Professional Documents
Culture Documents
COURT OF APPEALS
319 SCRA 595
Sec. 12 13 / 186
FACTS:
Spouses Pacheco were in the construction business. Due to the delay in
payment of receivables from DPWH they were constrained to obtain loans
from Mrs. Vicencio who owns a pawnshop and whose husband was a
former Judge. The Spouses Pacheco loaned a total of P85,000 from Mrs.
Vicencio. As a condition for the loan, Mrs. Vicencio required the Spouses
Pacheco to issue an undated check every time they contracted a loan
assuring the Pachecos that the check are merely evidence of their
indebtedness and will not be presented to the bank for payment since the
bank account of the Pachecos no longer had funds.
Of the P85,000 loaned, the Pachecos were able to settle P70,000. When
the remaining balance of P15,000 became due and demandable the
Pachecos were not able to pay. Mrs. Vicencio, her husband and daughter
asked the Pachecos to place a date of Aug. 15, 1992 on two of the six
undated checks. Despite being informed by the Pachecos that their RCBC
account was already closed in Aug. 17, 1989 Mrs. Vicencio insisted on the
dating of the check and again assuring the Pachecos that the checks will
not be presented to the bank and will only serve as evidence of their
indebtedness. The Pachecos placed the date on the checks fearing that
they would not be able to obtain loans in the future from Mrs. Vicencio if
they did not comply with the request.
On Aug. 29, 1992 the Pachecos received a demand letter informing them
that the two dated checks were presented for payment and were
dishonored due to the closing of the account. A complaint was then filed by
Mrs. Vicencios husband against the Pachecos and two informations for
estafa were filed against them.
The informations alleged that the dishonored checks were issued in
payment of a diamond ring.
ISSUE:
W/N the Spouses Pacheco are guilty of estafa
RULING:
Estafa may be committed in several ways, one of which is by postdating a
check or issuing a check in payment of an obligation when the offender has
no funds in the bank or his funds deposited are not sufficient to cover the
amount of the check. The failure of the drawer of the check to deposit the
amount necessary to cover the check within 3 days from receipt of notice
from the bank and/or the payee or holder that the check is dishonored
shall be prima facie evidence of deceit constituting a fraudulent act.
Elements of Estafa
1. that the offender postdated or issued a check in payment of an
obligation contracted at the time the check was issued
2. that such postdating or issuing a check was done when the
offender had no funds in the bank, or his funds deposited therein
were not sufficient to cover the amount of the check
3. deceit or damage to the payee
In this case the first and third elements are not present. A check has the
character of negotiability and at the same time constitutes an evidence of
indebtedness.
By mutual agreement of parties the negotiable character of the check may
be waived which is exactly what happened in this case. Hence there
cannot be deceit on the part of the Pachecos because there was an
agreement with Mrs. Vicencio at the time of the issuance of the checks that
the same will not be encashed or presented to the banks. The checks
therefore became mere evidence of indebtedness. It has been ruled that a
drawer who issues a check as security or evidence of investment is not
liable for estafa.
Also, Mrs. Vicencio was informed that the Spouses Pacheco no longer had
funds with RCBC when the checks were issued and that when she asked for
the postdating of the checks in 1992 she was also made aware that the
account was closed as early as 1989.
Knowledge of 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.
Also, the checks were not presented within reasonable time from issue.
The current banking practice is that a check becomes stale after more than
6 months. In this case, the checks were issued more than 3 years prior to
their presentment. There were a total of 6 check issued, but only 2
presented for payment, this fact shows that the 2 checks were chosen to
cover the remaining balance of the loan and that the checks were not to be
modes of payment but mere promissory notes.
The argument that the checks were issued as payment for jewelry
purchased in 1992 is also untenable since as mentioned earlier the RCBC
account was closed as early as 1989. The Pachecos, however, remain liable
for the amount of P15,000.
P 1 of 51
REPUBLIC BANK v. CA
196 SCRA 100
Sec. 124 and 125
FACTS:
Cancelled check went the regular route of the regular routine and it
was returned to PLDT when the alteration was discovered
Peoples Bank was notified of the alteration on the same day; HSBC
requested Peoples Bank to refund the amount. Peoples Bank
refused
FACTS:
ISSUE:
Whatever remedy the HSBC has would lie not against the Peoples
Bank but against the party responsible for changing the name of
the payee.
Republic also said that it was not guilty of negligence and that it
was SMCs fault in drawing the check in such a way as to permit
the insertion of numerals increasing the amount.
Private Respondents Contentions (FNCB):
3.
4.
NATURE:
An appeal from the decision of the Auditor General who disallowed the
claim of Banco Atlantico against the Philippine Embassy in Spain
FACTS:
The case involves three checks all issued by the Philippine Embassy with
Luis Gonzales (ambassador) and Virginia Boncan (finance officer) as
signatories and all paid by Banco Atlantico to Boncan.
1.
2.
3.
Banco Atlantico presented the check to PNB for payment. PNB dishonored
the check on the ground that the Philippine Embassy, the drawer, had
ordered the payments stopped. It then sent notices of protests to the
Philippine Embassy and Boncan who both refused to pay the value of the
checks. Banco Atlantico filed the corresponding money claim with the
Auditor General. The Auditor General denied the claim and concurred with
the views of Luis Gonzales, the ambassador that:
1.
2.
The Embassy did not have an account with Banco Atlantico. Only
the embassys employee Virginia Boncan did.
That the 3 checks were not honored and paid out to Boncan in the
ordinary course of its banking transactions. Boncan had special
personal relations with the banks employees and enjoyed a
preferential treatment.
The $10K and $35K checks were materially altered. They were
originally only $109 and $75 respectively. While the $90K check
was a demand note and Boncan requested that it not be presented
to the drawee bank until a later date. The fact that Boncan did not
want the check to be presented for collection was proof of the
glaring infirmity of the instrument. Yet the bank took the check and
paid the amount to Boncan.
Bank is not a holder in due course. The conditions set in Sec. 52 for
it to be a holder in due course are not present.
HELD:
The petitioner asked the court to rule on two issues:
1. If there was forgery according to Sec. 23 which bars it from
collecting from the Philippine Embassy
2. Do the payment of the checks without clearing them with the
drawee bank constitute actual notice of defective title in the
indorser or an assumption of risk by the petitioner as to defeat its
claim?
The court ruled that Banco Atlantico paid the checks contrary to normal or
ordinary banking practice. The large amounts and the fact that the drawee
bank was a foreign bank should have been a red flag that required prior
clearance. It is also apparent that Boncan altered the amounts of the check
and that it was because of her special relations with the bank that the
latter encashed the checks without clearing them first.
Therefore, the Philippine Embassy as drawer of the checks cannot be held
liable for the amounts. The material alterations made by Boncan made the
checks wholly inoperative. No right of payment thereof against any party
thereto could have been acquired.
AMERICAN BANK V. MACONDRAY
4 Phil. 695
Sec. 124 and 125
FACTS:
V.S. Wolff Drawer
Macondray & Co. - Indorser
- (magulo un facts sorry basta sure ako sa nakasulat sa taas)
$300.00
At sight pay to my order 300$, value received, charge to my account
V.S. Wolff
To F.H. Taylor
V.S. Wolff. The signature is ok. Payment guaranteed. Protest,
demand, and notice of nonpayment waived. Macondray & Company.
P 3 of 51
ISSUE:
W/N MACONDRAY is liable upon said bill of exchange as an indorser
If indorsement was made by Macondray in the form alleged by the
BANK, then MACONDRAY is clearly liable
RULING:
MACONDRAY is not liable
Payment guaranteed. Protest, demand, and notice of
nonpayment waived. was added by some person after the
signature of the defendant was affixed
The liability of an indorser of a bill of exchange after due protest
and notice of nonpayment and dishonor, is the same as that of
original obligors on such a contract, any material alteration in
the terms of the contract by the holder of the same,
without the consent of the obligor, will RELIEVE obligor
from all liability
There was a material alteration in this case and the original
indorsement created no liability on the part of MACONDRAY
The orig indorsement was only for the purpose of assuring the
BANK that the signature of VS Wolff was genuine (that it was in fact
VS Wolff who signed the bill of exchange); it was an indorsement
for the identification of the person only and not for the purpose of
incurring liability
PNB v. CA
88 Phil. 178
Sec. 124 and 125
DECS issued a check with serial no. 7-3666-223-3, dated Aug. 1981
in the amount of P97,650
It was payable to F. Abante marketing and drawn against PNB
Drawee DECS
Drawee Bank PNB
Payee F. Abante
- On Aug. 11, 1981, Abante, deposited the check in its savings account
with Capitol bank
- Capitol, on the other hand, deposited the same in its account with
PBCOM
- PBCOM, in turn, sent it to PNB for clearing
- PNB cleared the check as good; PBCOM then credited Capitols
account with the amount of the check
- On Oct 19, 1981, PNB returned the check to PBCOM and debited its
account for the reason that there was a material alteration in the
check number
- PBCOM then debited Capitols account; however, Capitol could not
debit Abantes account since the latter had already withdrawn the
amount of the check as early as Oct 15 (4 days before)
- PNBS main contention is that there was a material alteration in the
check (serial no.) and that the TCAA check (a medium of exchange of
governments) through its serial number is determined to have been issued
by a particular office of the gov.
ISSUE:
1) w/n the change of the serial no. of the check was a material alteration
2) w/n the certification issued by Batonghinog (cashier of DECS) saying the
check was not issued by DECS should be given due course by the court
3) w/n the drawee bank may still recover the value of the check from the
collecting bank if it failed to return the check within the 24-hour clearing
period
RULING:
1)NO. An alteration is said to be material if it alters the effect of the
instrument or if it modifies the obligation of the parties.
serial number is not an essential requisite for negotiability
it did not change the relations of the parties
name of drawer and drawee was not altered
the contention that the serial no. determines the origin of the
check is erroneous since the issuer of the check is clearly printed
on its face MINISTRY OF EDUCATION AND CULTURE and below the
name of the payee are rubber-stamped wordsMinistry of Educ and
Culture
ownership of check is still clearly established
FACTS:
P 4 of 51
MONTINOLA V. PNB
88 SCRA 179
Sec. 124 / 32 / 52-59 / 186
NATURE:
3) Since there was no material alteration in the check, PNB has no right to
dishonor it and return it to PBCOM (no right to recover since the check was
in fact a negotiable instrument without any material alteration)
Ubaldo Laya is the Provincial Treasurer of Misamis Oriental and exofficio agent of PNB
Manzano Ramos is an assistant agent who through the
recommendation of Laya was inducted into the USAFFE as
disbursing officer of an army division
As disbursing officer Ramos went to Lanao to procure a cash
advance of P880K for USAFFE
The Treasurer of Lanao gave Ramos P300K in emergency notes
(which were being used prior to the occupation of Japan) and a
check for P500K
Ramos went to Misamis Oriental to encash the check. Laya did not
have enough cash to cover the checks so he gave Ramos P400K in
emergency notes and a check for P100K drawn on PNB
Ramos was not able to cash the check because he was imprisoned
by the Japanese. He was in prison until 1943, after which, he was
released and he resumed his status as a civilian.
Ramos allegedly indorsed the P100K check to Montinola in 1944.
Montinola now seeks to enforce payment of the said check against
PNB and the Provincial Treasurer of Misamis Oriental who issued
the check supposedly as agent of PNB.
According to Montinola, Ramos indorsed the check to him because
Ramos needed money to buy food and medicine. Montinola
allegedly went to the president of PNB in Manila to ensure that the
check was genuine and negotiable. Said president certified the
genuineness and negotiability of the check. After the examination,
Ramos and Montinola finally agreed to the sale of the check.
The indorsement of Ramos to Montinola now appear at the back of
the check, the words pay to the order of rubber stamped in violet
ink and placed one inch from the top of the check. The words are
followed by Enrique Montinola typewritten. The edges of the
check appear to have been burned. The signature M.V. Ramos in
green ink can also be found.
Ramos on the other hand claims that he was only selling P30K of
the check and for this reason he wrote the following at the back of
the check:
P 5 of 51
ISSUE:
W/N Montinola can claim payment from PNB
Sub-issue (on material alteration): W/N PNB is also the drawer of the check
HELD:
From SC inquiries it was found that: The check was issued by Laya in his
capacity as Provincial Treasurer of Misamis with PNB as drawee. Ramos
only sold 30,000 of the check to Montinola. The wirting made by Ramos at
the back of the check was an instruction to PNB to pay only P30,000 and to
deposit the remaining in Ramos account. At the time of the transfer of the
check from Ramos to Montinola the check which was payable on demand
was long overdue (by 2 and years)
No. Aside from the reason of the material alterations made by Montinola on
the check and the lack of authority of Ramos to negotiate or assign the
check in his personal capacity the following arguments were made by the
SC
The check was not legally negotiated within the meaning of the Negotiable
Instruments Law.
Sec. 32 provides: the indorsement must be an indorsement of the entire
instrument. An indorsement which purports to transfer to the indorsee a
part only of the amount payable (as in this case) does not operate as
negotiation of the instrument
Montinola may therefore not be considered as an indorsee. At most he may
be regarded as mere assignee of the P30K sold to him by M.V. Ramos. As
assignee, he is subject to all defenses available to the drawer and against
Ramos.
