59410771

Digests
Negotiable Instruments Law

Michael Vernon Guerrero Mendiola 2004 Shared under Creative Commons AttributionN
onCommercial-ShareAlike 3.0 Philippines license.
Some Rights Reserved.
Table of Contents
Abubakar vs. Auditor General, GR L-1405, 31 July 1948 ......... 1 Ang Tiong vs. T
ing, GR L-26767, 22 February 1968 ......... 1 Arrieta vs. National Rice & Corn Co
rporation (NARIC), GR L-15645, 31 January 1964 ......... 1 Associated Bank vs. CA
, GR 89802, 7 May 1992 ......... 2 Associated Bank vs. CA, GR 107382, 31 January
1996 ......... 2 Bataan Cigar and Cigarette Factory vs. CA, GR 93048, 3 March 199
4 ......... 3 Caltex (Philippines) Inc. vs. CA, GR 97753, 10 August 1992 .........
3 Caram Resources vs. Contreras, AM MTJ0830849, 26 October 1994 ......... 4 City
Trust Banking vs. CA, GR 92591, 30 April 1991 ......... 5 Clark vs. Sellner, GR
16477, 22 November 1921 ......... 5 Co vs. PNB, GR L-51767, 29 June 1982 .........
6 Cruz vs. CA, GR 108738, 17 June 1994 ......... 6 Crystal vs. CA, GR L-35767, 1
8 June 1976 ......... 6 Dela Victoria vs. Burgos, GR 111190, 27 June 1995 ........
.7 Firestone Tire and Rubber vs. Ines Chaves & Co., GR L-17106, 19 October 1966 .
........ 7 Gempesaw vs. CA, GR 92244, 9 February 1993 ......... 8 Hongkong & Shan
ghai Bank vs. Peoples Bank and Trust, GR L-28226, 30 September 1970 ......... 8 Ib
asco vs. CA, GR 117488, 5 September 1996 ......... 9 Jimenez vs. Bucoy, GR L-1022
1, 28 February 1958 ......... 9 Kalalo vs. Luz, GR L-27782, 31 July 1970 .........
10 Lao vs. CA, GR 119178, 20 June 1997 ......... 10 Lazaro vs. CA, GR 105461, 11
November 1993 ......... 11 Lim vs. CA, GR 107898, 19 December 1995 ......... 11 L
im vs. People, GR 130038, 18 September 2000 ......... 12 Lim vs. Rodrigo, GR 7697
4, 18 November 1988 ......... 12 Llamado vs. CA, GR 99032, 26 March 1997 .........
13 Lozano vs. Martinez, GR L-63419, 18 December 1986 ......... 13 Magno vs. CA,
GR 96132, 26 June 1992 ......... 14 Manila Lighter Transportation vs. CA, GR L-50
373, 15 February 1990 ......... 14 Moran vs. CA, GR 105836, 7 March 1994 .........
15 MWSS vs. CA, GR L-62943, 14 July 1986 ......... 15 Navarro vs. CA, GR 112389,
1 August 1994 ......... 16 People vs. Grospe, GR L-74053-54, 20 January 1988 ....
..... 16 People vs. Maniego, GR L-30910, 27 February 1987 ......... 17 People vs.
Reyes, GR 101127-31, 18 November 1993 ......... 17 People vs. Tuanda, AC 3360, 3
0 January 1990 ......... 18 Philippine Bank of Commerce vs. Aruego, GR L-25836-37
, 31 January 1981 ......... 18 Philippine Commercial Industrial Bank vs. CA, GR 1
21413, 29 January 2001 ......... 19 Philippine Education Co. vs. Soriano, GR L-22
405, 30 June 1971 ......... 20 Pineda vs. dela Rama, GR L-31831, 28 April 1983 ...
...... 20 PNB vs. CA, GR L-26001, 29 October 1968 ......... 21 PNB vs. National C
ity Bank, GR 43596, 31 October 1936 ......... 21 PNB vs. Quimpo, GR L-53194, 14 M
arch 1988 ......... 22 Ponce vs. CA, GR L-49444, 31 May 1979 ......... 23 Prudenci
o vs. CA, GR L-34539, 14 July 1986 ......... 23 Que vs. People, GR 75217-18, 21 S
eptember 1987 ......... 24 Republic Bank vs. CA, GR 42725, 22 April 1991 .........
24 Republic Bank vs. Ebrada, GR L-40796, 31 July 1975......... 25 Republic Plant
ers Bank vs. CA, GR 93073, 21 December 1992 ......... 25 San Carlos Milling vs. B
PI, GR 37467, 11 December 1933 ......... 26
Sesbreno vs. CA, GR 89252, 24 May 1993 ......... 26 State Investment House vs. CA
, GR 101163, 11 January 1993 ......... 27 State Investment House vs. IAC, GR 7276
4, 13 July 1989 ......... 28 Stelco Marketing vs. CA, GR 96160, 17 June 1992 .....
.... 28 Tan vs. CA, GR 108555, 20 December 1994 ......... 29 Tibajia vs. CA, GR 1
00290, 4 June 1993 ......... 29 Travel On vs. CA, GR 56169, 26 June 1992 .........
30 Uy vs. CA, GR 119000, 28 June 1997 ......... 30 Vaca vs. CA, GR 43596, 31 Oct
ober 1936 ......... 30 Vda. de Eduque vs. Ocampo, GR L-222, 26 April 1950 ........
. 31
This collection contains sixty (60) cases summarized in this format by Michael V
ernon M. Guerrero (as a sophomore law student) during the Second Semester, schoo
l year 2003-2004 in the Negotiable Instruments Law class under Atty. Minda Gapuz
at the Arellano University School of Law (AUSL). Compiled as PDF, July 2011. Be
rne Guerrero entered AUSL in June 2002 and eventually graduated from AUSL in 200
6. He passed the Philippine bar examinations immediately after (April 2007).
www.berneguerrero.com
Digests (Berne Guerrero)

[1] Abubakar vs. Auditor General GR L-1405, 31 July 1948 First Division, Bengzon
(J) Facts: Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes
on 10 December 1941 for P1,000, but is now in the hands of Benjamin Abubakar. T
he Auditor refused to authorize the payment of the treasury warrant. Abubakar co
ntends he is a holder in good faith and for value and thus, entitled to the righ
ts and privileges of a holder in due course. Issue: Whether Abubakar is a holder
in due course. Held: A treasury warrant is not a negotiable instrument; it bein
g 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. There
fore, a holder of a treasury warrant cannot argue that he is a holder in good fa
ith and for value of a negotiable instrument and thus entitled to the rights and
privileges of a holder in due course, free from defenses. [2] Ang Tiong vs. Tin
g GR L-26767, 22 February 1968 En Banc, Castro (J) Facts: Lorenzo Ting issued a
check for P4,000 payable to cash or bearer. With Felipe Angs signature (indorsement
in blank) at the back thereof, the instrument was received by Ang Tiong who the
reafter presented it to the bank for payment. The drawee bank dishonored it. Ang
Tiong made written demands on both Ting and Ang to make good the amount represe
nted by the check. These demands unheeded. Ang Tiong filed suit for collection.
The trial court adjudged for Ang Tiong. Only Ang appealed, maintaining that he i
s only an accommodation party. Issue: Whether Felipe Ang is an accommodation par
ty. Held: Felipe Ang is a general indorser (Section 63, Negotiable Instruments L
aw), in the absence of any indication by appropriate words his intention to be b
ound in some other capacity. Even on the assumption that Ang is a mere accommoda
tion party, he is liable on the instrument to a holder for value notwithstanding
that such holder at the time of taking the instrument knew him to be only an ac
commodation party (Section 29, Negotiable Instruments Law). Assuming further tha
t Ang is an accommodation indorser, the fact that Ang may obtain security from t
he maker to protect himself against the danger of insolvency of the latter canno
t in any manner affect his liability to Ang Tiong, as the said remedy is a matte
r of concern exclusively between an accommodation indorser and an accommodated p
arty. The liability of Felipe Ang remains primary and unconditional. [3] Arrieta
vs. National Rice & Corn Corporation (NARIC) GR L-15645, 31 January 1964 En Ban
c, Regala (J) Facts: On 19 May 1952, Paz and Vitaliado Arrieta participated in t
he public bidding called by NARIC for the
Negotiable Instruments Law, 2004 ( 1 )

supply of 20,000 metric tons of Burmese rice. Ad her bid of $203 per metric ton
was the lowest, she was awarded the contract for the same. As a result of the de
lay in the opening of the letter of credit by NARIC, the allocation of Arrietas s
upplier in Rangoon was cancelled and the 5% deposit amounting to an equivalent o
f P200,000 was forfeited. Arrieta endeavored but failed to restore the cancelled
Burmese rice allocation, and thus offered Thailand rice instead. Such offer was
rejected by NARIC. Subsequently, Arrieta sent a letter to NARIC, demanding comp
ensation for the damages caused her in the sum of US$286,000 representing unreal
ized profit. The demand having been rejected, she instituted the case. Issue: Wh
ether the rate of exchange to be applied in the conversion is that prevailing at
the time of breach, or at the time the obligation was incurred, or on the promu
lgation of the decision. Held: As pronounced in Eastboard Navigation vs. Ismael,
if there is any agreement to pay an obligation in the currency other than Phili
ppine legal tender, the same is null and void as contrary to public policy (RA 5
29), and the most that could be demanded is to pay said obligation in Philippine
currency to be measured in the prevailing rate of exchange at the time the obli
gation was incurred. Herein, the rate of exchange to be applied is that of 1 Jul
y 1952, when the contract was executed. [4] Associated Bank vs. CA GR 89802, 7 M
ay 1992 First Division, Cruz (J) Facts: Melissas RTWs customers issued cross check
s payable to Melissas RTW, which its proprietor Merle Reyes did not receive. It w
as learned that the checks had been deposited with the Associated Bank by one Ra
fael Sayson. Sayson was not authorized by Reyes to deposit and encash said check
s. Reyes filed an action for the recovery of the total value of the checks plus
damages. Issue: Whether the bank was negligent for the loss. Held: Crossing a ch
eck means that the drawee bank should not encash the check but merely accept it
for deposit, that the check may be negotiated only once by one who has an accoun
t in a bank, and that the check serves as warning that it was issued for a defin
ite purpose so that he must inquire if he has received the check pursuant to tha
t purpose. The effect, thus, relate to the mode of its presentment for payment,
in accordance with Section 72 of the Negotiable Instruments Law. The bank paid t
he checks notwithstanding that title had not passed to the indorser, as the chec
ks had been crossed and issued for payees account only. It does did so in its own p
eril and became liable to the payee for the value of the checks. The failure of
the bank to make an inquiry as to Saysons authority was a breach of its duty. The
bank is negligent and is thus liable to Reyes. [5] Associated Bank vs. CA GR 10
7382, 31 January 1996 Second Division, Romero (J) Facts: The Province of Tarlac
maintains a current account with the Philippine National Bank (PNB Tarlac Branch
) where the provincial funds are deposited. Portions of the funds were allocated
to the Concepcion Emergency Hospital. Checks were issued to it and were receive
d by the hospitals administrative officer and cashier (Fausto Pangilinan). Pangil
inan, through the help of Associated Bank but after forging the signature of the
hospitals chief (Adena Canlas), was able to deposit the checks in his personal a
ccount. All the checks bore the stamp All prior endorsement guaranteed Associated
Bank. Through post-audit, 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 reimburs
ement from Associated Bank. Both banks resisted payment. Hence, the present acti
on. Issue: Who shall bear the loss resulting from the forged checks. Held: PNB i
s not negligent as it is not required to return the check to the collecting bank
within 24 hours as the banks involved are covered by Central Bank Circular 580
and not the rules of the Philippine Clearing House. Associated Bank, and not PNB
, is the one duty-bound to warrant the instrument as genuine, valid and subsisti
ng at the time of indorsement pursuant to Section 66 of the Negotiable Instrumen
ts Law. The stamp guaranteeing prior indorsement is not an empty rubric; the col
lecting bank is held accountable for checks deposited by its customers. However,
due to the fact that the Province of Tarlac is equally negligent in permitting
Pangilinan to collect the checks when he was no longer connected with the hospit
al, it shares the burden of loss from the checks bearing a forged indorsement. T
herefore, the Province can only recover 50% of the amount from the drawee bank (
PNB), and the collecting bank (Associated Bank) is liable to PNB for 50% of the
same amount. [6] Bataan Cigar and Cigarette Factory vs. CA GR 93048, 3 March 199
4 Second Division, Nocon (J) Facts: Bataan Cigar and Cigarette Factory Inc. (BCC
FI) engaged one of its suppliers, Kim Tim Pua George (George King), to deliver b
ales of tobacco leaf. In consideration thereof, BCCFI issued postdated cross che
cks to King. King sold the checks, at a discount, to the State Investment House
Inc. (SIHI). As King failed to deliver the bales of tobacco leaf despite demand,
BCCFI issued stop payment orders on the checks. Efforts by SIHI to collect from
BCCFI failed. SIHI filed suit. Issue: Whether SIHI can recover the value of the
checks, premised on the issue whether SIHI is a holder in due course. Held: The
facts of the case are on all fours to the case of SIHI vs. Intermediate Appella
te Court. The crossing of the checks should put the holder on inquiry and upon h
im 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 gro
ss negligence amounting to legal absence of good faith, contrary to Section 52 (
c) of the Negotiable Instruments Law, and as such the consensus of authority is
to the effect that the holder of the check is not a holder in due course. BCCFI
cannot be obliged to pay the checks as there is a failure of consideration (King
being unable to supply the bales of tobacco leaf, for which the checks were int
ended for). Still, SIHI -- a holder not in due course -- can collect from the im
mediate indorser, George King. Such is the disadvantage of a holder not in due c
ourse, i.e. the instrument is subject to defenses as if it were non-negotiable.
[7] Caltex (Philippines) Inc. vs. CA GR 97753, 10 August 1992 Second Division, R
egalado (J) Facts: On various dates, Security Bank and Trust Co. (SEBTC), throug
h its Sucat branch, issued 280 certificates of time deposit (CTD) in favor of on
e Angel dela Cruz who deposited with the bank the aggregate amount of P1.12 mill
ion. Anger de la Cruz delivered the CTDs to Caltex in connection with his purcha
se of

