(1)

Evangelista v. Screenex, Inc.

G. R. No. 211564, November 20, 2017
By: Alba, Ma. Angela

Topic: Discharge of a check

Doctrine: A check is subject to prescription of actions upon a written contract.

Evangelista obtained a loan from Screenex, Inc. As security for the loan, Evangelista gave two open-dated checks
both pay to the order of Screenex, Inc. From the time the checks were issued by Evangelista, they were held in
safe keeping by Philip Gotuaco, Sr. until the his death on 19 November 2004. Before the checks were deposited,
there was a personal demand from the family of the decedent for Evangelista to settle the loan and likewise a
demand letter sent by the family lawyer. Evangelista heed their demand thus, on August 2005, he was charged
with violation of Batas Pambansa Blg. 22 filed with the Metropolitan Trial Court of Makati. Evangelista raises the
defense that any civil liability attributable to him had been extinguished and/or was barred by prescription.

A.Can Evangelista successfully interpose the defense of prescription?

Yes. The defense of prescription can be successfully invoked.

Section 119, Paragraph (d) of the NIL states that a negotiable instrument like a check may be discharged by any
other act which will discharge a simple contract for the payment of money. A check therefore is subject to
prescription of actions upon a written contract. Article 1144 of the Civil Code provides, “The following actions must
be brought within ten years from the time the right of action accrue: 1.) Upon a written contract, …”

Barring any extrajudicial or judicial demand that may toll the 10-year prescription period and any evidence which
may indicate any other time when the obligation to pay is due, the cause of action based on a check is reckoned
from the date indicated on the check. If the check is undated, however, the cause of action is reckoned from the
date of the issuance of the check. This is so because regardless of the omission of the date indicated on the check,
Section 17 of the Negotiable Instruments Law instructs that an undated check is presumed dated as of the time of
its issuance.
 (2)
BDO Unibank v. Lao
G.R. No. 227005, June 19, 2017
By: Arid, Hannah Mhae G.

Topic: Indorsements; Liabilities of an Indorser; Crossed-checks

Doctrine: Under Section 66 of the Negotiable Instruments Law, an endorser warrants "that the instrument is
genuine and in all respects what it purports to be; that he has good title to it; that all prior parties had capacity to
contract; and that the instrument is at the time of his endorsement valid and subsisting."

Facts: Respondent Lao entered into a transaction with Ever link, under which, Everlink would supply him with
"HCG sanitary wares"; and that for the down payment, he issued two (2) Equitable crossed checks payable to
Everlink: Check No. 0127-242249 and Check No. 0127-242250, in the amounts of ₱273,300.00 and ₱336,500.00,
respectively. Upin encashment of the chevhs, however, Everlink failed to perofrm its obligation. Lao learned that
the checks were deposited in two different bank accounts at respondent International Exchange Bank, now
respondent Union Bank of the Philippines (UnionBank).Lao filed a complaint against Everlink and Wu for their
failure to comply with their obligation and against BDO for allowing the encashment of the two (2) checks. He later
withdrew his complaint against Everlink as the corporation had ceased existing. Lao filed an Amended Complaint,
wherein he impleaded Union Bank as additional defendant for allowing the deposit of the crossed checks in two
bank accounts other than the payee's, in violation of its obligation to deposit the same only to the payee's account.

Issue: W/N a Union Bank as a collecting bank should assume responsibility for a crossed check as a general
endorser in accordance with section 66 of the Negotiable Instruments Law.

Held: Yes, UnionBank is liable for the crossed checks as the general endorser. The liability of the collecting bank is
anchored on its guarantees as the last endorser of the check. Under Section 66 of the Negotiable Instruments Law,
an endorser warrants "that the instrument is genuine and in all respects what it purports to be; that he has good
title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his endorsement
valid and subsisting." It has been repeatedly held that in check transactions, the collecting bank generally suffers
the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the party making the presentment has done
its duty to ascertain the genuineness of the endorsements. If any of the warranties made by the collecting bank
turns out to be false, then the drawee bank may recover from it up to the amount of the check.