Montinola is also not a holder in due course because he became holder of
the check long after it was overdue. In fact, Montinola is not even a holder
because he is neither a payee or an indorsee but a mere assignee. He also
did not take the check in good faith, since he still has not paid the full
amount of consideration for the P30K value of the check.
Hence, Montinola cannot claim from PNB
Sub-issue: PNB is not the drawer of the check, the treasurer is not an agent
of PNB. The words agent of were placed by Montinola after the check was
issued. The check was issued by the Treasurer of Misamis in his capacity as
P 6 of 51
the serial number is not an alteration of any of the requisites under Sec 1.
The serial number is not the sole indication of the checks origin.
2) W/N the 24-Hour Clearing period should be applied----NO
FACTS:
The Ministry of Education and Culture issued checks drawn against
Philippine National Bank (hereinafter, PNB) which International Corporate
Bank, Inc (hereinafter, International) accepted for deposit. After 24 hours
from submission of the checks to PNB for clearing, International paid the
value of the checks and allowed the withdrawals of the deposits. On Oct 14
1981, PNB returned all the checks to International without clearing them on
the ground that they were materially altered. It appears that the serial
numbers on the checks were altered. Thus, International instituted an
action for collection against PNB to recover the value of the checks.
Trial Court: International is liable and cannot recover from PNB. PNB
cannot be faulted for the delay in clearing the checks considering the
ingenuity in which the alterations were affected. On the other hand,
International, as collecting bank, should have inquired from PNB regarding
the status of the checks, but this it failed to do.
CA: CA reversed, applying CB Circular 580 which mandated the 24-Hour
Clearing Time. It held that checks which have been materially altered
should be returned within the 24-hour clearing time to relieve the drawee
bank of liability. It also said that even if the return of the checks in question
is done within 24 hours after discovery of the alteration and not within the
24-hour clearing time, the drawee bank will still not be relieved of liability.
Moreover, if it can be shown that the drawee bank had been patently
negligent in the performance of its verification function, then such bank
should not be relieved of liability. Thus it declared PNB liable for failure to
recognize the within a reasonable period the altered checks and in not
returning the checks within the period.
PNB filed for reconsideration and CA reversed itself holding International
liable this time, affirming the Trial Courts decision that Internationals loss
was caused by the lack of caution of its personnel.
Thus International appealed to the SC.
ISSUES AND HELD:
1) W/N the checks were materially altered----NO
The alterations in the checks were made on their serial numbers. In PNB v
CA, the court held that the alteration on the serial number of a check in
NOT a material alteration. A material alteration is an alteration changing
the effect of the instrument; an unauthorized change that purports to
modify in any respect the obligation of a party or an authorized addition of
words or numbers or other change to an incomplete instrument relating to
the obligation of a party. A material alteration is one which changes the
items which are required to be stated under Sec 1 of NIL. An alteration of
The Court did not deem it necessary to rule on the application of the CB
Circular 580 on the 24-Hour Clearing Time because there were NO material
alterations made on the checks. PNB therefore, had no right to dishonor
the checks and return them to International. Thus, PNB is liable to
International for the value of the checks.
METROPOLITAN BANK and TRUST COMPANY v CABILZO
510 SCRA 259
Sec. 124 and 125
FACTS:
Renato Cabilzo was one of Metrobanks clients who maintained a current
account with them. On Nov 12, 1994 Cabilzo issued a Metrobank Check
payable to CASH and postdated on Nov 24, 1994 in the amount of
P1,000. The check was paid by Cabilzo to a certain Mr. Marquez, as his
sales commission. The check was presented to Westmont Bank for
payment. Westmont in turn indorsed the check to Metrobank for
appropriate clearing. Metrobank cleared the check in accordance with the
Phil Clearing House Corporation (PCHC) Rules.
On Nov 16, 1994 Cabilzos representative was asked by a Metrobank
personnel if Cabilzo had issued a check amounting to P91,000. Cabilzos
rep answered in the negative. Cabilzo then called Metrobank and said he
did not issue such check and requested that said check be returned to him
for verification. The said check with P91,000 was apparently the check
issued to Marquez with the original amount of P1,000. Cabilzo demanded
Metrobank to re-credit the amount of P91,000 to his account. After several
demands, Metrobank still failed to re-credtit such amount. Thus the present
case.
Metrobanks Defense: Upon receipt of said check through the PCHC, it
examined the genuineness and authenticity of drawers signature and the
technical entries and no alterations were noted. After verifying as well as
the indorsement that stated, all prior indorsements and lack of
indorsement guaranteed, Metrobank cleared the check.
It also claimed that as collecting bank and the last indorser, Westmont
should be held liable because it assumed the liability of a general indorser.
Also, it claimed that Cabilzo was partly liable for leaving spaces on the
check which made the fraudulent insertion of the amount and figures
possible. Cabilzos negligence was the proximate cause of the loss.
RTC: Metrobank is liable to Cabilzo because of its negligence in not
detecting the alteration.
CA affirmed RTC decision.
ISSUES AND HELD:
P 7 of 51
erroneously written, but in all these cases it will be found that the
contracts themselves left no possible doubt as to who the real parties were
and as to the real intent of the document. (best example : Richard vs.
Woodward where Woodward executed a bond $10k to the sheriff (Richard)
tho the name Minot Wheeler occurred nowhere else in the instrument,
it was held that the bond should be construed as if the name Harvey
Woodward had been originally written therein instead of Minot Wheeler.)
The writing upon which the action is brought does not in terms show ant
obligation in favor of the plaintiff and the action can only be maintained
upon the theory that the writing does not express the true intent of the
parties. We may surmise that the guarantee in question was intended for
the benefit of the party who subsequently discounted the note, but we
cannot be certain. The note may have been merely an accommodation
note and the guarantee may have been intended for the protection of the
maker in the event of the discounting of the note or its transfer to 3 rd
parties.
Apealee contends that this hypothesis is negatived by the fact that the
words value received appear in the note as quoted in the stipulation of
facts. But that proves nothing. Unless otherwise stated in the instrument, a
negotiable promissory note IMPLES prima facie valuable consideration
moving to the maker, whether the words value received appeared in it or
not. Nothing in the note that distinguishes it from an accommodation note.
Remember: Contracts of guarantee and Surety ship are strictly construed
in favor of the surety or guarantor.
TRAVEL ON INC. VS. CA
210 SCRA 351
Sec. 24
FACTS:
Travel-On is a travel agency selling airline tickets on commission basis
for and on behalf of diff airline companies. PR, Arturo Miranda had a
revolving credit line with petitioner, Travel-On (a travel agency). He
procured the tickets on behalf of airline passengers and derived
commissions there from.
Travel-On fileled a suit to collect amount of 6 checks which was issued
by Miranda worth P115k. Pet. Said that it sold and delivered various
airline tickets to respondent totalling P200k+. To settle the amounts, he
pain in cash and in kind and later on issued 6 post-dated checks, which
were dishonored upon presentment to the drawee banks.
Miranda said that he paid, and even overpaid his obligations and infact
he is entitled to a refund. He argued that these checks were merely given
for the purpose of accommodation only. He says these were given in order
that the Gen. Manager Elita Montilla, manager of Travel-On, could show the
companys Board of Directors that their accounts receivable are still good
and that Montilla tried to encash the same but were dishonoured and
returned to him.
Sec. 24
FACTS:
Pineda was involved in a case against the National Rice and Corn
Administration (NARIC) for allegedly misappropriating 11,000 cavans of
palay deposited in a ricemill located at Concepcion, Tarlac. He then hired
Atty. Dela Rama to delay the filing of the action against him while he
worked out an amicable settlement with NARIC. Pineda hired Dela Rama
because the latter is a close friend of the NARIC administrator Jose
Rodriguez having worked with him at the Philippine consulate at Hongkong.
Later on, Pineda signed a promissory note for P9,300.00 in favor of Dela
Rama. This note is now subject of a collection claim by Dela Rama together
with P5,000.00 as Attorneys fees.
FACTS:
Sellner together with Clarke (with an e!) and Maye signed a note in favor of
Clark (without an e!), the note dated July 1, 1914 states:
Clarke,
his
attorney.
Geo. C. Sellner.
Defendant claims the following:
1. He did not receive any part of the debt
2.the instrument was not presented to him for payment and
3. That he is only an accommodation party and should only be held liable if
the note is negotiated.
ISSUE:
W/N Clark can collect payment from Sellner.
RULING:
Yes.
P 10 of 51
1.As one of the signers of the note his liability is not dependent on whether
or not he has received any part of the amount of the debt. In fact, he is
expressly liable as one of the joint and several debtors on the noteand is
liable under sec 60 of NIL
2.Presentment for payment is not necessary to charge the person primarily
liable such as the defendant ( Sec 70 of NIL)
3.By putting his signature on the note, he lent his name, not to the
creditor, but to those who signed with him placing himself with respect to
the creditor in the same position and with the same liability as the said
signers
a. with out receiving value by virtue of the therefore as
used in sec29 of NIL means without receiving value by
virtue of the instrument and not, as it apparently is
supposed to mean, without receiving payment for lending
his name.
b. He can also be regarded as a joint surety and as to the
plaintiff he is the holder for value under sec29.
Doctrine: the mere fact that a joint and several note has been signed by
one or various of the makers thereof for the accommodation by one or
more of his comakers, does not render him or them an accommodation
maker or makers with respect to the CREDITOR who, upon the receipt of
the note, pays the full value thereof.
Note: mere delay in the part of the creditor, after the maturity of the note,
in enforcing said note, does not affect the liability of the maker and the
latter is not released even if the guaranty becomes worthless by the lapse
of time.
HELD:
FACTS:
Spouses Hipolito contracted a loan from TSLB for Php 700k with 24%
interest and issued a PN with maturity date in 3 years. They They defaulted
in their payment. Hipolitos contend that they were not personally liable
because the loan was for the account of Pilarita Reyes (sister of Miguel
Hipolito). Spouses Hipolito only signed the note because they were
persuaded by Joey Santos, president of TSLB. They said that Santos told
them the demand letters were mere formality for Pilaritas obligation.
Hipolitos contend they were merely guarantors.
RTC- Hipolitos liable as accommodation party.
CA- Reversed saying that Hipolitos accommodated TSLB. This is because
TSLB could only loan a maximum of Php 700k pursuant to a Central Bank
regulation while Pilarita needed to borrow Php 1.4M.
ISSUE:
Trial Court
Trial court held that 1) parol evidence was not admissible to alter, vary, or
modify the terms of the contract of indorsement therefore, it refused to
consider evidence showing that by verbal agreement the indorser was a
mere vehicle for the transfer of title and thus without consideration and 2)
it was immaterial whether there was consideration because the indorser
was a mere accommodation party
ISSUES:
HELD:
HELD:
1) Yes. There was never a moment when Serrano owned the note. It
was Maulini, who provided for the money borrowed, which was the
consideration of the instrument, who owned it. Serrano acted
merely as an agent by which naked title was passed, his only
payment would be for the transaction of the loan. He was paid
nothing as to be an indorser, nor did Maulini lose or forego
anything nor alter his position.
2) No. An accommodation note is one which the accommodation
party has put his name, without consideration, for the purpose of
accommodating some other party who is to use it and is expected
to pay it. The reference to accommodation party in Nego.In. law
refers to the maker, not the lender nor indorser. A favor was made
by Serrano to Maulini, but this is not the same situation
contemplated by the law.
3) Yes. The prohibition of accepting parol evidence in the civil code is
to prevent alteration, change and modification of the terms of a
written contract. In this case, the purpose of the evidence was to
show that no contract of indorsement ever existed. The prohibition
therefore does not apply in the case at hand. Parole evidence is
deemed admissible, and since no counter evidence was presented,
was considered true as to the merits of the case.
P 12 of 51
debtor. But in the eyes of the creditor, both of them are mere joint and
several makers.
ACUNA VS. VELOSO AND XAVIER
50 Phil 241
Sec. 29
FACTS:
Xavier wanted to buy a land situated in Legarda. However, he lacks funds
which would enable him to acquire the property. He then asked Veloso his
principal (Xavier, being an agent of Veloso with regards the latters
properties in Manila) to help him secure the funds.
Veloso then
approached Gonzales who was described as a man of means. Gonzales
promised to advance the money. It turned out that Gonzales approached
one of his clients named Rosario who then issued a check worth Php
25,000.00 This same check was delivered by Gonzales to Xavier. In turn,
Xavier gave Gonzales a promissory note signed by him and Veloso saying
that they are jointly and severally liable to pay the payee. Xavier turned
over the check to Ramon Sotelo, the vendor of the Legarda property.
It turned out that the Legarda property was already mortgaged to
Shanghai Life Insurance Company. A foreclosure proceeding took place.
But while waiting for the results of the proceeding, the note became due.
It turned out that Gonzales transferred the note to a certain Mariano Acuna
who filed an action in court to recover the Php 25,000 plus the interest.
The trial court held that Veloso is an accommodation maker of the note and
ordered that Veloso be subrogated to the rights of the plaintiff Acuna in a
mortgage given by Xavier to secure the debt. The defendants cite the
case of Rylee vs. Wilkinson in their contention that where an
accommodation
paper
is
not
negotiated
after
maturity,
the
accommodation party cannot be held liable thereon.
