Professional Documents
Culture Documents
1.
PNB
v.
CA
-
LIBONGCO
ER:
-
-
-
-
-
-
Parties:
DECS
(drawer),
PNB
(drawee
bank),
Abante
(payee),
Capitol
(payees
bank),
PBCom
(collecting
bank)
DECS
wrote
a
check
in
favor
of
Abante
against
the
PNB.
Abante
deposited
check
to
Capitol,
Capitol
deposited
to
PBCom.
PBCom
sent
the
check
to
PNB
for
clearing.
PNB
initially
cleared
the
check,
credited
PBCom.
PNB
returned
the
check,
debited
PBComs
account
because
there
was
a
material
alteration
(check
number)
W/N
an
alteration
of
the
check
number
is
a
material
alteration
NO
An
alteration
is
said
to
be
material
if
it
alters
the
effect
of
the
instrument.
It
means
an
unauthorized
change
in
an
instrument
that
purports
to
modify
in
any
respect
the
obligation
of
a
party
or
an
unauthorized
addition
of
words
or
numbers
or
other
change
to
an
incomplete
instrument
relating
to
the
obligation
of
a
party.
In
other
words,
a
material
alteration
is
one
which
changes
the
items
which
are
required
to
be
stated
under
Section
1
of
the
NIL.
Facts:
- A
check,
dated
Aug.
7,
1981
in
the
amount
of
P97,650
was
drawn
by
the
Ministry
of
Education
and
Culture
(now
known
as
DECS)
payable
to
F.
Abante
Marketing
(Abante).
The
check
was
drawn
against
the
PNB.
- Abante,
a
client
of
Capitol
City
Development
Bank
(Capitol),
deposited
the
check
in
its
saving
account
in
said
bank.
In
turn,
Capitol
deposited
the
same
in
its
account
with
PBCom,
which
then
sent
the
check
to
PNB
for
clearing.
- PNB
initially
cleared
the
check.
PBCom
credited
Capitols
account
for
P97,650.
- Oct.
1981:
PNB
returned
the
check
to
PBCom
and
debited
the
amount
from
the
latters
account
there
being
a
material
alteration
of
the
check
number.
- PBCom
then
proceeded
to
debit
Capitols
account
and
subsequently
sent
the
check
back
to
PNB.
PNB,
however,
returned
the
check
to
PBCom.
- Capitol
could
no
longer
debit
Abantes
account
since
he
had
withdrawn
the
amount
of
the
check.
Capitol
sought
clarification
from
PBCom
and
demanded
re-crediting.
PBCom
also
performed
these
steps
against
PNB.
- Capitol
filed
a
suit
with
the
RTC
of
Manila
against
PBCom,
which
filed
a
third-party
complaint
against
PNB
for
indemnity
with
respect
to
Capitols
claims.
PNB
then
filed
a
fourth-party
suit
against
Abante.
- RTC:
PBCom
should
re-credit
Capitol
the
amount
plus
12%
interest
from
Oct.
19,1981
,
PNB
should
reimburse
PBCom,
Abante
should
reimburse.
Attorneys
fees
was
also
awarded
to
Capitol
with
the
same
reimbursement
scheme.
- CA:
modified
RTC
judgement,
held
that
PBCom
was
exempt
from
liability.
PNB
should
honor
the
check
plus
interest.
PBCom
to
re-credit
Capitols
account
with
said
amount.
- Motion
for
reconsideration
by
PNB
was
dismissed,
hence
this
petition.
Primary
Issue:
W/N
an
alteration
of
the
serial
number
of
a
check
is
a
material
alteration
Secondary
Issue:
W/N
certification
by
DECS
can
be
given
weight
in
evidence
W/N
a
drawee
bank
which
failed
to
return
a
check
within
the
24
hour
clearing
period
may
recover
the
value
of
the
check
from
the
collecting
bank
W/N
PNB
is
liable
for
attorneys
fees
despite
absence
of
malice
or
ill
will
Ratio:
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
Sec.
125
of
the
NIL.
PNB
argues
that
here
is
no
hard
and
fast
rule
in
the
interpretation
of
the
aforequoted
provision
of
the
NIL.
It
maintains
that
under
Section
125
(f),
any
change
that
alters
the
effect
of
the
instrument
is
a
material
alteration.
o An
alteration
is
said
to
be
material
if
it
alters
the
effect
of
the
instrument.
It
means
an
unauthorized
change
in
an
instrument
that
purports
to
modify
in
any
respect
the
obligation
of
a
party
or
an
unauthorized
addition
of
words
or
numbers
or
other
change
to
an
incomplete
instrument
relating
to
the
obligation
of
a
party.
In
other
words,
a
material
alteration
is
one
which
changes
the
items
which
are
required
to
be
stated
under
Section
1
of
the
NIL.
Justice
Jose
C.
Vitug
opines
that
an
innocent
alteration
(generally,
changes
on
items
other
than
those
required
to
be
stated
under
Sec.
1
of
the
NIL)
and
spoliation
(alterations
done
by
a
stranger)
will
not
avoid
the
instrument,
but
the
holder
may
enforce
it
only
according
to
its
original
tenor.
o Material
Alterations:
(1)
Substituting
the
words
or
bearer
for
order.
(2)
Writing
protest
waived
above
blank
indorsements.
(3)
A
change
in
the
date
from
which
interest
is
to
run.
(4)
A
check
was
originally
drawn
as
follows:
Iron
County
Bank,
Crystal
Falls,
Mich.
Aug.
5,
1901.
Pay
to
G.L.
or
order
$9
fifty
cents
CTR.
The
insertion
of
the
figure
5
before
the
figure
9,
the
instrument
being
otherwise
unchanged.
5)
Adding
the
words
with
interest
with
or
without
a
fixed
rate.
(6)
An
alteration
in
the
maturity
of
a
note,
whether
the
time
for
payment
is
thereby
curtailed
or
extended.
