Digest Compilation 5.b-Bills, Notes and Commercial Papers | May 4, 2016

8/16/2019 Digest Compilation 5.b-Bills, Notes and Commercial Papers | May 4, 2016

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Digest Compilation 5.b-Bills, Notes and Commercial Papers | May 4, 20!

Table of ContentsBPI v Roxas...............................................................................................1Nota Sapiera v CA....................................................................................1Metrobank v PBCOM................................................................................2

BPI v CA....................................................................................................3Cooli!e " Pa#son...................................................................................$Rep%bli& " PNB........................................................................................'PA( " CA................................................................................................. ..')ort%nao " CA........................................................................................*Mesina " IAC.............................................................................................*Ne+ Pa&ifi& Ti,ber " Seneris.................................................................-a&/tel " Rosen......................................................................................-Ro,an Cat/oli& Ar&/bis/op of Malolos In& " IAC................................-B%lliet " Alle!/en# Tr%st Co....................................................................-S%tter " Se&%rit# Tr%st Co.......................................................................-PNB " Pi&ornell......................................................................................10

Ban&o Atlanti&o " A%itor eneral.......................................................10M&Corna&k " Central State Bank..........................................................12Aolp/ Ra,is/ In& " oor%ff...........................................................13a&/ovia Bank " Crafton...................................................................... 14oro+it5 " ollo+it5.............................................................................1

BPI v RoxasLIABILITY OF PARTIES>5. ChecksBPI v RoxasSAN6O"A(78TI9RR9: ;.< O&tober 1$ 200*

)ACTS=Respondent Roxas sold vegetable oil to Spouses Cawili. As

payment, spouses Cawili issued a personal chec !in the amount o"

P#$%,%&'.'&(.Respondent tried to encash the chec but it was dishonored by the

drawee ban. Spouses assured Roxas that they would replace the

bounced chec with a cashier)s chec " rom petitioner BPI. Roxas and Rodrigo Cawili went to BPI where the branch manager

personally attended to them. A cashier)s chec was drawn against

the account o" *arissa Cawili, payable to Roxas and was handed to

the latter.

+he "ollowing day, Roxas returned to BPI to encash the cashier)s

chec but it was dishonored !reason *arissa)s account was closed

on that date( -espite insistence, BPI o""icers re"used to encash the chec.

ventually, a complaint was "iled. BPI claimed that it issued the

chec by mistae in good "aith/ that its dishonor was due to lac o" consideration and that Roxas) remedy was to sue Rodrigo Cawili who

purchased the chec. BPI "iled a third party complaint against

spouses Cawili. R+C rendered 0udgment in "avor o" Roxas and ordered BPI to pay

"ace value o" the cashier)s chec, among others. As to the third party

complaint, spouses Cawili were ordered to indemni"y BPI.CA a""irmed R+C 0udgment. 1ence this petition.

ISS89>49(6>RATIO 234 BPI is liable to Roxas "or the amount o" thecashier)s chec. 5es.


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In International Corporate Bank v. Spouses Gueco, Court held that acashier)s chec is really the ban)s own chec and may be treated as apromissory note with the ban as the maer. +he chec becomes the primaryobligation o" the ban which issues it and constitutes a written promise to payupon demand.Petitioner ban became liable to respondent "rom the moment it issued the

cashier)s chec. +he mere issuance o" a cashier)s chec is consideredacceptance thereo". 1aving been accepted by respondent, sub0ect to nocondition whatsoever, petitioner should have paid the same uponpresentment by the "ormer.Side note: As to the issue of w/n Roxas was a HIC! this was answered "# the Court in the affir$ative. Contention of petitioner that the ele$ent of valueis not present lacks $erit. %he fact that it was Rodri&o who purchased thecashier's check fro$ petitioner will not affect respondent's status as a holder for value since the check was delivered to hi$ as pa#$ent for the ve&eta"leoil he sold to spouses Cawili.

4ota Sapiera v CA

Nota Sapiera 7 inorser v. CA ? S%a 7 inorsee @1

(actsSaperia was a sari6sari store owner who purchased grocery items "rom Sua,and paid "or them with checs issued by Arturo de 7u8man. +hese checswere signed at the bac by Saperia. 9pon presentment, these weredishonored on the ground Account Closed. Sua in"ormed both de 7u8manand Saperia about the dishonor but both "ailed to pay. Although Saperia wasac:uitted o" esta"a !due to prosecution)s "ailure toprove conspiracy with de 7u8man(, she was made liable "or the value o" thechecs.

Issue whether petitioner is liable to pay civil indemnity to private respondenta"ter the trial court had ac:uitted her o" the criminal charge

Held Saperia was still liable.• It is undisputed that the "our !$( checs issued by de 7u8man were

signed by petitioner at the bac without any indication as to how sheshould be bound thereby and, there"ore, she is deemed to be an indorser thereo". +he 4I; clearly provides <SC+I=4 >?. Construction where instrument is ambiguous. < 2herethe language o" the instrument is ambiguous, or there are admissionstherein, the "ollowing rules o" construction apply . . . !"( 2here asignature is so placed upon the instrument that it is not clear in what

capacity the person maing the same intended to sign, he is deemed anindorser. . .SC+I=4 @#. 2hen person deemed indorser. < A person placing hissignature upon an instrument otherwise than as maer, drawer oracceptor, is deemed to be an indorser unless he clearly indicates byappropriate words his intention to be bound in some other capacity.

SC+I=4 @@. ;iability o" general indorser. < very indorser whoindorses without :uali"ication, warrants to all subse:uent holders in duecourse !a( +he matters and things mentioned in subdivisions !a(, !b( and!c( o" the next preceding section/ and !b( +hat the instrument is, at thetime o" the indorsement, valid and subsisting/

And, in addition, he engages that, on due presentment, it shall beaccepted or paid or both, as the case may be, according to its tenor, andthat i" it be dishonored and the necessary proceedings on dishonor beduly taen, he will pay the amount thereo" to the holder or to anysubse:uent indorser who may be compelled to pay it.