ISSUE:
W/N Veloso should still be held liable considering that the promissory note
was transferred to Acuna only two years after the note became due.
DECISION:
Yes. Rylee vs. Wilkinson cannot be applied in the case at bar for in said
case, the accommodation maker draws a note payable to the
accommodated payee and the payee first negotiates the note after the
date of maturity. In the case at bar, the accommodating party and the
accommodated party unite in making a joint and several note to a person
who advanced such at the time of the its creation. It cannot be said that
the note is lacking of consideration just because Veloso received no
amount whatsoever. Value was given for the note, and this is enough. In
equity, Veloso is entitled to all rights of a surety while Xavier is the real
Note: The fact is, Acuna became a holder only two years after the note
became due. we are to follow section 52, he will not be considered as
holder in due course. Thus, Veloso can raise this defense. The decision is
questionable.
PNB V. MAZA AND MACENAS
48 Phil 207
Sec. 29
NATURE:
Collection suit of PNB against Maza and Macenas
FACTS:
Maza and Macenas executed 5 promissory notes in favor of PNB, with 2
due 3 months after date and 3 due 4 months after date. The notes were
not paid at maturity. PNB is now suing for collection of the amounts due
with interest totaling to P65K.
PNB brought the case to CFI-Iloilo. The court ruled in favor of PNB despite
the following arguments and special defense that the defendants
interposed:
1.
2.
3.
HELD:
On appeal Maza and Macenas assigned 4 errors. The first is on the refusal
of the lower court to include Echaus as party-defendant. The SC said that
Echaus is not an indispensable party. The 3 errors go to the merits and rest
on the same foundation as their special defense. Maza and Macenas admit
to the genuineness and due execution of the notes and that there was no
mistake or alteration in the amounts on the notes.
Hence, whether they are principals and Echaus their agent or they are
makers which is exactly what they appear to be, both must keep their
engagement and pay as promised. They are primarily and unconditionally
liable.
P 13 of 51
Also even if they claim that they are just accommodation parties, lending
their names to some other person, they are still liable according to terms
of the notes as if they were really financially interested in the transaction.
And, although they never received the value of the notes, to fasten liability
of an accommodation party, it is not necessary that any consideration
should move to him. The consideration of the accommodation party is the
principal consideration of the person taking the note and the person
accommodated.
Obiter: An accommodation party that makes payment to the holder has the
right to sue and ask reimbursement from the accommodated party. Their
relationship is that of a principal and a surety, the accommodation party
being the surety.
NATURE:
RYL gave to Armstrong Industries(sister corp and manufacturing arm of
STELCO), a check drawn against Metrobank amounting to P126,129. The
check was a company check of Steelweld corp. of the Phil.,signed by its
President, Peter Liamson, and its VPres., Artemio Torres.The check was
issued by Limson at Romeo Lims request (Pres. Of RYL). Limson agreed to
give Lim a check only by way of accommodation (only as guaranty but not
to pay for anything) when the former asked for financial assistance. The
check was given by RYLim to Armstrong Industries, when the check was
deposited, it was dishonored bec. drawn against insufficiency of funds.
The check bore 2 indorsements, that of the RYL and Armstrong.
On complaint of Armstrong due to the dishonored check, Limson and Torres
were charged in the RTC of Manila for violating BP22 but were acquitted on
the ground that the check in question was not issued by the drawer to
apply on account for value, it being merely for accommodation purposes.
4 years after issuance of check, STELCO filed a complaint for recovery
against RYL and steelweld but RYL cannot be found. Steelweld contends
that it was a complete stranger to the contract and that the check was only
given as collateral.
ISSUE:
1) W/N Stelco was a holder in due course such that it can recover
from RYL and Steelweld
HELD:
HELD:
The record does not show any intervention b/w Steelweld and Stelco, or
b/w either of them and Armstrong, anytime before the dishonor of the
check, neither it shows that after the check had been deposited and
dishonored, Stelco came into possession of it several years after the check
is dishonored.
Possession of a negotiable instrument after presentment and dishonor is
utterly consequential; it does not make the possessor a holder for value
within the meaning of the law.
It is clear from the circumstances that Stelco cannot be deemed a holder of
the check for value. It does not meet the two essential requisites
prescribed by the statute. It did not become the holder of it before it was
overdue, and w/o notice that it had been previously dishonored, and it did
not take the check in good faith for value.
ANG TIONG V. TING
22 SCRA 713
Sec. 29
The instrument is genuine and duly executed, hence Ang Tiong is a holder
for value.
1) The bank check is a negotiable instrument, hence Art. 2071 of the
Civil Code is not applicable.
2) Felipe Ang is a general indorser according to Sec. 63 (He who signs
the instrument not as a maker, drawer or acceptor is a general
indorser unless he clearly indicates that he is to be bound in
another capacity) of the Negotiable Instruments Law. As general
indorser he warrants to all subsequent holders in due course:
a) the genuiness of the instrument
b) that he has good title to it
c) that all parties to it have capacity to contract and
d) the instrument is at the time of his indorsement valid and
subsisting.
As general indorser he also engages that the instrument on due
presentment will be accepted and paid and if dishonored he shall
pay the amount to the holder
P 15 of 51
An accommodation party on the other hand who made payment has the
right to contribution from his co-accomodation maker, in the absence of
stipulation to the contrary. This rights comes from the implied promise
between the accommodation makers to share equally the burdens that
they might encounter in placing their signatures on the promissory note.
They placed themselves as joint guarantors of the former.
The requisites before an accommodation party can seek reimbursement
are governed by Art. 2073 of the Civil Code (the negotiable instruments
law has no specific provision that defines the rights of one accommodation
party to seek reimbursement from another).
When there are two or more guarantors of the same debtor and for the
same debt, the one among them who has paid may demand of each of the
others the share which is proportionally owing from him.
FACTS:
Sadaya, Sevilla and Varona executed jointly and severally a promissory
note in favor of BPI for P15K. Only Varona received the proceeds of the
note with Sadaya and Sevilla signing the note as co-makers only as a favor
to Varona. Payments were made on the note but a balance of P4,850
remained. The bank collected from Sadaya. Varona failed to reimburse
Sadaya despite the demands of the latter. Sevilla on the other hand died.
Sadaya then filed a creditors claim on the estate of Sevilla which was
opposed by the estate administrator on the ground that Sevilla did not
receive any amount as consideration for the promissory note and that
Sevilla signed only as a surety.
The trial court issued judgment in favor of Sadaya while the CA reversed
the judgment.
HELD:
Sevilla and Sadaya were joint and several accommodation parties of the
P15K note. Their individual obligation is no different to the obligation of
Varona notwithstanding that they did not receive the proceeds of the loan.
They executed the note for the purpose of lending their names to Varona
and the bank can claim against any one of them as it did against Sadaya.
Sadaya can seek for reimbursement from Varona of what he paid out.
There is an implied contract of indemnity between the two, Varona is
bound by the obligation to reimburse Sadaya.
The relationship of the three signatories to the bank is that of joint and
several obligors. But the obligation of Varona and Sevilla to Sadaya (who
paid the balance) cannot be said to be joint and several. If the payment
was made by Varona, he cannot seek reimbursement from Sevilla and
Sadaya who are merely accommodation parties.
P 16 of 51
that the promissory notes, which bound the petitioners to pay, were
executed after the addendum.
CRISOLOGO-JOSE V. CA.
177 SCRA 594
Sec. 29
FACTS:
Ricardo Santos Jr the Vp of Mover Enterprises while Atty. Benares was the
President. Atty. Benares, in accommodation of his clients, the spouses Ong,
issued a check drawn against Traders Royal Bank. The check should have
been signed by the treasurer, but in his absence, Benares asked Santos to
sign the instrument.
The check (45,000) was issued to Ernestina Crisologo- Jose in consideration
of the waiver or quitclaim by her over a certain property which the GSIS
agreed to sell to the spouses Ong .
The check was dishonoured for insufficiency of funds.
Petitioner alleges that the accommodation party is Movers enterprise and
not the private respondent who merely signed the check in question in a
representative capacity.
ISSUE:
ISSUE:
HELD:
W/N the addendum constitutes a novation of the contract by substitution of
debtor which exempts the petitioners from any liability over the promissory
notes.
HELD:
No. By this time, we note a subsidiary contract of suretyship had taken
effect since petitioners signed the promissory notes as maker and
accommodation party for the benefit of Wonderland.
Requirements of novation:
1. Previous valid obligation
2. Agreement of the parties to a new contract
3. Extinguishment of the old contract
4. Validity of the new contract
CALTEX V. CA
212 SCRA 449
Sec. 30
FACTS:
Angel dela Cruz deposited Php 1.12M with Security Bank and Trust
Company (SBTC), Sucat Branch. For this he was issued 280
Certificate of Time Deposit (CTD).
Dela Cruz delivered these CTDS to Caltex for the purchase of fuel.
Dela Cruz gave SBTC an affidavit of loss for the CTDS. He was
issued new ones.
Caltex presented the lost CTDs to SBTC for payment alleging the
CTDs were securities for purchases made with Caltex.
did not legally vest in petitioner any right effective against and binding
upon the respondent bank.
When a bearer instrument is not delivered for purposes of negotiation but
physically delivered merely as security for another obligation, there is no
negotiation in the sense of transfer of legal title to the instrument and
would constitute the subsequent holder merely as a holder for value and
not a holder in due course. Accordingly, negotiation for such purpose
cannot be effected by mere delivery of the instrument, since, necessarily,
the terms thereof and the subsequent disposition of such security, in the
event of non-payment of the principal obligation, must be contractually
proved.
The assignment of the CTDs by Angel Dela Cruz to the bank, on the other
hand, was evidenced by a public instrument and is therefore valid.
MANUEL LIM V. CA
251 SCRA 408
Sec. 30
FACTS:
Manuel and Rosita Lim charged with Estafa and violating BP 22 for
issuing 7 checks that bounced.
Lims allege that they told bank to stop payment because the
materials were not in accordance with purchase orders.
FINANCING
&
INVESTMENT
CORP.
v.
Sec. 38 / 65
FACTS:
Dr. Javier Villaruel executed a promissory note in favor of Ng
Sambok Sons Motors Co., Ltd., in the amount of P15,939 payable in 12
equal monthly installments.
On the same day Sambok Motors Company (Sambok), sister
company of Ng Sambok Sons and under the same management,
negotiated and indorsed the note in favor of Metropol with the following
indorsement:
Pay to the order of Metropol Bacolod Financing & Investment
Corporation with recourse. Notice of Demand; Dishonor; Protest: and
Presentment are hereby waived.
SAMBOK MOTORS CO. (BACOLOD)
By:
RODOLFO G. NONILLO
Asst. General Manager
Dr. Villaruel defaulted in the payment of his installments, so
Metropol presented the PN for payment to the maker (Dr. Villaruel). Dr.
Villaruel failed to pay the PN as demanded, hence Metropol notified
Sambok as indorsee of the fact that the same has been dishonored and
demanded payment.
Sambok likewise failed to pay, hence this collection case. Sambok
contended that it could not be obliged to pay until after its co-defendant
Dr. Villaruel has been declared insolvent.
During the pendency of the case, Dr. Villaruel died and the case
against him was dismissed. Sambok was held liable by trial court.
Samboks contentions: that by adding the words with recourse in
the indorsement, it becomes a qualified indorser; that being a qualified
indorser, it does not warrant that if said note is dishonored by the maker
on the presentment, it will pay the amount to the holder; that it only
warrants the following pursuant to Sec 65 of NIL: a) that the instrument is
genuine and in all respects what it purports to be; b) that he has good title
to it; c) that all prior parties had capacity to contract; d) that he has
knowledge of any fact which would impair the validity of the instrument or
render it valueless.
ISSUE: Whether Sambok is a general indorser making it liable ---- YES!
A qualified indorsement constitutes the indorser a mere assignor of
the title to the instrument. It may be made by adding to the indorsers
signature the words without recourse or any words of similar import.
Such an indorsement relieves the indorser of the general obligation to pay
if the instrument is dishonored but not of the liability arising from
warranties on the instrument as provided in Sec 65 of NIL. Sambok
P 19 of 51
indorsed the note with recourse and even waived the notice of demand,
dishonor, protest and presentment.
Recourse means resort to a person who is secondarily liable after
the default of the person who is primarily liable. Sambok by indorsing the
note with recourse does not make itself a qualified indorser but a
general indorser who is secondarily liable because by such
indorsersement, it agreed that if Dr. Villaruel fails to pay the note, Metropol
can go after Sambok. The note was indorsed without qualification. A
person who indorses without qualification engages that on due
presentment, the note shall be accepted or paid, or both as the case may
be, and that if it be dishonored, he will pay the amount thereof to the
holder. Samboks intention of indorsing the note without qualification is
made even more apparent by the fact that the notice of demand, dishonor,
protest and presentment were all waived.
Moreover, after an instrument is dishonored by non-payment, the
person secondarily liable thereon ceases to be such and becomes a
principal debtor. His liability becomes the same as that of the original
obligor. The holder need not even proceed against the maker before suing
the indorser.
BPI v CA, et al.
GR No. 136202
Sec. 49
FACTS:
ISSUE:
YES, petitioner had the right to debit Salazars account for the
value of the checks it previously credited in her favor.
