Defenses:

GR. NO. 107508

PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS
April 25, 1996
FACTS:
Ministry of Education Culture issued a check payable to Abante Marketing and drawn against Philippine National Bank
(PNB). Abante Marketing, deposited the questioned check in its savings account with Capitol City Development Bank
(CAPITOL). In turn, Capitol deposited the same in its account with the Philippine Bank of Communications (PBCom)
which, in turn, sent the check to PNB for clearing. PNB cleared the check as good and thereafter, PBCom credited Capitol's
account for the amount stated in the check. However, PNB returned the check to PBCom and debited PBCom's account for
the amount covered by the check, the reason being that there was a "material alteration" of the check number. PBCom, as
collecting agent of Capitol, then proceeded to debit the latter's account for the same amount, and subsequently, sent the
check back to petitioner. PNB, however, returned the check to PBCom. On the other hand, Capitol could not in turn, debit
Abante Marketing's account since the latter had already withdrawn the amount of the check. Capitol sought clarification
from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an explanation and recrediting from PNB. Since the demands of Capitol were not heeded, it filed a civil suit against PBCom which in turn, filed a
third-party complaint against PNB for reimbursement/indemnity with respect to the claims of Capitol. PNB, on its part, filed
a fourth-party complaint against Abante Marketing.
The Trial Court rendered its decision, ordering PBCom to re-credit or reimburse; PNB to reimburse and indemnify PBCom
for whatever amount PBCom pays to Capitol; Abante Marketing to reimburse and indemnify PNB for whatever amount
PNB pays to PBCom. The court dismissed the counterclaims of PBCom and PNB. The appellate court modified the
appealed judgment by ordering PNB to honor the check. After the check shall have been honored by PNB, the court ordered
PBCom to re-credit Capitol's account with it the amount. PNB filed the petition for review on certiorari averring that under
Section 125 of the NIL, any change that alters the effect of the instrument is a material alteration.
ISSUE:
WON an alteration of the serial number of a check is a material alteration under the NIL.
HELD:
NO, alteration of a serial number of a check is not a material alteration contemplated under Sec. 125 of the NIL.
RATIO:
An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument
that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other
change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which
changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law.
In the present case what was altered is the serial number of the check in question, an item which is not an essential requisite
for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the
relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same.
The sum of money due to the payee remained the same. The check's serial number is not the sole indication of its origin.
The name of the government agency which issued the subject check was prominently printed therein. The check's issuer was
therefore insufficiently identified, rendering the referral to the serial number redundant and inconsequential.
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G.R. No. 92244
Gempesaw v. Court of Appeals
February 9, 1993
FACTS:
Petitioner argues that respondent drawee Bank should not have honored the checks because they were crossed checks.
ISSUE:
Whether or not the issuance of crossed checks is restrictive indorsement.
RULING:

