[1]Abubakar vs. Auditor GeneralGR L-1405, 31 July 1948First Division, Bengzon (J)

Facts: Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes on 10 December 1941 for P1,000, but is now in the hands of Benjamin Abubakar. The Auditor refused to authorize the payment of the treasury warrant. Abubakar contends he is a holder in good faith and for value and thus, entitled to the rights and privileges of a holder in due course.Issue: Whether Abubakar is a holder in due course.Held: A treasury warrant is not a negotiable instrument; it being 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. Therefore, a holder of a treasury warrant cannot argue that he is a holder in good faith and for value of a negotiable instrument and thus entitled to the rights and privileges of a holder in due course, free from defenses.

[2]Ang Tiong vs. TingGR L-26767, 22 February 1968En Banc, Castro (J)

Facts: Lorenzo Ting issued a check for P4,000 payable to “cash or bearer.” With Felipe Ang’s signature (indorsement in blank) at the back thereof, the instrument was received by Ang Tiong who thereafter presented it to the bank for payment. The drawee bank dishonored it. Ang Tiong made written demands on both Ting and Ang to make good the amount represented by the check. These demands unheeded. Ang Tiong filed suit for collection. The trial court adjudged for Ang Tiong. Only Ang appealed, maintaining that he is only an accommodation party.Issue: Whether Felipe Ang is an accommodation party.Held: Felipe Ang is a general indorser (Section 63, Negotiable Instruments Law), in the absence of any indication by appropriate words his intention to be bound in some other capacity. Even on the assumption that Ang is a mere accommodation party, he is liable on the instrument to a holder for value notwithstanding that such holder at the time of taking the instrument knew him to be only an accommodation party (Section 29, Negotiable Instruments Law). Assuming further that Ang is an accommodation indorser, the fact that Ang may obtain security from the maker to protect himself against the danger of insolvency of the latter cannot in any manner affect his liability to Ang Tiong, as the said remedy is a matter of concern exclusively between an accommodation indorser and an accommodated party. The liability of Felipe Ang remains primary and unconditional.

[3]Arrieta vs. National Rice & Corn Corporation (NARIC)GR L-15645, 31 January 1964En Banc, Regala (J)Facts: On 19 May 1952, Paz and Vitaliado Arrieta participated in the public bidding called by NARIC for the supply of 20,000 metric tons of Burmese rice. Ad her bid of $203 per metric ton was the lowest, she was awarded the contract for the same. As a result of the delay in the opening of the letter of credit by NARIC, the allocation of Arrieta’s supplier in Rangoon was cancelled and the 5% deposit amounting to an equivalent of P200,000 was forfeited. Arrieta endeavored but failed to restore the cancelled Burmese rice allocation, and thus offered Thailand rice instead. Such offer was rejected by NARIC. Subsequently, Arrieta sent a letter to NARIC, demanding compensation for the damages caused her in the sum of US$286,000 representing unrealized profit. The demand having been rejected, she instituted the case.

Issue: Whether the rate of exchange to be applied in the conversion is that prevailing at the time of breach, or at the time the obligation was incurred, or on the promulgation of the decision.Held: As pronounced in Eastboard Navigation vs. Ismael, if there is any agreement to pay an obligation in the currency other than Philippine legal tender, the same is null and void as contrary to public policy (RA 529), and the most that could be demanded is to pay said obligation in Philippine currency to be measured in the prevailing rate of exchange at the time the obligation was incurred. Herein, the rate of exchange to be applied is that of 1 July 1952, when the contract was executed.

[4]Associated Bank vs. CAGR 89802, 7 May 1992First Division, Cruz (J)Facts: Melissa’s RTW’s customers issued cross checks payable to Melissa’s RTW, which its proprietor Merle Reyes did not receive. It was learned that the checks had been deposited with the Associated Bank by one Rafael Sayson. Sayson was not authorized by Reyes to deposit and encash said checks. Reyes filed an action for the recovery of the total value of the checks plus damages. Issue: Whether the bank was negligent for the loss.Held: Crossing a check means that the drawee bank should not encash the check but merely accept it for deposit, that the check may be negotiated only once by one who has an account in a bank, and that the check serves as warning that it was issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose. The effect, thus, relate to the mode of its presentment for payment, in accordance with Section 72 of the Negotiable Instruments Law. The bank paid the checks notwithstanding that title had not passed to the indorser, as the checks had been crossed and issued “for payee’s account only.” It did so in its own peril and became liable to the payee for the value of the checks. The failure of the bank to make an inquiry as to Sayson’s authority was a breach of its duty. The bank is negligent and is thus liable to Reyes.

[5]Associated Bank vs. CAGR 107382, 31 January 1996Second Division, Romero (J)Facts: The Province of Tarlac maintains a current account with the Philippine National Bank (PNB Tarlac Branch) where the provincial funds are deposited. Portions of the funds were allocated to the Concepcion Emergency Hospital. Checks were issued to it and were received by the hospital’s administrative officer and cashier (Fausto Pangilinan). Pangilinan, through the help of Associated Bank but after forging the signature of the hospital’s chief (Adena Canlas), was able to deposit the checks in his personal account. All the checks bore the stamp “All prior endorsement guaranteed Associated Bank.” Through post-audit, the province discovered that the hospital did not receive several allotted checks, and sought the restoration of the debited amounts from PNB. In turn, PNB demanded reimbursement from Associated Bank. Both banks resisted payment. Hence, the present action.Issue: Who shall bear the loss resulting from the forged checks.Held: PNB is not negligent as it is not required to return the check to the collecting bank within 24 hours as the banks involved are covered by Central Bank Circular 580 and not the rules of the Philippine Clearing House. Associated Bank, and not PNB, is the one duty-bound to warrant the instrument as genuine, valid and subsisting at the time of indorsement pursuant to Section 66 of the Negotiable Instruments Law. The stamp guaranteeing prior indorsement is not an empty rubric; the collecting bank is held accountable for checks deposited by its customers. However, due to the fact that the Province of Tarlac is equally negligent in permitting Pangilinan to collect the checks when he was no longer connected with the hospital, it shares the burden of loss from the checks bearing a forged indorsement. Therefore, the

Province can only recover 50% of the amount from the drawee bank (PNB), and the collecting bank (Associated Bank) is liable to PNB for 50% of the same amount.

[6]Bataan Cigar and Cigarette Factory vs. CAGR 93048, 3 March 1994Second Division, Nocon (J)Facts: Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its suppliers, Kim Tim Pua George (George King), to deliver bales of tobacco leaf. In consideration thereof, BCCFI issued postdated cross checks to King. King sold the checks, at a discount, to the State Investment House Inc. (SIHI). As King failed to deliver the bales of tobacco leaf despite demand, BCCFI issued stop payment orders on the checks. Efforts by SIHI to collect from BCCFI failed. SIHI filed suit.Issue: Whether SIHI can recover the value of the checks, premised on the issue whether SIHI is a holder in due course.Held: The facts of the case are on all fours to the case of SIHI vs. Intermediate Appellate Court. The crossing of the checks should put the holder on inquiry and upon him devolves the duty to ascertain the indorser’s title to the check or the nature of his possession. Failing in this respect, the holder is declared guilty of gross negligence amounting to legal absence of good faith, contrary to Section 52 (c) of the Negotiable Instruments Law, and as such the consensus of authority is to the effect that the holder of the check is not a holder in due course. BCCFI cannot be obliged to pay the checks as there is a failure of consideration (King being unable to supply the bales of tobacco leaf, for which the checks were intended for). Still, SIHI -- a holder not in due course -- can collect from the immediate indorser, George King. Such is the disadvantage of a holder not in due course, i.e. the instrument is subject to defenses as if it were non-negotiable.

[7]Caltex (Philippines) Inc. vs. CAGR 97753, 10 August 1992Second Division, Regalado (J)Facts: On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued 280 certificates of time deposit (CTD) in favor of one Angel dela Cruz who deposited with the bank the aggregate amount of P1.12 million. Anger de la Cruz delivered the CTDs to Caltex in connection with his purchase of fuel products from the latter. Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance of the replacement CTDs. De la Cruz was able to obtain a loan of P875,000 from the bank, and in turn, he executed a notarized Deed of Assignment of Time Deposit in favor of the bank. Thereafter, Caltex presented for verification the CTDs (which were declared lost by de la Cruz) with the bank. Caltex formally informed the bank of its possession of the CTDs and its decision to preterminate the same. The bank rejected Caltex’ claim and demand, after Caltex failed to furnish copy of the requested documents evidencing the guarantee agreement, etc. In 1983, de la Cruz’ loan matured and the bank set-off and applied the time deposits as payment for the loan. Caltex filed the complaint, but which wasdismissed. Issue [1]: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.Held [1]: The CTDs in question meet the requirements of the law for negotiability. Contrary to the lower court’s findings, the CTDs are negotiable instruments (Section 1). Negotiability or non-negotiability of an instrument is determined from the writing, i.e. from the face of the instrument itself. The documents provided that the amounts deposited shall be repayable to the depositor. The amounts are to be repayable to the bearer of the documents, i.e. whosoever may be the bearer at the time of presentment. Issue [2]: Whether the CTDs’ negotiation require delivery only.Held [2]: Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it (Caltex) and de la Cruz requires both delivery and indorsement; as the CTDs were delivered to it as security for dela Cruz’ purchases of its fuel products, and not for payment. Herein, there was no negotiation in the sense of a

transfer of title, or legal title, to the CTDs in which situation mere delivery of the bearer CTDs would have sufficed. The delivery thereof as security for the fuel purchases at most constitutes Caltex as a holder for value by reason of his lien. Accordingly, a negotiation for such purpose cannot be effected by mere delivery of the instrument since the terms thereof and the subsequent disposition of such security, in the event of non-payment of the principal obligation, must be contractually provided for.

[8]Caram Resources vs. ContrerasAM MTJ0830849, 26 October 1994First Division, Davide Jr. (J)Facts: Teresita Dizon obtained a loan from Caram Resources payable in installments. She issued a promissory note and postdated BPI checks, four of which were dishonored when presented to the bank as the account against which they were drawn had been closed. Caram charged Dizon for violation of BP22, but where Judge Contreras acquitted Dizon on the ground of reasonable doubt. Subsequently, Caram charged Judge Maximo Contreras with gross ignorance of the law and gross misconduct committed in Dizon’s criminal case.Issue: Whether malice is an essential element in BP 22.Held: In the 4 criminal cases before Judge Contreras, Dizon as accused admitted that a loan was granted to her and in connection therewith she executed a promissory note wherein she bound herself to pay the loan in 12 installments. She issued the postdated checks to cover the installments as they fall due. The checks were drawn against her BPI current account, which she closed in the same months she obtained the loan, so that when the checks were presented for payment they were dishonored. Malice and intent in issuing a worthless check are immaterial. The offense is committed by the very fact of its performance, i.e. the mere act of issuing a worthless check. The offense is malum prohibitum. An act may not be considered by society as inherently wrong, hence, not malum in se, but because of the harm that it inflicts on the community, it can be outlawed and criminally punished as malum prohibitum, pursuant to the State’s exercise of police power.

