Foutch

v Alexandria Bank & Trust Co.

April 5, 1941 • When this check was presented to the Bank for
Chambliss, J. payment by B. W. Foutch, the payee, the figure 4
Drawer v Drawee appeared between the dollar mark and the figures 18.
DRAWER: W. L. Foutch And on the line below, in front of the word “Eighteen”,
DRAWEE: Alexandria Bank appeared the words, “Four Hundred”, the check thus
calling for $418; and following the words, “For cow”,
in the left-hand corner, appeared the words, “&note.”
FACTS: All of the figures and writing on the check, as it was
• DRAWER: W. L. Foutch presented to the Bank, except the signature, were in
o purchased a cow from B. W. Foutch for $18, the same handwriting, that of the payee.
o he gave a check to B. W. Foutch, • The Bank paid to B. W. Foutch the sum of $418 called
§ payable to his order. for by the check, and charged it to the account of the
§ His practice: checks which he gave filled WL Foutch. This amount over-drew the account of W.
out by the parties to whom his checks L. Foutch, the testimony showing that a
were made, o special arrangement had been made between
§ this check was written wholly by the Foutch and the Bank for protecting his over-
payee. drafts.
§ DRAWEE: Alexandria Bank. • The Bank at once notified W. L. Foutch that his account
o testifies that the figures “18.00” were so placed was overdrawn, and he advised the Bank that this
in the blank provided on the check for that check had been raised without his knowledge or
purpose that consent to the extent and in the manner above
§ ample space was left between the figures indicated.
and the dollar mark for the insertion of an • B. W. Foutch was thereupon
additional figure. o arrested and prosecuted and, meanwhile, a
o On the line lower down on the check provided note was executed to the Bank for a sum
for that purpose, and beginning at a point about whichmade good the account,
midway of the line, were written the words, § question: pending disposition of the
“Eighteen and no /100,” just before the printed question as to whether the loss would be
word, “Dollars.” On the left-hand corner, lower borne by the Bank or the depositor, in the
down, the words were written, “For cow.”
 event it was not recovered from B. W. We are constrained to reverse the decree of the Court of
Foutch. Appeals and affirm the judgment of the Circuit Court.
§ Some months later this action was
brought in the Circuit Court by W. L. RATIO:
Foutch, seeking to recover from the Bank 1. The CA is correct insofar as the à GR: Bank must bear the
this sum of $400. loss when it cashes an altered check;
• The Bank defended,
o relying upon estoppel, insisting, BUT the great weight of authority recognizes an EXCEPTION
§ first, that W. L. Foutch had ratified the where the drawer of the checks has been guilty of such
payment of the check by the Bank by negligence in its issuance, as to facilitate and induce its
making good the over-draft, and failing alteration so as proximately to cause its payment in its
promptly to disaffirm; and, altered form.
§ second, that the Bank had been induced • Reasons adduced from the authorities supporting the
to pay the amount called for by the face rule that the loss resulting from the payment of a
of the check by the affirmative inducing raised check must fall on the drawer, when the
negligence of the maker in its preparation alteration in amount has been facilitated by the
and issuance, the Bank being without drawer's negligence, may be thus summarized:
negligence. 1. That the true proximate cause of the loss is the
negligence of the drawer in issuing the check in
such form that it may readily be so altered that the
alteration cannot be detected by the use of
ordinary care.
2. That where one of two innocent persons must
suffer, the loss should fall on the one whose
ISSUE: negligence has facilitated the loss.
WON WL Foutch’s negligence in the preparation and 3. That the negligence of the drawer implies an
issuance of the check would bar his recovery from Alexandria invitation or authority to fill out blanks which
Bank – YES estops the drawer as to a drawer who has, while
exercising due care, honored the instrument in its
HELD: thus altered amount.
 4. That the relationship of a depositor with his banker • In the case of checks drawn by a customer on his
imports an obligation to exercise reasonable care banker,
in the preparation and issuance of his mandate o there is a special duty to exercise care in the
order on the banker to pay, a breach of which framing of what is a mandate – a special duty
obligation renders the depositor liable for a loss. which does not exist in the same fashion in the
instance of the acceptor of a bill of exchange.
2. THUS, the SC disagrees with the CA’s use of the “criminal o A drawer of a check has the duty to fill it up, so
instrumentality rule” as expounded in its cited authorities. that when it leaves his hands as a signed
(There are many cited American jurisprudence, please see instrument, tampering with its contents or
case). filling in a sum different from what was meant
shall be prevented.
The SC says there is an essential distinction between bank o In case this duty is not complied with, and loss
checks and negotiable instruments of the note and bill results due to tampering or unauthorized filling
class. up for a greater amount, the customer, and not
• In the case of P/Ns, the bank should suffer the loss. The payee,
o one who purchases a note, or like negotiable having been authorized to fill out the check in
instrument, is under no manner of compulsion his handwriting, with the words and figures
and acts purely at his option or election, under placed as herein shown, no possibility of
which the principle of “caveat emptor”(let the detection of the check having been thus raised
buyer beware) may be applied; was left open to the Bank; no negligence can be
• whereas, the Bank imputed to the Bank.
o is under a direct and peculiarly delicate
obligation, which requires prompt discharge, AS APPLIED TO THE CASE:
usually with little opportunity for investigation, (1) a check for a depositor on his banker, as distinguished
to pay the check of its depositor, upon from a promissory note or negotiable bill of exchange
presentation, or subject itself to the risk of (2) with spaces or blanks, left in such positions, and to such
damages. Furthermore, the depositor, on the extent, as not only to facilitate, but to invite, the filling in of
other hand, owes to his bank the duty to additional figures and words requisite to present the
exercise care in drawing his checks in order to appearance of a completed instrument
avoid possible loss. (3) written in pencil, with the words and figures altogether in
the handwriting of the payee to it was delivered, but
conveying an application of authority in the draftsman to
make additions thereto
(4) an element of agency in the matter of the preparation of
the instrument, universally recognized as fixing responsibility
upon the depositor

SAVINGS BANK OF RICHMOND V SAVINGS BANK OF RICHMOND (trusting Massie’s moral and
NAT’L BANK OF GOLDSBORO financial strength)
• purchased the draft for $8,470 giving him in exchange
FACTS a cashier’s check for the same amount.
Drawer: AC Norwood (national bank of Goldsboro) • attempted to collect it, only then did it find out that
Drawee: First National Bank of NY the draft was forged.
Payee: NL Maisie (forged the draft) à sold to Savings Bank • Defendant/bank refused to pay
of Richmond
Savings Bank
• insists that the National Bank of Goldsboro (THE
A.C. Norwood (DRAWER), DRAWER/defendant) should be liable
• President of the National Bank of Goldsboro o on the theory that it was negligent or amiss in
• issued a certain DRAFT dated March 29, 1918 for the its duty to ensure that the draft is safe from
sum of $6, every reasonable chance of alteration.
o drawn against the FIRST NATIONAL BANK OF § Ordinary paper was used and that there
NEW YORK (the DRAWEE) was
o payable to the order of N.L. Massie. § no protectograph or other safety device
to prevent alteration.
DRAFT • Cited Daniel, a commentator on the negotiable
• was thereafter unlawfully and without the knowledge instruments law, as authority for the liability of the
or consent of A.C. Norwood or the Goldsboro Bank, drawer of a bill or the maker of a note who by careless
fraudulently forged and altered in material respects. execution of the instrument left room for any
• The date was changed from March 29, 1918 to June alteration, insertion or erasure, which would prejudice
21, 1918, the bona fide holder’s rights.
• and the amount thereof from $6 to $8,470.
Goldsboro Bank counters
Massie • that with a completed draft, losses arising from its
• sold the altered draft to the SAVINGS BANK OF subsequent alteration and forgery do not fall upon it
RICHMOND, with whom he had been transacting with but rather upon those who have chosen to accept the
for two years. same as changed.

 • Assuming that the argument of Savings Bank to be except as against the party who has himself made,
valid, it will not be liable because it is not the authorized or assented to the alteration and subsequent
proximate cause of the loss. indorsers. But when the instrument has been materially
altered and is in the hands of a holder in due course, not a
ISSUES party to the alteration, he may enforce payment thereof
1. WON Savings Bank can recover from point of view of tort according to the original tenor.”
or negligence. NO
2. WON Bank can recover from the draft as a contract btwn
the parties. NO
3. WON Savings Bank can recover from the negotiable
instrument. YES

HELD

1. NO. The issuing of the note could in no sense be
considered as proximate cause of the loss. Where a
negotiable note was delivered in completed form, the
possibility that it might be altered by the willful fraud or
forgery of another was too remote to afford basis of an
action either in tort or in contract.

2. NO. The note in its forged and altered state is not a
contract of the maker of the instrument. Thus, a suit based
on contract can neither prosper.

