1. Allied Banking (P) v. Lim Sio Wan, Metropolitan Bank and Producers Bank (Rs) | 549 SCRA 504 | 2008 | Velasco, Jr., J. P | Negotiable Instruments1. On 11.14.83 R deposited with P a Money Market Placement worth 1.152M for a term of 31 days, maturing on 12.15.83. On 12.5.83 one who claimed to be R called PB informing them that (P) as claimed will pre-terminate and instructed to issue a managers check in the name of Santos. Santos later picked up the managers check in the name of R, it was cross-checked for payees account only.2. The check was then deposited in the account of Filipinas Cement Co (FCC). at RB1 (Metrobank) with the forged signature of R as endorser. Said deposit was claimed to be RB2s (Producers Bank) payment of its Obligation to FCC.3. Upon Maturity R went to PB to withdraw his placement PB refused to pay thus the sewing. R sued PB to recover the proceeds; PB filed a 3rd Party complaint against RB1 and Santos; Metrobank sued FCC; and FCC sued Producers Bank (Santos could no longer be found)4. The RTC Favored R, ordered Allied Bank to pay; Allied Cross-claim was dismissed; so were the other cross claims. PB appealed to the CA5. The CA modified and held that PB should be held 60% liable and RB1 at 40% liability. Hence this PBs appeal.6. SC Affirmed but modified CAs ruling holding RB2 liable to PB and RB1.7. In the instant case, the trial court correctly found Allied negligent in issuing the managers check and in transmitting it to Santos without even a written authorization. In fact, Allied did not even ask for the certificate evidencing the money market placement or call up Lim Sio Wan at her residence or office to confirm her instructions. Allieds negligence must be considered as the proximate cause of the resulting loss. 8. The liability of Allied, however, is concurrent with that of Metrobank as the last indorser of the check. When Metrobank indorsed the check in compliance with the PCHC Rules and Regulations without verifying the authenticity of Lim Sio Wans indorsement and when it accepted the check despite the fact that it was cross-checked payable to payees account only, its negligent and cavalier indorsement contributed to the easier release of Lim Sio Wans money and perpetuation of the fraud. Given the relative participation of Allied and Metrobank to the instant case, both banks cannot be adjudged as equally liable. Hence, the 60:40 ratio of the liabilities.9. As to the claim that there was unjust enrichment on the part of Producers Bank, the same is correct. Allied correctly claims in its petition that Producers Bank should reimburse Allied for whatever judgment that may be rendered against it pursuant to Art. 22 of the Civil Code, which provides: Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just cause or legal ground, shall return the same to him.10. In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment upon her request, or upon maturity of the placement, or until the bank is released from its obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains unextinguished.11. Tolentino: Payment made by the debtor to a wrong party does not extinguish the obligation as to the creditor, if there is no fault or negligence which can be imputed to the latter. Even when the debtor acted in utmost good faith and by mistake as to the person of his creditor, or through error induced by the fraud of a third person, the payment to one who is not in fact his creditor, or authorized to receive such payment, is void, except as provided in Article 1241.

2. Velasquez (P) v. Solidbank (R) | 550 SCRA 119 | 2008 | Reyes R.T. J,p. | Negotiable Instruments1. P is in the Export Business operating Wilderness Trading (WT). P sold to Goldwell Trading of Pusan, South Korea (GW) dried seaweeds. To facilitate payment, GW opened in Bank of Seoul a Letter of Credit (LOC) in favor of WT in the amount of US$ 87.5M. On 11.12.92 P applied for credit accommodation w/ RB for pre-shipment financing, w/c was granted.2. The first 2 exports was successful, payment was drawn on the letter of credit, the third though On 2.22.93 P submitted to RB the necessary documents for his 3rd shipment. Wanting to be paid in advance P negotiated for a sight draft to be drawn from the letter of credit.3. As a requirement P promised that the draft will be accepted and paid by Bank of Seoul according to its tenor, P also held himself liable if the sight draft was not accepted. The letter of undertaking was accepted by RB and advanced to P 1.495M (after exchange rate), RB then sent the documents to Bank of Seoul which failed to collect from the latter, for reasons of late shipment, forgery and absence of countersignature of the negotiating bank on the inspection certificate. GW as well stopped issuance of payment due to the products inconsistencies. RB then demanded restitution of the sum advanced. P failed to heed the demand, hence the suing. 4. In his answer P alleged that his liability under the sight draft was extinguished when RB failed to protest its non-acceptance as required under the Negotiable Instruments Law (NIL), further, that the letter of undertaking is not binding because it is a superfluous document, and that he did not violate any of the provision of the letter of credit. 5. RTC Cebu ruled in favor of RB, holding that Sec. 152 of NIL is not a bar to claim against P, that the letter of undertaking was clear, P is thereby bound; The CA affirmed w/ modifications. Hence this.6. Petition denied. P is not bound by the letter of credit but by his undertaking.7. Petitioner was discharged from liability under the sight draft when respondent failed to protest it for non-acceptance by the Bank of Seoul. A sight draft made payable outside the Philippines is a foreign bill of exchange. When a foreign bill is dishonored by non-acceptance or non-payment, protest is necessary to hold the drawer and endorsers liable. Verily, respondents failure to protest the non-acceptance of the sight draft resulted in the discharge of petitioner from liability under the instrument.8. Although. Even if an endorser of a sight draft was discharged from liability for failure of the holder to protest for non-acceptance, he would still be liable under his letter of undertaking since the same is independent from his liability under the sight draftliability subsists on it even if the sight draft was dishonored for non-acceptance or nonpayment. It bears stressing that it is a separate contract from the sight draft. The liability of petitioner under the letter of undertaking is direct and primary. It is independent from his liability under the sight draft. Liability subsists on it even if the sight draft was dishonored for non-acceptance or non-payment. The bank would certainly not have agreed to grant petitioner an advance export payment were it not for the letter of undertaking.9. We cannot accept petitioners thesis that he is only a mere guarantor under the letter of credit. Petitioner cannot be both the primary debtor and the guarantor of his own debt. This is inconsistent with the very purpose of a guarantee which is for the creditor to proceed against a third person if the debtor defaults in his obligation. Certainly, to accept such an argument would make a mockery of commercial transactions.