[9]City Trust Banking vs. CAGR 92591, 30 April 1991Third Division, Gutierrez Jr. (J)Facts: William Samara purchased from Citytrust Bank Draft 23681 for US$ 40,000 the payee being Thai International Airways and the corresponding drawee bank in the United States is Marine Midland. Samara executed a stop-payment order of the bank draft instructing Citytrust to inform Marine Midland about the order through telex. Marine Midland noted the order, and thus Citytrust credited Samara’s account. Seven months later, Citytrust re-debited Samara’s account upon discovery that Marine Midland had already debited Citytrust’s account.Issue: Who shall be liable for the amount.Held: Citytrust and Marine Midland were not in privity with each other in a transaction involving payment through a bank draft. A bank draft is a bill of exchange drawn by a bank upon its correspondent bank issued at the solicitation of a stranger who purchases and pays therefor. It is an order for payment of money. Citytrust was the drawer of the draft through which it ordered Marine Midland, the drawee bank, to pay Thai Airways. The drawee bank acting as payor bank is solely liable for acts not done in accordance with the instructions of the drawer bank or the purchaser of the draft. The drawee bank has the burden of proof that it did not so violate. Meanwhile, the drawer, if sued by the purchaser of the draft, is liable for the act of debiting the customer’s account despite an instruction to stop payment. The drawer has the duty to prove that he complied with the order to inform the drawee.

[10]

Clark vs. SellnerGR 16477, 22 November 1921First Division, Romualdez (J)Facts: George Sellner, with WH Clarke and John Mave, signed a note in favor of RN Clark dated 1 July 1914 in Manila for the amount of P12,000. The note matured, but its amount was not paid. Action was filed in court. Sellner’s counsel allege that Sellner did not receive anything of value for the transaction, that the instrumnet was not presented to sellner for payment, and that Sellner, being an accommodation party is not liable unless the note is negotiated, which was allegedly not done. Issue: Whether Sellner is an accommodation party liable for the note.Held: Sellner, as one of the signers of the note, is one of the joint and several debtors on the note, and as such he is liable under Section 60 of the Negotiable Instruments Law/ Sellner lent his name, not to the creditor, but to those who signed with him placing himself with respect to the creditor in the same position and with the same liability as the said signers; and thus is a joint surety rather than an accommodation party. As to the presentment for payment, such action is not necessary in order to charge the person primarily liable, as is Sellner (Section 70, Negotiable Instruments Law).

[11]Negotiable Instruments Law, 2004 ( 5 )Digests (Berne Guerrero)Co vs. PNBGR L-51767, 29 June 1982Second Division, Barredo (J)Facts: Standard Parts Manufacturing Corporation mortgaged properties to PNB. When Standard failed to payits obligation (P4,296,803,56 secured by said properties), PNB extra-judicially foreclosed the mortgages.Standard, meanwhile, transferred its rights in the mortgages to Citadel Insurance and Surety Co., which wrotePNB its interest to redeem the Makati property (one of the property mortgaged) for P1,621,970. PNB rejectedthe offer. Citadel filed suit against PNB, where the complaint was accompanied by an RCBC manager’s checkand which was deposited under a savings bank account with RCBC by order of the trial court.Issue: Whether there was a valid and effective tender of payment.Held: The unequivocal tender of redemption was made, through a manager’s check of RCBC (a well-known,big and reputable banking institution) for the amount it believed it should pay as redemption price. PNBrejected it on the sole and only ground that it considered the amount insufficient. Redemption was made ontime, i.e. 1 year from the date appearing as the date of the registration of the certificate of sale. Tender bymanager’s check was not inefficacious as the Court has already sanctioned redemption by check (SeeJavellana vs. Mirasol).[12]Cruz vs. CAGR 108738, 17 June 1994First Division, Kapunan (J)Facts: Andrea Mayor is engaged in the business of granting interest-bearing loans and in rediscountingchecks. Roberto Cruz, on the other hand, is engaged in selling ready to wear clothes at the Pasay CommercialCenter. Cruz frequently borrows money from Mayor. In 1989, Cruz borrowed P176,000 from mayor, whichMayor delivered. In turn, Cruz issued a Premiere Bank check for the same amount. When the check matured,Mayor presented it to the bank but was dishonored and marked “account closed.” When notified of thedishonor, Cruz promised to pay in cash. No payment was made, and thus the criminal action for violation ofBP 22 was instituted.Issue: Whether Cruz is liable for violating BP 22, even upon the claim that the check was issued to serve a

mere evidence of indebtedness, and not for circulation or negotiation.Held: A check issued as an evidence of debt, though not intended to be presented for payment has the sameeffect of an ordinary check, hence, it falls within the ambit of BP 22. When a check is presented for payment,the drawee bank will generally accept the same regardless of whether it was issued in payment of anobligation or merely to guarantee the said obligation. What the law punishes is the issuance of a bouncingcheck, not the purpose for which it was issued nor the term and conditions relating to its issuance. The mereact of issuing a worthless check is malum prohibitum.[13]Crystal vs. CAGR L-35767, 18 June 1976Resolution of the Second Division, Barredo (J)Facts: The Supreme Court, in its decision of 25 February 1975, affirmed the decision of the Court of Appeals,Negotiable Instruments Law, 2004 ( 6 )Digests (Berne Guerrero)holding that Raymundo Crystal’s redemption of the property acquired by Pelagia Ocang, Pacita, Teodulo,Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de Garcia, was invalid as the check whichCrystal used in paying the redemption price has been either dishonored or had become stale (Ergo, the valueof the check was never realized). Crystal filed a motion for reconsideration.Issue: Whether the conflicting circumstances of the check being dishonored and becoming stale affect thevalidity of the redemption sale.Held: For a check to be dishonored upon presentment and to be stale for not being presented at all in time areincompatible developments that have variant legal consequences. If indeed the questioned check wasdishonored, the redemption was null and void. If it had only become state, it becomes imperative that thecircumstances that caused its non-presentment be determined, for if it was not due to the fault of the drawer, itwould be unfair to deprive him of the rights he had acquired as redemptioner. Herein, it appears that there is astrong showing that the check was not dishonored, although it became stale, and that Pelagia Ocang hadactually been paid the full value thereof. The Supreme Court, thus, reconsidered its decision and remandedthe case to the trial court for further proceedings.[14]Dela Victoria vs. BurgosGR 111190, 27 June 1995First Division, Bellosillo (J)Facts: Raul Sesbreno filed a complaint for damages against Assistant City Fiscal Bienvenido Mabanto beforethe RTC of Cebu City. After trial, judgment was rendered ordering Mabanto to pay Sesbreno P11,000. Thedecision having become final and executory, the trial court ordered its execution upon Sesbreno’s motion. Thewrit of execution was issued despite Mabanto’s objection. A notice of garnishment was served upon Loreto dela Victoria as City Fiscal of Mandaue City where Mabanto was then detailed. De la Victoria moved to quashthe notice of garnishment claiming that he was not in possession of any money, funds, etc. belonging toMabanto until delivered to him, and as such are still public funds which could not be subject of garnishment..Issue: Whether the checks subject of garnishment belong to Mabanto or whether they still belong to thegovernment.Held: Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable instrument isincomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. Asordinarily understood, delivery means the transfer of the possession of the instrument by the maker or drawerwith the intent to transfer title to the payee and recognize him as the holder thereof. Herein, the salary checkof a government officer or employee does not belong to him before it is physically delivered to him. Inasmuch

as said checks had not yet been delivered to Mabanto, they did not belong to him and still had the character ofpublic funds. As a necessary consequence of being public fund, the checks may not be garnished to satisfy thejudgment.[15]Firestone Tire and Rubber vs. Ines Chaves & Co.GR L-17106, 19 October 1966En Banc, Regala (J)Facts: The check was intended as part of the payment of Ines Chaves’ debt. When presented to the SecurityBank and Trust Co. by Firestone, the check was returned for insufficiency of funds. Despite repeatedNegotiable Instruments Law, 2004 ( 7 )Digests (Berne Guerrero)demands, Ines Chaves failed to settle its account; hence, the suit.Issue: Whether good faith is required in the issuance of a check.Held: Everyone must in the performance of his duties, observe honesty and good faith. Where a person issuesa postdated check without funds to cover it and informs the payee of this fact, he cannot be held guilty ofestafa because there is no deceit. Herein, there is nothing in the record to show that Firestone knew that therewere no funds when it accepted the check, much less that Firestone agreed to take the check with knowledgeof the lack of funds. As Ines Chavez is guilty of fraud (bad faith) in the performance of its obligation, it isliable for damages. Its conduct wanting in good faith, the award of attorney’s fees was warranted.[16]Gempesaw vs. CAGR 92244, 9 February 1993Second Division, Campos Jr. (J)Facts: Natividad Gempesaw issued checks, prepared by her bookkeeper, a total of 82 checks in favor ofseveral supplies. Most of the checks for amounts in excess of actual obligations as shown in theircorresponding invoices. It was only after the lapse of more than 2 years did she discovered the fraudulentmanipulations of her bookkeeper. It was also learned that the indorsements of the payee were forged, and thechecks were brought to the chief accountant of Philippine Bank of Commerce (the Drawee Bank, BuendiaBranch) who deposited them in the accounts of Alfredo Romero and Benito Lam. Gempesaw made demandupon the bank to credit the amount charged due the checks. The bank refused. Hence, the present action.Issue: Who shall bear the loss resulting from the forged indorsements.Held: As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot chargethe drawer’s account for the amount of said check. An exception to the rule is where the drawer is guilty ofsuch negligence which causes the bank to honor such checks. Gempesaw did not exercise prudence in takingsteps that a careful and prudent businessman would take in circumstances to discover discrepancies in heraccount. Her negligence was the proximate cause of her loss, and under Section 23 of the NegotiableInstruments Law, is precluded from using forgery as a defense. On the other hand, the banking rule banningacceptance of checks for deposit or cash payment with more than one indorsement unless cleared by somebank officials does not invalidate the instrument; neither does it invalidate the negotiation or transfer of saidchecks. The only kind of indorsement which stops the further negotiation of an instrument is a restrictiveindorsement which prohibits the further negotiation thereof, pursuant to Section 36 of the NegotiableInstruments Law. In light of any case not provided for in the Act that is to be governed by the provisions ofexisting legislation, pursuant to Section 196 of the Negotiable Instruments Law, the bank may be held liablefor damages in accordance with Article 1170 of the Civil Code. The drawee bank, in its failure to discover thefraud committed by its employee and in contravention banking rules in allowing a chief accountant to depositthe checks bearing second indorsements, was adjudged liable to share the loss with Gempesaw on a 50:50