(7)
An
instrument
was
payable
First
Natl
Bank,
the
plaintiff
added
the
word
Marion.
(8)
Plaintiff,
without
consent
of
the
defendant,
struck
out
the
name
of
the
defendant
as
payee
and
inserted
the
name
of
the
maker
of
the
original
note.
(9)
Striking
out
the
name
of
the
payee
and
substituting
that
of
the
person
who
actually
discounted
the
note.
(10)
Substituting
the
address
of
the
maker
for
the
name
of
a
co-maker.
o The
case
at
the
bench
is
unique
in
the
sense
that
what
was
altered
is
the
serial
number
of
the
check
in
question,
an
item
which,
it
can
readily
be
observed,
is
not
an
essential
requisite
for
negotiability
under
Sec.
1
of
the
NIL.
The
aforementioned
alteration
did
not
change
the
relations
between
the
parties.
The
name
of
the
drawer
and
the
drawee
were
not
altered.
The
intended
payee
was
the
same.
The
sum
of
money
due
to
the
payee
remained
the
same.
o The
checks
serial
number
is
not
the
sole
indication
of
its
origin.
As
succinctly
found
by
the
CA,
the
name
of
the
government
agency
which
issued
the
subject
check
was
prominently
printed
therein.
The
checks
issuer
was
therefore
sufficiently
identified,
rendering
the
referral
to
the
serial
number
redundant
and
inconsequential.
PNB
claims
that
even
if
the
author
of
the
certification
issued
by
the
DECS
was
not
presented,
still
the
best
evidence
of
the
material
alteration
would
be
the
disputed
check
itself
and
the
serial
number
thereon.
PNB
thus
assails
the
refusal
of
the
CA
to
give
weight
to
the
certification
because
the
author
thereof
was
not
presented
to
identify
it
and
to
be
cross-
examined
thereon.
o The
one
who
signed
the
certification
was
not
presented
before
the
trial
court
to
prove
that
the
said
document
was
really
the
document
he
prepared
and
that
the
signature
below
the
said
document
is
his
own
signature.
Neither
did
petitioner
present
an
eyewitness
to
the
execution
of
the
questioned
document
who
could
possibly
identify
it.
Absent
this
proof,
we
cannot
rule
on
the
authenticity
of
the
contents
of
the
certification.
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
Since
there
is
no
material
alteration
in
the
check,
PNB
has
no
right
to
dishonor
it
and
return
it
to
PBCom,
the
same
being
in
all
respects
negotiable.
PNB
cannot
then
recover
from
PBCom
However,
the
amount
of
P10,000.00
as
attorneys
fees
is
hereby
deleted.
In
their
respective
decisions,
the
RTC
and
the
CA
failed
to
explicitly
state
the
rationale
for
the
said
award.
2.
AMERICAN
BANK
v.
MACONDRAY
PEREZ
DE
CHAMP-LEH
Emergency
Recit:
Bill
of
exchange
was
presented
for
encashment
by
American
Bank
(AB);
dishonored.
Duly
protested
AB
alleged
that
Macondray
et
al
(Mac)
are
liable
under
their
indorsement.
o Submitted
an
alleged
form
of
the
negotiable
instrument
in
question.
Indorsement
stated
that
protest,
demand,
and
notice
of
nonpayment
was
waived
Court
found
that
the
waiver
was
added
after
Mac
et
al
affixed
their
signature
on
the
instrument
Ruled
that
such
was
a
material
alteration.
As
Mac
et
al
did
not
make,
authorize,
or
assent
to
the
alteration,
IT
IS
AVOIDED
I.
Facts
Action
by
the
American
Bank
(indorser)
against:
o Macondray
&
Co.
as
indorser
and
o V.
S.
Wolff
as
drawer
All
parties
to
a
certain
bill
of
exchange,
which,
as
set
out
in
the
complaint
of
the
plaintiff,
is
as
follows
(emphasis
supplied
by
digest
author):
MANILA,
P.
I.,
August
12,
1902.
$300.00
At
sight
pay
to
my
order
three
hundred
dollars,
value
received,
and
charge
to
my
account.
To
F.
H.
TAYLOR
&
Co.,
Louisville,
Kentucky.
No
................................
[Indorsements.]
V.
S.
Wolff.
The
signature
is
O.
K.
payment
guaranteed.
Protest,
demand,
and
notice
of
nonpayment
waived.
Macondray
&
Company.
Pay
to
First
National
Bank
of
San
Francisco,
or
order.
American
Bank,
Manila,
P.
I.
H.
B.
Mulford,
cashier.
Pay
to
3rd
National
Bank
or
order.
The
First
National
Bank
of
San
Francisco.
James
K.
Lynch,
cashier.
This
alleged
bill
of
exchange,
in
the
alleged
form
as
it
appears
above,
was
sent
to
the
correspondent
of
the
said
American
Bank
in
the
United
States
for
payment,
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
Payment
was
not
made
for
the
reasons
that
appear
in
a
protest
made
by
a
notary
public
in
the
United
States
(Gaston
the
entire
protest
of
the
notary
public
is
cited
in
the
case;
I
included
it
at
the
bottom
of
the
digest
for
those
who
want
to
see
it,
but
its
not
important
with
respect
to
the
topic
at
hand).
American
Bank
claims
the
right
to
recover
of
the
defendant
the
amount
of
said
bill
of
exchange,
together
with
the
expenses
incurred
by
the
protest,
upon
the
theory
that
the
defendant
guaranteed
the
payment
of
said
bill
of
exchange
in
the
following
form,
as
appears
upon
the
said
bill
of
exchange,
st
as
the
same
is
set
out
in
the
petition
of
the
plaintiff
(see
the
cited
negotiable
instrument;
1
indorsement)
The
defendant,
by
its
representative,
Atherton
Macondray,
testified:
o That
he
did
not
intend
to
guarantee
the
payment
of
said
bill
of
exchange;
o That
he
only
certified
that
the
signature,
V.