3. YES, but only as to the original face value of the draft.
Section 3106 of the Negotiable Instruments Law of North
Carolina provides: *equivalent of S124

“Where a negotiable instrument is materially altered
without the assent of all parties liable thereon, it is avoided
CRITTEN V CHEMICAL NAT’L BANK (1902) • obliterated by acids the name of the payee and the
Drawer: Plaintiff account specified in the checks, then made the check
Altered by: Davis(employee) payable to cash and raised its amount, in the majority
Drawee: Colonial Bank of cases, by the sum of $100.
• he would draw the money on the checks so altered
FACTS
from the defendant bank,
Plaintiff
• pay the bill for which the check was drawn in cash, and
• kept a large and active account with the defendant.
appropriate the excess.
• employed a clerk named Davis.
• On one occasion David did not collect the altered
o duty of Davis to
check from the defendant, but deposited it to his own
§ fill up the checks which it might be
credit in another bank.
necessary for the plaintiffs to give in the
course of business, • When a check was presented to Critten for signature
§ to make corresponding entries in the the number of dollars for which it was drawn would be
stubs of the check book, cut in the check by a punching instrument. When Davis
§ and present the checks so prepared to altered a check he would punch a new figure in front
Mr. Critten, one of the plaintiffs, for of those already appearing in the check.
signature together with the bills in This work has been entrusted to another person in Davis’
payment of which they were drawn. absence, hence the forgeries were discovered and
• After signing a check Critten would
place it and the bill in an envelope Davis was arrested and punished. Hence this action to
addressed to the proper party, seal recover the amount of these forged checks, over and
the envelope and put it in the above the sums for which they were originally drawn

mailing drawer.
ISSUES
DAVIS 1. WON plaintiff is guilty of negligence. YES
• In 24 separate instances,
• abstracted envelopes from the mailing drawer, HELD
opened it, 1. YES In this case, Davis falsified the additions or total sat
the foor of the pages in the check book. But with a few
exceptions he did not alter the amounts expressed in the
stubs. In no case did he change in the stubs the name of the 2. WON by negligence in its discharge or by the failure to
payee of the check. It is clear therefore that at all times a discover and notify the bank, the depositor (plaintiff) is
comparison of the returned checks with the stubs in the estopped from asserting that they are forgeries. NO
checkbooks would have exposed the alterations made in the
checks. Of course the knowledge of the forgeries that davis 2. NO. While the Court hold that this duty rests upon the
possessed from the fact that he himself was the forger, was depositor, it does not accept the doctrine asserted in some
in no respect to be attributed to the plaintiffs. the Court sees of the cases that, by negligence in its discharge or by the
no reason why they were not chargeable with such failure to discover and notify the bank, the depositor either
information as a comparison of the checks with the check adopts the checks as genuine and ratifies their payment or
book would have imparted to an innocent party previously estops himself from asserting that they are forgeries.
unaware of the forgeries.
In the present case, a check altered by Davis from the sum of
As regards the failure to discover the forgeries after the $22 to $622 was paid by the defendant to the Colonial Bank
return of the checks and the balancing of the account in the in which Davis had deposited it. Against the bank the
passbook. As held in Weisser’s adm’rs vs Denison, “the rule defendant has ample recourse. If it were to be held that the
is settled that the depositor owes his bank the duty of a plaintiffs are estopped from denying the genuineness of that
reasonable verification of the returned checks.” . If the check as against the defendant, the latter could have no
depositor has by his negligence in failing to detect forgeries claim against the Colonial Bank, nor is it clear that the
in his checks and give notice thereof caused loss to his bank, plaintiffs would have any direct right of action against that
either by enabling the forger to repeat his fraud or by Bank. The Colonial bank took the check solely on the
depriving the bank of an opportunity to obtain restitution, responsibility of Davis. To it the plaintiffs owed no duty. A
he should be responsible for the damage caused by his rule which might operate to relieve the bank from the
default but beyond this his liability should not extend. liability it assumed when it collected an altered check,
Moreover, the court sees no reason why the bank should be merely because the plaintiffs failed in their duty, not to it,
entitled to anything more than indemnity for the loss the but to a third party should not be upheld. Nor would it
depositor’s negligence has caused it *The Court also made a operate justly in a case in which the bank had paid a single
finding that the ordinary rule of principal and agent or forgery unless by the depositor’s default and delay the bank
master and servant that the principal or master is liable for had lost its opportunity to secure restitution.
the fault of his servant or agent in the master’s business
apply in this case.
3. WON defendant bank can claim relief from plaintiff’s DISSENTING OPINION Since plaintiffs entrusted the work to
negligence. NO a competent agent and, as established by evidence, took
other precautions, there was evidence to support the finding
3. NO. It was held that the defendant was also guilty of in their favor. The rule which imputes to a principal
negligence in paying the check. knowledge acquired by his agent rest upon the presumption
• The sixth in sequence of these forgeries was a check that the latter has disclosed all the material facts to the
with the name of the payee erased and “cash” written former. This presumption does not extend to a fact which, if
in the place thereof. disclosed would subject the agent to a prosecution for crime
• The teller of the defendant who paid the check and or defeat a scheme in which he was engaged to defraud his
was a witness on its behalf testified that the check employer.

showed on its face that the word “cash” had been

written in the place for the payee’s name over an

erasure;
• that it was in such mutilated condition when it was
presented to him that, before paying it he required
Davis to indorse upon the check a receipt for its
amount.
Had Davis been required to obtain the indorsement or
guaranty of the plaintiffs as to its correctness, the
forgeries of Davis would have been exposed, and their
repetition would not have occurred. The action brought
by plaintiffs was brought on contract, not on tort for the
allegation of negligence on the part of the defendant is
used only to defeat its claim for relief on account of the
plaintiff’s negligence.

Disposition The judgment should be reversed, and a new
trial granted.

METROPOLITAN BANK AND TRUST COMPANY, petitioners, visible to the naked eye and that the check was examined by
vs. RENATO D. CABILZO, respondent (G.R. No. 154469; Dec. a cash custodian whose functions do not include the
6, 2006; J. Chico-Nazario) (Chim) examination of checks. Fourth, since payment made by a
drawee bank under a materially altered instrument is not
F: Cabilzo, a Metrobank client, issued a post-dated check payment done in accordance with the drawer’s instructions,
payable to “CASH” in the amount of P1K which was drawn then Metrobank has no right to deduct the erroneous
against his account with Metrobank. After the check was payment it made from the Cabilzo’s account. Finally,
presented to Westmont Bank for payment, it was indorsed Metrobank cannot rely on Westmont Bank’s (collecting bank
to Metrobank which later on cleared the check. It turns out and last indorser) indorsement. The corollary liability of such
that the cleared check was ALTERED. The amount of indorsement, if any, is separate and independent from the
P1,000.00 was altered to P91,000.00 and the date 24 liability of Metrobank to Cabilzo.
November 1994 was changed to 14 November 1994. Since
Metrobank did not recredit the said amount to his account, Drawer: Cabilzo
he sued the said bank for damages. In its defense, Drawee: Metrobank
Metrobank argued that (1) it verified the authenticity and Collecting Bank: Westmont
propriety of the check; (2) as a collecting bank and the last
indorser, Westmont Bank should be held liable for the value FACTS:
of the check; and (3) Cabilzo was partly responsible in leaving Cabilzo
spaces on the check. The lower courts ruled in favor of • was one of Metrobank’s clients who maintained a
Cabilzo. So did the SC. current account with Metrobank Pasong Tamo
Branch.
R: First, the SC ruled that since the entries altered were the • On Nov. 12 1994, he issued a Metrobank Check
sum of money payable (NIL1b) and the date of the check (NIL payable to "CASH" and postdated on Nov. 24, 1994 in
125a), the case squarely falls within the purview of material the amount of P1K.
alteration. Second, Cabilzo was not remiss in the preparation • The check was drawn against Cabilzo’s Current
and issuance of the check. In fact, he placed asterisks before Account with Metrobank Pasong Tamo Branch and
and after the amount in words and figures in order to was paid by Cabilzo to a certain Mr. Marquez, as his
forewarn the subsequent holders that nothing follows sales commission.
before and after the amount indicated. Third, Metrobank did
not exercise the high degree of diligence required of banks Subsequently, the check was presented to Westmont Bank
considering that the material alterations on the check are for payment.
 Hence, Cabilzo demanded that Metrobank re-credit the
Westmont Bank, amount of P91K to his account.
• in turn, indorsed the check to Metrobank for
appropriate clearing. Metrobank,
• however, refused. Repeated verbal demands followed
Metrobank but Metrobank still failed to re-credit the said amount.
• cleared the check for encashment in accordance with
the Phil. Clearing House Corp. (PCHC) Rules Cabilzo
o After the entries thereon were examined, • sent a demand letter which was left unheeded,
including the availability of funds and the • instituted a civil action for damages against
authenticity of the signature of the drawer, Metrobank before the RTC of Manila.
o He claimed for reimbursement, actual and
moral damages plus costs of the suit be
On Nov. 16, 1994, Cabilzo’s representative was at Metrobank awarded in his favor.
Pasong Tamo Branch to make some transaction when he was
asked by a bank personnel if Cabilzo had issued a check in Metrobank’s Arguments:
the amount of P91K to which the former replied in the (1) After verifying the authenticity and propriety of the
negative. aforesaid entries, including the indorsement of the
collecting bank located at the dorsal side of the check
On the afternoon of the same date, Cabilzo himself called which stated that, "all prior indorsements and lack of
Metrobank to reiterate that he did not issue a check in the indorsement guaranteed," Metrobank cleared the
amount of P91K and requested that the questioned check be check.
returned to him for verification, to which Metrobank (2) As a collecting bank and the last indorser,
complied. Westmont Bank should be held liable for the value of
the check. Westmont Bank indorsed the check as the
Upon receipt of the check, Cabilzo discovered that the check an unqualified indorser, by virtue of which it assumed
he issued on Nov. 12, 1994 in the amount of P1,000.00 was the liability of a general indorser, and thus, among
altered to P91,000.00 and the date 24 November 1994 was others, warranted that the instrument is genuine and
changed to 14 November 1994. in all respect what it purports to be.

