Professional Documents
Culture Documents
Copyright 2015
Negotiable promissory notes are prima facie deemed to have been issued for
consideration.
The promissory notes, however, appear to be negotiable as they meet the
requirements of Section 1 of the Negotiable Instruments Law. Such being the case,
the notes are prima facie deemed to have been issued for consideration.
Quirino Gonzales Logging Concessionaire vs. Court of Appeals, G.R. No. 126568, April
30, 2003
provide that the amounts deposited shall be repayable to the depositor. And who,
according to the document, is the depositor? It is the "bearer." The documents do not
say that the depositor is Angel de la Cruz and that the amounts deposited are
repayable specifically to him. Rather, the amounts are to be repayable to the bearer of
the documents or, for that matter, whosoever may be the bearer at the time of
presentment.
Caltex (Phil.), Inc. vs. Court of Appeals, et al., G.R. No. 97753, August 10, 1992
Apolinario G. de los Santos vs. J. Howard Mcgrath, G.R. No. L-4818, February 28, 1955
Alfonso S. Tan vs. SEC, G.R. No. 95696, March 3, 1992
21, 2008
Order for payment out of certain appropriation is an order for payment out of a
particular fund.
The document bearing on its face the words "payable from the appropriation for
Copyright 2015
food administration" is actually an order for payment out of "a particular fund," and is
not unconditional, and does not fulfill one of the essential requirements of a
negotiable instrument.
Benjamin Abubakar vs. Auditor General, G.R. No. L-1405, July 31, 1948
Philippines might be the source of abuse and oppression, and make the courts
involuntary parties thereto. If the bank has a meritorious case, the judgment is
ultimately certain in the courts.
PNB vs. Manila Oil Refining & By-Products Co., Inc., G.R. No. L-18103, June 8, 1922
Annex A, in effect, authorized the RFC to fix the date of maturity of the
installments therein stipulated which is allowed by the Negotiable Instruments Law
and when a promissory note expresses "no time for payment," it is deemed "payable
on demand."
Jose L. Ponce De Leon vs. Rehabilitation Finance Corporation, G.R. No. L-24571,
December 18, 1970
As the two promissory notes in question were payable on demand, the Court of
Appeals correctly held that they were due immediately after delivery, and that the
corresponding period of prescription started to run from the date of such delivery.
Joseph Reich vs. Edmund Schwesinger, G.R. No. L-16525, January 31, 1963
instrument and will thus be open to all defenses available against the latter.
Consolidated Plywood Industries vs. IFC Leasing and Acceptance Corporation, G.R.
No. 72593, April 30, 1987
Juanita Salas vs. Court of Appeals, G.R. No. 76788, January 22, 1990
The subject check was equivocal and patently ambiguous. By making the check
read; "Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF
CASVILLE ENTERPRISES, INC." the payee ceased to be indicated with reasonable
certainty in contravention of Section 8 of the Negotiable Instruments Law.
Equitable Banking Corporation vs. Intermediate Appellate Court, G.R. No. 74451, May
25, 1988
Bank incurs no liability if, satisfied with identity of bearer, it pays the check
without further question.
But where the Bank is satisfied of the identity and/or the economic standing of the
bearer who tenders the check for collection, it will pay the instrument without further
question; and it would incur no liability to the drawer in thus acting.
Ang Tek Lian vs. Court of Appeals, G.R. No. L-2516, September 25, 1950
Copyright 2015
The payee of a negotiable instrument acquires no interest with respect thereto until
its delivery to him. 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.
Development Bank of Rizal vs. Sima Wei, G.R. No. 85419, March 9, 1993
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.
Remedios Nota Sapiera vs. Court of Appeals, G.R. No. 128927, September 14, 1999
Failure to disclose principal renders agent personally liable for drafts he accepted.
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
Copyright 2015
10
Company. For failure to disclose his principal, Aruego is personally liable for the
drafts he accepted.
Philippine Bank of Commerce vs. Jose M. Aruego, G.R. Nos. L-25836-37, January 31,
1981
Salesman authorized to collect money does not have implied authority to indorse
checks received in payment.
The right of an agent to indorse commercial paper is a very responsible power and
will not be lightly inferred. A salesman with authority to collect money belonging to
his principal does not have the implied authority to indorse checks received in
payment. Any person taking checks made payable to a corporation which can act by
agents, does so at his peril, and must abide by the consequences if the agent who
endorses the same is without authority.
Jai-alai Corp. of the Phil. vs. BPI, G.R. No. L-29432, August 6, 1975
Insular Drug Co., Inc. vs. PNB, G.R. No. 38816, November 3, 1933
11
If a bank pays a forged check, it must be considered as paying out of its funds and
cannot charge the amount so paid to the account of the depositor.
Traders Royal Bank vs. Radio Philippines Network, G.R. No. 138510, October 10, 2002
The Philippine National Bank had no license or authority to pay the money to
Maasim or anyone else upon a forged signature. It was its legal duty to know that
Melicor's endorsement was genuine before cashing the check. Its remedy is against
Maasim to whom it paid the money.