In the case at bar, BDO as the drawee bank when it paid to UnionBank the value of the check other than the payee
named in the check which, in turn, credited the amount to New Wave's account, it did not comply with the terms of
the check and violates its duty to charge the drawer's account only for properly payable items because as a drawee
bank it is under strict liability to pay the check only to the payee or to the payee's order and in this case the payee
named in the check was in favour of Everlink and that said check was not even endorsed by Everlink to New Wave.
Nevertheless, even if BDO violated its duty, the loss still pertained to Union Bank being the collecting bank. Union
Bank was clearly negligent when it allowed the check to be presented by, and deposited in the account of New
Wave, despite knowledge that it was not the payee named therein. Further, it could not have escaped its attention
that the subject checks were crossed checks. A crossed check is one where two parallel lines are drawn across its
face or across the comer thereof. A check may be crossed generally or specially. A check is crossed especially when
the name of a particular banker or company is written between the parallel lines drawn. It is crossed generally
when only the words "and company" are written at all between the parallel lines. Jurisprudence dictates that the
effects of crossing a check are: (1) that the check may not be encashed but only deposited in the bank; (2) that
the check may be negotiated only once - to one who has an account with a bank; and (3) that the act of crossing
the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must
inquire if he has received the check pursuant to that purpose. The effects of crossing a check, thus, relate to the
mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the
payee named therein. It is undisputed that Check No. 0127-242250 had been crossed generally as nothing was
written between the parallel lines appearing on the face of the instrument. This indicated that Lao, the drawer, had
intended the same for deposit only to the account of Everlink, the payee named therein. Despite this clear
intention, however, Union Bank negligently allowed the deposit of the proceeds of the said check in the account of
New Wave.
 (3)
Ubas, Sr. v. Chan
G.R. No. 215910, February 6, 2017
By: Bernardo, Michael Gerard T.

Doctrine: Unless otherwise rebutted, every negotiable instrument is deemed to have been issued for a
valuable consideration.

Topic: Presumption of consideration; Privity of contracts

Wilson Chan under the name and style of UNIMASTERS entered into a loan agreement with Manuel Ubas for an
amount of P 1, 500, 000.00 representing the price of boulders, sand, gravel, and other construction materials
allegedly purchased by Wilson Chan from Manuel Ubas for the construction of the Macagtas Dam in Macagtas,
Catarman, Northern Samar. Wilson Chan issued three (3) bank checks, payable to “CASH” in the amount of
₱500,000.00 each but when Manuel Ubas presented the subject checks for encashment, the same were dishonored
due to a stop payment order.

Manuel Ubas filed a collection case against Wilson Chan. Wilson Chan filed a Motion to Dismiss on the ground that
Manuel Ubas has no cause of action against him considering that Manuel Ubas failed to present any documentary
proof that he or his firm delivered construction materials for the Macagtas Dam project and that the checks does
not belong to him but to UNIMASTERS.

A. Whether or not Wilson Chan can successfully invoke the defense of lack of consideration.

No, Wilson Chan cannot successfully invoke the defense of lack of consideration.

Section 24 of the Negotiable Instrument Law provides that every negotiable instrument is deemed prima facie to
have been issued for a valuable consideration; and every person whose signature appears thereon to have become
a party thereto for value.

In this case, Manuel Ubas had presented in evidence the three (3) dishonored checks which were undeniably
signed by respondent. The respondent even admitted that he signed the checks. Hence, it is presumed that the
subject checks were issued for a valid consideration, which therefore, dispensed with the necessity of any
documentary evidence to support petitioner's monetary claim. Unless otherwise rebutted, the legal presumption of
consideration under Section 24 of the NIL stands.

B. Whether or not Manuel Ubas can collect from Wilson Chan despite the fact that the checks issued
were under the name of UNIMASTERS.

Yes, Manuel Ubas may collect from Wilson Chan.

Jurisprudence provides that the manner or mode of payment does not alter the nature of the obligation.

The source of obligation, as claimed by Manuel Ubas in this case, stems from his contract with Wilson Chan. When
they agreed upon the purchase of the construction materials on credit for the amount of P1,500,000,00, the
contract between them was perfected. Therefore, even if corporate checks were issued for the payment of the
obligation, the fact remains that the juridical tie between the two (2) parties was already established during the
contract's perfection stage and, thus, does not preclude the creditor from proceeding against the debtor during the
contract's consummation stage.

(4)
 Asia Brewery Inc. v. Equitable PBI Bank
G.R. No. 190432, April 25, 2017
By: Bigornia, Donna

Topic: Delivery; when effectual; when presumed

Doctrine: Where the instrument is no longer in the possession of a party whose signature appears
thereon, a valid and intentional delivery by him is presumed until the contrary is proved.

Facts: Several checks and demand drafts were issued in the name of Charlie Go, bearing the annotation "endorsed
by PCI Bank, Ayala Branch, All Prior Endorsement And/Or Lack of Endorsement Guaranteed." All the demand drafts
were crossed. However, none of the above checks and demand drafts reached payee, co-plaintiff Charlie S. Go.
Rather, all of the above checks and demand drafts fell into the hands of the then Sales Accounting Manager of
plaintiff Asia Brewery, Inc., who falsely, willfully, and maliciously pretending to be the payee, co-plaintiff Charlie S.
Go, succeeded in opening accounts with defendant Equitable PCI Bank in the name of Charlie Go and thereafter
deposited the said checks and demand drafts in said accounts and withdrew the proceeds thereof to the damage
and prejudice of plaintiff Asia Brewery, Inc. For this reason, petitioners filed a Complaint for payment,
reimbursement, or restitution against respondent. Respondent, in its answer, alleged that Go is not entitled to
reimbursement on the ground that he never became the holder or owner of the instruments due to non-delivery
and, hence, did not acquire any right or interest.