3. Dela Rama Co (P) v. Admiral United Savings Bank (RB) | 551 SCRA 472 | 2008 | Nachura, J,P. | Negotiable Instruments1. On 2.28.83, RB loaned 500K to P w/ L. Isip as co-maker, it was evidence w/ a promissory note (PN) (A1-0414, 2.28.83), payable on or before 2.23.84 w/ 18%/annum interest, providing also for liquidated damages at 3%/month, etc.2. Failing to pay even after demands, RB sued, P answered alleging that the PN was sham and frivolous, hence void ab initio, denying receiving any benefits from the loan, claiming that RB only induced him to execute the PN, that further he ceded several vehicles to RB, the value of w/c was more than enough thereby there was condonation of the debt and novation of the obligation, also that laches had set in.3. During the trials L. Isip died; further P imputed Metro Rent, claiming that it prodded him to obtain the loan and promised him that the loan will be taken care of Metro Rent, which it denied. 4. RTC dismissed RBs complaint holding that Metro Rent had already been paid or otherwise extinguished, relying on the release of mortgage executed by RBs officials and Cos testimony that Metro Rent already paid the loan. 5. CA reversed the decision, finding preponderance of evidence to hold P liable, rejecting Ps assertion that he merely was an accommodation party in favor of Metro Rent, further, that P and Metro Rents agreement cannot bind RB since it was unaware of their transactions. Hence this.6. Affirmed w/ Modifications. Ps assertion that he merely acted as an accommodation party for METRO RENT cannot release him from liability under the note. An accommodation party who lends his name to enable the accommodated party to obtain credit or raise money is liable on the instrument to a holder for value even if he receives no part of the consideration. He assumes the obligation to the other party and binds himself to pay the note on its due date. By signing the note, Co thus became liable for the debt even if he had no direct personal interest in the obligation or did not receive any benefit therefrom.7. Co also offered the alternative defense that the loan had already been extinguished by payment. He testified that METRO RENT paid the loan a week before April 11, 1983. In Alonzo v. San Juan, 451 SCRA 45 (2005), we held that the receipts of payment, although not exclusive, were deemed to be the best evidence of the fact of payment. In this case, no receipt was presented to substantiate the claim of payment. Instead, Co presented a Release of Real Estate Mortgage dated April 11, 1983 to prove his assertion. But a cancellation of mortgage is not conclusive proof of payment of a loan, even as it may serve as basis for an inference that payment of the principal obligation had been made.8. A party who pleads payment as a defense has the burden of proving that such payment had, in fact, been made. When the plaintiff alleges nonpayment, still, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment.4. Sps. Violago (P) v. BA Finance (R) & Avelino Violago (RV) | 559 SCRA 69, 2008 | Negotiable Instruments | Velasco, JR. J,p:1. Sometime in 1983, RV, president of Violago Motor Sales Co. (VMSC), offered to sell a car to his cousin to Ps (Sps), explaining that he needed to increase his sales quota, that Ps would only need to pay 60.5K, the balance of w/c will be finance by R (BA Finance), then Ps would pay monthly to R Ps agreed. 2. On 8.4.83 Ps and RV signed a PN, the former binding themselves to pay jointly and severally to the order of VMSC for 209.6K in 36 monthly installments of 5.8K/month; On 9.16.83 RV prepared a disclosure statement of Loan/Credit Transportation w/c indicated the net purchase price of the vehicle, DP, Balance, and Final Charges. VMSC then issued a sales invoice in favor of Ps w/ the detailed description of the car; VMSC through RV endorsed the PN to R w/o recourse, then received the amount of 209.6K, thereafter issued a Deed of Assignment of its rights and interests under the PN and chattel mortgage in favor of R.3. The vehicle was then registered. Although Ps were unaware that the same car was already sold another of their cousins (E. Violago). Despite Ps demands, VMSC failed to deliver the vehicle, thereafter Ps didnt pay the amortization to R.4. R sued for Replevin w/ damages against Ps, w/c defaulted. RTC ruled in favor of R.5. Meanwhile, E. Violago conveyed the vehicle to J. Olvido, and registered the same under his name, whom executed a chattel mortgage over the vehicle in favor of G. Lopez as security for a loan covered by a PN in the amount of 260.6K, which was later endorsed to Rs Cebu Office.6. Ps motioned to reconsider and to quash the writ of execution w/c was denied; they then appealed to the CA, w/c nullified the RTCs order and became final and executory.7. On 1.28.92 Ps filed their answer to the RTC alleging that they never received the vehicle from VMSC, and that Rs recourse shouldve been against VMSC; and w/ LOC filed a 3rd party complaint against RV. RV on the other hand that he should not be made a party, instead VMSC, w/c was denied. The RTC ruled, finding for R but against the Ps, the RTC however declared that Ps are entitled to be indemnified by RV.8. Ps appealed to the CA, contending that the RTC erred when it applied the Civil Code instead of NIL, since the subject was a PN, further that the sale was null and void since there was no delivery of the vehicle; That R was also aware that Ps didnt have the vehicle since the PN it received in its Cebu Branch proves the same.9. CA ruled that the PN was a NIL, but faulted Ps for not impleading VMSC, thereby setting aside the RTCs ruling holding RV as liable. 10. SC set aside insofar as they dismissed w/o prejudice the 3rd party complaint of Ps against RV, the decision of the RTC was reinstated and affirmed. 11. In the present recourse, on its face, (a) the Promissory Note is complete and regular; (b) the Promissory Note was endorsed by the VMSC in favor of the Appellee; (c) the Appellee, when it accepted the Note, acted in good faith and for value; (d) the Appellee was never informed, before and at the time the Promissory Note was endorsed to the Appellee, that the vehicle sold to the Defendants-Appellants was not delivered to the latter and that VMSC had already previously sold the vehicle to Esmeraldo Violago. Although Jose Olvido mortgaged the vehicle to Generoso Lopez, who assigned his rights to the BA Finance Corporation (Cebu Branch), the same occurred only on May 8, 1987, much later than August 4, 1983, when VMSC assigned its rights over the Chattel Mortgage by the Defendants-Appellants to the Appellee. Hence, Appellee was a holder in due course.12. A holder in due course, however, holds the instrument free from any defect of title of prior parties and from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof. Since BA Finance is a holder in due course, petitioners cannot raise the defense of non-delivery of the object and nullity of the sale against the corporation. The NIL considers every negotiable instrument prima facie to have been issued for a valuable consideration. 13. In Salas, 181 SCRA 296 (1990), we held that a party holding an instrument may enforce payment of the instrument for the full amount thereof. As such, the maker cannot set up the defense of nullity of the contract of sale. Thus, petitioners are liable to Respondent Corporation for the payment of the amount stated in the instrument.14. The fact that VMSC was not included as defendant in petitioners third party complaint does not preclude recovery by petitioners from Avelino; neither would such non-inclusion constitute a bar to the application of the piercing-of-the-corporate-veil doctrine. We suggested as much in Arcilla v. Court of Appeals, 215 SCRA 120 (1992), an appellate proceeding involving petitioner Arcillas bid to avoid the adverse CA decision on the argument that he is not personally liable for the amount adjudged since the same constitutes a corporate liability which nevertheless cannot even be enforced against the corporation which has not been impleaded as a party below.

5. Bautista (P) v. Auto Plus Traders (APT) & CA (RC) | Negotiable Instruments | Quisumbing, J. P:1. P, president of Cruiser Bus Lines (CBL) purchased various spare parts from APT, and issued 2 post-dated checks to cover w/c was subsequently dishonored because of insufficient funds. Despite notice of dishonor and demands, P failed to answer, APT then sued for PB 22.2. P pleaded not guilty, and filed a demurrer to evidence w/c was granted on 4.21.03, though was ordered to pay the amount totaling to 248.7K including the interest plus the litigation fees, denied on his move for partial reconsideration; both parties appealed to the RTC w/c ruled to modify; CA affirmed the ruling, hence this.3. P asserts that BP 22 merely pertains to the criminal liability of the accused and that the corporation w/c has a separate personality from its officers, is solely liable for the value of the two checks. APT contends that P should be held liable after it issued the two bouncing check, one in Ps personal name and the other on the CBLs name. APT holds P as an accommodation party w/c is liable on the instrument to a holder for value; that P is also liable as to the Company Check, because instituting another case would result to multiplicity and delay of suits.4. SC Granted the petition, reversed and set-aside, the criminal case dismissed w/o prejudice to the right of APT to file the proper civil action.5. Juridical entities have personalities separate and distinct from its officers and the persons composing it. Generally, the stockholders and officers are not personally liable for the obligations of the corporation except only when the veil of corporate fiction is being used as a cloak or cover for fraud or illegality, or to work injustice. 6. These situations, however, do not exist in this case. The evidence shows that it is Cruiser Bus Lines and Transport Corporation that has obligations to Auto Plus Traders, Inc. for tires. There is no agreement that petitioner shall be held liable for the corporations obligations in his personal capacity. Hence, he cannot be held liable for the value of the two checks issued in payment for the corporations obligation in the total amount of P248,700.7. Contrary to private respondents contentions, petitioner cannot be considered liable as an accommodation party for Check No. 58832. Section 29 of the Negotiable Instruments Law defines an 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.8. The first two elements are present here, however there is insufficient evidence presented in the instant case to show the presence of the third requisite. All that the evidence shows is that petitioner signed Check No. 58832, which is drawn against his personal account. The said check, dated December 15, 2000, corresponds to the value of 24 sets of tires received by Cruiser Bus Lines and Transport Corporation on August 29, 2000. There is no showing of when petitioner issued the check and in what capacity. In the absence of concrete evidence it cannot just be assumed that petitioner intended to lend his name to the corporation. Hence, petitioner cannot be considered as an accommodation party.

