Kauffman vs PNB, GR No.

16454 September 29, 1921, digested (Negotiable Instruments) Facts: Plaintiff was entitled to the sum of P98,000 from the surplus earnings of Philippine Fiber & Produce Company (PFPC) which was placed to his credit on the companys books. The PFPC treasurer requested from PNB Manila that a telegraphic transfer of S45,000 should be made to the plaintiff in NY upon account of PFPC. The treasurer drew and delivered a check for the amount of P90,355 on the PNB which is the total costs o said transfer. As evidence, a document was made out and delivered to the PFPC treasurer which is referred to by the banks assistant cashier as its official receipt. On the same day the Philippine National Bank dispatched to its New York agency a cablegram to the following effect: Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE NATIONAL BANK, Manila. Upon receipt of the telegraphic message, the banks representative advised the withholding of the money from Kauffman, in view of his reluctance to accept certain bills of the PFPC. The PNB agreed and sent to its NY agency another message to withhold the payment as suggested. Upon advice of the PFPC treasurer that S45,000 had been placed to his credit, he presented himself at the PNB NY and demanded the money but was refused due to the direction of the withholding of payment. Issue: WON plaintiff has a right over the money withhold. Held: No. Provisions of the NIL can come into operation there must be a document in existence of the character described in section 1 of the Law; and no rights properly speaking arise in respect to said instrument until it is delivered. The order transmitted by PNB to its NY branch, for the payment of a specified sum of money to the plaintiff was not made payable to order or to bearer, as required in subsection (d) of that Act; and inasmuch as it never left he possession of the bank, or its representative in NY, there was no delivery in the sense intended in section 16 of the same Law. In connection, it is unnecessary to point out that the official receipt delivered by the bank to the purchaser of the telegraphic order cannot itself be viewed in the light of a negotiable instrument, although it affords complete proof of the obligation actually assumed by the bank.

BPI EXPRESS CARD CORPORATION V. CA 292 SCRA 260 FACTS: Marasigan was the holder of a BPI credit card. Due to his delinquency in payment, immediate demand was given by BPI to pay account. Marasigan issued a postdated check. The check was thereafter kept in custiody by BPI and card was temporarily suspended. And on a relevant date, Marasigan after eating in Caf Adriatico tried to use his card to pay but it was dishonored. HELD: The issuance of the postdated check was not effective payment on the part of Marasigan and thus, the bank was justified in suspending temporarily his use of the credit card. A check is only a substitute for money and not money, and the delivery of such instrument doesn't itself operate as payment.

ROMAN CATHOLIC OF MALOLOS V. IAC 191 SCRA 411 FACTS: Petitioner was the owner of a parcel of land. It then entered into a contract of lease agreement with Robes-Fransisco Realty for the parcel of land. The agreement was that there would be downpayment plus installments with interest. Robes-Fransisco was then in default. Knowing that it was in its payment of the installments, it requested for the restructuring of the installment payments but was denied. It then asked for grace period to pay the same and tendered a check thereafter. Such was refused and the contract was cancelled.

HELD: A check whether a managers check or ordinary check is not legal tender and an offer of a check in payment of a debt is not valid tender of payment and may be refused receipt by the obligee or creditor. As this is the case, the subsequent consignation of the check didn't operate to discharge Robes-Fransisco from its obligation to petitioner.

ROMEO GARCIA VS. DIONISIO LLAMAS G.R. No. 154127. December 8, 2003 Facts: A complaint for sum of money was filed by respondent Dionisio Llamas against Petitioner Romeo Garcia and Eduardo de Jesus alleging that the two borrowed Php 400, 000 from him. They bound themselves jointly and severally to pay the loan on or before January 23, 1997 with a 15% interest per month. The loan remained unpaid despite repeated demands by respondent. Petitioner resisted the complaint alleging that he signed the promissory note merely as an accommodation party for de Jesus and the latter had already paid the loan by means of a check and that the issuance of the check and acceptance thereof novated or superseded the note. The trial court rendered a judgment on the pleadings in favor of the respondent and directed petitioner to pay jointly and severally respondent the amounts of Php 400, 000 representing the principal amount plus interest at 15% per month from January 23, 1997 until the same shall have been fully paid, less the amount of Php 120,000 representing interests already paid. The Court of Appeals ruled that no novation, express or implied, had taken place when respondent accepted the check from de Jesus. According to the CA, the check was issued precisely to pay for the loan that was covered by the promissory note jointly and severally undertaken by petitioner and de Jesus. Respondents acceptance of the check did not serve to make de Jesus the sole debtor because first, the obligation incurred by him and petitioner was joint and several; and second, the check which had been intended to extinguish the obligation bounced upon its presentment. Issues: (1) Whether or not there was novation of the obligation