•

+he dismissal o" the criminal cases against petitioner did not erase hercivil liability since the dismissal was due to insu""iciency o" evidence andnot "rom a declaration "rom the court that the "act "rom which the civilaction might arise did not exist. An accused ac:uitted o" esta"a maynevertheless be held civilly liable where the "acts established by theevidence so warrant. +he accused should be ad0udged liable "or theunpaid value o" the checs signed by her in "avor o" the complainant.

*etroban v PBC=*

*etroban v PBC=*

)a&ts=• Pipe *aster Corp. entered into a chec discounting agreement with

ilipinas =rient• Pipe *aster issued a Board Resolution authori8ing 5u io in his

capacity as President and3or +an uan ;im in his capacity as Dice6President to execute, indorse mae, sign, deliver or negotiateinstruments, documents, and such other papers necessary inconnection with any transaction coursed through ilipinas =rient "orand in behal" o" the corporation.

• 9nder the chec discounting agreement between Pipe *aster andilipinas =rient, 5u io sold to ilipinas =rient $ *etro Ban checs

amounting to P>*. In exchange, ilipinas =rient !drawer( issued to2


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5u io $ PBCom !drawee( crossed checs amounting to PE@$,#.@F, payable to Pipe *aster !payee( with the statement G"orpayee)s account only.H

• 5u io indorsed and deposited the $ checs to his personal account.# o" the checs were deposited in his *etro Ban account and >chec was deposited in his Solid Ban personal account. !Collecting

agents o" 5u io *etro Ban and Solid Ban( PBCom paid *etroBan and Solid Ban the value o" the checs. In turn, *etro Banand Solid Ban credited the value o" the checs to 5u io)s personalaccount.

• 2hen ilipinas =rient presented the $ *etro Ban checs amountingto P>* it received "rom 5u io, they were dishonored by *etro Ban.Pipe *aster, the drawer, re"used to pay the amounts o" the checsclaiming that it never received the proceeds o" the PBCom checs asthey were delivered and paid to the wrong party, 5u io, who was notthe named payee.

• ilipinas =rient "iled a complaint "or a sum o" money against Pipe*aster, +an uan ;ian who executed a continuing guaranty I=

ilipinas =rient instruments "or which Pipe *aster may becomeliable, and3or PBCom.

Iss%e= 234 *etro Ban and Solid Ban are liable to ilipinas =rient "oraccepting the PBCom crossed checs payable to Pipe *aster. 9S

Ratio=It is the collecting ban which is bound to scrutini8e the chec and to now itsdepositors be"ore it can mae the clearing indorsement, Gall priorindorsements and3or lac o" indorsement guaranteed.H +he law imposes onthe collecting ban the duty to diligently scrutini8e the checs deposited withit "or the purpose o" determining their genuineness and regularity.

+he Court previously held that the collecting ban or last indorser generallysu""ers the loss because it had the duty to ascertain the genuineness o" allprior indorsements and is privy to the depositor who negotiates the chec. In)ai*alai Corp. of the +hilippines v. B+I , the Court ruled that one who acceptsand encashes a chec "rom an individual nowing that the payee is acorporation does so at his own peril.

In this case, *etro Ban and Solid Ban are liable to ilipinas =rient "or theirnegligence in accepting the checs and allowing the transaction to pushthrough and disregarding established baning rules and procedures. +heyaccommodated 5u io being a valued client. +hey stamped at the bac o"

the checs their clearing indorsements. In doing so, they became general

indorsers. 9nder Sec. @@ o" the 4I;, an endorser warrants Gthat theinstrument is genuine and in all respects what it purports to be/ that he has agood title to it/ that all prior parties had capacity to contract/ and that theinstrument is at the time o" his indorsement valid and subsisting.H

BPI v CA

BAND O) T49 P4I(IPPIN9 IS(AN6S petitioner vs. CA an B9N;AMINC. NAPI:A respondents

ebruary FE, F&&&5nares6SantiagoRS

)a&ts=

• =n September #, >E%?, private respondent deposited in his oreignCurrency -eposit 9nit !C-9( Savings Account in petitioner bansBuendia Branch a Continental Ban *anagers Chec payable to JcashJ

in the amount o" KF,'&&.&& and duly endorsed by private respondent onits dorsal side.

• +he chec belonged to a certain 1enry Chan who went to the o""ice o"private respondent and re:uested him to deposit the chec in his dollaraccount by way o" accommodation and "or the purpose o" clearing thesame. Private respondent acceded, and agreed to deliver to Chan asigned blan withdrawal slip, with the understanding that as soon as thechec is cleared, both o" them would go to the ban to withdraw theamount.

• 9sing the blan withdrawal slip given by private respondent to Chan, one7ayon r. was able to withdraw the amount o" KF,'$>.@? "rom the saidC-9 Account. 4otably, the withdrawal slip shows that the amount waspayable to Ramon A. de 7u8man and Agnes C. de 7u8man and wasduly initialed by the branch assistant manager.

• Petitioner received communication "rom the 2ells argo BanInternational o" 4ew 5or that the said chec deposited by privaterespondent was a counter"eit chec because it was Jnot o" the type orstyle o" checs issued by Continental Ban International.J

• or "ailure o" private respondent to return the amount, Petitioner "iled acomplaint against private respondent.

• Private responent Admitted that he indeed signed a JblanJwithdrawal slip with the understanding that the amount deposited wouldbe withdrawn only a"ter the chec in :uestion has been cleared. 1e

liewise alleged that he instructed the party to whom he issued the"


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signed blan withdrawal slip to return it to him a"ter the ban dra"tsclearance so that he could lend that party his passboo "or the purposeo" withdrawing the amount. 1owever, without his nowledge, said partywas able to withdraw the amount through collusion with one o" petitionersemployees. Private respondent added that he had Jgiven the Plainti"" "i"tyone !'>( days with which to clear the ban dra"t in :uestion.J Petitioner

should have disallowed the withdrawal because his passboo was notpresented. 1e claimed that petitioner had no one to blame except itsel"J"or being grossly negligent/J in "act, it had allegedly admitted having paidthe amount in the chec Jby mistaeJ x x x Ji" not altogether due tocollusion and3or bad "aith on the part o" !its( employees.J

• (o+er &o%rt= dismissed the complaint. It held that petitioner could nothold private respondent liable based on the checs "ace value alone. +oso hold him liable Jwould render inutile the re:uirement o" clearance "romthe drawee ban be"ore the value o" a particular "oreign chec or dra"tcan be credited to the account o" a depositor maing such deposit.J Itwas incumbent upon the petitioner to credit the value o" the chec in:uestion to the account o" the private respondent only upon receipt o" the

notice o" "inal payment and should not have authori8ed the withdrawal"rom the latters account o" the value or proceeds o" the chec.J 1avingadmitted that it committed a JmistaeJ in not waiting "or the clearance o"the chec be"ore authori8ing the withdrawal o" its value or proceeds,petitioner should su""er the resultant loss.

