Villanueva V. Nite Nite loaned from Villanueva P409,000

as a security he issued an Asian Bank Corporation (ABC) check of P325,500 dated February 8, 1994

it was consented to be changed to June 8, 1994

check was dishonored due to a material alteration

then, Nite while abroad partially paid P235K through her representative The balance of P174K was due on or before December 8, 1994.

Villanueva filed an action for a sum of money and damages against ABC for the full amount of the dishonored check (despite the loan not being due and Nite away)

RTC: favored Villanueva

June 30, 1997: Nite went to ABC to withdraw but she was not able to because of the RTC order

August 25, 1997: ABC remitted to the sheriff a managers check amounting to P325,500 drawn on Nite's account

CA: favored Nite's appeal W/N ABC should be liable to Villanueva

No

SEC. 189. When check operates as an assignment. A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check the contract of loan was between Villanueva and Nite. No collection suit could prosper without Nite who was an indispensable partyGR 101163, State Investment v CA (1993) Moulic issued to Victoriano (as security for pieces of jewelryto be sold on commission) 2 post dated checks amounting to 50,000 each

Victoriano negotiated the checks to State Investment

Moulic failed to sell the jewelries and returned the same to Victoriano before maturity of the checks

Moulic could no longer retrieve the checks so she instead withdraw funds from her account The checks were dishonored

Moulic contends she incurred no obligations on the check because she had not sold the jewelry

W/N State investment is a holder in due course

Yes

A prima facie presumption exists that the holder of a negotiable instrument is a holder in due course. Consequently, the burden of proving that STATE is not a holder in due course lies in the person who disputes the presumption. In this regard, MOULIC failed. That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as against a holder in due course. Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability on her checks to a holder in due course.GR 141968, International Corp Bank vs CA (2001)

the respondents obtained a loan from the petitioner to purchase a motor vehicle (car). The respondents defaulted in payment of installments. A civil case was filed by the petitioner which resulted later into negotiations in lowering the remaining unpaid balance from P184,000.00 to P150,000.00, detaining the car until payment thereof. Respondent delivered a managers check but petitioner insisted on the signing of Joint Motion to Dismiss, still holding the motor vehicle. Respondent initiated civil action for damages before MTC but the case was dismissed for lack of merit. On appeal to RTC, the decision of MTC was reversed ordering herein petitioners to indemnify the respondents. The Court of Appeals likewise affirmed the decision of the RTC. Whether or not the respondents are entitled of indemnification for damages. NO. Petitioners act of requiring respondents to sign the Joint Motion to Dismiss can not be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. The law presumes good faith. In fact, the act of petitioner bank in lowering the debt of respondent from P184,000.00 to P150,000.00 is indicative of its good faith and sincere desire to settle the case. The decision of the Court of Appeals affirming the decision of the RTC was set aside. Respondents were ordered to pay the original obligation amounting to P150,000.00 to the petitioner upon surrender or cancellation of the managers check in the latters possession, afterwhich, petitioner is to return the subject motor vehicle in good working condition.

GR 138510, Traders Royal v RPN (2002) BIR assessed Radio Philippines Network (RPN), Intercontinental Broadcasting Corporation (IBC), and Banahaw Broadcasting Corporation (BBC) Vera purchased 3 managers checks from Traders to be used as payment for their tax liabilities

The checks were given to Vera, but were never forwarded to the BIR

It was discovered that the 3 checks were presented for payment by unknown persons to Security Bank

BIR issued warrants of levy, distraint and garnishment against them. Traders was constrained to enter into a compromise and paid BIR

traders sent letters to RPN and Security Bank, demanding that the amounts covered by the checks be reimbursed or credited to their account W/N Traders should solely bare the loss for its negligence Yes

if a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount so paid to the account of the depositor primary duty of Traders to know that the check was duly indorsed by the original payee and, where it pays the amount of the check to a third person who has forged the signature of the payee, the loss falls upon it who cashed the check.GR 156262, Tuazon v Ramos (2005) Tuazon purchased cavans of rice from Ramos Only a portion of the purchased cavans were paid