assume the formers place in the relation. Well-settled is the rule that novation is never presumed. Consequently, that which arises from a purported change in the person of the debtor must be clear and express. It is thus incumbent on petitioner to show clearly and unequivocally that novation has indeed taken place. Note also that for novation to be valid and legal, the law requires that the creditor expressly consent to the substitution of a new debtor. In a solidary obligation, the creditor is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. It is up to the former to determine against whom to enforce collection. Having made himself jointly and severally liable with de Jesus, petitioner is therefore liable for the entire obligation. (2) By its terms, the note was made payable to a specific person rather than bearer to or ordera requisite for negotiability. Hence, petitioner cannot avail himself of the NILs provisions on the liabilities and defenses of an accommodation party. Besides, a non-negotiable note is merely a simple contract in writing and evidence of such intangible rights as may have been created by the assent of the parties. The promissory note is thus covered by the general provisions of the Civil Code, not by the NIL. Even granting that the NIL was applicable, still petitioner would be liable for the note. An accommodation party is liable for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an accommodation party. The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promissory debtor from the beginning. The liability is immediate and direct.

TRADERS ROYAL BANK V. CA 269 SCRA 15 FACTS: Filriters through a Detached Agreement transferred ownership to Philfinance a Central Bank Certificate of Indebtedness. It was only through one of its officers by which the CBCI was conveyed without authorization from the company. Petitioner and Philfinance later entered into a Repurchase agreement, on which petitioner bought the CBCI from Philfinance. The latter agreed to repurchase the CBCI but failed to do so. When the petitioner tried to have it registered in its name in the CB, the latter didn't want to recognize the transfer. HELD: The CBCI is not a negotiable instrument. The instrument provides for a promise to pay the registered owner Filriters. Very clearly, the instrument was only payable to Filriters. It lacked the words of negotiability which should have served as an expression of the consent that the instrument may be transferred by negotiation. The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchstone relating to the protection of

(2) Whether or not the defense that petitioner was only an accommodation party had any basis. Held: For novation to take place, the following requisites must concur: (1) There must be a previous valid obligation; (2) the parties concerned must agree to a new contract; (3) the old contract must be extinguished; and (4) there must be a valid new contract. The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance of the check or that the check would take the place of the note. There is no incompatibility between the promissory note and the check. Neither could the payment of interests, which in petitioners view also constitutes novation, change the terms and conditions of the obligation. Such payment was already provided for in the promissory note and, like the check, was totally in accord with the terms thereof. Also unmeritorious is petitioners argument that the obligation was novated by the substitution of debtors. In order to change the person of the debtor, the old must be expressly released from the obligation, and the third person or new debtor must

holders in due course, and the freedom of negotiability is the foundation for the protection, which the law throws around a holder in due course. This freedom in negotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a sum of money to a specified person or entity for a period of time. The transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the negotiable instruments law. The pertinent question then iswas the transfer of the CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the CBCI registered in its name with the Central Bank? Clearly shown in the record is the fact that Philfinances title over CBCI is defective since it acquired the instrument from Filriters fictitiously. Although the deed of assignment stated that the transfer was for value received, there was really no consideration involved. What happened was Philfinance merely borrowed CBCI from Filriters, a sister corporation. Thus, for lack of any consideration, the assignment made is a complete nullity. Furthermore, the transfer wasn't in conformity with the regulations set by the CB. Giving more credence to rule that there was no valid transfer or assignment to petitioner.