6. Far East Bank & Trust Co. (P) v. Gold Palace Jewelry Co. (R [represented by Judy L. Yang-Go and Kho Soon Huat]) | 562 SCRA 604, 2008 | Negotiable Instruments | Nachura, J p:1. Sometime 6.98, a foreigner Samuel Tagoe (ST) purchased from R several pieces of jewelry in the amount of 258K as payment ST payed in Foreign Draft (FD) issued by United Overseas Bank of Malaysia (UOB) addressed to Land Bank Phils. (LBP) and payable to RCo worth 380K.2. P Bank was also a tenant on the mall (SM North Edsa), R went to P to ask about the FD, P informed R that it is as good as a Managers Check (MC), though, P advised R not to release the jewelry until the draft had been cleared, following the advice, R (Yang) issued a Cash Invoice to the foreigner, asked him to come back, and informed him that said jewelry would be released after clearance of the FD.3. R Yang consequently deposited the FD in the companys account w/ P on 6.2.98. P then presented the FD to LBP, w/c cleared the FD and credited said amount to Rs account. 4. ST then claimed the jewelry and because the FDs value was larger than the price, she issued as change a Check from P worth 122K, w/c was later cashed by P.5. On 6.26.98, LBP informed P that the amount in the FD was forged from 300 to 380K, and that it was returning the same, this after UOB informed LBP when it tried to credit back the amount.6. R meanwhile, have already used up the amount in their account w/ P. on 7.20.98, w/ Rs account having a standing balance of 168K P debited the same w/o prior written notice, and only informed thru phone R. On 8.12.98, P demanded the additional amount required to debit the FDs value at 211.9K. R didnt heed to the demand, resulting to P suing R in RTC Makati. In their answer R denied all allegations claiming innocence in the forgery.7. RTC ruled in favor of P. CA reversed and awarded Rs counterclaim. It ruled in the main that Far East failed to undergo the proceedings on the protest of the foreign draft or to notify Gold Palace of the drafts dishonor; thus, Far East could not charge Gold Palace on its secondary liability as an endorser. The appellate court further ruled that the drawee bank had cleared the check, and its remedy should be against the party responsible for the alteration. Hence this.8. Petition denied. Act No. 2031, or NIL explicitly provides that the acceptor, by accepting the instrument, engages that he will pay it according to the tenor of his acceptance. This provision applies with equal force in case the drawee pays a bill without having previously accepted it. His actual payment of the amount in the check implies not only his assent to the order of the drawer and a recognition of his corresponding obligation to pay the aforementioned sum, but also, his clear compliance with that obligation. Actual payment by the drawee is greater than his acceptance, which is merely a promise in writing to pay. The payment of a check includes its acceptance.9. Following the plain language of the law, the drawee, by the said payment, recognized and complied with its obligation to pay in accordance with the tenor of his acceptance. The tenor of the acceptance is determined by the terms of the bill as it is when the drawee accepts. Stated simply, LBP was liable on its payment of the check according to the tenor of the check at the time of payment, which was the raised amount. LBP, having the most convenient means to correspond with UOB, did not first verify the amount of the draft before it cleared and paid the same10. Gold Palace had no facility to ascertain with the drawer, UOB Malaysia, the true amount in the draft. It was left with no option but to rely on the representations of LBP that the draft was good. Gold Palace is protected by Section 62 of the NIL, its collecting agent, Far East, should not have debited the money paid by the drawee bank from respondent company's account. When Gold Palace deposited the check with Far East, it, under the terms of the deposit and the provisions of the NIL, became an agent of the Gold Palace for the collection of the amount in the draft.11. Gold Palace is protected by Section 62 of the NIL, its collecting agent, Far East, should not have debited the money paid by the drawee bank from respondent company's account. When Gold Palace deposited the check with Far East, it, under the terms of the deposit and the provisions of the NIL, became an agent of the Gold Palace for the collection of the amount in the draft.

7. PNB (P) v. Rodriguez Spouses (R) | 566 SCRA 513 | Negotiable Instruments | Reyes, RT, J, p:1. R Spouses were clients of P Bank Cebu City Branch, maintaining savings and demand/checking accounts. Ps were engaged in informal lending business, they had a discounting arrangement w/ PNB Employees Savings and Load Assoc. (PEMSLA) of PNB Employees, naturally PEMSLA, likewise is a client of P, maintaining a current and savings account therein.2. PEMSLA regularly grants loans to its members. Rs would rediscount the postdated checks issued to members whenever the association was short of funds, by replacing the checks with their own that is readily available.3. It was PEMSLAs policy not to approve loans to employees w/ outstanding debts, to subvert this some officers of the former devised a scheme, allowing them to take out new loans using the names of other employees and forging endorsements. Short to say Rs accepted this checks. 4. From 11.98 to 2.99, Rs issued 69 checks amounting to 2.345M. PNB eventually discovered the scheme, and eventually closed PEMSLAs current account, resulting to the returned and dishonored checks, thereby incurring losses, thereby suing PEMSLA, Multi-Purpose Coop (MPC) and PNB, seeking to recover their losses, holding that PNB is accountable for paying the wrong employees.5. PNB moved to dismiss, for lack of cause of action, arguing that the payees of the checks and not Rs, and since there are no demands from the PEMSLA payees, the obligation should be considered discharged, w/c was denied, now PNB contends that Ps, the makers, actually did not intend for the named payees to receive the proceeds of the checks. Consequently, the payees were considered as fictitious payees as defined under the Negotiable Instruments Law (NIL). RTC ruled in favor of Ps. 6. CA reversed and set-aside, as appealed by PNB, holding that the checks should be considered as payable to bearer and not to order. On appeal CA reversed itself after Ps argued that the checks on their faces were unquestionably payable to order; and that PNB committed a breach of contract when it paid the value of the checks to PEMSLA without indorsement from the payees. They also argued that their cause of action is not only against PEMSLA but also against PNB to recover the value of the checks.7. SC Affirmed. As a rule, when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as a bearer instrument.8. An order instrument requires an indorsement from the payee or holder before it may be validly negotiated while a bearer instrument is negotiable by mere delivery. Under Section 9(c) of the Negotiable Instruments Law (NIL), a check payable to a specified payee may nevertheless be considered as a bearer instrument if it is payable to the order of a fictitious or non-existing person, and such fact is known to the person making it so payable.9. A review of US jurisprudence yields that an actual, existing, and living payee may also be fictitious if the maker of the check did not intend for the payee to in fact receive the proceeds of the check.10. 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.11. 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. Verily, the subject checks are presumed order instruments. This is because, as found by both lower courts, PNB failed to present sufficient evidence to defeat the claim of respondents spouses that the named payees were the intended recipients of the checks proceeds. 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. Because of a failure to show that the payees were fictitious in its broader sense, the fictitious-payee rule does not apply.12. PNB was remiss in its duty as the drawee bank. It does not dispute the fact that its teller or tellers accepted the 69 checks for deposit to the PEMSLA account even without any indorsement from the named payees.13. In a checking transaction, the drawee bank has the duty to verify the genuineness of the signature of the drawer and to pay the check strictly in accordance with the drawers instructions, i.e., to the named payee in the check.

