Philippine Education Co. Vs.

Soriano FACTS: Enrique Montinola sought to purchase from the Manila Post Office 10 money orders (P200 each), offering to pay for them with a private check. Montinola was able to leave the building with his check and the 10 money orders without the knowledge of the teller. Upon discovery that it was stolen, message was sent to all postmasters and banks involving the unpaid money orders. One of the money orders was received by the Philippine Education Co. as part of its sales receipt. It was deposited by the company with the Bank of America, which cleared it with the Bureau of Post. The Postmaster, through the Chief of the Money Order Division of the Manila Post Office informed the bank of the irregular issuance of the money order. The bank debited the account of the company. The company moved for reconsideration. ISSUE: Whether postal money orders are negotiable instruments and the petitioner as a holder in due course can demand payment. HELD: Philippine postal statutes are patterned from those of the United States, and the weight of authority in said country is that Postal money orders are not negotiable instruments inasmuch as the establishment of a postal money order is an exercise of governmental power for the publics benefit. Furthermore, some of the restrictions imposed upon money order by postal laws and regulations are inconsistent with the character of negotiable instruments. For instance, postal money orders may be withheld under a variety of circumstances, and which are restricted to not more than one indorsement. Hence, petitioner cannot demand payment and recover the amount debited. Caltex Philippines, Inc. v. Court of Appeals Facts: Defendant bank issued 280 certificates of time deposit (CTD) in favor of Angela Dela Cruz upon deposit in the amount of P1,120,000. A sample text of the CTD is as follows: This is to certify that BEARER has deposited in this Bank the sum of Four Thousand Only... Dela Cruz deliver the CTD to petition for the purchase of fuel products. Thereafter, he informed the branch manager that the CTD was lost based on her affidavit, which the branch manager accepted and issued a replacement. Thereafter, Dela Cruz negotiated and obtained a loan from the bank in the amount of P875,00 and executed a notarized Deed of Assignment of time deposit. In 1982, Credit Manager of Caltex went to the defendant bank's and presented for verification the CTDs declared lost by Angel Dela Cruz alleging that the same were delivered to herein plaintiff "as security for purchases made with Caltex Philippines, Inc." by said depositor. However, this was rejected by the defendant. When the loan of Dela Cruz fell due, the latter set-off and applied the time deposits in question to the payment of the matured loan. However, the plaintiff filed the instant complaint, praying that defendant bank be ordered to pay it the aggregate value of the certificates of time deposit of P1,120,000.00 plus accrued interest and damages as well as attorney's fees. On appeal, the CA held in favor of defendant bank on the basis that CTD was not a negotiable instrument, hence, Caltex cannot be a holder in due course.

Issue: Whether or not the Certificate of Time Deposit (CTD) is a negotiable instrument and Caltex was a holder in due course? Held: The Certificate of Time Deposit is a negotiable instrument. The negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself. The duty of the court in such case is to ascertain, not what the parties may have secretly intended as contra distinguished from what their words express, but what is the meaning of the words they have used. What the parties meant must be determined by what they said. However, Petitioner's insistence that the CTDs were negotiated to it begs the question. Under the Negotiable Instruments Law, an instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder thereof, and a holder may be the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. In the present case, however, there was no negotiation in the sense of a transfer of the legal title to the CTDs in favor of petitioner in which situation, for obvious reasons, mere delivery of the bearer CTDs would have sufficed. Here, the delivery thereof only as security for the purchases of Angel de la Cruz could at the most constitute petitioner only as a holder for value by reason of his lien. Metrobank vs. Court of Appeals Facts: Gomez opened an account with Golden Savings and deposited 38 treasury warrants. All these warrants were subsequently indorsed by Castillo, cashier of Golden Savings and deposited to its Savings Account in Metrobank. Gloria Castillo went several times to Metrobank for the cleared warrants. Exasperated over Glorias repeated inquiries and also as an accommodation for a valued client, she was allowed to withdraw from the proceeds of the warrants. In turn, Golden Savings subsequently allowed Gomez to make withdrawals. After the withdrawal of Gomez, Metrobank informed Golden Savings that the warrants were dishonoured by the Bureau of Treasury for forgery of signatures and demanded the refund of the amount contending that by indorsing the warrants in general, Golden Savings assumed the warranty of a general indorser under Section 66. Issue: Whether or not Golden Savings should be liable as a general indorser under Section 66. Held: No, Section 66 is not applicable to the warrants because the same is non-negotiable. The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order not unconditional and the warrants themselves non-negotiable. Sesbreno vs. Court of Appeals Facts: Petitioner made a placement with Philfinance. The latter delivered to him documents, some of which was a promissory note from Delta Motors and a post-dated check. The post-dated checks were dishonored. This prompted petitioner to ask for the promissory note from DMC and it was discovered that the note issued by DMC was marked as non-negotiable. As Sesbreno failed to recover his money, he filed case against DMC and Philfinance. Issue: Whether or not a nonnegotiable instrument cannot be transferred .

HELD: The non-negotiability of the instrument doesnt mean that it is non-assignable or transferable. It may still be assigned or transferred in whole or in part, even without the consent of the promissory note, since consent is not necessary for the validity of the assignment. In assignment, the assignee is merely placed in the position of the assignors and acquires the instrument subject to all the defenses that might have been set up against the original payee. Firestone Tire & Rubber Co. vs. Court of Appeals FACTS: Fojas Arca and Firestone Tire entered into a franchising agreement wherein the former purchase on credit the latters products. The former could pay through special withdrawal slips which were deposited and accepted by Citibank. Firestone believed in the sufficient funding of the slips until Citibank informed the former that one of the slips was dishonored. It wrote then a demand letter to Fojas Arca for the payment and damages but the latter refused to pay, prompting Firestone to file an action against it. Issue: Whether or not the bank is liable for the alleged belated delay in notifying the dishonor of the negotiable instrument. HELD: The withdrawal slips are non-negotiable. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this character. Hence, the rule on immediate notice of dishonor is non-applicable to the case at hand. Thus, the bank was under no obligation to give immediate notice that it wouldn't make payment on the subject withdrawal slips. Nonetheless, Citibank erroneously accepted the same as such and thus, must bear the risks attendant to the acceptance of the instruments. Ang Tek Lian vs. Court of Appeals Facts: In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He said that he meant to withdraw from the bank but the banks already closed. In exchange, he gave Lee Hua a check which is payable to the order of cash. The next day, Lee Hua presented the check for payment but it was dishonored due to insufficiency of funds. Lee Hua eventually sued Ang Tek Lian. In his defense, Ang Tek Lian argued that he did not indorse the check to Lee Hua and that when the latter accepted the check without Ang tek Lians indorsement, he had done so fully aware of the risk he was running thereby. ISSUE: Whether or not the indorsement of Ang Tek Lian is essential in a bearer instrument. HELD: No. Under the Negotiable Instruments Law, a check drawn payable to the order of cash is a check payable to bearer hence a bearer instrument, and the bank may pay it to the person presenting it for payment without the drawers indorsement. The drawee bank need not obtain any indorsement of the check, but may pay it to the person presenting it without any indorsement. Development Bank of the Phils vs. Sima Wei