S.
Wolff,
to
said
bill
of
exchange
was
genuine,
and
o That
the
statement
that
appears
in
the
above
alleged
indorsement
"Payment
guaranteed.
Protest,
demand,
and
notice
of
nonpayment
waived"
was
not
written
on
said
indorsement
at
the
time
he
signed
the
firm
name
of
Macondray
&
Co
The
plaintiff,
American
Bank,
by
its
representative,
H.
B.
Mulford,
cashier,
in
his
testimony
stated
that
this
statement
"Payment
guaranteed.
Protest,
demand,
and
notice
of
nonpayment
waived"
were
written
on
said
bill
of
exchange
before
the
same
was
signed
by
Macondray
&
Co.
Issue
W/N
Macondray
&
Co.
is
liable
upon
said
bill
of
exchange
as
an
indorser
[Court
explains
issue
further]
If
the
indorsement
was
made
by
Macondray
&
Co.
in
the
form
alleged
by
the
plaintiff,
said
company
is
clearly
liable
as
an
indorser
upon
said
bill
of
exchange,
providing
the
same
was
duly
protested
for
nonpayment.
No
question
is
raised
as
to
the
legality
of
the
protest.
o
II.
III.
IV.
Held
[Macondray
et
al
not
liable]
The
judgment
of
the
lower
court
is
reversed,
with
the
costs
of
both
instances
to
be
charged
against
the
plaintiff.
So
ordered.
Ratio
Court
examined
o the
alleged
indorsement
of
Macondray
&
Co.
which
appeared
upon
the
said
bill
of
exchange
at
the
time
of
the
trial,
and
o the
indorsement
of
said
company
at
the
time
of
the
trial,
and
o the
indorsement
of
said
company
at
the
time
of
the
protest
of
said
bill
of
exchange,
1
Uncertainty
or
doubt
as
to
whether
something
is
the
case
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
NOT
THE
MAIN
ISSUE
WITH
RESPECT
TO
CURRENT
TOPIC
IN
NEGO
We
hold
that
his
original
indorsement
created
no
liability
whatever.
o The
original
indorsement
by
the
defendant
was
for
the
purpose
only
of
assuring
the
plaintiff
that
the
signature
of
V.
S.
Wolff,
as
attached
to
the
original
bill
of
exchange,
was
genuine
that
is
to
say,
that
the
person
who
signed
the
said
bill
of
exchange
was
in
fact
V.
S.
Wolff,
the
person
whom
he
represented
himself
to
be.
o It
was
an
indorsement
for
identification
of
the
person
only,
and
not
for
the
purpose
of
incurring
any
liability
as
to
the
payment
of
such
bill
of
exchange.
PROTEST
(FOR
THOSE
OF
YE
WHO
WANT
TO
SEE
IT)
State
of
Kentucky,
City
of
Louisville,
Jefferson
County
}
ss.
On
this
25th
day
of
September,
1902,
I.
C.
W.
Dieruff,
notary
public,
duly
authorized
and
appointed
as
such,
and
residing
in
the
city
of
Louisville,
at
the
petition
of
the
Third
National
Bank
of
Louisville,
Kentucky,
went
with
the
original
bill
of
exchange,
a
true
copy
of
which
is
hereto
annexed,
and
made
a
diligent
search
for
said
F.
H.
Taylor
&
Company,
in
order
to
demand
payment
of
the
same,
but
I
was
unable
to
find
said
F.
H.
Taylor
&
Company,
nor
a
representative
of
said
company
with
authority
to
pay
the
same.
I
went
also
to
various
banks
and
demanded
payment,
which
was
denied.
Therefore,
I,
the
said
notary
public,
have
protested
and
for
these
reasons
do
solemnly
protest
against
the
drawer,
indorser,
and
against
all
other
persons,
for
the
exchange,
reexchange,
and
all
the
expenses,
damages,
and
interest
sustained,
or
that
will
be
sustained,
by
reason
of
the
nonpayment
an
dishonor
of
said
bill
of
exchange.
Protest
and
copy
$1.25
For information
1.00
Postage stamps
$2.27
Made
and
protested
in
said
city
and
county,
and
my
notarial
seal
affixed
the
said
day
and
year,
being
written
in
my
office,
as
required
by
the
law.
C.
W.
DIERUFF,
Notary
Public.
3.
MONTINOLA
v.
PNB
-
GERALDEZ
Sir
in
the
case
of
Montinola
vs.
PNB,
Montinola
filed
a
complaint
against
PNB
to
collect
P100k,
the
value
of
a
check
that
was
supposedly
indorsed
to
him.
The
story
of
this
check
starts
with
RAMOS,
who
was
an
employee
under
LAYA,
the
latter
being
a
Provincial
Treasurer.
Ramos
then
became
a
disbursing
officer
of
USAFFE,
and
after
having
received
funds
(in
emergency
notes,
which
was
money
then,
and
a
check)
from
another
province,
and
presenting
it
to
Laya
in
his
own
province,
Laya
gave
him
more
emergency
notes
and
this
check
for
P100k.
Money
here
was
to
be
used
to
fund
gorillas
against
the
japs.
Unfortunately,
Ramos
was
captured
and
released
almost
a
year
later.
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
Eventually,
Ramos
indorses
check
to
Montilano.
Circumstances
surrounding
the
negotiation
are
very
cloudy,
but
it
CFI
has
found
that
Ramos
indorsed
P30,000
of
emergency
money
of
the
check
to
Montillano,
for
P90,000
worth
of
Japanese
Military
Notes.
He
is
now
trying
to
enforce
payment
of
this
check,
which
appears
to
be
in
very
bad
shape
and
has
been
held
to
have
been
altered
mainly
in
the
manner
of
how
the
indorsement
was
done
and
written,
as
well
as
whether
the
maker
was
an
agent
of
PNB
or
signing
as
Provincial
Treasurer.