8. J. Dy (P) v. People & CA | 571 SCRA 59 | Negotiable Instruments | Quisumbing J, p:1. P was a distributor of WL Food Products (WL) in Naga City, w/ a business namen of Dyna Marketing (DM). P pays WL w/ Cash or Check. P sometimes entrusts payment to his drivers. On 6.24.92 Dys driver went to WL to pick-up stocks, upon confirmation of the WLs checker of its Ps credit to the main office gave the merchandise to the driver worth 106.5K, in return handed a signed blank post-dated check issued by FEBTC; this was repeated on 7.1.92 w/ the same driver in the amount of 226.7K in the same manner.2. Upon WLs presentment of the checks to FEBTC, it was dishonored for insufficiency of funds and drawn against uncollected funds (DAUD). Upon WLs demand, P explained that he could not pay yet because of insufficiency of funds, WL then sent a demand letter w/c was ignored by P. On 7.16.93, WL sued for Estafa and 2 counts of BP22. Dy was found guilty by the RTC, w/c was affirmed by the CA but modified as to the sentence and deleted the payment of interest. Hence this. 3. P contends that the checks were ineffectively issued. He stresses that not only were the checks blank, but also that W.L. Foods accountant had no authority to fill the amounts. Dy also claims failure of consideration to negate any obligation to W.L. Foods; On the other hand, the State, avers that the delivery of the checks by Dys driver to Maraca, constituted valid issuance. The OSG sustains Ongs prima facie authority to fill the checks based on the value of goods taken.4. SC acquitted him of Estafa and BP22, and ordered to pay the amount due. 5. Section 191 of the Negotiable Instruments Law defines issue as the first delivery of an instrument, complete in form, to a person who takes it as a holder. Significantly, delivery is the final act essential to the negotiability of an instrument. Delivery denotes physical transfer of the instrument by the maker or drawer coupled with an intention to convey title to the payee and recognize him as a holder. It means more than handing over to another; it imports such transfer of the instrument to another as to enable the latter to hold it for himself. In this case, even if the checks were given to W.L. Foods in blank, this alone did not make its issuance invalid. When the checks were delivered to Lim, through his employee, he became a holder with prima facie authority to fill the blanks. This was, in fact, accomplished by Lims accountant. The pertinent provisions of Section 14 of the Negotiable Instruments Law.6. The prima facie presumption of deceit arises only when a check has been dishonored for lack or insufficiency of funds. Notably, the law speaks of insufficiency of funds but not of uncollected deposits. Jurisprudence teaches that criminal laws are strictly construed against the Government and liberally in favor of the accused. Hence, in the instant case, the law cannot be interpreted or applied in such a way as to expand its provision to encompass the situation of uncollected deposits because it would make the law more onerous on the part of the accused. Clearly, the estafa punished under Article 315, paragraph 2(d) of the Revised Penal Code is committed when a check is dishonored for being drawn against insufficient funds or closed account, and not against uncollected deposit.7. In Tan v. People, 349 SCRA 777 (2001), this Court acquitted the petitioner therein who was indicted under B.P. Blg. 22, upon a check which was dishonored for the reason DAUD, among others. We observed that: In the second place, even without relying on the credit line, petitioners bank account covered the check she issued because even though there were some deposits that were still uncollected the deposits became good and the bank certified that the check was funded. To be liable under Section 1 of B.P. Blg. 22, the check must be dishonored by the drawee bank for insufficiency of funds or credit or dishonored for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 8. Like Article 315 of the Revised Penal Code, B.P. Blg. 22 also speaks only of insufficiency of funds and does not treat of uncollected deposits. To repeat, we cannot interpret the law in such a way as to expand its provision to encompass the situation of uncollected deposits because it would make the law more onerous on the part of the accused. Again, criminal statutes are strictly construed against the Government and liberally in favor of the accused.

9. BPI (P) v. Royeca Spouses (R) | 559 SCRA 207 | Negotiable Instruments | Nachura, J p:1. On 8.23.93 Rs executed and delivered to Toyota Shaw a PN worth 577K payable in 48 monthly installments, maturing on 8.18.97, w/ a 3% penalty for every month unpaid. To pay for this, they chattel mortgaged the subject car to FEBTC.2. FEBTC claims that Rs failed to pay monthly amortizations, demanding payment; Rs refused claiming that they had already payed. Suing ensued, for Replevin and damages (Later BPI absorbed BPI hence becoming P); Rs averred that they had paid showing 8 postdated checks received by P, further claiming that no notice of dishonor for such checks were received by them, and considering that these checks were issued 3 years ago, they believed that they have fulfilled their obligation; Witness from P admitted that they did receive the checks, but 2 of which were dishonored. MeTC ruled in favor of Rs.3. RTC reversed. CA reversed and reinstated MeTCs decision, hence this. 4. P insists that the respondents did not sufficiently prove the alleged payment. It avers that, under the law and existing jurisprudence, delivery of checks does not constitute payment. It points out that this principle stands despite the fact that there was no notice of dishonor of the two checks and the demand to pay was made three years after default.5. Reversed. As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.6. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized.7. It should be noted that the petitioner, as payee, did not have a legal obligation to inform the respondents of the dishonor of the checks. A notice of dishonor is required only to preserve the right of the payee to recover on the check. It preserves the liability of the drawer and the indorsers on the check. Otherwise, if the payee fails to give notice to them, they are discharged from their liability thereon, and the payee is precluded from enforcing payment on the check. The respondents, therefore, cannot fault the petitioner for not notifying them of the non-payment of the checks because whatever rights were transgressed by such omission belonged only to the petitioner.8. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment. Reasonable banking practice and prudence dictates that, when a check given to a creditor bank in payment of an obligation is dishonored, the bank should immediately return it to the debtor and demand its replacement or payment lest it causes any prejudice to the drawer. In light of this and the fact that the obligation has been partially paid, we deem it just and equitable to reduce the 3% per month penalty charge as stipulated in the Promissory Note to 12% per annum.