Facts: In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the latter executed and delivered to the former a promissory note. However, two checks were not delivered to the petitioner or to any of its authorized representatives. Instead for these checks came into the possession of respondent Lee Kian Huat, who deposited the checks without the petitioners indorsement to the account of respondent Plastic Corporation in Producers Bank which was afterwards credited to Plastic Corporations account. Issue: Whether petitioner Bank can hold petitioner liable for the undelivered check. Held: A negotiable instrument must be delivered to the payee in order to evidence its existence as a binding contract. Delivery of an instrument means transfer of possession, actual or constructive, from one person to another. Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must be intended to give effect to the instrument. Without the delivery of said checks to petitioner-payee, the former did not acquire any right or interest therein and cannot therefore assert any cause of action, founded on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other respondents. Philippine Bank of Commerce vs. Aruego Facts: Plaintiff instituted an action against defendant Aruego for recovery of money signed by the defendent. The latter interposes that he signed the drafts in a representative capacity, that he signed only as an accommodation party and that he is not liable. The court denied the motion and rendered judgement against the defendant. Hence this petition. Issue: Whether or not defendant is liable by accepting the instrument? Held: Yes, an inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing as representative of the Philippine Education Foundation Company. For failure to disclose his principal as required under Section 20 of the NIL, he is personally liable for the drafts he accepted. Fransisco vs. Court of Appeals FACTS: Sometime in 1979, Ong discovered that Diaz and Francisco had executed and signed seven checks drawn against the Insular Bank of Asia & America (IBAA) and payable to Herby Commercial & Construction Corporation (HCC) for completed and delivered work under the contract. Ong, however, claims that these checks were never delivered to HCCC. Upon inquiry with Diaz, Ong learned that the GSIS gave Francisco custody of the checks since she promised that she would deliver the same to HCCC. Instead, Francisco forged the signature of Ong, without his knowledge or consent, at the dorsal portion of the said checks to make it appear that HCCC had indorsed the checks; Francisco then indorsed the checks for a second time by signing her name at the back of the checks and deposited the checks in her IBAA savings account. IBAA credited Franciscos account with the amount of the checks and the latter withdrew the amount so credited.

Petitioner claims that she was, in any event, authorized to sign Ongs name on the checks by virtue of the Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS, including the questioned checks. ISSUE: Whether or not petitioner singing in a representative capacity is liable to the questioned checks. Held: The Negotiable Instruments Law provides that when a person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. An agent, when so signing, should indicate that he is merely signing as an agent in behalf of the principal and must disclose the name of his principal. Otherwise, he will be held liable personally. If fransisco was indeed authorized, she didn't comply with the requirements of the law. Instead of signing Ongs name, she should have signed in her own name as agent of HCCC. Hence, she is liable. Jai-Alai Coporation vs. BPI Facts: Petitioner deposited in its current account with respondent bank several checks acquired from Antonio J. Ramirez, a regular bettor. The deposits were temporarily credited to petitioners account. However, after the checks had been submitted to interbank clearing, it was discovered that all indorsements made were forged. Hence, respondent Bank debited the petitioners current account and forwarded to the latter the checks containing the forged indorsement, which petitioner refused to accept. Thereafter, petitioner drew against its current account a check which were latter dishonoured due to insufficiency of funds. Issue: Whether or not the respondent bank had the right to debit the petitioners current account. Held: Yes, under Section 23 of the NIL, a forged signature is wholly inoperative and no right to discharge it or enforce its payment can be acquired through or under the forged signature except against a party who cannot invoke the forgery. As a collecting bank which indorsed the checks should be liable to the drawee-bank for reimbursement because the checks had been forged prior to their delivery to the petitioner. The petitioner must in turn shoulder the loss of the amounts which the respondent, as its collecting agent, had to reimburse to the drawee-banks. Republic Bank vs. Ebrada Facts: A check was issued to Lorenzo who turned out to be dead for 11 years. The check was indorsed to Lorenzo to Dominguez and to Ebrada. It was encashed by Ebrada at the Republic Banks main office. Informing the bank that the indorsement of Lorenzo was forged, the Bureau of Treasury requested the Bank to refund the amount. Thereafter, the Bank sued Ebrada to return the money. Issue: Whether or not Ebrada is liable to return the value of the check bearing a forged signature. Held: Yes, as last indorser, Ebrada was supposed to have warranted that she has good title to said check. The drawee of a check can recover from the holder the money paid to him on a forged instrument. This is because the indorser is supposed to warrant to the drawee that the signatures of the payee and previous indorser are genuine.

MWSS vs. CA Facts: MWSS issued 23 personalized checks against its account with PNB. During the same month, a second batch of 23 checks bearing the same numbers were issued. Both were paid and cleared by PNB and debited against the account of MWSS. Investigation was conducted by NBI showed that all the payees for the 2nd batch were all fictitious persons. Thereafter, MWSS demanded from PNB to restore the amount of the 2nd batch payments which were claimed as forged. Issue: Whether or not the drawee bank PNB is liable. Held: No. Forgery cannot be presumed. It must be established by clear, positive and convincing evidence which is lacking in the case at bar. Further, petitioner was using its own personalized checks, instead of the official PNB Commercial blank checks. The Drawee bank PNB cannot be faulted for not having detected the fraudulent encashment of the checks because the printin was not done under the supervision and control of the Bank. The petitioner was in a better position to detect and prevent the fraudulent encashment of its checks. Banco de Oro vs. Equitable Banking Corporation Facts: Banco De Oro drew six crossed managers check payable to certain member establishments of Visa Card. The checks were deposited with Equitable Bank. After stamping at the bank the usual endorsements, the checks were sent for clearing through the PCHC. Banco De Oro paid the checks. Thereafter, Banco De Oro discovered that the endorsements appearing at the back of the Checks were forged and/or unauthorized, hence he claimed reimbursement from Equitable bank. Issue: Whether or not Banco de Oro could collect reimbursement from Equitable Bank. Held: Yes. The petitioner having stamped its guarantee and indorsed is estopped from claiming that the checks under consideration are not negotiable instruments. The collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements. Gempesaw vs. Court of Appeals FACTS: In the signing of the checks prepared by Galang, Gempensaw didn't bother herself in verifying to whom the checks were being paid and if the issuances were necessary. She didn't verify the returned checks of the bank when the latter notifies her of the same. During her two years in business, there were incidents shown that the amounts paid for were in excess of what should have been paid. It was also shown that even if the checks were crossed, the intended payees didn't receive the amount of the checks. This prompted Gempesaw to demand the bank to credit her account for the amount of the forged checks. The bank refused to do so and this prompted her to file the case against the bank. Issue: Whether or not the bank Gempesaw has the right to demand the credit of the amount forged.