fuel products from the latter. Subsequently, dela Cruz informed the bank that he
lost all the CTDs, and thus executed an affidavit of loss to facilitate the iss
uance of the replacement CTDs. De la Cruz was able to obtain a loan of P875,000
from the bank, and in turn, he executed a notarized Deed of Assignment of Time D
eposit in favor of the bank. Thereafter, Caltex presented for verification the C
TDs (which were declared lost by de la Cruz) with the bank. Caltex formally info
rmed the bank of its possession of the CTDs and its decision to preterminate the
same. The bank rejected Caltex claim and demand, after Caltex failed to furnish
copy of the requested documents evidencing the guarantee agreement, etc. In 1983
, de la Cruz loan matured and the bank set-off and applied the time deposits as p
ayment for the loan. Caltex filed the complaint, but which was dismissed. Issue
[1]: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
Held [1]: The CTDs in question meet the requirements of the law for negotiabili
ty. Contrary to the lower courts findings, the CTDs are negotiable instruments (S
ection 1). Negotiability or non-negotiability of an instrument is determined fro
m the writing, i.e. from the face of the instrument itself. The documents provid
ed that the amounts deposited shall be repayable to the depositor. The amounts a
re to be repayable to the bearer of the documents, i.e. whosoever may be the bea
rer at the time of presentment. Issue [2]: Whether the CTDs negotiation require d
elivery only. Held [2]: Although the CTDs are bearer instruments, a valid negoti
ation thereof for the true purpose and agreement between it (Caltex) and de la C
ruz requires both delivery and indorsement; as the CTDs were delivered to it as
security for dela Cruz purchases of its fuel products, and not for payment. Herei
n, there was no negotiation in the sense of a transfer of title, or legal title,
to the CTDs in which situation mere delivery of the bearer CTDs would have suff
iced. The delivery thereof as security for the fuel purchases at most constitute
s Caltex as a holder for value by reason of his lien. Accordingly, a negotiation
for such purpose cannot be effected by mere delivery of the instrument since th
e terms thereof and the subsequent disposition of such security, in the event of
non-payment of the principal obligation, must be contractually provided for. [8
] Caram Resources vs. Contreras AM MTJ0830849, 26 October 1994 First Division, D
avide Jr. (J) Facts: Teresita Dizon obtained a loan from Caram Resources payable
in installments. She issued a promissory note and postdated BPI checks, four of
which were dishonored when presented to the bank as the account against which t
hey were drawn had been closed. Caram charged Dizon for violation of BP22, but w
here Judge Contreras acquitted Dizon on the ground of reasonable doubt. Subseque
ntly, Caram charged Judge Maximo Contreras with gross ignorance of the law and g
ross misconduct committed in Dizons criminal case. Issue: Whether malice is an es
sential element in BP 22. Held: In the 4 criminal cases before Judge Contreras,
Dizon as accused admitted that a loan was granted to her and in connection there
with she executed a promissory note wherein she bound herself to pay the loan in
12 installments. She issued the postdated checks to cover the installments as t
hey fall due. The checks were drawn against her BPI current account, which she c
losed in the same months she obtained the loan, so that when the checks were pre
sented for payment they were dishonored. Malice and intent in issuing a worthles
s check are immaterial. The offense is committed by the very fact of its perform
ance, i.e. the mere act of issuing a worthless check. The offense is malum prohi
bitum. An act may not be considered by society as inherently

wrong, hence, not malum in se, but because of the harm that it inflicts on the c
ommunity, it can be outlawed and criminally punished as malum prohibitum, pursua
nt to the States exercise of police power. [9] City Trust Banking vs. CA GR 92591
, 30 April 1991 Third Division, Gutierrez Jr. (J) Facts: William Samara purchase
d from Citytrust Bank Draft 23681 for US$ 40,000 the payee being Thai Internatio
nal Airways and the corresponding drawee bank in the United States is Marine Mid
land. Samara executed a stop-payment order of the bank draft instructing Citytru
st to inform Marine Midland about the order through telex. Marine Midland noted
the order, and thus Citytrust credited Samaras account. Seven months later, Cityt
rust re-debited Samaras account upon discovery that Marine Midland had already de
bited Citytrusts account. Issue: Who shall be liable for the amount. Held: Citytr
ust and Marine Midland were not in privity with each other in a transaction invo
lving payment through a bank draft. A bank draft is a bill of exchange drawn by
a bank upon its correspondent bank issued at the solicitation of a stranger who
purchases and pays therefor. It is an order for payment of money. Citytrust was
the drawer of the draft through which it ordered Marine Midland, the drawee bank
, to pay Thai Airways. The drawee bank acting as payor bank is solely liable for
acts not done in accordance with the instructions of the drawer bank or the pur
chaser of the draft. The drawee bank has the burden of proof that it did not so
violate. Meanwhile, the drawer, if sued by the purchaser of the draft, is liable
for the act of debiting the customers account despite an instruction to stop pay
ment. The drawer has the duty to prove that he complied with the order to inform
the drawee. [10] Clark vs. Sellner GR 16477, 22 November 1921 First Division, R
omualdez (J) Facts: George Sellner, with WH Clarke and John Mave, signed a note
in favor of RN Clark dated 1 July 1914 in Manila for the amount of P12,000. The
note matured, but its amount was not paid. Action was filed in court. Sellners co
unsel allege that Sellner did not receive anything of value for the transaction,
that the instrumnet was not presented to sellner for payment, and that Sellner,
being an accommodation party is not liable unless the note is negotiated, which
was allegedly not done. Issue: Whether Sellner is an accommodation party liable
for the note. Held: Sellner, as one of the signers of the note, is one of the j
oint and several debtors on the note, and as such he is liable under Section 60
of the Negotiable Instruments Law/ Sellner lent his name, not to the creditor, b
ut to those who signed with him placing himself with respect to the creditor in
the same position and with the same liability as the said signers; and thus is a
joint surety rather than an accommodation party. As to the presentment for paym
ent, such action is not necessary in order to charge the person primarily liable
, as is Sellner (Section 70, Negotiable Instruments Law). [11]

Co vs. PNB GR L-51767, 29 June 1982 Second Division, Barredo (J) Facts: Standard
Parts Manufacturing Corporation mortgaged properties to PNB. When Standard fail
ed to pay its obligation (P4,296,803,56 secured by said properties), PNB extra-j
udicially foreclosed the mortgages. Standard, meanwhile, transferred its rights
in the mortgages to Citadel Insurance and Surety Co., which wrote PNB its intere
st to redeem the Makati property (one of the property mortgaged) for P1,621,970.
PNB rejected the offer. Citadel filed suit against PNB, where the complaint was
accompanied by an RCBC managers check and which was deposited under a savings ba
nk account with RCBC by order of the trial court. Issue: Whether there was a val
id and effective tender of payment. Held: The unequivocal tender of redemption w
as made, through a managers check of RCBC (a well-known, big and reputable bankin
g institution) for the amount it believed it should pay as redemption price. PNB
rejected it on the sole and only ground that it considered the amount insuffici
ent. Redemption was made on time, i.e. 1 year from the date appearing as the dat
e of the registration of the certificate of sale. Tender by managers check was no
t inefficacious as the Court has already sanctioned redemption by check (See Jav
ellana vs. Mirasol). [12] Cruz vs. CA GR 108738, 17 June 1994 First Division, Ka
punan (J) Facts: Andrea Mayor is engaged in the business of granting interest-be
aring loans and in rediscounting checks. Roberto Cruz, on the other hand, is eng
aged in selling ready to wear clothes at the Pasay Commercial Center. Cruz frequ
ently borrows money from Mayor. In 1989, Cruz borrowed P176,000 from mayor, whic
h Mayor delivered. In turn, Cruz issued a Premiere Bank check for the same amoun
t. When the check matured, Mayor presented it to the bank but was dishonored and
marked account closed. When notified of the dishonor, Cruz promised to pay in cas
h. No payment was made, and thus the criminal action for violation of BP 22 was
instituted. Issue: Whether Cruz is liable for violating BP 22, even upon the cla
im that the check was issued to serve a mere evidence of indebtedness, and not f
or circulation or negotiation. Held: A check issued as an evidence of debt, thou
gh not intended to be presented for payment has the same effect of an ordinary c
heck, hence, it falls within the ambit of BP 22. When a check is presented for p
ayment, the drawee bank will generally accept the same regardless of whether it
was issued in payment of an obligation or merely to guarantee the said obligatio
n. What the law punishes is the issuance of a bouncing check, not the purpose fo
r which it was issued nor the term and conditions relating to its issuance. The
mere act of issuing a worthless check is malum prohibitum. [13] Crystal vs. CA G
R L-35767, 18 June 1976 Resolution of the Second Division, Barredo (J) Facts: Th
e Supreme Court, in its decision of 25 February 1975, affirmed the decision of t
he Court of Appeals,