NO. They are not the same. In restrictive indorsement, the prohibition to transfer or negotiate must be written in express
words at the back of the instrument, so that any subsequent party may be forewarned that ceases to be negotiable. Crossed
checks, on the other hand, is done by drawing two parallel lines across the face of the check to mean that it cannot be
presented for payment in cash, but can only be deposited in payees account. Crossing of checks do not ipso facto cause the
cessation of its negotiable character.
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GR No 139130
Ilusorio vs CA
Nov 27, 2004
Facts:
The petitioner maintains a current account with Manila Banking Corp. He entrusts his checkbook and credit cards to his
secretary. During the period 1980-81. His secretary was able to encash a total of 17 checks drawn against Manila Banking
Corp. Ilusorio discovered these checks upon examination of his bank statements forwarded by the bank. And upon
investigation, it was found out that his signatures was forged by his secretary on those 17 checks. Ilusorio demanded the
return of amount by the drawee bank. The drawee bank contended negligence on the part of the petitioner.
Issue:
Who should suffer the loss?
Held:
The SC held that Ilusorio was negligent. While it may be true that the signature of Ilusorio was forged by his secretary and
that he did not authorized the encashment of these checks (claiming real defense of forgery on his part), Ilusorios previous
conduct effectively precluded him from claiming forgery as a defense. The mere fact that these checks have been encashed
for a period of almost two years, the petitioner should have detected the forgery. Further, the unusual degree of trust which
he had accorded his secretary, such as unrestricted access to his credit cards an checkbooks amounts to negligence on his
part and the proximate loss of his funds is attributable to this unusual degree of trust and confidence which he reposed to his
secretary.
Therefore:
General Rule drawee bank bears the loss because of Sec 62 of NIL.
Exception Ilusorio case (negligence on the part of the drawer)
Addendum:
Question:
1. How about if it is the signature of the endorser which is forged? Is the drawee bank still liable?
2. How about if the drawee bank has already paid the holder when it discovered the forged endorsement of the payee? Who
bears the loss?
Answer:
No. The drawee bank should not be made liable. The collecting bank or last endorser generally suffers the loss because it
has the duty to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for
payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness
of the indorsements.
As between the drawer and the drawee bank, the drawee bank should bear the loss. The drawee bank shall have recourse
against the collecting bank because such collecting bank guarantees that all prior endorsements are genuine. The collecting
bank then can go against the forger.
In cases involving a forged check, where the drawers is forged, drawer can recover from the drawee bank. No drawee bank
has a right to pay a forged check. If it does, it shall have to recredit the amount of check to the account of the drawer. The
liability chain ends with drawee bank whose responsibility it is to know the drawers signature since the latter is its
customer. (Associated Bank vs CA, 252 SCRA 620).
The endorser is liable on the instrument although the signature of the payee is forged because the endorser by his
endorsement guaranteed that the instrument is genuine, therefore, impliedly, that the instrument is valid, otherwise, there
would be nothing for the endorser to guarantee. (Republic vs Ebrada 65 SCRA 680).
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G.R. No. L-40796

Republic Bank v. Ebrada
July 31, 1975
FACTS:
Treasury of the Philippines issued a check payable to MARTIN LORENZO who was already dead that time. Signature
forged, the check was indorsed to RAMON LORENZO, then to DELIA DOMINGUEZ, then to appellant, where it was
encashed with the plaintiff-appellee drawee bank.
ISSUE:
Whether or not the drawee bank can recover from the one who encashed a check with forged signature of payee.
RULING
YES. Defendant-appellant, upon receiving the check in question from Dominguez, was duty-bound to ascertain whether the
check in question was genuine before presenting it to plaintiff Bank for payment. Her failure to do so makes her liable for
the loss and the plaintiff Bank may recover from her the money she received for the check. As reasoned out above, had she
performed the duty of ascertaining the genuineness of the check, in all probability the forgery would have been detected and
the fraud defeated.
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Enforcement of Liability
G.R. No. 117857
LUIS WONG vs. CA
February 2, 2001
FACTS:
Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of calendars. However, petitioner had a history of
unremitted collections. Hence, petitioners customers were required to issue postdated checks before LPI would accept their
purchase orders.
In early December 1985, Wong issued 6 postdated checks totaling P18,025, all dated December 30, 1985 and drawn payable
to the order of LPI. The checks were drawn against Allied Banking Corporation.
The checks were initially intended to guarantee the calendar orders of customers who failed to issue post-dated checks.
However, following company policy, LPI refused to accept the checks as guarantees. Instead, the parties agreed to apply the
checks to the payment of petitioners unremitted collections for 1984 amounting to P18,077.07. LPI waived the P52.07
difference.
Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and promised to replace them
within 30 days. However, petitioner reneged on his promise. Hence, on June 5, 1986, LPI deposited the checks with Rizal
Commercial Banking Corporation (RCBC). The checks were returned for the reason account closed.
On June 20, 1986, complainant notified the petitioner of the dishonor. However, petitioner failed to make arrangements for
payment within 5 banking days.
On November 6, 1987, petitioner was charged with 3 counts of violation of B.P. Blg. 22 under 3 separate Informations for
the 3 checks amounting to P5,500.00, P3,375.00, and P6,410.00.
Petitioner was similarly charged in Criminal Case No. 12057 for ABC Check No. 660143463 in the amount of P3,375.00,
and in Criminal Case No. 12058 for ABC Check No. 660143464 for P6,410.00. Both cases were raffled to the same trial
court.
The version of the defense is that petitioner issued the 6 checks to guarantee the 1985 calendar bookings of his customers,
not as payment for any obligation. In fact, the face value of the 6 postdated checks tallied with the total amount of the
calendar orders of the 6 customers of the accused. Although these customers had already paid their respective orders,
petitioner claimed LPI did not return the said checks to him.
On August 30, 1990, the trial court found petitioner guilty beyond reasonable doubt with 3 counts of Violations of Sec.1 of
B.P. Blg. 22.