10. Associated Citizens Bank (P) v. BA Finance, Miller Offset Press, Uy Kiat Chung, Ching Uy Seng, Uy Chung Guan Seng, and Bank of America (Ps) | 588 SCRA 51, 2009 | Negotiable Instruments | Carpio, J p:1. On 10.78 BA Finance (BAF) transacted w/ Miller Offset Press (MOP) through the Chinese guys. BAF granted MOP a credit line facility for the latter to assigne or discount its trade receivables w/ the former. On 10.20.78 BAF and Chinese executed a Continuing Suretyship Agreement (CSA) whereby they are jointly and severally guaranteeing a full and prompt payment of any and all indebtedness w/c MOP may incur.2. In consideration BAF issued four checks payable to the order of MOP notated as For Payees Account Only, and can be drawn against Bank of America (BOA), w/ a total amount of 741.2K. Said checks were deposited by the Chinese to P, in a joint account for said Chinese the checks were marked all prior endorsements and/or lack of endorsements guaranteed it was later honored by BOA.3. When MOP When Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables, BA-Finance filed a collection suit against Miller and impleaded the three representative of the latter.4. BOA filed a third party complaint against Associated Bank. In its answer to the third party complaint, Associated Bank admitted having received the four checks for deposit in the joint account of Ching Uy Seng and Uy Chung Guan Seng, but alleged that Ching Uy Seng, being one of the corporate officers of Miller, was duly authorized to act for and on behalf of Miller.5. RTC ruled against BOA to pay BAF the value and for P reimburse BOA. CA affirmed with modifications, ordering BOA to pay BAF and third-party P to reimburse BOA and Chinese to pay P, hence this consolidated petitions.6. Affirmed. The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract between the bank and its customer (drawer), to pay the check only to the payee or the payees order. The drawers instructions are reflected on the face and by the terms of the check.7. When the drawee bank pays a person other than the payee named on the check, it does not comply with the terms of the check and violates its duty to charge the drawers account only for properly payable items. Thus, we ruled in Philippine National Bank v. Rodriguez (566 SCRA 513 [2008]) that a drawee should charge to the drawers accounts only the payables authorized by the latter; otherwise, the drawee will be violating the instructions of the drawer and shall be liable for the amount charged to the drawers account.8. This Court has repeatedly held that in check transactions, the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements. When Associated Bank stamped the back of the four checks with the phrase all prior endorsements and/or lack of endorsement guaranteed, that bank had for all intents and purposes treated the checks as negotiable instruments and, accordingly, assumed the warranty of an endorser. Being so, Associated Bank cannot deny liability on the checks.9. Associated Bank was also clearly negligent in disregarding established banking rules and regulations by allowing the four checks to be presented by, and deposited in the personal bank account of, a person who was not the payee named in the checks. The checks were issued to the Order of Miller Offset Press, Inc., but were deposited, and paid by Associated Bank, to the personal joint account of Ching Uy Seng (a.k.a. Robert Ching) and Uy Chung Guan Seng. It could not have escaped Associated Banks attention that the payee of the checks is a corporation while the person who deposited the checks in his own account is an individual. Verily, when the bank allowed its client to collect on crossed checks issued in the name of another, the bank is guilty of negligence.10. One who accepts and encashes a check from an individual knowing that the payee is a corporation does so at his peril. Accordingly, we hold that Associated Bank is liable for the amount of the four checks and should reimburse the amount of the checks to Bank of America.11. It appearing, however, from the evidence on record that since Ching Uy Seng and/or Uy Chung Guan Seng received the proceeds of the checks as they were deposited in their personal joint account with Associated Bank, they should, therefore, be obliged to reimburse Associated Bank for the amount it has to pay to Bank of America, in line with the rule that no person should be allowed to unjustly enrich himself at the expense of another.

11. Bank of America NT&SA (P) v. Philippine Racing Club (R) | 594 SCRA 301, 2009 | Negotiable Instruments | Leonardo-De Castro, J p:1. R is a domestic corporation, maintaining several accounts w/ different banks, one of which is P their authorized joint signatories were its president Antonio Reyes (AR) and VP for Finance Gregorio Reyes (GR).2. On 12.88 AR and GR, were scheduled for a business trip not to disrupt business transactions, they pre-signed several checks w/ their current account w/ P; entrusting the same to their accountant w/ instruction to make use of the same as the need arose.3. On 12.16.99, a JOHN DOE (Clarita Mesina, later criminally sued) presented to P for encashment a couple of the checks totaling to 220K w/c were the pre-signed ones, payable to CASH. P w/o verifying and/or confirming the legitimacy of the checks encashed them. R demanded from P to pay them back, P didnt heed.4. RTC ruled in favor of R, CA affirmed, hence this. Hence this. Petitioner insists that it merely fulfilled its obligation under law and contract when it encashed the aforesaid checks. Invoking Sections 1267 and 1858 of the Negotiable Instruments Law (NIL), petitioner claims that its duty as a drawee bank to a drawer-client maintaining a checking account with it is to pay orders for checks bearing the drawer-clients genuine signatures.5. SC Affirmed w/ modifications, altering down to 60% Ps liability. The genuine signatures of the clients duly authorized signatories affixed on the checks signify the order for payment. Thus, pursuant to the said obligation, the drawee bank has the duty to determine whether the signatures appearing on the check are the drawer-clients or its duly authorized signatories. If the signatures are genuine, the bank has the unavoidable legal and contractual duty to pay. If the signatures are forged and falsified, the drawee bank has the corollary, but equally unavoidable legal and contractual, duty not to pay. 6. It is well-settled that banks are engaged in a business impressed with public interest, and it is their duty to protect in return their many clients and depositors who transact business with them. They have the obligation to treat their clients account meticulously and with the highest degree of care, considering the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that of a good father of a family.7. A material alteration is defined in Section 125 of the NIL to be one which changes the date, the sum payable, the time or place of payment, the number or relations of the parties, the currency in which payment is to be made or one which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect. With respect to the checks at issue, petitioner points out that they do not contain any material alteration. This is a fact which was affirmed by the trial court itself.8. Taking this with the testimony of petitioners operations manager that in case of an irregularity on the face of the check (such as when blanks were not properly filled out) the bank may or may not call the client depending on how busy the bank is on a particular day, we are even more convinced that petitioners safeguards to protect clients from check fraud are arbitrary and subjective. Every client should be treated equally by a banking institution regardless of the amount of his deposits and each client has the right to expect that every centavo he entrusts to a bank would be handled with the same degree of care as the accounts of other clients. Perforce, we find that petitioner plainly failed to adhere to the high standard of diligence expected of it as a banking institution.9. Even if we assume that both parties were guilty of negligent acts that led to the loss, petitioner will still emerge as the party foremost liable in this case. In instances where both parties are at fault, this Court has consistently applied the doctrine of last clear chance in order to assign liability. In Westmont Bank v. Ong, 375 SCRA 212 (2002), we ruled: [I]t is petitioner [bank] which had the last clear chance to stop the fraudulent encashment of the subject checks had it exercised due diligence and followed the proper and regular banking procedures in clearing checks. As we had earlier ruled, the one who had a last clear opportunity to avoid the impending harm but failed to do so is chargeable with the consequences thereof.

12. Metropolitan Bank & Trust Co. (P) v. BA Finance and Malayan Insurance (R) | 604 SCRA 620, 2009 | Negotiable Instruments | Carpio-Morales, J p:1. L. Bitanga (LB) obtained from R a 329.2K loan, mortgaging his car.2. The car was stolen. On LBs claim, Malayan Insurance (MI) issued a check payable to the order of R and LB for 224.5K drawn against China Bank crossed w/ the notation For Deposit Payees Account Only.3. LB, w/o Rs indorsement or authority, deposited the check to his account w/ P (Asiabank now FEBTC thru merger), and subsequently withdrew the entire proceeds of the check. LBs loan then became past due, and after demands he failed to settle it. R eventually learned of the cars loss and issuance by MI of the check. Thereafter R sued P and LB.4. P then made a counterclaim against R, claiming bad faith to coerce them to pay the entire amount; A cross claim against LB alleging fraudulent transaction; A third-party complaint against MI for negligence in issuing the check payable to LB and R.5. RTC found P and LB jointly and severally liable to R in accordance w/ Sec. 41 of NIL all other claims by Asiabank and Bitanga were dismissed. CA affirmed, hence this. 6. SC Affirmed. Section 41 of the Negotiable Instruments Law provides: Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others. Bitanga alone endorsed the crossed check, and petitioner allowed the deposit and release of the proceeds thereof, despite the absence of authority of Bitangas co-payee. Clearly, petitioner, through its employee, was negligent when it allowed the deposit of the crossed check, despite the lone endorsement of Bitanga, ostensibly ignoring the fact that the check did not, it bears repeating, carry the indorsement of BA Finance.7. To be sure, a collecting bank, Asianbank in this case, where a check is deposited and which indorses the check upon presentment with the drawee bank, is an indorser. This is because in indorsing a check to the drawee bank, a collecting bank stamps the back of the check with the phrase all prior endorsements and/or lack of endorsement guaranteed and, for all intents and purposes, treats the check as a negotiable instrument, hence, assumes the warranty of an indorser. Without Asianbanks warranty, the drawee bank (China Bank in this case) would not have paid the value of the subject check. Petitioner, as the collecting bank or last indorser, generally suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of prior indorsements. Accordingly, one who credits the proceeds of a check to the account of the indorsing payee is liable in conversion to the non-indorsing payee for the entire amount of the check. 8. Section 68 of the Negotiable Instruments Law which instructs that joint payees who indorse are deemed to indorse jointly and severally. Recall that when the maker dishonors the instrument, the holder thereof can turn to those secondarily liablethe indorserfor recovery. And since the law explicitly mandates a solidary liability on the part of the joint payees who indorse the instrument, the holder thereof (assuming the check was further negotiated) can turn to either Bitanga or BA Finance for full recompense.