holding that Raymundo Crystals redemption of the property acquired by Pelagia Oca
ng, Pacita, Teodulo, Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surname
d de Garcia, was invalid as the check which Crystal used in paying the redemptio
n price has been either dishonored or had become stale (Ergo, the value of the c
heck was never realized). Crystal filed a motion for reconsideration. Issue: Whe
ther the conflicting circumstances of the check being dishonored and becoming st
ale affect the validity of the redemption sale. Held: For a check to be dishonor
ed upon presentment and to be stale for not being presented at all in time are i
ncompatible developments that have variant legal consequences. If indeed the que
stioned check was dishonored, the redemption was null and void. If it had only b
ecome state, it becomes imperative that the circumstances that caused its non-pr
esentment be determined, for if it was not due to the fault of the drawer, it wo
uld be unfair to deprive him of the rights he had acquired as redemptioner. Here
in, it appears that there is a strong showing that the check was not dishonored,
although it became stale, and that Pelagia Ocang had actually been paid the ful
l value thereof. The Supreme Court, thus, reconsidered its decision and remanded
the case to the trial court for further proceedings. [14] Dela Victoria vs. Bur
gos GR 111190, 27 June 1995 First Division, Bellosillo (J) Facts: Raul Sesbreno
filed a complaint for damages against Assistant City Fiscal Bienvenido Mabanto b
efore the RTC of Cebu City. After trial, judgment was rendered ordering Mabanto
to pay Sesbreno P11,000. The decision having become final and executory, the tri
al court ordered its execution upon Sesbrenos motion. The writ of execution was i
ssued despite Mabantos objection. A notice of garnishment was served upon Loreto
de la Victoria as City Fiscal of Mandaue City where Mabanto was then detailed. D
e la Victoria moved to quash the notice of garnishment claiming that he was not
in possession of any money, funds, etc. belonging to Mabanto until delivered to
him, and as such are still public funds which could not be subject of garnishmen
t.. Issue: Whether the checks subject of garnishment belong to Mabanto or whethe
r they still belong to the government. Held: Under Section 16 of the Negotiable
Instruments Law, every contract on a negotiable instrument is incomplete and rev
ocable until delivery of the instrument for the purpose of giving effect thereto
. As ordinarily understood, delivery means the transfer of the possession of the
instrument by the maker or drawer with the intent to transfer title to the paye
e and recognize him as the holder thereof. Herein, the salary check of a governm
ent officer or employee does not belong to him before it is physically delivered
to him. Inasmuch as said checks had not yet been delivered to Mabanto, they did
not belong to him and still had the character of public funds. As a necessary c
onsequence of being public fund, the checks may not be garnished to satisfy the
judgment. [15] Firestone Tire and Rubber vs. Ines Chaves & Co. GR L-17106, 19 Oc
tober 1966 En Banc, Regala (J) Facts: The check was intended as part of the paym
ent of Ines Chaves debt. When presented to the Security Bank and Trust Co. by Fir
estone, the check was returned for insufficiency of funds. Despite repeated

demands, Ines Chaves failed to settle its account; hence, the suit. Issue: Wheth
er good faith is required in the issuance of a check. Held: Everyone must in the
performance of his duties, observe honesty and good faith. Where a person issue
s a postdated check without funds to cover it and informs the payee of this fact
, he cannot be held guilty of estafa because there is no deceit. Herein, there i
s nothing in the record to show that Firestone knew that there were no funds whe
n it accepted the check, much less that Firestone agreed to take the check with
knowledge of the lack of funds. As Ines Chavez is guilty of fraud (bad faith) in
the performance of its obligation, it is liable for damages. Its conduct wantin
g in good faith, the award of attorneys fees was warranted. [16] Gempesaw vs. CA
GR 92244, 9 February 1993 Second Division, Campos Jr. (J) Facts: Natividad Gempe
saw issued checks, prepared by her bookkeeper, a total of 82 checks in favor of
several supplies. Most of the checks for amounts in excess of actual obligations
as shown in their corresponding invoices. It was only after the lapse of more t
han 2 years did she discovered the fraudulent manipulations of her bookkeeper. I
t was also learned that the indorsements of the payee were forged, and the check
s were brought to the chief accountant of Philippine Bank of Commerce (the Drawe
e Bank, Buendia Branch) who deposited them in the accounts of Alfredo Romero and
Benito Lam. Gempesaw made demand upon the bank to credit the amount charged due
the checks. The bank refused. Hence, the present action. Issue: Who shall bear
the loss resulting from the forged indorsements. Held: As a rule, a drawee bank
who has paid a check on which an indorsement has been forged cannot charge the d
rawers account for the amount of said check. An exception to the rule is where th
e drawer is guilty of such negligence which causes the bank to honor such checks
. Gempesaw did not exercise prudence in taking steps that a careful and prudent
businessman would take in circumstances to discover discrepancies in her account
. Her negligence was the proximate cause of her loss, and under Section 23 of th
e Negotiable Instruments Law, is precluded from using forgery as a defense. On t
he other hand, the banking rule banning acceptance of checks for deposit or cash
payment with more than one indorsement unless cleared by some bank officials do
es not invalidate the instrument; neither does it invalidate the negotiation or
transfer of said checks. The only kind of indorsement which stops the further ne
gotiation of an instrument is a restrictive indorsement which prohibits the furt
her negotiation thereof, pursuant to Section 36 of the Negotiable Instruments La
w. In light of any case not provided for in the Act that is to be governed by th
e provisions of existing legislation, pursuant to Section 196 of the Negotiable
Instruments Law, the bank may be held liable for damages in accordance with Arti
cle 1170 of the Civil Code. The drawee bank, in its failure to discover the frau
d committed by its employee and in contravention banking rules in allowing a chi
ef accountant to deposit the checks bearing second indorsements, was adjudged li
able to share the loss with Gempesaw on a 50:50 ratio. [17] Hongkong & Shanghai
Bank vs. Peoples Bank and Trust GR L-28226, 30 September 1970 First Division, Fer
nando (J) Facts: The Philippine Long Distance Telephone Company (PLDT) drew a ch
eck on the Hongkong &

Shanghai Banking Corporation (HSBC) in the latters favor for P14,608.05, and sent
it through mail. The check fell into the hands of Florentino Changco, who was a
ble to erase the name of the payee and substituted his own, and deposited the al
tered check in his current account with the Peoples Bank and Trust Co. (PBTC). Th
e check was cleared by HSBC, and PBTC credited Changco the amount. The alteratio
n was known when the cancelled check was returned to PLDT. HSBC requested PBTC t
o refund the amount, but the latter refused. Issue: Whether HSBC can claim reimb
ursement from PBTC. Held: A person who presents fro payment checks guarantees th
e genuineness of the check, and the drawee bank need to concern itself with noth
ing but the genuineness of the signature, and the state of the account with it o
f the drawee. If at all, whatever remedy, whatever remedy HSBC has would lie not
against PBTC but as against the party responsible for changing the name of the
payee (i.e. Changco). Its failure to call the attention of PBTC as to such alter
ation until after the lapse of 27 days would, in the light of Central Bank Circu
lar 9 (24-hour clearing house rule), negate whatever right it might have had aga
inst PBTC. [18] Ibasco vs. CA GR 117488, 5 September 1996 Third Division, Davide
Jr. (J) Facts: The Ibasco spouses requested credit accommodation fro the supply
of ingredients in the manufacture of animal feeds from the Trivinio spouses. Ib
asco issued 3 checks for 3 deliveries of darak. The checks bounced and the Ibasc
o spouses were notified of the dishonor. Ibasco instead offered a property in Da
et. The property, being across the sea, the Trivinio spouses did not inspect the
property. For the failure of the Ibasco spouses to settle their account, the Tr
ivinio spouses filed criminal cases against the former for violation of BP22. Is
sue: Whether the checks were for accommodation or guarantee to acquire the benef
its of the interpretation of Ministry Circular 4 of the Department of Justice in
relation to BP 22. Held: Ministry Circular 4, issued 1 December 1981 by the Dep
artment of Justice, provides that where a check is issued as part of an arrangem
ent to guarantee or secure the payment of the obligation, pre-existing or not, t
he drawer is not criminally liable for either estafa or violation of BP 22. Inci
dents however indicate that the checks were issued as payment and for value, and
not for accommodation (i.e. pertaining to an arrangement made a favor to anothe
r, not upon a consideration received). as the checks failed to bear any statemen
t for accommodation and for guarantee to show Ibascos intent. ( It must be noted, how
ever, that BP22 does not distinguish and applies even in cases where dishonored
checks were issued as a guarantee or for deposit only. The erroneous interpretat
ion of Ministry Circular 4 was rectified by the repealing Ministry Circular 12,
issued on 8 August 1984). [19] Jimenez vs. Bucoy GR L-10221, 28 February 1958 En
Banc, Bengzon (J) Facts: In the proceedings in the intestate of Luther Young an
d Pacita Young who died in 1954 and 1952, respectively, Pacifica Jimenez present
ed for payment 4 promissory notes signed by Pacita for different amounts totalli
ng P21,000. Acknowledging receipt by Pacita during the Japanese occupation, in t
he currency

then prevailing, the Administrator manifested willingness to pay provided adjust
ment of the sums be made in line with the Ballantyne schedule. The claimant obje
cted to the adjustment insisting on full payment in accordance with the notes. T
he court held that the notes should be paid in the currency prevailing after the
war, and thus entitling Jimemez to recover P21,000 plus P2,000 as attorneys fees
. Hence, the appeal. Issue: Whether the amounts should be paid, peso for peso; o
r whether a reduction should be made in accordance with the Ballantyne schedule.
Held: If the loan was expressly agreed to be payable only after the war, or aft
er liberation, or became payable after those dates, no reduction could be effect
ed, and peso-for-peso payment shall be ordered in Philippine currency. The Balla
ntyne Conversion Table does not apply where the monetary obligation, under the c
ontract, was not payable during the Japanese occupation. Herein, the debtor unde
rtook to pay six months after the war, peso for peso payment is indicated. [20] Ka
lalo vs. Luz GR L-27782, 31 July 1970 En Banc, Zaldivar (J) Facts: On 17 Novembe
r 1959, Octavio Kalalo entered into an agreement with Alfredo Luz where he was t
o render engineering design services for a fee. On 11 December 1961, Kalalo sent
Luz a statement of account where the balance due for services rendered was P59,
505. On 18 May 1962, Luz sent Kalalo a resume of fees due to the latter, and a c
heck for P10,861.08. Kalalo refused to accept the check as full payment of the b
alance of the fees due him. On 10 August 1962, Kalalo filed a complaint containi
ng 4 causes of action, i.e. $28,000 (representing 20% of the amount paid to Luz
in the International Research Institute project) and the balance of P30,881.25 a
s fees; P17,0000 as consequential and moral damages; P55,000 as moral damages, a
ttorneys fees and litigation expenses; and P25,000 as actual damages, attorneys fe
es and litigation expenses). The trial court ruled in favor of Kalalo. Luz filed
an appeal directly with the Supreme Court raising only questions of law. Issue:
Whether the rate of exchange of dollar to peso are those at the time of the pay
ment of the judgment or at the time when the research institute project became d
ue and demandable. Held: Luz obligation to pay Kalalo the sum of US$28,000 accrue
d on 25 August 1961, or after the enactment of RA 529 (16 June 1950). Thus, the
provision of the statute which requires payment at the prevailing rate of exchan
ge when the obligation was incurred cannot be applied. RA 529 does not provide f
or the rate of exchange for the payment of obligation incurred after the enactme
nt of the Act, and thus the rate of exchange should be that prevailing at the ti
me of payment. The view finds support in the ruling of the Court in Engel vs. Ve
lasco & Co. The trial court did not err in holding the rate of exchange is that
at the time of payment. [21] Lao vs. CA GR 119178, 20 June 1997 Third Division,
Panganiban (J) Facts: Lim Lim Lao was a junior officer of Premier Investment Hou
se in its Binondo branch. She was authorized to sign checks for and in behalf of
the corporation. In the course of business, she met Fr. Artelijo Palijo, provin
cial treasurer of the Society of the Divine Word. Fr. Palijo was authorized to i
nvest donations of the society and had been investing the societys money with Pre
miere. Fr. Palijo was issued checks in