Petitioner appealed his conviction to the CA. However, it affirmed the trial courts decision in toto on October 28, 1994.
ISSUES:
1. Whether the checks were issued merely as guarantee or for payment of petitioners unremitted collections.
2. WON the prosecution was able to establish beyond reasonable doubt all the elements of the offense penalized under B.P.
Blg. 22.
3. WON petitioners penalty may be modified to only payment of fine.
HELD:
1.This is a factual issue involving as it does the credibility of witnesses. Said factual issue has been settled by the trial court
and CA. Its findings of fact are generally conclusive, and there is no cogent reason to depart from such. In cases elevated
from the CA, the SCs review is confined to alleged errors of law. Absent any showing that the findings by the respondent
court are entirely devoid of any substantiation on record, the same must stand. The lack of accounting between the parties is
not the issue in this case. As repeatedly held, the SC is not a trier of facts.
2. There are 2 ways of violating B.P. Blg. 22:
(a) by making or drawing and issuing a check to apply on account or for value knowing at the time of issue that the check is
not sufficiently funded; and
(b) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds
therein, or credit with, said bank to cover the full amount of the check when presented to the drawee bank within a period of
90 days.
The elements of B.P. Blg. 22 under the 1st situation, pertinent to the present case, are:
(a) The making, drawing & issuance of any check to apply for account or for value;
(b) The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with
the drawee bank for the payment of such check in full upon its presentment; and
(c) The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same
reason had not the drawer, without any valid cause, ordered the bank to stop payment.
As to the 1st element, the RTC & CA have both ruled that the checks were in payment for unremitted collections, and not as
guarantee. What B.P. Blg. 22 punishes is the issuance of a bouncing check, and not the purpose for which it was issued nor
the terms and conditions relating to its issuance.
As to the 2nd element, B.P. Blg. 22 creates a presumption juris tantum that the 2nd element prima facie exists when the 1st
& 3rd elements of the offense are present. Thus, the makers knowledge is presumed from the dishonor of the check for
insufficiency of funds.
An essential element of the offense is knowledge on the part of the maker/drawer of the check of the insufficiency of his
funds in, or credit with, the bank to cover the check upon its presentment. Since this involves a state of mind difficult to
establish, the statute itself creates a prima facie presumption of such knowledge where payment of the check is refused by
the drawee because of insufficient funds in, or credit with, such bank when presented within 90 days from the date of the
check. The statute provides that such presumption shall not arise if within 5 banking days from receipt of the notice of
dishonor, the maker/drawer makes arrangements for payment of the check by the bank or pays the holder the amount of the
check.
Nowhere in the said provision does the law require a maker to maintain funds in his bank account for only 90 days. Rather,
the clear import of the law is to establish a prima facie presumption of knowledge of such insufficiency of funds under the
following conditions: (1) presentment within 90 days from date of the check, and (2) the dishonor of the check & failure of
the maker to make arrangements for payment in full within 5 banking days after notice thereof. That the check must be
deposited within 90 days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to
arise. It is not an element of the offense. Neither does it discharge petitioner from his duty to maintain sufficient funds in the
account within a reasonable time thereof. Under Sec. 186 of the Negotiable Instruments Law, a check must be presented
for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of
the loss caused by the delay. By current banking practice, a check becomes stale after more than 6 months (180 days).
Private respondent herein deposited the checks 157 days after the date of the check. Hence said checks cannot be considered
stale. Only the presumption of knowledge of insufficiency of funds was lost, but such knowledge could still be proven by
direct or circumstantial evidence. As found by the RTC, private respondent did not deposit the checks because of the