ratio.[17]Hongkong & Shanghai Bank vs. People’s Bank and TrustGR L-28226, 30 September 1970First Division, Fernando (J)Facts: The Philippine Long Distance Telephone Company (PLDT) drew a check on the Hongkong &Negotiable Instruments Law, 2004 ( 8 )Digests (Berne Guerrero)Shanghai Banking Corporation (HSBC) in the latter’s favor for P14,608.05, and sent it through mail. Thecheck fell into the hands of Florentino Changco, who was able to erase the name of the payee and substitutedhis own, and deposited the altered check in his current account with the People’s Bank and Trust Co. (PBTC).The check was cleared by HSBC, and PBTC credited Changco the amount. The alteration was known whenthe cancelled check was returned to PLDT. HSBC requested PBTC to refund the amount, but the latterrefused.Issue: Whether HSBC can claim reimbursement from PBTC.Held: A person who presents fro payment checks guarantees the genuineness of the check, and the draweebank need to concern itself with nothing but the genuineness of the signature, and the state of the account withit of the drawee. If at all, whatever remedy, whatever remedy HSBC has would lie not against PBTC but asagainst the party responsible for changing the name of the payee (i.e. Changco). Its failure to call the attentionof PBTC as to such alteration until after the lapse of 27 days would, in the light of Central Bank Circular 9(24-hour clearing house rule), negate whatever right it might have had against PBTC.[18]Ibasco vs. CAGR 117488, 5 September 1996Third Division, Davide Jr. (J)Facts: The Ibasco spouses requested credit accommodation fro the supply of ingredients in the manufactureof animal feeds from the Trivinio spouses. Ibasco issued 3 checks for 3 deliveries of darak. The checksbounced and the Ibasco spouses were notified of the dishonor. Ibasco instead offered a property in Daet. Theproperty, being across the sea, the Trivinio spouses did not inspect the property. For the failure of the Ibascospouses to settle their account, the Trivinio spouses filed criminal cases against the former for violation ofBP22.Issue: Whether the checks were for accommodation or guarantee to acquire the benefits of the interpretationof Ministry Circular 4 of the Department of Justice in relation to BP 22.Held: Ministry Circular 4, issued 1 December 1981 by the Department of Justice, provides that where a checkis issued as part of an arrangement to guarantee or secure the payment of the obligation, pre-existing or not,the drawer is not criminally liable for either estafa or violation of BP 22. Incidents however indicate that thechecks were issued as payment and for value, and not for accommodation (i.e. pertaining to an arrangementmade a favor to another, not upon a consideration received). as the checks failed to bear any statement “foraccommodation” and “for guarantee” to show Ibasco’s intent. ( It must be noted, however, that BP22 does notdistinguish and applies even in cases where dishonored checks were issued as a guarantee or for deposit only.The erroneous interpretation of Ministry Circular 4 was rectified by the repealing Ministry Circular 12, issuedon 8 August 1984).[19]Jimenez vs. BucoyGR L-10221, 28 February 1958En Banc, Bengzon (J)

Facts: In the proceedings in the intestate of Luther Young and Pacita Young who died in 1954 and 1952,respectively, Pacifica Jimenez presented for payment 4 promissory notes signed by Pacita for differentamounts totalling P21,000. Acknowledging receipt by Pacita during the Japanese occupation, in the currencyNegotiable Instruments Law, 2004 ( 9 )Digests (Berne Guerrero)then prevailing, the Administrator manifested willingness to pay provided adjustment of the sums be made inline with the Ballantyne schedule. The claimant objected to the adjustment insisting on full payment inaccordance with the notes. The court held that the notes should be paid in the currency prevailing after thewar, and thus entitling Jimemez to recover P21,000 plus P2,000 as attorney’s fees. Hence, the appeal.Issue: Whether the amounts should be paid, peso for peso; or whether a reduction should be made inaccordance with the Ballantyne schedule.Held: If the loan was expressly agreed to be payable only after the war, or after liberation, or became payableafter those dates, no reduction could be effected, and peso-for-peso payment shall be ordered in Philippinecurrency. The Ballantyne Conversion Table does not apply where the monetary obligation, under the contract,was not payable during the Japanese occupation. Herein, the debtor undertook to pay “six months after thewar,” peso for peso payment is indicated.[20]Kalalo vs. LuzGR L-27782, 31 July 1970En Banc, Zaldivar (J)Facts: On 17 November 1959, Octavio Kalalo entered into an agreement with Alfredo Luz where he was torender engineering design services for a fee. On 11 December 1961, Kalalo sent Luz a statement of accountwhere the balance due for services rendered was P59,505. On 18 May 1962, Luz sent Kalalo a resume of feesdue to the latter, and a check for P10,861.08. Kalalo refused to accept the check as full payment of the balanceof the fees due him. On 10 August 1962, Kalalo filed a complaint containing 4 causes of action, i.e. $28,000(representing 20% of the amount paid to Luz in the International Research Institute project) and the balanceof P30,881.25 as fees; P17,0000 as consequential and moral damages; P55,000 as moral damages, attorney’sfees and litigation expenses; and P25,000 as actual damages, attorney’s fees and litigation expenses). The trialcourt ruled in favor of Kalalo. Luz filed an appeal directly with the Supreme Court raising only questions oflaw.Issue: Whether the rate of exchange of dollar to peso are those at the time of the payment of the judgment orat the time when the research institute project became due and demandable.Held: Luz’ obligation to pay Kalalo the sum of US$28,000 accrued on 25 August 1961, or after the enactmentof RA 529 (16 June 1950). Thus, the provision of the statute which requires payment at the prevailing rate ofexchange when the obligation was incurred cannot be applied. RA 529 does not provide for the rate ofexchange for the payment of obligation incurred after the enactment of the Act, and thus the rate of exchangeshould be that prevailing at the time of payment. The view finds support in the ruling of the Court in Engel vs.Velasco & Co. The trial court did not err in holding the rate of exchange is that at the time of payment.[21]Lao vs. CAGR 119178, 20 June 1997Third Division, Panganiban (J)Facts: Lim Lim Lao was a junior officer of Premier Investment House in its Binondo branch. She wasauthorized to sign checks for and in behalf of the corporation. In the course of business, she met Fr. ArtelijoPalijo, provincial treasurer of the Society of the Divine Word. Fr. Palijo was authorized to invest donations ofthe society and had been investing the society’s money with Premiere. Fr. Palijo was issued checks in

Negotiable Instruments Law, 2004 ( 10 )Digests (Berne Guerrero)payment of interest for the society’s investments. The checks were dishonored for “insufficiency of funds.”Fr. Palijo was only able to acquire P5,000 for his efforts in demanding the payment of the checks. Premiere,subsequently, was placed under receivership. Fr. Palijo filed a suit against Lim Lao and his co-signatory,Teodulo Asprec, head of operations for violation of BP 22.Issue: Whether an employee who, as part of her regular duties, signs blank corporate check, be held forviolation of BP22.Held: The checks co-signed by Lim Lao were signed in advance and in blank, delivered to the head ofoperations, who subsequently filled in the name of he payee, the amounts and corresponding dates ofmaturity; this procedure followed in keeping with her duties as a junior officer. Though BP 22 provides thepresumption that a drawer is knowledgeable of the fact of insufficiency of funds, such presumption may bedebunked by contrary evidence. Herein, Lim Lao does not have the power, duty or responsibility to monitorand assess the balances against the issuance, nor to make sure that the checks were funded. Suchresponsibility devolved upon the corporation’s Treasury Department in Cubao, Quezon City. Furthermore, nonotice of dishonor was actually sent or received by Lim Lao to support the prima facie evidence of knowledgeof insufficient funds. She was thus acquitted.[22]Lazaro vs. CAGR 105461, 11 November 1993Second Division, Padilla (J)Facts: Marlyn Lazaro received from Rudy Chua the amount of P90,000 as advanced payment for deliveriesof sugar, etc. Lazaro was only able to deliver partial delivery. To refund the undelivered goods, she issued acheck for P72,000. When deposited, the check was dishonored and stamped “account closed.” To make up forthe dishonor, Lazaro indorsed a check issued by one Lolita Soriano, payable to “Cash.” It was likewisedishonored and marked “account closed.” Chua sent a demand letter asking for the payment of the amountcovered by the first check within days from receipt of letter. For failure of the accused to pay the amount,Chua filed cases for estafa and violation of BP 22.Issue: Whether damage or prejudice is an element of BP 22 violation.Held: The clear intention of the framers of BP 22 is to make the mere act of issuing a check that is worthlessmalum prohibitum. The law does not require that there be damage or prejudice to the individual complainantby reason of the issuance of the check. The fine provided for in BP 22 was intended as an additional penaltyfor the act of issuing a worthless check. BP 22 provides that a fine of not less than but not more than doublethe amount of the dishonored check may be imposed by the court.[23]Lim vs. CAGR 107898, 19 December 1995First Division, Bellosillo (J)Facts: Spouses Manuel and Rosita Lim are the president and treasurer, respectively, of RIGI Built IndustriesInc. RIGI had been transacting business with Linton Commercial Company for years, the latter supplying theformer with steel plates, steel bars, flat bars and purlin sticks which the company uses in the fabrication,installation and building of steel structures. The Lims ordered steel plates from Linton Commercial,delivering checks to the latter’s collector as payment. The checks were dishonored for “insufficiency ofNegotiable Instruments Law, 2004 ( 11 )Digests (Berne Guerrero)funds” with the additional notation “payment stopped” (The Lims claimed that the supplies delivered by

Linton Commercial were not in accordance with the specifications of purchase orders). Despite demands, theLims refused to make good the checks or to pay value of the deliveries.Issue: Whether the receipt of the checks by the collector of Linton is the issuance and delivery to the payeewithin the contemplation of the law (as prelude to jurisdiction issue).Held: “Issue” means the first delivery of the instrument complete in form to a person who takes it as a holder.“Holder“ refers to the payee or indorsee of a note or who is in possession of it or the bearer thereof. Theissuance as well as the delivery of the check must be to a person who takes it as a holder. Delivery of thechecks signifies transfer of possession (actual or constructive) from one person to another with intent totransfer title thereto; the delivery being the final act essential to its consummation as an obligation. Thecollector was not the person who could take the checks as a holder. Neither could the collector be deemed anagent of Linton Commercial with respect to the checks because he was a mere employee.[24]Lim vs. PeopleGR 130038, 18 September 2000En Banc, Pardo (J)Facts: Rosa Lim bought various kinds of jewelry worth P300,000 from the store of Maria Antonia Seguan, byissuing a check payable to “cash” drawn against MetroBank. The next day, Lim again purchased jewelryvalued at P241,668 by issuing another check payable to cash likewise drawn against MetroBank. Seguandeposited the checks with her bank. The checks were returned with a notice of dishonor as Lim’s accounts insaid bank were already closed. Upon demand, Lim promised to pay Seguan the amounts of the twodishonored checks. She never did. Rosa Lim was charge for two counts of violation of BP 22, where she wasfound guilty, and sentenced to 1 year imprisonment with fine (P200,000).Issue: Whether Lim has knowledge of the insufficiency of funds when issuing the checks.Held: The elements of BP22 are (1) the making, drawing and issuance of any check to apply for account orfor value, (2) the knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficientfunds in or credit with the drawee bank for the payment of such check in full upon its presentment, and (3) thesubsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for thesame reason had not the drawer, without any valid cause, ordered the bank to stop payment. Lim never deniedissuing the check. Section 2 of BP 22 creates a presumption juris tantum that the second element prima facieexists when the first and third elements are present. If not rebutted, it suffices to sustain a conviction.It must be noted that similar to the Vaca case, the Court deleted the prison sentences imposed upon Lim,holding that the two fines imposed for each of the violation (P200,000 each ) are appropriate and sufficient.Subsidiary imprisonment not exceeding 6 months is provided in case of insolvency or non-payment of thefines as decreed.[25]Lim vs. RodrigoGR 76974, 18 November 1988Third Division, Fernan (J)Facts: Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in payment of a certain obligationNegotiable Instruments Law, 2004 ( 12 )Digests (Berne Guerrero)to Benito Lim. Said checks were handed to Lim’s brother, Vicente, at Ko Hu’s office in Nueva Street, Manilafor delivery to Benito Lim in Baguio City. When presented at Lim’s depository bank in Baguio City, thechecks were dishonored for having been drawn against a closed account. Lim filed a suit against Ko Hu forviolation of BP 22 in Baguio City.Issue: Whether the delivery of the checks to Benito Lim’s brother is the delivery contemplated by law