Tuazon issued checks for payment of the balance but were dishonored

Tuazon denied having bought from Ramos alleging that Maria Tuazon was merely an agent of Magdalena Ramos and that the true buyer was Evangeline Santos

It was Evangeline to allegedly issued the checks that Maria received in good faith before indorsing the same to Ramos

W/N petitioners are agents of Ramos

No

In a contract of agency, one binds oneself to act as the representative of another with the latters authority or consent. Since the basis of agency is representation, there must be an actual intention on the part of the principal to appoint and an intention on the part of the agent to accept the appointment and act on it. Absent such mutual intent, there is generally no agency. The declarations of the agents alone are insufficient to establish the fact or extent of their authority. The burden to prove the existence of agency lies on the person alleging it which in the present case, the petitioners failed to do so by their actions.GR 176664, BPI v Sps Royeca (2008) Facts: In 1993, spouses Royeca executedand delivered to Toyota Shaw, Inc. apromissory note for P577,008 payable in 48equal monthly installments. It provides for apenalty of 3% for every month or fraction of a month that an installment remains unpaid. To secure the payment of said promissorynote, the spouses executed a ChattelMortgage in favor of Toyota over a certainmotor vehicle. Toyota assigned the interestover the Chattel with Far East Bank and TrustCompany (FEBTC) which eventually mergedwith BPI. The bank claimed that the spousesfailed to pay 4 monthly amortizations andmade formal demands. The respondentsrefused to pay on the ground that they havepaid their obligation by issuing 8 postdatedchecks in different amounts. FEBTC thenfiled a complaint for replevin and damages. The spouses filed a counterclaim fordamages. They averred that they were ingood faith since they did not receive any notice from the drawee banks or from FEBTCthat these checks were dishonored. MeTCruled for the spouses. On appeal the RTCreversed, holding for the BPI. The CA ruledfor the spouses and reinstated the MeTC decision. WON tender of checks constitutes payment No. Settled is the rule thatpayment must be in legal tender.

Acheck is not legal tender and, therefore,cannot constitute a valid tender of payment. Since a negotiable instrument is only asubstitute for money and not money, thedelivery of such an instrument does not, byitself, operate as payment.

Mere deliveryof checks does not discharge theobligation under a judgment. Theobligation is not extinguished andremains suspended until the paymentby commercial document is actually realized. To establish their defense, the respondentstherefore had to present proof, not only thatthey delivered the checks to the petitioner,but also that the checks were encashed. Therespondents failed to do so. As a generalrule, one who pleads payment has theburden of proving it. Even where the plaintiff must allege non-payment, the general rule isthat the burden rests on the defendant toprove payment, rather than on the plaintiff to prove non-payment. The debtor has theburden of showing with legal certainty thatthe obligation has been discharged bypayment.GR 97753, Caltex v CA (1992) Security Bank issued 280 Certificated of Time Deposit (CTDs) in favor of dela Cruz who deposited 1.12 million Dela Cruz delivered the CTDs to Caltex in connection with his purchased of fuel products

Dela Cruz then informed the bank that he had lost all the CTDs and issued a affidavit of loss to facilitate replacement of the same

Caltex presented the CTDs to security bank but was rejected

Caltex filed a complaint which was dismissed on the ground that the subject certificates of deposit are non-negotiable. W/N the CTDs are negotiable instruments

Yes

The CTDs in question are negotiable instruments as they meet the requirements of the law for negotiability as provided for in Section 1 of the Negotiable Instruments Law. The documents provide that the amounts deposited shall be repayable to the depositor. And according to the document, the depositor is the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter, whosoever may be the bearer at the time of presentment. However, petitioner cannot recover on the CTDs. Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it and dela Cruz, as ultimately ascertained, requires both delivery and indorsement. In this case, there was no indorsement as the CTDs were delivered not as payment but only as a security for dela Cruz' fuel purchases.GR 170325, PNB v Sps Rodriguez (2008) Spouses Erlando and Norma Rodriguez were engaged in the informal lending business and had a discounting arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employee PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to members whenever the association was short of funds. As was customary, the spouses would replace the postdated checks with their own checks issued in the name of the members. PEMSLA had a policy not to approve applications of loans to members with outstanding loan accounts