Great Eastern Life Insurance Co. vs. Hongkong & Shanghai Banking Corp., G.R. No.
18657, August 23, 1922
There are two (2) parts of the provision. The first part states the general rule while
the second part states the exception to the general rule. The general rule is to the effect
that a forged signature is "wholly inoperative", and payment made "through or under
such signature" is ineffectual or does not discharge the instrument. The exception to
this rule is when the party relying on the forgery is "precluded from setting up the
forgery or want of authority." In this jurisdiction we recognize negligence of the party
invoking forgery as an exception to the general rule. (See Banco de Oro Savings and
Mortgage Bank vs. Equitable Banking Corporation supra; Philippine National Bank
vs. Quimpo, G.R. No. L-53194, March 14, 1988; Philippine National Bank vs. Court
of Appeals, G.R. No. L-26001, October 29, 1968; Republic vs. Equitable Banking
Corporation, G.R. No. L-15894, January 30, 1964; National Bank vs. National City
Bank of New York, 63 Phil. 711 [1936]; San Carlos Milling Co. vs. Bank of P.I., 59
Phil. 59 [1933]). In these cases we determined the rights and liabilities of the parties
under a forged endorsement by looking at the legal effects of the relative negligence
of the parties thereto.
Bank of the Phil. Islands vs. Court of Appeals, G.R. No. 102383, November 26, 1992
The petitioner is barred from setting up the defense of forgery under Section 23 of
the Negotiable Instruments Law . . . [b]ecause it was guilty of negligence not only
before the questioned checks were negotiated but even after the same had already
been negotiated.
Republic of the Phil. vs. Equitable Banking Corporation, G.R. No. L-15894, January 30,
1964
Metropolitan Waterworks and Sewerage System vs. Court of Appeals, G.R. No.
L-62943, July 14, 1986
Copyright 2015
12
It is apparent that the said three (3) checks were fraudulently altered as to their
amounts and, therefore, wholly inoperative. No right of payment thereof against any
party thereto could have been acquired the petitioner.
Banco Atlantico vs. Auditor General, G.R. No. L-33549, January 31, 1978
The signatures to the checks being forged, under section 23 of the Negotiable
Instruments Law they are not a charge against plaintiff nor are the checks of any value
to the defendant.
San Carlos Milling Co. vs. BPI, G.R. No. 37467, December 11, 1933
True, it is a rule that when a signature is forged or made without the authority of
the person whose signature it purports to be, the check is wholly inoperative. No right
to retain the instrument, or to give a discharge therefor, or to enforce payment thereof
against any party, can be acquired through or under such signature. However, the rule
does provide for an exception, namely: "unless the party against whom it is sought to
enforce such right is precluded from setting up the forgery or want of authority."
Ramon K. Ilusorio vs. Hon. Court of Appeals, G.R. No. 139130, November 27, 2002
Since the signature of the payee, in the case at bar, was forged to make it appear
that he had made an endorsement in favor of the forger, such signature should be
Copyright 2015
13
deemed as inoperative and ineffectual. Petitioner, as the collecting bank, grossly erred
in making payment by virtue of said forged signature. The payee, herein respondent,
should therefore be allowed to recover from the collecting bank.
The collecting bank is liable to the payee and must bear the loss because it is its
legal duty to ascertain that the payee's endorsement was genuine before cashing the
check. As a general rule, a bank or corporation who has obtained possession of a
check upon an unauthorized or forged indorsement of the payee's signature and who
collects the amount of the check from the drawee, is liable for the proceeds thereof to
the payee or other owner, notwithstanding that the amount has been paid to the person
from whom the check was obtained.
Westmont Bank vs. Eugene Ong, G.R. No. 132560, January 30, 2002
14
Drawee bank paying a forged check cannot recover from holder who took no part
in the forgery.
If a drawee bank pays a forged check which was previously accepted or certified by
the said bank it cannot recover from a holder who did not participate in the forgery
and did not have actual notice thereof.
PNB vs. The National City Bank of New York, G.R. No. 43596, October 31, 1936
Requisites to entitle the holder of a forged check to retain money obtained thereon.
To entitle the holder of a forged check to retain the money obtained thereon, there
must be a showing that the duty to ascertain the genuineness of the signature rested
entirely upon the drawee, and that the constructive negligence of such drawee in
failing to detect the forgery was not affected by any disregard of duty on the part of
the holder, or by failure of any precaution which, from his implied assertion in
presenting the check as a sufficient voucher, the drawee had the right to believe he
had taken.
PNB vs. The National City Bank of New York, G.R. No. 43596, October 31, 1936
Bank bears the loss when it cashed the check to a third person who forged the
payee's signature.
Where a check is drawn payable to the order of one person and is presented to a
bank by another and purports upon its face to have been duly indorsed by the payee of
the check, it is the duty of the bank to know that the check was duly indorsed by the
original payee, and where the Bank pays the amount of the check to a third person,
Copyright 2015
15
who has forged the signature of the payee, the loss falls upon the bank who cashed the
check, and its only remedy is against the person to whom it paid the money.