 (3) Cabilzo was partly responsible in leaving spaces on
the check, which, made the fraudulent insertion of the CA: affirmed with modification RTC’s Decision of the court a
amount and figures thereon, possible. quo without prejudice, however, to the outcome of the case
between Metrobank and Westmont Bank which was
Thus, Metrobank demanded from Cabilzo, for payment in pending before PCHC
the amount of P100K which represents the cost of litigation
and attorney’s fees, for allegedly bringing a frivolous and Metrobank’s MR was denied. Hence, this Petition for Review
baseless suit. on Certiorari.

Metrobank ISSUE: Is Metrobank, as drawee bank, liable for the
• also filed a Third-Party Complaint against Westmont alterations on the subject check bearing the drawer’s
Bank on account of its unqualified indorsement authentic signature?
stamped at the dorsal side of the check which the
former relied upon in clearing what turned out to be a RULING: YES. Petition DENIED (Metrobank should pay
materially altered check. Cabilzo 90K + 50K exemplary damages).

Subsequently, a Motion to Dismiss the Third-Party Complaint 1. This case involves a material alteration.
was then filed by Westmont bank because another case
involving the same cause of action was pending before a An alteration is said to be material if it changes the effect
different court. The said case arose from an action for of the instrument.
reimbursement filed by Metrobank before the Arbitration • It means that an unauthorized change in an
Committee of the PCHC against Westmont Bank, and now instrument that purports to modify in any respect the
the subject of a Petition for Review before the RTC of Manila obligation of a party or an unauthorized addition of
(but different branch). words or numbers or other change to an incomplete
instrument relating to the obligation of a party. In
RTC: granted the MtD the 3rd-Party Complaint; as to the other words, a material alteration is one which
main case, it ruled in favor of Cabilzo and thereby ordered changes the items which are required to be stated
Metrobank to pay the sum of P90K under NIL 1 (refer to NIL 1 and 125 as these were cited
• BASIS: fiduciary nature of the relationship between by the court as the pertinent provisions in this case).
the bank and its clients and the negligence of the drawee
bank in failing to detect an apparent alteration on the check CAB
 • the check was altered so that the amount was loss. Cabilzo was never remiss in the preparation and
increased from P1,000.00 to P91,000.00 and the date issuance of the check, and there were no indicia of evidence
was changed from 24 November 1994 to 14 November that would prove otherwise. Indeed, Cabilzo placed asterisks
1994. Apparently, since the entries altered were before and after the amount in words and figures in order to
among those enumerated under NIL 1 and 125, forewarn the subsequent holders that nothing follows
namely, the sum of money payable and the date of the before and after the amount indicated other than the one
check, the instant controversy therefore squarely falls specified between the asterisks.
within the purview of material alteration. Hence, the degree of diligence required of a reasonable man
in the exercise of his tasks and the performance of his duties
2. Effects and obligations of parties under a materially has been faithfully complied with by Cabilzo.
altered instrument
Verily, Metrobank cannot impute that Cabilzo was negligent
On Cabilzo’s part and is therefore prevented from asserting his rights under
NIL 124. Alteration of instrument; effect of. – Where a the doctrine of equitable estoppel when the facts on record
negotiable instrument is materially altered without are bare of evidence to support such conclusion.
the assent of all parties liable thereon, it is AVOIDED,
except as against a party who has himself made, The doctrine of equitable estoppel
authorized, and assented to the alteration and • states that when one of the two innocent persons,
subsequent indorsers. each guiltless of any intentional or moral wrong, must
suffer a loss, it must be borne by the one whose
But when the instrument has been materially altered erroneous conduct, either by omission or commission,
and is in the hands of a HIDC not a party to the was the cause of injury.
alteration, he may enforce the payment thereof • Metrobank cannot rely on this dictum. Metrobank
according to its original tenor. cannot argue that Cabilzo was negligent and this
negligence was the proximate cause of the loss in the
CAB absence of even a scintilla proof to support such claim.
è Cabilzo was not the one who made nor authorized the
alteration. Neither did he assent to the alteration by his
express or implied acts. There is no showing that he failed to
exercise such reasonable degree of diligence required of a On Metrobank’s part
prudent man which could have otherwise prevented the
In every case, the depositor expects the bank to treat his appellant’s employees should have again noticed why only 2
account with the utmost fidelity. The point is that as a asterisks were placed before the amount in figures, while 3
business affected with public interest and because of the asterisks were placed after such amount. The word "NINETY"
nature of its functions, the bank is under obligation to treat is also typed differently and with a lighter ink, when
the accounts of its depositors with meticulous care, always compared with the words "ONE THOUSAND PESOS ONLY."
having in mind the fiduciary nature of their relationship. The The letters of the word "NINETY" are likewise a little bigger
appropriate degree of diligence required of a bank must be when compared with the letters of the words "ONE
a high degree of diligence, if not the utmost diligence. THOUSAND PESOS ONLY".

CAB Surprisingly, however, Metrobank failed to detect the above
è Here, it is obvious that Metrobank was remiss in that duty alterations. This negligence was exacerbated by the fact that
and violated that relationship. As observed by the CA, there the check in question was examined by the cash custodian
are material alterations on the check that are visible to the whose functions do not include the examinations of checks
naked eye. Thus: indorsed for payment against drawer’s accounts. Obviously,
the employee allowed by Metrobank to examine the check
x x x The number "1" in the date is clearly imposed on a white was not verse and competent to handle such duty.
figure in the shape of the number "2".
Metrobank’s negligence consisted in the omission of that
The appellant’s employees who examined the said check degree of diligence required of a bank owing to the fiduciary
should have been put on guard as to why at the end of the nature of its relationship with its client.
amount in words, (i.e., after the word "ONLY") there are 4
asterisks, while at the beginning of the line or before said NCC 1173: The fault or negligence of the obligor consists in
phrase, there is none, even as 4 asterisks have been placed the omission of that diligence which is required by the nature
before and after the word "CASH" in the space for payee. In of the obligation and corresponds with the circumstances of
addition, the 4 asterisks before the words "ONE THOUSAND the persons, of the time and of the place. x x x.
PESOS ONLY" have noticeably been erased with typing
correction paper, leaving white marks, over which the word Indeed, Metrobank failed to comply with the degree
"NINETY" was superimposed. The same can be said of the required by the nature of its business as provided by law and
numeral "9" in the amount "91,000", which is superimposed jurisprudence. If indeed it was not remiss in its obligation,
over a whitish mark, obviously an erasure, in lieu of the then it would be inconceivable for it not to detect an evident
asterisk which was deleted to insert the said figure. The alteration considering its vast knowledge and technical
expertise in the intricacies of the banking business. This
Court is not completely unaware of banks’ practices of Metrobank: Westmont Bank, as the collecting bank and the
employing devices and techniques in order to detect last indorser, shall bear the loss.
forgeries, insertions, intercalations, superimpositions and
alterations in checks and other negotiable instruments. SC: Metrobank cannot rely on Westmont Bank’s
Metrobank cannot now feign ignorance nor claim diligence; indorsement. The corollary liability of such indorsement, if
neither can it point its finger at the collecting bank, in order any, is separate and independent from the liability of
to evade liability. Metrobank to Cabilzo.