payment of interest for the societys investments. The checks were dishonored for i
nsufficiency of funds. Fr. Palijo was only able to acquire P5,000 for his efforts
in demanding the payment of the checks. Premiere, subsequently, was placed unde
r receivership. Fr. Palijo filed a suit against Lim Lao and his co-signatory, Te
odulo Asprec, head of operations for violation of BP 22. Issue: Whether an emplo
yee who, as part of her regular duties, signs blank corporate check, be held for
violation of BP22. Held: The checks co-signed by Lim Lao were signed in advance
and in blank, delivered to the head of operations, who subsequently filled in t
he name of he payee, the amounts and corresponding dates of maturity; this proce
dure followed in keeping with her duties as a junior officer. Though BP 22 provi
des the presumption that a drawer is knowledgeable of the fact of insufficiency
of funds, such presumption may be debunked by contrary evidence. Herein, Lim Lao
does not have the power, duty or responsibility to monitor and assess the balan
ces against the issuance, nor to make sure that the checks were funded. Such res
ponsibility devolved upon the corporations Treasury Department in Cubao, Quezon C
ity. Furthermore, no notice of dishonor was actually sent or received by Lim Lao
to support the prima facie evidence of knowledge of insufficient funds. She was
thus acquitted. [22] Lazaro vs. CA GR 105461, 11 November 1993 Second Division,
Padilla (J) Facts: Marlyn Lazaro received from Rudy Chua the amount of P90,000
as advanced payment for deliveries of sugar, etc. Lazaro was only able to delive
r partial delivery. To refund the undelivered goods, she issued a check for P72,
000. When deposited, the check was dishonored and stamped account closed. To make
up for the dishonor, Lazaro indorsed a check issued by one Lolita Soriano, payab
le to Cash. It was likewise dishonored and marked account closed. Chua sent a demand
letter asking for the payment of the amount covered by the first check within d
ays from receipt of letter. For failure of the accused to pay the amount, Chua f
iled cases for estafa and violation of BP 22. Issue: Whether damage or prejudice
is an element of BP 22 violation. Held: The clear intention of the framers of B
P 22 is to make the mere act of issuing a check that is worthless malum prohibit
um. The law does not require that there be damage or prejudice to the individual
complainant by reason of the issuance of the check. The fine provided for in BP
22 was intended as an additional penalty for the act of issuing a worthless che
ck. BP 22 provides that a fine of not less than but not more than double the amo
unt of the dishonored check may be imposed by the court. [23] Lim vs. CA GR 1078
98, 19 December 1995 First Division, Bellosillo (J) Facts: Spouses Manuel and Ro
sita Lim are the president and treasurer, respectively, of RIGI Built Industries
Inc. RIGI had been transacting business with Linton Commercial Company for year
s, the latter supplying the former with steel plates, steel bars, flat bars and
purlin sticks which the company uses in the fabrication, installation and buildi
ng of steel structures. The Lims ordered steel plates from Linton Commercial, de
livering checks to the latters collector as payment. The checks were dishonored f
or insufficiency of

funds with the additional notation payment stopped (The Lims claimed that the suppl
ies delivered by Linton Commercial were not in accordance with the specification
s of purchase orders). Despite demands, the Lims refused to make good the checks
or to pay value of the deliveries. Issue: Whether the receipt of the checks by
the collector of Linton is the issuance and delivery to the payee within the con
templation of the law (as prelude to jurisdiction issue). Held: Issue means the fi
rst delivery of the instrument complete in form to a person who takes it as a ho
lder. Holder refers to the payee or indorsee of a note or who is in possession of
it or the bearer thereof. The issuance as well as the delivery of the check must
be to a person who takes it as a holder. Delivery of the checks signifies trans
fer of possession (actual or constructive) from one person to another with inten
t to transfer title thereto; the delivery being the final act essential to its c
onsummation as an obligation. The collector was not the person who could take th
e checks as a holder. Neither could the collector be deemed an agent of Linton C
ommercial with respect to the checks because he was a mere employee. [24] Lim vs
. People GR 130038, 18 September 2000 En Banc, Pardo (J) Facts: Rosa Lim bought
various kinds of jewelry worth P300,000 from the store of Maria Antonia Seguan,
by issuing a check payable to cash drawn against MetroBank. The next day, Lim agai
n purchased jewelry valued at P241,668 by issuing another check payable to cash
likewise drawn against MetroBank. Seguan deposited the checks with her bank. The
checks were returned with a notice of dishonor as Lims accounts in said bank wer
e already closed. Upon demand, Lim promised to pay Seguan the amounts of the two
dishonored checks. She never did. Rosa Lim was charge for two counts of violati
on of BP 22, where she was found guilty, and sentenced to 1 year imprisonment wi
th fine (P200,000). Issue: Whether Lim has knowledge of the insufficiency of fun
ds when issuing the checks. Held: The elements of BP22 are (1) the making, drawi
ng and issuance of any check to apply for account or for value, (2) the knowledg
e of the maker, drawer or issuer that at the time of issue he does not have suff
icient funds in or credit with the drawee bank for the payment of such check in
full upon its presentment, and (3) the subsequent dishonor of the check by the d
rawee bank for insufficiency of funds or credit or dishonor for the same reason
had not the drawer, without any valid cause, ordered the bank to stop payment. L
im never denied issuing the check. Section 2 of BP 22 creates a presumption juri
s tantum that the second element prima facie exists when the first and third ele
ments are present. If not rebutted, it suffices to sustain a conviction. It must
be noted that similar to the Vaca case, the Court deleted the prison sentences
imposed upon Lim, holding that the two fines imposed for each of the violation (
P200,000 each ) are appropriate and sufficient. Subsidiary imprisonment not exce
eding 6 months is provided in case of insolvency or non-payment of the fines as
decreed. [25] Lim vs. Rodrigo GR 76974, 18 November 1988 Third Division, Fernan
(J) Facts: Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in p
ayment of a certain obligation

to Benito Lim. Said checks were handed to Lims brother, Vicente, at Ko Hus office
in Nueva Street, Manila for delivery to Benito Lim in Baguio City. When presente
d at Lims depository bank in Baguio City, the checks were dishonored for having b
een drawn against a closed account. Lim filed a suit against Ko Hu for violation
of BP 22 in Baguio City. Issue: Whether the delivery of the checks to Benito Li
ms brother is the delivery contemplated by law (prelude to juridictional issue) H
eld: The venue of the offense lies at the place where the check was executed and
delivered to the payee and that the place where a check was written, signed or
dated does not fix the place where it was executed, as what is of decisive impor
tance is the delivery thereof which is the final act essential to its consummati
on as an obligation. The delivery contemplated by law must be to a person who takes
the check as a holder, i.e. the payee or indorsee of a bill or note, who is in po
ssession of it, or the bearer thereof. Vicente Lim, Benitos brother, cannot be sai
d to have taken the checks in the concept of a holder for he is neither the paye
e or indorsee thereof. Neither could he be deemed to be Benitos agent with respec
t thereto, for he was purposely sent to Ko Hu to get certain stock certificates
and not the checks in question (This is similar to the People vs. Yabut case). [
26] Llamado vs. CA GR 99032, 26 March 1997 Second Division, Torres Jr. (J) Facts
: Ricardo Llamado and Jacinto Pascual were Treasurer and President of Pan Asia F
inance Corporation. Leon Gaw delivered P180,000 to Llamado with assurance that t
he amount would be repaid on 4 November 1983 with 12% interest and a share of th
e profits of the corporation. On said date, Gaw deposited the check but it was d
ishonored. Informing Llamado of the dishonor, Llamado offered in writing to pay
Gaw a portion of the amount equivalent to 10% thereof on 14 or 15 November and t
he balance rolled over for a period of 90 days. Llamado failed to do so. Gaw fil
ed a complaint against Llamado and Pascual for violation of BP 22. Pascual remai
ns at large. Llamado contends he signed the check in blank. Issue: Whether Llama
do is personally liable for the bounced check. Held: Llamados claim that he signe
d the check in blank is hardly a defense. By signing the check, he made himself
prone to being charged with violation of BP 22. It became incumbent upon him to
prove his defenses. As treasurer of the corporation who signed the check in his
capacity as corporate officer, lack of involvement in the negotiation for the tr
ansaction is not a defense. Llamado is personally liable even if the check was i
n the name of the corporation. Third paragraph of Section 1, BP 22, states that w
here the check is drawn by a corporation, company or entity, the person(s) who a
ctually signed the check in behalf of such drawer shall be liable under this Act
. It must be noted that the check was issued for a valuable consideration (P180,0
00). Had the money been intended to be returned when the investment was successf
ul, the check need not be issued. A receipt and their written agreement would ha
ve sufficed. [27] Lozano vs. Martinez GR L-63419, 18 December 1986 En Banc, Yap
(J)

Facts: Lozano vs. Martinez (GR L-63419), Lobaton vs. Cruz (GR L-66839-42), Datui
n vs. Pano (GR 71654), Violago vs. Pano (GR 74524-25), Abad vs. Gerochi (GR 7512
2-49), Aguiliz vs. Presiding Judge of Branch 154 (GR 75812-13), Hojas vs. Penara
nda (GR 75765-67) and People vs. Nitafan (GR 75789) are cases involving prosecut
ion of offenses under BP 22 which were consolidated herein as the parties (defen
dants) thereto question the constitutionality of the statute, BP 22. Issue: Whet
her BP 22 is constitutional. Held: The language of BP22 is broad enough to cover
all kinds of checks, whether present dated or post dated, whether issued in pay
ment of pre-existing obligations or given in mutual or simultaneous exchange for
something of value. BP 22 is aimed to put a stop or to curb the practice of iss
uing worthless checks, which is proscribed by the State because of the injury it
causes to public interests. The gravamen of the offense punished by BP 22 is th
e act of making or issuing a worthless check or a check which is dishonored upon
its presentation for payment. it is not the non-payment of an obligation which
the law punishes. The law publishes the act not as an offense against property b
ut an offense against public order. The enactment of BP 22 is a valid exercise o
f police power and is not repugnant to the constitutional inhibition against imp
risonment for debt. The statute is not unconstitutional. [28] Magno vs. CA GR 96
132, 26 June 1992 Second Division, Paras (J) Facts: Oriel Magno lacked funds to
purchase necessary equipment to make his car repair shop business operational. H
e approached Corazon Teng, who in turn referred LS Finance and Management Corpor
ation, who could accommodate him and provide him credit facilities. LS Finance r
equired a warranty deposit (30% of the total value of the pieces of equipment to
be purchased), which Teng advanced, unknown to Magno. When the equipment were d
elivered to Magno, he issued a postdated check to LS Finance, which delivered it
to Teng. When the check matured, Magno requested that the check not to be depos
ited as he no longer banks with Pacific Bank. To replace the check, Magno issued
6 postdated checks, 2 of which were deposited and cleared, the other 4 were hel
d momentarily by Teng, on the request of Magno for they are not covered with suf
ficient funds. As Magno cannot pay the monthly rentals fro the equipment, the sa
me were pulled out. Only then did Magno learned that Teng was the one who advanc
ed the deposit. Magno promised to pay her but payment never came. When the check
s were deposited, they were dishonored. Magno was found guilty of violation of B
P22 when the cases were adjudicated. Issue: Whether there was a violation of BP
22. Held: The crux of the matter rest upon the reason for the drawing of the pos
tdated checks by Magno, i.e. whether they were drawn or issued to apply on accoun
t or for value, as required under Section 1 of BP 22. When viewed against the def
initions of warranty and deposit, for which the postdated checks were issued or draw
n, the alleged crime could not have been committed by Magno. Furthermore, the el
ement of knowing at the time of issue that he does not have sufficient funds in o
r credit with the drawee bank....: is inversely applied in the case. From the beg
inning, Magno never hid the fact that he had no funds. Magno, thus, was acquitte
d of the crime charged. [29] Manila Lighter Transportation vs. CA

GR L-50373, 15 February 1990 First Division, Grino-Aquino (J) Facts: 49 checks w
ere issued by Manila Lighter Transportations customers in payment of brokerage /
lighterage services and were all delivered to its collector, Augusto Perez. Upon
forged indorsements of the companys General Manager, Luis Gaskell, the checks fo
und their way to the accounts of third persons and were later withdrawn. A compl
aint to recover the value of the checks were filed against China Bank. Bank deni
ed liability. Issue: Whether the bank is negligent as to bear the loss resulting
from the checks with forged indorsements. Held: Since Manila Lighter Transporta
tion was not a client of the bank, the latter had no way of ascertaining the aut
henticity of its indorsements on the checks which were deposited in the accounts
of third persons (Ko Lit and Cao Pek) in said bank. The bank was not negligent
because, in accordance with banking practice, it caused the checks to pass throu
gh the clearing house before it allowed their proceeds to be withdrawn by the de
positors. [30] Moran vs. CA GR 105836, 7 March 1994 Second Division, Regalado (J
) Facts: George and Librada Moran maintained 3 joint accounts with CityTrust Ban
king Corporation. The Morans issued checks in favor of Petrophil Corporation, wh
ich were dishonored for insufficiency of funds. Moran deposited the amount that
would cover the checks the day after the checks clearing. Petrophil did not deliv
er the Morans fuel orders for their Wack-Wack Petron Gasoline station, prompting
the latter to temporarily stop business operations. The Morans sued the bank for
damages. Issue: Whether a bank is liable for its refusal to pay a check on acco
unt of insufficient funds, notwithstanding the fact the fact that a deposit was
made later in the day. Held: A check is a bill of exchange drawn on a bank payab
le on demand. Where the bank possesses funds of a depositor, it is bound to hono
r his checks to the extent of the amount of the deposits. Failure to do so, when
deposit is sufficient, entitles the drawer to substantial damages without proof
of actual damages. Herein, however, the balance of the account maintained in th
e bank was not enough to cover either of the two checks when they were dishonore
d. A check, as distinguished from an ordinary bill of exchange, is supposed to b
e drawn against a previous deposit of funds. As such, a drawer must remember his
responsibilities every time he issues a check. He must personally keep track of
his available balance in the bank and not rely on the bank to notify him of the
necessity to fund the checks he previously issued. A bank is under no obligatio
n to make part payment on a check, up to only the amount of the drawers funds, wh
ere the check is drawn for an amount larger than what the drawer has on deposit.
A check is intended not only to transfer a right to the amount named in it, but
to serve the further purpose of affording evidence for the bank of the payment
of such amount when the check is taken up. Clearly, a bank is not liable for its
refusal to pay a check on account of insufficient funds, notwithstanding the fa
ct that a deposit may be made later in the day. Before a bank depositor may main
tain a suit to recover a specific amount from his bank, he must first show that
he had on deposit sufficient funds to meet his demand. [31] MWSS vs. CA