SC
held
Montinola
couldnt
collect
because:
There
was
a
material
alteration,
there
was
no
valid
indorsement,
he
was
not
a
holder
in
due
course,
he
did
not
take
in
good
faith,
and
the
indorser
indorsed
in
his
own
name
when
it
shouldve
been
in
his
capacity
as
disbursing
officer
of
USAFFE.
FACTS
(this
has
already
been
shortened
a
lot.
Its
here
in
case
he
decided
to
test)
1. In
August,
1947,
Enrique
P.
MONTINOLA
(MONTINOLA)
filed
a
complaint
in
the
CFI
of
Manila
against
the
PNB
and
the
Provincial
Treasurer
of
Misamis
Oriental,
Ubaldo
LAYA
(LAYA),
to
collect
the
sum
of
P100,000,
the
amount
of
CHECK
No.
1382
issued
on
May
2,
1942
by
the
Provincial
Treasurer
of
Misamis
Oriental,
to
Mariano
V.
RAMOS
(RAMOS)
and
supposedly
indorsed
to
MONTINOLA.
a. After
hearing,
the
court
rendered
a
decision
DISMISSING
the
complaint
with
costs
against
MONTINOLA.
2. Background
Story
about
CHECK
a. There
is
no
dispute
as
to
the
following
facts.
In
April
and
May,
1942,
LAYA
was
the
Provincial
Treasurer
of
Misamis
Oriental.
i. As
such
Provincial
Treasurer
he
was
ex
officio
agent
of
the
PNB
branch
in
the
province.
b. RAMOS
worked
under
LAYA
as
assistant
agent
in
the
bank
branch
aforementioned.
In
April
of
that
year
1942,
the
currency
being
used
in
Mindanao,
particularly
Misamis
Oriental
and
Lanao
which
had
not
yet
been
occupied
by
the
Japanese
invading
forces,
was
the
emergency
currency.
c. April
26,
1942,
LAYA
recommended
RAMOS
to
be
inducted
into
the
US
Armed
Forces
in
the
Far
East
(USAFFE)
as
disbursing
officer.
i. As
such,
he
went
to
neighboring
proving
Lanao
to
get
a
cash
advance,
P800,000,
to
be
used
by
USAFFE.
ii. Provincial
Treasurer
of
Lanao
did
not
have
cash,
so
instead
he
gave
RAMOS
P300,000
in
emergency
notes,
and
a
check
for
P500,000.
iii. May
2,
1942,
RAMOS
went
to
LAYA
to
encash
check,
but
LAYA
did
not
have
cash.
Instead,
LAYA
gave
RAMOS
P400,000
in
emergency
notes,
and
the
CHECK
No.
1382
for
P100,000,
drawn
on
PNB.
1. LAYA
had
deposited
P500,000
in
PNB
Cebu,
whereat
the
CHECK
is
expected
to
be
deposited
and
against.
d. RAMOS
did
not
get
to
encash
CHECK.
Same
day
the
CHECK
was
issued,
he
became
a
prisoner
of
war
until
February
1943.
He
resumed
life
as
a
civilian,
not
anymore
a
member
of
USAFFE.
3. Sometime
late
1944
January
1945,
Ramos
allegedly
indorsed
CHECK
to
MONTINOLA.
4. This
negotiation
and
transfer
are
now
in
controversy.
a. MONTINOLA
claims:
i. RAMOS
indorsed
the
check
to
him.
They
went
to
President
of
PNB
in
Manila.
PNB
President
said
check
was
good.
ii. RAMOS
agreed
to
sell
the
CHECK
for
P850,000
Japanese
military
notes
(different
from
emergency
notes).
P450,000
paid
in
the
Jap.
Mil.
Notes,
P400,000
payable
in
kind
medicines.
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
iii. The
indorsement
at
the
back
of
CHECK
was
described
in
detail
by
CFI.
b. RAMOS
claims:
i. The
agreement
between
himself
and
MONTINOLA
regarding
the
transfer
of
the
CHECK
was
that
he
was
selling
only
P30,000
of
the
CHECK.
ii. The
indorsement
read:
Pay
to
the
order
of
Enrique
P.
MONTINOLA
P30,000
only.
The
balance
to
be
deposited
in
the
PNB
to
the
credit
of
RAMOS.
iii. In
addition,
MONTINOLA
was
to
pay
him
P90,000
in
Jap.
Mil.
Notes.
1. Half
was
paid
by
virtue
of
two
checks.
The
other
half
is
still
unpaid.
5. The
CHECK
a
description.
a. The
indorsement
inscribed
at
the
back
of
CHECK
mentioned
by
RAMOS
is
now
gone.
The
one
mentioned
by
MONTINOLA
is
found
there.
b. During
filing
of
complaint,
MONTINOLA
claimed
the
CHECK
was
lost.
In
lieu
of
this,
he
filed
a
photostic
(?)
copy.
During
the
trial,
MONTINOLA
presented
the
actual
check.
However,
it
was
in
bad
shape.
i. It
was
badly
mutilated,
bottled,
torn
and
partly
burned.
It
is
pasted
all
over
with
cellophane.
Seems
to
have
been
cut
and
torn
into
3.
Theres
a
big
blotch
of
indelible
ink.
It
looked
freaky
and
nasty.
ii. Difficult,
if
not
impossible,
to
read
some
of
the
words
and
figures.
c. In
explanation
of
the
condition,
MONTINOLA
says
that
after
receiving
the
CHECK,
RAMOS
demanded
that
it
be
returned,
and
if
not,
the
latter
would
inflict
physical
harm
with
his
Guerilla
friends.
i. To
discourage
RAMOS
from
getting
it
back,
he
had
to
resort
to
a
brilliant
mutilation
of
CHECK.
6. The
INDORSEMENT
written
at
the
back
SC
cites
CFIs
well-written
decision
(in
very
great
detail)
a. According
to
MONTINOLA
story,
he
paid
P850,000,
in
Jap.