• CA a""irmed lower court. It held that petitioner committed Jclear grossnegligenceJ in allowing 7ayon r. to withdraw the money withoutpresenting private respondents passboo and, be"ore the chec wascleared and in crediting the amount indicated therein in privaterespondents account.

Iss%e>4el=

>.......21+1R =R 4=+ RSP=4-4+ 4APILA IS ;IAB; 94-R 1IS2ARRA4+IS AS A 74RA; I4-=RSR. !4=(

Petitioner claims that private respondent, having a""ixed his signature at thedorsal side o" the chec, should be liable "or the amount stated therein inaccordance with Sec. @@. o" the 4I;.

Section @', on the other hand, provides "or the "ollowing warranties o" aperson negotiating an instrument by delivery or by :uali"ied indorsement !a(that the instrument is genuine and in all respects what it purports to be/ !b(

that he has a good title to it, and !c( that all prior parties had capacity tocontract.

=rdinarily private respondent may be held liable as an indorser o" the checor even as an accommodation party. 1owever, to hold private respondentliable "or the amount o" the chec he deposited by the strict application o" the

law would result in an in0ustice. M+he interest o" 0ustice thus demands looinginto the events that led to the encashment o" the chec.

+he propriety o" the withdrawal should be gauged by compliance with therules thereon that both petitioner ban and its depositors are duty6bound toobserve.

F.......21+1R =R 4=+ A C=4+RAC+ = A74C5 2AS CRA+-B+24 RSP=4-4+ 4APILA A4- R9B4 7A5=4. !4=(

Petitioner alleged that had private respondent indicated therein the personauthori8ed to receive the money, then Ruben 7ayon, r. could not havewithdrawn any amount. Petitioner contends that J!i(n "ailing to do so !i.e.,naming his authori8ed agent(, he practically authori8ed any possessorthereo" to write any amount and to collect the same..H

Such contention would have been valid i" not "or the "act that the withdrawalslip itsel" indicates a special instruction that the amount is payable to JRamon

A. de 7u8man N3or Agnes C. de 7u8man.J Such being the case, petitionerspersonnel should have been duly warned that 7ayon, who was alsoemployed in petitioners Buendia branch, was not the proper payee o" theproceeds o" the chec. =therwise, either Ramon or Agnes de 7u8manshould have issued another authority to 7ayon "or such withdrawal. ="

course, at the dorsal side o" the withdrawal slip is an Jauthority to withdrawJnaming 7ayon the person who can withdraw the amount indicated in thechec. Private respondent does not deny having signed such authority.1owever, considering petitioners clear admission that the withdrawal slip wasa blan one except "or private respondents signature, the unavoidableconclusion is that the typewritten name o" JRuben C. 7ayon, r.J wasintercalated and therea"ter it was signed by 7ayon or whoever was allowedby petitioner to withdraw the amount. 9nder these "acts, there could not havebeen a principal6agent relationship between private respondent and 7ayonso as to render the "ormer liable "or the amount withdrawn.

#.......21+1R =R 4=+ P+I+I=4R 2AS 7R=SS;5 47;I74+ I4

A;;=2I47 +1 2I+1-RA2A;. !5S(4


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9nder the rules appearing on private respondent)s passboo, to be able towithdraw "rom the savings account deposit under the Philippine "oreigncurrency deposit system, two re:uisites must be presented to petitioner banby the person withdrawing an amount !a( a duly "illed6up withdrawal slip, and!b( the depositors passboo.

As correctly held by the Court o" Appeals, in depositing the chec in hisname, private respondent did not become the outright owner o" the amountstated therein. By depositing the chec with petitioner, private respondentwas, in a way, merely designating petitioner as the collecting ban. +his is inconsonance with the rule that a negotiable instrument, such as a chec,whether a managers chec or ordinary chec, is not legal tender. As such,a"ter receiving the deposit, under its own rules, petitioner shall credit theamount in private respondents account or in"use value thereon only a"ter thedrawee ban shall have paid the amount o" the chec or the chec has beencleared "or deposit. Again, this is in accordance with ordinary baningpractices and with this Courts pronouncement that Jthe collecting ban or lastendorser generally su""ers the loss because it has the duty to ascertain the

genuineness o" all prior endorsements considering that the act o" presentingthe chec "or payment to the drawee is an assertion that the party maing thepresentment has done its duty to ascertain the genuineness o" theendorsements.J +he rule "inds more meaning in this case where the checinvolved is drawn on a "oreign ban and there"ore collection is more di""icultthan when the drawee ban is a local one even though the chec in :uestionis a manager)s chec.s

In the case at bar, petitioner, in allowing the withdrawal o" privaterespondents deposit, "ailed to exercise the diligence o" a good "ather o" a"amily. It is apparent that petitioner)s personnel allowed the withdrawal o" anamount bigger than the original deposit o" K?'&.&& and the value o" the chec

deposited in the amount o" KF,'&&.&& although they had not yet receivednotice "rom the clearing ban in the 9nited States on whether or not thechec was "unded. Reyes contention that a"ter the lapse o" the #'6day periodthe amount o" a deposited chec could be withdrawn even in the absence o"a clearance thereon, otherwise it could tae a long time be"ore a depositorcould mae a withdrawal, is untenable. Said practice amounts to a disregardo" the clearance re:uirement o" the baning system.