reassurance of petitioner that he would issue new checks. Upon his failure to do so, LPI was constrained to deposit the said
checks. After the checks were dishonored, petitioner was duly notified of such fact but failed to make arrangements for full
payment within 5 banking days thereof. There is, on record, sufficient evidence that petitioner had knowledge of the
insufficiency of his funds in or credit with the drawee bank at the time of issuance of the checks. And despite petitioners
insistent plea of innocence, the respondent court is not in error for affirming his conviction by the trial court for violations
of the Bouncing Checks Law.
3. Pursuant to the policy guidelines in Administrative Circular No. 12-2000, which took effect on November 21, 2000, the
penalty imposed on petitioner should now be modified to a fine of not less than but not more than double the amount of the
checks that were dishonored. The penalty imposed on him is modified so that the sentence of imprisonment is deleted.
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GR 141968
The International Corporate Bank (now Union Bnak of the Philippines) vs. Spouses Gueco
12 February 2001
Facts:
Spouses Francis S. Gueco and Ma. Luz E. Gueco obtained a loan from petitioner International Corporate Bank (now Union
Bank of the Philippines) to purchase a car a Nissan Sentra 1600 4DR, 1989 Model. In consideration thereof, the Spouses
executed promissory notes which were payable in monthly installments and chattel mortgage over the car to serve as
security for the notes. The Spouses defaulted in payment of installments. Consequently, the Bank filed on 7 August 1995 a
civil action (Civil Case 658-95) for "Sum of Money with Prayer for a Writ of Replevin" before the Metropolitan Trial Court
of Pasay City, Branch 45. On 25 August 1995, Dr. Francis Gueco was served summons and was fetched by the sheriff and
representative of the bank for a meeting in the bank premises. Desi Tomas, the Bank's Assistant Vice President demanded
payment of the amount of P184,000.00 which represents the unpaid balance for the car loan. After some negotiations and
computation, the amount was lowered to P154,000.00, However, as a result of the non-payment of the reduced amount on
that date, the car was detained inside the bank's compound. On 28 August 1995, Dr. Gueco went to the bank and talked with
its Administrative Support Auto Loans/Credit Card Collection Head, Jefferson Rivera. The negotiations resulted in the
further reduction of the outstanding loan to P150,000.00. On 29 August 1995, Dr. Gueco delivered a manager's check in the
amount of P150,000.00 but the car was not released because of his refusal to sign the Joint Motion to Dismiss. It is the
contention of the Gueco spouses and their counsel that Dr. Gueco need not sign the motion for joint dismissal considering
that they had not yet filed their Answer. the Bank, however, insisted that the joint motion to dismiss is standard operating
procedure in their bank to effect a compromise and to preclude future filing of claims, counterclaims or suits for damages.
After several demand letters and meetings with ban representatives, the Gueco spouses initiated a civil action for damages
before the Metropolitan Trial Court of Quezon City, Branch 33. The Metropolitan Trial Court dismissed the complaint for
lack of merit. On appeal to the Regional Trial Court, Branch 227 of Quezon City, the decision of the Metropolitan Trial
Court was reversed. In its decision, the RTC held that there was a meeting of the minds between the parties as to the
reduction of the amount of indebtedness and the release of the car but said agreement did not include the signing of the joint
motion to dismiss as a condition sine qua non for the effectivity of the compromise. The court further ordered the bank to
return immediately the subject car to the spouses in good working condition; and to pay the spouses the sum of P50,000.00
as moral damages; P25,000.00 as exemplary damages, and P25,000.00 as attorney's fees, and to pay the cost of suit. In other
respect, the court affirmed the decision of the Metropolitan Trial Court Branch 33. The case was elevated to the Court of
Appeals, which on 17 February 2000, issued the decision, denying the petition for review on certiorari and affirming the
Decision of the RTC of Quezon City, Branch 227, in Civil Case Q-97-31176, in toto; with costs against the bank. The bank
filed the petition for review on certiorari with the Supreme Court.
(Short facts: In the meeting of 29 August 1995, Dr. Gueco delivered a manager's check representing the reduced amount of
P150,000.00. Said check was given to Mr. Rivera, a representative of the bank However, since Dr. Gueco refused to sign the
joint motion to dismiss, he was made to execute a statement to the effect that he was withholding the payment of the check.
Subsequently, in a letter addressed to Ms. Desi Tomas, vice president of the bank, dated 4 September 1995, Dr. Gueco
instructed the bank to disregard the "hold order" letter and demanded the immediate release of his car, to which the former
replied that the condition of signing the joint motion to dismiss must be satisfied and that they had kept the check which
could be claimed by Dr. Gueco anytime. While there is controversy as to whether the document evidencing the order to hold
payment of the check was formally offered as evidence by the bank, it appears from the pleadings that said check has not
been encashed.)
Issue:
Whether the bank was negligent in opting not to deposit or use the managers check.

