Bank.
ISSUE:
Whether or not a collecting bank assumes responsibility for a crossed check as a
general endorser in accordance with section 66 of the negotiable instruments law.
RULING:
The Supreme Court, speaking through Justice Mendoza, ruled that “the Court agrees
with the appellate court that in cases of unauthorized payment of checks to a person other than
the payee named therein, the drawee bank may be held liable to the drawer. The drawee bank,
in turn, may seek reimbursement from the collecting bank for the amount of the check. This rule
on the sequence of recovery in case of unauthorized check transactions had already been
deeply embedded in jurisprudence. The liability of the drawee bank is based on its contract with
the drawer and its duty to charge to the latter's accounts only those payables authorized by him.
A drawee bank is under strict liability to pay the check only to the payee or to the payee's order.
When the drawee bank pays a person other than the payee named in the check, it does not

37 | P a g e
comply with the terms of the check and violates its duty to charge the drawer's account only for
properly payable items.”
“Generally, BDO must be ordered to pay Lao the value of the subject check; whereas,
Union Bank would be ordered to reimburse BDO the amount of the check. The aforesaid
sequence of recovery, however, is not applicable in the present case due to the presence of
certain factual peculiarities.”

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 Dy vs. People

G.R. No. 158312

November 14, 2008
FACTS:
John Dy has been the distributor of W.L. Food Products would pay the same in either
cash or check upon pick up of stocks of snack foods at the latter's branch or main office in
Quezon City. At times, he would entrust the payment to one of his drivers.
Dy's driver went to the branch office of W.L. Foods to pick up stocks of snack foods.  the
driver handed her a blank Far East Bank and Trust Company (FEBTC) Check. He introduced
himself to the checker, Mary Jane D. Maraca, Thereafter, the same driver obtained snack foods
from Maraca in the amount of P226,794.36 in exchange for a blank FEBTC Check. In both
instances, the driver was issued an unsigned delivery receipt. The amounts for the purchases
were filled in later by Evelyn Ong, accountant of W.L. Foods, based on the value of the goods
delivered. Apparently, When presented for payment, FEBTC dishonored the checks for
insufficiency of funds. Raul D. Gonzales, manager of FEBTC-Naga Branch, notified Atty. Rita
Linda Jimeno, counsel of W.L. Foods, of the dishonor.
Later, Gonzales sent Atty. Jimeno another letter advising her that FEBTC Check No.
553602 for P106,579.60 was returned to the drawee bank for the reasons stop payment order
and drawn against uncollected deposit (DAUD), and not because it was drawn against
insufficient funds as stated in the first letter. When William Lim, owner of W.L. Foods, phoned
Dy about the matter, the latter explained that he could not pay since he had no funds, yet which
prompts him to send demand letter which the latter it ignored.
On July 16, 1993, Lim charged Dy with two counts of estafa. the RTC convicted Dy on
two counts each of estafa and violation of B.P. Blg. 22. Dy brought the case to the Court of
Appeals. In the assailed Decision of January 23, 2003, the appellate court affirmed the RTC.
ISSUE:
Whether or not the honorable court of appeals gravely erred in finding that the
prosecution has proven the guilt of accused beyond reasonable doubt of violation of bp 22 on
two (2) counts?

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RULING:
The Supreme Court, speaking through Justice Quisumbing, ruled that “Before an
accused can be held liable for estafa under Article 315, paragraph 2(d) of the Revised Penal
Code, as amended by Republic Act No. 4885, the following elements must concur: (1)
postdating or issuance of a check in payment of an obligation contracted at the time the check
was issued; (2) insufficiency of funds to cover the check; and (3) damage to the payee thereof.
These elements are present in the instant case.

Section 191 of the Negotiable Instruments Law defines "issue" as the first delivery of an
instrument, complete in form, to a person who takes it as a holder. Significantly, delivery is the
final act essential to the negotiability of an instrument. Delivery denotes physical transfer of the
instrument by the maker or drawer coupled with an intention to convey title to the payee and
recognize him as a holder. It means more than handing over to another; it imports such transfer
of the instrument to another as to enable the latter to hold it for himself.

In this case, even if the checks were given to W.L. Foods in blank, this alone did not make its
issuance invalid. When the checks were delivered to Lim, through his employee, he became a
holder with prima facie authority to fill the blanks. This was, in fact, accomplished by Lim's
accountant.”

we are not swayed by petitioner's arguments that the single incident of dishonor and his
absence when the checks were delivered belie fraud. Indeed damage and deceit are essential
elements of the offense and must be established with satisfactory proof to warrant
conviction. Deceit as an element of estafa is a specie of fraud. It is actual fraud which consists
in any misrepresentation or contrivance where a person deludes another, to his hurt. There is
deceit when one is misled -- by guile, trickery or by other means -- to believe as true what is
really false.

Prima facie evidence of deceit was established against petitioner with regard to FEBTC Check
No. 553615 which was dishonored for insufficiency of funds.”

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 Samsung Construction vs. Far East Bank and Trust Company

G.R. No. 129015

August 13, 2004
FACTS:

Plaintiff Samsung Construction Company Philippines, Inc maintained a current account

with defendant Far East Bank and Trust Company. The sole signatory to Samsung
Construction's account was Jong Kyu Lee ("Jong"), its Project Manager while the checks
remained in the custody of the company's accountant, Kyu Yong Lee ("Kyu"). Thereafter, a
certain Roberto Gonzaga presented for payment FEBTC Check No. 432100 to the bank's
branch in Bel-Air, Makati. The check, payable to cash and drawn against Samsung
Construction's current account, was in the amount of Nine Hundred Ninety-Nine Thousand Five
Hundred Pesos (P999,500.00) and found that it had been encashed upon submission of
proof of identity and three (3) identification cards. The following day, Kyu, examined the
balance of the ban k account and discovered that a check in the amount of P999,500.00 had
been encashed. As the last blank check was missing, Jong learned that his
signature was forged.