Issue: Whether or not there was a delivery of the subject instruments to Go such that he has a right to seek for
the reimbursement of the value of the instruments from the defendant Equitable PCI Bank.

Held: Yes, there was a delivery.

Section 16 of the Negotiable Instrument Law provides that where the instrument is no longer in the possession of a
party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is
proved. Furthermore, Associated Bank vs. Court of Appeals held that the possession of a check on a forged or
unauthorized indorsement is wrongful, and when the money is collected on the check, the bank can be held for
moneys had and received.

In this case, the defendant bank did not present any evidence to dispute the presumption that the signatories of
the subject instruments validly and intentionally delivered the instrument to petitioner Go. Also, there was a
wrongful collection considering that the Sales accounting manager who deposited and withrew the proceeds of the
instruments was not the payee of the subject instruments. The subject instruments were also endorsed by PCI-
Bank-Ayala Branch "All Prior Endorsement And / Or Lack of Endorsement Guaranteed.

Therefore, Go is entitled to reimbursement from Equitable PCI Bank of the value of the subject instruments
considering that the said instruments were presumed to be delivered to the former.

(06) Aguilar vs Calimbas

G.R. No. 209605, January 12, 2015
By: Kathrina De Castro
Topic: Check

DOCTRINE: A check constitutes an evidence of indebtedness and is a veritable proof of an obligation

Three complaints for sum of money filed against Tantiangco, Aguilar and Calimbas as evidence by Cash
Disbursement Vouchers and supported by PNB Checks. In which, there is discrepancy between the principal
amount of the loan evidenced by the cash disbursement voucher and the net amounts being collected. The PNB
checks issued to the petitioners proved the existence of the loan transactions. Both Calimbas and Aguilar liable to
respondent for their respective debts. Their receipts of the loan were proven by their signatures appearing on the
dorsal portions of the checks as well as on the cash disbursement vouchers.

A. Can the court rely to the check as an evidence of indebtedness

Yes. Based on several jurisprudence, the Court expressly recognized that a check constitutes an evidence of
indebtedness and is a veritable proof of an obligation. Hence, it can be used in lieu of and for the same purpose as
a promissory note. It pointed out that a check functions more than a promissory note since it not only contains an
undertaking to pay an amount of money but is an “order addressed to a bank and partakes of a representation that
the drawer has funds on deposit against which the check is drawn, sufficient to ensure payment upon its
presentation to the bank. In this case, there is no dispute that the signatures of the petitioners were present on
both the PNB checks and the cash and the cash disbursement vouchers. The checks were also made payable to the
order of the petitioners. Hence, respondent can properly demand that they pay the amounts borrowed. Therefore,
the check can be used as an evidence of indebtedness or that there is a contract of loan that existed.

(7) Rivera v. Spouses Chua

G.R. No. 184458, January 14, 2015
By: Gaite, Rhio Angeline

Topic: Promissory Note; When demand is not necessary

Doctrine: A negotiable promissory note is an unconditional promise in writing made by one person to another,
signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in
money to order or to bearer. Where a note is drawn to the maker’s own order, it is not complete until indorsed by
him.
Facts: Rivera and Chua were kumpadres. On 24 February 1995, Rivera obtained a loan from the Spouses Chua in
the amount of Php120,000.00. Rivera then made a promise to pay the spouses Chua on 31 December 1995. He
also stipulated that in the event of failure on his part, he agrees to pay the sum equivalent to 5% interest monthly
from the date of default until the entire obligation is fully paid for. Almost three years from the date of payment
stipulated in the promissory note, Rivera, as partial payment for the loan, issued and delivered to the spouses
Chua, as payee, a check, dated 30 December 1998, drawn against Rivera’s current account with PCIB in the
amount of ₱25,000.00. On 21 December 1998, Spouses Chua received another check presumably issued by Rivera,
likewise drawn against Rivera’s PCIB current account, duly signed and dated, but blank as to payee and amount.
Ostensibly, as per understanding by the parties, PCIB Check was issued in the amount of ₱133,454.00 with "cash"
as payee. Purportedly, both checks were simply partial payment for Rivera’s loan in the principal amount of
₱120,000.00. Upon presentment for payment, the two checks were dishonored for the reason "account closed." As
of 31 May 1999, the amount due the Spouses Chua was pegged at ₱366,000.00 covering the principal of
₱120,000.00 plus 5% interest per month from 1 January 1996 to 31 May 1999. The Spouses Chua alleged that
they have repeatedly demanded payment from Rivera to no avail.