HELD: Forgery is a real defense by the party whose signature was forged. As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot debit the account of a drawer for the amount of said check. An exception to this rule is when the drawer is guilty of negligence which causes the bank to honor such checks. Petitioner in this case has relied solely on the honesty and loyalty of her bookkeeper and never bothered to verify the accuracy of the amounts of the checks she signed the invoices attached thereto. And though she received her bank statements, she didn't carefully examine the same to double-check her payments. Petitioner didn't exercise reasonable diligence which eventually led to the fruition of her bookkeepers fraudulent schemes. Associated Bank v. Court of Appeals Facts: The Province of Tarlac maintains a current account with PNB. Checks were issued and received by the hospitals administrative officer and cashier, Pangilinan. Panilinan, through the help of Associated Bank but after forging the signature of the hospitals chief was able to deposit the checks in his personal account. The province discovered that the hospital did not receive several allotted checks, and sought the restoration of the debited amounts from PNB. In turn, PNB demanded reimbursement from Associated Bank. Both banks resisted payment. Hence, this present action. Issue: Whether or not Associated Bank should bear the loss. Held: Associated Bank, and not PNB, is the one duty-bound to warrant the instrument as genuine, valid and subsisting at the time of indorsement pursuant to Section 66 of the NIL. The stamp guaranteeing prior indorsement is not an empty rubric; the collecting bank is held accountable for checks deposited by its customers. Metrobank vs. First National City Bank Facts: A check was drawn by Joaquin Cunanan & Company on First National City Bank (FNCB) which was deposited in Metrobank by Salvador Sales. The check was cleared the same day and the latter withdrew it and closed his account. Thereafter, upon return of the cancelled check, Joaquin Cunanan & Company notified the bank that the check was altered from actual amount of P50 raised to P50,000 and over the name superimpose the word Cash. FNCB notified and reiterated the request to Metrobank for the reimbursement but the latter was adamant in its refusal, hence, this action. Issue: Wether or not Metrobank should bear the loss from a materially altered check? Held: In this case, the check was not returned to Metro Bank in accordance with the 24-hour clearing house period, but was cleared by FNCB. Failure of FNCB, therefore, to call the attention of Metro Bank to the alteration of the check in question until after the lapse of nine days, negates whatever right it might have had against Metro Bank in the light of the said Central Bank Circular. Its remedy lies not against Metro Bank, but against the party responsible for the changing the name of the payee and the amount on the face of the check. Republic Bank vs. Court of Appeals

FACTS: San Miguel Corporation (SMC) drew a check amounting to P240.00 on its account in First National City Bank (FNCB) in favor of Delgado, a stockholder. Delgado fraudulently altered the amount of the check to P9,240 after which he endorsed and deposited it with Republic Bank. Republic Bank endorsed the check to First National City Bank (FNCB), the drawee bank, by stamping on the back of the check all prior and / or lack of indorsement guaranteed". Based on such endorsement, FNCB paid the amount to Republic Bank. Later on, San Miguel informed FNCB of the material alteration of the amount. FNCB recredited the amount to San Miguels account, and demanded refund from Republic Bank. Republic Bank refused, claiming there was delay in giving it notice of the alteration. ISSUE: Whether petitioner Republic Bank as the collecting bank should bear the loss resulting from the altered check. RULING: When an indorsement is forged, the collecting bank or last indorser, as a general rule, bears the loss. But the unqualified indorsement of the collecting bank on the check should be read together with the 24-hour regulation on clearing house operation. Hence, when a drawee bank fails to return a forged or altered check to the collecting bank within the 24-hour clearing period, the collecting bank is absolved from liability. Philippine Commercial International Bank vs. Court of Appeals FACTS: Ford Philippines filed actions to recover from the drawee bank Citibank and collecting bank PCIB the value of several checks payable to the Commissioner of Internal Revenue which were embezzled allegedly by an organized syndicate. What prompted this action was the drawing of a check by Ford, which it deposited to PCIB as payment and was debited from their Citibank account. It later on found out that the payment wasnt received by the Commissioner. Meanwhile, according to the NBI report, one of the checks issued by petitioner was withdrawn from PCIB for alleged mistake in the amount to be paid. This was replaced with managers check by PCIB, which were allegedly stolen by the syndicate and deposited in their own account. The trial court decided in favor of Ford. ISSUE: Has Ford the right to recover the value of the checks intended as payment to CIR? HELD: The checks were drawn against the drawee bank but the title of the person negotiating the same was allegedly defective because the instrument was obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to the payee. The mere fact that the forgery was committed by a drawer-payors confidential employee or agent, who by virtue of his position had unusual facilities for perpetrating the fraud and imposing the forged paper upon the bank, doesnt entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. Ramon Ilusorio vs. Court of Appeals FACTS: Petitioner was a prominent businessman who, because of different business commitments, entrusted to his then secretary the handling of his credit cards and checkbooks. For a material

period of time, the secretary was able to encash and deposit in her personal account money from the account of petitioner. Upon knowledge of her acts, she was fired immediately and criminal actions were filed against her. Thereafter, petitioner requested the bank to restore its money but the bank refused to do so. Issue: Whether or not the bank is liable for the forged checks. HELD: The petitioner doesnt have a course of action against the bank. To be entitled to damages, petitioner has the burden of proving negligence on the part of the bank for failure to detect the discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish the fact of forgery. It was petitioner who was negligent in this case. He failed to examine his bank statements and this was the proximate cause of his own damage. Because of this negligence, he is precluded from setting up the defense of forgery with regard the checks. Samsung Construction Company Phils., Inc vs FEBTC Facts: Petitioner maintains a current account with the respondent bank and authorized Jong to sign checks in behalf of the company. The checks are in the custody of an accountant Kyu. On one occasion, a certain Gonzaga presented a check to FEBTC purportedly drawn by the Company in the amount of P999,500. The check was payable to cash and appeared to be signed by Jong. FEBTC upon ascertaining that there are sufficient fund to cover the check and finding the signature of Jong appears to be genuine paid Gonzaga. Later, the forgery was discovered. Samsung demanded that the amount paid to Gonzaga be credited back to its account because they have not authorized the encashment of the check. On the other hand, the respondent bank claimed negligence on the part of the petitioner in protecting its check. Issue: Whether or not FEBTC should bear the loss. Held: The SC held that the FEBTC should bear the loss. Under Sec. 62 of NIL, among the warranties to be assumed by the acceptor is it admits the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument. It is incumbent upon the drawee bank to ascertain the genuineness of the signature of its depositor. The respondent bank in this case did not exercise the degree of diligence required to enable it to detect the forgery. Philippine National Bank vs. Court of Appeals FACTS: DECS issued a check in favor of Abante Marketing containing a specific serial number, drawn against PNB. The check was deposited by Abante in its account with Capitol and the latter consequently deposited the same with its account with PBCOM which later deposited it with petitioner for clearing. The check was thereafter cleared. However, on a relevant date, petitioner PNB returned the check on account that there had been a material alteration on it. Subsequent debits were made but Capitol cannot debit the account of Abante any longer for the latter had withdrawn all the money already from the account. This prompted Capitol to seek reclarification from PBCOM and demanded the recrediting of its account.