3. Metrobank’s (drawee bank) Liability Metrobank’s contention that it relied on the strength of
collecting bank’s indorsement may be merely a lame excuse
The bank on which the check is drawn, known as the drawee to evade liability.
bank, is under strict liability to pay to the order of the payee
in accordance with the drawer’s instructions as reflected on What is even deplorable is that, having been informed of the
the face and by the terms of the check. Payment made under alteration, Metrobank did not immediately re-credit the
materially altered instrument is not payment done in amount that was erroneously debited from Cabilzo’s account
accordance with the instruction of the drawer. but permitted a full blown litigation to push through, to the
prejudice of its client. As mentioned earlier, the records are
When the drawee bank pays a materially altered check, bare of evidence to prove that Cabilzo was negligent. There’s
• it violates the terms of the check, no justifiable reason therefore why Metrobank did not
• as well as its duty to charge its client’s account only for immediately reimburse his account.
bona fide disbursements he had made.
Anyway, Metrobank is not left with no recourse for it can still
Since the drawee bank, in this case, did not pay according to run after the one who made the alteration or with the
the original tenor of the instrument, as directed by the collecting bank, which it had already done.
drawer, then it has no right to claim reimbursement from the
drawer, much less, the right to deduct the erroneous
payment it made from the drawer’s account which it was
expected to treat with utmost fidelity.
THE MARINE NATIONAL BANK v. THE NATIONAL CITY BANK
4. What about Westmont Bank?
November 17, 1874 • sent the check to MARINE, which duly certified the
Allen, J. check upon presentation.
Digest by Kiko del Valle • At this certification, DERIPPE delivered the gold to the
buyer and indorsed the check for deposit in their
Topic/Provisions: Effect of Drawee’s Payment of Acceptance account at NATIONAL.
of the Altered Check
MARINE
Drawer: Lunt brothers • paid the check to NATIONAL in the morning of
Drawee: Marine National Bank (plaintiff) December 3
Payee: Order of Henry Smith • but, upon discovering the alterations later that same
Collecting bank: National (defendant) day, notified the defendant bank, offered to return the
COURT: collecting bank liable
check and requested repayment.

Facts: NATIONAL refused soàMARINE sued them to recover the
amounts they have paid.
LUNT BROTHERS,
• merchants in New York, The referee
• gave to a stranger in exchange for $25, a check for the • found, as conclusions of law, that the plaintiff in
same amount, drawn upon MARINE, payable to the certifying the check did not guarantee the
order of Henry Smith On 1 December 1869, genuineness of the filling-up of the check and was not
estopped to raise the defense of alteration.
a person • Thus, MARINE was entitled to judgment for the
• next day, bought $3,334 in gold currency at the price amount paid.
of $4,079.96 from DERIPPE & CO, gold brokers,.
• Using the check mentioned above but with alteration The General Term of the Superior Court of the city of New
of the date, payee and amount such that it appeared York
to have been issued on December 2, to DERIPPE for • reversed the referee and ruled in favor of the
the amount of $4,079.96. defendant.

DERIPPE
Court of Appeals of New York
 • reversed the Order of the General Term. change in the usual way of business, they held that the
• It stated that the certification of the bank did not certification of the bank only covered facts within the
include an assertion of the genuineness of the check knowledge of the certifying bank and did not include
in all its parts, saying: alterations. Thus, plaintiff was not estopped by the
“But if the doctrine contended for in opposition certification from raising the alteration and the judgment
to this view is correct and the certifying bank is entered on the report of the referee was affirmed.
bound to warrant, not only the genuineness of
the drawers' signature and the sufficiency of Defendant filed a Motion for Reargument upon affidavits of
their credit, but also the genuineness of the distinguished bankers and merchants seeking to have the
check in all its parts … then obviously there must certification interpreted as including a warranty of the
occur an immediate and complete change in the genuineness of the check in all its parts.
modes of doing business, which would defeat
and practically put an end to the use of certified Issues/Held:
checks. For no bank, under such a rule, could 1. WON the Court may grant the present Motion for
safely certify a check without, in the first Reargument on the affidavits of distinguished businessmen?
instance, investigating its origin and history by NO.
inquiry of its makers and payees. The burden of 2. WON a certification by a drawee bank includes warranty
such inquiries could not be borne without as to the genuineness of the check in all its parts? NO.
interfering with, or interrupting the other
necessary business of the bank, and the practice Dispositive:
of certifying checks would have to be Motion for Reargument DENIED. Judgment based on report
abandoned, or a staff of inquirers instituted in of referee REINSTATED and NATIONAL is ORDERED to repay
every bank, specially charged with these duties. the amounts paid by MARINE.
It is plain that banks, in self-protection, would
be compelled to refuse altogether to certify
checks, and that this convenient and useful Ratio:
invention of modern business would come to an
end.” (Emphasis supplied.) 1. WON the Court may grant the present Motion for
Reargument on the affidavits of distinguished
The Court being unwilling to attribute such a violent businessmen? NO.
construction to the parties’ acts that would necessitate a
1. The present motion is not founded upon any allegation An inquiry may reasonably be made of the drawee as to the
that a question decisive of the case and duly submitted by genuineness of the signature of the drawer and the state of
counsel was overlooked by the court, or that the decision is his account, but a resort would be had to other sources of
in conflict with an express statute or with a controlling information to learn the consideration of the check, by
decision. whom the body was written, the genuineness of the
Usage and custom properly proved can impress upon words indorsement and the title of the payee. As to such matters,
and phrases a particular or technical meaning, and control the drawee could not be supposed, ordinarily, to have any
the interpretation of commercial contracts but these must information, and would not be called upon or expected to
be proved as a question of fact and such proof cannot be give answer in respect to them.
received by an appellate tribunal. Neither affidavit
submitted by the businessmen drew attention to any custom Hence, in all reason, as well as legally, the inquiring of a
or usage on which to base the enlarged liability sought by the drawee in respect to a check, and the response, whether
defendants in this case. verbally or in writing, that it is “good,” must be held, in the
If the gentlemen are correct in their assertion that the absence of circumstances indicating a wider reach of
interpretation given by the Court is narrower than inquiry and a broader answer, to relate to those facts, and
stakeholders in the industry would wish, such stakeholders those only, of which the drawee is presumed to have
are not precluded from assuming such enlarged liability by knowledge.
plainly changing the terms of their undertaking.

2. When the bill is presented for acceptance, the acceptor
looks to the handwriting of the drawer with which he is
presumed to be acquainted, but he cannot be presumed to
have any such knowledge of the other facts upon which the
rights of the holder may depend.

Money paid on such checks and drafts which have been
forgeries, either in the body or the indorsements, or in any
respect except the name of the drawer, have been held as
recoverable as for money paid by mistake.

C.I.T. Corp. v. Panac
December 28, 1944 On one particular instance, Krajer, the neighbor of the
Carter, J. defendants, introduced to them William Hart, an agent of
Digest by: Lao the Home Improvement Company. William Hart quickly
gained the trust and confidence of the defendants, and Mr.
Topic: Fraud Panac testified that we was a very cordial, a “lovely sort of a
man,” a good salesman and gave you the impression that he
Short Facts: was your best friend.

The plaintiff, a holder in due course, brought this action After having been introduced, the Panac spouses
against the defendants for the payment of two promissory accompanied defendants to the premises where repairs on
notes. The defendants alleged fraud in the execution of the the property of the defendants were made. Hart made notes
promissory notes because William Hart, the agent of the of the details of the work to be done, on a memorandum
payee, deceived them into signing the said promissory notes. book, which the spouses referred to as the “black book”.
They then went to the house of the defendants, where Hart
This was possible because the defendants were illiterate, not prepared a document which purported to embody the
being able to read or write the English language and Mr. understanding arrived at on the work to be performed. He
William Hart knew of this fact. They were made to believe presented it to the defendants with a request that they sign
that they were signing a contract to repair dwelling houses it. Both defendants refused to sign it stating that they could
and nothing else, and that they were ignorant of the fact that not read it and they wished to see an attorney before signing.
they were signing notes. Hart assured the defendants that it was not necessary and
that the contract had to be signed immediately so that work
Facts: could get started. Hart the offered to read the contents of
the paper, and in doing so, he read off the “black book” and
The defendant spouses Panac were immigrants from Italy assured the spouses that the paper was substantially the
who were able to acquire several pieces of real property. same with the records on the “black book”. He again urged
Though they eventually became citizens of America, they the spouses to sign but they still refused. Finally, the spouses
were unable to read or write the English language. Mrs. were prevailed over and were overcome by Hart’s assurance
Panac testified to the effect that she had never attended that they merely represented the same contents as the
school in America nor in her native country, Italy, and that “black book”.
she could only sign her name and copy.
Another note was signed by the spouses under the similar There was sufficient evidence to convince the court that
circumstances. The spouses further testified that at the time fraud was in fact employed by the agent of the payee
their signatures were obtained, the price of some of the because of the following circumstances:
items of the work had not yet been ascertained nor agreed
upon. They also testified that they agreed that the payment 1. the defendants were illiterate;
of the work would be in installments to commence sixty days 2. the high pressure method pursued by Hart;
after the completion of the work, but never did they 3. the reading of only the contract of repairs and not the
contemplate the giving of notes for the payment. Eventually, notes;
the work was never completed. 4. the insistence by Hart of an immediate execution; and
5. Hart’s brushing aside the suggestion that a legal advice
Issue: from an attorney be sought.
WON fraud is a real defense that may be raised against a
holder in due course. YES. The Court further noted that while it is true that there were
other persons present during the execution of the contract,
Ratio: these persons were friend of Hart. Therefore, the defense of
The SC of California ruled that where there is in fact no the defendants was good against a holder in due course.
contract, or there is fraud in the execution, it is not
enforceable by a holder in due course in the absence of
negligence on the part of the maker; that is, the maker has a
real defense to an action thereon.

