Philippine Education Co. vs. Soriano
vs Court of Appeals
Facts:
Enrique Montinola sought to purchase from Manila Post Office ten
money orders of 200php each payable to E. P. Montinola. Montinola offered
to pay with the money orders with a private check. Private check were not
generally accepted in payment of money orders, the teller advised him to
see the Chief of the Money Order Division, but instead of doing so,
Montinola managed to leave the building without the knowledge of the teller.
Upon the disappearance of the unpaid money order, a message was sent to
instruct all banks that it must not pay for the money order stolen upon
presentment. The Bank of America received a copy of said notice. However,
The Bank of America received the money order and deposited it to the
appellants account upon clearance. Mauricio Soriano, Chief of the Money
Order Division notified the Bank of America that the money order deposited
had been found to have been irregularly issued and that, the amount it
represented had been deducted from the banks clearing account. The Bank
of America debited appellants account with the same account and give
notice by mean of debit memo.
Issue:
Whether or not the postal money order in question is a negotiable
instrument
Held:
No. It is not disputed that the Philippine postal statutes were patterned
after similar statutes in force in United States. The Weight of authority in the
United States is that postal money orders are not negotiable instruments, the
reason being that in establishing and operating a postal money order
system, the government is not engaged in commercial transactions but
merely exercises a governmental power for the public benefit. Moreover,
some of the restrictions imposed upon money orders by postal laws and
regulations are inconsistent with the character of negotiable instruments. For
instance, such laws and regulations usually provide for not more than one
endorsement; payment of money orders may be withheld under a variety of
circumstances.
Caltex (Philippines), Inc.
In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs) from
Security Bank and Trust Company for the formers deposit with the said bank
amounting to P1,120,000.00. The said CTDs are couched in the following
manner:
This is to Certify that B E A R E R has deposited in this Bank the sum
of _____Pesos, Philippine Currency, repayable to said
depositor _____ days. after date, upon presentation and surrender of this
certificate, with interest at the rate of ___ % per cent per annum.
Angel de la Cruz subsequently delivered the CTDs to Caltex in connection
with the purchase of fuel products from Caltex.
In March 1982, Angel de la Cruz advised Security Bank that he lost the
CTDs. He executed an affidavit of loss and submitted it to the bank. The
bank then issued another set of CTDs. In the same month, Angel de la Cruz
acquired a loan of P875,000.00 and he used his time deposits as collateral.
In November 1982, a representative from Caltex went to Security Bank to
present the CTDs (delivered by de la Cruz) for verification. Caltex advised
Security Bank that de la Cruz delivered Caltex the CTDs as security for
purchases he made with the latter. Security Bank refused to accept the
CTDs and instead required Caltex to present documents proving the
agreement made by de la Cruz with Caltex. Caltex however failed to produce
said documents.
In April 1983, de la Cruz loan with Security bank matured and no payment
was made by de la Cruz. Security Bank eventually set-off the time deposit to
pay off the loan.
Caltex sued Security Bank to compel the bank to pay off the CTDs. Security
Bank argued that the CTDs are not negotiable instruments even though the
word bearer is written on their face because the word bearer contained
therein refer to depositor and only the depositor can encash the CTDs and
no one else.
ISSUE: Whether or not the certificates of time deposit are negotiable.
HELD: Yes. The CTDs indicate that they are payable to the bearer; that
there is an implication that the depositor is the bearer but as to who the
depositor is, no one knows. It does not say on its face that the depositor is
Angel de la Cruz. If it was really the intention of respondent bank to pay the
amount to Angel de la Cruz only, it could have with facility so expressed that
fact in clear and categorical terms in the documents, instead of having the
word BEARER stamped on the space provided for the name of the
depositor in each CTD. On the wordings of the documents, therefore, the
amounts deposited are repayable to whoever may be the bearer thereof.
Thus, de la Cruz is the depositor insofar as the bank is concerned, but
obviously other parties not privy to the transaction between them would not
be in a position to know that the depositor is not the bearer stated in the
CTDs.
However, Caltex may not encash the CTDs because although the CTDs are
bearer instruments, a valid negotiation thereof for the true purpose and
agreement between Caltex and De la Cruz, requires both delivery and
indorsement. As discerned from the testimony of Caltex representative, the
CTDs were delivered to them by de la Cruz merely for guarantee or security
and not as payment.