(prelude to juridictional issue)Held: The venue of the offense lies at the place where the check was executed and delivered to the payee andthat the place where a check was written, signed or dated does not fix the place where it was executed, aswhat is of decisive importance is the delivery thereof which is the final act essential to its consummation as anobligation. The “delivery” contemplated by law “must be to a person who takes the check as a holder,” i.e.“the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.” Vicente Lim,Benito’s brother, cannot be said to have taken the checks in the concept of a holder for he is neither the payeeor indorsee thereof. Neither could he be deemed to be Benito’s agent with respect thereto, for he waspurposely sent to Ko Hu to get certain stock certificates and not the checks in question (This is similar to thePeople vs. Yabut case).[26]Llamado vs. CAGR 99032, 26 March 1997Second Division, Torres Jr. (J)Facts: Ricardo Llamado and Jacinto Pascual were Treasurer and President of Pan Asia Finance Corporation.Leon Gaw delivered P180,000 to Llamado with assurance that the amount would be repaid on 4 November1983 with 12% interest and a share of the profits of the corporation. On said date, Gaw deposited the checkbut it was dishonored. Informing Llamado of the dishonor, Llamado offered in writing to pay Gaw a portionof the amount equivalent to 10% thereof on 14 or 15 November and the balance rolled over for a period of 90days. Llamado failed to do so. Gaw filed a complaint against Llamado and Pascual for violation of BP 22.Pascual remains at large. Llamado contends he signed the check in blank.Issue: Whether Llamado is personally liable for the bounced check.Held: Llamado’s claim that he signed the check in blank is hardly a defense. By signing the check, he madehimself prone to being charged with violation of BP 22. It became incumbent upon him to prove his defenses.As treasurer of the corporation who signed the check in his capacity as corporate officer, lack of involvementin the negotiation for the transaction is not a defense. Llamado is personally liable even if the check was inthe name of the corporation. Third paragraph of Section 1, BP 22, states that “where the check is drawn by acorporation, company or entity, the person(s) who actually signed the check in behalf of such drawer shall beliable under this Act.”It must be noted that the check was issued for a valuable consideration (P180,000). Had the money beenintended to be returned when the investment was successful, the check need not be issued. A receipt and theirwritten agreement would have sufficed.[27]Lozano vs. MartinezGR L-63419, 18 December 1986En Banc, Yap (J)Negotiable Instruments Law, 2004 ( 13 )Digests (Berne Guerrero)Facts: Lozano vs. Martinez (GR L-63419), Lobaton vs. Cruz (GR L-66839-42), Datuin vs. Pano (GR 71654),Violago vs. Pano (GR 74524-25), Abad vs. Gerochi (GR 75122-49), Aguiliz vs. Presiding Judge of Branch154 (GR 75812-13), Hojas vs. Penaranda (GR 75765-67) and People vs. Nitafan (GR 75789) are casesinvolving prosecution of offenses under BP 22 which were consolidated herein as the parties (defendants)thereto question the constitutionality of the statute, BP 22.Issue: Whether BP 22 is constitutional.Held: The language of BP22 is broad enough to cover all kinds of checks, whether present dated or postdated, whether issued in payment of pre-existing obligations or given in mutual or simultaneous exchange for

something of value. BP 22 is aimed to put a stop or to curb the practice of issuing worthless checks, which isproscribed by the State because of the injury it causes to public interests. The gravamen of the offensepunished by BP 22 is the act of making or issuing a worthless check or a check which is dishonored upon itspresentation for payment. it is not the non-payment of an obligation which the law punishes. The lawpublishes the act not as an offense against property but an offense against public order. The enactment of BP22 is a valid exercise of police power and is not repugnant to the constitutional inhibition againstimprisonment for debt. The statute is not unconstitutional.[28]Magno vs. CAGR 96132, 26 June 1992Second Division, Paras (J)Facts: Oriel Magno lacked funds to purchase necessary equipment to make his car repair shop businessoperational. He approached Corazon Teng, who in turn referred LS Finance and Management Corporation,who could accommodate him and provide him credit facilities. LS Finance required a warranty deposit (30%of the total value of the pieces of equipment to be purchased), which Teng advanced, unknown to Magno.When the equipment were delivered to Magno, he issued a postdated check to LS Finance, which delivered itto Teng. When the check matured, Magno requested that the check not to be deposited as he no longer bankswith Pacific Bank. To replace the check, Magno issued 6 postdated checks, 2 of which were deposited andcleared, the other 4 were held momentarily by Teng, on the request of Magno for they are not covered withsufficient funds. As Magno cannot pay the monthly rentals fro the equipment, the same were pulled out. Onlythen did Magno learned that Teng was the one who advanced the deposit. Magno promised to pay her butpayment never came. When the checks were deposited, they were dishonored. Magno was found guilty ofviolation of BP22 when the cases were adjudicated.Issue: Whether there was a violation of BP 22.Held: The crux of the matter rest upon the reason for the drawing of the postdated checks by Magno, i.e.whether they were drawn or issued “to apply on account or for value,” as required under Section 1 of BP 22.When viewed against the definitions of “warranty” and “deposit,” for which the postdated checks were issuedor drawn, the alleged crime could not have been committed by Magno. Furthermore, the element of “knowingat the time of issue that he does not have sufficient funds in or credit with the drawee bank....:” is inverselyapplied in the case. From the beginning, Magno never hid the fact that he had no funds. Magno, thus, wasacquitted of the crime charged.[29]Manila Lighter Transportation vs. CANegotiable Instruments Law, 2004 ( 14 )Digests (Berne Guerrero)GR L-50373, 15 February 1990First Division, Grino-Aquino (J)Facts: 49 checks were issued by Manila Lighter Transportation’s customers in payment of brokerage /lighterage services and were all delivered to its collector, Augusto Perez. Upon forged indorsements of thecompany’s General Manager, Luis Gaskell, the checks found their way to the accounts of third persons andwere later withdrawn. A complaint to recover the value of the checks were filed against China Bank. Bankdenied liability.Issue: Whether the bank is negligent as to bear the loss resulting from the checks with forged indorsements.Held: Since Manila Lighter Transportation was not a client of the bank, the latter had no way of ascertainingthe authenticity of its indorsements on the checks which were deposited in the accounts of third persons (KoLit and Cao Pek) in said bank. The bank was not negligent because, in accordance with banking practice, it

caused the checks to pass through the clearing house before it allowed their proceeds to be withdrawn by thedepositors.[30]Moran vs. CAGR 105836, 7 March 1994Second Division, Regalado (J)Facts: George and Librada Moran maintained 3 joint accounts with CityTrust Banking Corporation. TheMorans issued checks in favor of Petrophil Corporation, which were dishonored for insufficiency of funds.Moran deposited the amount that would cover the checks the day after the check’s clearing. Petrophil did notdeliver the Morans’ fuel orders for their Wack-Wack Petron Gasoline station, prompting the latter totemporarily stop business operations. The Morans sued the bank for damages.Issue: Whether a bank is liable for its refusal to pay a check on account of insufficient funds, notwithstandingthe fact the fact that a deposit was made later in the day.Held: A check is a bill of exchange drawn on a bank payable on demand. Where the bank possesses funds ofa depositor, it is bound to honor his checks to the extent of the amount of the deposits. Failure to do so, whendeposit is sufficient, entitles the drawer to substantial damages without proof of actual damages. Herein,however, the balance of the account maintained in the bank was not enough to cover either of the two checkswhen they were dishonored. A check, as distinguished from an ordinary bill of exchange, is supposed to bedrawn against a previous deposit of funds. As such, a drawer must remember his responsibilities every timehe issues a check. He must personally keep track of his available balance in the bank and not rely on the bankto notify him of the necessity to fund the checks he previously issued. A bank is under no obligation to makepart payment on a check, up to only the amount of the drawer’s funds, where the check is drawn for anamount larger than what the drawer has on deposit. A check is intended not only to transfer a right to theamount named in it, but to serve the further purpose of affording evidence for the bank of the payment of suchamount when the check is taken up. Clearly, a bank is not liable for its refusal to pay a check on account ofinsufficient funds, notwithstanding the fact that a deposit may be made later in the day. Before a bankdepositor may maintain a suit to recover a specific amount from his bank, he must first show that he had ondeposit sufficient funds to meet his demand.[31]MWSS vs. CANegotiable Instruments Law, 2004 ( 15 )Digests (Berne Guerrero)GR L-62943, 14 July 1986Second Division, Gutierrez Jr. (J)Facts: By special arrangement with PNB, MWSS used personalized checks in drawing from its account. Thechecks were printed by its printer, F. Mesina Enterprises. 23 checks were paid and cleared by PNB, anddebited against MWSS’ account from March to May 1969. The checks were deposited by payees Raul Dizon,Arturo Sison, and Antonio Mendoza in their account with PCIBank. Said persons were later found to befictitious. MWSS requested PNB to restore the amount debited due to the 23 checks, allegedly forged, to itsaccount. The bank refused. Hence, the present action.Issue: Who shall bear the loss resulting from the alleged forged checks.Held: There was no express and categorical finding that the 23 checks were forged or signed by persons otherthan the authorized MWSS signatories. Forgery is not presumed but should be established by clear, positiveand convincing evidence. MWSS is barred from setting up defense of forgery under Section 23 of theNegotiable Instruments Law as MWSS committed gross negligence in the printing of its personalized checks,failed to reconcile its bank statements with its own records, and failed to provide appropriate security