The words “defect of title” in the NIL and by the definition of
“holder [in due course]” do not indicate with perfect
clearness that it is only personal or equitable defenses from
which the holder is freed, but there was probably no
intention to change the law in regard to the matter, and
there is no reason to suppose that a change has been
effected.

THE PEOPLE OF THE PHILIPPINES, vs. CECILIA QUE YABUT to the bank, the checks were dishonored and inspite
and HON. JESUS DE VEGA, as Judge of the Court of First of repeated demands to deposit the necessary funds
Instance of Bulacan, Branch II, to cover the checks within the reglementary period
THE PEOPLE OF THE PHILIPPINES, vs. GEMINIANO YABUT, enjoined by law, failed and refused to do so.
JR., • Geminiano Yabut, Jr., as president of the Yabut Transit
April 29, 1977 Line, was accused by means of false pretenses and
Martin, J. pretending to have sufficient funds in the Merchants
Digest by Doms Gana Banking Corporation and Manufacturers Bank and
Trust Company, located in Caloocan City, for
Topic and Provision: Complete instrument which is preparing, issuing and making out 12 Checks dated
undelivered, Sec. 16 NIL February 23, 26, 27, March 1, 3, 10, 11, 12, April 4, 7,
8 and 9, 1975 in the total sum of P37,206.00,drawn
Facts: against the Merchants Banking Corporation and
• Cecilia Yabut and Germiniano Yabut, Jr. were both Manufacturers Bank and Trust Company, payable to
separately accused of estafa by means of false the Free Tires Supply and Free Caltex Station, in
pretenses before the Court of First Instance of payment articles and merchandise delivered to and
Bulacan. received by said accused, gave and delivered the said
• Cecilia was accused, as treasurer of Yabut Transit Line, checks to said Freeway Tires Supply and Freeway
by means of false pretenses and pretending to have Caltex Station, and knowing that at the time there was
sufficient funds in the Merchants Banking no or insufficient funds in the said Merchants Banking
Corporation, located Caloocan City, for preparing, Corporation and Manufacturers Bank and Trust
issuing and making out 3 Checks dated February 22, Company, and upon presentation of the said checks to
1975, February 24, 1975 and February 26, 1975, in the the bank, the checks were dishonored and inspite of
total sum of P6,568.94, drawn against the Merchants repeated demands by the owner of the Freeway Tires
Banking Corporation, payable to Freeway Tires Supply, Supply and Freeway Caltex Station to deposit the
owned by Alicia P. Andan, in payment of articles and necessary funds to cover the cheeks within the
merchandise delivered to and received by said reglementary period enjoined by law, failed and
accused, and delivered said checks to Freeway Tires refused to do so.
Supply, knowing that at the time there was no or • Both accused filed a motion to quash, claiming that (1)
insufficient funds in the said Merchants Banking the facts recited do not constitute an offense because
Corporation, and upon presentation of the said checks the checks were issued in payment of a pre-existing
 obligation; and (2) the venue was improperly laid, While the subject checks were written, signed, or
considering that the postdated checks were issued dated in Caloocan City, they were not completely
and delivered to and received by the Andan in City of made or drawn there, but in Malolos, Bulacan,
Caloocan, where Yabut holds office. The motion to where they were uttered and delivered. That is the
quash were granted. place of business and residence of the payee.
• The place where the bills were written, signed, or
Issue: Was the motion to quash proper? NO! dated does not necessarily fix or determine the
Held: The motion to quash was not proper. Venue was place where they were executed. What is of
proper since the last element of the crime occurred in decisive importance is the delivery thereof. The
Bulacan and the facts properly constituted the crime of delivery of the instrument is the final
estafa despite checks being issued for payment of a pre- act essential to its consummation as an
existing obligation. obligation. An undelivered bill or note is
Dispositive: ACCORDINGLY, the appealed orders of the inoperative. Until delivery, the contract is
respondent trial courts ordering the quashal of the estafa revocable. And the issuance as well as the delivery
informations against the two private respondents in the of the check must be to a person who takes it as
petitions at bar are hereby reversed and set aside. The a holder. Delivery of the check signifies transfer of
informations substantially conform with the crime charged possession, whether actual or constructive, from
as defined in the law. one person to another with intent to transfer
title thereto.
Ratio: • Modesto Yambao's receipt of the bad checks from
1. Venue was Proper (main issue) Cecilia or Geminiano in Caloocan City cannot be
• Estafa by postdating or issuing a bad check under licitly taken as delivery of the checks to the Andan
Art. 315, par. 2 (d) of the Revised Penal Code may at Caloocan City to fix the venue there. Yambao
be a transitory or continuing offense. Its basic was merely Andan’s messenger/part time
elements of deceit and damage may independently employee, and no there was no contract of agency.
arise in separate places. • The venue of the offense lies at the place where the
• Deceit has taken place in Malolos, Bulacan, while check was executed and delivered to the payee. In
the damage in Caloocan City, where the checks this case, it was in Malolos, Bulacan where the
were dishonored by the drawee banks there. checks were uttered and delivered to complaint
Jurisdiction can, therefore, be entertained by Andan, at which place, her business and residence
either the Malolos court or the Caloocan court.
 were also located, the criminal prosecution of (RIGI) located at Kalookan. RIGI had been transacting
estafa may be lodged therein. business with LINTON (business address at Navotas)
for years, the latter supplying the former with steel
2. Facts properly constituted Estafa plates, steel bars, flat bars and purlin sticks which it
• We hold that the facts charged in the informations uses in the fabrication, installation and building of
against the Yabuts constitute estafa under Art. 315, steel structures.
par. 2 (d) of the Revised Penal Code. In considering o As officers of RIGI the Lim spouses were allowed
a motion to quash based on the ground "(t)hat the 30, 60 and sometimes even up to 90 days credit.
facts charged do not constitute an offense," the
point of resolution is whether the facts alleged, if • 27 May 1983: Lims ordered 100 pieces of mild steel
hypothetically admitted, would meet the essential plates from LINTON which were delivered on the same
elements of the offense as defined in the law. The day To pay LINTON for the delivery the Lims issued
facts alleged in the criminal charge should be taken SOLIDBANK Check No. 027700 postdated 3 September
as they are. An analysis of the two informations 1983.
involved in the present case convinces Us that the
facts charged therein substantially constitute the • 30 May 1983: Lims ordered another 65 pieces of mild
integral elements of the offense as defined in the steel plates which were delivered at their place of
law. business on the same day. They issued as payment
SOLIDBANK Check No. 027699 postdated 20 August
Lim v CA 1983.
December 19, 1995
Bellosillo, J. • Lim spouses also ordered 2,600 "Z" purlins which were
Digest by Joydee delivered to them on various dates, to wit: 15 and 22
April 1983; 11, 14, 20, 23, 25, 28 and 30 May 1983;
Topic and Provisions: Transfer and Negotiation: Issuance and, 2 and 9 June 1983. To pay for the deliveries, they
and Delivery issued seven SOLIDBANK checks.