13. Annabelle dela Pea & Adrian Villareal (P) v. CA & Rural Bank of Bolinao (R) | 579 SCRA 396, 2009 | Negotiable Instruments | Nachura, J. p:1. On 10.20.83, RB extended a 81K loan to Ps, evidenced by a PN, and payable on or before 10.14.84 Ps failed to pay their obligation in full Collection case followed. 2. On pre-trial set on 10.17.95 Ps didnt appear, consequently, upon motion, trial moved ex-parte, and Ps were considered in default MTC decided. On appeal at the RTC, w/c remanded the case back to the MTC, it held that the complaint was not material to the allegations in Paragraph 2 of the PN (Date issues).3. With LOC, R amended its complaint to conform w/ the PN and was admitted again, Ps failed to appear trial went on ex-parte, and MTC decided again, reiterating the same ruling as before; Ps again appealed to the RTC w/c again, remanded the case to MTC holding that the MTC did not adhere to the RTC order to conduct further proceedings. Despite its earlier ruling setting aside the declaration of default against the petitioners, the MTC did not require petitioners to file their answer and the MTC did not set the case anew for pre-trial and presentation of evidence from both parties. 4. Upon remand Respondent caused the re-service of the summons to Ps whom filed their answer on 7.7.03 where Ps admitted obtaining a loan, but alleged substantial payment. After a series of postponement and reschedule, and upon motion by respondent, MTC allowed the presentation of its evidence ex parte, and motioned to render judgment. Ps moved for reconsideration, averring that they were unable to attend because they got sick, and was unable to inform the court because there is no possibility to contact the court, and finally averred that they have a meritorious defense, which was fruitless.5. Appealing again to the RTC, holding that the form and substance of the MTCs decision did not state the law on w/c the findings were based from. RTC again set-aside the MTCs decision and remanded the case for further proceedings.6. Dissatisfied R went to the CA w/c reversed the RTCs decision, hence this. Petitioners fault the CA for reversing the RTC, and for reinstating and upholding the MTC decision. Reiterating their arguments before the RTC, they assert that the MTC decision is null and void for it does not conform to the requirement of Section 14, Article VIII of the Constitution and of the Rules of Court.7. SC upheld CAs decision. As we held in Sierra v. Court of Appeals, 211 SCRA 785 (1992), and recently in Henry dela Rama Co v. Admiral United Savings Bank, 551 SCRA 472 (2008): A promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date and under the conditions agreed upon by the borrower and the lender. A person who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a token of his good faith. If he reneges on his promise without cause, he forfeits the sympathy and assistance of this Court and deserves instead its sharp repudiation. Thus, petitioners cannot renege on their commitment to pay their obligation, including interest and penalty, to the respondent.8. Jurisprudence is replete with rulings that in civil cases, the party who alleges a fact has the burden of proving it. Burden of proof is the duty of a party to present evidence of the facts in issue necessary to prove the truth of his claim or defense by the amount of evidence required by law. Thus, a party who pleads payment as a defense has the burden of proving that such payment has, in fact, been made. When the plaintiff alleges nonpayment, still, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment. In Alonzo v. San Juan, 451 SCRA 45 (2005), we held that the receipts of payment, although not exclusive, are deemed the best evidence of the fact of payment. In this case, no receipt was presented to substantiate the claim of payment as petitioners did not take advantage of all the opportunities to present their evidence in the proceedings a quo. Not even a photocopy of the alleged proof of payment was appended to their answer. Verily, petitioners failed to discharge the burden. Accordingly, we reject their defense of payment.

14. Gonzales (P) v. Philippine Commercial & International Bank & R. Noceda (R) | 644 SCRA 180, 2011 | Negotiable Instruments | Velasco, Jr. J. p:1. P is a client of RB, in 10.92, RB granted a credit line to P by executing a Credit-on-Hand Loan Agreement (COHLA), Ps aggregate amount of the accounts of Gonzales w/ PCIB served as collateral for and his availment limit under the credit line. P also have a Foreign Currency Deposit (FCD).2. On 10.30.95, by taking 3 consecutive loans, together w/ Spouses Panlilio (SPSP), totaling to 1.8M, were covered by 3 PNs, to secure the loans a Real Estate Mortgage (REM) over a parcel of land was executed by P and SPSP. However it was SPSP whom received all the amount.3. The monthly interests were paid by SPSP through automatic debiting of their account in RB, then they defaulted. R allegedly informed P.4. In the meantime P issued a check dated 9.30.98 in favor of Rene Unson for 250K drawn against their COHLA w/ RB w/c it dishonored because RB have already terminated the credit line for the unpaid account, likewise RB also froze the FCD account of P.5. On 1.28.99 P demanded from RB to return the proceeds of his FCD as well as damages, RB didnt heed due to the outstanding loans. Then P sued, RTC decided in favor of RB holding true that RB had the right to dishonor the check, finding P solidarily liale w/ Sps Panlilio on the three PNs. CA dismissed Ps appeal, citing, their findings that Gonzales was indeed solidarily liable with the spouses Panlilio for the three promissory notes executed for the REM loan; second, it likewise found neither fault nor negligence on the part of PCIB in dishonoring the check issued by Gonzales in favor of Unson, ratiocinating that PCIB was merely exercising its rights under the contractual stipulations in the COHLA brought about by the outstanding past dues of the REM loan and interests for which Gonzales was solidarily liable with the spouses Panlilio to pay under the promissory notes. Hence this. 6. SC Partly Granted Ps demand for damages. As an accommodation party, Gonzales is solidarily liable with the spouses Panlilio for the loans. In Ang v. Associated Bank, 532 SCRA 244 (2007), quoting the definition of an accommodation party under Section 29 of the Negotiable Instruments Law, the Court cited that an accommodation party is 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.7. There was no proper notice to Gonzales of the default and delinquency of the PhP 1,800,000 loan. It must be borne in mind that while solidarily liable with the spouses Panlilio on the PhP 1,800,000 loan covered by the three promissory notes, Gonzales is only an accommodation party and as such only lent his name and credit to the spouses Panlilio. While not exonerating his solidary liability, Gonzales has a right to be properly apprised of the default or delinquency of the loan precisely because he is a co-signatory of the promissory notes and of his solidary liability.8. We find PCIB negligent in not properly informing Gonzales, who is an accommodation party, about the default and the exact outstanding periodic interest dues. Without being properly apprised, Gonzales was not given the opportunity to properly act on them. The business of banking is impressed with public interest and great reliance is made on the banks sworn profession of diligence and meticulousness in giving irreproachable service.9. Gonzales is liable for the loans covered by the above promissory notes. First, Gonzales admitted that he is an accommodation party which PCIB did not dispute. In his testimony, Gonzales admitted that he merely accommodated the spouses Panlilio at the suggestion of Ocampo, who was then handling his accounts, in order to facilitate the fast release of the loan.