Held:
NO. A stale check is one which has not been presented for payment within a reasonable time after its issue. It is valueless
and, therefore, should not be paid. Under the negotiable instruments law, an instrument not payable on demand must be
presented for payment on the day it falls due. When the instrument is payable on demand, presentment must be made within
a reasonable time after its issue. In the case of a bill of exchange, presentment is sufficient if made within a reasonable time
after the last negotiation thereof. A check must be presented for payment within a reasonable time after its issue, and in
determining what is a "reasonable time," regard is to be had to the nature of the instrument, the usage of trade or business
with respect to such instruments, and the facts of the particular case. The test is whether the payee employed such
diligence as a prudent man exercises in his own affairs. This is because the nature and theory behind the use of a check
points to its immediate use and payability. In a case, a check payable on demand which was long overdue by about two and
a half (2-1/2) years was considered a stale check. Failure of a payee to encash a check for more than 10 years undoubtedly
resulted in the check becoming stale. Thus, even a delay of 1 week or two (2) days, under the specific circumstances of the
certain cases constituted unreasonable time as a matter of law. Herein, the check involved is not an ordinary bill of exchange
but a manager's check. A manager's check is one drawn by the bank's manager upon the bank itself. It is similar to a
cashier's check both as to effect and use. A cashier's check is a check of the bank's cashier on his own or another check. In
effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its
issuance. It is really the bank's own check and may be treated as a promissory note with the bank as a maker. The check
becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. The
mere issuance of it is considered an acceptance thereof. If treated as promissory note, the drawer would be the maker and in
which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance. Even
assuming that presentment is needed, failure to present for payment within a reasonable time will result to the discharge of
the drawer only to the extent of the loss caused by the delay. Failure to present on time, thus, does not totally wipe out all
liability. In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the check. In this case,
the Gueco spouses have not alleged, much less shown that they or the bank which issued the manager's check has suffered
damage or loss caused by the delay or non-presentment. Definitely, the original obligation to pay certainly has not been
erased. It has been held that, if the check had become stale, it becomes imperative that the circumstances that caused its
non-presentment be determined. Herein, the bank held on the check and refused to encash the same because of the
controversy surrounding the signing of the joint motion to dismiss. The Court saw no bad faith or negligence in this position
taken by the Bank.
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G.R. No. 142641
PACIFICO B. ARCEO, JR vs. PEOPLE OF THE PHILIPPINES
July 17, 2006
FACTS:
Pacifico Arceo obtained a loan from Josefino Cenizal. He then issued a check in favor of Cenizal, in which he promised
verbally seven times that he would replace it with cash. After not replacing the check, he encashed the check but was
dishonored due to insufficient funds.
Cenizal went to Arceo's house to inform him of the dishonor but he was not around anymore so he went to Arceo's lawyer
and gave him a letter giving him three days to pay the check. When Arceo failed, Cenizal charged him in violation of BP 22.
The lower court found him guilty.
Arceo contends that he should not be held liable because it was presented beyond the 90-day period provided under the law;
that he only given three days to pay and not five banking days as per law; and that he paid his obligation.
ISSUE:
Whether Arceo is guilty.
RULING:
The SC denied Arceo's petition. The SC held that the life of a check is six months. Cenizal presented the check within four
months of issuance. The 90-day period in the law is not an element of the offense. Arceo cannot claim that he was not given
five banking days (the rule is three), because he still remained unpaid after five days of his receipt of dishonor. Lastly, his
claim that he paid the obligation was only mere allegation as there was no proof of his payment and that the check still
remained on Arceo.
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G.R. No. 125851

