Philippine Education Co. Inc. v. Soriano [G.R. No. L-22405.

June 30, 1971]

FACTS
Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders each payable to
E.P. Montinola. After the postal teller had made out money orders, Montinola offered to pay for them with
a private checks were not generally accepted in payment of money orders, the teller advised him to see
the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave building with
his own check and the ten(10) money orders without the knowledge of the teller. Upon discovery of the
disappearance of the unpaid money orders, an urgent message was sent to all postmasters, and the
following day notice was likewise served upon all banks, instructing them not to pay anyone of the money
orders aforesaid if presented for payment. The Bank of America received a copy of said notice three days
later. It debited appellants account with the same amount and gave it advice thereof by means of a debit
memo.
ISSUE
Whether or not postal money orders are negotiable instruments.
RULING
NO. Postal money orders are not negotiable instruments. Our postal statutes were patterned after
statutes in force in the United States. For this reason, ours are generally construed in accordance with the
construction given in the United States to their own postal statutes, in the absence of any special reason
justifying a departure from this policy or practice. The weight of authority in the United States is that postal
money orders are not negotiable instruments, the reason behind this rule being that, in establishing and
operating a postal money order system, the government is not engaging in commercial transactions but
merely exercises a governmental power for the public benefit.It is to be noted in this connection that some
of the restrictions imposed upon money orders by postal laws and regulations are inconsistent with the
character of negotiable instruments. For instance, such laws and regulations usually provide for not more
than one endorsement; payment of money orders may be withheld under a variety of circumstances.

Caltex Inc. v. Court of Appeals [G.R. No. 97753. August 10, 1992]
FACTS
On various dates, Security Bank and Trust Company (SBTC), through its Sucat Branch issued 280
certificates of time deposit (CTD) in favor of one Angel dela Cruz who later lost them.
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND
ONLY, SECURITY BANK SUCAT OFFICE P4,000& 00 CTS Pesos, Philippine Currency, repayable to said
depositor 731 days. after date, upon presentation and surrender of this certificate, with interest at the rate
of 16% per cent per annum.
(Sgd. Illegible)
Caltex (Phils.) Inc. went to the SBTCSucat branch and presented for verification the CTDs declared lost
by Angel dela Cruz alleging that the same were delivered to herein plaintiff as security for purchases
made with Caltex Philippines, Inc. by said depositor. SBTC rejected Caltexs demand and claim. Caltex
sued SBTC but case was dismissed rationalizing that CTDs are non-negotiable instruments.

ISSUE
Whether or not Certificate of Time Deposit (CTD) is a negotiable instrument.
RULING
YES. The CTDs in question undoubtedly meet the requirements of the law for negotiability under Section
1 of the Negotiable Instruments Law. The accepted rule is that the negotiability or non-negotiability of an
instrument is determined from the writing, that is, from the face of the instrument itself. In the construction
of a bill or note, the intention of the parties is to control, if it can be legally ascertained. Here, if it was
really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with
facility so expressed that fact in clear and categorical terms in the documents, instead of having the word
BEARER stamped on the space provided for the name of the depositor in each CTD.
While the writing may be read in the light of surrounding circumstances in order to more perfectly
understand the intent and meaning of the parties, yet as they have constituted the writing to be the only
outward and visible expression of their meaning, no other words are to be added to it or substituted in its
stead.
Metropolitan Bank and Trust Co. v. Court of Appeals [G.R. No. 88866. February 18, 1991]
24
MAR
FACTS
Various treasury warrants drawn by the Philippine Fish Marketing Authority were subsequently indorsed
by Golden Savings. Petitioner allowed Golden Savings to withdraw thrice from uncleared treasury
warrants as the former was exasperated over persistent inquiries of the latter after one week. Warrants
were later dishonored by the Bureau of Treasury.
ISSUE
(a) Whether or not treasury warrants are negotiable instruments.
(b) Whether or not petitioners negligence would bar them for recovery.
RULING
(a) NO. The indication of fund as the source of the payment to be made on the treasury warrants makes
the order or promise to pay not unconditional and the warrants themselves non-negotiable. Metrobank
cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were
genuine and in all respects what they purport to be, in accordance with Section 66 of the Negotiable
Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury
warrants.
(b) YES. Metrobank was indeed negligent in giving Golden Savings the impression that the treasury
warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the proceeds
thereof from his account with it. Without such assurance, Golden Savings would not have allowed the
withdrawals; with such assurance, there was no reason not to allow the withdrawal. However, withdrawals
released after the notice of the dishonor may be debited as it will result to unjust enrichment.