The Great Eastern Life Insurance Co. vs. Hongkong & Shanghai Banking Corp. and
PNB, G.R. No. 18657, August 23, 1922
Collecting bank relying upon warranty made by depositor of forged checks is not
liable for resulting loss.
Where the depositor indorsed the checks with forged indorsement when it
deposited them with the collecting bank, the former as an endorser guaranteed the
genuineness of all prior indorsement thereon. The collecting bank which relied upon
this warranty cannot be held liable for the resulting loss.
Jai-alai Corp. of the Phil. vs. BPI, G.R. No. L-29432, August 6, 1975
Copyright 2015
16
The genuineness of the deceased's signature having been shown, he is prima facie
presumed to have become a party to the check for value, following Section 24 of the
Negotiable Instruments Law.
Felicito G. Sanson vs. Court of Appeals, G.R. No. 127745, April 22, 2003
Under Section 3, Rule 131 of the Rules of Court the following presumptions,
among others, are satisfactory if uncontradicted: a) That there was a sufficient
consideration for a contract and b) That a negotiable instrument was given or indorsed
for sufficient consideration. A similar presumption is found in Section 24 of the
Negotiable Instruments Law which provides that every negotiable instrument is
deemed prima facie to have been issued for valuable consideration and every person
whose signature appears thereon to have become a party for value.
Charles Lee vs. Court of Appeals, G.R. No. 117913, February 1, 2002
Mico Metals Corporation vs. Court of Appeals, G.R. No. 117914, February 1, 2002
17
18
Such an indorsement is generally for the purpose of better securing the payment of
the note - that is, he lends his name to the maker, not to the holder. Putting it in
another way: An accommodation note is one to which the accommodation party has
put his name, without consideration, for the purpose of accommodating some other
party who is to use it and is expected to pay it. The credit given to the accommodation
party is sufficient consideration to bind the accommodation maker. Where, however,
an indorsement is made as a favor to the indorsee, who requests it, not the better to
secure payment, but to relieve himself from a distasteful situation, and where the only
consideration for such indorsement passes from the indorser to the indorsee, the
situation does not present one creating an accommodation indorsement, nor one where
there is a consideration sufficient to sustain an action on the indorsement.
Fernando Maulini vs. Antonio G. Serrano, G.R. No. 8844, December 16, 1914
19
The accommodation party can claim no benefit as such, but he is liable according
to the face of his undertaking, the same as if he were himself financially interested in
the transaction.
PNB vs. Ramon Maza, G.R. No. 24224. November 3, 1926
Accommodation party is liable to a holder for value even if he did not receive
valuable consideration thereto.
The accommodation party is liable to a holder for value as if the contract was not
for accommodation. It is not a valid defense that the accommodation party did not
receive any valuable consideration when he executed the instrument. It is not correct
to say that the holder for value is not a holder in due course merely because at the time
he acquired the instrument, he knew that the indorser was only an accommodation
party.
Ang Tiong vs. Lorenzo Ting, G.R. No. L-26767, February 22, 1968
Copyright 2015
20
Republic Bank vs. Mauricia T. Ebrada, G.R. No. L-40796, July 31, 1975
As regards an accommodation party, the fourth condition, i.e., lack of notice of any
infirmity in the instrument or defect in title of the persons negotiating it, has no
application. This is because Section 29 of the law preserves the right of recourse of a
"holder for value" against the accommodation party notwithstanding that "such holder,
at the time of taking the instrument, knew him to be only an accommodation party."
Stelco Marketing Corporation vs. Court of Appeals, G.R. No. 96160, June 17, 1992
21
the instrument.
The provision of the Negotiable Instruments Law which holds an accommodation
party liable on the instrument to a holder for value, although such holder at the time of
taking the instrument knew him to be only an accommodation party, does not include
nor apply to corporations which are accommodation parties. This is because the issue
or indorsement of negotiable paper by a corporation without consideration and for the
accommodation of another is ultra vires. Hence, one who has taken the instrument
with knowledge of the accommodation nature thereof cannot recover against a
corporation where it is only an accommodation party. If the form of the instrument, or
the nature of the transaction, is such as to charge the indorsee with knowledge that the
issue or indorsement of the instrument by the corporation is for the accommodation of
another, he cannot recover against the corporation thereon.
Ernestina Crisologo-Jose vs. Court of Appeals, G.R. No. 80599, September 15, 1989
Although the defendant-appellant to whom the plaintiff Bank paid the check was
not proven to be the author of the supposed forgery, yet as last indorser of the check,
she has warranted that she has good title to it even if in fact she did not have it
because the payee of the check was already dead 11 years before the check was
issued. The fact that immediately after receiving the cash proceeds of the check in
question in the amount of P1,246.08 from the plaintiff Bank, defendant-appellant
immediately turned over said amount to Adelaida Dominguez (Third-Party defendant
and the Fourth-Party plaintiff) who in turn handed the amount to Justina Tinio on the
same date would not exempt her from liability because by doing so, she acted as an
accommodation party in the check for which she is also liable under Section 29 of the
Negotiable Instruments Law (Act 2031).