Allied Banking Corporation vs.Court of Appeals
July 11, 2006
Doctrine:
There are well-defined distinctions between the contract of an endorser and that of a guaranty/surety of a commercial paper.
The contract of endorsement is primarily that of transfer, while the contract of guaranty is that of personal security. The
liability of an endorser is not as broad as that of a guarantor or surety.
Facts:
Petitioner purchased a letter of credit from respondent G.G. Sportswear Mfg. Corporation. The export bill was issued by
Chekiang First Bank Ltd., Hongkong. With the purchase of the bill, ALLIED credited GGS the peso equivalent of the
aforementioned bill. On the same date, respondents executed their respective Letters of Guaranty, holding themselves liable
on the export bill if it should be dishonored or retired by the drawee for any reason. When ALLIED negotiated the export
bill to Chekiang, payment was refused due to some material discrepancies in the documents submitted by GGS relative to
the exportation covered by the letter of credit. Consequently,ALLIED demanded payment from all the respondents based on
the Letters of Guaranty and Surety executed in favor of ALLIED. However, respondents refused to pay, prompting ALLIED
to file an action for a sum of money. Respondents claim that the petitioner did not protest upon dishonor of the export bill
by Chekiang First Bank, Ltd. According to respondents, since there was no protest made upon dishonor of the export bill, all
of them, as indorsers were discharged under Section 152 of the Negotiable Instruments Law.
Issue:
Whether or not protest upon dishonor is necessary on a guarantor of a commercial paper.
Held:
No, Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by respondents, is not pertinent to this
case. There are well-defined distinctions between the contract of an indorser and that of a guarantor/surety of a commercial
paper, which is what is involved in this case. The contract of indorsement is primarily that of transfer, while the contract of
guaranty is that of personal security. The liability of a guarantor/surety is broader than that of an indorser. Unless the bill is
promptly presented for payment at maturity and due notice of dishonor given to the indorser within a reasonable time, he
will be discharged from liability thereon. On the other hand, except where required by the provisions of the contract of
suretyship, a demand or notice of default is not required to fix the suretys liability. Hence, respondents are liable and protest
upon dishonor is not necessary.
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Checks:

G.R. No. 93048

Bataan Cigar and Cigarette Factory, Inc. v. Court of Appeals
March 3, 1994
FACTS:
Petitioner BCCFI issued crossed checks to George King in consideration of tobacco bales, which the latter sold to
respondent SIHI in a discounted price. George King failed to deliver the consideration. BCCFI ordered to stop payment.
SIHI failed to encash the crossed checks.
ISSUE:
Whether or not respondent SIHI here have shown legal absence of good faith.
RULING:
YES. In failing to inquire about crossed checks, the holder SIHI is declared guilty of gross negligence amounting to legal
absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law, and as such the consensus of authority is to
the effect that the holder of the check is not a holder in due course.
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G.R. No. 148211
SINCERE Z. VILLANUEVA v. MARLYN P. NITE