2hile it is true that private respondents having signed a blan withdrawal slipset in motion the events that resulted in the withdrawal and encashment o"the counter"eit chec, the negligence o" petitioners personnel was theproximate cause o" the loss that petitioner sustained. +he proximate cause o"

the withdrawal and eventual loss o" the amount o" KF,'&&.&& on petitioner)spart was its personnel)s negligence in allowing such withdrawal in disregardo" its own rules and the clearing re:uirement in the baning system. In sodoing, petitioner assumed the ris o" incurring a loss on account o" a "orgedor counter"eit "oreign chec and hence, it should su""er the resulting damage.

A""irmed.

Coolidge D PaysonC==;I-7 v. PA5S=4

AC+S-RA2R Cornhwaite N Cary-RA2 Collidge N Co. !de"endant(PA5 ohn RandallI4-=RS Payson N Co. !plainti""(

O Coolidge held proceeds o" the cargo o" the 1iram claimed by

Cornthwaite. Corthwaite executed bonds o" indembity an executed srolls anddrew on them "or KF,?&&, payable to Randall, and endorsed by him toPayson. Coolidge wrote to Corthwaite stating that, since there is no seal toany o" the signatures, it is necessary to ascertain the legality o" the scrolls.Coolidge wrote to its "riend, 2illiam, who was to determine whether the dra"twas to be honored. 2illiam replied, approving the bond.

O Cornthwaithe called on 2illiam to in:uire whether he had satis"iedCoolidge respecting the bond. 2illiams stated the substance o" the letter hehad written, and read to him a part o" it. Payson also called on him to maethe same in:uiry, to whom he gave the same in"ormation and also read theletter he had written.

O F days later, a bill was drawn by Cornthwaite and paid to Payson inpart o" the protested bill o" KF,?&&.it was presented to Coolidge, who re"usedto accept it.

ISS92=4 Coolidge is deemed to have accepted the bill, hence liable to Payson

1;- 5SO A promise to accept a bill amounts to an acceptance to a person whohas taen it on the credit o" that promise, although the promise was madebe"ore the existence o" the bill, and although it is drawn in "avor o" a person

who taes it "or a pre6existing debt5


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O 9pon a review o" several cases, the court holds that a letter writtenwithin a reasonable time be"ore or a"ter the bill o" exchange, describing it interms not to be mistaen, and promising to accept it, is i" shown to the personwho a"terwards taes the bill on the credit o" the letter, a virtual acceptancebinding the person who maes the promise.

Republic D P4B

Republic of the Philippines v. PNB (1961)

Facts:

• The Republic filed a complaint for escheat of certain unclaimed bank

deposit balances against several banks.

o Under Act 3936, “unclaimed balances” include credits,

deposits of money, bullion, security and other evidence of

indebtedness of any kind of persons not heard from for 10years or more.

• PNB wanted to exclude from the escheat proceedings cashier’s or

manager’s checks, demand drafts and telegraphic transfer payment

orders.

• Lower court ruled cashier’s check or manager’s checks and demand

drafts cannot be excluded, only the telegraphic transfer payment

orders.

o Upon an MR, demand drafts may be excluded, not subject to

escheat

Issue: WoN demand drafts (NO) and telegraphic orders (YES) come within

the purview of “credits”, hence may be subject to escheat

Held: PNB is liable for the cashier’s checks and manager’s checks but is not

liable for the demand draft.

• Demand drafts are bills of exchange payable on demand.

o A bill of exchange in NIL does not constitute an assignment

of funds and the drawee is not liable on it unless he accepts

it.

o Therefore, since the drafts have not been presented either

for acceptance or for payment, PNB cannot be liable for it.

• However, PNB is liable for the cashier’s checks and manager’s

checks.

o PNB is primarily liable for them since they may be treated as

a promissory note considering the fact that PNB is both thedrawer and the drawee for these items.

o Substantial equivalent of a certified check

• Telegraphic transfer payment orders are transactions for the

telegraphic or cable transfer.

o The agreement to remit creates a contractual obligation and

has been termed a purchase and sale transaction.

o Absurd to say that the drawer bank is still the owner of the

telegraphic orders.

o In this case, amounts in the telegraphic orders appear in the

names of the payees. The drawer bank wsd already paid

such amount. Should payee decide to have their money

remain in the bank, it cannot claim ownership over the

telegraphic payment orders.

PA; D CA

PA; vs CAacts

6 Respondent +an "iled a complaint "or damages against petitioner PA;where PA; was ordered by the CI to pay +an a sum o" money. +his

was a""irmed by the CA. +he decision has become "inal andexecutory. +he records were remanded to the CI "or execution o"

0udgment.6 +he order and writ o" execution were subse:uently issued. +he writ

was re"erred to one -eputy Sheri"" milio Reyes.6 our months a"ter, +an moved "or the issuance o" an alias writ o"

execution stating that the 0udgment remained unsatis"ied. PA;opposed this motion stating that it had already "ully paid its obligationthrough Reyes.

6 +he CA denied the motion "or being premature and ordered Reyes toappear with his return and explain his "ailure to surrender the

!


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amounts paid to him. +his order could not be served, however,because Reyes disappeared.

6 Subse:uently, an alias writ was issued by the CI. PA; "iled a motionto :uash the alias writ stating that no return o" the writ was made andthat the 0udgment debt had already been "ully satis"ied as evidenceby the cash vouchers signed and receipted by Reyes.

Issue 234 the payment made by checs to Reyes extinguished the 0udgment debt 4=Ratio

6 +he SC held that under the peculiar circumstances o" the case, thepayment to the absconding sheri"" by chec in his name did notoperate as a satis"action o" the 0udgment debt.

6 In general, a payment, in order to be e""ective to discharge anobligation, must be made to the proper person. 9nder ordinarycircumstances, payment by the 0udgment debtor in the case at bar, tothe sheri"" should be valid payment to extinguish the 0udgment debt.