Issues: (1) Is the promissory note a negotiable instrument?

(2) Is demand necessary?

Held: (1) No, the promissory note is not a negotiable instrument. The negotiable instruments law provides that a
negotiable promissory note is an unconditional promise in writing made by one person to another, signed by the
maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or
to bearer. Where a note is drawn to the maker’s own order, it is not complete until indorsed by him. In this case,
the promissory note is made out specifically to spouses Chua as payees. Thus, the promissory note made by Rivera
is not a negotiable instrument.

(2) No, demand is not necessary. In this case, the Negotiable Instruments Law does not apply. What is applicable
is the New Civil Code which provides that demand is not necessary for delay to exist when the law or obligation
expressly so declare. The promissory note herein is not a negotiable instrument since it was made out specifically
to spouses Chua as payees. Further, the promissory note is unequivocal when the obligation becomes due and
demandable which is on 31 December 1995. Thus, demand is not necessary.
 (8) Areza vs, Express Savings Bank
G.R. No. 176697, September 10, 2014
By: Grande, Jonicocel

Topic: Duty of depositary/collecting bank or last endorser

Doctrine: The depositary/collecting bank or last endorser generally suffers the loss because it has the duty to
ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to
the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness
of the endorsements.

A certain Gerry paid petitioners with 9 checks payable to different payees and drawn against the Philippine
Veterans Bank (drawee), each valued at 200,000.00 for a total of ₱1,800,000.00. Petitioners deposited the said
checks in their savings account with the Bank. The Bank, in turn, deposited the checks with its depositary bank,
Equitable-PCI Bank. Equitable-PCI Bank presented the checks to the drawee, the Philippine Veterans Bank, which
honored the checks. The subject checks were returned to the drawee on the ground that the amount on the face of
the checks was altered from the original amount. The drawee returned the checks amounting to ₱1,800,000.00 and
the debited the account of Equitable-PCI Bank. In turn, Equitable-PCI Bank debited the deposit account of the Bank
of the same amount. The Bank then withdrew the same amount representing the returned checks from petitioners’
savings account.

Whether the bank had the right to debit the amount of ₱1,800,000.00 from the petitioners’ accounts.

NO.

Under Section 66 of the Negotiable Instruments Law, an endorser warrants "that the instrument is genuine and in
all respects what it purports to be; that he has good title to it; that all prior parties had capacity to contract; and
that the instrument is at the time of his endorsement valid and subsisting." In check transactions, the
depositary/collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the
genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee
is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the
endorsements. However, the depositary/collecting bank may resist or defend against a claim for breach of warranty
if the drawer, the payee, or either the drawee bank or depositary bank was negligent and such negligence
substantially contributed to the loss from alteration.

In this case, as a collecting bank, the Bank is liable for the amount of the materially altered checks because it has
the duty to ascertain the genuineness of all prior endorsements and no negligence can be attributed to petitioners.
Thus, the Bank had no right to debit the account of the petitioners.
 (9) Metropolitan Bank and Trust Company v. Chiok
G.R. No. 172652, Nov. 26, 2014
By: Jovero, John Tristram V.

Topic: Manager’s/Cashier’s Check

Doctrine: It is a well-known and accepted practice in the business sector that a Manager’s/Cashier’s Check is
deemed as cash.

Facts: Respondent Wilfred N. Chiok (Chiok) had been engaged in dollar trading for several years. He usually buys
dollars from Gonzalo B. Nuguid (Nuguid) at the exchange rate prevailing on the date of the sale. Chiok pays Nuguid
either in cash or manager’s check, to be picked up by the latter or deposited in the latter’s bank account. Nuguid
delivers the dollars either on the same day or on a later date as may be agreed upon between them, up to a week
later. Chiok then deposited the three checks (Asian Bank MC Nos. 025935 and 025939, and Metrobank CC No.
003380), with an aggregate value of P26,068,350.00 in Nuguid’s account with Far East Bank & Trust Company
(FEBTC), the predecessor-in-interest of petitioner Bank of the Philippine Islands (BPI). Nuguid was supposed to
deliver US$1,022,288.50,4 the dollar equivalent of the three checks as agreed upon, in the afternoon of the same
day. Nuguid, however, failed to do so, prompting Chiok to request that payment on the three checks be stopped.
Chiok was allegedly advised to secure a court order within the 24-hour clearing period. On the following day, July
6, 1995, Chiok filed a Complaint for damages with application for ex parte restraining order and/or preliminary
injunction with the Regional Trial Court (RTC) of Quezon City against the spouses Gonzalo and Marinella Nuguid,
and the depositary banks, Asian Bank and Metrobank.