ISSUE:

Whether a bank which pays out on a forged check is liable to reimburse the drawer from
whose account the funds were paid out.
RULING:
The Supreme Court, speaking through Justice Tinga, declared that “The general rule is
to the effect that a forged signature is "wholly inoperative," and payment made "through or
under such signature" is ineffectual or does not discharge the instrument. If payment is made,
the drawee cannot charge it to the drawer's account. The traditional justification for the result is
that the drawee is in a superior position to detect a forgery because he has the maker's
signature and is expected to know and compare it. The rule has a healthy cautionary effect on

41 | P a g e
banks by encouraging care in the comparison of the signatures against those on the signature
cards they have on file. Moreover, the very opportunity of the drawee to insure and to distribute
the cost among its customers who use checks makes the drawee an ideal party to spread the
risk to insurance”

“Under Section 23 of the Negotiable Instruments Law, forgery is a real or absolute

defense by the party whose signature is forged.26 On the premise that Jong's signature was
indeed forged, FEBTC is liable for the loss since it authorized the discharge of the forged check.
Such liability attaches even if the bank exerts due diligence and care in preventing such faulty
discharge. Forgeries often deceive the eye of the most cautious experts; and when a bank has
been so deceived, it is a harsh rule which compels it to suffer although no one has suffered by
its being deceived. The forgery may be so near like the genuine as to defy detection by the
depositor himself, and yet the bank is liable to the depositor if it pays the check.

Thus, the first matter of inquiry is into whether the check was indeed forged. A document
formally presented is presumed to be genuine until it is proved to be fraudulent. In a forgery trial,
this presumption must be overcome but this can only be done by convincing testimony and
effective illustrations.”

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 Metropolitan Bank and Trust Company vs. Cablizo

G.R. No. 154469

December 6, 2006
FACTS:
Respondent Renato D. Cabilzo (Cabilzo) was one of Metrobank’s clients who
maintained a current account with Metrobank Pasong Tamo Branch. He issued a Metrobank
Check No. 985988, payable to "CASH" and postdated on 24 November 1994 in the amount of
One Thousand Pesos (P1,000.00). Subsequently, the check was presented to Westmont Bank
for payment. Westmont Bank, in turn, indorsed the check to Metrobank for appropriate clearing.
Thereafter, Metrobank cleared the check for encashment in accordance with the Philippine
Clearing House Corporation (PCHC) Rules.
Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some
transaction when he was asked by a bank personnel if Cabilzo had issued a check in the
amount of P91,000.00 to which the former replied in the negative. Cabilzo requested that the
questioned check be returned to him for verification, to which Metrobank complied. Upon receipt
of the check, Cabilzo discovered that Metrobank Check he issued on 12 November 1994 in the
amount of P1,000.00 was altered to P91,000.00 and the date 24 November 1994 was changed
to 14 November 1994. Prompted him to demand to Metrobank to re-credit the amount
of P91,000.00 to his account. However, Metrobank refusedreasoning that it has to refer the
matter first to its Legal Division for appropriate action. Repeated verbal demands followed but
Metrobank still failed to re-credit the amount of P91,000.00 to Cabilzo’s account.
ISSUE:
Whether or not metrobank, as drawee bank, liable for the alterations on the subject
check bearing the authentic signature of the drawer thereof.

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RULING:
The Supreme Court, speaking through Justice Chico-Nazario, ruled that “an alteration is
said to be material if it changes the effect of the instrument. It means that an unauthorized
change in an instrument that purports to modify in any respect the obligation of a party or an
unauthorized addition of words or numbers or other change to an incomplete instrument relating
to the obligation of a party. In other words, a material alteration is one which changes the items
which are required to be stated under Section 1 of the Negotiable Instruments Law.
In the case at bar, the check was altered so that the amount was increased
from P1,000.00 to P91,000.00 and the date was changed from 24 November 1994 to 14
November 1994. Apparently, since the entries altered were among those enumerated under
Section 1 and 125, namely, the sum of money payable and the date of the check, the instant
controversy therefore squarely falls within the purview of material alteration.”
We never fail to stress the remarkable significance of a banking institution to commercial
transactions, in particular, and to the country’s economy in general. The banking system is an
indispensable institution in the modern world and plays a vital role in the economic life of every
civilized nation. Whether as mere passive entities for the safekeeping and saving of money or
as active instruments of business and commerce, banks have become an ubiquitous presence
among the people, who have come to regard them with respect and even gratitude and, most of
all, confidence”

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 Ching vs. Nicdao,

G.R. No. 141181, April 27, 2007

Bank of America vs. Philippine Racing Club

G.R. No. 150228, July 30, 2009

Asia Brewery, Inc. Vs. Equitable PCI Bank (now Banco De Oro, EPCI, Inc.),

G.R. No. 190432

April 25, 2017

Arceo vs. People

G.R. No. 142641

July 17, 2006

Allied Banking Corporation vs. Court of Appeals

G.R. No. 125851

July 11, 2006

Hongkong and Shanghai Banking Corporation Limited - Philippine Branches vs.

Commissioner of Internal Revenue

G.R. No. 166018

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 June 4, 2014

Evangelista vs. Screenex, Inc.

G.R. No. 211564

November 20, 2017

Villanueva vs. Nite

G.R. No. 148211, G.R. No. 148211

July 25, 2006

Equitable PCI Bank vs. Ong

G.R. No. 156207

September 15, 2006

Security Bank and Trust Company vs. Rizal Commercial Banking Corporation

G.R. No. 170984

January 30, 2009

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