6 1owever, the SC held that there are circumstances which compel a

di""erent conclusion. +he payment made by PA; to the abscondingsheri"" 2AS 4=+ in cash or legal tender but in C1CS. +he checswere not payable to +an or Able Printing Press but to Reyes.

o 4CC >F$E Q xxx the delivery o" promissory notes payable to

order, or bills o" exchange or other mercantile documentsshall produce the e""ect o" payment only when they havebeen cashed, or when through the "ault o" the creditor theyhave been impaired. xx

6 In the absence o" an agreement, payment means the discharge o" adebt or obligation in money and unless so agreed, a debtor has norights to substitute something in lieu o" cash as medium o" payment

o" his debt. Conse:uently, a public o""icer has no authority to acceptanything other than money in payment o" an obligation under a

0udgment being executed. Since a negotiable instrument is only asubstitute "or money and is not money, the delivery o" such aninstrument does not, by itsel", operate as payment.

6 1aving "ailed to employ the proper sa"eguards to protect itsel", the 0udgment debtor whose act made possible loss had but itsel" toblame.

ortunado D CA

*esina D IAC

*esina vs. IAC

AC+S

ose 7o purchased "rom Associated Ban a cashierMs chec "or P%&&,&&&.&&.9n"ortunately, he le"t said chec on the top o" the des o" the ban managerwhen he le"t the ban. +he ban manager entrusted the chec "orsa"eeeping to a ban o""icial, a certain Albert 9y. 2hile 9y went to themenMs room, the chec was stolen by his visitor in the person o" Alexander;im. 9pon discovering that the chec was lost, ose 7o accomplished aJS+=P PA5*4+J order. +wo days later, Associated Ban received the lostchec "or clearing "rom Prudential Ban. A"ter dishonoring the same chectwice, Associated Ban received summons and copy o" a complaint "ordamages o" *arcelo *esina who was in possession o" the lost chec and is

demanding payment. Petitioner claims that a cashierMs chec cannot becountermanded in the hands o" a holder in due course.

ISS9

2hether or not petitioner can collect on the stolen chec on the ground thathe is a holder in due course.

R9;I47

4o. Petitioner "ailed to substantiate his claim that he is a holder in duecourse and "or consideration or value as shown by the established "acts o"

the case. Admittedly, petitioner became the holder o" the cashierMs chec asendorsed by Alexander ;im who stole the chec. 1e re"used to say how andwhy it was passed to him. 1e had there"ore notice o" the de"ect o" his titleover the chec "rom the start. +he holder o" a cashierMs chec who is not aholder in due course cannot en"orce such chec against the issuing banwhich dishonors the same.

A person who became the holder o" a cashierMs chec as endorsed by theperson who stole it and who re"used to say how and why it was passed tohim is not a holder in due course.

#


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4ew Paci"ic +imber D Seneris

2achtel D Rosen

LIABILITY OF PARTIES>5. Checks> b.Certiic!tion !nd its eectsa&/tel v Rosen)ACTS=

2achtel !drawer( gave to Rosen !payee( his chec drawn on

4ational Par Ban !drawee( Rosen presented the chec "or certi"ication/ certi"ication was re"used.

ISS89>49(6>RATIO= 234 the re"usal by a drawee ban to certi"y a chec atthe re:uest o" the holder amounts to dishonor !the same as the re"usal o" acceptance o" a bill o" exchange other than a chec( so that the holder maysue the drawer as i" the chec had been presented "or payment and paymenthad been re"used. 4o.+he general rule is that a chec is o" right presentable only "or payment and

that the ban is under no obligation to certi"y, although it may do so.Certi"ication di""ers in e""ect "rom mere acceptance o" bills other than checs,in that it is not an added obligation but a substitute obligation. Althoughsection #F#> provides that Gcerti"ication is e:uivalent to acceptance,H themeaning is merely that certi"ication is synonym o" acceptance. It does notmean that the same e""ect is to be given to certi"ication as is given to theacceptance o" an ordinary bill o" exchange.

Roman Catholic Archbishop o" *alolos Inc D IAC

Bulliet D Allegheny +rust Co.

Bulliet v Allegheny +rust Co

acts• C.C. *itchell drew a chec on Respondent Allegheny +rust "or

K',&&& to the order o" 7rove6*c4air, dated eb. >& >E>Eo *itchell was negotiating "or oil propertyo 7rove6*c4air was his agent

$ection "2" o% N&'( )*ere a c*ec+ is certied by t*eban+ on *ic* it is dran t*e certication is e/ialent

to an acceptance.

• A memorandum agreement o" sale was entered into by *itchelland D.. Bullet whereby K',&&& would be placed in escrow whileawaiting the payment o" the remainder

o Provision i" *itchell "ails to pay the remainder, theescrow is "or"eited to the seller

• *itchell "ailed to mae payments

• *itchell ordered a stop payment o" the chec• +hus, Allegheny +rust re"used to honor the chec and returned it,

writing on the bac o" the chec Gon account o" theindorsements o" same, and also because *r. *itchell hasre:uested me to withhold payment until some matters inconnection with the deal are cleared up.H

Issue31olding3Ratio• 2=4 the real de"ense that plainti"" had no record title to the oil

property !want o" consideration( was valid 4=.o An acceptor admits everything essential to the validity o"

the bill, and on this ground he cannot, "or example, evenset up the de"ense o" want o" consideration betweendrawer and payee.

o +he reply o" Allegheny that it would honor the checamounted to certi"ication o" the ban, thus maing itliable.

o Such certi"ication at the re:uest o" the holder created anew obligation on the part o" the ban to that holder. Itpassed the amount o" the chec to the credit o" theholder, who is therea"ter a depositor to that amount.

Sutter D Security +rust Co.S%tter v Se&%rit# Tr%st Co. @12 7 RS;)a&ts=• Appellant had a checing account with respondent, and he, having a

balance therein to his credit o" K>,$.$>, drew a chec thereon to theorder o" his wi"e "or K>,&&&, and on the same date procured thecerti"ication thereo" by respondent.

• Appellant delivered the certi"ied chec to his wi"e in consideration o" a

certain agreement between them concerning a separation. In suchagreement the wi"e agreed, amongst other things, not to remove certain"urniture "rom appellantMs home. A"ter delivery o" the chec, the wi"e

violated the agreement.1


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• Appellant discussed the matter with respondent)s president and

treasurer, and signed and delivered to the respondent a re:uest, inwriting, to stop payment on the chec.