A. Whether or not payment of manager’s and cashier’s checks are subject to the condition that the
payee thereof should comply with his obligations to the purchaser of the checks.

No. While indeed, it cannot be said that manager’s and cashier’s checks are pre-cleared, clearing should not be
confused with acceptance. Manager’s and cashier’s checks are still the subject of clearing to ensure that the same
have not been materially altered or otherwise completely counterfeited. However, manager’s and cashier’s checks
are pre-accepted by the mere issuance thereof by the bank, which is both its drawer and drawee. Thus, while
manager’s and cashier’s checks are still subject to clearing, they cannot be countermanded for being drawn against
a closed account, for being drawn against insufficient funds, or for similar reasons such as a condition not
appearing on the face of the check. Long-standing and accepted banking practices do not countenance the
countermanding of manager’s and cashier’s checks on the basis of a mere allegation of failure of the payee to
comply with its obligations towards the purchaser. On the contrary, the accepted banking practice is that such
checks are as good as cash.
Thus, in New Pacific Timber & Supply Company, Inc. v. Hon. Seneris, we held: It is a well-known and accepted
practice in the business sector that a Cashier’s Check is deemed as cash. It is an understanding that the check is
good then, and shall continue good, and this agreement is as binding on the bank as its notes in circulation, a
certificate of deposit payable to the order of the depositor, or any other obligation it can assume. The object of
certifying a check, as regards both parties, is to enable the holder to use it as money.”

B. Whether or not the purchaser of manager’s and cashier’s checks has the right to have the checks
cancelled by filing an action for rescission of its contract with the payee.

No. Metrobank and Global Bank are not parties to the contract to buy foreign currency between Chiok and Nuguid.
Therefore, they are not bound by such contract and cannot be prejudiced by the failure of Nuguid to comply with
the terms thereof. Neither could Chiok be validly granted a writ of injunction against Metrobank and Global Bank to
enjoin said banks from honoring the subject manager’s and cashier’s checks. Chiok could have and should have
proceeded directly against Nuguid to claim damages for breach of contract and to have the very account where he
deposited the subject checks garnished. Evidently, it was the utmost trust and confidence reposed by Chiok to
Nuguid that caused this entire debacle, dragging three banks into the controversy, and having their resources
threatened because of an alleged default in a contract they were not privy to.
 (10) Wesleyan University-Philippines v. Nowella Reyes
G.R. No. 208321, July 30, 2014
By: Lapuz, Jesus Ros

Topic: Crossed Checks

Doctrine: The crossing of a check means that the check may not be encashed but only deposited in the bank.

Respondent Nowella Reyes was appointed as WUP’s University Treasurer on probationary basis. A little over a year
after, she was appointed as full time University Treasurer. WUP Board of Trustees discovered following an audit
were irregularities in the handling of petitioner’s finances, mainly, the encashment by its Treasury Department of
checks issued to WUP personnel, a practice purportedly in violation of the imprest system of cash management,
and the encashment of various crossed checks payable to the University Treasurer by Chinabank despite
management’s intention to merely have the funds covered thereby transferred from one of petitioner’s bank
accounts to another.

It was noted that checks consisting of various checks payable to teachers, staffs and other third parties had been
the subject of encashment directly with the Treasury Department under the stewardship of Mrs. Nowella A. Reyes,
the University Treasurer. This practice is a clear violation of imprest system of cash management, hence, she was
terminated.

Whether a crossed check may be encashed.

No, the crossing of a check means that the check may not be encashed but only deposited in the bank.

As Treasurer, respondent knew or is at least expected to be aware of and abide by this basic banking practice and
commercial custom. Clearly, the issuance of a crossed check reflects management’s intention to safeguard the
funds covered thereby, its special instruction to have the same deposited to another account and its restriction on
its encashment.
 (11) The Hongkong and Shanghai Banking Corporation Limited-Philippine Branches v. CIR
G.R. No. 166018, June 4, 2014
By: Mano, Razna I.

Topic: Requisites of Negotiability; Presentment for Payment; Presentment for Acceptance

Doctrine: The Documentary Stamp Tax under Section 181 of the Tax Code is levied on the acceptance or payment
of a “bill of exchange purporting to be drawn in a foreign country but payable in the Philippines.” The instructions
given through electronic messages that are subjected to DST are not negotiable instruments as they do not comply
with the requisites of negotiability under Section 1 of the Negotiable Instruments Law.