• LINTON alleged that when those seven (7) checks were
Facts: deposited with the Rizal Commercial Banking
• Manuel Lim and Rosita Lim are the president and Corporation they were dishonored for "insufficiency
treasurer, respectively, of Rigi Bilt Industries, Inc.
 of funds" with the additional notation "payment Dispositive: WHEREFORE, the decision of the Court of
stopped" stamped thereon. Appeals dated 18 September 1992 affirming the conviction
of petitioners Manuel Lim and Rosita Lim —
• Despite demand Manuel and Rosita refused to make
good the checks or pay the value of the deliveries. In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-
Manuel alleged that there were no insuficiency of MN); CA-G.R. CR No. 07278 (RTC Crim. Case No. 1700-
funds (as evidenced by the ledger) and that he ordered MN); CA-G.R. CR No. 07279 (RTC Crim. Case No. 1701-
SOLIDBANK to stop payment because the supplies MN); CA-G.R. CR No. 07280 (RTC Crim. Case No. 1702-
delivered by LINTON were not in accordance with the MN); CA-G.R. CR No. 07281 (RTC Crim. Case No. 1703-
specifications in the purchase orders. Thus, LINTON MN); CA-G.R. CA No. 07282 (RTC Crim. Case No. 1704-
charged the spouses in RTC MALABON with with MN); and CA-G.R. CR No. 07283 (RTC Crim Case No.
estafa on three (3) counts under Art. 315, par. 2 (d), of 1705-MN), the Court finds the accused-appellants
The Revised Penal Code. The spouses were also
charged with seven (7) counts of violation of B.P. Blg. MANUEL LIM and ROSITA LIM guilty beyond
22, otherwise known as the Bouncing Checks Law. reasonable doubt of violation of Batas Pambansa
Bilang 22 and are hereby sentenced to suffer a
• RTC held that both of the accused were guilty of estafa STRAIGHT PENALTY OF ONE (1) YEAR IMPRISONMENT
and violation of B.P. Blg. 22. CA set aside and in each case, together with all the accessory penalties
acquitted both of estafa on the ground that indeed provided by law, and to pay the costs.
the checks were not made in payment of an
obligation contracted at the time of their issuance. In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-
However it affirmed the finding of the trial court that MN), both accused-appellants are hereby ordered to
they were guilty of having violated B.P. Blg. 22. indemnify the offended party in the sum of
P27,900.00.
Issue:
1. W/N RTC has jurisdiction. In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1700-
2. W/N spouses were guilty of violating BP 22. MN) both accused-appellants are hereby ordered to
Held: indemnify the offended party in the sum of
1. P32,550.00.
2.
 In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1701- • Petitioner spouses: Prosecution failed to prove that
MN) both accused-appellants are hereby ordered to any of the essential elements of the crime punishable
indemnify the offended party in the sum of under B.P. Blg. 22 was committed within the
P27,900.00. jurisdiction of the Regional Trial Court of Malabon.
They claim that what was proved was that all the
In CA-G.R. CR No. 07280 (RTC Crim. Case No. 1702- elements of the offense were committed in Kalookan
MN) both accused-appellants are hereby ordered to City. The checks were issued at their place of
indemnify the offended party in the sum of business, received by a collector of LINTON, and
P27,900.00. dishonored by the drawee bank, all in Kalookan City.
Considering that the checks were all issued, delivered,
In CA-G.R. CR No. 07281 (RTC Crim. Case No. 1703- and dishonored in Kalookan City, the trial court of
MN) both accused are hereby ordered to indemnify Malabon exceeded its jurisdiction when it tried the
the offended party in the sum of P63,455.00. case and rendered judgment thereon.
• COURT: Venue in criminal cases is a vital ingredient
In CA-G.R CR No. 07282 (RTC Crim. Case No. 1704-MN) of jurisdiction. Violation of BP 22 is categorized as
both accused-appellants are hereby ordered to transitory or continuing crimes. In other words, a
indemnify the offended party in the sum of person charged with a transitory crime may be validly
P51,800.00, and tried in any municipality or territory where the
offense was in part committed.
In CA-G.R. CR No. 07283 (RTC Crim. Case No. 1705- o The following acts material and essential to
MN) both accused-appellants are hereby ordered to each crime and requisite to its consummation
indemnify the offended party in the sum of must be considered: (a) the seven (7) checks
P37,200.00 33 — were issued to LINTON at its place of business in
Balut, Navotas; b) they were delivered to
as well as its resolution of 6 November 1992 denying LINTON at the same place; (c) they were
reconsideration thereof, is AFFIRMED. Costs against dishonored in Kalookan City; and, (d)
petitioners. petitioners had knowledge of the insufficiency
of their funds in SOLIDBANK at the time the
Ratio: checks were issued. Since there is no dispute
1. Jurisdiction of the Court that the checks were dishonored in Kalookan
 City, it is no longer necessary to discuss where which is controlling and sufficient to vest
the checks were dishonored. jurisdiction upon the Regional Trial Court of
o Sec. 191 of the Negotiable Instruments Law: Malabon.
the term "issue" means the first delivery of the
instrument complete in form to a person who
takes it as a holder. On the other hand, the 2. Spouses were guilty of BP 22
term "holder" refers to the payee or indorsee Petitioners: Furthermore, no evidence whatsoever supports
of a bill or note who is in possession of it or the the proposition that they knew that their checks were
bearer thereof. Although LINTON sent a insufficiently funded. In fact, some of the checks were
collector who received the checks from funded at the time of presentment but dishonored
petitioners at their place of business in nonetheless upon their instruction to the bank to stop
Kalookan City, they were actually issued and payment.
delivered to LINTON at its place of business in Court: Section 2 of B.P. Blg. 22 establishes a prima facie
Balut, Navotas. The receipt of the checks by the evidence of knowledge of insufficient funds. The prima facie
collector of LINTON is not the issuance and evidence has not been overcome by petitioners in the cases
delivery to the payee in contemplation of law. before us because they did not pay LINTON the amounts due
The collector was not the person who could on the checks; neither did they make arrangements for
take the checks as a holder, i.e., as a payee or payment in full by the drawee bank within five (5) banking
indorsee thereof, with the intent to transfer days after receiving notices that the checks had not been
title thereto. Neither could the collector be paid by the drawee bank. Further, the notice of dishonor
deemed an agent of LINTON with respect to the issued by the drawee bank, indicates not only that payment
checks because he was a mere employee. of the check was stopped but also that the reason for such
o (Just in case sir asks, the Court relied heavily in order was that the maker or drawer did not have sufficient
People v Yabut in deciding the jurisdiction) funds with which to cover the checks.
o Thus, venue or jurisdiction lies either in the
Regional Trial Court of Kalookan City or
Malabon. Further, venue or jurisdiction is
determined by the allegations in the
Information. The Informations in the cases
under consideration allege that the offenses
were committed in the Municipality of Navotas
Linick v. A. J. Nutting Co. sufficient to create an estoppel. In the case of
Supreme Court of New York commercial paper it was long ago held that, when by
Burr, J. voluntary act a party intrusts another with such paper
Digest by: CG with a blank thereon designed to be filled up with a
stipulated amount, such party is liable to a bona fide
Topic: Defenses and Equities > Duress > Incomplete holder of the instrument, although the amount
Instrument which delivered inserted was larger than that agreed upon.
- The rule that the bona fide holder of an incomplete
Facts: instrument, negotiable but for some lack capable of
- On July 20, 1909, Linick signed his name to a blank being supplied, has an implied authority to supply the
check. David Ryckoft and Benjamin Silberman stole omission, and to hold the maker thereon, only applies
the check, filled in the name of F. A. Mann as payee where the latter has by his own act, or the act of
and the sum of $147.87 as the amount thereof. They another, authorized, confided in, or invested with
presented it to the State Bank, where plaintiff kept his apparent authority by him, put the instrument in
account, and procured it to be certified. circulation as negotiable paper. In other words, the
- They indorsed said check with the name of F. A. Mann maker becomes liable for an incomplete instrument
and passed it to defendant for value, who collected if he delivers it.
the amount thereof from the said bank. - None of the circumstances connected with the theft of
- Plaintiff, having taken up said check from the bank, this paper appear, except that it was stolen, and that
now sues defendant for money received for the the persons guilty of the crime have been tried,
amount of the check. convicted, and sentenced for the same. Plaintiff,
therefore, cannot be charged with negligence giving
Issue: WON defendant acquired a valid title on the check rise to an estoppel, unless a man is guilty of negligence
Held: No. Plaintiff is not liable to a holder for value on a in writing his name upon a piece of paper which by
blank check stolen and completed by the thief. some possibility may afterwards be stolen from him,
Dispositive: The judgment appealed from must be reversed, which paper afterwards comes into the hands of a
and a new trial ordered; costs to abide the event. third person who is an entire stranger to the
transaction, with words written over the signature
Ratio: which are sufficient in form to make it a check or note.
- As a general rule, one can only part with title to - “Where the instrument is in the hands of a holder in
personal property by his voluntary act or by conduct due course, a valid delivery thereof by all parties
 prior to him so as to make them liable to him is with the authority given and within a reasonable time.
conclusively presumed,” (Section 16) must be read in But if any such instrument, after completion, is