15. Philippine Commercial International Bank (P) v. A. Balmaceda (RAB) & R. Ramos (RRR) | 658 SCRA 33, 2011 | Negotiable Instruments | Brion, J. p:1. On 9.10.93, P sued for an action for recovery of sum of money with damages against RAB, Branch Manager of its Sta. Cruz Manila Branch, alleging that between 1991 and 1993, RAB took advantage of his position, fraudulently obtained and encashed Managers check worth 11.937M. On 2.28.94, P impleaded RRR, as a recipient.2. RAB was in default for not answering, and RRR denied any knowledge of RABs scheme, but admitted receiving money from RAB as payment for Fighting Cocks that the latter bought from him (his business).3. RTC decided in favor of P, and ordered both RAB and RRR to pay P. On appeal, CA dismissed the complaint against RRR, finding to evidence to prove collusion. Further it held P liable to RRR for freezing its bank account, and ordered to pay for damages. Hence this.4. Partly Granted. Award of Damages to RRR was removed but increased in Attorneys fees.5. P contends Ramos had knowledge of, and acted in complicity with Balmaceda in, the perpetuation of the fraud. Ramos explanation that he is a businessman and that he received the Managers checks as payment for the fighting cocks he sold to Balmaceda is unconvincing, given the large sum of money involved. While Ramos presented evidence that he is a reputable businessman, this evidence does not explain why the Managers checks were made payable to him in the first place.6. PCIB maintains that it had the right to freeze and debit the amount of P251,910.96 from Ramos bank account, even without his consent, since legal compensation had taken place between them by operation of law. PCIB debited Ramos bank account, believing in good faith that Ramos was not entitled to the proceeds of the Managers checks and was actually privy to the fraud perpetrated by Balmaceda. PCIB cannot thus be held liable for moral and exemplary damages.7. Another telling indicator of PCIBs negligence is the fact that it allowed Balmaceda to encash the Managers checks that were plainly crossed checks. In other words, the crossing of a check is a warning that the check should be deposited only in the account of the payee. When a check is crossed, it is the duty of the collecting bank to ascertain that the check is only deposited to the payees account. In complete disregard of this duty, PCIBs systems allowed Balmaceda to encash 26 Managers checks which were all crossed checks, or checks payable to the payees account only.8. A bank does not have a unilateral right to freeze the account of a depositor based on its mere suspicion that the funds therein were proceeds of some shady transactions; For legal compensation to take place, two persons, in their own right, must first be creditors and debtors of each other. We see no legal merit in PCIBs claim that legal compensation took place between it and Ramos, thereby warranting the automatic deduction from Ramos bank account. For legal compensation to take place, two persons, in their own right, must first be creditors and debtors of each other. While PCIB, as the depositary bank, is Ramos debtor in the amount of his deposits, Ramos is not PCIBs debtor under the evidence the PCIB adduced. PCIB thus had no basis, in fact or in law, to automatically debit from Ramos bank account.

16. J.E. Cayanan (P) v. North Star International Travel (R) | 658 SCRA 644, 2011 | Negotiable Instruments | Villarama, Jr. J, p:1. R is a travel agency business, P is the owner/GM of JEAC International Management and Contractor Services (recruitment agency).2. On 3.17.94, V. Balagtas (VB) GM of R in accommodation and upon the instruction of its client, P sent the amount of $60,000 to View Sea Ventures, Ltd., (VSV) in Nigeria from her personal account in Citibank Makati. On 3.29.94, VB again sent $40,000 to VSV by telegraphic transfer w/ $15,000 coming from petitioner. Likewise on various dates, R extended credit to petitioner for the airplane tickets of his clients, w/ the total amount of such indebtedness under the credit extensions eventually reaching PhP. 510K. To cover payment P issued several checks to R.3. Some Checks were dishonored for insufficiency of funds, while 3 were for stop payment order from petitioner. R informed and demanded payment to P, but failed to settle the obligations hence the institution of a criminal case, charging P w/ BP22. P was found guilty. The RTC, acquitted petitioner both criminally and on civil liabilities. Aggrieved, R went to the CA and reversed the order of the RTC and held P liable as for the value of the checks. Hence this.4. P argues that since North Star did not give any valuable consideration for the checks. He insists that the US$85,000 sent to View Sea Ventures was not sent for the account of North Star but for the account of Virginia as her investment. He points out that said amount was taken from Virginias personal dollar account in Citibank and not from North Stars corporate account. P on the other hand, counters that petitioner is liable for the value of the five subject checks as they were issued for value. Respondent insists that petitioner owes North Star P2.5M plus interest of P264K, and that the P220K petitioner paid to North Star is conclusive proof that the checks were issued for value.5. Petition Denied. We have held that upon issuance of a check, in the absence of evidence to the contrary, it is presumed that the same was issued for valuable consideration which may consist either in some right, interest, profit or benefit accruing to the party who makes the contract, or some forbearance, detriment, loss or some responsibility, to act, or labor, or service given, suffered or undertaken by the other side.6. Under the Negotiable Instruments Law, it is presumed that every party to an instrument acquires the same for a consideration or for value. As petitioner alleged that there was no consideration for the issuance of the subject checks, it devolved upon him to present convincing evidence to overthrow the presumption and prove that the checks were in fact issued without valuable consideration. Sadly, however, petitioner has not presented any credible evidence to rebut the presumption, as well as North Stars assertion, that the checks were issued as payment for the US$85,000 petitioner owed.7. Petitioner claims that North Star did not give any valuable consideration for the checks since the US$85,000 was taken from the personal dollar account of Virginia and not the corporate funds of North Star. The contention, however, deserves scant consideration. The subject checks, bearing petitioners signature, speak for themselves. The fact that petitioner himself specifically named North Star as the payee of the checks is an admission of his liability to North Star and not to Virginia Balagtas, who as manager merely facilitated the transfer of funds.