But to subvert the policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan accounts by taking out loans in the names of unknowing members, without the knowledge or consent of the latter spouses issued 69 checks totalling to P2,345,804. These were payable to 47 individual payees who were all members of PEMSLA PNB discovered the fraudulent acts and closed the account

Spouses filed a civil complaint for damages The spouses contended that because PNB credited the checks to the PEMSLA account even without indorsements, PNB violated its contractual obligation to them as depositors. PNB paid the wrong payees, hence, it should bear the loss. W/N the 69 checks are payable to order for not being issued to fictitious persons thereby dismissing PNB from liability No

For the fictitious-payee rule to be available as a defense, PNB must show that the makers did not intend for the named payees to be part of the transaction involving the checks. At most, the banks thesis shows that the payees did not have knowledge of the existence of the checks. This lack of knowledge on the part of the payees, however, was not tantamount to a lack of intention on the part of respondents-spouses that the payees would not receive the checks proceeds. Considering that respondents-spouses were transacting with PEMSLA and not the individual payees, it is understandable that they relied on the information given by the officers of PEMSLA that the payees would be receiving the checks. US jurisprudence: fictitious if the maker of the check did not intend for the payee to in fact receive the proceeds of the check The bank failed to satisfy a requisite condition of a fictitious-payee situation that the maker of the check intended for the payee to have no interest in the transaction.GR 166405, Bautista v Auto Plus (2008) Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments Law) Claude P. Bautista, in his capacity as President and Presiding Officer of Cruiser Bus Lines and Transport Corporation (Cruiser), purchased various spare parts from Auto Plus Traders, Inc. (Auto Plus) and issued 2 postdated checks The checks were subsequently dishonored

2 Informations for violation of BP Blg. 22 were filed with the MTCC

MTCC: Cruiser directed to pay the Auto Plus

CA Affirmed RTC: Bautista personally issued the check

According to Auto Plus, Bautista, by issuing his check to cover the obligation of the corporation, became an accommodation party

ISSUE: W/N Bautista as an officer of the corporation, is personally and civilly liable for the 2 checks

HELD: NO. petition is GRANTED. CA REVERSED and SET ASIDE. Criminal Case DISMISSED

Section 29 of the Negotiable Instruments Law

accommodation party is liable on the instrument to a holder for value Private respondent adds that petitioner should also be liable for the value of the corporation check because instituting another civil action against the corporation would result in multiplicity of suits and delay.

Generally this Court, in a petition for review on certiorari under Rule 45 of the Rules of Court, has no jurisdiction over questions of facts. But, considering that the findings of the MTCC and the RTC are at variance, we are compelled to settle this issue.

2 check return slips in conjunction with the Current Account Statements would show that the check for P151,200 was drawn against the current account of Claude Bautista while the check for P97,500 was drawn against the current account of Cruiser Bus Lines and Transport Corporation. Hence, we sustain the factual finding of the RTC. Nonetheless, appellate court in error for affirming the decision of the RTC holding petitioner liable for the value of the checks considering that he was acquitted of the crime charged and that the debts are clearly corporate debts for which only Cruiser Bus Lines and Transport Corporation should be held liable.