HSBC is a custodian bank. HSBC’s investor-clients maintain Philippine peso and/or foreign currency accounts, which
are managed by HSBC through instructions given through electronic messages. The said instructions are standard
forms known in the banking industry as SWIFT, or "Society for Worldwide Interbank Financial Telecommunication."
In purchasing shares of stock and other investment in securities, the investor-clients would send electronic
messages from abroad instructing HSBC to debit their local or foreign currency accounts and to pay the purchase
price therefor upon receipt of the securities.

Pursuant to the electronic messages of its investor-clients, HSBC purchased and paid Documentary Stamp Tax
(DST). Subsequently, HSBC filed an administrative claim for the refund of the erroneously paid DST to the BIR
pursuant to BIR Ruling No. 132-99 to the effect that instructions or advises from abroad on the management of
funds located in the Philippines which do not involve transfer of funds from abroad are not subject to DST.

A. Whether the electronic messages are negotiable instruments as to make it proper subjects of DST.

No, the instructions given through electronic messages are not negotiable instruments as they do not comply with
the requisites of negotiability under Section 1 of the Negotiable Instruments Law (NIL).

Applying the requisites under Section 1 of the NIL, the electronic messages are not signed by the investor-clients
as supposed drawers of a bill of exchange; they do not contain an unconditional order to pay a sum certain in
money as the payment is supposed to come from a specific fund or account of the investor-clients; and, they are
not payable to order or bearer but to a specifically designated third party. Thus, the electronic messages are not
bills of exchange. As there was no bill of exchange or order for the payment drawn abroad and made payable here
in the Philippines, there could have been no acceptance or payment that will trigger the imposition of the DST
under Section 181 of the Tax Code.

Therefore, the electronic messages "cannot be considered negotiable instruments as they lack the feature of
negotiability, which, is the ability to be transferred" and that the said electronic messages are "mere memoranda"
of the transaction consisting of the "actual debiting of the investor-client-payor’s local or foreign currency account
in the Philippines" and "entered as such in the books of account of the local bank," HSBC.

B. Whether the electronic messages received by HSBC from its investor-clients abroad instructing the
former to debit the latter's local and foreign currency accounts and to pay the purchase price of shares
of stock or investment in securities properly qualify as either presentment for acceptance or
presentment for payment.

No, there is neither presentment for acceptance nor presentment for payment.

Acceptance applies only to bills of exchange. Under Section 132 of the NIL, what is accepted is a bill of exchange,
and the acceptance of a bill of exchange is both the manifestation of the drawee’s consent to the drawer’s order to
pay money and the expression of the drawee’s promise to pay.

In the case at bar, there was no bill of exchange or order for the payment drawn abroad and made payable here in
the Philippines. Thus, there was no acceptance as the electronic messages did not constitute the written and signed
manifestation of HSBC to a drawer's order to pay money. As HSBC could not have been an acceptor, then it could
not have made any payment of a bill of exchange or order for the payment of money drawn abroad but payable
here in the Philippines.

Therefore, HSBC erroneously paid DST on the said electronic messages for which it is entitled to a tax refund.
 (13) People v. Wagas
G.R. No. 157943, September 04, 2013
By: Pangilinan, Gene Alexis

Topic: Checks payable to bearer

Doctrine: A check payable to cash is payable to the bearer and could be negotiated by mere delivery without the
need of an indorsement.

Gilbert R. Wagas was accused for estafa when, through a telephone, he placed an order with Alberto Ligaray for
200 bags of rice with the proposed payment by a postdated check. Ligaray released the goods to Wagas on April
30, 1997 and at the same time received a check for P200,000.00 payable to cash and postdated May 8, 1997.
Ligaray deposited the check with his depository bank, but the check was dishonored due to insufficiency of funds,
and despite repeated demands, Wagas did not pay Ligaray.

Wagas testified and said that he issued the Check to Cañada, his brother-in-law, and that it was Cañada who had
transacted with Ligaray. He explained that the check was intended as payment for a portion of Cañada’s property
that he wanted to buy, but when the sale did not push through, he did not anymore fund the check. It was Cañada
who had negotiated the check to Ligaray

Whether it may be established beyond reasonable doubt that it was Wagas who defrauded Ligaray by
issuing the check?

No, the check delivered to Ligaray was made payable to cash. Under the Negotiable Instruments Law, this type of
check was payable to the bearer and could be negotiated by mere delivery without the need of an indorsement.
This rendered it highly probable that Wagas had issued the check not to Ligaray, but to somebody else like Cañada,
his brother-in-law, who then negotiated it to Ligaray. Relevantly, Ligaray confirmed that he did not himself see or
meet Wagas at the time of the transaction and thereafter, and expressly stated that the person who signed for and
received the stocks of rice was Cañada. The accused, to be guilty of estafa, must have used the check in order to
defraud the complainant. Wagas could not be held guilty of estafa simply because he had issued the check used to
defraud Ligaray. The proof of guilt must still clearly show that it had been Wagas as the drawer who had defrauded
Ligaray by means of the check.
 (14) Lim vs. Mindanao Wines & Liquor Galleria
G.R. No. 175851. July 4, 2012
By: Radovan, Althea Therese

Topic: Check

Doctrine: It is well to remember that a check may be evidence of indebtedness.