Salazar failed to discharge this burden, and the return of the check
proceeds to Templonuevo was therefore warranted under the
circumstance despite the fact that Templonuevo may not have
clearly demonstrated that he never authorized Salazar to deposit
the checks or to encash the same.
P 20 of 51
ISSUE:
Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its
suppliers, George King, to deliver 2k bales of tobacco leaf. In
consideration thereof, BCCFI issued crossed checks that post dated in
the total amount of P820k.
Relying on the suppliers representation that he would complete
delivery within 3months, the petitioner agreed to purchase additional
2,500 bales of tobacco leaves, despite the suppliers failure to deliver
in accordance with their earlier agreement. Petitioner, once again
issued postdated crossed checks in the total amount of P1,100,000.00
(payable Sept.)
At the same time, George King was also dealing with SIHI (private
resp.). He sold to SIHI at a discount the postdated check bearing the
amount of P164k drawn by pet. In favor of George King. Later on, he
sold 2 more post dated checks both worth 100k drawn by petitioner in
favor of George King. (so 3 post dated checks sold)
George King failed to deliver the bales of tobacco leaf as agreed upon
despite pets demands.
BCCFI issued a stop payment order on all checks payable to George
King.
SIHI (private resp.), tried to collect from BCCFI but failed. So SIHI
instituted the present case. The trial court ruled in favor of SIHI as
having a valid claim as a holder in due course and that the noninclusion of George King as a party defendant is immaterial since as a
payee, he was not an indispensable party.
ISSUE:
1) Whether SIHI, a second indorser, and holder of crossed checks, is a
holder in due course, to be able to collect from the drawer BCCFI.
HELD and RATIO:
Sec. 59 of the NIL gives prima facie presumption that every holder is a
holder in due course. However, if it is shown that the title of any person
who negotiated the instrument is defective then the holder has the burden
of proving that he is a holder in due course.
SIHI is not a holder in due course. It is settled that crossing of checks
should put the holder on inquiry and upon him devolves the duty to
ascertain the indorser's title to the check or the nature of his possession.
Failing in this respect, the holder 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.
In the present case, BCCFI's defense in stopping payment is as good to SIHI
as it is to George King. Because, really, the checks were issued with the
intention that George King would supply BCCFI with the bales of tobacco
P 21 of 51
leaf. There being failure of consideration, SIHI is not a holder in due course.
Consequently, BCCFI cannot be obliged to pay the checks.
FACTS:
The foregoing does not mean, however, that respondent could not recover
from the checks. The only disadvantage of a holder who is not a holder in
due course is that the instrument is subject to defenses as if it were nonnegotiable. Hence, respondent can collect from the immediate indorser, in
this case, George King.
Notes:
(This case mentions the next case, State Investment house vs. IAC,
because their facts are on all fours. Theyre the same)
ISSUE:
The three subject checks in the case at bar had been crossed generally
and issued payable to Sikatuna, which could only mean that the drawer
had intended the same for deposit only by the rightful person, i.e., the
payee named therein. Apparently, it was not the payee who presented
the same for payment and therefore, there was no proper
presentment, and the liability did not attach to the drawer.
When SIHI rediscounted the check knowing that it was a crossed check
he was knowingly violating the avowed intention of crossing the check.
Furthermore, his failure to inquire from the holder, Sikatuna, the
purpose for which the three checks were cross despite the warning of
the crossing, prevents him from being considered in good faith and
thus he is not a holder in due course. Being not a holder in due course,
plaintiff is subject to personal defenses, such as lack of consideration
between appellants and Sikatuna.
Thus, in the absence of due presentment, the drawer did not become
liable. Consequently, no right of recourse is available to petitioner
against the drawer of the subject checks (private respondent wife)
considering that petitioner is not the proper party authorized to make
presentment of the checks in question.
That the subject checks had been issued subject to the condition that
private respondents on due date would make the back up deposit for
said checks but which condition apparently was not made, thus
resulting in the non-consummation of the loan intended to be granted
by private respondents to Sikatuna, constitutes a good defense (which
is lack of consideration) against petitioner who is not a holder in due
course.
Notes:
Section 52 of the NIL defines a holder in due course as one who takes
the instrument "in good faith and for value" and that in order that one
may be a holder in due course, it is necessary that "at the time the
instrument was negotiated to him he had no notice of any defect in the
title of the person negotiating it." However, under Section 59 every
holder is deemed prima facie to be a holder in due course.
P 23 of 51
STATE INVESTMENT V. CA
217 SCRA 32
Sec. 52-59 / 119
FACTS:
Nora B. Moulic issued to Corazon Victoriano, as security for pieces
of jewelry to be sold on commission 2 post-dated checks ( from
Equitable Bank) in the amount of P50,000
Each one dated 30 Aug 1979 and 30 Aug 1979
Payee (Victoriano) then negotiated the checks to State Investment
House (STATE)
Moulic failed to sell the jewelry so she returned the jewelry before
the maturity of the check
The checks could no longer be negotiated coz they were already
negotiated
Before maturity date, MOULIC withdrew her funds
Upon presentment for payment, the checks were dishonored
STATE alleges that the checks were dishonored and that she pay in
cash instead
STATE sued to recover the amount of the checks
MOULICs defense: she incurred no liability since the jewelry was
not sold and checks were negotiated without her consent
She instituted a 3rd party complaint against Victoriano who later
assumed responsibility for the checks
TC: STATE lost
CA: affirmed TC; that checks should never have been presented for
payment since the jewelry were returned
ISSUE: w/n STATE is a holder in due course
HELD:
YES it is an HDC
there is always a prima facie presumption of being an HDC
evidence shows that:
1)on their face the checks were complete and regular
2) pertitioner boufht the checks from the payee, before their due
dates
3) pet. Took the checks in good faith and for value, albeit
discounted price
4) pet was never informed no r made aware that the checks were
merely issued as a security and not for value
STATE holds it free from all defects of title of prior parties and may
enforce full payment
MOULIC cant set up defense of failure of consideration since it is a
personal defense which she can invoke only if STATE was privy to
the purpose for which they were issued
MOULIC cant also invoke SEC 119 of the NIL (on discharge of
instrument):
a)
b)
c)
d)
e)
-
SALAS V. CA
181 SCRA
Sec. 8 / 52-59
FACTS:
Juanita Salas bought a motor vehicle from the Violago Motor Sales
Corporation (VMS) for P58,138.20 as evedienced by a promissory
note
PN was subsequently indorsed to Filinvest Finance and Leasing
Corp which financed the purchase
Salas defaulted in the payment of the PN allegedly due to
discrepancies in the engine and chassis numbers in the sales
invoice, certificate of registration and deed of chattel mortgage
which she allegedly discovered when the motor vehicle got into an
accident
Filinvest then filed for collection of the sum of money against Salas
TC: ordered Salas to pay P28,414
CA: ordered Salas to pay balance of P54,908
Salas filed petition before SC alleging fraud, bad faith and
misrepresentation of Violago Motors which supposedly released
Salas from liability to Filinvest who should instead go against
Violago
P 24 of 51
ISSUE:
W/N Filinvest is a mere assignee of the Promissory note or a holder in due
course
RULING:
-Filinvest is a holder in due course
The promissory note has all the earmarks of negotiability:
1) it is in writing and signed by the maker Juanita Salas
2) it contains an unconditional promise to pay the amount of
P58,138.20
3) it is payable at a fixed or determinable future time which is
P1,614.95 monthly for 36 monthly installments
4) it is payable to violago or order
5) drawee was named with certainty
It
was
an
HDC
1) the PN was complete and regular upon its face
2) It became the holder before it was overdue or without notice that it was
previously dishonored
3) It took the same in good faith and for value
4) when it was negotiated to Filinvest, the latter had no notice of any
infirmity in the instrument or defect in the title of VMS
Filinvest now holds it free from all defenses and defects that Salas may
set up against Violago
CONSOLIDATED PLYWOOD INDUSTRIES V. IFC LEASING
149 SCRA 448
Sec. 52-59
FACTS:
Consolidated Plywood bought two used tractors from Atlantic Gulf and
Pacific Company through its sister company and marketing arm, Industrial
Products Marketing. Industrial assured Consolidated, after inspecting the
jobsite, that the used tractors were fit for the job. It even gave
Consolidated a 90-day warranty.
Consolidated, through president and vice-president, agreed to purchase
the tractors on installment and with a 210K downpayment. Simultaneously
with the execution of the deed of sale, the chattel mortgage and
promissory note, Industrial assigned its rights and interest in the chattel
mortgage to IFC Leasing.
RULING
1.
2.
3.
4.
Sections 52 and 56 of the NIL are applicable. IFC Leasing failed to take the
promissory note (1) in good faith and for value and (2) he had notice of the
infirmity or defect in title of the person negotiating it, in this case
Industrial. He had actual knowledge of the infirmity and the defect in title.
Campos v. Campos and Commercial Credit Corp v. Orange Country: a
financing company is not a holder in good faith. It is a moving force in the
transaction from its inception.
Sec. 58 also provides that in the hands of a holder other than a holder in
due course, a negotiable instrument is subject to the same defenses as if it
were non-negotiable.
FACTS:
Anita Gatchalian, interested in looking for a car, was shown and offered a
car by Manuel Gonzales. Gonzales represented to Gatchalian that he was
duly authorized by the owner of the car, Ocampo Clinic (hereinafter
Ocampo), to look for a buyer of said car and to negotiate for and
accomplish said sale, but these facts were not known to Ocampo.
Gatchalian requested Gonzales to bring the car the following day together
with the certificate of registration of the car. Gonzales however, advised
her that the owner of the car will not be willing to give the certificate of
registration unless there is showing that the party interested in the
purchase of said car is ready and willing to make such purchase and that
for this purpose Gonzales requested Gatchalian to give him a check which
will be shown to the owner as evidence of the buyers good faith in the
intention to purchase the car. The said check was to be for safekeeping
only of Gonzales and to be returned to Gatchalian the following day when
Gonzales brings the car and certificate of registration. Gatchalian then
issued a check. These facts were again not known to Ocampo.
On the failure of Gonzales to appear with the car and its certificate the
following day, Gatchalian issued a Stop Payment Order on the check with
the drawee bank.
Subsequently, Gonzales, having received the check from Gatchalian,
delivered the same to Ocampo Clinic, in payment of fees and expenses
arising from the hospitalization of his wife, Matilde. Ocampo, for and in
consideration of fees of hospitalization accepted the said check from
Gonzales. As the check was issued for P600, while the hospital bills
amounted to P441.75, Ocampo delivered to Gatchalian the difference of
P158.25. This transaction was made without inquiry by Ocampo from
Gonzales.
A case for estafa was thereafter filed by Ocampo against Gonzales as the
check bounced (by virtue of Gatchalians Stop Payment Order). The
estafa case was dropped and now a collection case against Gatchalian was
filed.
GATCHALIANs CONTENTIONS:
The check is not a negotiable instrument because it was only for
safekeeping, hence, there was no delivery required by law. Assuming that
there was delivery, it was subject to a condition which was not fulfilled.
Ocampo is not a holder in due course because Ocampo as the following
facts brought suspicion about Gonzales possession of the check:
1) Check is not personal check of Manual Gonzales
2) Maker, Gatchalian, a complete stranger, is not in any manner
obligated both to Gonzales and Ocampo
P 26 of 51
3)
4)
The check could not have been initiated to pay the hospital fees
as it was in the amount of P600 and not P441.75.
Check is payable to bearer, hence any person who holds it should
have been subject to inquiries.
ISSUE:
Whether Ocampo is a holder in due course ---NO, requisite of good faith is
lacking.
Gatchalian had no obligation to Ocampo; the amount of the check did not
correspond exactly with Gonzales obligation to Ocampo; and the check
was a crossed check- these facts should have put Ocampo to inquiry as to
the why and wherefore of the possession of the check by Gonzales. It was
Ocampos duty to ascertain from Gonzales what the nature of the latters
title to the check was or the nature of his possession. Ocampo is therefore
guilty of gross neglect in not finding out the nature and title and
possession of Gonzales, amounting to legal absence of good faith. It is
sufficient to show that Ocampo had notice that there was something wrong
about his assignors acquisition of title to show absence of good faith
because actual knowledge of the particulars or nature of the fraud
committed are not necessary.
*Story of the 15-year old boy, less than 5 ft tall, immature in appearance
and bearing on his face the stamp of a degenerate, who presented stolen
liberty bonds to a clerk of Liberty Loan department for sale. The boy
claimed the bonds belonged to his mother and so the clerk paid the bonds
without inquiry. Held: Owner of the bonds can recover the value from Loan
department. Bad faith here is used in the commercial sense. Although
gross negligence does not of itself constitute bad faith, it is evidence from
which bad faith may be inferred.
*The rule that a possessor of the instrument is prima facie a holder in due
course does not apply because there was a defect in the title of the holder.
The burden was placed upon the payee to show that notwithstanding the
suspicious circumstances, it acquired the check in actual good faith, this it
failed to do.
*Gill v. Cubitt: the purchaser of a negotiable paper must exercise
reasonable prudence and caution and that if the circumstances were such
as ought to have excited the suspicion of a prudent and careful man, and
he made no inquiry, he did not stand the legal position of a bona fide
holder.