measures over its own record. PNB, the drawee bank, had taken necessary measures in the detection of forgedchecks and the prevention of their fraudulent encashment through constant reminders to all its current accountbookkeepers informing them of the activities of forgery syndicates. MWSS’ gross negligence was theproximate cause of the loss (P3 million), and should bear the loss.[32]Navarro vs. CAGR 112389, 1 August 1994First Division, Cruz (J)Facts: Mercedes D. Navarro was convicted of violating Batas Pambansa Bilang 22 (BP 22) in the RegionalTrial Court of Pangasinan. She failed to file her brief on appeal. She claimed to have made payment to theoriginal complainant’s saleslady when she filed a motion for new trial on the ground of “newly discoveredevidence.” Such motion was denied.Issue: Whether Navarro is indeed guilty of violating the bouncing check law.Held: Payment of the value of the check either by the drawer or by the drawee bank within 5 banking daysfrom notice of dishonor given to the drawer is a complete defense. The prima facie presumption that thedrawer had knowledge of the insufficiency of funds or credit at the time of the issuance and on its presentedfor payment would be rebutted by such payment. This defense lies regardless of the strength of the evidenceoffered by the prosecution to prove the elements of the offense (i.e. violation of BP 22). Herein, Navarrofailed to overcome the presumption by substantiating her allegation of payment. There is no proof that thepayment, if it was really made at all, was done within 5 days from the notice of dishonor.[33]People vs. GrospeGR L-74053-54, 20 January 1988Second Division, Melencio-Herrera (J)Facts: Manuel Parulan issued a check to the San Miguel Corporation, which was received by the latter’sfinance officer in Guiguinto, Bulacan, and which was forwarded and deposited in SMC’s BPI account in SanNegotiable Instruments Law, 2004 ( 16 )Digests (Berne Guerrero)Fernando, Pampanga. Another check was issued by Parulan as direct payment for the spot sale of beer, whichwas similarly received, forwarded and deposited as above. Both were dishonored for “insufficiency of funds.”Parulan was charged with violation of Batas Pambansa Bilang 22 and for estafa under Article 315, paragraph2 (d) of the Revised Penal Code. Tried jointly, the court dismissed the cases for lack of jurisdiction.Issue: Whether the checks were issued in Bulacan or Pampanga.Held: While the subject check was issued in Bulacan, it was not completely drawn thereat, but in SanFernando, Pampanga, where it was uttered and delivered. The place where the bills were written, signed ordated does not fix or determine the place where they were executed. What is of decisive importance is thedelivery thereof, as it is the final act essential to its consummation as an obligation. The issuance and thedelivery of the check must be to a person who takes it as a holder, i.e. the payee or indorsee of a bill or note,who is in possession of it or the bearer thereof. Both estafa by postdating or issuing a bad check a transitory orcontinuing offense. Thus, as jurisdiction or venue is determined by the allegations in the information, i.e. SanFernando, Pampanga, the venue was properly laid. Case is remanded to the trial court for proper disposition.[34]People vs. ManiegoGR L-30910, 27 February 1987First Division, Narvasa (J)Facts: Julia Maniego was an indorser of several checks drawn by her sister, Milagros Pamintuan, which were

dishonored after they had been exchange with cash belonging to the Government, then in the official custodyof Lt. Rizalino Ubay. Ubay, Pamintuan and Maniego were indicted for the crime of malversation. Ubay andManiego were arraigned, while Pamintuan fled to the United States. Ubay was found guilty while Maniegowas acquitted. Both, however, were ordered to pay in solidum the amount of P57,434.50 to the government.Maniego appealed.Issue: Whether Maniego is liable even if she is a mere indorser.Held: Under the law, the holder or last indorsee of a negotiable instrument has the right to enforce payment ofthe instrument for the full amount thereof against all parties liable thereon. Among the parties liable thereon isan indorser of the instrument. Such an indorser who indorses without qualification, inter alia, engaged that ondue presentment, the instrument shall be accepted or paid, or both, according to its tenor, and that if it bedishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to theholder, or to any subsequent indorser who may be compelled to pay it. Maniego may also be deemed an“accommodation party” in the light of the facts (i.e. without receiving value for the same). As such, she isliable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrumentknew her to be only an accommodation party, although she has the right, after paying the holder, to obtainreimbursement from the party accommodated.[35]People vs. ReyesGR 101127-31, 18 November 1993First Division, Cruz (J)Facts: Lorie Garcia delivered rice to Cresencia Reyes, as accommodation to her friend Manny Cabrera whohad no more stock to sell. Reyes issued 6 checks for 6 orders delivered in different dates. Only 3 of the 6checks were made good, the other 3 were returned by the bank due to “insufficient funds.” Garcia notifiedNegotiable Instruments Law, 2004 ( 17 )Digests (Berne Guerrero)Reyes of the dishonor and the latter promised to pay her their total value. Despite demands, Reyes failed tomake good the checks or replace them with cash. 3 criminal cases for violation of BP 22 and 2 criminal casesfor estafa were filed against Reyes.Issue: Whether a single act of issuing a check may entail criminal liability of both violation of BP 22 andArticle 315 of the Revised Penal Code (Estafa).Held: A single criminal act may give rise to a multiplicity of offenses and where there is a variance ordifferences between the elements of an offense in one law and another law. The gravamen of the offensepunished by BP 22 is the act of making and issuing a worthless check or a check that is dishonored upon itspresentment for payment; and act deemed pernicious and inimical to public welfare. BP 22 applies evenwhere the dishonored checks were issued merely in the form of a deposit or a guaranty and not as actualpayment, as the law does not make any distinction. On the other hand, the checks were not payment for a preexistingobligation nut as consideration for each shipment of rice. The checks were issued as an inducementfor the surrender by the party deceived of her property. Reyes made good 3 of the checks, giving assurance toGarcia that the remaining checks were fully funded. Her failure to make good the checks raised the primafacie inference of deceit.[36]People vs. TuandaAC 3360, 30 January 1990Resolution En Banc, Per CuriamFacts: In 1983, Atty. Fe Tuanda received from one Herminia A. Marquez several pieces of jewelry with atotal value of P36,000 for sale on commission bases. In 1984, instead of returning the unsold pieces of

jewelry worth P26,250, she issued 3 checks. These checks were dishonored by the drawee bank, TradersRoyal Bank, for insufficiency of funds. Notwithstanding receipt of the notice of dishonor, Tuanda made noeffort to settle her obligation. Criminal cases were filed, wherein she was acquitted of estafa but was foundguilty of violation of BP 22. The appellate court affirmed the decision of the trial court and imposed furthersuspension against Tuanda in the practice of law, on the ground that the offense involves moral turpitude.Issue: Whether violation of BP 22 involves moral turpitude to allow the suspension of a member of the barfrom the practice of law.Held: Conviction of a crime involving moral turpitude relates to and affects the good moral character of aperson convicted of such offense. Herein, BP 22 violation is a serious criminal offense which deleteriouslyaffects public interest and public order. The effects of the issuance of a worthless check transcends the privateinterest of parties directly involved in the transaction and touches the interest of the community at large.Putting valueless commercial papers in circulation, multiplied a thousand fold, can very well pollute thechannels of trade and commerce, injure the banking system and eventually hurt the welfare of society and thepublic interest. The Court affirmed the suspension of Tuanda from the practice of law.[37]Philippine Bank of Commerce vs. AruegoGR L-25836-37, 31 January 1981First Division, Fernandez (J)Facts: Jose Aruego publishes a periodical called “World Current Events.” To facilitate payment of theprinting, Aruego obtained a credit accommodation from the Philippine Bank of Commerce. For every printingNegotiable Instruments Law, 2004 ( 18 )Digests (Berne Guerrero)of the periodical, the printer (Encal Press and Photo-Engraving) collected the cost of printing by drawing adraft against the bank, said draft being sent later to Aruego for acceptance. As an added security for thepayment of the amounts advanced to the printer, the bank also required Aruego to execute a trust receipt infavor of the bank wherein Aruego undertook to hold in trust for the bank the periodicals and to sell the samewith the promise to turn over to the bank the proceeds of the sale to answer for the payment of all obligationsarising from the draft. The bank instituted an action against Aruego to recover the cost of printing of thelatter’s periodical for the period of 28 August 1950 to 14 March 1951.Issue [1]: Whether the drafts were bills of exchange or mere pieces of evidence of indebtedness.Held [1]: Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in writingaddressed by one person to another, signed by the person giving it, requiring the person to whom it isaddressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or tobearer. As long as a commercial paper conforms with the definition of a bill of exchange, that paper isconsidered a bill of exchange. The nature of acceptance is important only in the determination of the kind ofliabilities of the parties involved, but not in the determination of whether a commercial paper is a bill ofexchange or not.Issue [2]: Whether Aruego is an agent of Philippine Education Foundation Company when he signed thesupposed bills of exchange.Held [2]: Nowhere in the drafts accepted by Aruego that he disclosed that he was signing as representative ofthe Philippine Education Foundation Company. For failure to disclose his principal, Aruego is personallyliable for the drafts he accepted, pursuant to Section 20 of the Negotiable Instruments Law.Issue [3]: Whether Aruego is primarily liable.Held [3]: An accommodation party is one who has signed the instrument as maker, drawer, acceptor, indorser,without receiving value therefor and for the purpose of lending his name to some other person. Herein,Aruego signed as a drawee / acceptor. Under the Negotiable Instruments Law, a drawee is primarily liable. If

Aruego intended to be secondarily liable only, he should not have signed as an acceptor / drawee. In doing so,he became primarily and personally liable for the drafts.[38]Philippine Commercial Industrial Bank vs. CAGR 121413, 29 January 2001Second Division, Quisumbing (J)Facts: Ford issued Citibank checks in favor of the Commissioner of Internal Revenue as payments of itstaxes, through the depository bank Insular Bank of Asia and America (later PCIBank). Proceeds of the checkswere never received by the Commissioner, but were encashed and diverted to the accounts of members of asyndicate, to which Ford’s General Ledger Accountant Godofredo Rivera belongs. Upon demand of theCommissioner anew, Ford was forced to make second payment of its taxes. Thus, Ford instituted actions torecover the amounts from the collecting (depository) and drawee banks.Issue: Whether Ford has the right to recover from the collecting bank (PCI Bank) and/or the drawee bank(Citibank) the value of the checks.Held: The mere fact that forgery was committed by a drawer-payor’s confidential employee or agent, who byvirtue of his position had unusual facilities to perpetrate the fraud and imposing the forged paper upon theNegotiable Instruments Law, 2004 ( 19 )Digests (Berne Guerrero)bank, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstanceraising estoppel against the drawer. The rule applies to checks fraudulently negotiated or diverted by theconfidential employees who hold them in their possession.In GRs 121413 and 121479, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks.Furthermore, PCIBank’s clearing stamp which guarantees prior or lack of indorsements render PCIBankliable as it allowed Citibank without any other option but to pay the checks. PCIBank, being a depository /collecting bank of the BIR, had the responsibility to make sure that the crossed checks were deposited in“Payee’s account only” as found in the instrument.In GR 128604, on the other hand, the switching operation involving the checks, while in transit for clearing,were the clandestine or hidden actuations performed by the members of the syndicate in their own personal,covert and private capacity; without the knowledge nor official or conscious participation of PCIBank in theprocess of embezzlement. Central Bank Circular 580 (1977), however, provide d that any theft affecting itemsin transit for clearing are for the account of the sending bank (herein PCIBank). Still, Citibank was likewisenegligent in the performance of its duties as it failed to establish its payment of Ford’s checks were made indue course and legally in order. The fact that drawee bank did not discover the irregularity seasonablyconstitutes negligence in carrying out the bank’s duty to its depositors.[39]Philippine Education Co. vs. SorianoGR L-22405, 30 June 1971En Banc, Dizon (J)Facts: Enrique Montinola sought to purchase from the Manila Post Office 10 money orders (P200 each),offering to pay for them with a private check. Montinola was able to leave the building with his check and the10 money orders without the knowledge of the teller. Upon discovery, message was sent to all postmastersand banks involving the unpaid money orders. One of the money orders was received by the PhilippineEducation Co. as part of its sales receipt. It was deposited by the company with the Bank of America, whichcleared it with the Bureau of Post. The Postmaster, through the Chief of the Money Order Division of theManila Post Office informed the bank of the irregular issuance of the money order. The bank debited theaccount of the company. The company moved for reconsideration.