Mindanao Wines and Liquor Galleria (Mindanao Wines) delivered several cases of liquors to H & E Commercial
owned by Emilia, for which the latter issued four Philippine National Bank (PNB) postdated checks worth
P25,000.00 each. Two(2) of the checks bounced for the reasons ‘ACCOUNT CLOSED’ and ‘DRAWN AGAINST
INSUFFICIENT FUNDS,’ thus Mindanao Wines, demanded payment from H & E Commercial. Despite repeated
demands, H&E commercial did not pay. Thus Mindanao Wines filed a case of BP22 against Emilia. Emilia was
acquitted for the criminal charges, however she was still found to be civilly liable because she has redeemed one of
the checks during the pendency of the criminal cases.

A. Is Emilia liable to pay the value of the bounced checks, notwithstanding her acquittal?

Yes. When Emilia redeemed one of the checks, such is considered as an acknowledgement on her part of her
obligation with Mindanao Wines. She had impliedly admitted that she was the maker of the checks when she
redeemed a third check from the complainant. A check may be evidence of indebtedness. A check, the entries of
which are in writing, could prove a loan transaction. While Emilia is acquitted of violations of BP 22, she should
nevertheless pay the debt she owes.
 (15) PNB vs. Spouses Cheah Chee Chong
G.R. No. 170865, April 25, 2012
By: Rosario, Patricia Kaye

Topic: Diligence Required of Banks

Doctrine: The diligence required of banks is more than that of a good father of a family. With regard to collection
or encashment of checks, the law imposes on the collecting bank the duty to scrutinize diligently the checks
deposited with it for the purpose of determining their genuineness and regularity.

Adelina Guarin requested respondent Ofelia Cheah if she could have Filipina Tuazon’s check cleared and encashed,
since she has a joint dollar savings account with her husband with PNB Buendia Branch. The check is Bank of
America Check No. 190 drawn against Bank of America in California, USA, with a face amount of $300,000.00. That
same day, Ofelia and Adelina went to PNB Buendia Branch, where Ofelia deposited Filipina’s check. A week before
the 15-day clearing period, PNB informed Ofelia that the check was already cleared and allowed her to withdraw
the credited amount. Filipina received all the proceeds. Subsequently, PNB Buendia Branch learned that the subject
check was dishonored and demanded Ofelia to return the money withdrawn. Ofelia immediately contacted Filipina
to get the money back, but all the money had already been given to several beneficiaries. Meanwhile, the bank
officials and the spouses Cheah signed a letter stating that the amount withdrawn would be treated as a loan
account with deferred interest while the spouses try to recover the money from those who defrauded them.
However, the agreement did not materialize. PNB eventually sent a demand letter to spouses Cheah, froze their
peso and dollar deposits and filed a complaint for sum of money. The spouses Cheah countered that the proximate
cause of PNB’s injury was its own negligence of paying a US dollar denominated check without waiting for the 15-
day clearing period, in violation of its bank practice as mandated by its own bank circular.

A. Was PNB’s negligence of paying a US dollar denominated check without waiting for the 15-day
clearing period the proximate cause of the loss?

YES, PNB’s act was the proximate cause of the loss.

Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening
cause, produces the injury and without which the result would not have occurred. Jurisprudence dictates that
when a bank allows the withdrawal of the value of a check prior to its clearing, the collecting bank can only assume
at its own risk that the check would be cleared and paid out. This is because the diligence required of banks is
more than that of a good father of a family. With regard to collection or encashment of checks, the law imposes on
the collecting bank the duty to scrutinize diligently the checks deposited with it for the purpose of determining their
genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public
as the expert on this field, and thus is expected to have the necessary means to ascertain whether a check, local or
foreign, is sufficiently funded.

Here, PNB Buendia Branch, upon calling up Ofelia that the check had been cleared, allowed the proceeds thereof to
be withdrawn a week before the lapse of the standard 15-day clearing period. Hence, PNB is guilty of gross
negligence when it miserably failed to do its duty of exercising extraordinary diligence.

B. Should the complaint for sum of money against the spouses Cheah be dismissed?

NO, the spouses Cheah are guilty of contributory negligence and are bound to equally suffer the loss with PNB.

Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he
has suffered, which falls below the standard to which he is required to conform for his own protection.