*Goodman v. Harvey: nothing short of actual bad faith or fraud in the
purchaser would deprive him of the character of a bona fide purchaser and
let in defenses existing between prior parties, that no circumstances of
suspicion merely, or want of proper caution in the purchaser, would have
this effect, and that even gross negligence would have no effect, except as
evidence tending to establish bad faith or fraud.
*It is finally settled that negligence on the part of the plaintiff, or suspicious
circumstances sufficient to put a prudent man on inquiry, will not of
themselves prevent a recovery, but are to be considered merely as
evidence bearing on the question of bad faith. When the plaintiff is called
upon to prove himself a holder in due course to be entitled to recover, he is
required to establish the conditions entitling him to standing as such,
including good faith in taking the instrument. It devolves upon him to
disclose the facts and circumstances attending the transfer, from which
good or bad faith in the transaction may be inferred.
PEOPLE VS. MANIEGO
148 SCRA 30
Sec. 52-59
FACTS:
CFI of Rizal indicted Lt.Rizalino Ubay, Milagros Pamintuan, and Julia
Maniego for the crime of Malversation.
Lt.Rizalino, officer of the Armed Forces of the Phil., was designated as
Disbursing Officer in the Office of the Chief of Finance and entrusted with
the control of public funds. He accepted from his co-accused several
personal checks drawn against the Philippine National Bank and the Bank
of the Phil Islands, of which the accused Pamintuan is the drawer and
Maniego, the indorser. They cashed said checks in the amount of
P66,434.50 and using for this purpose the public funds entrusted to Lt.
Ubay though they all knew that said checks are worthless.
Maniego prayed that she be absolved from civil liability. She(Maniego)
contends that as mere indorser, she may not be made liable on account of
the dishonor of the checks indorsed by her.
ISSUE:
W/N a mere indorser is liable on account of the dishonor of the checks
indorsed
HELD: (YES)
Under the law, the holder or last indorsee of a negotiable instrument for
the full amount thereof against all parties liable thereon. Among the
parties liable thereon is an indorser of the instrument.
Maniego may also be deemed an accommodation party in the light of the
facts i.e. a person who has signed the instrument as a maker, drawer,
P 27 of 51
ISSUE:
W/N Makati Bel-Air is a holder in due course
HELD: (NO)
Makati was a party to the contract of sale. Makati was fully aware, at the
time it had received the managers check, that there was at least a partial
failure of consideration since it was unable to comply with its obligation to
deliver office space amounting to 165 square meters to Altiura.
YANG V. CA
409 SCRA 159
Sec. 52-59
FACTS:
Agreement between Cely Yang and Prem Chandiramani:
Yang obliges himself to:
1. Deliver 2 managers checks worth Php 2.087M
Yang filed a case against Equitable, Chandiramani and David for injunction
and damages, amended for Equitable to return Php 2.087M with interest
until paid.
Yang filed a similar case against FEBTC amended to return Php 2.087M and
the value of the FEBTC dollar draft with interest 18% until fully paid.
While the case was pending, amount of the checks were converted to Tbills
so as to earn interest to be awarded to the winner.
RTC- Fernando David is a holder in due course. He is entitled to the checks
and proceeds and Yang must collect from Chandiramani.
CA- Affirmed RTCs ruling
MAIN ISSUE:
P 28 of 51
Whether Fernando David was a holder in due course and therefore entitled
to the proceeds of the 2 checks.
Yang contended to SC that (1) Lack of proof the David tendered valuable
consideration for the 2 checks and (2) David failed to inquire from
Chandiramani how he came to possess the checks, resulting in Davids
intentional ignorance tantamount to bad faith.
HELD:
Yes, David is a holder in due course.
The checks were complete in form. They were not yet overdue and he had
no notice of their dishonor. He paid for it in good faith and for value. He
had no notice of any infirmity or defect in title of the drawer. In fact, he
even asked the manager of China Banking Corp to inquire on genuineness
of the checks.
Every holder of a negotiable instrument is deemed prima facie a holder in
due course. A holder is the payee in possession. David was the payee and
had possession. Since there was no evidence to the contrary, the
presumption holds.
(1) Sec 24 presumes valuable consideration. No evidence was
presented to overcome this presumption.
(2) There is no circumstance that should raise Davids suspicion. It was
Yang and Chandiramani who had an agreement which David knew
nothing about. Davids own dealing with Chandiramani was for the
latter to deliver the checks with David as payee. David also took
every step to inquire about the genuineness of the checks and only
accepted them after being assured that there was nothing wrong
with them. David did not close his eyes to the fraud Chandiramani
committed because he had no knowledge of it. He is not in bad
faith.
MESINA V. IAC
145 SCRA 497
Sec. 52 59 / 185
FACTS:
Jose Go purchased a managers check from Associated Bank (AB) worth
800,000. He left the check on the managers table when he left the bank.
So, the bank manager entrusted the check to a bank official (Uy). Uy, in
turn, had a visitor (Lim). Uy answered a telephone call, then proceeded to
the mens room. When he returned, the Gos managers check was gone.
Go issues a stop order. Uy on the other hand goes to the police pointing to
Lim as the perpetrator. Later, AB receives the check for clearing from
Prudential Bank. It dishonors it. It receives it for clearing again, and
Associated Bank dishonors it for the 2 nd time, saying that it was a stolen
check. AB subsequently receives a letter from a certain Atty. Navarro
demanding payment on the cashiers check. Navarro however refuses to
reveal the name of his client. The police sends a letter to Prudential asking
how it had acquired the stolen check. Prudential does not divulge
information, as it wanted to protect its client.
AB then files an action for Interpleader with Jose Go and a John Doe.
Prudential later discloses that the John Doe is Mesina, who allegedly
received the check from Lim in a certain transaction. He would not
disclose further. Mesina posits that he was a holder in due course, as the
check was validly negotiated to him by Lim.
TC denies Mesinas motion to dismiss, holds Mesina in default. IAC affirms
the denial of the motion
ISSUES:
W/N Mesina was holder in due course
W/N interpleader was proper remedy
W/N Mesina was in default in TC
HELD:
1) NO. Not willing to explain how the check came to be in his possession,
and as indorsed by Lim, Mesina was said to have known the defect in his
title over the check. Moreover, Go purchased the check from AB to
transport funds to another bank. AB had no other intention that to issue it
to Go alone. When the check was lost, no one except Go could be said to
be a holder in due course as he had not indorsed it in due course. The
check was never properly negotiated and was never for value.
A holder of a cashiers check who is not a holder in due course cannot
enforce such check against the issuing bank which dishonors it. If a payee
obtained the check by fraud or there is some other reason that the payee
is not entitled to collect, the bank can refuse payment since the bank is
aware of the facts surrounding the loss.
P 29 of 51
A draft for the amount alleged drawn by Snows Ltd. Against the
defendants was presented to them through the plaintiff as agent of
Snows Ltd. For acceptance
Being assured by the plaintiff that the cases contained the batiste,
they accepted the draft.
defense to the draft which they would have a right to make against
Snows Ltd. (fraud)
The defendants conditionally accepted the draft and upon
discovery of the fraud the defendants promptly notified the bank.
this chain is to fit into a gipsy wheel, so therefore, the size must
be exact. Material is to be made up according to Lloyds rules and
the material is to be stamped with test marks and certificate of
origin is to be sent with shipping documents. Price, $18.70 per 100
lbs, FLF Manila.
The defendant claims that they accepted the chain believing that
the chain was in conformity to the specifications made. However,
they claim that the chain did not follow the specifications
ISSUE:
W/N the defendants are liable on the draft
HELD:
Yes. Having received the chain and accepted the draft, the
defendants became at least primarily liable for the payment of the
draft. The defendants have the burden of proving that the chain
did not meet the standard.
The defendants answer did not specify or point out any specific
defect in the chain, or how, or in what manner or particular it does
not comply with the conditions and terms of the contract.
Furthermore, the chain came with the proper test marks and
certificate of origin.
NO DIGESTS FOR SEC. 60 to 63
P 30 of 51
FACTS:
The Treasurer of the United States for the United States Veterans
Bureau issued a warrant in the amount of $361, payable to the order of
Francisco Sabectoria Bacos. Paulino Gullas and Pedro Lopez signed as
indorsers. Thereupon it was cashed by PNB. Subsequently the treasury
warrant was dishonored by the Insular Treasurer.
At that time the outstanding balance of Attorney Gullas on the
books of PNB was P509. Against this balance he had issued certain checks
which could not be paid when the money was sequestered by the bank.
Without giving notice to Gullas, PNB applied the P509 in his account to the
treasury warrant that was dishonored. PNB subsequently sent a letter to
Gullas informing him of the dishonored checks and the fact that they
applied his account as part payment for the said treasury warrant. As a
consequence, Gullas insurance was left unpaid since his check was
dishonored for lack of sufficient funds. Moreover, periodicals in the vicinity
gave prominence to the news to the great mortification of Gullas.
PNB claims the right to set-off the account of Gullas against that
indorsed treasury warrant by virtue of the NCC provisions on
compensation. It further claims that there is a creditor-debtor relationship
between the bank and its client.
ISSUE: Whether PNB has the right to apply the deposit of a depositor to the
bankGenerally yes, but if the depositor is an indorser and not maker (as
in this case), he should first be notified before applying compensation.
NIL contains provisions establishing the liability of a general
indorser and giving the procedure for notice of dishonor. The general
indorser of a negotiable instrument engages that if it be dishonored and
the necessary proceedings of dishonor be duly taken, he will pay the
amount thereof to the holder. Notice of dishonor is therefore necessary in
order to charge an indorser and that the right of action against him does
not accrue until the notice is given.
As a general rule, a bank has a right of set off-of the deposits in its
hands for the payment of any indebtedness to it on the part of a depositor.
However, the fact is undeniable that prior to the mailing of notice of
dishonor, and without waiting for any action by Gullas, the bank made use
of the money standing in his account to make good for the treasury
warrant.
As to a depositor who has funds sufficient to meet payment of a
check drawn by him in favor of a third party, it has been held that he has a
right of action against the bank for its refusal to pay such a check in the
absence of notice to him that the bank has applied the funds so deposited
in extinguishment of past due claims held against him. However this rule
should be differently applied to an indorser because NIL clearly provides
that notice should actually have first been given him in order that he might
protect his interests before compensation may be applied by the bank. The
action of the bank was clearly prejudicial to Gullas.
ASSOCIATED BANK V. TAN
P 31 of 51
Petitioner (Far East Realty Investment, Inc.) alleged that Dy Hian Tat,
Siy Chee, and Gaw Suy An approached the petitioner at its office in
Manila on September 13, 1960 and obtained a loan in the amount of
P4,500 (Philippine currency).
And to to back this promise up, Dy Hian Tat drew a check from his
bank, China Banking Corporation to Far East on the same day the loan
was obtained and in the same amount which was P4,500.
Siy Chee and Gaw Suy An, signed on the back of the check as
accommodation parties.
The check was dated September 13, 1960 (which was the time they
obtained the loan)
March 4, 1964 (around 4 years later), Far East presented the check to
China bank but the check bounced and was not cashed by the bank
because the current account of the drawer had already been closed.
Far East gave formal notice of the checks dishonor by letter dated
April 27, 1968 (around 4 years later) and demanded payment.
Far East then brought suit in the City Court of Manila, which ruled in
their favor.
The Court of Appeals held that Far East had failed to present the check
for payment within a reasonable time.
Far East appealed to the Philippine Supreme Court hence this petition.
The check in question was issued on Spetemnet 13, 1960, BUT was
presented by the drawee ONLY on March 5, 1964 (around 4 years
later), and dishonored on the same date.
After dishonor, a formal notice of dishonor was made only 4 more years
after on April 27, 1968.
Under these circumstances, the petitioner undoubtedly failed to
exercise prudence and diligence on what he ought to do as required by
law. There was also no justification as to his delay.
In its answer the First National City Bank of New York claims that,
while it admits that various savings deposits, pre-war inactive
accounts, and sundry accounts contained in its report submitted to
the Treasurer of the Philippines pursuant to the Act, totalling more
than P100k, which remained dormant for 10 years or more, are
subject to escheat however, it has inadvertently included in said
report certain items amounting to P18,589.89 which, properly
speaking, are not credits or deposits within the contemplation of
Act No. 3936. Hence, it prayed that said items be not included in
the claim of plaintiff.
ISSUE: Do demand draft and telegraphic orders come within the meaning
of the term "credits" or "deposits" employed in the law? Can their import
be considered as a sum credited on the books of the bank to a person who
appears to be entitled to it? Do they create a creditor-debtor relationship
between drawee and the payee therefore subject o eschaeat?
HELD and RATIO: No. a demand draft is a bill of exchange payable on
demand. Considered as a bill of exchange, a draft is said to be, like the
former, an open letter of request from, and an order by, one person on
another to pay a sum of money therein mentioned to a third person, on
demand or at a future time therein specified.
On the other hand, a bill of exchange within the meaning of our Negotiable
Instruments Law does not operate as an assignment of funds in the hands
of the drawee who is not liable on the instrument until he accepts it. This is
the clear import of Section 127. It says: "A bill of exchange of itself does
not operate as an assignment of the funds in the hands of the drawee
available for the payment thereon and the drawee is not liable on the bill
unless and until he accepts the same."