Issue: Whether postal money orders are negotiable instruments.Held: Philippine postal statutes are patterned from those of the United States, and the weight of authority insaid country is that Postal money orders are not negotiable instruments inasmuch as the establishment of apostal money order is an exercise of governmental power for the public’s benefit. Furthermore, some of therestrictions imposed upon money order by postal laws and regulations are inconsistent with the character ofnegotiable instruments. For instance, postal money orders may be withheld under a variety of circumstances,and which are restricted to not more than one indorsement.[40]Pineda vs. dela RamaGR L-31831, 28 April 1983First Division, Gutierrez (J)Facts: Jose V. dela Rama is a lawyer whose services were retained by Jesus Pineda for the purpose of makingrepresentations with the chairman and general manager of the National Rice and Corn Administration to stopNegotiable Instruments Law, 2004 ( 20 )Digests (Berne Guerrero)and delay the institution of criminal charges against Pineda who allegedly misappropriated 11,000 cavans ofpalay deposited at his ricemill in Concepcion, Tarlac. Subsequently, Dela Rama filed suit to collect a P9,300loan, evidenced by the matured promissory note, and P5,000 as attorney’s fees. The Court of First Instanceruled in favor of Pineda, which was reversed by the Court of Appeals.Issue: Whether the promissory note is void for lack of consideration.Held: The presumption that a negotiable instrument is issued for a valuable consideration (Section 24,Negotiable Instruments Law) is only prima facie. It can be rebutted by proof to the contrary. The term of thenote sustains the version of Pineda that he signed the promissory note because he believed dela Rama’s storythat these amounts had already been advanced by dela Rama and given as gifts for NARIC officials. Thepromissory note was thus executed for an illegal consideration; and thus is void like any other contract as perArticle 1409 of the Civil Code. The consideration for the promissory note -- to influence public officers in theperformance of their duties -- is contrary to law and public policy. The promissory note is void ab initio andno cause of action for the collection cases can arise from it.[41]PNB vs. CAGR L-26001, 29 October 1968En Banc, Concepcion (J)Facts: One Augusto Lim deposited in his current account with PCI Bank (Padre Faura Branch) a GSIS checkdrawn against PNB. The signatures of the General Manager and Auditor of GSIS were forged. PCIBankstamped at the back of the check “All prior indorsements or lack of indorsements guaranteed, PCI Bank.”PCIBank sent the check to PNB through the Central Bank. PNB did not return the check to PCIBank; andthus PCIBank credited Lim’s account. As GSIS has informed PNB that the check was lost two months beforesaid transaction, its account was recredited by PNB upon its demand (due to the forged check). PNBrequested for refund with PCI Bank. The latter refused.Issue: Who shall bear the loss resulting from the forged check.Held: The collecting bank is not liable as the forgery existing are those of the drawers’ and not of theindorsers’. The indorsement of the intermediate bank does not guarantee the signature of the drawer. PNB’sfailure to return the check to the collecting bank implied that the check was good. In fact, PNB even honoredthe check even if GSIS has reported two months earlier that the check was stolen and the bank thus shouldstop payment. PNB’s negligence was the main and proximate cause for the corresponding loss. PNB thusshould bear such loss. Upon payment by PNB, as drawee, the check ceased to be a negotiable instrument, and

became a mere voucher or proof of payment.[42]PNB vs. National City BankGR 43596, 31 October 1936En Banc, Recto (J)Facts: An unknown person or persons negotiated with Motor Service Co. checks purportedly issued by thePangasinan Transportation Co. by JL Klar, Manager and Treasurer, against PNB and in favor of InternationalAuto Repair Shop for P144.50 and P215.75. Said checks were indorsed by said unknown persons in themanner indicated at the back thereof. The checks were indorsed fro deposit at the National City Bank of NewYork (NCBNY) and Motor Service Co. was credited with the amounts thereof. Said checks were cleared atNegotiable Instruments Law, 2004 ( 21 )Digests (Berne Guerrero)the clearing house and PNB credited NCBNY for the amounts thereof, believing that the signatures of thedrawer are genuine, etc. PNB found that the signature were forged when so informed by the PangasinanTransportation Co. It demanded reimbursement from NCBNY and Motor Service Co. Both refused.Pangasinan Transportation objected to its deduction of its deposit.Issue [1]: Whether the payment of the checks made by the drawee bank constitutes an acceptance.Held [1]: A check is a bill of exchange payable on demand and only the rules governing bills of exchangepayable on demand are applicable to it (Section 185). The fact that acceptance is a step unnecessary insofar asbills of exchange payable on demand are concerned, it follows that the provisions relative to “acceptance” arewithout application to checks. There is nothing in law, however, against the presentation of checks foracceptance before they are paid. Certification is equivalent to acceptance (Section 187). When certified, thedrawer will perform his promise by any other means than the payment of money (Section 132). Whencertified, the drawer and all indorsers are discharged from liability thereon (Section 188), and then the checkoperates as an assignment of a part of the funds to the credit of the drawer with the bank (Section 189).Acceptance has a technical meaning in the Negotiable Instruments Law. With few exceptions, “payment”neither includes or implies “payment.” Payment of the check, cashing it on presentment is not acceptance.Issue [2]: Whether the drawee bank is liable for the amount in a forged check for its failure to detect theforgery.Held [2]: In determining the relative rights of a drawee who, under a mistake of fact, has paid, and a holderwho has received such payment, upon a check to which the name of the drawer is forged, it is only fair toconsider the question of diligence or negligence contributed to the success of the fraud or to mislead thedrawee. To entitle the holder of a forged check to retain the money obtained thereon, there must be a showingthat the duty to ascertain the genuineness of the signature rested entirely upon the drawee, and that theconstructive negligence of such drawee in failing to detect the forgery was not affected by any disregard ofduty on the part of the holder, or by failure of any precaution which, from his implied assertion in presentingthe check as a sufficient voucher, the drawee had the right to believe he had taken. Under the circumstance ofthe case, if the PNB is allowed to recover, there will be no change of position as to the injury or prejudice ofthe Motor Service Co.[43]PNB vs. QuimpoGR L-53194, 14 March 1988First Division, Gancayco (J)Facts: Francisco Gozon was a depositor of the Philippine National Bank (PNB Caloocan City branch).Ernesto Santos, Gozon’s friend, took a check from the latter’s checkbook which was left in the car, filled it upfor the amount of P5,000, forged Gozon’s signature, and encashed it. Gozon learned about the transaction

upon receipt of the bank’s statement of account, and requested the bank to recredit the amount to his account.The bank refused. Hence, the present action.Issue: Who shall bear the loss resulting from the forged check.Held: The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or the depositoron the check being encashed. It is expected to use reasonable business prudence in accepting and cashing acheck being encashed or presented to it. Payment in neglect of duty places upon him the result of suchnegligence. Still, Gozon’s act in leaving his checkbook in the car, where his trusted friend remained in, cannotbe considered negligence sufficient to excuse the bank from its own negligence. The bank bears the loss.Negotiable Instruments Law, 2004 ( 22 )Digests (Berne Guerrero)[44]Ponce vs. CAGR L-49444, 31 May 1979First Division, Melencio-Herrera (J)Facts: On 3 June 1969, Jesus Afable, together with Feliza Mendoza and Ma. Aurora Dino executed apromissory note in favor of Nelia Ponce in the sum of P814,868.42 payable without interest on or before 31July 1969, subject to an interest of 12% per annum if not paid at maturity, and an additional sum equivalent to10% of total amount due as attorney’s fees in case it is necessary to bring suit, and the execution of a firstmortgage on their properties or the Carmen Planas Memorial Inc. in the event of failure to pay theindebtedness in accordance with the terms. Upon failure of the debtors to pay, a complaint was filed againstthem for the recovery of the principal sum, plus interest and damages. The trial court rendered judgment infavor of Ponce. The Court of Appeals affirmed the decision of the trial court. On the second motion forreconsideration, however, the appellate court reversed the judgment and opined that the intent of the partieswas that the note was payable in US dollars which is illegal, with neither party entitled to recover under the“in pari delicto” rule.Issue: Whether an agreement to pay in dollars defeat a creditor’s claim for payment.Held: If there is an agreement to pay an obligation in a currency other than Philippine legal tender, the sameis illegal / null and void as contrary to public policy, pursuant to RA 529, and the most that can be demandedis to pay the said obligation in Philippine currency. It cannot defeat a creditor’s claim for payment, for suchwill allow a person to enrich himself inequitably at another’s expense. What RA 529 prohibits is the paymentof an obligation in dollars. A creditor cannot oblige the debtor to pay in dollars, even if the loan was given insaid currency. In such case, the indemnity is expressed in Philippine currency on the basis of the current rateof exchange at the time of payment.[45]Prudencio vs. CAGR L-34539, 14 July 1986Second Division, Gutierrez Jr. (J)Facts: Eulalio and Elisa Prudencio are the registered owners of a parcel of land located in Sampaloc, Manila.The property was mortgaged to PNB to guarantee a loan of P1,000 extended to one Domingo Prudencio.Sometime in 1955, Concepcion & Tamayo Construction Co., through Jose Toribio (Prudencio’s relative),persuaded the Prudencios to mortgage their property to secure the loan of P10,000 which the company wasnegotiating with the PNB. The Prudencios signed the “Amendment of Real Estate Mortgage.” The promissorynote covering the P10,000 loan was signed by Toribio. The Prudencios also signed the portion of the noteindicating that they are requesting the PNB to issue the check covering the loan to the Company. Jose Toribioexecuted the “Deed of Assignment” assigning all payments made by the Bureau to the company on account ofthe Puerto Princesa building project in favor of PNB. The Bureau, however, conditioned that the payment