Here, considering that Filipina was not personally known to her and the amount of the foreign check to be
encashed was $300,000 a higher degree of care is expected of Ofelia. Also, the fact that the check was cleared
after only eight banking days from the time it was deposited should have prompted Ofelia to verify the regularity of
such hasty clearance. If something goes wrong with the transaction, it is she and her husband who would be put at
risk and not the accommodated party, being the clients of PNB and the ones who negotiated the instrument with
the bank. Hence, the spouses Cheah are equally negligent and must equally suffer the loss.
 (17) RCBC vs. Hi-Tri Development Corporation
GR No. 192413, June 13, 2012
By: Torres, Ma. Roma

Topic: Delivery

Doctrine: The delivery, in order to be effectual, must be made either by or under the authority of the party
making, drawing, accepting, or indorsing, as the case may be.

In a civil case between Spouses Bakunawa and Teresita Millan, the former prayed for a rescission of the sale of
their property to Millan and for the latter to accept the downpayment she made. Spouses Bakunawa through their
company, Hi-Tri, issued a Manager’s Check from RCBC in the amount of 1M payable to Millans company Rosmil
Realty and Development Corporation (Rosmil) c/o Teresita Millan. Unknown to Spouses Bakunawa, RCBC reported
the value representing this check to the Bureau of Treasury as among its unclaimed balances against Rosmil. Later,
this value was included in the escheat proceedings against Rosmil.

Petitioner argues that, since the funds represented by the Manager’s Check were deemed transferred to the credit
of the payee upon issuance of the check, the proper party entitled to the notices was the payee Rosmil and not
respondents. Petitioner avers that it was not under any obligation to record the address of the payee of a
Manager’s Check.

Whether it was proper to include the value of the manager’s check in the escheat proceedings without
prior notice to the payee respondents.

NO.

The Negotiable Instruments Law provide:

Sec. 16. Delivery; when effectual; when presumed. Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties
and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be
made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be
xxx

When Rosmil did not accept the Manager’s Check offered by respondents, the latter retained custody of the
instrument instead of cancelling it. As the Manager’s Check neither went to the hands of Rosmil nor was it further
negotiated to other persons, the instrument remained undelivered. Since there was no delivery, presentment of the
check to the bank for payment did not occur. An order to debit the account of respondents was never made.

As a result, the assigned fund is deemed to remain part of the account of Hi-Tri, which procured the Manager’s
Check.
 (19)
FIDELIZA J. AGLIBOT v. INGERSOL L. SANTIA
G.R. No. 185945 05 December 2012
By: Valencia Mary Clydeen L.

TOPIC: ACCOMODATION PARTY

DOCTRINE: In lending his name to the accommodated party, the accommodation party is in effect a surety for the
latter. The liability is immediate and direct.

QUESTION: Engr. Ingersol L. Santia (Santia) loaned the amount of ₱2,500,000.00 to Pacific Lending & Capital
Corporation (PLCC), through its Manager, Fideliza J. Aglibot (Aglibot). The loan was evidenced by a Promissory
Note dated 1 July 2003, issued by Aglibot in behalf of PLCC, payable in one year subject to interest at 24% per
annum. Also, Aglibot issued and delivered to Santia eleven (11) post-dated personal checks drawn from her own
demand account. The aforesaid checks, upon presentment for payment, were dishonored by the bank for having
been drawn against insufficient funds or closed account. Santia demanded payment from PLCC and Aglibot of the
face value of the checks, but neither of them heeded his demand. Consequently, eleven (11) Informations for
violation of Batas Pambansa Bilang 22 corresponding to the number of dishonored checks were filed. In her
counter-affidavit, Aglibot admitted that she did obtain a loan from Santia, but she claimed that she did so in behalf
of PLCC – the true borrower and beneficiary of the loan; that she was a mere guarantor of the said debt of PLCC
when she agreed to issue her own checks.

Is Aglibot a guarantor? Why or why not?

ANSWER: Aglibot is not a guarantor. She is an accommodation party.

Sec. 29 of the NIL provides that an accommodation party is one who has signed the instrument as maker, drawer,
indorser, without receiving value therefor and for the purpose of lending his name to some other person. Such
person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of the taking of
the instrument knew him to be only an accommodation party. In lending his name to the accommodated party, the
accommodation party is in effect a surety for the latter. He lends his name to enable the accommodated party to
obtain credit or to raise money. He receives no part of the consideration for the instrument but assumes liability to
the other parties thereto because he wants to accommodate another. The liability, therefore, is immediate and
direct.

Aglibot, as the manager of PLCC, agreed to accommodate its loan to Santia by issuing her own post-dated checks
in payment thereof. Under the NIL, she is an accommodation party. The mere fact that she issued her own checks
to Santia made her personally liable to the latter on her checks without the need to first go after PLCC for the
payment of its loan.