Copyright 2015
22
Republic Bank vs. Mauricia T. Ebrada, G.R. No. L-40796, July 31, 1975
An accommodation party is "one 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. Such a person is liable on the instrument to a holder
for value, notwithstanding such holder at the time of taking the instrument knew the
same to be only an accommodation party."
Fernando Maulini vs. Antonio G. Serrano, G.R. No. 8844, December 16, 1914
An accommodation party is one who has signed the instrument as maker, drawer,
acceptor, indorser, without receiving value therefor and for the purpose of lending his
name to some other person. Such person is liable on the instrument to a holder for
value, notwithstanding such holder, at the time of the taking of the instrument knew
him to be only an accommodation party. In lending his name to the accommodated
party, the accommodation party is in effect a surety for the latter. He lends his name to
enable the accommodated party to obtain credit or to raise money. He receives no part
of the consideration for the instrument but assumes liability to the other parties thereto
Copyright 2015
23
Section 29 of the NIL 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.
Genevieve Lim vs. Florencio Saban, G.R. No. 163720, December 16, 2004
Ernestina Crisologo-Jose vs. Court of Appeals, G.R. No. 80599, September 15, 1989
Tomas Ang vs. Associated Bank, et al., G.R. No. 146511, September 5, 2007
Copyright 2015
24
25
the general obligation to pay if the instrument is dishonored but not of the liability
arising from warranties on the instrument.
Metropol (Bacolod) Financing & Investment Corp. vs. Sambok Motors Company, et al.,
G.R. No. L-39641, February 28, 1983
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
Copyright 2015
26
check.
Metrobank vs. BA Finance Corp., et al., G.R. No. 179952, December 4, 2009
There can be no question that the petitioner, as the payee named in, and as the
holder of each of the five bills of exchange sued upon, is entitled under section 51 of
the Negotiable Instruments Law to sue upon said instruments in its own name.
Westminster Bank, Ltd. vs. Luis P. Torres, G.R. No. 38139, October 27, 1932
Copyright 2015
27
When a holder not in due course may recover from a person primarily liable.
A person who is not himself a holder in due course of a negotiable instrument may
yet recover against the person primarily liable thereon, even though the consideration
for the instrument has failed, where it appears that such holder derives his title
through a holder in due course. But in order that the holder may recover on the
instrument under such circumstances, it is incumbent upon him to show that he person
through whom he derives his indefeasible title was a holder in due course; and this
must be proved as an independent matter of fact.
Charles A. Fossum vs. Fernandez Hermanos, G.R. No. 19461, March 28, 1923
28
The Negotiable Instruments law does not provide that a holder who is not a holder
in due course, may not in any case, recover on the instrument. The only disadvantage
of a holder who is not a holder in due course is that the negotiable instrument is
subject to defenses as if it were non-negotiable.
Chan Wan vs. Tan Kim and Chen So, G.R. No. L-15380, September 30, 1960
Presumption that one is a holder in due course does not exist where his title is
defective or suspicious.
Where a holder's title is defective or suspicious, it cannot be stated that the payee
acquired the check without the knowledge of said defect in holder's title, and for this
reason the presumption that it is a holder in due course or that it acquired the
instrument in good faith does not exist.
Vicente R. de Ocampo & Co. vs. Anita Gatchalian, G.R. No. L-15126, November 30,
1961
Bank encashing a check is not deemed holder in due course if payee requested
deferment of presentment.
The fact that the payee of a check payable on demand requested the encashing bank
to defer the presentment for collection of the same to the drawee bank to a later date,
is an indication of an infirmity in the instrument or defect in the title of the person
negotiating it, so that the encashing bank cannot be considered a holder in due course.
Banco Atlantico vs. Auditor General, G.R. No. L-33549, January 31, 1978
In the instant case, the checks were crossed checks and specifically indorsed for
deposit to payee's account only. From the beginning, Atrium was aware of the fact
that the checks were all for deposit only to payee's account, meaning E.T. Henry.
Clearly, then, Atrium could not be considered a holder in due course.
Atrium Management Corp. vs. Court of Appeals, G.R. No. 109491, February 28, 2001
Copyright 2015
29
Lourdes M. De Leon vs. Court of Appeals, G.R. No. 121794, February 28, 2001
30
of a holder who is not a holder in due course is that the negotiable instrument is
subject to defenses as if it were non-negotiable.
Chan Wan vs. Tan Kim, G.R. No. L-15380, September 30, 1960
The law presumes that a holder of a negotiable instrument is a holder thereof in due
course.
Sps. Pedro and Florencia Violago vs. BA Finance Corp., et al., G.R. No. 158262, July
21, 2008
Payee's interest is merely to see that the note be paid according to its terms.
The maker of a promissory note cannot escape liability by alleging that he spent the
money for the medical treatment of his daughter, the beneficiary of the trustee who is
Copyright 2015
31
the payee of the note, since it is not the payee's concern to know how said proceeds
should be spent, inasmuch as that is the sole concern of the maker, and payee's interest
is merely to see that the note be paid according to its terms.
J. Antonio Araneta vs. Antonio Perez, G.R. Nos. L-20787-8, June 29, 1965
As makers of the negotiable instruments, they must keep their engagement and
must pay as promised. Their liability on the instruments is primary and unconditional.