• Subse:uently to his signing the stop6payment re:uest, his wi"e presented

the chec to respondent "or payment, and payment was re"used by itbecause payment had been stopped. She was told that payment o" the

chec should be de"erred "or a "ew days, and that *rs. Sutter wasthere"ore re:uested to postpone presentation o" the chec until *r. Sutter could be seen.

• *rs. Sutter went to her brother in Philadelphia, endorsed the chec over

to him. 1er brother deposited it in his ban in that city. +he chec waspresented to respondent "or payment through the ederal Reserve Bano" Philadelphia, and payment re"used and chec protested on the groundo" Jpayment stopped.J

• +he 9nion 4ational Ban o" Philadelphia told appellant that the chec

was in the hands o" an innocent third person, "or value, and that unlesshe indemni"ied respondent the chec would be paid. Appellant declined

to indemni"y respondent, and on April @th the chec was again presented"or payment, and was paid.

• Suit was then instituted by appellant against the respondent "or

K>,$.$>.

Iss%e= 2hether the the ban, by reason o" its certi"ication, would have been 0usti"ied in maing payment to *rs. Sutter, the payee, upon properpresentation o" the chec by her, notwithstanding the service o" the notice tostop payment by her husband, the maer, and a disclosure by him to theo""icers o" the ban o" the condition upon which the chec was obtained by*rs. Sutter. !5S(1eld• A drawer o" a chec, which has been certi"ied at his re:uest be"ore

delivery, may recall the same and re:uire the certi"ying ban to re"usepayment to the payee named therein i" such payee is not a bona "ideholder, "or value, but has obtained the chec by "raud perpetrated by himupon the maer. And "urther, that upon suit by the payee named in thechec against the certi"ying ban, upon its re"usal to pay, a"ter notice"rom the drawer to stop payment, "or reasons showing the payee not tobe a bona "ide holder thereo", "or value, the ban can urge and have thebene"it o" any de"ense that the drawer could have against such payee,establishing that such payee obtained the instrument, or any signaturethereto, by "raud, duress or "orce and "ear, or other unlaw"ul means, or

"or an illegal consideration/ and also that the right o" the maer o" achec, certi"ied at his re:uest be"ore delivery, is the same against anendorsee holder, who is not a holder, in due course, as is his right to stoppayment against the payee who is not a bona "ide holder, "or value. Suchrule, however, has no application to a certi"ied chec held by a payeewho is a bona "ide holder, "or value, nor to a holder in due course,

although certi"ied at the re:uest o" the drawer be"ore delivery, nor wherethe chec, a"ter delivery, is certi"ied at the re:uest o" the payee or holder.

• +here is nothing to 0usti"y a holding that *rs. Sutter, the payee, procured

the chec by any "raud perpetrated by her upon her husband. or thisreason we conclude that the ban would have been 0usti"ied in maingpayment o" the chec to *rs. Sutter, upon presentation thereo" by her. I"the ban was not 0usti"ied in maing payment to *rs. Sutter, the payeenamed in the chec, then it was not 0usti"ied in maing payment to *r.*ac !brother(, the endorsee, who, we have "ound, under the "acts herepresented, was not a holder in due course, and the stop6payment noticeo" the maer, under such conditions, would operate in "avor o" the maer

against him as such holder, and would place the ban in a position whereit was not 0usti"ied in maing payment to such an endorsee holder.

• As the ban was, under the "acts presented, 0usti"ied and legally called

upon to mae payment to *rs. Sutter, upon presentation and demand, asagainst the notice o" the maer o" the chec to stop payment, itsobligation, under the "acts, was liewise to mae payment to theendorsee holder, *r. *ac.

A""irmed.

P4B D Picornell

PNB ". PICORN9(( 122acts

• A bill o" exchange was drawn by Picornell in "avor o" P4B, plainti"",against the "irm o" 1yndman, +avera N Dentura, now dissolved, itsonly successor being the de"endant oa:uin Pardo de +avera.

• Said B= was "or the amount obtained by Picornell "or the purchaseo" bales o" tobacco in Cebu by the instructions o" his principal,1yndman, +avera N Dentura.

• +his instrument, together with the invoice and bill o" lading o" thetobacco, were delivered to the 4ational Ban with the understandingthat the ban should not deliver them to 1yndman, +avera N Dentura

except upon payment o" the bill.


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• +he central o""ice o" P4B in *anila received the bill and the a"oresaiddocuments annexed thereto/ and presented the bill to 1yndman,+avera N Dentura, who accepted it.

• 9pon inspection by 1yndman, +avera N Dentura o" the tobacco, itwrote to Picornell, noti"ying him that o" the tobacco received, therewas a certain portion which was o" no use and was damaged.

• +herea"ter, 1yndman, +avera N Dentura in"ormed the plainti"" that itre"used to pay the B= because o" the noncompliance o" the drawerPicornell .

• 1ence the ban brought this instant action.

Issue 2hether ban could recover on the drawee 1yndman, +avera NDentura under the sub0ect B=. 5S

1;- Partial want o" consideration, i" it was, does not exist with respect to

the ban which paid to Picornell the "ull value o" said bill o"exchange.

+he ban was a holder in due course, and was such "or value "ulland complete. +he 1yndman, +avera N Dentura company cannotescape liability in view o" section F% o" the 4egotiable Instruments;aw.

As to Picornell, he warranted, as drawer o" the bill, that it would beaccepted upon proper presentment and paid in due course, and as itwas not paid, he became liable to the payment o" its value to theholder thereo", which is the plainti"" ban.

+he "act that the tobacco was or was not o" in"erior :uality does not

a""ect the responsibility o" Picornell, because while it may have ane""ect upon the contract between him and the "irm o" 1yndman,+avera, Dentura, yet it cannot have upon the responsibility o" both tothe ban, upon the bill drawn and accepted as above stated.

+he drawee, the 1yndman, +avera N Dentura company, or itssuccessors, . Pardo de +avera, accepted the bill and is primarilyliable "or the value o" the negotiable instrument, while the drawerPicornell, is secondarily liable. 1owever, no :uestion has been raisedabout this aspect o" the responsibility o" the de"endants. +heappellants are liable to P4B "or the value o" the bill o" exchange.