Issue: Whether or not PBCOM should bear the loss for the check materially altered. HELD: An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in the instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of the party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the NIL. In this case, the alleged material alteration was the alteration of the serial number of the check in issuewhich is not an essential element of a negotiable instrument under Section 1. Therefore, there being no material alteration in the check committed, PNB could not return the check to PBCOM. It should pay the same. Montinola vs. Philippine National Bank Facts: Ramos, a disbursing officer of USAFE made cash advancements with the provincial Treasurer of Lanao. The latter gave him a P500,000 check. Thereafter, Ramos presented the check to laya for encashment. Laya in his capacity as Provincial Treasurer issued a check to Ramos in the sum of P100,000. Ramos was assigned only P30000 of the value of the document to Montinola and to deposit the balance to Ramoss credit. This writing however, mysteriously obliterated and in its place, a supposed indorsement appearing on the back of the check was made for the whole amount of the check Agent, Phil. National Bank under the signature of Laya purportedly showing that Laya issued the check as agent of the PNB. Issue: Whether the words, Agent, Phil. National Bank were added after Laya had issued the check and thus constitutes a material alteration which discharges the instrument. Held: The insertion of the words Agent, Phil. National Bank, which converts the bank from a mere drawer and therefore changes its liability, constitutes a material alteration of the instrument without the consent of the parties liable thereon, and so discharges the instrument. Sadaya vs. Sevilla FACTS: Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the bank. Varona was the only one who received the proceeds of the note. Sadaya and Sevilla both signed as co-makers to accommodate Varona. Thereafter, the bank collected from Sadaya. Varona failed to reimburse. Consequently, Sevilla died and intestate estate proceedings were established. Sadaya filed a creditors claim on his estate for the payment he made on the note. The administrator resisted the claim on the ground that Sevilla didn't receive any proceeds of the loan. Issue: Whether or not Sadaya had the right to demand payment. HELD: A solidary accommodation makerwho made paymenthas the right to contribution, from his co-accomodation maker, in the absence of agreement to the contrary between them, subject to

conditions imposed by law. This right springs from an implied promise to share equally the burdens thay may ensue from their having consented to stamp their signatures on the promissory note. Crisologo-Jose v. CA Facts: The VP of Mover Enterprises, Inc. issued a check drawn against Traders Royal Bank, payable to petitioner Ernestina Crisologo-Jose, for the accommodation of his client. Petitioner payee was charged with the knowledge that the check was issued for the personal account of teh President who merely prevailed upon the VP to act as co-signatory in accordance with the arrangement of the corporation with its depository bank. Issue: Whether or not private respondent, is an accommodation party under NIL and is liable for the amount of said check. Held: Yes. To be considered an accommodation party, a person must (1) be a party to the instrument, (2) not receive value therefor, (3) sign for the purpose of lending his name for the credit of some other person. It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument. He is liable to a holder for value as if the contract was not for accommodation, in whatever capacity such accommodation party signed the instrument, whether primarily or secondarily. Stelco Marketing vs. Court of Appeals FACTS: Petitioner was engaged in the distribution and sale of structural steel bars. RYL bought on several occasion large quantities of steel bars but the same were never paid for despite several demands by petitioner. On a relevant date, RYL gave to Armstrong Industries a check in payment of its obligations. That check was a company check of another corporation, Steelweld Corporation of the Philippines, signed by its President, Peter Rafael Limson, and VP. The check was issued by Limson at the behest of his friend, Romeo Y. Lim, President of RYL. Romeo Lim had asked Limson, for financial assistance, and the latter had agreed to give Lim a check only by way of accommodation, "only as guaranty but not to pay for anything. Stelco filed a complaint against RYL and Steelweld for the recovery of sum of money in payment of the steel bars ordered on the ground that the said check has been given for payment of steel bars. Issue: Whether or not petitioner as a holder for value may recover from the accommodation party. HELD: No. An accommodation party is liable to a holder for value. However, Stelco cannot be considered as a holder for value for there is no evidence whatsoever that the check was ever given to it, or indorsed to it in any manner or form in payment of an obligation or as security for an obligation, or for any other purpose before it was presented for payment. STELCO never became a holder for value and that nowhere in the check itself does the name of Stelco Marketing appear as payee, indorsee or depositor thereof. Travel-On vs. Court of Appeals

Facts: Travel-On filed suit to collect on 6 checks issued by private respondent with a total face amount of P115 ,000 as payment of various airline tickets sold to respondent. Private respondent claimed that he had already fully paid the obligations. He argued that he had issued postdated checks for purposes of accommodation, as he had in past accorded similar favors to petitioner. Issue: Whether or not said checks were for accommodation and that private respondent is still liable considering that petitioner is a holder for value. Held: Travel-on is not an accommodated party; it realize no value on the checks bounced. It presented these checks for payment at the drawee bank but the checks bounced. Thus private responded must be held liable on the six checks here involved. Those checks in themselves constituted evidence of indebtedness of private respondent. BPI vs. Court of Appeals Facts: Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a dollar check owned by Henry Chan in which he affixed his signature at the dorsal side thereof. For this purpose, Napiza gave Chan a signed blank withdrawal slip. However, Gayon Jr. got hold of the withdrawal slip and used it to withdraw the proceeds of the dollar check, even before the check was cleared and without the presentation of the bank passbook. Issues: Whether or not petitioner can hold private respondent liable for the proceeds of the check for having affixed his signature at the dorsal side as indorser. Held: 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 such, she is under the law liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew * * (her) to be only an accommodation party, although she has the right, after paying the holder, to obtain reimbursement from the party accommodated, since the re lation between them is in effect that of principal and surety, the accommodation party being the surety." It is thus clear that ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party. However, to hold private respondent liable for the amount of the check he deposited by the strict application of the law and without considering the attending circumstances in the case would result in an injustice and in the erosion of the public trust in the banking system. The interest of justice thus demands looking into the events that led to the encashment of the check. Agro Conglomerates, Inc. vs. Court of Appeals FACTS: Petitioner sold to Wonderland Food Industries two parcels of land. They stipulated under a Memorandum of Agreement that the terms of payment would be P1,000,000 in cash, P2,000,000 in shares of stock, and the balance would be payable in monthly installments. Petitioner Soriano signed as maker the promissory notes payable to the bank. However, the petitioners failed to pay the obligations as they were due. During that time, the bank was in financial distress and this

prompted it to endorse the promissory notes for collection. The bank gave ample time to petitioners then to satisfy their obligations. Issue: Whether or not Agro Conglomerates is liable as accommodation parties. HELD: Petitioners became liable as accommodation parties. They have the right after paying the instrument to seek reimbursement from the party accommodated, since the relation between them has in effect became one of principal and surety. Furthermore, as it turned out, the contract of surety between Woodland and petitioner was extinguished by the rescission of the contract of sale of the farmland. With the rescission, there was confusion in the persons of the principal debtor and surety.