PNB vs. Ramon Maza, G.R. No. 24224, November 3, 1926
The liability of the defendant, as one of the signers of the note, is not dependent on
whether he has, or has not, received any part of the amount of the debt. The defendant
is really and expressly one of the joint and several debtors on the note, and as such he
is liable under the provisions of section 60 of Act No. 2031.
R. N. Clark vs. George C. Sellner, G.R. No. 16477, November 22, 1921
Drawer of a bill becomes liable for the payment of its value if it is not paid.
The fact that the drawer was a commission agent of the drawee in the purchase of
the merchandise covered by the bill does not necessarily make him an agent of the
drawee in his obligations emanating from the bill drawn by him. His acts in
negotiating the bill constitute a contract distinct from that made by his having
purchased the merchandise on behalf of the drawee, unless at the time of signing the
bill he should have added to his signature some expression to indicate it. (Sec. 20,
Negotiable Instruments Law.) Nor is his liability as drawer affected by the fact that
the merchandise shipped by him, which constituted the consideration for the drawing
of the bill, was or was not of inferior quality.
PNB vs. Bartolome Picornell, G.R. No. L-18915, September 26, 1922
32
would be paid, and that if it be dishonored, he will pay the amount thereof to the
holder. Wherefore, in the absence of due presentment, the drawer did not become
liable.
Chan Wan vs. Tan Kim and Chen So, G.R. No. L-15380, September 30, 1960
Drawee who unconditionally accepts the bill cannot allege want of consideration
between him and the drawer.
The drawee, by accepting unconditionally the bill, becomes liable to the holder, and
Copyright 2015
33
cannot allege want of consideration between him and the drawer. The holder is a
stranger as regards the transaction between the drawer and the drawee, and if he has
given value to the drawer and has no knowledge of any equity between the drawer and
the drawee, he is in the same situation as an indorsee in good faith. Hence, in an
action brought by the holder against the acceptor it is no defense that the merchandise
sent by the drawer, and which constituted the consideration for the drawing of the bill,
is of inferior quality than was ordered by the drawee to such a degree that it is not
worth the value of the bill.
PNB vs. Bartolome Picornell, G.R. No. L-18915, September 26, 1922
Act No. 2031, or the Negotiable Instruments Law (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.
Far East Bank & Trust Co. vs. Gold Palace Jewellery Co., G.R. No. 168274, August 20,
2008
Philippine National Bank vs. Court of Appeals, G.R. No. L-26001, October 29, 1968
Having relied on the drawee bank's clearance and payment of the draft and not
being negligent (it delivered the purchased jewelry only when the draft was cleared
and paid), respondent is amply protected by the said Section 62. Commercial policy
favors the protection of any one who, in due course, changes his position on the faith
of the drawee bank's clearance and payment of a check or draft.
Far East Bank & Trust Co. vs. Gold Palace Jewellery Co., G.R. No. 168274, August 20,
2008
Thus, considering that, in this case, Gold Palace is protected by Section 62 of the
Copyright 2015
34
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, the latter, under the terms of the deposit and the provisions of the
NIL, became an agent of the former for the collection of the amount in the draft. The
subsequent payment by the drawee bank and the collection of the amount by the
collecting bank closed the transaction insofar as the drawee and the holder of the
check or his agent are concerned, converted the check into a mere voucher, and, as
already discussed, foreclosed the recovery by the drawee of the amount paid. This
closure of the transaction is a matter of course; otherwise, uncertainty in commercial
transactions, delay and annoyance will arise if a bank at some future time will call on
the payee for the return of the money paid to him on the check.
Far East Bank & Trust Co. vs. Gold Palace Jewellery Co., G.R. No. 168274, August 20,
2008
Jai-Alai Corporation vs. Bank of the Philippine Islands, G.R. No. L-29432, August 6,
1975
Ang Tiong vs. Lorenzo Ting, G.R. No. L-26767, February 22, 1968
Section 63 of Act No. 2031 or the Negotiable Instruments Law provides that the
acceptor, by accepting the instrument, engages that he will pay it according to the
tenor of his acceptance. The acceptor is a drawee who accepts the bill. In Philippine
National Bank v. Court of Appeals, the payment of the amount of a check implies not
only acceptance but also compliance with the drawee's obligation.
Areza v. Express Savings Bank, Inc., G.R. No. 176697, September 10, 2014, citing
Copyright 2015
35
Indorser warrants to the drawee that the signatures of payee and previous
indorsers are genuine.
It is not supposed to be the duty of a drawee bank to ascertain whether the
signatures of the payee or indorsers are genuine or not. This is because the indorser is
supposed to warrant to the drawee that the signatures of the payee and previous
indorsers are genuine, warranty not extending only to holders in due course.
05plpecda
Republic Bank vs. Mauricia T. Ebrada, G.R. No. L-40796, July 31, 1975
The liability of an indorser of a bill of exchange, after due protest and notice of
nonpayment and dishonor, is the same as that of the original obligors on such a
contract, and any material alteration in the terms of this contract by the holder of the
same, without the consent of the obligor, will relieve such obligor from all liability
thereon.