Banco Atlantico D Auditor 7eneral

Banco Atlantico v. Auditor 7eneral !ernande8, >E?%(

Case appeal "rom Auditor 7eneral)s decision disallowing payment claims byBanco Atlantico against the Philippine mbassy in *adrid.

Banco Atlantico !BA( is a ban in *adrid.

+he Checs

,-!-.- Check: 0+aid "# BA 1ct 2-! -34 5 ori&inal a$ount was -.- 5salar# of +ace6Check drawer 5 +h e$"ass# in 7adrid! si&ned "# 8uis Gon9ales thea$"assador and ir&inia Boncan as (inance 1fficer.Check drawee 5 +;B "ranch in ;ew


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this because o" *s Boncan)s Gvery special relationsH with theemployees and chie"s o" BA(

F. Basing the claim under 4I; Section @> Q the basis is out o" context.*ust interpret with other provisions in 4I;. BA was not a holder indue course Q which is a re:uirement to avail o" Section @>.

#. Boncan altered the "irst and second checs !>& and #'( by

increasing the amounts. BA should su""er the loss because itaccommodated Boncan on these checs without clearing "irst.$. +he E& chec was a demand note. +here was a letter "rom Boncan

that the chec should not be presented "or collection until a laterdate. +his letter should have put BA on guard that something waswrong with the chec. It loudly proclaims G+ae me at your risH. SoBA is not a 1I-C because it had nowledge o" de"ect and in"irmity o"the chec. 2hen BA honored it, it was grossly negligent.

ISS9S>. 2=4 there was "orgery on the # checs to bar BA "rom collecting

against the Ph embassy I" there was, is the Ph mbassy precluded"rom setting up "orgery or want o" authority o" *iss Boncan !5S,4=(

F. 2=4 actual payment by BA without clearing "irst with P4B645 wasan actual notice o" de"ective title in the endorser thereo" !orassumption o" ris by BA as to de"eat collection( !5S(.

4ote the court did not discuss thoroughly its ruling per issue. Instead o"material alteration, it based its decision on "orgery.

5es, there was "orgery !as discussed in the "acts(. +he # checs were"raudulently altered by Boncan as to their amounts and there"ore whollyinoperative !4I; F#(. 4o right o" payment against any party could have been

ac:uired by BA.

-isposition Auditor 7eneral)s decision denying BA)s claim is a""irmed.

*cCornac D Central State Ban

*CC=R4AC v C4+RA; S+A+ BA4

)ACTS= Plainti""s, including Peter *cCornac !I believe the other plainti"" isspouse(, had money on deposit with Central State Ban. In uly >EF&, one1alverson gained Peter)s con"idence and represented to him that he!1alverson( had a client !CR utsman( who wished to borrow money to besecured by mortgage on land. *cCornac consented and signed a chec "or

K>,&&'.'& payable to order o" utsman which he delivered to 1alverson "or utsman. 1alverson delivered to *cCornac a note purporting to be signedby utsman and secured by mortgage on land, purporting to be signed byCR and *abel utsman.

1alveron indorsed the name CR utsman to his own name on the chec and

deposited it in his own account. Chec was paid on presentation to CentralState Ban and the amount was charged to plainti""s) account. +his moduswas repeated several other times by 1alverson against *cCornac.

In August >EF&, Central State Ban delivered to plainti""s a statement o" their account with cancelled checs charged against it. 4o claim o" error wasmade until >EF$, when it was discovered that the note and mortgage were"orged instruments and no such person as CR utsman in "act existed andthe land belonged to others. Payments o" interest were made by 1alverson.Plainti""s "iled this case to recover the payments made by Central State Ban.

ISS89 ? R8(IN= 2=4 drawee Central State Ban is liable "or paymentsmade5S. A chec payable to the order o" a "ictitious person with drawer)snowledge is payable to bearer. 1owever, when this is unnown to drawer,the drawee ban is in no di""erent position than when it pays a chec payableto a real party upon a "orged instrument.

In this case, *cCornac did not now the payee was "ictitious. +he checthere"ore was not payable to bearer, and the ban cannot escape liability.

+he obligation o" a ban is absolute that it will pay only in the manner directed by the depositor, not that it will exercise reasonable care anddiligence to do so. +he :uestion o" the drawee)s negligence may arise, wheredrawer was also guilty o" negligence. +his is not the case here. *cCornacwas not guilty o" negligence in maing the chec payable to one to whom hebelieved he was maing a loan and delivering it to one who made applicationon behal" o" the borrower "or the loan. +here is no showing that anything hadcome to his nowledge to put him upon in:uiry as to 1alverson)s honesty.

!I*P=R+A4+(+he drawee ban also cannot escape liability under Sec EF'> o" 4I; G+hedrawer by drawing the instrument admits the existence o" the payee and histhen capacity to indorse, and engages that on due presentment theinstrument will be accepted or paid, or both, according to its tenor, and that i" it be dishonored, and the necessary proceedings on dishonor be duly taen,he will pay the amount thereo" to the holder, or to any subse:uent indorser


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who may be compelled to pay it.H +his provision protects not the drawee banbut the holder or the compelled indorser.

+he provision that protects the drawee is Sec E$@E, under which the draweeis relieved o" the duty to ascertain the genuineness o" the payee)sindorsement when the drawer 4=2S the payee is a "ictitious person.

1ence, i" the drawer did not now the payee to be "ictitious, which is the casehere, the drawer is 4=+ relieved o" said duty.

I" a depositor has a right to draw a chec payable to the order o" a stranger and who, "or all the drawer nows, may be a "ictitious person, and to relyupon the ban to pay the chec only on a genuine indorsement, and it is theduty o" the ban to now at its peril be"ore it pays the chec that theindorsement o" the payee is genuine, then it is the drawee ban that isnegligent.

In short A drawee ban has the duty to ascertain the genuineness o" anindorsement. +hat the payee is a "ictitious person does not relieve thedrawee ban o" this duty, I the drawer -I- 4=+ 4=2 that said payee is"ictitious.