There is no agreement that petitioner shall be held liable for the corporation's obligations in his personal capacity. Hence, he cannot be held liable for the value of the 2 checks issued in payment for the corporation's obligation

Section 29 of the Negotiable Instruments Law

accommodation party

a person "who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person requisites

he must be a party to the instrument, signing as maker, drawer, acceptor, or indorser -present

he must not receive value therefor - present

he must sign for the purpose of lending his name or credit to some other person - lacking

Cruiser Bus Lines and Transport Corporation, however, remains liable for the checks especially since there is no evidence that the debts covered by the subject checks have been paid.GR 146511, Ang v Associate Bank, et al (2007)

August 28, 1990: Associated Bank (formerly Associated Banking Corporation and now known as United Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng Liong (principal debtor) and petitioner Tomas Ang (co-maker) for the 2 promissory notes

October 3 and 9, 1978: obtained a loan of P50,000 and P30,000 evidenced by promissory note payable, jointly and severally, on January 31, 1979 and December 8, 1978

Despite repeated demands for payment, the latest on September 13, 1988 and September 9, 1986, they failed to settle their obligations totalling to P539,638.96 as of July 31, 1990

Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80,000

Tomas Ang: bank is not the real party in interest as it is not the holder of the promissory notes, much less a holder for value or a holder in due course; the bank knew that he did not receive any valuable consideration for affixing his signatures on the notes but merely lent his name as an accommodation party

bank granted his co-defendant successive extensions of time within which to pay, without his knowledge and consent

the bank imposed new and additional stipulations on interest, penalties, services charges and attorney's fees more onerous than the terms of the notes, without his knowledge and consent

he should be reimbursed by his co-defendant any and all sums that he may be adjudged liable to pay, plus P30,000, P20,000 and P50,000 for moral and exemplary damages, and attorney's fees, respectively.

October 19, 1990: RTC held Antonio Ang Eng Liong was ordered to pay the principal amount of P80,000 plus 14% interest per annum and 2% service charge per annum

Lower Court: Granted against the bank, dismissing the complaint for lack of cause of action.

CA: ordered Ang to pay the bank - bank is a holder

CA observed that the bank, as the payee, did not indorse the notes to the Asset Privatization Trust despite the execution of the Deeds of Transfer and Trust Agreement and that the notes continued to remain with the bank until the institution of the collection suit.

With the bank as the "holder" of the promissory notes, the Court of Appeals held that Tomas Ang is accountable therefor in his capacity as an accommodation party.

Tomas Ang cannot validly set up the defense that he did not receive any consideration therefor as the fact that the loan was granted to the principal debtor already constitutes a sufficient consideration.

ISSUE: W/N Ang is liable as accomodation party even without consideration and his co-accomodation party was granted accomodation w/o his knowledge

HELD: CA AFFIRMED

At the time the complaint was filed in the trial court, it was the Asset Privatization Trust which had the authority to enforce its claims against both debtors

accommodation party as a person "who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person." As gleaned from the text, an accommodation party is one who meets all the three requisites, viz: (1) he must be a party to the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value therefor; and (3) he must sign for the purpose of lending his name or credit to some other person

petitioner signed the promissory note as a solidary co-maker and not as a guarantor. This is patent even from the first sentence of the promissory note which states as follows:

"Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together with interest x x x at the rate of SIXTEEN (16) per cent per annum until fully paid."

immaterial so far as the bank is concerned whether one of the signers, particularly petitioner, has or has not received anything in payment of the use of his name.

since the liability of an accommodation party remains not only primary but also unconditional to a holder for value, even if the accommodated party receives an extension of the period for payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned, he is a solidary co-debtor.Velazquez v Solidbank (2008)

Lessons Applicable: Protest, acceptance and payment for honor (Negotiable Instruments Law)

FACTS:

Wilderness Trading (Velasquez) sold and exported to Goldwell Trading of Pusan, South Korea dried sea cucumber

To facilitate payment, Goldwell Trading opened a letter of credit in favor of Wilderness Trading in the amount of US$87,500.00 with the Bank of Seoul, Pusan, Korea.

November 12, 1992: Gonzales applied for credit accommodation with Solidbank Corp. for pre-shipment financing - granted.

First two export - successful

Third export - not successful

February 22, 1993: Velasquez submitted to RCBC the necessary documents for his third shipment.