Mil.
Notes
and
in
kind.
True?
i. One
thing
difficult
to
understand
is
why
RAMOS
should
go
into
the
laborious
task
of
placing
the
rubber
stamp
"Pay
to
the
order
of"
and
afterwards
move
to
the
typewriter
and
write
the
words
"Enrique
P.
MONTINOLA"
"and
"517
Isabel
Street",
and
finally
sign
his
name
too
far
below
the
main
indorsement.
ii. Other
circumstances
that
bear
heavily
on
the
claim
of
MONTINOLA
is
the
present
condition
of
check,
which
is
accepted
in
court
to
have
been
done
by
MONTINOLA.
Acts
done
by
him
to
a
document
he
claims
to
contain
his
life
savings,
approximate
intentional
cancellation.
1. His
excuse
for
this
in
order
to
disinterest
RAMOS
from
retrieving
it
is
super
stupid.
(read
the
case
for
funny
details)
a. CFI:
Why
is
he
so
scared
of
RAMOS?
Why
not
call
police?
2. The
only
logical
conclusion
is
that
MONTINOLA
didnt
invest
enough
in
that
check
to
have
adopted
a
what
do
I
care?
attitude.
(case)
iii. Theres
also
the
issue
of
allegedly
losing
the
check
at
the
time
of
filing
of
complaint.
1. Comparing
the
2
checks
shows
major
discrepancies.
2. Also
unbelievable,
again
because
the
check
is
supposedly
vital
to
him,
that
he
took
extreme
pains
and
precautions
to
save
CHECK
from
possible
ravages
of
war,
registered
it
with
General
Auditing
Office,
took
a
pic
of
it,
etc.
iv. MONTINOLA
was
not
so
sure
as
to
what
he
had
testified
to
in
reference
to
the
consideration
he
paid
for
the
CHECK.
In
court
he
testified
paying
part
in
cash,
then
presented
evidence
in
court
showing
a
letter
he
himself
wrote
mentioning
nothing
about
cash
(just
goods).
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
b. Bottom
line
is,
CFI
concludes
that
the
RAMOS
story
is
the
correct
story
(Bullet
#4-B).
7. The
NIL
AGENCY
issues
SC
again
cites
CFI
decision
a. At
the
beginning,
we
stated
that
Provincial
Treasurer
LAYA
was
ex
officio
of
PNB
Branch
in
that
province.
On
the
face
of
CHECK,
we
now
find
the
words
in
parenthesis
"Agent,
Phil.
National
Bank"
under
the
signature
of
LAYA,
purportedly
saying
that
the
CHECK
was
issued
by
LAYA
as
agent
of
PNB.
i. If
this
is
true,
the
bank
becomes
drawee
and
drawer
of
CHECK.
ii. MONTINOLA
wants
to
hold
PNB
as
drawer,
for
if
not,
PNB,
as
payee,
need
not
pay
since
it
is
a
mere
drawee
only.
It
has
not
yet
accepted.
b. CFI
finds:
i. LAYA
testified
that
when
he
issued
this
check,
these
words
were
not
there.
RAMOS
corroborated
this.
1. Reason:
if
he
signed
as
agent,
it
would
be
countersigned
by
cashier
of
PNB.
Instead,
it
was
signed
by
provincial
auditor,
who
is
not
in
any
way
connected
to
PNB.
ii. Preponderance
of
evidence
supports
LAYAs
testimony.
1. Court
also
finds
that
LAYA
deposited
amount
in
PNB
Cebu
branch
in
his
capacity
as
Provincial
Treasurer,
expecting
that
the
check
will
be
cashed
against
that.
2. Also,
at
time
of
issuance
of
CHECK,
LAYA
already
knew
that
Manila
and
Cebu
were
occupied
and
he
wouldnt
have
issued
checks
as
a
bank
employee
drawn
against
the
central
office
of
same
bank.
iii. Bottom
line
is,
theres
no
reason
why
LAYA
would
issue
check
as
agent
of
PNB.
PNB
does
not
fund
USAFFE,
government
does.
8. OTHER
facts
and
things
considered
a. Could
RAMOS
be
the
culprit
in
adding
the
words,
etc.?
i. No.
Even
before
induction
to
USAFFE,
he
was
already
assistant
of
LAYA.
1. He
would
have
known
the
procedure
regarding
who
should
countersign
and
stuff.
b. During
the
transcription
of
the
record
on
appeal,
many
omissions
were
made
by
MONTINOLA
i. He
did
not
mention
the
part
about
LAYA
signing
as
agent
of
PNB.
c. It
would
seem
the
original
Annex
A,
containing
the
photostatic
copy,
is
unexplainably
gone.
The
new
Annex
B,
seems
not
to
be
the
same
as
the
original.
d. Annex
B,
the
new
photostatic
copy
with
the
court,
does
not
seem
to
be
a
faithful
and
accurate
reproduction
of
the
CHECK.
Court
goes
on
to
discuss
relative
positioning
of
letters
and
marks,
etc.
9. Note
that
the
check
was
payable
on
demand.
But
it
was
issued
2.5
years
ago.
It
is
now
stale.
The
intimation
of
MONTINOLA
that
he
met
with
the
President
of
PNB,
etc.,
has
been
flatly
denied.
ISSUE
and
HELD:
1.
W/N
MONTINOLA
can
collect.
-
NO,
CFI
decision
affirmed.
Not
to
mention,
criminal
charges
can
be
filed
against
him.
RATIO:
On
the
basis
of
the
facts
above
related
there
are
several
reasons
why
the
complaint
of
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
MONTINOLA
cannot
prosper:
o The
insertion
of
the
words
"Agent,
Phil.
National
Bank"
which
converts
the
bank
from
a
mere
drawee
to
a
drawer
and
therefore
changes
its
liability,
constitutes
a
material
alteration
of
the
instrument
without
the
consent
of
the
parties
liable
thereon,
and
so
discharges
the
instrument.