should be for labor and materials. The Prudencios wrote PNB that since PNB authorized payments to theCompany where there were changes in the conditions of the contract without their knowledge, they seek tocancel the mortgage contract. Failing to cancel the mortgage, they filed suit to cancel the same.Issue: Whether the Prudencios were solidary co-debtors or sureties as a result of being accommodationmakers.Negotiable Instruments Law, 2004 ( 23 )Digests (Berne Guerrero)Held: In lending his name to the accommodated party, the accommodation party is in effect a surety.However, unlike in a contract of suretyship, the liability of the accommodation party remains not onlyprimary but also unconditional to a holder for value such that even if the accommodated party receives anextension of the period of payment without the consent of the accommodation party, the latter is still liable forthe whole obligation and such extension does not release him because as far as the holder for value isconcerned, he is a solidary co-debtor. Consequently, the Prudencios cannot claim to have been released fromtheir obligation simply because the time of payment of such obligation was temporarily deferred by PNBwithout their knowledge and consent. To be freed of obligation, it is thus necessary to determine if PNB, thepayee of the promissory note, is a holder in due course. Herein, PNB was an immediate party or in privy tothe note, besides that it dealt directly with the Prudencios knowing fully well that they are accommodationmakers. The general rule that a payee may be considered a holder in due course does not apply to PNB.[46]Que vs. PeopleGR 75217-18, 21 September 1987Resolution of the Second Division, Paras (J)Facts: The Regional Trial Court convicted Victor Que of the crime of violation of BP 22. Said judgment wasaffirmed by the Court of Appeals and the Supreme Court. In its motion for consideration, Que alleged that theRTC Quezon City does not have jurisdiction as the element of the place of the issuance of the check wasabsent.Issue [1]: Whether the place of issuance or the place or the place of deposit determines jurisdiction / venue ofBP 22 cases.Held [1]: The findings of the trial court reveal that the checks were issued in Quezon City (as admitted byQue himself in his answer). It is of no moment whether the checks were deposited by the complainant in abank outside of Quezon City. The determinative factor is the place of issuance.Issue [2]: Whether BP 22 applies to dishonored checks issued as guarantee.Held [2]: BP 22 applies even in cases where dishonored checks are issued merely in the form of a deposit orguarantee. The enactment does not make any distinction as to whether the checks within its contemplation areissued in payment of an obligation or merely to guarantee the said obligation. The history of the enactmentevinces the definite legislative intent to make the prohibition all-embracing without making any exceptionfrom the operation thereof in favor of a guarantee.[47]Republic Bank vs. CAGR 42725, 22 April 1991First Division, Grino Aquino (J)Facts: San Miguel Corporation issued a dividend check for P240 in favor of J. Roberto Delgado, astockholder. Delgado altered the amount of the check to P9,240. The check was indorsed and deposited byDelgado with Republic Bank. Republic Bank endorsed the check to First National City Bank (FNCB), thedrawee bank, by stamping on the back of the check “all prior and / or lack of indorsements guaranteed.Relying on the endorsement, FNCB paid the amount to Republic Bank. Later on, San Miguel informed FNCB

of the material alteration of the amount. FNCB recredited the amount to San Miguel’s account, anddemanded refund from Republic Bank. Republic Bank refused. Hence, the present action.Negotiable Instruments Law, 2004 ( 24 )Digests (Berne Guerrero)Issue: Who shall bear the loss resulting from the altered check.Held: When an indorsement is forged, the collecting bank or last indorser, as a general rule, bears the loss.But the unqualified indorsement of the collecting bank on the check should be read together with the 24-hourregulation on clearing house operation. Thus, when the drawee bank fails to return a forged or altered check tothe collecting bank within the 24-hour clearing period (as provided by Section 4c of Central Bank Circular 9,as amended), the collecting bank is absolved from liability. The drawee bank, FNCB, should bear the loss forthe payment of the altered check for its failure to detect and warn Republic Bank of the fraudulent characterof the check within the 24-hour clearing house rule.[48]Republic Bank vs. EbradaGR L-40796, 31 July 1975First Division, Martin (J)Facts: Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank (Escolta Branch). TheBureau of Treasury, which issued the check advised the bank that the alleged indorsement of the check by one“Martin Lorenzo” was a forgery as the latter has been dead since 14 July 1952; and requested that it berefunded he sum deducted from its account. The bank refunded the amount to the Bureau and demanded uponEbrada the sum in question, who refused. Hence, the present action.Issue: Whether the bank can recover from the last indorser.Held: According to Section 23 of the Negotiable Instruments Law, where the signature on a negotiableinstrument is forged, the negotiation of the check is without force or effect. However, following the ruling inBeam vs. Farrel (US case), where a check has several indorsements on it, only the negotiation based on theforged or unauthorized signature which is inoperative. The last indorser, Ebrada, was duty-bound to ascertainwhether the check was genuine before presenting it to the bank for payment. Her failure to do so makes herliable for the loss and the Bank may recover from her the money she received for the check. Had sheperformed her duty, the forgery would have been detected and fraud defeated. Even if she turned over theamount to Dominguez immediately after receiving the cash proceeds of the check, she is liable as anaccommodation party under Section 29 of the Negotiable Instruments Law.[49]Republic Planters Bank vs. CAGR 93073, 21 December 1992Second Division, Campos Jr. (J)Facts: Republic Planters Bank issued 9 promissory notes signed by Shozo Yamaguchi (President) andFermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc. Yamaguchi and Canlas were authorizedby the corporation to apply for credit facilities with the bank in form of export advances and letters of creditor trust receipts accommodations. Three years after, the bank filed an action to recover the sums of moneycovered by the promissory notes. Worldwide Garment Manufacturing changed its name to PinchManufacturing Corp. Canlas alleged he was not liable personally for the corporate acts that he performed, andthat the notes were still blank when he signed them.Issue: Whether the corporate treasurer is liable for the amounts in the promissory notes.Negotiable Instruments Law, 2004 ( 25 )Digests (Berne Guerrero)Held: Canlas is a co-maker of the promissory notes, under the law, and cannot escape liability arising

therefrom. Inasmuch as the instrument contained the words “I promise to pay” and is signed by two or morepersons, said persons are deemed to be jointly and severally liable thereon. As the promissory notes arestereotype ones issued by the bank in printed form with blank spaces filled up as per agreed terms of the loan,following customary procedures, leaving the debtors to do nothing but read the terms and conditions thereinand to sign as makers or co-makers. Section 14 of the Negotiable Instruments Law, therefore, does not apply.Canlas is solidarily liable with the corporation for the amount of the 9 promissory notes.[50]San Carlos Milling vs. BPIGR 37467, 11 December 1933Second Division, Hull (J)Facts: Joseph Wilson, the principal employee of San Carlos Milling Co. Ltd. in the Manila Office, conspiredwith one Alfredo Dolores, a messenger-clerk in the same office, in sending a cablegram in code to thecompany in Honolulu requesting a telegraphic transfer of $100,000 to China Bank of Manila. Upon receipt ofthe money, China Bank sent an exchange contract to San Carlos Milling offering the sum of P201,000, whichwas then the current rate of exchange. On this contract was forged the name of Newland Baldwin. Amanager’s check on China Bank payable to San Carlos Milling or order was receipt for by Dolores. The checkwas deposited with BPI indorsed by a spurious signature of Baldwin. After clearing, BPI received a letter,purportedly signed by Baldwin, directing the shipment and delivery of P201,000. Dolores witnessed thepacking of the money and returned with the check for P201,000 purportedly signed by Baldwin. Doloresturned the money over to Wilson and received as his share P10,000. When the crime was discovered, BPIrefused to credit San Carlos Milling’s account with the amount withdrawn by the forged checks.Issue: Who shall be liable for the value of the forged check.Held: A bank that cashes a check must know to whom it pays. It is an elementary principle both in bankingand of the Negotiable Instruments Law that a bank is bound to know the signatures of its customers; and if itpays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarilycharge the amount so paid to the account of the depositor whose name was forged. As the proximate cause ofloss was due to the negligence of BPI in honoring and cashing the forged checks, it is liable for the amount ofP201,000 with legal interest thereon from 23 December 1928, until payment.[51]Sesbreno vs. CAGR 89252, 24 May 1993Third Division, Feliciano (J)Facts: On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000 withthe Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued toSesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note (2731), theCertificate of Securities Delivery Receipt indicating the sale of the note with notation that said security was inthe custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and America forP304,533.33 payable on 13 March 1981. The checks were dishonored for having been drawn againstinsufficient funds. Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno; butSesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has a face value ofP2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was stamped “non-negotiable” onits face. As Sesbreno was unable to collect his investment and interest thereon, he filed an action for damagesNegotiable Instruments Law, 2004 ( 26 )Digests (Berne Guerrero)against Delta Motors and Pilipinas Bank.Issue: Whether non-negotiability of a promissory note prevents its assignment.

Held: Only an instrument qualifying as a negotiable instrument under the relevant statute may be negotiatedeither by indorsement thereof coupled with delivery, or by delivery alone if it is in bearer form. A negotiableinstrument, instead of being negotiated, may also be assigned or transferred. The legal consequences ofnegotiation and assignment of the instrument are different. A negotiable instrument may not be negotiated butmay be assigned or transferred, absent an express prohibition against assignment or transfer written in theface of the instrument. herein, there was no prohibition stipulated.[52]State Investment House vs. CAGR 101163, 11 January 1993First Division, Bellosillo (J)Facts: Nora B. Moulic issued to Corazon Victoriano checks, as security for pieces of jewelry sold oncommission. Victoriano negotiated the checks to the State Investment House Inc. (SIHI). Moulic failed to sellthe pieces of jewelry, so he returned them to the payee before the maturity of the checks. The checks,however, could not be retrieved as they had already been negotiated. Before the check’s maturity dates,Moulic withdrew her funds from the drawee bank. Upon presentment of the checks for payment, they weredishonored for insufficiency of funds. SIHI sued to recover the value of the checks.Issue: Whether the personal defense of failure or absence of consideration is available, or conversely, whetherSIHI is a holder in due course.Held: On their faces, the post-dated checks were complete and regular; SIHI bought the checks from thepayee (Victoriano) before their due dates; SIHI took the checks in good faith and for value, albeit at adiscounted price; and SIHI was never informed not made aware that the checks were merely issued to payeeas security and not for value. Complying with the requisites of Section 52 of the Negotiable Instruments Law,SIHI is a holder in due course. As such, it holds the instruments free from any defect of title of prior parties,and from defenses available to prior parties among themselves. SIHI may enforce full payment of the checks.The defense of failure or absence of consideration is not available as SIHI was not privy to the purpose forwhich the checks were issued.That the post-dated checks were merely issued as security is not a ground for the discharge of the instrumentas against a holder in due course. It is not one of the grounds outlined in Section 119 of the NegotiableInstrument Law, for the instrument to be discharged.It must be noted that the drawing and negotiation of a check have certain effects aside from the transfer oftitle or the incurring of liability in regard to the instrument by the transferor. The holder who takes thenegotiated paper makes a contract with the parties on the face of the instrument. There is an impliedrepresentation that funds or credit are available for the payment of the instrument in the bank upon which it isdrawn. Consequently, the withdrawal of the money from the drawee bank to avoid liability on the checkscannot prejudice the rights of holders in due course.The drawer, Moulic, is liable to the holder in due course, SIHI.[53]Negotiable Instruments Law, 2004 ( 27 )Digests (Berne Guerrero)State Investment House vs. IACGR 72764, 13 July 1989Third Division, Fernan (J)Facts: New Sikatuna Wood Industries Inc. (NSWI) requested for a loan from Harris Chua, who issued 3crossed checks. Subsequently, NSWI entered in an agreement with the State Investment House Inc. (SIHI),under a deed of sale, where the former assigned and discounted 11 postdated checks including the 3 issued byChua. When the 3 checks were allegedly deposited by SIHI, the checks were dishonored by reason of