17. RCBC (P) v. Hi-Tri Development Co. & L. Bakunawa (R) | 675 SCRA 514, 2012 | Negotiable Instruments | Sereno, J. p:1. R, together with his husband, were registered owners of 6 parcels of land, in 1990 a certain T. Milan through representative J. Montemayor (JM) offered to buy said lots for 6.7M. Thereafter they arranged that TM will take care of all obstacles, then Rs gave the original TCTs to TM, and TM gave 1M as advance payment then after a while, TM was unable to facilitate no, then Rs moved to rescind the contract, and offered to return the payment made TM refused, consequently Rs through their company Hi-Tri, took out on 10.28.91 a managers check, payable to TMs company Rosmil realty and devt., c/o TM, then the suing. All through out litigation, TM was made aware that the check was available for pick up if they wish to settle. 2. During the pendency of the trial and w/o notice P reported the existing check to the Bureau of Treasury as among its unclaimed balances as of 1.31.03. On 12.14.06, Republic, through SOLGEN filed w/ the RTC the action below for Escheat to said cash.3. On 4.30.08, R settled amicably their dispute w/ TM and to pay for 3M. On their attempt to withdraw the check to add to the 3M, and to their surprise it was already subject to an escheat proceedings before the RTC w/c was won by the government. RTC denied their motion to be parties. RTC explained that the Republic had proven compliance with the requirements of publication and notice, which served as notice to all those who may be affected and prejudiced by the Complaint for Escheat.4. CA reversed the the RTC, ruling that, RCBC failed to prove that the latter had communicated with the purchaser of the Managers Check (Hi-Tri and/or Spouses Bakunawa) or the designated payee (Rosmil) immediately before the bank filed its Sworn Statement on the dormant accounts held therein. Hence this.5. Petition denied. Affirmed. There was no contention that they were the procurers of the Managers Check. It is undisputed that there was no effective delivery of the check, rendering the instrument incomplete. In addition, we have already settled that respondents retained ownership of the funds. As it is obvious from their foregoing actions that they have not abandoned their claim over the fund, we rule that the allocated deposit, subject of the Managers Check, should be excluded from the escheat proceedings. We reiterate our pronouncement that the objective of escheat proceedings is state forfeiture of unclaimed balances6. Escheat proceedings refer to the judicial process in which the state, by virtue of its sovereignty, steps in and claims abandoned, left vacant, or unclaimed property, without there being an interested person having a legal claim thereto. In the case of dormant accounts, the state inquires into the status, custody, and ownership of the unclaimed balance to determine whether the inactivity was brought about by the fact of death or absence of or abandonment by the depositor. If after the proceedings the property remains without a lawful owner interested to claim it, the property shall be reverted to the state to forestall an open invitation to self-service by the first comers. However, if interested parties have come forward and lain claim to the property, the courts shall determine whether the credit or deposit should pass to the claimants or be forfeited in favor of the state.7. In case the bank complies with the provisions of the law and the unclaimed balances are eventually escheated to the Republic, the bank shall not thereafter be liable to any person for the same and any action which may be brought by any person against in any bank xxx for unclaimed balances so deposited xxx shall be defended by the Solicitor General without cost to such bank. Otherwise, should it fail to comply with the legally outlined procedure to the prejudice of the depositor, the bank may not raise the defense provided under Section 5 of Act No. 3936, as amended.

18. Fideliza J. Aglibot (P) v. Ingersol L. San-Tia (R) | 687 SCRA 283, 2012 | Negotiable Instruments | Reyes, J. p:1. R loaned to Pacific Lending & Capital Co. (PLCC) the amount of 2.5M, thru its manager P, evidenced by a PN issued by P on behalf of PLCC payable in 1 year subject to a 24% interest per annum. Allegedly as a guaranty/security, P also issued and delivered to R 11 post dated personal checks drawn from her own demand account maintained at Metro Bank.2. Upon presentment, the checks were dishonored for having been drawn against insufficient funds or closed account. R demanded payment to no avail, consequently 11 BP22 charges were made; In its counterclaim, P did admit that they took a loan from P, but did it in the name of PLCC, further claimed that although they have already payed the loan, and after demands of returning the checks, R didnt do so.3. MTCC sided w/ P and acquitted her of BP22 but was ordered to pay 3M representing the total face value of the 11 checks plus interest. On appeal, the RTC further absolved Aglibot of the civil liability. Hence this.4. Petition Denied. It is settled that the liability of the guarantor is only subsidiary, and all the properties of the principal debtor, the PLCC in this case, must first be exhausted before the guarantor may be held answerable for the debt. Thus, the creditor may hold the guarantor liable only after judgment has been obtained against the principal debtor and the latter is unable to pay.5. Concerning a guaranty agreement, which is a promise to answer for the debt or default of another, the law clearly requires that it, or some note or memorandum thereof, be in writing. Otherwise, it would be unenforceable unless ratified, although under Article 1358 of the Civil Code, a contract of guaranty does not have to appear in a public document.6. The relation between an accommodation party and the party accommodated is, in effect, one of principal and suretythe accommodation party being the surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promisor and debtor from the beginning.7. It was held in Aruego that unlike in a contract of suretyship, the liability of the accommodation party remains not only primary but also unconditional to a holder for value, such that 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 codebtor. The mere fact, then, that Aglibot issued her own checks to Santia made her personally liable to the latter on her checks without the need for Santia to first go after PLCC for the payment of its loan. It would have been otherwise had it been shown that Aglibot was a mere guarantor, except that since checks were issued ostensibly in payment for the loan, the provisions of the Negotiable Instruments Law must take primacy in application.

19. People (P) v. Gilbert Reyes Wagas (R) | 705 SCRA 17, 2013 | Negotiable Instruments | Bersmin, J. p:1. Allegedly, On 5.8.97 R issued a BPI check to A. Ligaray (AL)in the amount of 200K, w/c bounced. R admitted during trial that there was insufficient funds in the account. Said check was used to pay for the 200 bags of rice sold to Rs by AL, whom was convinced by Rs after persuasion that they have sufficient funds to pay. On Cross examination AL admitted that he and R didnt meet personally and only transacted thru phone, and surrendered the bags of rice to its cousin Canada; R on the other hand claims and said he didnt issue the checks to AL, instead to his cousin for purposes of buying a parcel of land w/c didnt push thru, thereafter didnt fund the check anymore. 2. Prosecution presented evidence a letter made by R to ALs counsel admitting owing AL 200K, R admitted the letter but insisted that it was Canada who had transacted w/ Ligaray.3. RTC held R guilty, by issuing the post-dated checks and by then failing to deposit the sufficient amount to cover the. R moved for reconsideration and reopening for newly discovered evidence (testimony of Canada) RTC denied, hence this, thru notice of appeal.4. R insists that he and Ligaray were neither friends nor personally known to one other; that it was highly incredible that Ligaray, a businessman, would have entered into a transaction with him involving a huge amount of money only over the telephone; that on the contrary, the evidence pointed to Caada as the person with whom Ligaray had transacted, considering that the delivery receipt, which had been signed by Caada, indicated that the goods had been Ordered by ROBERT CAADA.5. SC acquitted R, but ordered him to pay AL for actual damages and interest. In order to constitute estafa under this statutory provision, the act of postdating or issuing a check in payment of an obligation must be the efficient cause of the defraudation. In other words, the Prosecution must show that the person to whom the check was delivered would not have parted with his money or property were it not for the issuance of the check by the offender.6. In every criminal prosecution, the identity of the offender, like the crime itself, must be established by proof beyond reasonable doubt. In that regard, the Prosecution did not establish beyond reasonable doubt that it was Wagas who had defrauded Ligaray by issuing the check.7. The check delivered to Ligaray was made payable to cash. Under the Negotiable Instruments Law, this type of check was payable to the bearer and could be negotiated by mere delivery without the need of an indorsement. This rendered it highly probable that Wagas had issued the check not to Ligaray, but to somebody else like Caada, his brother-inlaw, who then negotiated it to Ligaray. Relevantly, Ligaray confirmed that he did not himself see or meet Wagas at the time of the transaction and thereafter, and expressly stated that the person who signed for and received the stocks of rice was Caada.8. It bears stressing that the accused, to be guilty of estafa as charged, must have used the check in order to defraud the complainant. What the law punishes is the fraud or deceit, not the mere issuance of the worthless check. Wagas could not be held guilty of estafa simply because he had issued the check used to defraud Ligaray.9. An accused, though acquitted of estafa, may still be held civilly liable where the preponderance of the established facts so warrants. Wagas as the admitted drawer of the check was legally liable to pay the amount of it to Ligaray, a holder in due course. Consequently, we pronounce and hold him fully liable to pay the amount of the dishonored check, plus legal interest of 6% per annum from the finality of this decision.