Metropolitan Bank & Trust Company vs. Court of Appeals
G.R. No. 88866 February, 18, 1991
Cruz, J.:
Facts:
Eduardo Gomez opened an account with Golden Savings and
deposited 38 treasury warrants. All warrants were subsequently indorsed by
Gloria Castillo as Cashier of Golden Savings and deposited to its Savings
account in Metrobank branch in Calapan, Mindoro. They were sent for
clearance. Meanwhile, Gomez is not allowed to withdraw from his account,
later, however, exasperated over Floria repeated inquiries and also as an
accommodation for a valued client Metrobank decided to allow Golden
Savings to withdraw from proceeds of the warrants. In turn, Golden Savings
subsequently allowed Gomez to make withdrawals from his own account.
Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded the refund by Golden
Savings of the amount it had previously withdrawn, to make up the deficit in
its account. The demand was rejected. Metrobank then sued Golden
Savings.
Issue:
1. Whether or not Metrobank can demand refund agaist Golden Savings
with regard to the amount withdraws to make up with the deficit as a result of
the dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable instruments
Held:
No. Metrobank is negligent in giving Golden Savings the impression
that the treasury warrants had been cleared and that, consequently, it was
safe to allow Gomez to withdraw. Without such assurance, Golden Savings
would not have allowed the withdrawals. Indeed, Golden Savings might even
have incurred liability for its refusal to return the money that all appearances
belonged to the depositor, who could therefore withdraw it anytime and for
any reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that
Golden Savings deposited them to its account with Metrobank. Golden
Savings had no clearing facilities of its own. It relied on Metrobank to
determine the validity of the warrants through its own services. The proceeds
of the warrants were withheld from Gomez until Metrobank allowed Golden
Savings itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the warrants in general, Golden
Savings assumed that they were genuine and in all respects what they
purport to be, in accordance with Sec. 66 of NIL. The simple reason that NIL
is not applicable to non negotiable instruments, treasury warrants.
No. The treasury warrants are not negotiable instruments. Clearly
stamped on their face is the word: non negotiable. Moreover, and this is
equal significance, it is indicated that they are payable from a particular fund,
to wit, Fund 501. An instrument to be negotiable instrument must contain an
unconditional promise or orders to pay a sum certain in money. As provided
by Sec 3 of NIL an unqualified order or promise to pay is unconditional
though coupled with: 1st, an indication of a particular fund out of which
reimbursement is to be made or a particular account to be debited with the
amount; or 2nd, a statement of the transaction which give rise to the
instrument. But an order to promise to pay out of particular fund is not
unconditional. The indication of Fund 501 as the source of the payment to be
made on the treasury warrants makes the order or promise to pay not
conditional and the warrants themselves non-negotiable. There should be
no question that the exception on Section 3 of NIL is applicable in the case
at bar.
 It appears that, knowing he had no funds therefor, Ang Tek Lian drew on
SESBRENO VS CA Saturday, November 16, 1946, the check Exhibits A upon the China Banking
Corporation for the sum of P4,000, payable to the order of "cash". He
delivered it to Lee Hua Hong in exchange for money which the latter handed
in act. On November 18, 1946, the next business day, the check was
presented by Lee Hua Hong to the drawee bank for payment, but it was
dishonored for insufficiency of funds, the balance of the deposit of Ang Tek
Lian on both dates being P335 only.

The Court of Appeals believed the version of Lee Huan Hong who testified
that "on November 16, 1946, appellant went to his (complainant's) office, at
1217 Herran, Paco, Manila, and asked him to exchange Exhibit A which
he (appellant) then brought with him with cash alleging that he needed
badly the sum of P4,000 represented by the check, but could not withdraw it
from the bank, it being then already closed; that in view of this request and
relying upon appellant's assurance that he had sufficient funds in the blank
to meet Exhibit A, and because they used to borrow money from each other,
even before the war, and appellant owns a hotel and restaurant known as
the North Bay Hotel, said complainant delivered to him, on the same date,
the sum of P4,000 in cash; that despite repeated efforts to notify him that the
check had been dishonored by the bank, appellant could not be located any-
where, until he was summoned in the City Fiscal's Office in view of the
complaint for estafa filed in connection therewith; and that appellant has not
paid as yet the amount of the check, or any part thereof."

Inasmuch as the findings of fact of the Court of Appeals are final, the only
question of law for decision is whether under the facts found, estafa had
been accomplished.

Article 315, paragraph (d), subsection 2 of the Revised Penal Code,

punishes swindling committed "By post dating a check, or issuing such
check in payment of an obligation the offender knowing that at the time he
had no funds in the bank, or the funds deposited by him in the bank were not
Ang Tek Lian vs CA 87 SCRA 383
sufficient to cover the amount of the check, and without informing the payee
of such circumstances".