“insufficient funds,” “stop payment” and “account closed.” SIHI made demands upon Chua to make goodsaid checks, Chua failed to do so.Issue: Whether SIHI is a holder in due course so as to recover the amounts in the checks from Chua, thedrawer.Held: The Negotiable Instruments Law does not mention “crossed checks” but the Court has recognized thepractice that crossing the check (by two parallel lines in the upper left portion of the check) means that thecheck may only be deposited in the bank and that the check may be negotiated only once (to one who has anaccount with a bank). The act of crossing a check serves as a warning to the holder that the check has beenissued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose,otherwise he is not a holder in due course. Herein, SIHI rediscounted the check knowing that it was a crossedcheck. His failure to inquire from the holder (NSWI) the purpose for which the checks were crossed preventshim from being considered in good faith, and thus, as a holder in due course. SIHI, therefor is subject topersonal defenses, such as the lack of consideration between the NSWI and Chua, i.e. resulting from the nonconsummationof the loan.[54]Stelco Marketing vs. CAGR 96160, 17 June 1992Second Division, Narvasa (J)Facts: Stelco Marketing Corporation sold steel bars and GI wires to RYL Construction Inc. worthP126,859.61. RYL gave Stelco’s “sister corporation,” Armstrong Industries, a MetroBank check fromSteelweld Corporation (The check was issued apparently by Steelweld’s President Peter Rafael Limson toRomeo Lim, President of RYL and Limson’ friend, by way of accommodation, as a guaranty and not inpayment of an obligation). When Armstrong deposited the check at its bank, it was dishonored because it wasdrawn against insufficient funds. When so deposited, the check bore 2 indorsements, i.e. RYL and Armstrong.A criminal case was instituted against Limson, etc. for violation of BP 22, Subsequently, Stelco filed a civilcase against RYL and Steelweld to recover the value of the steel products.Issue: Whether Stelco was a holder in due course of the check issued by Steelweld.Held: The records do not show any intervention or participation by Stelco in any manner or form whatsoeverin the transaction involving the check, or any communication of any sort between Steelweld and Stelco, orbetween either of them and Armstrong Industries, at any time before the dishonor of the check. The recorddoes show that after the check was deposited and dishonored, Stelco came into possession of it in some way.Stelco cannot thus be deemed a holder of the check for value as it does not meet two essential requisitesprescribed by the statute, i.e. that it did not become “the holder of it before it was overdue, and without noticethat it had been previously dishonored,” and that it did not take the check “in good faith and for value.”[55]Negotiable Instruments Law, 2004 ( 28 )Digests (Berne Guerrero)Tan vs. CAGR 108555, 20 December 1994First Division, Kapunan (J)Facts: Ramon Tan, a businessman from Puerto Princesa, secured a Cashier’s Check from PhilippineCommercial Industrial Bank (PCIBank) to P30,000 payable to his order to avoid carrying cash while enrouteto Manila. He deposited the check in his account in Rizal Commercial Banking Corporation (RCBC) in itsBinondo Branch. RCBC sent the check for clearing to the Central Bank which was returned for having been“missent” or “misrouted.” RCBC debited Tan’s account without informing him. Relying on common

knowledge that a cashier’s check was as good as cash, and a month after depositing the check, he issued twopersonal checks in the name of Go Lak and MS Development Trading Corporation. Both checks bounced dueto “insufficiency of funds.” Tan filed a suit for damages against RCBC.Issue: Whether a cashier’s check is as good as cash, so as to have funded the two checks subsequently drawn.Held: An ordinary check is not a mere undertaking to pay an amount of money. There is an element ofcertainty or assurance that it will be paid upon presentation; that is why it is perceived as a convenientsubstitute for currency in commercial and financial transactions. Herein, what is involved is more than anordinary check, but a cashier’s check. A cashier’s check is a primary obligation of the issuing bank andaccepted in advance by its mere issuance. By its very nature, a cashier’s check is a bank’s order to pay what isdrawn upon itself, committing in effect its total resources, integrity and honor beyond the check. Herein,PCIB by issuing the check created an unconditional credit in favor any collecting bank. Reliance on thelayman’s perception that a cashier’s check is as good as cash is not entirely misplaced, as it is rooted inpractice, tradition and principle.[56]Tibajia vs. CAGR 100290, 4 June 1993Second Division, Padilla (J)Facts: A suit for collection of sum of money was ruled in favor of Eden Tan and against the spouses NorbertoJr. and Carmen Tibajia. After the decision was made final, Tan filed a motion for execution and levied uponthe garnished funds which were deposited by the spouses with the cashier of the Regional Trial Court ofPasig. The spouses, however, delivered to the deputy sheriff the total money judgment in the form ofCashier’s Check (P262,750) and Cash (P135,733.70). Tan refused the payment and insisted upon thegarnished funds to satisfy the judgment obligation. The spouses filed a motion to lift the writ of execution onthe ground that the judgment debt had already been paid. The motion was denied.Issue: Whether the spouses have satisfied the judgment obligation after the delivery of the cashier’s checkand cash to the deputy sheriff.Held: A check, whether a manager’s check or ordinary check, is not legal tender, and an offer of a check inpayment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor(Philippine Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs. Intermediate AppellateCourt). The court is not, by decision, sanctioning the use of a check for the payment of obligations over theobjection of the creditor (Fortunado vs. Court of Appeals).[57]Negotiable Instruments Law, 2004 ( 29 )Digests (Berne Guerrero)Travel On vs. CAGR 56169, 26 June 1992Third Division, Feliciano (J)Facts: Travel-On Inc. is a travel agency selling airline tickets on commission basis for and in behalf ofdifferent airline companies. Arturo S. Miranda had a revolving credit line with Travel-On. He procured ticketson behalf of airline passengers and derived commissions therefrom. Miranda apparently owed Travel-On theamount of P278,201.57 (the value of airline tickets sold to the former), to which Miranda paid variousamounts in cash and in kind. He thereafter issued 6 post-dated checks amounting to P115,000 which were alldishonored by the drawee bank. Travel-On filed suit to recover the value of the checks. Miranda counteredthat he instead overpaid his obligations, and that he merely issued the checks for purposes of accommodationas he allegedly had in the past accorded Travel-On.Issue: Whether Miranda is indebted to Travel-On, or whether he is an accommodation party.

Held: A check which is regular on its face is deemed prima facie to have been issued for a valuableconsideration and every person whose signature appears thereon is deemed to have become a party thereto forvalue. Thus, the mere introduction of the instrument sued on, in evidence prima facie, entitles the plaintiff torecovery. Such presumption subsists unless otherwise contradicted by other competent evidence. The checks,being presented for payment, were thus intended for encashment. There is nothing in the checks (nor in otherdocuments) that stated otherwise. Travel-On was a payee, not an accommodated party for the checks, as itrealized no value on the checks which bounced. Travel-On, thus, is entitled to the benefit of the presumptionthat it is a holder in due course.[58]Uy vs. CAGR 119000, 28 June 1997First Division, Bellosillo (J)Facts: Rosa Uy and Consolacion Leong, who are friends, formed a partnership; with Consolacioncontributing additional capital for the expansion of Rosa’s lumber business. The friendship between the twosoured when the partnership documents were never processed. Consolacion asked for the return of herinvestments. Rosa issued check which were dishonored for insufficiency of funds. Uy was charged for estafaand violation of BP 22.Issue: Whether knowledge of insufficiency of funds is transitory or simultaneous with the issuance of theinstrument.Held: Even if it is true that BP 22 is a transitory or continuing offense and as such a person indicted with atransitory offense may be validly tried in any jurisdiction where the offense was in part committed,knowledge by the maker or drawer of the fact that he has no sufficient funds to cover the check or of havingsufficient funds is simultaneous to the issuance of the instrument. None of the essential ingredients of BP 22was committed in the City of Manila; i.e. Consolacion was a resident of Makati while Uy was a resident ofCaloocan City; the place of business of the alleged partnership is in Malabon; the drawee bank was located inMalabon; and the checks were all deposited for collection in Makati.[59]Vaca vs. CAGR 43596, 31 October 1936Negotiable Instruments Law, 2004 ( 30 )Digests (Berne Guerrero)En Banc, Recto (J)Facts: Eduardo Vaca is the president and owner of Ervine International while Fernando Nieto, Vaca’s son-inlaw,is the firm’s purchasing manager. They issued a check for P10,000 to the General Agency forReconnaissance, Detection and Security (GARDS) and drawn against China Bank. When deposited withPCIBank, the check was dishonored for insufficiency of funds. GARDS sent a demand letter but the drawersfailed to pay within the time given (7 days from notice). A few days later, however, Vaca issued a check toGARDS for P19,866.16, drawn against Associated Bank, replacing the dishonored check. GARDS did notreturn the dishonored check. Later on, GARDS Acting Operations Manager filed a criminal suit against Vacaand Nieto for violation of BP 22. The trial court sentenced each to 1 year imprisonment and to pay a fine ofP10,000 and costs.Issue [1]: Whether the drawers had knowledge of insufficient funds in issuing the check.Held [1]: Section 2 of BP 22 provides a presumption of knowledge of insufficiency of funds if the drawerfails to maintain sufficient funds within 90 days after the date of the check, or to make arrangement forpayment in full by the drawee of such check within 5 days after receiving notice that such check has not beenpaid by the drawee. Herein, the second check supposedly replacing the dishonored check is actually the

payment of two separate bills, and was issued 15 days after notice. Such “replacement” cannot negate thepresumption that the drawers knew of the insufficiency of funds.Issue [2]: Whether the absence of damages incurred by the payee absolves the drawers from liability.Held [2]: The claim -- that the case was simply a result of a misunderstanding between GARDS and thedrawers and that the security agency did not suffer any damage from the dishonor of the check -- is flimsy.Even if the payee suffered no damage as a result of the issuance of the bouncing check, the damage to theintegrity of the banking system cannot be denied. Damage to the payee is not an element of the crimepunished in BP 22.Note: In this case, the Court recognized the contribution of Filipino entrepreneurs to the national economy;and that to serve the ends of criminal justice, instead of the 1 year imprisonment, a fine of double the amountof the check involved was imposed as penalty. This was made to redeem valuable human material and preventunnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of thesocial order.[60]Vda. de Eduque vs. OcampoGR L-222, 26 April 1950Second Division, Moran (CJ)Facts: On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon, DonaEscolastica delos Reyes and Don Jose M. Ocampo, with amount s of P40,000 and P15,000, both payablewithin 20 years with interest of 5% per annum. Payment of the loans was guaranteed by mortgage on realproperty. On 6 December 1943, Salvacion F. Vda de Eduque, as administratrix of the estate of Dr. JoseEduque, tendered payment by means of a cashier’s check representing Japanese War notes to Jose M.Ocampo, who refused payment. By reason of such refusal, an action was brought and the cashier’s check wasdeposited in court. After trial, judgment was rendered against Ocampo compelling him to accept the amount,to pay the expenses of consignation, etc. Ocampo accepted the judgment as to the second loan but appealed asto the first loan.Negotiable Instruments Law, 2004 ( 31 )Digests (Berne Guerrero)Issue: Whether there is a tender of payment by means of a cashier’s check representing war notes.Held: Japanese military notes were legal tender during the Japanese occupation; and Ocampo impliedlyaccepted the consignation of the cashier’s check when he asked the court that he be paid the amount of thesecond loan (P15,000). It is a rule that a cashier’s check may constitute a sufficient tender where no objectionis made on this ground.Negotiable