GR L-62943, 14 July 1986 Second Division, Gutierrez Jr. (J) Facts: By special ar
rangement with PNB, MWSS used personalized checks in drawing from its account. T
he checks were printed by its printer, F. Mesina Enterprises. 23 checks were pai
d and cleared by PNB, and debited against MWSS account from March to May 1969. Th
e checks were deposited by payees Raul Dizon, Arturo Sison, and Antonio Mendoza
in their account with PCIBank. Said persons were later found to be fictitious. M
WSS requested PNB to restore the amount debited due to the 23 checks, allegedly
forged, to its account. The bank refused. Hence, the present action. Issue: Who
shall bear the loss resulting from the alleged forged checks. Held: There was no
express and categorical finding that the 23 checks were forged or signed by per
sons other than the authorized MWSS signatories. Forgery is not presumed but sho
uld be established by clear, positive and convincing evidence. MWSS is barred fr
om setting up defense of forgery under Section 23 of the Negotiable Instruments
Law as MWSS committed gross negligence in the printing of its personalized check
s, failed to reconcile its bank statements with its own records, and failed to p
rovide appropriate security measures over its own record. PNB, the drawee bank,
had taken necessary measures in the detection of forged checks and the preventio
n of their fraudulent encashment through constant reminders to all its current a
ccount bookkeepers informing them of the activities of forgery syndicates. MWSS g
ross negligence was the proximate cause of the loss (P3 million), and should bea
r the loss. [32] Navarro vs. CA GR 112389, 1 August 1994 First Division, Cruz (J
) Facts: Mercedes D. Navarro was convicted of violating Batas Pambansa Bilang 22
(BP 22) in the Regional Trial Court of Pangasinan. She failed to file her brief
on appeal. She claimed to have made payment to the original complainants salesla
dy when she filed a motion for new trial on the ground of newly discovered eviden
ce. Such motion was denied. Issue: Whether Navarro is indeed guilty of violating
the bouncing check law. Held: Payment of the value of the check either by the dr
awer or by the drawee bank within 5 banking days from notice of dishonor given t
o the drawer is a complete defense. The prima facie presumption that the drawer
had knowledge of the insufficiency of funds or credit at the time of the issuanc
e and on its presented for payment would be rebutted by such payment. This defen
se lies regardless of the strength of the evidence offered by the prosecution to
prove the elements of the offense (i.e. violation of BP 22). Herein, Navarro fa
iled to overcome the presumption by substantiating her allegation of payment. Th
ere is no proof that the payment, if it was really made at all, was done within
5 days from the notice of dishonor. [33] People vs. Grospe GR L-74053-54, 20 Jan
uary 1988 Second Division, Melencio-Herrera (J) Facts: Manuel Parulan issued a c
heck to the San Miguel Corporation, which was received by the latters finance off
icer in Guiguinto, Bulacan, and which was forwarded and deposited in SMCs BPI acc
ount in San

Fernando, Pampanga. Another check was issued by Parulan as direct payment for th
e spot sale of beer, which was similarly received, forwarded and deposited as ab
ove. Both were dishonored for insufficiency of funds. Parulan was charged with vio
lation of Batas Pambansa Bilang 22 and for estafa under Article 315, paragraph 2
(d) of the Revised Penal Code. Tried jointly, the court dismissed the cases for
lack of jurisdiction. Issue: Whether the checks were issued in Bulacan or Pampa
nga. Held: While the subject check was issued in Bulacan, it was not completely
drawn thereat, but in San Fernando, Pampanga, where it was uttered and delivered
. The place where the bills were written, signed or dated does not fix or determ
ine the place where they were executed. What is of decisive importance is the de
livery thereof, as it is the final act essential to its consummation as an oblig
ation. The issuance and the delivery of the check must be to a person who takes
it as a holder, i.e. the payee or indorsee of a bill or note, who is in possessi
on of it or the bearer thereof. Both estafa by postdating or issuing a bad check
a transitory or continuing offense. Thus, as jurisdiction or venue is determine
d by the allegations in the information, i.e. San Fernando, Pampanga, the venue
was properly laid. Case is remanded to the trial court for proper disposition. [
34] People vs. Maniego GR L-30910, 27 February 1987 First Division, Narvasa (J)
Facts: Julia Maniego was an indorser of several checks drawn by her sister, Mila
gros Pamintuan, which were dishonored after they had been exchange with cash bel
onging to the Government, then in the official custody of Lt. Rizalino Ubay. Uba
y, Pamintuan and Maniego were indicted for the crime of malversation. Ubay and M
aniego were arraigned, while Pamintuan fled to the United States. Ubay was found
guilty while Maniego was acquitted. Both, however, were ordered to pay in solid
um the amount of P57,434.50 to the government. Maniego appealed. Issue: Whether
Maniego is liable even if she is a mere indorser. Held: Under the law, the holde
r or last indorsee of a negotiable instrument has the right to enforce payment o
f the instrument for the full amount thereof against all parties liable thereon.
Among the parties liable thereon is an indorser of the instrument. Such an indo
rser who indorses without qualification, inter alia, engaged that on due present
ment, the instrument shall be accepted or paid, or both, according to its tenor,
and that if it be dishonored, and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent indor
ser who may be compelled to pay it. Maniego may also be deemed an accommodation p
arty in the light of the facts (i.e. without receiving value for the same). As su
ch, she is 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 reimburse
ment from the party accommodated. [35] People vs. Reyes GR 101127-31, 18 Novembe
r 1993 First Division, Cruz (J) Facts: Lorie Garcia delivered rice to Cresencia
Reyes, as accommodation to her friend Manny Cabrera who had no more stock to sel
l. Reyes issued 6 checks for 6 orders delivered in different dates. Only 3 of th
e 6 checks were made good, the other 3 were returned by the bank due to insuffici
ent funds. Garcia notified

Reyes of the dishonor and the latter promised to pay her their total value. Desp
ite demands, Reyes failed to make good the checks or replace them with cash. 3 c
riminal cases for violation of BP 22 and 2 criminal cases for estafa were filed
against Reyes. Issue: Whether a single act of issuing a check may entail crimina
l liability of both violation of BP 22 and Article 315 of the Revised Penal Code
(Estafa). Held: A single criminal act may give rise to a multiplicity of offens
es and where there is a variance or differences between the elements of an offen
se in one law and another law. The gravamen of the offense punished by BP 22 is
the act of making and issuing a worthless check or a check that is dishonored up
on its presentment for payment; and act deemed pernicious and inimical to public
welfare. BP 22 applies even where the dishonored checks were issued merely in t
he form of a deposit or a guaranty and not as actual payment, as the law does no
t make any distinction. On the other hand, the checks were not payment for a pre
existing obligation nut as consideration for each shipment of rice. The checks w
ere issued as an inducement for the surrender by the party deceived of her prope
rty. Reyes made good 3 of the checks, giving assurance to Garcia that the remain
ing checks were fully funded. Her failure to make good the checks raised the pri
ma facie inference of deceit. [36] People vs. Tuanda AC 3360, 30 January 1990 Re
solution En Banc, Per Curiam Facts: In 1983, Atty. Fe Tuanda received from one H
erminia A. Marquez several pieces of jewelry with a total value of P36,000 for s
ale on commission bases. In 1984, instead of returning the unsold pieces of jewe
lry worth P26,250, she issued 3 checks. These checks were dishonored by the draw
ee bank, Traders Royal Bank, for insufficiency of funds. Notwithstanding receipt
of the notice of dishonor, Tuanda made no effort to settle her obligation. Crim
inal cases were filed, wherein she was acquitted of estafa but was found guilty
of violation of BP 22. The appellate court affirmed the decision of the trial co
urt and imposed further suspension against Tuanda in the practice of law, on the
ground that the offense involves moral turpitude. Issue: Whether violation of B
P 22 involves moral turpitude to allow the suspension of a member of the bar fro
m the practice of law. Held: Conviction of a crime involving moral turpitude rel
ates to and affects the good moral character of a person convicted of such offen
se. Herein, BP 22 violation is a serious criminal offense which deleteriously af
fects public interest and public order. The effects of the issuance of a worthle
ss check transcends the private interest of parties directly involved in the tra
nsaction and touches the interest of the community at large. Putting valueless c
ommercial papers in circulation, multiplied a thousand fold, can very well pollu
te the channels of trade and commerce, injure the banking system and eventually
hurt the welfare of society and the public interest. The Court affirmed the susp
ension of Tuanda from the practice of law. [37] Philippine Bank of Commerce vs.
Aruego GR L-25836-37, 31 January 1981 First Division, Fernandez (J) Facts: Jose
Aruego publishes a periodical called World Current Events. To facilitate payment o
f the printing, Aruego obtained a credit accommodation from the Philippine Bank
of Commerce. For every printing

of the periodical, the printer (Encal Press and Photo-Engraving) collected the c
ost of printing by drawing a draft against the bank, said draft being sent later
to Aruego for acceptance. As an added security for the payment of the amounts a
dvanced to the printer, the bank also required Aruego to execute a trust receipt
in favor of the bank wherein Aruego undertook to hold in trust for the bank the
periodicals and to sell the same with the promise to turn over to the bank the
proceeds of the sale to answer for the payment of all obligations arising from t
he draft. The bank instituted an action against Aruego to recover the cost of pr
inting of the latters periodical for the period of 28 August 1950 to 14 March 195
1. Issue [1]: Whether the drafts were bills of exchange or mere pieces of eviden
ce of indebtedness. Held [1]: Under the Negotiable Instruments Law, a bill of ex
change is an unconditional order in writing addressed by one person to another,
signed by the person giving it, requiring the person to whom it is addressed to
pay on demand or at a fixed or determinable future time a sum certain in money t
o order or to bearer. As long as a commercial paper conforms with the definition
of a bill of exchange, that paper is considered a bill of exchange. The nature
of acceptance is important only in the determination of the kind of liabilities
of the parties involved, but not in the determination of whether a commercial pa
per is a bill of exchange or not. Issue [2]: Whether Aruego is an agent of Phili
ppine Education Foundation Company when he signed the supposed bills of exchange
. Held [2]: Nowhere in the drafts accepted by Aruego that he disclosed that he w
as signing as representative of the Philippine Education Foundation Company. For
failure to disclose his principal, Aruego is personally liable for the drafts h
e accepted, pursuant to Section 20 of the Negotiable Instruments Law. Issue [3]:
Whether Aruego is primarily liable. Held [3]: An accommodation party is one who
has signed the instrument as maker, drawer, acceptor, indorser, without receivi
ng value therefor and for the purpose of lending his name to some other person.
Herein, Aruego signed as a drawee / acceptor. Under the Negotiable Instruments L
aw, a drawee is primarily liable. If Aruego intended to be secondarily liable on
ly, he should not have signed as an acceptor / drawee. In doing so, he became pr
imarily and personally liable for the drafts. [38] Philippine Commercial Industr
ial Bank vs. CA GR 121413, 29 January 2001 Second Division, Quisumbing (J) Facts
: Ford issued Citibank checks in favor of the Commissioner of Internal Revenue a
s payments of its taxes, through the depository bank Insular Bank of Asia and Am
erica (later PCIBank). Proceeds of the checks were never received by the Commiss
ioner, but were encashed and diverted to the accounts of members of a syndicate,
to which Fords General Ledger Accountant Godofredo Rivera belongs. Upon demand o
f the Commissioner anew, Ford was forced to make second payment of its taxes. Th
us, Ford instituted actions to recover the amounts from the collecting (deposito
ry) and drawee banks. Issue: Whether Ford has the right to recover from the coll
ecting bank (PCI Bank) and/or the drawee bank (Citibank) the value of the checks
. Held: The mere fact that forgery was committed by a drawer-payors confidential
employee or agent, who by virtue of his position had unusual facilities to perpe
trate the fraud and imposing the forged paper upon the