connection with the provision declaring that “Where negotiated to a holder in due course, it is valid and
an incomplete instrument has not been delivered it effectual for all purposes in his hands, and he may
will not, if completed and negotiated, without enforce it as if it had been filled up strictly in
authority, be a valid contract in the hands of any accordance with the authority given and within a
holder, as against any person whose signature was reasonable time.
placed thereon before delivery.” (Section 15)
Facts:
− Private respondent filed an action against petitioners
FEDERICO O. BORROMEO, LOURDES O. BORROMEO and to compel the transfer to his name in the books of
FEDERICO O. BORROMEO, INC, petitioners vs. AMANCIO F.O.B., Inc., 23,223 shares of stock registered in the
SUN and the COURT OF APPEALS, respondents. name of Federico O. Borromeo, as evidenced by a
October 22, 1999 Deed of Assignment dated January 16, 1974.
PURISIMA, J. − Petitioner Federico O. Borromeo disclaimed any
Digest by Eugenio Leynes participation in the execution of the Deed of
Assignment, theorizing that his supposed signature
Topic and Provisions: Interpretation and Construction; thereon was forged.
Blanks; When Filled − The Deed of Assignment was dated January 16, 1974.
NIL, Sec. 14. Blanks; when may be filled. - Where the However, the signature (as found by the private
instrument is wanting in any material particular, the respondent’s expert witness and the PC Crime
person in possession thereof has a prima facie Laboratory) was found to be circa 1954-1957.
authority to complete it by filling up the blanks − The trial court found that the signature in question is
therein. And a signature on a blank paper delivered by the genuine signature of Federico O. Borromeo
the person making the signature in order that the between the years 1954 to 1957 although the words
paper may be converted into a negotiable instrument in the blank space of the document in question were
operates as a prima facie authority to fill it up as such written on a much later date. The same conclusion
for any amount. In order, however, that any such was arrived at by the Court of Appeals on the basis of
instrument when completed may be enforced against the Report of the PC crime Laboratory corroborating
any person who became a party thereto prior to its the findings of Col. Jose Fernandez that the signature
completion, it must be filled up strictly in accordance under controversy is genuine.
 respondent had to have a counter evidence of
Issue: ownership of the shares involve.
1) WON the Deed of Assignment is valid. − Thus the execution of the deed of assignment in blank,
Held: to be filled up whenever needed. The same explains
1) YES. The Deed is valid. the discrepancy between the date of the deed of
Dispositive: WHEREFORE, the Petition is DISMISSED for lack assignment and the date when the signature was
of merit and the assailed Resolution, dated March 13, 1986, affixed thereto.
AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Ratio:
− That the Deed of Assignment is dated January 16, 1974
while the questioned signature was found to be circa
1954-1957, and not that of 1974, is of no moment. It
does not necessarily mean, that the deed is a forgery.
− Pertinent records reveal that the subject Deed of
Assignment is embodied in a blank form for the
assignment of shares with authority to transfer such
shares in the books of the corporation. It was clearly
intended to be signed in blank to facilitate the
assignment of shares from one person to another at
any future time.
− This is similar to Section 14 of the Negotiable
Instruments Law where the blanks may be filled up
by the holder, the signing in blank being with the
assumed authority to do so.
− Indeed, as the shares were registered in the name of
Federico O. Borromeo just to give him personality and
standing in the business community, private
Pacheco v. CA checks cannot be encashed as the same were not
December 2, 1999 funded. Petitioner Ernesto also signed the three
Ynares-Santiago checks as required by Mrs. Vicencio on the same
Digest by: CGo conditions as the first check.
- THIRD LOAN: one for P10,000.00 and another for
Topic: Dates of Instrument P15,000.00. Again she issued two more RCBC checks
(No. 101768 for P10,000.00 and No. 101774 for
Facts: P15,000.00) as required by Mrs. Vicencio with the
- Petitioners (Virginia Pacheco and spouse) are engaged same assurance that the checks shall not be presented
in the construction business, due to financial for payment but shall stand only as evidence of
difficulties they had to obtain loans from the indebtedness in lieu of the usual promissory note.
complainant Vicencios (pawn shop owners). FIRST - The six checks represent a total obligation of
LOAN: 10,000, instead of asking for a promissory note, P85,000.00. However, since the loan of P10,000.00
the spouses required the petitioners to write a check, under the first check was already paid when the
which will allegedly not be presented to the bank. The amount thereof was deducted from the proceeds of
understanding was the check is not to be encashed but the second loan, the remaining account was only
merely intended as an evidence of indebtedness, P75,000.00. Of this amount, petitioners were able to
which cannot be negotiated. settle and pay in cash P60,000.00 in July 1989.
- SECOND LOAN: P50,000.00 from Mrs. Vicencio. She Petitioners never had any transaction nor ever dealt
received only P35,000.00 as the previous loan of with Mrs. Vicencio’s husband, the complainant herein.
P10,000.00 as well as the 10% interest amounting to - When the remaining balance became due and
P5,000.00 on the new loan were deducted by the demandable, petitioners were not able to pay despite
latter. With the payment of the previous debt, Virginia demands to do so. Respondents went to petitioners’
Pacheco asked for the return of the first check, but the residence to persuade Virginia to place the date
spouses Vicencio can no longer locate the check. She “August 15, 1992” on checks nos. 101756 and 101774,
also required Virginia to issue three (3) more checks in although said checks were respectively given undated
various amounts – two checks for P20,000.00 each to Mrs. Vicencio on May 17, 1989 and July 21, 1989.
and the third check for P10,000.00. Virginia issued Check no. 101756 was required by Mrs. Vicencio to be
three undated RCBC checks numbered 101783 and dated as additional guarantee for the P15,000.00
101784 in the sum of P20,000.00 each and 101785 for unpaid balance allegedly under check no. 101774.
P10,000.00, and again informed Mrs. Vicencio that the Despite being informed by petitioner Virginia that
 their account with RCBC had been closed as early as 1. that the offender postdated or issued a check in
August 17, 1989, Mrs. Vicencio and her daughter payment of an obligation contracted at the time
insisted that she place a date on the checks allegedly the check was issued;
so that it will become evidence of their indebtedness. 2. that such postdating or issuing a check was done
The former reluctantly wrote the date on the checks when the offender had no funds in the bank, or his
for fear that she might not be able to obtain future funds deposited therein were not sufficient to
loans from Mrs. Vicencio. cover the amount of the check;
- Petitioners were surprised to receive on August 29, 3. deceit or damage to the payee thereof.
1992 a demand letter from Mrs. Vicencio’s spouse The first and third elements are not present in this
informing them that the checks when presented for case. A check has the character of negotiability
payment on August 25, 1992 were dishonored due to and at the same time it constitutes an evidence of
“Account Closed”. Consequently, upon the complaint indebtedness. By mutual agreement of the parties,
of Mrs. Vicencio’s husband with whom petitioners the negotiable character of a check may be waived
never had any transaction, two informations for and the instrument may be treated simply as proof
estafa, defined in Article 315(2)(d) of the Revised of an obligation. There cannot be deceit on the
Penal Code, were filed against them. part of the obligor, petitioners herein, because
they agreed with the obligee at the time of the
Issue: WON Guilty of Estafa issuance and postdating of the checks that the
Held: No same shall not be encashed or presented to the
Dispositive: WHEREFORE, the assailed Decision is REVERSED banks. As per assurance of the lender, the checks
and SET ASIDE. Petitioners are ACQUITTED of the charge of are nothing but evidence of the loan or security
estafa but they are ORDERED to pay Mrs. Vicencio the thereof in lieu of and for the same purpose as a
amount of P15,000.00 without interest. However, from the promissory note. By their own covenant,
time this judgment becomes final and executory, the amount therefore, the checks became mere evidence of
due shall earn legal interest of twelve percent (12%) per indebtedness. It has been ruled that a drawer
annum until full payment. who issues a check as security or evidence of
investment is not liable for estafa. Mrs. Vicencio
Ratio: could not have been deceived nor defrauded by
- The essential elements in order to sustain a conviction petitioners in order to obtain the loans because
under the above paragraph are: she was informed that they no longer have funds
in their RCBC accounts. In 1992, when the Vicencio
 family asked Virginia to place a date on the check, - Moreover, a check must be presented within a
the latter again informed Mrs. Vicencio that their reasonable time from issue. By current banking
account with RCBC was already closed as early as practice, a check becomes stale after more than six
August 1989. With the assurance, however, that (6) months. In fact a check long overdue for more
the check will only stand as a firm evidence of than two and one-half years is considered stale. In
indebtedness, Virginia placed a date on the check. this case, the checks were issued more than three
Under these circumstances, Mrs. Vicencio cannot years prior to their presentment. In his complaint,
claim that she was deceived or defrauded by complainant alleged that petitioners bought jewelry
petitioners in obtaining the loan. In the absence of from him and that he would not have parted with his
the essential element of deceit, no estafa was jewelry had not petitioners issued the checks. The