Adolph Ramish , Inc D 2oodru""

RA*IS1 v 2==-R9F Cal Fd >E& FE -ec >E#$ C9R+IS, .AC+S !TF is very important(>. A certain Craig executed and delivered to 2oodru"" a promissory note "orK>&,&&&. 2oodru"" executed and delivered a similar note !K>#,'&&(. Bothnotes were dated ebruary >E, >E#F, and were to mature E& days a"ter thedue date. Craig paid nothing on the note.F. Craig would later indorse the 2oodru"" note to Ramish, the indorsement

stating that Craig Jhereby waive!s( presentation o" the note to the maer,demand o" payment, protest and notice non6payment, and to guaranteepayment o" the same, and o" all expenses o" collection thereo" includingattorneyMs "ees, incurred in en"orcing this 79ARA4+5, and do hereby withoutnotice, expressly consent to the delay or indulgence o" enc"orcing paymentand to express extension o" payment o" the same.J#. Ramish sued 2oodru"" on the note. In 2oodru""Ms de"ense, he admits theexecution and delivery o" note to Craig but denies that title was trans"erredbecause that the note was only delivered to Ramish "or inspection andinvestigation/ however, he notes that Ramish may sue as the note was thebasis o" collateral security !"or K@%F&(. Such de"ense is available to him sinceRamish is being argued to not be a holder in due course.

+he basis o" this argument is the nature o" the indorsement made by Craig toRamish66 whether or not it was meant "or collateral security or "or trans"er o"title.$. +rial court o" Cali"ornia ruled in "avor o" 2oodru"" !there was valid trans"ero" title66 there was valid indorsement "rom Craig to Ramish(. 1ence thispetition.

ISS9 2hether or not 2oodru"" is liable as a general indorser in spite o" theMguarantyM. !5S(1;- Reversed.6 In this ind o" scenario, the MindorsementM may be considered either aguaranty or indorsement depending on two "actors !>( w3n there is apassage o" title, and !F( the nature o" the liability incurred by the trans"erorwho has made the MguarantyM3MindorsementM. In this case, the only issue is !>(as the only de"ense invoed was o""set against the original payee !Craig(.6 Crucial here is the statement that purports to be either a guaranty or anindorsement. +here are two views on how this may operatea. +he minority rule is that a guaranty placed on a bill3note does not constituea commercial negotiation thereo", and that the guaranty is a separatecontract. !based on the theory that a blan indorsemen admits o" theimplications o" its terms only becase o" the "act that it is in blan/ where thereare express terms, there can be no implied terms(b. +he ma0ority rule, applied by the Court due to their being in accordancewith the policy o" "ree circulation o" commercial papers as money substitutesand given 4I; @# !one is deemed an indorser unless he clearly indicates byappropriate words his intent to be bound in some other capacity(, is that i"one shows intent to be treated as guarantor3indorser, he shall be treated asone. or example, a word o" guaranty enlarges oneMs liability66 here, onedoes not merely assume the burdens o" indorsement, but also assumes theunconditional liability o" a guarantor !in contrast, an indorser is conditionallyliable/ presentment, dishonor, and proceedings "or dishonor3protest arere:uired(.

An example o" what was considered a guaranty stated JI hereby sell, setover and assign the note... and hereby 79ARA4+ that this is a good,valid and subsisting promissoryu note.J6 +here appears to be con"lict among the evidence present !the indorsementitsel", the argument that there was no delivery o" the note other than "orpurposes o" inspection and investigation/ there were even points on lac o"meeting o" minds and authority o" agent(. 1owever, in case o" doubt, thetendency o" the law is to resolve doubt"ul cases on negotiable instruments in"avor o" due course holding. 7iven the indorsement and thesecircumstances, it appears that there was at the very least an indorsement

2


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and a holder in due course, such that there would be liability on the "ullconsideration P;9S the collateral security.In other words, even i" the indorsement is stated as a guaranty, it is stillconsidered an indorsement unless it sees to enlarge the liability o" theMguarantor3indorser.M

2achovia Ban D Cra"ton

)ac*oia Ban+ . Cra%ton

1 N.C. 404 0# $e.3. "! 2

67C8$(

8*is is a promissory note %or a gambling debt. Ma+er is 9.M.Carer, payee 9.). Cra%ton. Cra%ton indorsed t*e note to)ac*oia and no denies liability on t*e note beca/se t*ela proides all notes and contracts %or gambling debts areoid. )ac*oia is a *older in d/e co/rse.

&$$:3 ; st indorser !2ollowit8 ( who indorsed it to lastindorser !ormac( and "inally sold "or value and indorsed to plainti""

holder !1orowit8(.!F( 9pon presentment, Cohen re"used to honor his obligation on the

grounds that ormac was paid a usurious rate on the note by Cohenwhich rendered the P4 void ab initio. !de"ense o" illegality used bythe maer against the holder(.

!#( Case was "iled against all indorsers and the maer. B8T t/es%bEe&t of t/e appeal +as t/e liabilit# of t/e last inorser @;or,a&k.

4=+ A4 ISS9 +he court did not pass on the :uestion o" 2=4 a maer can use the de"ense o" illegality against a holder in due course since,ISS9 2hat was the liability o" the last indorser !ormac(

1;- ormac is liable to 1orowit8 because!>( Section >>@ o" the 4I; states that every indorser who indorses

without :uali"ication warrants to all subse:uent holders in duecourse, inter alia, that the instrument is at the time o" his indorsementvalid and subsisting.

!F( urthermore, apart "rom 4I; >>@, it is an established rule that theobligation o" an indorser is a new and independent contract, separateand distinct "rom the contract evidenced in the note.

-ISP=SI+ID Remand "or "urther trial.=ther examples cited in the case

!>( Pacard v. 2indhol8 Q *aer was +ruman. +ruman "orged "irst

indorsement o" aton to 2indhol8. 2indhol8 made real indorsementto Pacard. 2indhol8 was "ound liable to Pacard even i" he did not,in good "aith, now about the "irst "orged indorsement beause heguaranteed the genuineness o" all prior indorsements.

!F( ;ennon v. 7rauer Q even i" maer)s signature was "orged, it is not ade"ense that can be used by the indorser since he guaranteed allprior signatures.

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Digest Compilation 5.b-Bills, Notes and Commercial Papers | May 4, 2016