For having issued a rubber check, Ang Tek Lian was convicted of estafa in
the Court of First Instance of Manila. The Court of Appeals affirmed the
We believe that under this provision of law Ang Tek Lian was properly held
verdict.
liable. In this connection, it must be stated that, as explained in People vs.
Fernandez (59 Phil., 615), estafa is committed by issuing either a postdated
check or an ordinary check to accomplish the deceit.
It is argued, however, that as the check had been made payable to "cash"
and had not been endorsed by Ang Tek Lian, the defendant is not guilty of
the offense charged. Based on the proposition that "by uniform practice of all
banks in the Philippines a check so drawn is invariably dishonored," the
following line of reasoning is advanced in support of the argument:
. . . When, therefore, he (the offended party ) accepted the check
(Exhibit A) from the appellant, he did so with full knowledge that it
would be dishonored upon presentment. In that sense, the
appellant could not be said to have acted fraudulently because the
complainant, in so accepting the check as it was drawn, must be
considered, by every rational consideration, to have done so fully
aware of the risk he was running thereby." (Brief for the appellant,
p. 11.)
We are not aware of the uniformity of such practice. Instances have
undoubtedly occurred wherein the Bank required the indorsement of the
drawer before honoring a check payable to "cash." But cases there are too,
where no such requirement had been made . It depends upon the
circumstances of each transaction.
Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to
the order of "cash" is a check payable to bearer, and the bank may pay it to
the person presenting it for payment without the drawer's indorsement.
A check payable to the order of cash is a bearer instrument.
Bacal vs. National City Bank of New York (1933), 146 Misc., 732;
262 N. Y. S., 839; Cleary vs. De Beck Plate Glass Co. (1907), 54
Misc., 537; 104 N. Y. S., 831; Massachusetts Bonding & Insurance
Co. vs. Pittsburgh Pipe & Supply Co. (Tex. Civ. App., 1939), 135 S.
W. (2d), 818. See also H. Cook & Son vs. Moody (1916), 17 Ga.
App., 465; 87 S. E., 713.
Where a check is made payable to the order of "cash", the word
cash "does not purport to be the name of any person", and hence
the instrument is payable to bearer. The drawee bank need not
obtain any indorsement of the check, but may pay it to the person
presenting it without any indorsement. . . . (Zollmann, Banks and
Banking, Permanent Edition, Vol. 6, p. 494.)
Of course, if the bank is not sure of the bearer's identity or financial
solvency, it has the right to demand identification and /or assurance against
possible complications, for instance, (a) forgery of drawer's signature, (b)
loss of the check by the rightful owner, (c) raising of the amount payable, etc.
The bank may therefore require, for its protection, that the indorsement of
the drawer or of some other person known to it be obtained. But where
the Bank is satisfied of the identity and /or the economic standing of the
bearer who tenders the check for collection, it will pay the instrument without
further question; and it would incur no liability to the drawer in thus acting.
A check payable to bearer is authority for payment to holder. Where
a check is in the ordinary form, and is payable to bearer, so that no
indorsement is required, a bank, to which it is presented for
payment, need not have the holder identified, and is not negligent in
falling to do so. . . . (Michie on Banks and Banking, Permanent
Edition, Vol. 5, p. 343.)
. . . Consequently, a drawee bank to which a bearer check is
presented for payment need not necessarily have the holder
identified and ordinarily may not be charged with negligence in
failing to do so. See Opinions 6C:2 and 6C:3 If the bank has no
reasonable cause for suspecting any irregularity, it will be protected
in paying a bearer check, "no matter what facts unknown to it may
have occurred prior to the presentment." 1 Morse, Banks and
Banking, sec. 393.
Although a bank is entitled to pay the amount of a bearer check
without further inquiry, it is entirely reasonable for the bank to insist
that holder give satisfactory proof of his identity. . . . (Paton's
Digest, Vol. I, p. 1089.)
Anyway, it is significant, and conclusive, that the form of the check Exhibit A
was totally unconnected with its dishonor. The Court of Appeals declared
that it was returned unsatisfied because the drawer had insufficient funds
not because the drawer's indorsement was lacking.
Wherefore, there being no question as to the correctness of the penalty
imposed on the appellant, the writ of certiorari is denied and the decision of
the Court of Appeals is hereby affirmed, with costs.