committed by petitioners. evidence on record, however, does not support the
- The Respondent need not even ask the petitioners to theory of the crime.
place a date on the check, because as holder of the
check, he could have inserted the date pursuant to
Section 13 of the Negotiable Instruments Law (NIL).
Moreover, as stated in Section 14 thereof,
complainant, as the person in possession of the
check, has prima facie authority to complete it by
filling up the blanks therein. Besides, pursuant to
Section 12 of the same law, a negotiable instrument is
not rendered invalid by reason only that it is
antedated or postdated. Thus, the allegation of Mrs.
Vicencio that the date to be placed by Virginia was
necessary so as to make the check evidence of
indebtedness is nothing but a ploy. Petitioners openly
disclosed and never hid the fact that they no longer
have funds in the bank as their bank account was
already closed. Knowledge by the complainant that
the drawer does not have sufficient funds in the bank
at the time it was issued to him does not give rise to a
case for estafa through bouncing checks.
Dougherty vs Salt said, “Well, I wish you would.” A blank was then
1919 produced, filled out, and signed. The aunt handed the
Cardozo, J note to her nephew, with these words: “You have
Martin Lagmay always done for me, and I have signed this note for
Topic and Provisions: you. Now, do not lose it. Some day it will be valuable.”
Facts: • The trial judge submitted to the jury the question
• The plaintiff, a boy of eight years, received from his whether there was any consideration for the promised
aunt, the defendant’s testatrix, a promissory note for payment. Afterwards, he set aside the verdict in favor
$3,000, payable at her death or before. Use was made of the plaintiff, and dismissed the complaint
of a printed form, which contains the words “value • The Appellate Division, by a divided court, reversed
received.” the judgment of dismissal, and reinstated the verdict
• How the note came to be given was explained by the on the ground that the note was sufficient evidence of
boy’s guardian, who was a witness for his ward. The consideration
following is the testimony of the guardian Issue: WON the note is enforceable
• The aunt was visiting her nephew. When she saw Held: No
Charley coming in, she said, “Isn’t he a nice boy?” I Dispositive: We hold, therefore, that the verdict of the jury
answered her, Yes; that he is getting along very nice, was contrary to law, and that the trial judge was right in
and getting along nice in school; and I showed where setting it aside
he had progressed in school, having good reports, and Ratio:
so forth, and she told me that she was going to take • The inference of consideration to be drawn from the
care of that child; that she loved him very much. I said, form of the note has been so overcome and rebutted
“I know you do, Tillie, but your taking care of the child as to leave no question for a jury. This is not a case
will be done probably like your brother and sister where witnesses, summoned by the defendant and
done, take it out in talk.” She said, “I don’t intend to friendly to the defendant’s cause, supply the
take it out in talk; I would like to take care of him now.” testimony in disproof of value.
I said, “Well, that is up to you.” She said, “Why can’t I • This is a case where the testimony in disproof of value
make out a note to him?” I said, “You can, if you wish comes from the plaintiff’s own witness, speaking at
to.” She said, “Would that be right?” And I said, “I do the plaintiff’s instance. The transaction thus revealed
not know, but I guess it would; I do not know why it admits of one interpretation,and one only. The note
would not.” And she said, “Well, will you make out a was the voluntary and unenforceable promise of an
note for me?” I said, “Yes, if you wish me to,” and she executory gift.
 • This child of eight was not a creditor, nor dealt with as Francisco v. CA
one. The aunt was not paying a debt. She was November 29, 1999
conferring a bounty J. Gonzaga – Reyes
• The promise was neither offered nor accepted with Ortiz
any other purpose. “Nothing is consideration that is
not regarded as such by both parties.” Topic: Indorsement by Agent
• A note so given is not made for “value received,”
however its maker may have labeled it. The formula of Provisions:
the printed blank becomes, in the light of the
conceded facts, a mere erroneous conclusion, which Sec. 20. Liability of person signing as agent, and so forth. -
cannot overcome the inconsistent conclusion of the Where the instrument contains or a person adds to his
law signature words indicating that he signs for or on behalf of a
• The plaintiff through his own witness, has explained principal or in a representative capacity, he is not liable on
the genesis of the promise, and consideration has the instrument if he was duly authorized; but the mere
been disproved addition of words describing him as an agent, or as filling a
representative character, without disclosing his principal,
does not exempt him from personal liability.
In other words:
The note was voluntary and not an enforceable promise of Sec. 44. Indorsement in representative capacity. - Where any
an executory gift. There was no consideration. There was no person is under obligation to indorse in a representative
value received by the aunt for her promise. A promise to capacity, he may indorse in such terms as to negative
make a future gift is not enforceable under contract law. personal liability
Mere recitals of consideration are not consideration.
Facts:
- Petitioner Adalia Francisco (P) is the president of A.
Francisco Realty and Development Corporation (AFRDC)
- Respondent Jaime Ong (R) is the president and general
manager of Herby Commercial and Construction Corporation
(HCCC)
- Land Development and Construction Contract (LDCC) was
entered into by AFRDC and HCCC:
 → Financed by GSIS → P forged the signature of R at the dorsal portion of
→ HCCC to construct 35 housing units and the the checks. P then indorsed the checks for a second time by
development of 35 hectares of land signing her name at the back of the checks and deposited the
→ Payment = 'turn-key' basis = HCCC was to be paid checks in her IBAA savings account
on the basis of the completed houses and developed lands → IBAA credited P's account with the amount of the
delivered to and accepted by AFRDC and the GSIS checks and the latter withdrew the amount so credited
→ AFRDC authorized, through a Deed of Assignment, - R filed a case of estafa thru falsification of commercial
HCCC to collect payments directly from GSIS documents against P
→ AFRDC and GSIS put up an Executive Committee - Defense of P: R Ong allegedly issued a Certification
Account with the Insular Bank of Asia & America (IBAA) in the authorizing P to collect HCCC's receivables from GSIS, thus
amount of P4,000,000.00 from which checks would be issued making him an agent
and co-signed by petitioner Francisco and the GSIS Vice- - TC: In favor of R. Signatures were indeed forged according
President Armando Diaz to NBI experts. IBAA liable since it allowed for the withdrawal
- HCCC filed a case against P, AFRDC and GSIS for the despite obvious irregularities as the lack of initials to validate
collection of the unpaid balance under the LDCC in the the alterations made on the check, absence of the signature
amount of PhP 515k of a co-signatory in the corporate checks of HCCC and the
→ Amicable settlement: GSIS still owes PhP 520k depsit of checks on a second indorsement in the savings
representing incomplete construction of housing, account of P
incomplete land development and 5% retention. HCCC - CA: affirmed
turned over 83 housing units which have been accepted and
paid for by GSIS. HCC indebted to AFDRDC in the amount of Issue: WON Francisco forged the signature of Ong on the
PhP 180k, which will be paid out of the proceeds from the 40 seven checks
housing units still to be turned over by HCCC or from any
amount due to HCCC from GSIS Held: YES. P had no authority to encash checks
- A year later, R discovered that GSIS VP Diaz and P had
executed and signed 7 checks of various dates and amounts Dispositive: WHEREFORE, we AFFIRM the respondent
(amounting to PhP 370k) drawn against IBAA and payable to court’s decision promulgated on June 29, 1992, upholding
HCCC for completed and delivered work under LDCC the February 16, 1988 decision of the trial court in favor of
→ Never delivered to R private respondents, with the modification that the interest
→ GSIS gave P custody of the checks. The latter upon the actual damages awarded shall be at six percent
promised to deliver the same to HCCC (6%) per annum, which interest rate shall be computed from
the time of the filing of the complaint on November 19, 1979. the Certification cannot be used by P to validate her act of
However, the interest rate shall be twelve percent (12%) per forgery.
annum from the time the judgment in this case becomes
final and executory and until such amount is fully paid. The
basis for computation of the six percent and twelve percent
rates of interest shall be the amount of P370,475.00. No
pronouncement as to costs.

Ratio:
- The forgery was satisfactorily established in the trial court
upon the strength of the findings of the NBI handwriting
expert. Other than petitioner’s self-serving denials, there is
nothing in the records to rebut the NBI’s findings.
- P asserts that she had authority, citing the Certification
executed by Ong in her favor giving her the authority to
collect all the receivables of HCCC from the GSIS, including
the questioned checks.
→ The Negotiable Instruments Law provides that
where any person is under obligation to indorse in a
representative capacity, he may indorse in such terms as to
negative personal liability
→ An agent, when so signing, should indicate that he
is merely signing in behalf of the principal and must disclose
the name of his principal; otherwise he shall be held
personally liable
→ Assuming arguendo that Francisco was authorized
by HCCC to sign R’s name, still, P did not indorse the
instrument in accordance with law. Instead of signing R’s
name, P should have signed her own name and expressly
indicated that she was signing as an agent of HCCC. Thus,