In other words, in order that a drawee may be liable on the draft and then
become obligated to the payee it is necessary that he first accepts the
same. In fact, our law requires that with regard to drafts or bills of
exchange there is need that they be presented either for acceptance or for
payment within a reasonable time after their issuance or after their last
negotiation thereof as the case may be (Section 71, Act 2031). Failure to
make such presentment will discharge the drawer from liability or to the
extent of the loss caused by the delay
Since it is admitted that the demand drafts herein involved have not been
presented either for acceptance or for payment, the inevitable
consequence is that the appellee bank never had any chance of accepting
or rejecting them. Verily, appellee bank never became a debtor of the
payee concerned and as such the aforesaid drafts cannot be considered as
credits subject to escheat within the meaning of the law.
(Re telegraphic orders: If the latter choose to demand payment of their
telegraphic transfers at the time the same were received by the defendant
bank, there could be no question that this bank would have to pay them.
Now, the question is, if the payees decide to have their money remain for
sometime in the defendant bank, can the latter maintain that the
ownership of said telegraphic payment orders is now with the drawer
bank? The latter was already paid the value of the telegraphic payment
orders otherwise it would not have transmitted the same to the defendant
bank. Hence, it is absurd to say that the drawer banks are still the owners
of said telegraphic payment orders)
INTERNATIONAL CORPORATE BANK V. SPOUSES GUECO
315 SCRA 516
Sec. 71 / 186
FACTS:
Spouses Gueco obtained a loan from International Corporate Banik (Union
Bank) for the purchase of a car (Nissan Sentra 1600 4DR 19889 Model). As
evidence of the loan, they issued a promissory note payable in monthly
installments and a chattel mortgage on the car as security for the note.
They defaulted in payment of the installments and Union Bank instituted a
Civil Case for collection of sum of money with a prayer for a writ of
replevin. Spouses Gueco were served summons, after which they had a
meeting with the Bank representatives and entered into negotiations for
the reduction of their debt.
On Aug. 25, 1995 the Bank agreed to reduce the debt from 184K to 154K
and on Aug. 28, 1995 to further reduce it to 150K. On Aug. 29, 1995 Dr.
Gueco delivered a managers check for 150K to the bank but the car was
not released because of his refusal to sign the Joint Motion to Dismiss. Dr.
P 33 of 51
Gueco argued that the joint motion was unnecessary since he has not yet
filed an answer. However, the bank insisted saying that it is a standard
operating procedure.
b.
The Spouses Gueco initiated a civil action for damages after several
demands and meetings with the bank representatives. The MTC dismissed
the case but the RTC reversed the decision. It said that there was a
meeting of the minds as to the reduction of the debt but said agreement
did not include the signing of a joint motion to dismiss. Hence the car
should be returned to the Spouses Gueco immediately and the Bank may
deposit the Managers check. The court also awarded damages to the
Spouses Gueco.
c.
d.
e.
HELD:
f.
1.
2.
ANSALDO V. CA
177 SCRA 8
Sec. 74
FACTS:
Transoceanic Factors Corporation (TFC) issued 6 promissory notes signed
by its President A.S. Moreno in favor PCIB. The notes were made out in
various amounts totaling to 150K.
During the same span of time TFC extended two loans, one for the
petitioner Jose Ansaldo for the amount of 28,697.39 and another for Teofilo
Reyes for the amount of 26,000.00. The loans were evidenced by
negotiable promissory notes wherein Ansaldo and Reyes both (1) waived
demand, presentment, protest and notice of protest and non-payment
and (2) undertook in case of default the payment of damages.
P 34 of 51
TFC only paid 78K of its total obligation to PCIB. It endorsed Ansaldos and
Reyes promissory notes to PCIB. Despite repeated demands made by
PCIB, TFC, Ansaldo and Reyes still failed to pay. PCIB now asks for the
enforcement of the notes.
The trial court and the CA ruled in favor of PCIB. Only Ansaldo is appealing
the judgment of the CA.
ISSUES:
1.
2.
HELD:
1.
2.
Judgment of CA affirmed.
PHILIPPINE NATIONAL BANK v. SEETO
91 Phil 757
Sec. 84 / 186
FACTS:
Seeto asked PNB to delay the filing of the suit so he could inquire
as to why the check was dishonored. Thereafter, Seeto refused to
refund saying that the drawer had sufficient funds at the time the
check was issued and that PNB delayed in forwarding the check to
PBC until the funds of Gan Yek Kiao were exhausted. Had it not
delayed, it would have been paid.
HELD:
P 35 of 51
The reason for the difference between the liability of the indorser
and that of the drawer is not probably or necessarily prejudiced
thereby, while an indorser is actually or by legally presumed to be
prejudiced. (US Case: only when there is proof that the indorser
knew that when he cashed the check that there would be no funds
in the bank to meet it can the rule be avoided)
The fact that checks of the drawer subsequent to March 13, 1948,
drawn against the same bank and cashed at the same Surigao
agency, were not dishonored positively shows that the drawer had
enough funds when he issued the check in question, and that had
it not been for the unreasonable delay in its presentation for
payment, PNB would have been able to receive payment.
According to Section 89, indorsers are not liable unless they are
notified that the document was dishonored.
the account had been closed. FERI demanded payment from the
respondents and was refused.
Gaw Sun An raised the defense that he was merely an agent of Victory
Hardware (VH). Or even if he was considered an indorser, he was
discharged by FERIs delay in presentment for payment.
Dy Hian Tat raised the defense that he never approached FERI; that his
signature appeared on the check because it was delivered to him by Sin
Chin Juat Grocery and not FERI. He says according to Gaw Sun An, FERI
being an accommodation party of VH because the check was delivered to
Asian Surety and Insurance Co for VHs indebtedness, FERI is not a holder
for value and cannot collect from Dy being an indorser. He also raised the
same defense of delay in presentment for payment.
FERI argues that presentment may be dispensed with if it will be useless,
as when drawer has insufficient funds. Thus drawer will be liable without
the check having been presented to the bank for payment.
ISSUE:
Whether presentment for payment and notice of dishonor was made within
reasonable time.
ISSUE:
HELD/RATIO:
Whether the belated notice of dishonor makes LDB liable for damages.
Respondents are not liable. Presentment must be paid on the date it falls
due, or within reasonable time after issue if it is payable on demand.
"Reasonable time" has been defined as so much time as is necessary
under the circumstances for a reasonable prudent and diligent man to do,
conveniently, what the contract or duty requires should be done, having a
regard for the rights, and possibility of loss, if any, to the other party.
In the instant case, the check in question was issued on September 13,
1960, but was presented to the drawee bank only on March 5, 1964, and
dishonored on the same date. After dishonor by the drawee bank, a formal
notice of dishonor was made by the petitioner through a letter dated April
27, 1968. Under these circumstances, the petitioner undoubtedly failed to
exercise prudence and diligence on what he ought to do al. required by
law. The petitioner likewise failed to show any justification for the
unreasonable delay.
HELD/RATIO:
No. The withdrawal slip being a non-negotiable instrument, no obligation to
give notice of dishonor arises. Firestone is negligent for assuming that the
withdrawal slips were good when it is clearly marked non-negotiable.
FAR EAST REALTY INVESTMENT V. CA
166 SCRA 256
Sec. 102
FACTS:
On September 13, 1960, Dy Hian Tat, Siy Chee and Gaw Sun An
(RESPONDENTS) approached Far East Realty Investment (FERI) in their
Manila branch for an accommodation loan worth Php 4,500. The terms of
the loan were that respondent would be solidarily laible, interest of 14%
per annum and payable in one month. The respondents delivered a check
to FERI drawn against China Banking Corp (CBC) for Php 4,500, signed by
all of them at the back and dated September 13, 1960. Respondents
assured CBC that they would pay the loan in one month or that FERI could
present the check to CBC, which CBC will honor. FERI presented the check
to CBC for payment only on March 5, 1964 and was dishonored because
LAO V. CA
274 SCRA 572
Sec. 102
FACTS:
Lina Lim Lao (hereinafter Lim) was a junior officer of Premiere Investment
House and as such is authorized to sign checks for and on behalf of the
corporation. Father Artelijo Palijo (Society of Divine Word Treasurer)
invested donations in Premiere totaling Php 514,484.04. He received 3
checks as payment for interest; 2 of them for Php 150,000 and the other
P 37 of 51
for Php 26,010.73. The checks were signed by Lim and Teodulo Asprec
(Head of Operations). The checks were dishonored. Palijo went to the
corporation president and was paid Php 5,000 but no other payments were
made. Premiere was subsequently placed under receivership.
Palijo filed three cases of BP22 violation against Lim and Asprec (1 case for
each check that bounced). Asprec could not be found and Lim was found
guilty for 2 counts corresponding to the 2 checks worth Php 150,000.
Requisites for BP22
1. person makes or draws and issues any check
2. the check is to apply on account or for value
3. the person knows at the time of issue he does not have
sufficient funds for full payment upon presentation
4. checks is subsequently dishonored for lack of funds, or would
have been dishonored for the same reason if the drawer,
without any valid reason, ordered the bank to stop payment
Lim raised the defense of lack of knowledge of insufficiency of funds. In the
normal course of business, she signs the check in blank and Asprec takes
care of filling up the amount and payee. Her job took her mostly out on the
field and gives strength to her defense of lack of knowledge.
Another defense she raises is lack of adequate notice of dishonor. Lim was
not informed that the checked bounced.
ISSUE:
RULING:
HELD/RATIO:
Lim is acquitted. Lack of knowledge of insufficiency of funds and lack of
notice of dishonor are valid defenses. Without notice of dishonor, there can
be no prima facie evidence of knowledge of insufficiency of funds. BP22
provides for a presumption that the drawer had knowledge of the lack of
funds. However, BP22 states that this presumption only applies if after
receiving the notice of dishonor, there is no payment after 5 banking day.
Without the notice, this presumption will not apply.
Sec 102 of NIL states that notice must be given as soon as the instrument
is dishonored and, unless delay is excused as hereinafter provided, must
be given within the time fixed by this act.
FACTS:
On Dec. 10. 1980 Samara purchased from Citytrust Bank a Bank Draft
worth 40,000$usd , the payee being Thai International airways and the
drawee bank in the US being Marine Midland. On Dec. 23, 1980, Samara
executed a stop-payment order of the bank draft instructing Citytrust to
inform Marine Midland about the order through Teletex.
Citytrust
transmitted the message to MM the next day and followed it up with cable,
which MM acknowledged to have received on Jan 14, 1981 stating that it
has not paid the bank draft. Citytrust credited Samaras account due to
the non-payment. But after 7 months, Citytrust re-debited Ss account
after discovering that MM debited the account of Citytrust.
TC: MM is bound by its letter that it did not pay the bank draft and did not
give credence to defense of Citytrust that MM debited Citytrusts account
before the stop-payment order was made by Samara
ISSUE:
Citytrust form which Samara purchased the bank draft, was the drawer of
the draft throught which it ordered MM, the drawee bank, to pay the
amount of 40k USD in facor of Thai International, payee. The drawee bank
acting as a payor bank is solely liable for acts not done in accordance
with the instructions of the drawer bank or the purchaser of the draft. The
drawee bank has the burden of proving that id did not violate. Meanwhile,
the drawer, if sued by the purchaser of the draft is liable for the act of
debiting the customers account despite an instruction to stop payment.
The drawer has the duty to prove that he complied with the order to inform
the drawee. MM was the primary cause of the loss to Samara and is held
primarily liable.
**** The joint and several obligation to pay the private respondent and the
right of the petitioner to be reimbursed are retained. But the decision is
modified in so far as the amount of liability is concerned:
a. Citytrust- 40usd plus 12% compounded interest per annum
plus damages
b. MM- 40usd plus 6% simple interest plus attorneys fees
because the previous decision was appealed only by MM, the
modified or reduced amount of liability inured only to its benefit
the Court will not allow a situation where a codefendant who is
primarily liable would be charged for a lesser amount than its codefendant. MM is the source of injury and cant be unjustly
enriched
P 38 of 51
BANK OF AMERICA V. CA
228 SCRA 357
Letters of Credit
FACTS:
Bank of America received by registered maul an Irrevocable Letter of
Credit purportedly issued by Bank of Ayudha in Thailand for the account of
General Chemicals (Thailand) for $2,782,000 to cover the sale of plastic
ropes and agricultural files.
Bank of America acted as the advising bank to the beneficiary Inter-Resin
Industrial Corporation.
Bank of America notified Inter-resin of the letter of credit. Inter-resin then
sent its lawyer to confirm the letter of credit. A bank official said that there
was no need to confirm because the letter of credit would not have been
transmitted if it was not genuine.
Inter-resin sought to make partial availment of the letter of credit for the
shipment of goods worth $1,320,600. Bank of America issued a cashiers
check in pesos and subsequently asked for reimbursement from the Bank
of Ayudha.
Inter-resin again wanted to make a second availment of the letter of credit.
Bank of America received a telex from the Bank of Ayudha declaring the
letter of credit as fraudulent. The letter of credit had been issued for the
account of Siam Union Metal in favor of Electrolutic Zinc Co. and not for the
account of General Chemicals in favor of Inter-resin. Hence, Bank of
America stopped processing Inter-resins request.