Notwithstanding that the defendant is relieved from liability by reason of this
material alteration in his indorsement, we hold that his original indorsement created
Copyright 2015
36
no liability whatever. The original indorsement by the defendant was for the purpose
only of assuring the plaintiff that the signature of V. S. Wolff, as attached to the
original bill of exchange, was genuine that is to say, that the person whom he
represented himself to be. It was an indorsement of identification of the person only,
and not for the purpose of incurring any liability as to the payment of such bill of
exchange. There was no attempt to show that the drawer of said bill of exchange, V.
S. Wolff, was not the person who actually drew and signed said bill of exchange.
American Bank vs. Macondray & Co., G.R. No. 1808, August 23, 1905
Under Section 67 of the Negotiable Instruments Law, "Where a person places his
indorsement on an instrument negotiable by delivery he incurs all the liability of an
indorser," and under Section 66 of the same statute a general indorser warrants that
the instrument "is genuine and in all respects what it purports to be." Considering that
the petitioner indorsed the said checks when it deposited them with the respondent,
the petitioner as an indorser guaranteed the genuineness of all prior indorsements
thereon. The respondent which relied upon the petitioner's warranty should not be
held liable for the resulting loss.
Jai-Alai Corporation of the Philippines vs. Bank of the Philippine Island, G.R. No.
L-29432, August 6, 1975
The supposed assurances of refund in case of dishonor of the check are precisely
the ordinary obligations of an indorser, and these obligations are, under the law,
considered discharged by an unreasonable delay in the presentation of the check for
payment.
PNB vs. Benito Seeto, G.R. No. L-4388, August 13, 1952
It is thus clear that ordinarily private respondent may be held liable as an indorser
Copyright 2015
37
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.
Remedios Nota Sapiera vs. Court of Appeals, G.R. No. 128927, September 14, 1999
Copyright 2015
38
Areza v. Express Savings Bank, Inc., G.R. No. 176697, September 10, 2014
Copyright 2015
39
Bank of the Philippine Islands vs. Alfred Berwin & Company, G.R. No. 29075, October
2, 1928
Failure to notify indorser frees him from all liability upon the document.
If, after a negotiable instrument is dishonored for non-acceptance of non-payment,
the endorser is not notified of the fact in the time and manner prescribed by the law,
said endorser is released from all liability upon the document.
Asia Banking Corp. vs. Juan Javier, G.R. No. 19051, April 4, 1923.
Dishonor of check upon presentment differs in consequences from its being stale
for non-presentment.
The dishonoring of a check upon presentment, and its being stale for not being
Copyright 2015
40
presented at all time, are incompatible developments that naturally have variant legal
consequences. Thus, if indeed the check in question had been dishonored then there
can be no doubt that petitioner's redemption was null and void. On the other hand, if it
had only become stale, then it becomes imperative that the circumstances that caused
its non-presentment be determined, for if this was not due to the fault of the petitioner,
then it would be unfair to deprive him of the rights he had acquired as redemptioner,
particularly, if, after all, the value of the check has otherwise been received or realized
by the party concerned.
Raymundo A. Crystal vs. CA, G.R. No. L-35767, June 18, 1976
The silence of Section 186 as to the indorser is due to the fact that his discharge is
already expressly covered by the provision of Section 84, the indorser being a person
secondarily liable on the instrument. The reason for the difference between the
liability of the indorser and that of the drawer in case of dishonor is that the drawer is
not probably or necessarily prejudiced thereby, while an indorser is, actually or by
legal presumption.
Philippine National Bank vs. Benito Seeto, G.R. No. L-4388, August 13, 1952
Section 89 of the Negotiable Instruments Law (Act No. 2031) provides that, when
a negotiable instrument is dishonored for non-acceptance or non-payment, notice
thereof must be given to the drawer and of each of the endorsers, and those who are
not notified that the document was dishonored. Then, under the general principle of
the law of procedure, it will be incumbent upon the plaintiff, who seeks to enforce the
defendant's liability upon these checks as endorser, to establish said liability by
proving that notice was given to the defendant within the time, and in the manner,
required by the law that the checks in question had been dishonored. If these facts are
Copyright 2015
41
not proven, the plaintiff has not sufficiently established the defendant's liability.
Asia Banking Corp. vs. Juan Javier, G.R. No. 19051, April 4, 1923
42
recovery on the ground that the drawee by accepting admitted the existence of the
payee and his capacity to endorse.
The second view is that the acceptor/drawee despite the tenor of his acceptance is
liable only to the extent of the bill prior to alteration. This view appears to be in
consonance with Section 124 of the Negotiable Instruments Law which states that a
material alteration avoids an instrument except as against an assenting party and
subsequent indorsers, but a holder in due course may enforce payment according to its
original tenor. Thus, when the drawee bank pays a materially altered check, it violates
the terms of the check, as well as its duty to charge its client's account only for bona
fide disbursements he had made. If the drawee 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 drawer's account which it was expected to treat with utmost fidelity.