July 25, 2006

FACTS:
Marlyn Nite took out a loan of P409,000 from Sincere Villanueva. Nite issued an Asian Bank Corporation (ABC) check
worth P325,500. The check was dishonored due to material alteration. Then, throughNite's representative, she remitted
P235,000 to Villanueva as partial payment. The other balance was to be paid on a much later date.
A few days later, Villanueva filed an action for a sum of money and damages against ABC for the full amount of the
dishonored check. The RTC ruled in his favor but when Nite was to withdraw money from her account, she was unable to
do so because the RTC had ordered ABC to pay Villanueva the P325,000 check.
ABC then remitted to the sheriff the check which Villanueva received. Nite filed a petition to seek to annul the RTC's
decision. The CA held in favor Nite and was ordered to pay Nite a sum of money for extrinsic fraud.
ISSUE:
Whether the receipt of the check was legal.
RULING:
The SC ruled in favor of Nite and that Villanueva was fraudulent. The SC pointed out Villanueva's action of having to file
his complaint against the bank days after he received the P235,000 payment. By filing a complaint against the bank and Nite
not impleaded within, it show his intent to prevent her from opposing his action.
Still, the RTC decision was to be annulled becasue as the NIL provides, the drawee cannot be held liable unless he accepts
the check. There was no privity between ABC and Villanueva.
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GR# 156207
Equitable PCI vs Ong
September 15, 2006
FACTS:
Warliza Sarande deposited in her account at Philippine Commercial International (PCI) Bank a PCI Bank TCBT Check of
P225K.
December 5 1991: Upon inquiry by Serande at PCI Bank on whether the TCBT Check had been cleared, she received an
affirmative answer.
Relying on this assurance, she issued 2 checks drawn against the proceeds of TCBT Check.
PCI Bank Check No. 073661 dated 5 December 1991 for P132K which Sarande issued to respondent Rowena Ong owing
to a business transaction.
On the same day, Ong presented to PCI Bank requesting PCI Bank to convert the proceeds into a manager's check, which
the PCI Bank obliged.
December 6 1991: Ong deposited PCI Bank Manager's Check in her account with Equitable Banking Corporation
December 9 1991: she received a check return-slip informing her that PCI Bank had stopped the payment of the check on
the ground of irregular issuance.
Despite several demands made, it was refused
Ong was constrained to file a Complaint for sum of money, damages and attorney's fees against PCI Bank
CA affirmed RTC: favored Ong
ISSUE: W/N Ong can hold PCI liable
HELD: YES. Petition is DENIED. CA affirmed.
By admitting it committed an error, clearing the check of Sarande and issuing in favor of Ong not just any check but a
manager's check for that matter, PCI Bank's liability is fixed
certification = acceptance,
Equitable PCI as drawee bank is bound on the instrument upon certification and it is immaterial to such liability in favor of
Ong who is a holder in due course whether the drawer (Warliza Sarande) had funds or not with the Equitable PCI Bank
No unjust enrichment


SECTION 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument
under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice it had been previously dishonored, if such was
the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the
person negotiating it.
The same law provides further:
Sec. 24.Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a
valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.
Sec. 26. What constitutes holder for value. Where value has at any time been given for the instrument, the holder is
deemed a holder for value in respect to all parties who become such prior to that time.
Sec. 28. Effect of want of consideration. Absence or failure of consideration is a matter of defense as against any person
not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained
and liquidated amount or otherwise.
Manager's check
an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its
issuance
regarded substantially to be as good as the money it represents
same footing as a certified check
The object of certifying a check, as regards both parties, is to enable the holder to use it as money.
Check operates as an assignment of a part of the funds to the creditors
Sec. 187. Certification of check; effect of. Where a check is certified by the bank on which it is drawn, the certification is
equivalent to an acceptance
Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his account
Sec. 62. Liability of acceptor. The acceptor by accepting the instruments engages that he will pay it according to the tenor
of his acceptance; and admits
(a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.