Bank of America sought the help of its branch in Thailand and the NBI to
determine the authenticity of the letter of credit.
It was found that the vans exported by Inter-resin did not contain plastic
ropes but plastic strips and waste materials.
Bank of America files criminal charges against the officials of Inter-resin for
estafa which was dismissed for insufficiency of evidence. It is now seeking
recovery of the payment it made to Inter-resin. Inter-resin on the other
hand is claiming that it is entitled to be paid for the remaining balance of
the letter of credit covering the second shipment of goods. It is arguing
that Bank of America made assurances that enticed it to send merchandise
to Thailand and that Bank of America was at fault for not verifying the
authenticity of the letter of credit.
The trial court and the CA ruled in favor of Inter-resin and held the Bank of
America as liable for payment of the balance. Hence, this petition.
P 40 of 51
ISSUE:
5.
1.
2.
3.
HELD:
Read the annotations on letters of credit. The court explained the structure
and relationship of parties in letters of credit.
1.
2.
3.
4.
The Bank of America may also recover what it has paid to Interresin. What happened was a discounting arrangement, where Bank
of America acted independently as a negotiating bank. Inter-resin
did not have to present the documents to the Bank of Ayudha in
Thailand to recover payment.
a. As negotiating bank, Bank of America has a right of
recourse against the issuing bank and until reimbursement
Inter-resin has contingent liability
b. Bank of Ayudha in turn can claim reimbursement from
General Chemicals. But since the Bank of Ayudha disowned
the letter of credit, Bank of America may now turn to Interresin for payment
FEATI V. CA
196 SCRA 576
Letters of Credit
FACTS:
Villaluz and Christiansen entered into an agreement to sell lauan logs.
Christiansen issued a purchase order for the logs in favor of Hanmi Trade
and Development Corp. Christiansen acted as the broker of the sale.
Hanmi instructed the Security Pacific and National Bank to issue an
irrevocable letter of credit for $54,000 available at sight in favor of Villaluz.
The letter of credit was sent to Feati Bank (now Citytrust) with the
instruction that it forward the enclosed letter of credit to the beneficiary.
The letter of credit provided that the draft be drawn by Villlaluz against the
Security Pacific and National Bank and that it be accompanied by certain
documents including the certification of Christiansen stating that the logs
have been approved prior to shipment. Also incorporated by reference in
the letter of credit is the Uniform Customs and Practice for Documentary
Credits.
The logs were then loaded on the vessel Zenlin Glory and were inspected
and certified by the representatives from the Bureau of Customs and
Bureau of Forestry. The logs were also approved by the Chief Mate of the
vessel. Christiansen, however, refused to issue his certification. As a
consequence, Feati refused to advance payment on the letter of credit.
Although it had allowed Villaluz to obtain a loan for P45,000 in order to
cover the cost of shipment.
Villauz appealed to the Central Bank and the Central Bank issued a
memorandum stating that the certification of the Bureau of Forestry is
sufficient to approve the shipment of the logs.
P 41 of 51
a.
The logs arrived at Korea and received by Hanmi and were later on sold to
Taitsung Lumber Company.
The demand of Villauz for payment of the draft were unheeded by Feati
because of the absence of the certification of Christiansen. Villaluz filed a
petition for mandamus and specific performance against Christiansen and
the Feati Bank.
5.
The trial court and the Ca rule din favor of Villaluz. Hence this petition.
ISSUE:
1.
2.
HELD:
1.
2.
3.
4.
Keng Hua Paper Products bought 50 tons waste paper from Ho Kee
Waste Paper in Hong Kong as manifested by a letter of credit issued by
Equitable Bank. Partial shipment was allowed and that the remaining
balance of the shipment was only 10 more tons.
Sea Land Service received at its Hong Kong terminal a sealed container
with the waste paper for shipment to Keng Hua Paper Products. The
shipment was discharged at the port in Manila. Notices were then sent
to Keng Hua but the latter failed to discharge the shipment and the
waste paper remained inside the container of Sea Land Service for 481
days. During the 481 days, demurrage charges accrued. Sea Land
Service is now asking for payment for the demurrage from Keng Hua.
Keng Hua on the other hand alleges that it only agreed for the
shipment of the remaining balance of 10 tons of waste paper and that
what Sea Land Service was asking Keng Hua to accept was 20 tons of
waste paper and that Keng Hua informed Sea Land that the shipment
was wrong. Keng Hua also argued that Sea Land should collect
payment of the demurrage from Ho Kee Waste Paper, since the later
was the one that hired Sea Land.
ISSUE:
1. Whether or not Keng Hua accepted the Bill of Lading and is therefore
liable for the payment of the demurrage charges.
HELD:
1.
2.
3.
4.
Judgment of the trial court and the CA are affirmed with only the payment
of interest modified. Keng Hua is liable for payment of the demurrage
charges.
Omission by Philam to draw the required drafts on the standby LCs can be
explained by the fact that it was the Mendozas who prepared, predated
and pre-accepted them
FACTS:
Respondent spouses obtained 2 loans from from Philam Insurance total
amount of P6000,000 to finance construction of their residential house at
Mandaue. The loans were to be liquidated in equal amortizations over a
period of 5 years from March 1972 to March 1982
To secure payment, Philam Life required that amortizations be guaranteed
by an irrevocable standby letter of credit of a commercial bank. Thus, the
mendozas contracted with pet. Insular bank (IBAA) for the issuance of 2
irrevocable standby letters of Credit (L/C). 1 st was for 500k 2 nd was for
100k. the 2 L/Cs, were in turn, secured by an REM on the houses of the
respondent spouses
Mendozas executed a promissory note in favor of IBAA
Both Notes authorized IBAA to sell their properties or securities to be
applied as payments on their obligations
Mendozas failed to pay Philamlife due on September 1979, Philamlife again
informed IBAA that it eas declaring the entire balance outstanding on both
loans, including damages, immediately due and payable. Philamlife
wanted to recover P274k while IBAA said they should pay only the
remaining obligation under the LCs for 30k only
REM secured was extrajudicially foreclosed in favor of IBAA
ISSUE:
1.
TRANSFIELD V. LUZON
443 SCRA 307
Letters of Credit
FACTS:
Transfield and Luzon LHC entered into a turnkey contract. Trans, undertook
to construct on a turnkey basis , a 70 megawatt hydro-electric power
station at the Bakun River in the provinces of Benguet. Trans was given
sole responsibility for the design
Contract provides that 1)target date of completion is june 2000 or such
later date as maybe agreed upon 2) Trans can ask for extensions of time
for example due to force majeure or delay by LHC. To secure the
performans of petitioners obligation, it opened in favor of LHC 2 letters of
credit on the local branch of ANZ bank and with Security bank corporation.
In the course of the project, LHC sought many extensions. The banks sent
letters to pet. That they will pay if and when LHC calls on them. LHC
asserted that the additional extension would not be warranted and that
pet. Is declared in default and asked that payment of 75k usd to be paid for
each day of delay from june 28m 2000
Pet sought injunction against respondent LHC and the banks from paying
on or in any manner disposing of the securities in favor of LHC
LHC argues that the Securities are independent of the main contract
between them as shown of the face of the letters of credit.
Whether or not IBAA has liability to Phlam under the LCs and
whether it is direct and primary and cannot be reduced by direct
payments made by Mendozas to Philam
ISSUE:
1.
RULING:
IBAA has primary obligation under the LCs. The intention of the parties
must prevail. The LCs secure the payment of any obligation of the
Mendozas to Philam life including all interest, etc provided it does not
exceed 600k. While they are a security arrangement, they cant be
converted to a contract of guaranty for it would be ultra vires. They are an
absolute undertaking for the money advanced. They are separate and
independent contracts. Payments by mendozas to philam are due to their
own prestation under the loan agreement
RULING:
Yes it applies.
Where the credit is irrevocable as in this case, there is a definite
undertaking by the issuing bank to pay the beneficiary provided that the
stipulated docs are presented. To say that the independence principle may
only be invoked by the banks and not the beneficiary would make the
principle nugatory. If, as argued by pet that there should be a compromise
between LHC and Pet first would concert the LC into a guarantee.
P 44 of 51
SUBISSUE:
Whether trans can file for injunction against respondents
No. it failed to show the clear and unmistakable right to restrain LHCs call
on the securities which would justify the injunction. There was an express
stipulation in favor of LHC to call upon the securities
VINTOLA v. INSULAR BANK
159 SCRA 140
Trust Receipts
FACTS:
Spouses Tirzo Vintola and Loreta Dy Vintola are the proprietors of Dax Kin
International (Dax), a company engaged in the manufacture of raw
seashells into finished products.
On August 20, 1975, the Vintolas applied for and were granted, a
commercial letter of credit with the Insular Bank of Asia and America
(IBAA), Cebu City. The letter of credit authorized the bank to negotiate for
their account, drafts drawn in favor of one of their suppliers, Efren Alani, on
Dax in the amount of P35, 000 to represent a shipment of a variety of puka
and olive shells. The Vintolas promised and agreed to pay the bank at
maturity said amount. To secure the release of the raw seashells, on the
same day, the Vintolas executed in favor of IBAA a trust receipt agreement,
which was to mature on October 19, 1975.
Three months after IBAA demanded the payment of the P35, 000. the
Vintoals offered to return the raw seashells to IBAA instead because they
were not able to dispose them. IBAA refused to accept the shells. IBAA
instituted the present action against the spouses for their failure to pay
their obligation for the crime of estafa.
ISSUE:
Whether the Vintolas still owed IBAA even though the goods held in trust
were not sold---YES!
HELD:
Vintolas are still liable under the Letter of Credit arrangement!
A letter of credit-trust receipt arrangement is endowed with its own distinct
features and characteristics. Under the set-up, a bank extends a loan
covered by the Letter of Credit, with the trust receipt as a security for the
loan. The transaction involves a loan feature represented by the letter of
credit, and a security feature, which is in the covering trust receipt.
A trust receipt is a security agreement, pursuant to which a bank acquired
a security interest in the goods. It secures an indebtedness, and there
can be no such thing as security interest that secures no obligation. It is
intended to aid in financing importers and retain dealers who do not have
The signature of Chi in the dorsal portion of the trust receipt does not bind
him solidarily with Rayon. At most, Chi is merely a guarantor.
The person signing the trust receipt for the corporation is not solidarily
liable with the entrustee-corporation for the civil liability arising from the
criminal offense (in this case, violation of section 13 of PD 115 failure of
an entrustee to turn over the proceeds of the sale of goods). He may,
however, be personally liable if he bound himself to pay the debt of the
corporation under a separate contract of surety or guaranty.
Furthermore, any doubt as to the true intent of the solidary guarantee
clause should be resolved against Prudential. The trust receipt together
with the questioned solidary guaranty clause is on a form drafted and
prepared solely by Prudential. Chis participation therein is limited to the
affixing of his signature thereon. It is, therefore a contract of adhesion, as
such it must be strictly construed against the party responsible for its
preparation.
Chis responsibility is limited to the principal obligation in the trust receipt
plus all the accessories thereof including judicial costs; with respect to the
latter, he shall only be liable for those costs incurred after being judicially
required to pay. The attorneys fees to be paid by Chi cannot be the same
as that to be paid by Rayon since it is only the trust receipt that is covered
by the guaranty and not the full extent of the latters liability.
SUMCAD V. PROVINCE OF SAMAR
100 PHIL 72
Sec. 132
FACTS:
May 1942, while the province of Samar was still occupied by the Japanese
military forces, a check was issued by said province to Paulino Santos (then
the postmaster of Borongan) for the sum of P25,000, drawn against the
Philippine National Bank (PNB), Cebu. The payee negotiated the check with
James McGuire, an American citizen and resident of Borongan. After the
liberation in 1946, McGuire presented the check to the municipal treasurer
of Borongan for payment, but the latter (who merely noted it) was not able
or did not choose to pay the same.
McGuire wrote letter to the Bureau of Posts seeking payment, these letters
were referred by the Director of the Bureau to the PNB.
On April 25, 1950, PNB requested the Bureau to furnish it with photostatic
copies of the check which were duly received by the bank on May 12. As of
this date, the province of Samar still had a deposit of P84, 287.47 in the
PNB. On May 14, PNB request McGuire to present the check to the
provincial treasurer and the provincial auditor for the certification. On Aug
22, McGuire again requested the Buresau of Posts to expedite compliance
with the requirement of the PNB so as to permit the encashment of the
check. Before the check could be certified, the province of Samar on Sept
4, 1951 withdrew the amount of P83, 504.07 leaving a balance of P743.43.
McGuire transferred his rights to the check to the present plaintiffs
(Sumacad). Sumacad filed the present collection case. Trial Court held PNB
and province of Samar solidarily liable. Only PNB appealed contending that
it could not pay the check because it was never presented to it with the
necessary certification and that it is the province of Samar, as the drawee,
that is primarily liable.
ISSUES:
Whether PNB is primarily liableNO! PNB is only susidiarily liable; province
of Samar is primarily liable
Whether there was acceptance by PNB---YES! There was implied
acceptance.