De Ocampo vs. Gatchalian Facts: Anita Gatchalian was interested in buying a car when she was offered by Manuel Gonzales to a car owned by the Ocampo Clinic. Anita accepted the offer but Gonzales advised that the owners would only comply only upon showing of interest on the part of the buyer. Relying on the latters representation, Anita issued a check. The next day, Gonzales never appeared. The failure of Gonzales to appeal resulted in Gatchalian to issue a STOP PAYMENT ORDER on the check. It was later found out that Gonzales used the check as payment to the Vicente de Ocampo for the hospitalization fees of his wife. De Ocampo now demands payment for the check, which Gatchalian refused, arguing that de Ocampo is not a holder in due course and that there is no negotiation of the check. Issue: Whether or not De Ocampo is a holder in due course. Held: No. De Ocampo is not a holder in due course. Under the circumstances of the case, instead of the presumption that payee was a holder in good faith, the fact is that it acquired possession of the instrument under circumstances that should have put it to inquiry as to the title of the holder who negotiated the check to it. The holder did not show or tell the payee why he had the check in his possession and why he was using it for the payment of his own personal account which shows that holder's title was defective or suspicious. Mesina vs. IAC FACTS: Jose Go purchased from Associate Bank a Cashiers Check, which he left on top of the managers desk when left the bank. The bank manager then had it kept for safekeeping by one of its employees. The employee was then in conference with one Alexander Lim. He left the check in his desk and upon his return, Lim and the check were gone. When Go inquired about his check, the same couldn't be found and Go was advised to request for the stoppage of payment which he did. He

executed also an affidavit of loss as well as reported it to the police. Thereafter, petitioner demanded payment on the said check which she acquired as payment from Alexander Lim in certain transaction. Issue: Whether or not petitioner is a holder in due course and can demand payment. HELD: No, petitioner is not a holder in due course. Admittedly, petitioner became the holder of the cashier's check as endorsed by Alexander Lim who stole the check. He refused to say how and why it was passed to him. He had therefore notice of the defect of his title over the check from the start. The holder of a cashier's check who is not a holder in due course cannot enforce such check against the issuing bank which dishonors the same. Metropol vs. Sambok Facts: Dr. Javier executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd. On the same date, Sambok Motors, a sister company negotiated and indorsed the note in favour of Metropol Financing & Investment Corporation adding the word with recourse. When Dr. Villaruel failed to pay the promissory note after the demand of Metropol, the latter notified Sambok of the dishonor and demand payment. Sambok contended that it could not be obliged to pay until after its co-defendant Dr. Villaruel has been declared insolvent. Issue: Whether or not Sambok Motors Company, by adding the words with recourse becomes a qualified indorser and therefor does not warrant that if said not is dishonored, it will pay the amount to the holder. Held: Recourse means resort to a person who is secondarily liable after the default of the person who is primarily liable. Appellant, by indorsing the note with recourse does not make itself a qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it agreed that if Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The effect of such indorsement is that the note was indorsed without qualification. Maralit vs. Imperial Facts: Petitioner Maralit claimed that, as a consequence of the materially altered treasury warrant encashed by respondent imperial, she was held personally liable by the PNB for the total amount of P320,287.30. However, respondent claimed that she merely helped a relative, Aida Abengoza, to encash the treasury warrant and that she did not know the amounts were altered nor did she represent to petitioner that the treasury warrants are genuine and that upon being informed of dishonor, she immediately contacted her relative and signed an acknowledgement to pay the total amount of the treasury warrant. Issue: Whether or not respondent should be held liable as a general indorse. Held: The Court symphatizes with the petitioner that there was indeed damage and loss, but said loss is chargeable to the respondent who upon her indorsements warrant that the instrument is genuine in all respect what it purports to be and that she will pay the amount thereof in case of dishonor. Thus, while

the MTC found petitioner partly responsible for the encashment of the altered checks, it found respondent civilly liable because of her indorsements of the treasury warrants, in addition to the fact that respondent executed a notarized acknowledgment of debt promising to pay the total amount of said warrants. Sapiera vs. Court of Appeals Facts: On several occasions, petitioner Sapiera, a sari-sari store owner, purchased from Monnico Mart certain grocery items, mostly cigarettes, and paid for them with checks issued by one Arturo de Guzman. These checks were signed at the back by the petitioner. When presented for payment, the checks were dishonored because the drawers account was already closed. Private respondent Roman Sua informed De Guzman and petitioner about the dishonor but both failed to pay the value of the checks. Issue: Whether or not petitioner be required to pay civil indemnity to private respondent. Held: Yes. It is undisputed that the four (4) checks issued by De Guzman were signed by petitioner at the back without any indication as to how she should be bound thereby and, therefore, she is deemed to be an indorser thereof. The NIL clearly provides Sec. 17. Construction where instrument is ambiguous. --Where the language of the instrument is ambiguous, or there are admissions therein, the following rules of construction apply: x x x (f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is deemed an indorser. x x x BPI vs. Court of Appeals and Napiza Facts: Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a dollar check owned by Henry Chan in which he affixed his signature at the dorsal side thereof. For this purpose, Napiza gave Chan a signed blank withdrawal slip. However, Gayon Jr. got hold of the withdrawal slip and used it to withdraw the proceeds of the dollar check, even before the check was cleared and without the presentation of the bank passbook. Issues: Whether or not petitioner can hold private respondent liable for the proceeds of the check for having affixed his signature at the dorsal side as indorser. Held: No. It is thus clear that ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party.[17] However, to hold private respondent liable for the amount of the check he deposited by the strict application of the law and without considering the attending circumstances in the case would result in an injustice and in the erosion of the public trust in the banking system. The interest of justice thus demands looking into the events that led to the encashment of the check. Prudential Bank vs. IAC FACTS: To effect payment for machineries purchased by Philippine Rayon Mills with Nissho Co., Ltd, the former opened a commercial letter of credit with the Prudential Bank and Trust Company in favor of Nissho. Drafts were drawn and issued by Nissho, which were all paid by the Prudential Bank through its