bank, does not entitle the bank to shift the loss to the drawer-payor, in the ab
sence of some circumstance raising estoppel against the drawer. The rule applies
to checks fraudulently negotiated or diverted by the confidential employees who
hold them in their possession. In GRs 121413 and 121479, PCIBank failed to veri
fy the authority of Mr. Rivera to negotiate the checks. Furthermore, PCIBanks cle
aring stamp which guarantees prior or lack of indorsements render PCIBank liable
as it allowed Citibank without any other option but to pay the checks. PCIBank,
being a depository / collecting bank of the BIR, had the responsibility to make
sure that the crossed checks were deposited in Payees account only as found in the
instrument. In GR 128604, on the other hand, the switching operation involving
the checks, while in transit for clearing, were the clandestine or hidden actuat
ions performed by the members of the syndicate in their own personal, covert and
private capacity; without the knowledge nor official or conscious participation
of PCIBank in the process of embezzlement. Central Bank Circular 580 (1977), ho
wever, provide d that any theft affecting items in transit for clearing are for
the account of the sending bank (herein PCIBank). Still, Citibank was likewise n
egligent in the performance of its duties as it failed to establish its payment
of Fords checks were made in due course and legally in order. The fact that drawe
e bank did not discover the irregularity seasonably constitutes negligence in ca
rrying out the banks duty to its depositors. [39] Philippine Education Co. vs. So
riano GR L-22405, 30 June 1971 En Banc, Dizon (J) Facts: Enrique Montinola sough
t 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 w
ith his check and the 10 money orders without the knowledge of the teller. Upon
discovery, message was sent to all postmasters and banks involving the unpaid mo
ney 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 C
hief 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 c
ompany. The company moved for reconsideration. Issue: Whether postal money order
s are negotiable instruments. Held: Philippine postal statutes are patterned fro
m those of the United States, and the weight of authority in said country is tha
t Postal money orders are not negotiable instruments inasmuch as the establishme
nt of a postal money order is an exercise of governmental power for the publics b
enefit. Furthermore, some of the restrictions imposed upon money order by postal
laws and regulations are inconsistent with the character of negotiable instrume
nts. For instance, postal money orders may be withheld under a variety of circum
stances, and which are restricted to not more than one indorsement. [40] Pineda
vs. dela Rama GR L-31831, 28 April 1983 First Division, Gutierrez (J) Facts: Jos
e V. dela Rama is a lawyer whose services were retained by Jesus Pineda for the
purpose of making representations with the chairman and general manager of the N
ational Rice and Corn Administration to stop

and delay the institution of criminal charges against Pineda who allegedly misap
propriated 11,000 cavans of palay deposited at his ricemill in Concepcion, Tarla
c. Subsequently, Dela Rama filed suit to collect a P9,300 loan, evidenced by the
matured promissory note, and P5,000 as attorneys fees. The Court of First Instan
ce ruled in favor of Pineda, which was reversed by the Court of Appeals. Issue:
Whether the promissory note is void for lack of consideration. Held: The presump
tion that a negotiable instrument is issued for a valuable consideration (Sectio
n 24, Negotiable Instruments Law) is only prima facie. It can be rebutted by pro
of to the contrary. The term of the note sustains the version of Pineda that he
signed the promissory note because he believed dela Ramas story that these amount
s had already been advanced by dela Rama and given as gifts for NARIC officials.
The promissory note was thus executed for an illegal consideration; and thus is
void like any other contract as per Article 1409 of the Civil Code. The conside
ration for the promissory note -- to influence public officers in the performanc
e of their duties -- is contrary to law and public policy. The promissory note i
s void ab initio and no cause of action for the collection cases can arise from
it. [41] PNB vs. CA GR L-26001, 29 October 1968 En Banc, Concepcion (J) Facts: O
ne Augusto Lim deposited in his current account with PCI Bank (Padre Faura Branc
h) a GSIS check drawn against PNB. The signatures of the General Manager and Aud
itor of GSIS were forged. PCIBank stamped at the back of the check All prior indo
rsements or lack of indorsements guaranteed, PCI Bank. PCIBank sent the check to
PNB through the Central Bank. PNB did not return the check to PCIBank; and thus
PCIBank credited Lims account. As GSIS has informed PNB that the check was lost t
wo months before said transaction, its account was recredited by PNB upon its de
mand (due to the forged check). PNB requested for refund with PCI Bank. The latt
er refused. Issue: Who shall bear the loss resulting from the forged check. Held
: The collecting bank is not liable as the forgery existing are those of the dra
wers and not of the indorsers. The indorsement of the intermediate bank does not g
uarantee the signature of the drawer. PNBs failure to return the check to the col
lecting bank implied that the check was good. In fact, PNB even honored the chec
k even if GSIS has reported two months earlier that the check was stolen and the
bank thus should stop payment. PNBs negligence was the main and proximate cause
for the corresponding loss. PNB thus should bear such loss. Upon payment by PNB,
as drawee, the check ceased to be a negotiable instrument, and became a mere vo
ucher or proof of payment. [42] PNB vs. National City Bank GR 43596, 31 October
1936 En Banc, Recto (J) Facts: An unknown person or persons negotiated with Moto
r Service Co. checks purportedly issued by the Pangasinan Transportation Co. by
JL Klar, Manager and Treasurer, against PNB and in favor of International Auto R
epair Shop for P144.50 and P215.75. Said checks were indorsed by said unknown pe
rsons in the manner indicated at the back thereof. The checks were indorsed fro
deposit at the National City Bank of New York (NCBNY) and Motor Service Co. was
credited with the amounts thereof. Said checks were cleared at

the clearing house and PNB credited NCBNY for the amounts thereof, believing tha
t the signatures of the drawer are genuine, etc. PNB found that the signature we
re forged when so informed by the Pangasinan Transportation Co. It demanded reim
bursement from NCBNY and Motor Service Co. Both refused. Pangasinan Transportati
on objected to its deduction of its deposit. Issue [1]: Whether the payment of t
he checks made by the drawee bank constitutes an acceptance. Held [1]: A check i
s a bill of exchange payable on demand and only the rules governing bills of exc
hange payable on demand are applicable to it (Section 185). The fact that accept
ance is a step unnecessary insofar as bills of exchange payable on demand are co
ncerned, it follows that the provisions relative to acceptance are without applica
tion to checks. There is nothing in law, however, against the presentation of ch
ecks for acceptance before they are paid. Certification is equivalent to accepta
nce (Section 187). When certified, the drawer will perform his promise by any ot
her means than the payment of money (Section 132). When certified, the drawer an
d all indorsers are discharged from liability thereon (Section 188), and then th
e check operates as an assignment of a part of the funds to the credit of the dr
awer with the bank (Section 189). Acceptance has a technical meaning in the Nego
tiable Instruments Law. With few exceptions, payment neither includes or implies pa
yment. Payment of the check, cashing it on presentment is not acceptance. Issue [
2]: Whether the drawee bank is liable for the amount in a forged check for its f
ailure to detect the forgery. Held [2]: In determining the relative rights of a
drawee who, under a mistake of fact, has paid, and a holder who has received suc
h payment, upon a check to which the name of the drawer is forged, it is only fa
ir to consider the question of diligence or negligence contributed to the succes
s of the fraud or to mislead the drawee. 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 fail
ure 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. Under
the circumstance of the case, if the PNB is allowed to recover, there will be n
o change of position as to the injury or prejudice of the Motor Service Co. [43]
PNB vs. Quimpo GR L-53194, 14 March 1988 First Division, Gancayco (J) Facts: Fr
ancisco Gozon was a depositor of the Philippine National Bank (PNB Caloocan City
branch). Ernesto Santos, Gozons friend, took a check from the latters checkbook w
hich was left in the car, filled it up for the amount of P5,000, forged Gozons si
gnature, and encashed it. Gozon learned about the transaction upon receipt of th
e banks statement of account, and requested the bank to recredit the amount to hi
s account. The bank refused. Hence, the present action. Issue: Who shall bear th
e loss resulting from the forged check. Held: The prime duty of a bank is to asc
ertain the genuineness of the signature of the drawer or the depositor on the ch
eck being encashed. It is expected to use reasonable business prudence in accept
ing and cashing a check being encashed or presented to it. Payment in neglect of
duty places upon him the result of such negligence. Still, Gozons act in leaving
his checkbook in the car, where his trusted friend remained in, cannot be consi
dered negligence sufficient to excuse the bank from its own negligence. The bank
bears the loss.

[44] Ponce vs. CA GR L-49444, 31 May 1979 First Division, Melencio-Herrera (J) F
acts: On 3 June 1969, Jesus Afable, together with Feliza Mendoza and Ma. Aurora
Dino executed a promissory note in favor of Nelia Ponce in the sum of P814,868.4
2 payable without interest on or before 31 July 1969, subject to an interest of
12% per annum if not paid at maturity, and an additional sum equivalent to 10% o
f total amount due as attorneys fees in case it is necessary to bring suit, and t
he execution of a first mortgage on their properties or the Carmen Planas Memori
al Inc. in the event of failure to pay the indebtedness in accordance with the t
erms. Upon failure of the debtors to pay, a complaint was filed against them for
the recovery of the principal sum, plus interest and damages. The trial court r
endered judgment in favor of Ponce. The Court of Appeals affirmed the decision o
f the trial court. On the second motion for reconsideration, however, the appell
ate court reversed the judgment and opined that the intent of the parties was th
at the note was payable in US dollars which is illegal, with neither party entit
led to recover under the in pari delicto rule. Issue: Whether an agreement to pay
in dollars defeat a creditors claim for payment. Held: If there is an agreement t
o pay an obligation in a currency other than Philippine legal tender, the same i
s illegal / null and void as contrary to public policy, pursuant to RA 529, and
the most that can be demanded is to pay the said obligation in Philippine curren
cy. It cannot defeat a creditors claim for payment, for such will allow a person
to enrich himself inequitably at anothers expense. What RA 529 prohibits is the p
ayment of an obligation in dollars. A creditor cannot oblige the debtor to pay i
n dollars, even if the loan was given in said currency. In such case, the indemn
ity is expressed in Philippine currency on the basis of the current rate of exch
ange at the time of payment. [45] Prudencio vs. CA GR L-34539, 14 July 1986 Seco
nd Division, Gutierrez Jr. (J) Facts: Eulalio and Elisa Prudencio are the regist
ered owners of a parcel of land located in Sampaloc, Manila. The property was mo
rtgaged to PNB to guarantee a loan of P1,000 extended to one Domingo Prudencio.
Sometime in 1955, Concepcion & Tamayo Construction Co., through Jose Toribio (Pr
udencios relative), persuaded the Prudencios to mortgage their property to secure
the loan of P10,000 which the company was negotiating with the PNB. The Prudenc
ios signed the Amendment of Real Estate Mortgage. The promissory note covering the
P10,000 loan was signed by Toribio. The Prudencios also signed the portion of t
he note indicating that they are requesting the PNB to issue the check covering
the loan to the Company. Jose Toribio executed the Deed of Assignment assigning al
l payments made by the Bureau to the company on account of the Puerto Princesa b
uilding project in favor of PNB. The Bureau, however, conditioned that the payme
nt should be for labor and materials. The Prudencios wrote PNB that since PNB au
thorized payments to the Company where there were changes in the conditions of t
he contract without their knowledge, they seek to cancel the mortgage contract.
Failing to cancel the mortgage, they filed suit to cancel the same. Issue: Wheth
er the Prudencios were solidary co-debtors or sureties as a result of being acco
mmodation makers.