(Section
124
of
the
Negotiable
Instruments
Law).
o The
CHECK
was
not
legally
negotiated
within
the
meaning
of
the
Negotiable
Instruments
Law.
Section
32
of
the
same
law
provides
that
"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
a
negotiation
of
the
instrument."
MONTINOLA
may
therefore
not
be
regarded
as
an
indorsee.
At
most
he
may
be
regarded
as
a
mere
assignee
of
the
P30,000
sold
to
him
by
RAMOS,
in
which
case,
as
such
assignee,
he
is
subject
to
all
defenses
available
to
the
drawer
Provincial
Treasurer
of
Misamis
Oriental
and
against
RAMOS.
o Neither
can
MONTINOLA
be
considered
as
a
holder
in
due
course
because
section
52
of
said
law
defines
a
holder
in
due
course
as
a
holder
who
has
taken
the
instrument
under
certain
conditions,
one
of
which
is
that
he
became
the
holder
before
it
was
overdue.
When
MONTINOLA
received
the
CHECK,
it
was
long
overdue.
o And,
MONTINOLA
is
not
even
a
holder
because
section
191
of
the
same
law
defines
holder
as
the
payee
or
indorsee
of
a
bill
or
note
and
MONTINOLA
is
not
a
payee.
Neither
is
he
an
indorsee
for
as
already
stated,
at
most
he
can
be
considered
only
as
assignee.
o Neither
could
it
be
said
that
he
took
it
in
good
faith.
As
already
stated,
he
has
not
paid
the
full
amount
of
P90,000
for
which
RAMOS
sold
him
P30,000
of
the
value
of
the
CHECK.
In
the
second
place,
as
was
stated
by
the
trial
court
in
its
decision,
MONTINOLA
speculated
on
the
CHECK
and
took
a
chance
on
its
being
paid
after
the
war.
MONTINOLA
must
have
known
that
at
the
time
the
CHECK
was
issued
in
May,
1942,
the
money
circulating
in
Mindanao
and
the
Visayas
was
only
the
emergency
notes
and
that
the
CHECK
was
intended
to
be
payable
in
that
currency.
Also,
he
should
have
known
that
a
CHECK
for
such
a
large
amount
of
P100,000
could
not
have
been
issued
to
RAMOS
in
his
private
capacity
but
rather
in
his
capacity
as
disbursing
officer
of
the
USAFFE,
and
that
at
the
time
that
RAMOS
sold
a
part
of
the
CHECK
to
him,
RAMOS
was
no
longer
connected
with
the
USAFFE
but
already
a
civilian
who
needed
the
money
only
for
himself
and
his
family.
As
already
stated,
as
a
mere
assignee
MONTINOLA
is
subject
to
all
the
defenses
available
against
assignor
RAMOS.
And,
RAMOS
had
he
retained
the
CHECK
may
not
now
collect
its
value
because
it
had
been
issued
to
him
as
disbursing
officer.
As
observed
by
the
trial
court,
the
CHECK
was
issued
to
RAMOS
not
as
a
person
but
RAMOS
as
the
disbursing
officer
of
the
USAFFE.
Therefore,
he
had
no
right
to
indorse
it
personally
to
plaintiff.
It
was
negotiated
in
breach
of
trust,
hence
he
transferred
nothing
to
the
plaintiff.
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
Emergency
Recit:
Corazon
Victoriano
provided
pieces
of
jewelry
to
Nora
Moulic
so
that
the
latter
may
sell
the
same.
As
security
for
the
jewelry,
Moulic
issued
to
Victoriano
two
post
dated
checks
in
the
aggregate
amount
of
P100,000.00.
Moulic
was
not
able
to
sell
the
jewelry
so
she
returned
the
same
to
Victoriano.
Victoriano
was
however
unable
to
return
the
checks
as
Victoriano
had
already
negotiated
the
checks
to
State
Investment.
To
save
herself
from
paying
State
w/o
compensation,
she
withdrew
all
her
money
with
Equitable
Bank,
and
closed
her
account.
The
checks
were
subsequently
dishonored.
STATE
demanded
Moulic
to
pay,
and
alleged
that
it
had
given
her
a
notice
of
dishonor.
Moulic
also
refused
to
pay
because
she
said
the
checks
were
merely
used
as
security
for
the
jewelry.
ISSUE:
Whether
or
not
State
Investment
House
is
entitled
to
be
paid?
HELD:
Yes.
State
Investment
is
a
holder
in
due
course
as
it
met
all
the
requirements
to
be
one
pursuant
to
Section
52
of
the
Negotiable
Instruments
Law.
In
particular,
it
is
clearly
shown
that:
(a)
on
their
faces
the
post-dated
checks
were
complete
and
regular:
(b)
State
Investment
bought
these
checks
from
Victoriano,
before
their
due
dates;
(c)
State
Investment
took
these
checks
in
good
faith
and
for
value,
(d)
State
Investment
was
never
informed
nor
made
aware
that
these
checks
were
merely
issued
to
Victoriano
as
security
and
not
for
value.
Further,
there
is
no
need
to
issue
a
notice
of
dishonor
to
Moulic.
After
Moulic
withdrew
her
funds,
she
could
not
have
expected
her
checks
to
be
honored.
It
would
only
be
futile
for
State
Investment
to
be
sending
her
notices
of
dishonor
for
the
two
checks.
An
exception
under
Sec.
114.
I.
FACTS
Private
respondent
Nora
B.
Moulic
issued
to
Corazon
Victoriano
two
(2)
post-dated
Equitable
Banking
Corporation
(BANK)
checks
in
the
amount
of
Fifty
Thousand
Pesos
(P50,000.00)
each,
o Which
were
security
for
pieces
of
jewelry
to
be
sold
on
commission
o One
dated
30
August
1979
&
the
other,
30
September
1979.
Thereafter,
the
payee
Victoriano
negotiated
the
checks
to
petitioner
State
Investment
House.