correspondent in Japan. Two of these drafts were accepted by Philippine Rayon Mills while the others were not. Petitioner instituted an action for the recovery of the sum of money it paid to Nissho as Philippine Rayon Mills was not able to pay its obligations arising from the letter of credit. Respondent court ruled that with regard to the ten drafts which were not presented and accepted, no valid demand for payment can be made. Petitioner however claims that the drafts were sight drafts which did not require presentment for acceptance to Philippine Rayon. ISSUE: Whether presentment for acceptance of the drafts was indispensable to make Philippine Rayon liable thereon. HELD: In the case at bar, the drawee was necessarily the herein petitioner. It was to the latter that the drafts were presented for payment. There was in fact no need for acceptance as the issued drafts are sight drafts. Presentment for acceptance is necessary only in the cases expressly provided for in Section 143 of the Negotiable Instruments Law (NIL). In no other case is presentment for acceptance necessary in order to render any party to the bill liable. Obviously then, sight drafts do not require presentment for acceptance. Wong vs. Court of Appeals Facts: Petitioner Wong was an agent of Limtong Press, Inc. (LPI), a manufacturer of calendars. After printing the calendars, LPI would ship the calendars directly to the customers. Thereafter, the agents would come around to collect the payments. Petitioner, however, had a history of unremitted collections, which he duly acknowledged in a confirmation receipt he co-signed with his wife. Petitioner issued several checks in December 1985, initially to guarantee the payment of unremitted collections, however, upon agreement between the parties, the checks will be applied to unremitted collections. Before maturity, petitioner advised not to deposit the said checks, but after failing to replace them, respondent presented the check on June 1986 which was later on dishonoured by reason of account closed. Having failed to pay, a case of violation of BP 22 was filed against petitioner. Petitioner contends that he is not liable by reason of the delay in presenting the checks. Issue: Wether or not the petitioner is discharged from the liability on the said checks due to delay in presentment. Held: Under Section 186 of the Negotiable Instruments Law, a check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay. By current banking practice, a check becomes stale after more than six (6) months,23 or 180 days. Private respondent herein deposited the checks 157 days after the date of the check. Hence, said checks cannot be considered stale. The International Corporate Bank vs. Sps. Francis S. Gueco and Ma. Luz E. Gueco FACTS: Gueco spouses obtained a loan from ICB to purchase a car. In consideration thereof, the debtors executed PNs, and a chattel mortgage was made over the car. The spouses defaulted in payment of their obligations whereupon they entered into a compromise agreement with the bank.

After some negotiation and computation, they tendered a managers check in favor of the bank based on the reduced amount. Nonetheless, the car was still detained for the spouses refused to sign the joint motion to dismiss. Because of this, the spouses filed an action for recovery of the car and damages against the bank. As the result of the proceeding, the managers check tendered to the bank had become stale in the hands of the bank. Issue: Whether or not the bank should bear the loss on the stale managers check as a result of the proceedings. HELD: Failure to present for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay. It does not totally wipe out all liability. In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the check. In this case, the Gueco spouses have not alleged, much less shown that they or the bank which issued the managers check has suffered damage or loss caused by the delay or non-presentment. Definitely, the original obligation to pay certainly has not been erased. State Investment House vs. Court of Appeals Facts: New Sikatuna Wood Industries Inc. (NSWI) requested for a loan from Harris Chua, who issued 3 crossed checks. Subsequently, NSWI entered in an agreement with State Investment House Inc. (SIHI) where the former discounted several checks including the crossed checks. When the crossed checks were deposited by SIHI, the checks were dishonoured by reason of insufficient funds and account closed. SIHI made demands upon Chua to make good said checks by Chua failed. Issue: Whether SIHI is a holder in due course so as to recover the amounts in the checks from Chua. Held: No, the act of crossing a check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise he is not a holder in due course. His failure to inquire from the holder the purpose prevents him from being considered in good faith. SIHI, is subject to personal defences for such as the lack of consideration between the NSWI and Chua. Bataan Cigar and Cigarette Factory, Inc. vs. Court of Appeals Facts: Petitioner engaged one of its suppliers King Tim Pua George to deliver bales of tobacco leaf. In consideration thereof, petitioner issued a crossed check. Relying on the supplier's representation, petitioner agreed to purchase additional bales of tobacco leaves, despite the supplier's failure to deliver in accordance with their earlier agreement upon which he issued post dated crossed checks. However, the supplier sold the said check at a discount to private respondent State Investment House Inc.(SIHI). Upon failure to deliver said bales of tobacco leaf, petitioner issued a stop order payment on all checks. SIHI then instituted this action, upon dishonour of the check, on the ground that the same is a holder in due course and would be able to collect from petitioner. Issue: Whether or not SIHI, a holder of a crossed check, is a holder in due course and would be able to collect from petitioner.

Held: It is a settled ruled that crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the indorsers title to the check or the nature of his possession. Failing in this respect, the holder is declared guilty of gross negligence amounting to legal absence of good faith and is to the effect that the holder of the check is not a holder in due course. There being failure of consideration which is a personal defense, cannot be obliged to pay the checks to SIHI who is not a holder in due course. CItytrust Banking Corporation vs. Court of Appeals Facts: The case emanated from a complaint filed by respondent Emme for damages against petitioner. Respondent deposited with petitioner several cash in order to amply cover the post dated checks she issued. When presented for encahsement upon maturity, all checks were dishonoured due to insufficiency of funds. Petitioner in its answer averred that it was respondents fault that her checks were dishonoured because the account no. Reflected in the deposit slip which is 2900823 was not her correct no. Which is 29000823. Issue: Whether of not petitioner is liable for damages on the dishonoured checks. Held: The depositor expects the bank to treat his account with utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank is engaged in business impressed with public interest and it is its duty to protect in return its many clients and depositors who transact business with it. It is under obligation to treat the accounts of its depositors with meticulous care having in mind the fiduciary nature of their relationship. Hence, nominal damages may be awarded in order that a right of the plaintiff, which have been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Ramon Tan vs. Court of Appeals Facts: Ramon tan secured a cashiers from Philippine Commercial Industrial Bank (PCIB) payable to his order. He deposited his check in his account with Rizal Commercial Banking Corporation (RCBC) Binondo. On the same day, RCBC erroneously sent the same cashiers check for clearing to the Central Bank which was returned for having been missent or misrouted. The next day, RCBC debited the amount covered by the same cashiers check from the account of the petitioner. Respondent bank at this time had not informed the petitioner of its action. Relying that said checks were honoured, petitioner issued two personal check which was dishonoured due to insufficiency of funds. Petitioner alleging to have suffered humiliation and loss of face in the business sector due to the bounced check filed a complaint against RCBC. Issue: Whether or not RCBC may be held liable for damages upon erroneous debit covered by the cashiers check. Held: A bank cannot exculpate itself from liability for the consequences of the use of wrong deposit slip resulting in the misrouting of a regional check to the Central Bank for clearing. The bank is not expected to be infallible but it must bear the blame for not discovering the mistake of its teller despite the

established procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty it is to check and countercheck them for possible errors. As the result of the negligence of the bank, the depositor has the right to recover moral damages even if the banks negligence may not have been attended with malice and bad faith if the former suffered mental anguish, serious anxiety, embarrassment and humiliation. Papa vs. A.U. Valencia and Co. Inc. Facts: On 1992, a complaint was against Petitioner Myron C. Papa as attornery-in-fact of Angela M. Butte sold to respondent Penaroyo through respondent Valencia a parcel of land on 1973. Petitioner appealed decision, alleging among others that the sale was never consummated as he did not encash the check given by respondents Valencia and Pearroyo in payment of the full purchase price of the subject lot. He maintained that what said respondents had actually paid was only the amount of P5,000.00 (in cash) as earnest money. Issue: Whether or not the check did not amount to payment. Held: While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditors unreasonable delay in presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. This is in harmony with Article 1249 of the Civil Code under which payment by way of check or other negotiable instrument is conditioned on its being cashed, except when through the fault of the creditor, the instrument is impaired. The payee of a check would be a creditor under this provision and if its non-payment is caused by his negligence, payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay Allied Banking Corporation vs. Court of Appeals Facts: Petitioner purchased a letter of credit from respondent G.G. Sportswear Mfg. Corporation. The export bill was issued by Chekiang First Bank Ltd., Hongkong. With the purchase of the bill, ALLIED credited GGS the peso equivalent of the aforementioned bill. On the same date, respondents executed their respective Letters of Guaranty, holding themselves liable on the export bill if it should be dishonored or retired by the drawee for any reason. When ALLIED negotiated the export bill to Chekiang, payment was refused due to some material discrepancies in the documents submitted by GGS relative to the exportation covered by the letter of credit. Consequently, ALLIED demanded payment from all the respondents based on the Letters of

Guaranty and Surety executed in favor of ALLIED. However, respondents refused to pay, prompting ALLIED to file an action for a sum of money. Respondents claim that the petitioner did not protest upon dishonor of the export bill by Chekiang First Bank, Ltd. According to respondents, since there was no protest made upon dishonor of the export bill, all of them, as indorsers were discharged under Section 152 of the Negotiable Instruments Law. Issue: Whether or not protest upon dishonor is necessary on a guarantor of a commercial paper. Held: No, Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by respondents, is not pertinent to this case. There are well-defined distinctions between the contract of an indorser and that of a guarantor/surety of a commercial paper, which is what is involved in this case. The contract of indorsement is primarily that of transfer, while the contract of guaranty is that of personal security. The liability of a guarantor/surety is broader than that of an indorser. Unless the bill is promptly presented for payment at maturity and due notice of dishonor given to the indorser within a reasonable time, he will be discharged from liability thereon. On the other hand, except where required by the provisions of the contract of suretyship, a demand or notice of default is not required to fix the suretys liability. Hence, respondents are liable and protest upon dishonor is not necessary,. Sincere Villanueva vs. Marlyn Nite Facts: Respondent took a loan from petitioner. To secure the loan, respondent issued petitioner an Asian Bank Corporation check. The check was, however, dishonored due to a material alteration when petitioner deposited the check on due date. Petitioner, however, filed an action for a sum of money against ABC which was awarded by the court. When respondent went to withdraw from her account on ABC, she was unable to do so because the trial court had ordered ABC to pay petitioner the value of respondents ABC check. Respondent then filed a petition to annul and set aside the trial courts decision ordering ABC to pay petitioner the value of the ABC check. Issue: Whether or not ABC may be held liable to petitioner for the dishonour of the check. Held: If a bank refuses to pay a check notwithstanding the sufficiency of funds, the payee-holder cannot sue the bank because there is no privity of contract exists between the drawee-bank and the payee. Contracts take effect only between the parties, their assigns and heirs. In this case, the contract of loan was between petitioner and respondent. No collection suit could prosper without respondent who was an indispensable party Bank of the Philippine Island vs. Commissioner of Internal Revenue Facts: Petitioner Bank of the Philippine Islands (BPI) sold to the Central Bank of the Philippines U.S. dollars. BPI instructed, by cable, its correspondent bank in New York to transfer U.S. dollars deposited in BPIs account therein to the Federal Reserve Bank in New York for credit to the Central Banks account therein. Thereafter, the funds had been credited to its account and the Central Bank promptly transferred to the petitioners account in the Philippines the corresponding amount in Philippine pesos.

Under the NIRC Section 195, it imposes a documentary stamp tax on (1) foreign bills of exchange, (2) letters of credit, and (3) orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons. Issue: Whether or not the instruction by cable is a bill of exchange included in the activities where documentary stamp tax is imposed. Held: From this enumeration, two common elements need to be present: (1) drawing the instrument or ordering a drawee, within the Philippines; and (2) ordering that drawee to pay another person a specified amount of money outside the Philippines. What is being taxed is the facility that allows a party to draw the draft or make the order to pay within the Philippines and have the payment made in another country. The fact that the funds belong to BPI and were not advanced by the correspondent bank will not remove the transaction from the coverage of Section 195 of the NIRC. A bill of exchange, when drawn in the Philippines but payable in another country, would surely be covered by this section. And in the case of a bill of exchange, the funds may belong to the drawer and need not be advanced by the drawee, as in the case of a check or a draft. In the description of a draft provided hereunder, the drawee is in possession of funds belonging to the drawer of the bill. Citibank NA vs. Sabeniano Facts: Respondent Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance. Respondent filed a complaint to recover substantial deposits and money market placements with petitioner. Petitioners admitted them however when respondent failed to pay her loans with FNCB Finance despite repeated demands by petitioner Citibank, the latter exercised its right to off-set. In support of respondents assertion that she had already paid whatever loans she may have had with petitioner Citibank, she presented as evidence provisional receipts for the acceptance of the checks. Issue: Whether or not petitioner the provisional receipts upon acceptance of checks evidenced the payment. Held: 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. A check, whether a managers check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. 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. Since the provisional receipt was issued for the the receipt of the check, the same cannot be considered as evidence of payment hence the loan still subsist.