HELD:
An implied acceptance of the check by PNB was created in view of the fact
that upon its own request, it was furnished with the photostatic copies of
the check and it even required McGuire to present the check to the
provincial treasurer and auditor for certification. PNB voluntarily assumed
the obligation of holding so much of the deposit of the province of Samar
as would be sufficient to cover the amount of the check, or before allowing
the withdrawal that exhausted said deposit, of making the necessary
inquiry on the matter. Its actions amounted to implied acceptance.
ALLIED BANK V. CA
494 SCRA 467
Sec. 152
FACTS:
Allied Bank purchased an export bill from GGS. The bill was drawn form a
letter of credit covering mens Valvoline training suits in transit to West
Germany. The bill was issued by Chekiang First Bank, Hong Kong. In short,
GGS discounted the bill to Allied Bank instead of directly claiming payment
from Chekiang under the letter of credit. Allied Bank paid the peso
equivalent of the bill amounting to P151,474.52. GGS acknowleged receipt
of the amount in a letter.
Nari Gidwani and Alarcon International represented by Hans-Joachim
Schoeler executed Letters of Guaranty in favor of Allied Bank in case the
bill should be dishonored or retired. The Spouses De Villa and Nari Gadwani
executed a Continuing Gauaranty or Comprehensive Surety, guaranteeing
payment of any credit accommodation that Allied may extend to GGS.
Allied negotiated the bill to Chekiang, but payment was refused because of
some discrepancies in the documents. Allied demanded payment from GGS
and all the respondents based on the letters of guaranty and surety
agreement.
P 46 of 51
It is also argued that Allied did not protest the dishonor of the bill and
because of this GGS is discharged from its liability. The trial court dismissed
the petition of Allied but the CA reversed and ordered GGS to pay Allied.
Allied filed for a motion for reconsideration in order to hold Gidwani,
Alarcon and the Spouses De Villa liable for payment of the obligation.
ISSUE:
Can the respondents be held jointly and severally liable under the Letters
of Guaranty and Surety in the absence of protest on the bill in accordance
with Sec. 152 of the NIL?
RULING:
It is normal for a negotiating bank in a discounting arrangement, such as
Allied, to ask for securities. It is clear in this case that the respondents
undertook and bound themselves as guarantors and surety to pay the full
amount of the bill in case of dishonor or non-payment as evidenced by the
letters of guaranty and surety they executed. Obligations arising from
contracts have the force of law between the parties.
Also, it is immaterial that no protest was made by Allied in order to hold
the respondents liable.
1. The surety itself contained a stipulation waiving the need for notice
of dishonor and protest
2. Sec. 152 of the NIL is applicable only to indorsers and not to
guarantors and sureties. The liability of a gurantor and a surety is
broader than the liability of an indorser. Unless an instrument is
promptly presented for payment at maturity and a due notice of
dishonor is given to the indorser he is discharged from liability on
the bill. However, it is not necessary that notice be given to
gurarantors and sureties unless there is an express stipulation
requiring it.
It cannot also be argued that the contracts were contracts of adhesion
since the respondents fixed their signatures at different times on different
documents. Hence it is presumed that they had knowledge of the terms
and conditions of the letters of guaranty and surety. Laches is also
unavailing, inequity is not present in this case.
P 47 of 51
MORAN V. CA
230 SCRA 799
Sec. 185
Moran, 6 months after the incident, found out from Petrophil that Citytrust
notifying them that the two checks of Moran were inadvertently dishonored
due to operational error. This prompted Moran to write to Citytrust and ask
for indemnity for the damage caused by the dishonoring of the check.
Citytrust refused and Moran instituted a civil case for damages
FACTS:
The Morans are the owners of the Wack-Wack Petron gast station. They
purchase bulk fuel and other products form Pterophil Corp. on cash on
delivery basis. Orders were made by telephone and payments were
effected by personal checks upon delivery.
They maintained 1 current account and 2 savings account with Citytrust.
As special privilege the bank allowed the Morans to maintain a zero
balance in their current account. Transfers from savings account 1 to the
current account could only be made with the authority of the Morans, but
prior written authorization was given to Citytrust to transfer funds from
savings account 2 to the current account any time its funds are insufficient
to meet the withdrawals. The authorization was in the form of a preauthorized transfer agreement (PAT) which was an accommodation mae by
the bank in favor of the Morans.
Dec. 12, 1983 and Dec. 13, 1983: Moran issued 2 checks as payment for
the products they ordered from Petrophil. Check 1 P50,576 and Check 2
56,090
Dec. 14, 1983: Petrophil deposited the checks with PNB Pandacan.
Afterwards the checks were presented for clearing in the afternoon of the
same day. The Morans had zero balance in their current account and only
P26,104.30 in savings account 2 (the one with the PAT) while savings
account 1 only had P43,268.39
Dec. 15, 1983 (10:00 am): Moran deposited in savings account 1: P17,
628.83 and in savings account 2: P41,030. He also transferred by debit
memorandum P40,000 from savings account 1 to the current account and
at the same time P60,000 was transferred from savings account 2 to the
current account through the PAT
Petrophil refused to deliver
dishonoring of the checks
delivery forged the Morans
also cancelled their credit
purchases in cash.
Moran asked for an explanation from the bank, the bank replied that there
was a grave error that was committed. Diaz, the bank manager, then went
to Moran to get his signature for the managers check Moran applied for to
serve as payment for the dishonored checks. Diaz then personally went to
Petrophil to give the check.
ISSUES:
W/N Citytrust is liable to pay damages
W/N the Morans had sufficient funds to cover the checks when the bank
dishonored the checks
RULING: No.
A check is a bill of exchange drawn on a bank payable on demand. It is a
written order, addressed to a bank or persons carrying on the business of
banking, by a party having money in their hands, requesting them to pay
on presentment, to a person named therein or to bearer or order, a named
sum of money.
Fixed savings and current deposits of money in banks and other similar
institutions shall be governed by the provisions concerning simple loan.
The relationship between the bank and the depositor is that of debtor and
creditor. The bank is therefore bound to honor the checks of the depositor
to the extent of the amount of the deposits. The failure of the bank to pay
the check when the deposit is sufficient entitles the depositor to
substantial damages without any proof of actual damages.
Although the checks were processed in Dec. 15, 1983, the available
balance of the Morans on Dec. 14, 1983 was what was used in determining
whether or not there was sufficient cash deposited to fund the two checks.
Dec. 14, 1983 was the date when the checks were by presented by PNB
Pandacan to the clearing house. This is the standard clearing procedure.
Hence, the subsequent deposits and transfers made by the Morans on Dec.
15, 1983, were too late to prevent the dishonor of the checks.
A check as distinguished from an ordinary bill of exchange is supposed to
be drawn against a previous deposit of funds for it is ordinarily intended for
immediate payment. Only the drawer is at fault here since he failed to
keep track of his available balance. The PAT was merely an accommodation
in favor of Moran and legally the bank could still refuse the payment of the
checks since the Morans clearly did not have sufficient funds in their
accounts when the checks were dishonored.
The letter of Citytrust to Petrophil was merely to maintain goodwill and
continued patronage of a client and could not be construed as an
admission of liability
P 48 of 51
FACTS:
ISSUES:
Ines Chaves brought from Firestone several tires and paid using a check
amounting to Php 1,437.50. When the check was presented to Security
Bank, it was returned for insufficiency of funds.
Despite repeated
demands, Ines failed to pay thus firestone initiated an action against the
former. The petitioner asked for payment of attorneys fees which was
granted by the court. It is now the contention of Ines that she is not guilty
of bad faith and in consequence, attorney fees should not be granted.
ISSUES:
W/N there was bad faith on the part of Ines.
RULING:
Ines knew that that there were no funds to back up the check she issued.
This shows bad faith on her part. It would have been a different patter if
Firestone agreed to accept the check, knowing that it was not covered by
adequate funds in the bank in such a case, no finding of bad faith can be
made against the appellant. There was nothing in the record to show that
appellee knew that there were no funds in the bank when it accepted the
check from the appellant. Thus, the order of the lower court that the
appellants action was lacking of good faith was affirmed.
PEOPLE V. REYES ET. AL.
454 SCRA 635
Sec. 185 (NO DIGEST)
CRYSTAL V. CA
71 SCRA 443
Sec. 186
FACTS:
The case revolved around Crystals redemption of the property acquired by
respondent Ocang, Teodulo, etc. in an execution sale pursuant to a final
judgment of the trial court. According to the facts of the case, after issuing
a check for the redemption of the said land, the petitioner Crystal
immediately regained possession of the four parcels of land in question,
taking the same from Pelagia Ocang.
RULING:
The Supreme Court remanded the case for further proceedings to
determine whether the check was dishonored or become stale, in order to
determine if there was a valid redemption.
If the check has been
dishonored, then there can be no doubt that Crystals redemption was null
and void. If the check had become stale, then it becomes imperative that
the circumstance that caused its non-presentment be determined, for if
this was not due to the fault of Crystal, then it would be unfair to deprive
him of the rights he acquired as redemptioner, particularly, it the value of
the check was otherwise been received or realized by the party concerned.
WONG V. CA
351 SCRA 100
Sec. 186
FACTS:
Petitioner Wong was an agent of Limtong Press (LPI), a manufacturer of
calendars. As an agent. Limtong would get purchase orders of customers
and forward them to LPI. LPI would then ship the calendars directly to the
customers. It was then the agents that would collect the payments. Wong
however had a history of unremitted collections which he duly
acknowledged in a confirmation receipt he cosigned with his wife. Thus,
Wongs customers were required to issue postdated checks before LPI
would accept their purchase orders.
In 1985, Wong issued 6 postdated checks totaling Php 18T+ which were
initially intended to guarantee the calendar orders of customer who failed
to issue postdated checks. However, it was company policy not to accept
checks as guarantees, thus, Wong and LPI just agreed to apply the checks
to the payment of the petitioners unremitted collections for 1984 also
amounting to Php 18T+. Before the maturity of the checks, Wong asked
LPI not to deposit the checks and promised to replace them within 30 days.
But since petitioner did not fulfill his promise, LPI deposited the checks with
RCBC. The checks were returned by reason account closed. Wong was
charged with 3 counts of violation of BP22.
It was the contention of Wong that the checks were mere guarantees for
the calendar purchases of his customers, thus, there is no consideration
behind the checks issued. Wong also contends that LPI was not a holder
P 49 of 51
for value since the checks were deposited after the customers paid their
orders. The checks should have been returned to him instead.
Wong also contends that since complainant deposited the checks on June
5, 1986 or 157 days after maturity of the checks, the presumption of
knowledge of lack of funds under BP 22 should not apply to him. He
further claims that he should not be expected to keep his bank account
active and funded beyond the 90-day period.
ISSUES:
W/N the elements of BP 22 are present
RULING:
The issue of whether the checks were issued as mere guarantees of
payment for an obligation was already settled by the court. It was enough
to note that LPI does not accept checks as guarantees and that the mere
act of issuing worthless check is malum prohibitum, therefore, Wong
should be liable for the said checks.
There are two ways of violating BP 22,: 1) issuing worthless checks
knowing at the time of issue that the check is not sufficiently funded and
(2) by having sufficient funds in or credit with the draw bank at the time of
the issue but failing to keep sufficient funds with the said bank to cover the
full amount of the check when presented within a period of ninety days.
That the check must be deposited within 90 days is simply a condition
prima facie presumption of knowledge of lack of funds to arise. There are
other conditions such as the dishonor of the check and failure of the maker
to make arrangements for payment in full within 5 banking days after the
notice.
Under section 186, a check must be presented for payment within a
reasonable time after its issue to 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. In this
case, the checks issued were not yet stale, since they were deposited 157
days after the date of the check. Although LPI failed to avail of the prima
facie presumption with the 90 day condition, it can still prove lack of
knowledge through other means.
NAGRAMPA V. PEOPLE
386 SCRA 412
Sec. 186
It was the contention of NGARAMPA that they issued the check with an
agreement htat they will replace them with cash if the backhoe would be in
good running condition. Unfortunately, the said Backhoe broke down
several times despite frequent repairs. NGARAMPA said that it demanded
FEDCOR to return the checks but instead of returning them, the latter
deposited the checks. Petitioner further contends that they were not guilty
of Estafa since there was no element of damage on the part of FEDCOR.
ISSUES:
W/N the petitioner is guilty of violation of BP 22 considering that the
checks were presented more than 90 days after the maturity of the check.
RULING:
By current banking practice, a check becomes stale after more than 6
months or 180 days. These checks were presented before 6 months or 180
days. Thus, Nagrampa is guilty of 2 counts of BP 22.
It was also found that the account of NANGARAMPA has been closed 4
years before he issued the check. There was knowledge on his part that
there were no funds to back up the checks he issued.
NGARAMPAs contention that Administrative Circular No. 12-2000 removed
the penalty of imprisonment for BP 22 violations cannot be given any merit
for such circular merely laid dow3n a reule of preference in the application
of the penalties provided in BP 22.
AC12-2000 establishes a rule of
preference in the application of the penal provisions of BP 22 such that
where the circumstance of both the offense and the offender clearly
indicate good faith, imposition of fine is the more appropriate penalty. But
in this case, there clearly was bad faith, thus, fine as penalty is
inappropriate.
TY V. PEOPLE
439 SCRA 220
Sec. 186
FACTS:
FACTS:
P 50 of 51
P 51 of 51