Inc.
(STATE).
MOULIC
failed
to
sell
the
pieces
of
jewelry,
so
she
returned
them
to
the
payee
before
maturity
of
the
checks.
The
checks
could
no
longer
be
retrieved
as
they
had
already
been
negotiated.
Consequently,
before
their
maturity
dates,
MOULIC
withdrew
her
funds
from
the
drawee
bank.
Upon
presentment
for
payment,
the
checks
were
dishonored
for
insufficiency
of
funds.
On
20
December
1979
(allegedly)
o STATE:
we
notified
MOULIC
of
the
dishonor
of
the
checks
and
requested
that
it
be
paid
in
cash
instead.
o MOULIC:
says
that
no
such
notice
was
given
her.
On
6
October
1983,
STATE
sued
to
recover
the
value
of
the
checks
plus
attorney's
fees
and
expenses
of
litigation.
In
her
Answer,
MOULIC
contends
that
she
incurred
no
obligation
on
the
checks
because
the
jewelry
was
never
sold
and
the
checks
were
negotiated
without
her
knowledge
and
consent.
She
also
instituted
a
Third-Party
Complaint
against
Corazon
Victoriano,
who
later
assumed
full
responsibility
for
the
checks.
Trial
Court:
dismissed
the
Complaint
as
well
as
the
Third-Party
Complaint,
and
ordered
STATE
to
pay
MOULIC
P3,000.00
for
attorney's
fees.
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
CA:
affirmed
decision
on
the
ground
that
the
Notice
of
Dishonor
to
MOULIC
was
made
beyond
the
period
prescribed
by
the
Negotiable
Instruments
Law
o That
even
if
STATE
did
serve
such
notice
on
MOULIC
within
the
reglementary
period
it
would
be
of
no
consequence
as
the
checks
should
never
have
been
presented
for
payment.
The
sale
of
the
jewelry
was
never
effected;
the
checks,
therefore,
ceased
to
serve
their
purpose
as
security
for
the
jewelry.
Issue:
NEGO:
What
is
the
liability
of
the
drawer
to
a
holder
in
due
course
if
checks
were
issued
to
another
merely
as
security?
Held:
In
fine,
MOULIC,
as
drawer,
is
liable
for
the
value
of
the
checks
she
issued
to
the
holder
in
due
course,
STATE,
without
prejudice
to
any
action
for
recompense
she
may
pursue
against
the
VICTORIANOs
as
Third-Party
Defendants
who
had
already
been
declared
as
in
default.
Ratio:
NEGO
ISSUE
The
negotiability
of
the
checks
is
not
in
dispute.
Indubitably,
they
were
negotiable.
In
this
regard,
Sec.
52
of
the
Negotiable
Instruments
Law
provides
Sec.
52.
What
constitutes
a
holder
in
due
course.
A
holder
in
due
course
is
a
holder
who
has
taken
the
Instrument
under
the
following
conditions:
(a)
That
it
is
complete
and
regular
upon
its
face;
(b)
That
he
became
the
holder
of
it
before
it
was
overdue,
and
without
notice
that
it
was
previously
dishonored,
if
such
was
the
fact;
(c)
That
he
took
it
in
good
faith
and
for
value;
(d)
That
at
the
time
it
was
negotiated
to
him
he
had
no
notice
of
any
infirmity
in
the
instrument
or
defect
in
the
title
of
the
person
negotiating
it.
From
the
provision,
a
prima
facie
presumption
exists
that
the
holder
of
a
negotiable
instrument
is
a
holder
in
due
course.
Consequently,
the
burden
of
proving
that
STATE
is
not
a
holder
in
due
course
lies
in
the
person
who
disputes
the
presumption.
In
this
regard,
MOULIC
failed.
The
evidence
clearly
shows
that:
(a)
on
their
faces
the
post-dated
checks
were
complete
and
regular:
(b)
petitioner
bought
these
checks
from
the
payee,
Corazon
Victoriano,
before
their
due
dates;
(c)
petitioner
STATE
took
these
checks
in
good
faith
and
for
value,
albeit
at
a
discounted
price;
and,
(d)
STATE
was
never
informed
nor
made
aware
that
these
checks
were
merely
issued
to
payee
as
security
and
not
for
value.
Consequently,
STATE
is
indeed
a
holder
in
due
course.
As
such,
it
holds
the
instruments
free
from
any
defect
of
title
of
prior
parties,
and
from
defenses
available
to
prior
parties
among
themselves;
STATE
may,
therefore,
enforce
full
payment
of
the
checks.
MOULIC
cannot
set
up
against
STATE
the
defense
that
there
was
failure
or
absence
of
consideration.
o MOULIC
can
only
invoke
this
defense
against
STATE
if
it
was
privy
to
the
purpose
for
which
they
were
issued
and
therefore
is
not
a
holder
in
due
course.
That
the
post-dated
checks
were
merely
issued
as
security
is
not
a
ground
for
the
discharge
of
the
instrument
as
against
a
holder
in
due
course.
For
the
only
grounds
are
those
outlined
in
Sec.
119
of
the
Negotiable
Instruments
Law:
Sec.
119.
Instrument;
how
discharged.
A
negotiable
instrument
is
discharged:
(a)
By
payment
in
due
course
by
or
on
behalf
of
the
principal
debtor;
(b)
By
payment
in
due
course
by
the
party
accommodated,
where
the
instrument
is
made
or
accepted
for
his
accommodation;
(c)
By
the
intentional
cancellation
thereof
by
the
holder;
(d)
By
any
other
act
which
will
discharge
a
simple
contract
for
the
payment
of
money;
(e)
When
the
principal
debtor
becomes
the
holder
of
the
instrument
at
or
after
maturity
in
his
own
right.
Obviously,
MOULIC
may
only
invoke
paragraphs
(c)
and
(d)
as
possible
grounds
for
the
discharge
of
the
instrument.