The drawee, however, still has recourse to recover its loss. It may pass the liability
back to the collecting bank which is what the drawee bank exactly did in this case. It
debited the account of Equitable-PCI Bank for the altered amount of the checks.
Areza v. Express Savings Bank, Inc., G.R. No. 176697, September 10, 2014, citing
National City Bank of Chicago v. Bank of the Republic, 300 Ill. 103, 132 N.E. 832, 22
A.L.R. 1153
Bank assumes risk if it encashes check without first clearing it with drawee bank.
Where a bank to which a check was negotiated encashes the same without first
clearing it with the drawee bank, contrary to normal banking practice, and the check is
dishonored by the drawee bank on the ground that the drawer had ordered payment to
be stopped because the check was fraudulently altered, the encashing bank assumes
the risk and no right of payment could be acquired by the latter against any party
thereto.
Banco Atlantico vs. Auditor General, G.R. No. L-33549, January 31, 1978
The liability of an indorser of a bill of exchange, after due protest and notice of
nonpayment and dishonor, is the same as that of the original obligors on such a
contract, and any material alteration in the terms of this contract by the holder of the
same, without the consent of the obligor, will relieve such obligor from all liability
thereon.
American Bank vs. Macondray & Co., G.R. No. 1808, August 23, 1905
Copyright 2015
43
44
45
Indeed, "acceptance" and "payment" are, within the purview of said Law, essentially
different things, for the former is "a promise to perform an act," whereas the latter is
the "actual performance" thereof. In the words of the law, "the acceptance of a bill
is the signification by the drawee of his assent to the order of the drawer," which, in
the case of checks, is the payment, on demand, of a given sum of money. Upon the
other hand, actual payment of the amount of a check implies not only an assent to said
order of the drawer and a recognition of the drawee's obligation to pay the
aforementioned sum, but, also, a compliance with such obligation.
Philippine National Bank vs. Court of Appeals, G.R. No. L-26001, October 29, 1968
Under the Negotiable Instruments Law, persons who write their names on the face
of promissory notes are makers, promising that they will pay to the order of the payee
or any holder according to its tenor.
Astro Electronics Corp. vs. Phil. Export And Foreign Loan Guarantee Corp., G.R. No.
136729, September 23, 2003
Copyright 2015
46
Promissory notes executed to evidence crop loans become due and demandable
only at end of agricultural year.
Promissory notes executed to evidence crop loans to be used for plowing,
purchasing seeds, planting, cultivation, harvesting, marketing transportation etc. for
the agricultural year 1943 1944 became due and demandable only at the end of the
said agricultural year - more or less around the month of April, 1944.
In the Matter of the Testate Estate of the deceased German Gaston, Victoria Vda. de
Gaston vs. Republic of the Philippines, G.R. No. L-20320, March 30, 1967
Where duty to prove acquisition of check in good faith devolves upon payee.
Copyright 2015
47
Where the payee acquired the check under circumstances which should have put it
to inquiry, why the holder had the check and used it, to pay his own personal account,
the duty devolved upon it to prove that it actually acquired said check in good faith.
Vicente R. de Ocampo & Co. vs. Anita Gatchalian, G.R. No. L-15126, November 30,
1961
Purchaser of check or draft is obliged to satisfy himself that the paper is genuine.
One who purchases a check or draft is bound to satisfy himself that the paper is
genuine, and that by indorsing it or presenting it for payment or putting it into
circulation before presentation he impliedly asserts that he performed his duty.
PNB vs. The National City Bank of New York, G.R. No. 43596, October 31, 1936
Checks and money orders may be bought and sold like commodities.
Checks, as bills of exchange, are negotiable instruments and may be bought and
sold like a commodity. Money orders, also considered as bills of exchange of limited
negotiability, possess the same attributes as other negotiable instruments. Thus, they
may also be bought and sold like checks.
Manuel Bastida vs. Acting Commissioner of Customs, G.R. No. L-24011, October 24,
1970
Memorandum check signifies that maker/drawer engages to pay bona fide holder
unconditionally.
Copyright 2015
48
Holder of crossed check deemed not in good faith if it fails to ascertain indorser's
title or nature of possession.
It is then settled that crossing of checks should put the holder on inquiry and upon
him devolves the duty to ascertain the indorser's title to the check or the nature of his
possession. Failing in this respect, the holder is declared guilty of gross negligence
amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable
Instruments Law, and as such the consensus of authority is to the effect that the holder
Copyright 2015
49
A crossed check with the notation "account payee only" can only be deposited in
the named payee's account. It is gross negligence for a bank to ignore this rule solely
on the basis of a third party's oral representations of having a good title thereto.