Held: In lending his name to the accommodated party, the accommodation party is
in effect a surety. However, unlike in a contract of suretyship, the liability o
f the accommodation party remains not only primary but also unconditional to a h
older for value such that even if the accommodated party receives an extension o
f the period of payment without the consent of the accommodation party, the latt
er is still liable for the whole obligation and such extension does not release
him because as far as the holder for value is concerned, he is a solidary co-deb
tor. Consequently, the Prudencios cannot claim to have been released from their
obligation simply because the time of payment of such obligation was temporarily
deferred by PNB without their knowledge and consent. To be freed of obligation,
it is thus necessary to determine if PNB, the payee of the promissory note, is
a holder in due course. Herein, PNB was an immediate party or in privy to the no
te, besides that it dealt directly with the Prudencios knowing fully well that t
hey are accommodation makers. The general rule that a payee may be considered a
holder in due course does not apply to PNB. [46] Que vs. People GR 75217-18, 21
September 1987 Resolution of the Second Division, Paras (J) Facts: The Regional
Trial Court convicted Victor Que of the crime of violation of BP 22. Said judgme
nt was affirmed by the Court of Appeals and the Supreme Court. In its motion for
consideration, Que alleged that the RTC Quezon City does not have jurisdiction
as the element of the place of the issuance of the check was absent. Issue [1]:
Whether the place of issuance or the place or the place of deposit determines ju
risdiction / venue of BP 22 cases. Held [1]: The findings of the trial court rev
eal that the checks were issued in Quezon City (as admitted by Que himself in hi
s answer). It is of no moment whether the checks were deposited by the complaina
nt in a bank outside of Quezon City. The determinative factor is the place of is
suance. Issue [2]: Whether BP 22 applies to dishonored checks issued as guarante
e. Held [2]: BP 22 applies even in cases where dishonored checks are issued mere
ly in the form of a deposit or guarantee. The enactment does not make any distin
ction as to whether the checks within its contemplation are issued in payment of
an obligation or merely to guarantee the said obligation. The history of the en
actment evinces the definite legislative intent to make the prohibition all-embr
acing without making any exception from the operation thereof in favor of a guar
antee. [47] Republic Bank vs. CA GR 42725, 22 April 1991 First Division, Grino A
quino (J) Facts: San Miguel Corporation issued a dividend check for P240 in favo
r of J. Roberto Delgado, a stockholder. Delgado altered the amount of the check
to P9,240. The check was indorsed and deposited by Delgado with Republic Bank. R
epublic Bank endorsed the check to First National City Bank (FNCB), the drawee b
ank, by stamping on the back of the check all prior and / or lack of indorsements
guaranteed. Relying on the endorsement, FNCB paid the amount to Republic Bank.
Later on, San Miguel informed FNCB of the material alteration of the amount. FNC
B recredited the amount to San Miguels account, and demanded refund from Republic
Bank. Republic Bank refused. Hence, the present action.

Issue: Who shall bear the loss resulting from the altered check. Held: When an i
ndorsement is forged, the collecting bank or last indorser, as a general rule, b
ears the loss. But the unqualified indorsement of the collecting bank on the che
ck should be read together with the 24-hour regulation on clearing house operati
on. Thus, when the drawee bank fails to return a forged or altered check to the
collecting bank within the 24-hour clearing period (as provided by Section 4c of
Central Bank Circular 9, as amended), the collecting bank is absolved from liab
ility. The drawee bank, FNCB, should bear the loss for the payment of the altere
d check for its failure to detect and warn Republic Bank of the fraudulent chara
cter of the check within the 24-hour clearing house rule. [48] Republic Bank vs.
Ebrada GR L-40796, 31 July 1975 First Division, Martin (J) Facts: Mauricia Ebra
da encashed a back pay check for P1246.08 at Republic Bank (Escolta Branch). The
Bureau of Treasury, which issued the check advised the bank that the alleged in
dorsement of the check by one Martin Lorenzo was a forgery as the latter has been
dead since 14 July 1952; and requested that it be refunded he sum deducted from
its account. The bank refunded the amount to the Bureau and demanded upon Ebrada
the sum in question, who refused. Hence, the present action. Issue: Whether the
bank can recover from the last indorser. Held: According to Section 23 of the N
egotiable Instruments Law, where the signature on a negotiable instrument is for
ged, the negotiation of the check is without force or effect. However, following
the ruling in Beam vs. Farrel (US case), where a check has several indorsements
on it, only the negotiation based on the forged or unauthorized signature which
is inoperative. The last indorser, Ebrada, was duty-bound to ascertain whether
the check was genuine before presenting it to the bank for payment. Her failure
to do so makes her liable for the loss and the Bank may recover from her the mon
ey she received for the check. Had she performed her duty, the forgery would hav
e been detected and fraud defeated. Even if she turned over the amount to Doming
uez immediately after receiving the cash proceeds of the check, she is liable as
an accommodation party under Section 29 of the Negotiable Instruments Law. [49]
Republic Planters Bank vs. CA GR 93073, 21 December 1992 Second Division, Campo
s Jr. (J) Facts: Republic Planters Bank issued 9 promissory notes signed by Shoz
o Yamaguchi (President) and Fermin Canlas (Treasurer) of Worldwide Garment Manuf
acturing Inc. Yamaguchi and Canlas were authorized by the corporation to apply f
or credit facilities with the bank in form of export advances and letters of cre
dit or trust receipts accommodations. Three years after, the bank filed an actio
n to recover the sums of money covered by the promissory notes. Worldwide Garmen
t Manufacturing changed its name to Pinch Manufacturing Corp. Canlas alleged he
was not liable personally for the corporate acts that he performed, and that the
notes were still blank when he signed them. Issue: Whether the corporate treasu
rer is liable for the amounts in the promissory notes.

Held: Canlas is a co-maker of the promissory notes, under the law, and cannot es
cape liability arising therefrom. Inasmuch as the instrument contained the words
I promise to pay and is signed by two or more persons, said persons are deemed to
be jointly and severally liable thereon. As the promissory notes are stereotype
ones issued by the bank in printed form with blank spaces filled up as per agre
ed terms of the loan, following customary procedures, leaving the debtors to do
nothing but read the terms and conditions therein and to sign as makers or co-ma
kers. Section 14 of the Negotiable Instruments Law, therefore, does not apply. C
anlas is solidarily liable with the corporation for the amount of the 9 promisso
ry notes. [50] San Carlos Milling vs. BPI GR 37467, 11 December 1933 Second Divi
sion, Hull (J) Facts: Joseph Wilson, the principal employee of San Carlos Millin
g Co. Ltd. in the Manila Office, conspired with one Alfredo Dolores, a messenger
-clerk in the same office, in sending a cablegram in code to the company in Hono
lulu requesting a telegraphic transfer of $100,000 to China Bank of Manila. Upon
receipt of the money, China Bank sent an exchange contract to San Carlos Millin
g offering the sum of P201,000, which was then the current rate of exchange. On
this contract was forged the name of Newland Baldwin. A managers check on China B
ank payable to San Carlos Milling or order was receipt for by Dolores. The check
was deposited with BPI indorsed by a spurious signature of Baldwin. After clear
ing, BPI received a letter, purportedly signed by Baldwin, directing the shipmen
t and delivery of P201,000. Dolores witnessed the packing of the money and retur
ned with the check for P201,000 purportedly signed by Baldwin. Dolores turned th
e money over to Wilson and received as his share P10,000. When the crime was dis
covered, BPI refused to credit San Carlos Millings account with the amount withdr
awn by the forged checks. Issue: Who shall be liable for the value of the forged
check. Held: A bank that cashes a check must know to whom it pays. It is an ele
mentary principle both in banking and of the Negotiable Instruments Law that a b
ank is bound to know the signatures of its customers; and if it pays a forged ch
eck, it must be considered as making the payment out of its own funds, and canno
t ordinarily charge the amount so paid to the account of the depositor whose nam
e was forged. As the proximate cause of loss was due to the negligence of BPI in
honoring and cashing the forged checks, it is liable for the amount of P201,000
with legal interest thereon from 23 December 1928, until payment. [51] Sesbreno
vs. CA GR 89252, 24 May 1993 Third Division, Feliciano (J) Facts: On 9 February
1981, Raul Sesbreno made a money market placement in the amount of P300,000 wit
h the Philippine Underwriters Finance Corporation (PhilFinance), with a term of
32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale
of a Delta Motor Corporation Promissory Note (2731), the Certificate of Securiti
es Delivery Receipt indicating the sale of the note with notation that said secu
rity was in the custody of Pilipinas Bank, and postdated checks drawn against th
e Insular Bank of Asia and America for P304,533.33 payable on 13 March 1981. The
checks were dishonored for having been drawn against insufficient funds. Pilipi
nas Bank never released the note, nor any instrument related thereto, to Sesbren
o; but Sesbreno learned that the security was issued 10 April 1980, maturing on
6 April 1981, has a face value of P2,300,833.33 with PhilFinance as payee and De
lta Motors as maker; and was stamped non-negotiable on its face. As Sesbreno was u
nable to collect his investment and interest thereon, he filed an action for dam
ages