Wanting to be paid the value of the shipment in advance,Velasquez negotiated for a documentary sight draft for US$59,640.00 to be drawn on the letter of credit, chargeable to the account of Bank of Seoul.

Terms:

promised that the draft will be accepted and paid by Bank of Seoul according to its tenor

Velasquez himself liable if the sight draft was not accepted

Solidbank Corp. failed to collect on the sight draft as it was dishonored by non-acceptance by the Bank of Seoul. -reasons:

late shipment

forged inspection certificate

absence of countersignature of the negotiating bank on the inspection certificate

Goldwell Trading issued a stop payment order on the sight draft because most of the bags of dried sea cucumber exported contained soil

Solidbank Corp. demanded restitution of the sum advanced

Gonzales failed to heed the demand

June 3, 1993: Solidbank Corp. filed a complaint for recovery of sum of money with the RTC

alleged that his liability under the sight draft was extinguished when Solidbank Corp. failed to protest its non-acceptance, as required under the Negotiable Instruments Law (NIL)

RTC: favored Solidbank Corp. bec. even w/o protest Velasquez remained liable under the letter of undertaking which he signed

CA: affirmed w/ mod

ISSUE: W/N Velasquez is no longer liable because of failure by Solidbank to file protest against the sight draft (Sec. 152 of NIL) despite the letter of undertaking

HELD: NO. Petition is DENIED. CA Affirmed.

A sight draft made payable outside the Philippines = foreign bill of exchange

When a foreign bill is dishonored by non-acceptance or non-payment, protest is necessary to hold the drawer and indorsers liable

Section 152. In what cases protest necessary. Where a foreign bill appearing on its face to be such is dishonored by non-acceptance, it must be duly protested for non-acceptance, and where such a bill which has not been previously dishonored by non-acceptance, is dishonored by non-payment, it must be duly protested for non-payment. If it is not so protested, the drawer and indorsers are discharged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is unnecessary

Liability subsists on it even if the sight draft was dishonored for non-acceptance or non-payment

liability of Velasquez under the letter of undertaking is direct and primary and independent from the sight draft19 SCRA 924 Sevilla v Sevilla

FACTS:

Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the bank. Varona was the only one who received the proceeds of the note. Sadaya and Sevilla both signed as co-makers to accommodate Varona. Thereafter, the bank collected from Sadaya. Varona failed to reimburse.

Consequently, Sevilla died and intestate estate proceedings were established. Sadaya filed a creditors claim on his estate for the payment he made on the note. The administrator resisted the claim on the ground that Sevilla didn't receive any proceeds of the loan. The trial court admitted the claim of Sadaya though tis was reversed by the CA.

HELD:

Sadaya could have sought reimbursement from Varona, which is right and just as the latter was the only one who received value for the note executed. There is an implied contract of indemnity between Sadaya and Varona upon the formers payment of the obligation to the bank.

Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be joint and several. For indeed, had payment been made by Varona, Varona couldn't had reason to seek reimbursement from either Sadaya or Sevilla. After all, the proceeds of the loan went to Varona alone.

On principle, a solidary accommodation makerwho made paymenthas the right to contribution, from his co-accomodation maker, in the absence of agreement to the contrary between them, subject to conditions imposed by law. This right springs from an implied promise to share equally the

burdens thay may ensue from their having consented to stamp their signatures on the promissory note.

The following are the rules:

1. A joint and several accommodation maker of a negotiable promissory note may demand from the principal debtor reimbursement for the amount that he paid to the payee

2. A joint and several accommodation maker who pays on the said promissory note may directly demand reimbursement from his co-accommodation maker without first directing his action against the

principal debtor provided that

a. He made the payment by virtue of a judicial demand

b. A principal debtor is insolvent.

It was never shown that there was a judicial demand on Sadaya to pay the obligation and also, it was never proven that Varona was insolvent. Thus, Sadaya cannot proceed against Sevilla for reimbursement.