But,
the
intentional
cancellation
contemplated
under
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
paragraph
(c)
is
that
cancellation
effected
by
destroying
the
instrument
either
by
tearing
it
up,
burning
it,
or
writing
the
word
"cancelled"
on
the
instrument.
The
act
of
destroying
the
instrument
must
also
be
made
by
the
holder
of
the
instrument
intentionally.
Since
MOULIC
failed
to
get
back
possession
of
the
post-dated
checks,
the
intentional
cancellation
of
the
said
checks
is
altogether
impossible.
On
the
other
hand,
the
acts
which
will
discharge
a
simple
contract
for
the
payment
of
money
under
paragraph
(d)
are
determined
by
other
existing
legislations.
o Sec.
119
does
not
specify
what
these
acts
are,
e.g.,
Art.
1231
of
the
Civil
Code.
which
enumerates
the
modes
of
extinguishing
obligations.
o Again,
none
of
the
modes
outlined
therein
is
applicable
in
the
instant
case
as
Sec.
119
contemplates
of
a
situation
where
the
holder
of
the
instrument
is
the
creditor
while
its
drawer
is
the
debtor.
In
the
present
action,
the
payee,
Corazon
Victoriano,
was
no
longer
MOULIC's
creditor
at
the
time
the
jewelry
was
returned.
Correspondingly,
MOULIC
may
not
unilaterally
discharge
herself
from
her
liability
by
the
mere
expediency
of
withdrawing
her
funds
from
the
drawee
bank.
She
is
thus
liable
as
she
has
no
legal
basis
to
excuse
herself
from
liability
on
her
checks
to
a
holder
in
due
course.
Moreover,
the
fact
that
STATE
failed
to
give
Notice
of
Dishonor
to
MOULIC
is
of
no
moment.
The
need
for
such
notice
is
not
absolute;
there
are
exceptions
under
Sec.
114
of
the
Negotiable
Instruments
Law:
Sec.
114.
When
notice
need
not
be
given
to
drawer.
Notice
of
dishonor
is
not
required
to
be
given
to
the
drawer
in
the
following
cases:
(a)
Where
the
drawer
and
the
drawee
are
the
same
person;
(b)
When
the
drawee
is
a
fictitious
person
or
a
person
not
having
capacity
to
contract;
(c)
When
the
drawer
is
the
person
to
whom
the
instrument
is
presented
for
payment:
(d)
Where
the
drawer
has
no
right
to
expect
or
require
that
the
drawee
or
acceptor
will
honor
the
instrument;
(e)
Where
the
drawer
had
countermanded
payment.
Indeed,
MOULIC'S
actuations
leave
much
to
be
desired.
She
did
not
retrieve
the
checks
when
she
returned
the
jewelry.
She
simply
withdrew
her
funds
from
her
drawee
bank
and
transferred
them
to
another
to
protect
herself.
After
withdrawing
her
funds,
she
could
not
have
expected
her
checks
to
be
honored
hence,
there
was
no
need
to
serve
her
Notice
of
Dishonor,
which
is
simply
bringing
to
the
knowledge
of
the
drawer
or
indorser
of
the
instrument,
either
verbally
or
by
writing,
the
fact
that
a
specified
instrument,
upon
proper
proceedings
taken,
has
not
been
accepted
or
has
not
been
paid,
and
that
the
party
notified
is
expected
to
pay
it.
In
addition,
the
Negotiable
Instruments
Law
was
enacted
for
the
purpose
of
facilitating,
not
hindering
or
hampering
transactions
in
commercial
paper.
o Thus,
the
said
statute
should
not
be
tampered
with
haphazardly
or
lightly.
Nor
should
it
be
brushed
aside
in
order
to
meet
the
necessities
in
a
single
case.
The
drawing
and
negotiation
of
a
check
have
certain
effects
aside
from
the
transfer
of
title
or
the
incurring
of
liability
in
regard
to
the
instrument
by
the
transferor.
o The
holder
who
takes
the
negotiated
paper
makes
a
contract
with
the
parties
on
the
face
of
the
instrument.
o There
is
an
implied
representation
that
funds
or
credit
are
available
for
the
payment
of
the
instrument
in
the
bank
upon
which
it
is
drawn.
Consequently,
the
withdrawal
of
the
money
from
the
drawee
bank
to
avoid
liability
on
the
checks
cannot
prejudice
the
rights
of
holders
in
due
course.
o In
the
instant
case,
such
withdrawal
renders
the
drawer,
Nora
B.
Moulic,
liable
to
STATE,
a
holder
in
due
course
of
the
checks.
Under
the
facts
of
this
case,
STATE
could
not
expect
payment
as
MOULIC
left
no
funds
with
the
drawee
bank
to
meet
her
obligation
on
the
checks,
so
that
Notice
of
Dishonor
would
be
futile.
2C
2015
AQUINO.
BASCARA.
DEL
ROSARIO.
DURAN.
FU.
GERALDEZ.
KING.
LAGOS.
LIBONGCO.
LOPA.
LUCENARIO
PEREZ
DE
TAGLE.
NARVASA.
RIVERA.
SANTOS.
TIU.
VELASQUEZ
WHEREFORE,
the
petition
is
GRANTED.
CA
is
REVERSED,
private
respondent
NORA
B.
MOULIC
liable
to
petitioner
STATE
INVESTMENT
HOUSE,
INC.,
for
the
value
of
EBC
Checks
in
the
total
amount
of
P100,000.00,
P3,000.00
as
attorney's
fees,
and
the
costs
of
suit,
without
prejudice
to
any
action
for
recompense
she
may
pursue
against
the
VICTORIANOs
as
Third-Party
Defendants.
2C 2015 AQUINO. BASCARA. DEL ROSARIO. DURAN. FU. GERALDEZ. KING. LAGOS. LIBONGCO. LOPA. LUCENARIO PEREZ DE TAGLE. NARVASA. RIVERA. SANTOS. TIU. VELASQUEZ