Equitable PCI Bank vs. Rowena Ong

Facts: Sarande deposited in her account with Philippine Commercial International (PCI) Bank a check in amount of P225,000 which was cleared. Thereafter, Sarande issued a check amounting to P132,000 owing to a business consideration. On the same day, Ong presented the check to PCI Bank but instead of depositing it, she requested that proceeds thereof converted into a mangers check whereupon a managers check was issued. Thereafter, he deposited said check to Equitable Banking Corporation but was later on dishonored because PCI Bank issued a stop payment owing to Sarandes account being closed. Issue: Whether or not Ong is a holder in due course in the absence of consideration in the issuance of the managers check. Held:The claim is without basis. Easily discernible is that what Ong obtained from PCI Bank was not just any ordinary check but a managers check. A managers check is an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its issuance. By accepting PCI Bank Check issued by Sarande to Ong and issuing in turn a managers check in exchange thereof, PCI Bank assumed the liabilities of an acceptor under Section 62 of the Negotiable Instruments Law. Hence, Petitioner is liable to pay the value of the check with damages. International Corporate Bank vs. Court of Appeals and PNB Facts: The Ministry of Education and Culture issued 15 checks5drawn against respondent which petitioner accepted for deposit on various dates. After 24 hours from submission of the checks to respondent for clearing, petitioner paid the value of the checks and allowed the withdrawals of the deposits. However, on 14 October 1981, respondent returned all the checks to petitioner without clearing them on the ground that they were materially altered. Thus, petitioner instituted an action for collection of sums of money against respondent to recover the value of the checks. Issue: Whether or not respondent should be held liable for the materially altered checks. Held: The alterations in the checks were made on their serial numbers. Alteration on serial numbers are not within the purview of material alteration as provided under Section 125 of NIL for the name of the government agency which issued the check was prominently printed. Since there were no material alterations on the checks, respondent as drawee bank has no right to dishonor them and return them to petitioner, the collecting bank. Thus, respondent is liable to petitioner for the value of the checks, with legal interest from the time of filing. Melva Theresa Gonzales vs. Rizal Commercial Banking Corporation Facts: Gonzales was an employee of Rizal Commercial Banking Corporation (RCBC). A foreign check in the amount of $7,500 was drawn by Dr. Don Zapanta and payable to Gonzales mother, defendant Eva Alviar. Alviar then endorsed this check. Gonzales presented the foreign check to Olivia Gomez. After examining this, Olivia Gomez acquiesced to the early encashment of the check and signed the check but indicated thereon her authority of up to P17,500.00 only.

RCBC then tried to collect the check with the drawee bank but was dishonored because of irregular indorsement. Insisting, RCBC again sent the check to the drawee bank, but this time the check was returned due to account closed. Unable to collect, RCBC demanded from Gonzales the payment of the peso equivalent of the check that she received. Issue: Whether or not Gonzales is liable to the subsequent indorser despite of the defect introduced by the latter which rendered the instrument dishonored. Held: The foreign drawee bank, Wilshire Center Bank N.A., refused to pay the bearer of this dollar-check drawn by Don Zapanta because of the defect introduced by RCBC, through its employee, Olivia Gomez. There is no doubt in the mind of the Court that a subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith.

The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for irregular endorsement must not be the irregular endorser himself who gave cause for the dishonor. RCBC, which caused the dishonor of the check upon presentment to the drawee bank, through the qualified endorsementof its employee, Olivia Gomez, cannot hold prior endorsers, Alviar and Gonzales in this case, liable on the instrument. Metropolitan Bank and Trust Co. vs. Renato Cabilzo FACTS: Cabilzo issued a postdated Metrobank Check payable to CASH. The check was presented to Westmont Bank for payment by Mr. Marquez. Metrobank cleared the check for encashment. Thereafter, it was discovered that Metrobank Check which he issued in the amount of P1, 000.00 was altered to P91,000.00. Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his account. Issue: Whether or not petitioner is liable for the amount of the materially altered check. Held: The bank on which the check is drawn is under strict liability to pay to the order of the payee in accordance with the drawers instructions. Payment made under materially altered instrument is not payment done in accordance with the instruction of the drawer. When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge its clients account only for bona fide disbursements he had made. Since the drawee bank, in the instant case, did not pay according to the original tenor of the instrument, as directed by the drawer, then it has no right to claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from the drawers account which it was expected to treat with utmost fidelity. Hence, petitioner is liable to reimburse the drawer for the amount paid. Theresa MAcalalag vs. People of the Philippines Facts: Petitioner obtained loans from Grace Estrella. Failure to pay the interest and the loan, she executed two acknowledgement/affirmation receipts and as security for payment of the aforesaid loans issued two PNB checks in favor of Estrella. However, when Estrella presented said checks for payment

with the drawee bank, the same were dishonored for the reason that the account against which the same was drawn was already closed. Estrella sent a notice of dishonor and demand to make good the said checks to Macalalag, but the latter failed to do so. Hence, Estrella filed two criminal complaints for Violation of Batas Pambansa Blg. 22. Issue: Whether or not petitioner is violated BP 22 upon issuance of the check as security. Held: We have repeatedly held that there is no violation of Batas Pambansa Blg. 22 if the complainant was actually told by the drawer that he has no sufficient funds in a bank.10Where, as in the case at bar, the checks were issued as security for a loan, payment by the accused of the amount of the check prior to its presentation for payment would certainly serve the same purpose. When Estrella presented the checks for payment, the same were dishonored on the ground that they were drawn against a closed account. Despite notice of dishonor, petitioner Macalalag failed to pay the full face value of the second check issued. Only a full payment of the face value of the second check at the time of its presentment or during the five-day grace period15 could have exonerated her from criminal liability.

BPI vs. Court of Appeals G.R. 136202 FACTS: Templonuevo demanded payment from petitioner of a sum of money representing the aggregate value of three checks which were erroneously deposited with the petitioner to A.A. Salazar Construction and Engineering Services account. Finding merit in the demands, the bank then froze the account of the engineering firm as the account of Salazar was already closed or had insufficient funds. Failure of any settlement between Templonuevo and Salazar, this prompted the bank to debit the account of Salazar and give back the money to Templonuevo through cashiers check. The account of Salazar was also debited for whatever charges incurred for the issuance of the cashiers check. Hence, respondent Salazar filed this action for the recovery of the money. ISSUE: Whether or not the collecting bank have the authority to withdraw unilaterally from such depositors account the amount it had previously paid upon certain unendorsed order instruments deposited by the depositor to another account that she later closed? HELD: Consequently, petitioner, as the collecting bank, had the right to debit Salazars account for the value of the checks it previously credited in her favor. It is of no moment that the account debited by petitioner was different from the original account to which the proceeds of the check were credited because both admittedly belonged to Salazar, the former being the account of the sole proprietorship which had no separate and distinct personality from her, and the latter being her personal account. Howver, the bank is liable for damages caused to Salazar as a result of the erroneous debit by reason of its failure to perform its obligation to treat their depositors with meticulous care, having in mind the fiduciary nature of their relationship.