against Delta Motors and Pilipinas Bank. Issue: Whether non-negotiability of a p
romissory note prevents its assignment. Held: Only an instrument qualifying as a
negotiable instrument under the relevant statute may be negotiated either by in
dorsement thereof coupled with delivery, or by delivery alone if it is in bearer
form. A negotiable instrument, instead of being negotiated, may also be assigne
d or transferred. The legal consequences of negotiation and assignment of the in
strument are different. A negotiable instrument may not be negotiated but may be
assigned or transferred, absent an express prohibition against assignment or tr
ansfer written in the face of the instrument. herein, there was no prohibition s
tipulated. [52] State Investment House vs. CA GR 101163, 11 January 1993 First D
ivision, Bellosillo (J) Facts: Nora B. Moulic issued to Corazon Victoriano check
s, as security for pieces of jewelry sold on commission. Victoriano negotiated t
he checks to the State Investment House Inc. (SIHI). Moulic failed to sell the p
ieces of jewelry, so he returned them to the payee before the maturity of the ch
ecks. The checks, however, could not be retrieved as they had already been negot
iated. Before the checks maturity dates, Moulic withdrew her funds from the drawe
e bank. Upon presentment of the checks for payment, they were dishonored for ins
ufficiency of funds. SIHI sued to recover the value of the checks. Issue: Whethe
r the personal defense of failure or absence of consideration is available, or c
onversely, whether SIHI is a holder in due course. Held: On their faces, the pos
t-dated checks were complete and regular; SIHI bought the checks from the payee
(Victoriano) before their due dates; SIHI took the checks in good faith and for
value, albeit at a discounted price; and SIHI was never informed not made aware
that the checks were merely issued to payee as security and not for value. Compl
ying with the requisites of Section 52 of the Negotiable Instruments Law, SIHI i
s a holder in due course. As such, it holds the instruments free from any defect
of title of prior parties, and from defenses available to prior parties among t
hemselves. SIHI may enforce full payment of the checks. The defense of failure o
r absence of consideration is not available as SIHI was not privy to the purpose
for which the checks were issued. That the post-dated checks were merely issued
as security is not a ground for the discharge of the instrument as against a ho
lder in due course. It is not one of the grounds outlined in Section 119 of the
Negotiable Instrument Law, for the instrument to be discharged. It must be noted
that the drawing and negotiation of a check have certain effects aside from the
transfer of title or the incurring of liability in regard to the instrument by
the transferor. The holder who takes the negotiated paper makes a contract with
the parties on the face of the instrument. There is an implied representation th
at funds or credit are available for the payment of the instrument in the bank u
pon which it is drawn. Consequently, the withdrawal of the money from the drawee
bank to avoid liability on the checks cannot prejudice the rights of holders in
due course. The drawer, Moulic, is liable to the holder in due course, SIHI. [5
3]
State Investment House vs. IAC GR 72764, 13 July 1989 Third Division, Fernan (J)
Facts: New Sikatuna Wood Industries Inc. (NSWI) requested for a loan from Harri
s Chua, who issued 3 crossed checks. Subsequently, NSWI entered in an agreement
with the State Investment House Inc. (SIHI), under a deed of sale, where the for
mer assigned and discounted 11 postdated checks including the 3 issued by Chua.
When the 3 checks were allegedly deposited by SIHI, the checks were dishonored b
y reason of insufficient funds, stop payment and account closed. SIHI made demands up
n Chua to make good said checks, Chua failed to do so. Issue: Whether SIHI is a
holder in due course so as to recover the amounts in the checks from Chua, the d
rawer. Held: The Negotiable Instruments Law does not mention crossed checks but th
e Court has recognized the practice that crossing the check (by two parallel lin
es in the upper left portion of the check) means that the check may only be depo
sited in the bank and that the check may be negotiated only once (to one who has
an account with a bank). 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 in
quire if he has received the check pursuant to that purpose, otherwise he is not
a holder in due course. Herein, SIHI rediscounted the check knowing that it was
a crossed check. His failure to inquire from the holder (NSWI) the purpose for
which the checks were crossed prevents him from being considered in good faith,
and thus, as a holder in due course. SIHI, therefor is subject to personal defen
ses, such as the lack of consideration between the NSWI and Chua, i.e. resulting
from the nonconsummation of the loan. [54] Stelco Marketing vs. CA GR 96160, 17
June 1992 Second Division, Narvasa (J) Facts: Stelco Marketing Corporation sold
steel bars and GI wires to RYL Construction Inc. worth P126,859.61. RYL gave St
elcos sister corporation, Armstrong Industries, a MetroBank check from Steelweld Co
rporation (The check was issued apparently by Steelwelds President Peter Rafael L
imson to Romeo Lim, President of RYL and Limson friend, by way of accommodation,
as a guaranty and not in payment of an obligation). When Armstrong deposited the
check at its bank, it was dishonored because it was drawn against insufficient
funds. When so deposited, the check bore 2 indorsements, i.e. RYL and Armstrong.
A criminal case was instituted against Limson, etc. for violation of BP 22, Sub
sequently, Stelco filed a civil case against RYL and Steelweld to recover the va
lue of the steel products. Issue: Whether Stelco was a holder in due course of t
he check issued by Steelweld. Held: The records do not show any intervention or
participation by Stelco in any manner or form whatsoever in the transaction invo
lving the check, or any communication of any sort between Steelweld and Stelco,
or between either of them and Armstrong Industries, at any time before the disho
nor of the check. The record does show that after the check was deposited and di
shonored, Stelco came into possession of it in some way. Stelco cannot thus be d
eemed a holder of the check for value as it does not meet two essential requisit
es prescribed by the statute, i.e. that it did not become the holder of it before
it was overdue, and without notice that it had been previously dishonored, and t
hat it did not take the check in good faith and for value. [55]

Tan vs. CA GR 108555, 20 December 1994 First Division, Kapunan (J) Facts: Ramon
Tan, a businessman from Puerto Princesa, secured a Cashiers Check from Philippine
Commercial Industrial Bank (PCIBank) to P30,000 payable to his order to avoid c
arrying cash while enroute to Manila. He deposited the check in his account in R
izal Commercial Banking Corporation (RCBC) in its Binondo Branch. RCBC sent the
check for clearing to the Central Bank which was returned for having been missent
or misrouted. RCBC debited Tans account without informing him. Relying on common kn
owledge that a cashiers check was as good as cash, and a month after depositing t
he check, he issued two personal checks in the name of Go Lak and MS Development
Trading Corporation. Both checks bounced due to insufficiency of funds. Tan filed
a suit for damages against RCBC. Issue: Whether a cashiers check is as good as c
ash, so as to have funded the two checks subsequently drawn. Held: An ordinary c
heck is not a mere undertaking to pay an amount of money. There is an element of
certainty or assurance that it will be paid upon presentation; that is why it i
s perceived as a convenient substitute for currency in commercial and financial
transactions. Herein, what is involved is more than an ordinary check, but a cas
hiers check. A cashiers check is a primary obligation of the issuing bank and acce
pted in advance by its mere issuance. By its very nature, a cashiers check is a b
anks order to pay what is drawn upon itself, committing in effect its total resou
rces, integrity and honor beyond the check. Herein, PCIB by issuing the check cr
eated an unconditional credit in favor any collecting bank. Reliance on the laym
ans perception that a cashiers check is as good as cash is not entirely misplaced,
as it is rooted in practice, tradition and principle. [56] Tibajia vs. CA GR 10
0290, 4 June 1993 Second Division, Padilla (J) Facts: A suit for collection of s
um of money was ruled in favor of Eden Tan and against the spouses Norberto Jr.
and Carmen Tibajia. After the decision was made final, Tan filed a motion for ex
ecution and levied upon the garnished funds which were deposited by the spouses
with the cashier of the Regional Trial Court of Pasig. The spouses, however, del
ivered to the deputy sheriff the total money judgment in the form of Cashiers Che
ck (P262,750) and Cash (P135,733.70). Tan refused the payment and insisted upon
the garnished funds to satisfy the judgment obligation. The spouses filed a moti
on to lift the writ of execution on the ground that the judgment debt had alread
y been paid. The motion was denied. Issue: Whether the spouses have satisfied th
e judgment obligation after the delivery of the cashiers check and cash to the de
puty sheriff. Held: A check, whether a managers check or ordinary check, is not l
egal 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 (Philippine Air
lines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs. Intermediate Ap
pellate Court). The court is not, by decision, sanctioning the use of a check fo
r the payment of obligations over the objection of the creditor (Fortunado vs. C
ourt of Appeals). [57]

Travel On vs. CA GR 56169, 26 June 1992 Third Division, Feliciano (J) Facts: Tra
vel-On Inc. is a travel agency selling airline tickets on commission basis for a
nd in behalf of different airline companies. Arturo S. Miranda had a revolving c
redit line with Travel-On. He procured tickets on behalf of airline passengers a
nd derived commissions therefrom. Miranda apparently owed Travel-On the amount o
f P278,201.57 (the value of airline tickets sold to the former), to which Mirand
a paid various amounts in cash and in kind. He thereafter issued 6 post-dated ch
ecks amounting to P115,000 which were all dishonored by the drawee bank. TravelOn filed suit to recover the value of the checks. Miranda countered that he inst
ead overpaid his obligations, and that he merely issued the checks for purposes
of accommodation as he allegedly had in the past accorded Travel-On. Issue: Whet
her Miranda is indebted to Travel-On, or whether he is an accommodation party. H
eld: A check which is regular on its face is deemed prima facie to have been iss
ued for a valuable consideration and every person whose signature appears thereo
n is deemed to have become a party thereto for value. Thus, the mere introductio
n of the instrument sued on, in evidence prima facie, entitles the plaintiff to
recovery. Such presumption subsists unless otherwise contradicted by other compe
tent evidence. The checks, being presented for payment, were thus intended for e
ncashment. There is nothing in the checks (nor in other documents) that stated o
therwise. Travel-On was a payee, not an accommodated party for the checks, as it
realized no value on the checks which bounced. Travel-On, thus, is entitled to
the benefit of the presumption that it is a holder in due course. [58] Uy vs. CA
GR 119000, 28 June 1997 First Division, Bellosillo (J) Facts: Rosa Uy and Conso
lacion Leong, who are friends, formed a partnership; with Consolacion contributi
ng additional capital for the expansion of Rosas lumber business. The friendship
between the two soured when the partnership documents were never processed. Cons
olacion asked for the return of her investments. Rosa issued check which were di
shonored for insufficiency of funds. Uy was charged for estafa and violation of
BP 22. Issue: Whether knowledge of insufficiency of funds is transitory or simul
taneous with the issuance of the instrument. Held: Even if it is true that BP 22
is a transitory or continuing offense and as such a person indicted with a tran
sitory offense may be validly tried in any jurisdiction where the offense was in
part committed, knowledge by the maker or drawer of the fact that he has no suf
ficient funds to cover the check or of having sufficient funds is simultaneous t
o the issuance of the instrument. None of the essential ingredients of BP 22 was
committed in the City of Manila; i.e. Consolacion was a resident of Makati whil
e Uy was a resident of Caloocan City; the place of business of the alleged partn
ership is in Malabon; the drawee bank was located in Malabon; and the checks wer
e all deposited for collection in Makati. [59] Vaca vs. CA GR 43596, 31 October
1936

En Banc, Recto (J) Facts: Eduardo Vaca is the president and owner of Ervine Inte
rnational while Fernando Nieto, Vacas son-inlaw, is the firms purchasing manager.
They issued a check for P10,000 to the General Agency for Reconnaissance, Detect
ion and Security (GARDS) and drawn against China Bank. When deposited with PCIBa
nk, the check was dishonored for insufficiency of funds. GARDS sent a demand let
ter but the drawers failed to pay within the time given (7 days from notice). A
few days later, however, Vaca issued a check to GARDS for P19,866.16, drawn agai
nst Associated Bank, replacing the dishonored check. GARDS did not return the di
shonored check. Later on, GARDS Acting Operations Manager filed a criminal suit
against Vaca and Nieto for violation of BP 22. The trial court sentenced each to
1 year imprisonment and to pay a fine of P10,000 and costs. Issue [1]: Whether
the drawers had knowledge of insufficient funds in issuing the check. Held [1]:
Section 2 of BP 22 provides a presumption of knowledge of insufficiency of funds
if the drawer fails to maintain sufficient funds within 90 days after the date
of the check, or to make arrangement for payment in full by the drawee of such c
heck within 5 days after receiving notice that such check has not been paid by t
he drawee. Herein, the second check supposedly replacing the dishonored check is
actually the payment of two separate bills, and was issued 15 days after notice
. Such replacement cannot negate the presumption that the drawers knew of the insu
fficiency of funds. Issue [2]: Whether the absence of damages incurred by the pa
yee absolves the drawers from liability. Held [2]: The claim -- that the case wa
s simply a result of a misunderstanding between GARDS and the drawers and that t
he security agency did not suffer any damage from the dishonor of the check -- i
s flimsy. Even if the payee suffered no damage as a result of the issuance of th
e bouncing check, the damage to the integrity of the banking system cannot be de
nied. Damage to the payee is not an element of the crime punished in BP 22. Note
: In this case, the Court recognized the contribution of Filipino entrepreneurs
to the national economy; and that to serve the ends of criminal justice, instead
of the 1 year imprisonment, a fine of double the amount of the check involved w
as imposed as penalty. This was made to redeem valuable human material and preve
nt unnecessary deprivation of personal liberty and economic usefulness with due
regard to the protection of the social order. [60] Vda. de Eduque vs. Ocampo GR
L-222, 26 April 1950 Second Division, Moran (CJ) Facts: On 16 February 1935, Dr.
Jose Eduque secured two loans from Mariano Ocampo de Leon, Dona Escolastica del
os Reyes and Don Jose M. Ocampo, with amount s of P40,000 and P15,000, both paya
ble within 20 years with interest of 5% per annum. Payment of the loans was guar
anteed by mortgage on real property. On 6 December 1943, Salvacion F. Vda de Edu
que, as administratrix of the estate of Dr. Jose Eduque, tendered payment by mea
ns of a cashiers check representing Japanese War notes to Jose M. Ocampo, who ref
used payment. By reason of such refusal, an action was brought and the cashiers c
heck was deposited in court. After trial, judgment was rendered against Ocampo c
ompelling him to accept the amount, to pay the expenses of consignation, etc. Oc
ampo accepted the judgment as to the second loan but appealed as to the first lo
an.

Issue: Whether there is a tender of payment by means of a cashiers check represen
ting war notes. Held: Japanese military notes were legal tender during the Japan
ese occupation; and Ocampo impliedly accepted the consignation of the cashiers ch
eck when he asked the court that he be paid the amount of the second loan (P15,0
00). It is a rule that a cashiers check may constitute a sufficient tender where
no objection is made on this ground.

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