Equitable Banking Corp. vs. Special Steel Products, Inc., et al., G.R. No. 175350, June
13, 2012
The checks that Interco issued in favor of SSPI were all crossed, made payable to
SSPI's order, and contained the notation "account payee only." This creates a
reasonable expectation that the payee alone would receive the proceeds of the checks
and that diversion of the checks would be averted. This expectation arises from the
accepted banking practice that crossed checks are intended for deposit in the named
payee's account only and no other. At the very least, the nature of crossed checks
should place a bank on notice that it should exercise more caution or expend more
than a cursory inquiry, to ascertain whether the payee on the check has authorized the
holder to deposit the same in a different account. It is well to remember that "[t]he
banking system has become an indispensable institution in the modern world and
plays a vital role in the economic life of every civilized society. Whether as mere
passive entities for the safe-keeping and saving of money or as active instruments of
business and commerce, banks have attained an [sic] ubiquitous presence among the
people, who have come to regard them with respect and even gratitude and, above all,
trust and confidence. In this connection, it is important that banks should guard
against injury attributable to negligence or bad faith on its part. As repeatedly
emphasized, since the banking business is impressed with public interest, the trust and
confidence of the public in it is of paramount importance. Consequently, the highest
degree of diligence is expected, and high standards of integrity and performance are
required of it.
Equitable Banking Corp. vs. Special Steel Products, Inc., et al., G.R. No. 175350, June
13, 2012 citing Security Bank and Trust Company vs. Rizal Commercial Banking
Corporation, G.R. Nos. 170984 & 170987, January 30, 2009
The fact that a person, other than the named payee of the crossed check, was
presenting it for deposit should have put the bank on guard. It should have verified if
the payee (SSPI) authorized the holder (Uy) to present the same in its behalf, or
indorsed it to him. Considering however, that the named payee does not have an
account with Equitable (hence, the latter has no specimen signature of SSPI by which
Copyright 2015
50
to judge the genuineness of its indorsement to Uy), the bank knowingly assumed the
risk of relying solely on Uy's word that he had a good title to the three checks. Such
misplaced reliance on empty words is tantamount to gross negligence, which is the
"absence of or failure to exercise even slight care or diligence, or the entire absence of
care, evincing a thoughtless disregard of consequences without exerting any effort to
avoid them."
Equitable Banking Corp. vs. Special Steel Products, Inc., et al., G.R. No. 175350, June
13, 2012 citing Metropolitan Bank and Trust Company v. BA Finance Corporation, G.R.
No. 179952, December 4, 2009
A check is a bill of exchange payable on demand and only the rules governing bills
of exchange payable on demand are applicable to it, according to section 185 of the
Negotiable Instruments Law.
Philippine National Bank vs. The National City Bank of New York, G.R. No. 43596,
October 31, 1936
The checks in question which plaintiff drew on its foreign correspondents were
orders for the payment of money and clearly come within the definitions of a bill of
exchange under section 126 and a check as defined in section 185, and, as such, are
foreign bills of exchange within the meaning of subsection (i) of section 1449 of the
Administrative Code of 1917.
Bank of the Phil. Islands vs. Wenceslao Trinidad, G.R. No. 22967, February 27, 1925
51
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 (citing Sec. 189,
Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan London Co. vs. American
Bank, 7 Phil. 255; Tan Sunco vs. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check,
whether a manager's 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.
Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court, G.R. No.
72110, November 16, 1990
The law is that a check produces the effect of payment only when it has been
cashed.
Raymundo A. Crystal vs. Court of Appeals, G.R. No. L-35767, June 18, 1976
52
It is also true that Section 84 is applicable, but its application is subject to the
condition imposed by Section 186, to the effect that the check must be presented for
payment within a reasonable time after its issue.
Philippine National Bank vs. Benito Seeto, G.R. No. L-4388, August 13, 1952
A check must be presented for payment within a reasonable time after its issue,
and in determining what is a "reasonable time," regard is to be had to the nature of the
instrument, the usage of trade or business with respect to such instruments, and the
facts of the particular case. The test is whether the payee employed such diligence as
a prudent man exercises in his own affairs. This is because the nature and theory
behind the use of a check points to its immediate use and payability.
International Corporate Bank vs. Francis S. Gueco, G.R. No. 141968, February 12,
2001
A check is not legal tender and that a creditor may validly refuse payment by check,
whether it be a manager's, cashier's or personal check.
Norberto Tibajia, Jr., et al. vs. Court of Appeals, G.R. No. 100290, June 4, 1993
Acceptance
Moreover, according to section 191, "acceptance" means "an acceptance completed
by delivery or notification" and this concept is entirely incompatible with payment,
because when payment is made the check is retained by the bank, and there is no such
thing as delivery or notification to the party receiving the payment. (1 Bouvier's Law
Dictionary, 476.) There can be no such thing as "acceptance" in the ordinary sense of
the term. A check being payable immediately and on demand, the bank can fulfill its
Copyright 2015
53
duty to the depositor only by paying the amount demanded. The holder has no right to
demand from the bank anything but payment of the check, and the bank has no right,
as against the drawer, to do anything but pay it. (5 R.C.L., p. 516, par. 38.) A check is
not an instrument which in the ordinary course of business calls for acceptance. The
holder can never claim acceptance as his legal right. He can present for payment, and
only for payment. (1 Morse on Banks and Banking, 6th ed., People. 898, 899.)
Philippine National Bank vs. The National City Bank of New York, G.R. No. 43596,
October 31, 1936
Issue
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.
John Dy vs. People of the Phil., et al., G.R. No. 158312, November 14, 2008
Copyright 2015
54