Sesbreo v. Court of Appeals [G.R. No. 89252. May 24, 1993]

24

MAR
FACTS
Petitioner Raul Sesbreo made a money market placement in the amount of P300,000.00 with the
Philippine Underwriters Finance Corporation (Philfinance). The latter issued a Certificate of Confirmation
of Sale without recourse from Delta Motors Corporation Promissory Note, a Certificate of securities
indicating the sale to petitioner, with the notation that the said security was in custodianship of Pilipinas
Bank, andpost-dated checks payable with petitioner as payee, Philfinance as drawer. Petitioner
approached private respondent Pilipinas Bank and handed her a demand letter informing the bank that
his placement with Philfinance had remained unpaid and outstanding, and that he in effect was asking for
the physical delivery of the underlying promissory note. Pilipinas did not deliver the Note, nor any
certificate of participation in respect thereof, to petitioner.
ISSUES
(a) Whether or not Pilipinas Bank is liable for its action.
(b)Whether or not non-negotiable instruments are transferrable.
RULING
(1) YES. Private respondent Pilipinas bank is liable for damages plus legal interest thereon by arising out
of its breach of duty. By failing to deliver the Note to the petitioner as depositor-beneficiary of the thing
deposited, Pilipinas effectively and unlawfully deprived petitioner of the Note deposited with it. Whether or
not Pilipinas itself benefitted from such conversion or unlawful deprivation inflicted upon petitioner, is of no
moment for present purposes.In the case at bar, the custodian-depositary bank Pilipinas refused to
deliver the security deposited with it when petitioner first demanded physical delivery thereof. Instead of
complying with the demand of the petitioner, Pilipinas purported to require and await the instructions of
Philfinance, in obvious contravention of its undertaking under the DCR to effect physical delivery of the
Note upon receipt of written instructions from petitioner Sesbreo.
(2) YES. A non-negotiable instrument may, obviously, not be negotiated; but it may be assigned or
transferred, absent an express prohibition against assignment or transfer written in the face of the
instrument. It is important to bear in mind that the negotiation of a negotiable instrument must be
distinguished from the assignment or transfer of an instrument whether that be negotiable or nonnegotiable. Only an instrument qualifying as a negotiable instrument under the relevant statute may be
negotiated either by indorsement thereof coupled with delivery, or by delivery alone where the negotiable
instrument is in bearer form. A negotiable instrument may, however, instead of being negotiated, also be
assigned or transferred. The legal consequences of negotiation as distinguished from assignment of a
negotiable instrument are, of course, different.

Firestone Tire vs. CA

Firestone Tire & rubber Co. vs. Court of Appeals
GR No. 113236
March 5, 2001
Quisumbing, J.:
Facts:
Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon
Development Bank, the latter authorized and allowed withdrawals of funds though the medium of special
withdrawal slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit with FirestoneTire &
Rubber Company, in payment Fojas-Arca delivered a 6 special withdrawal slips. In turn, these were
deposited by the Firsestone to its bank account in Citibank. With this, relying on such confidence and
belief Firestone extended to Fojas-Arca other purchase on credit of its products but several withdrawal
slips were dishonored and not paid. As a consequence, Citibank debited the plaintiffs account

representing the aggregate amount of the two dishonored special withdrawal slips. Fojas-Arca averred
that the pecuniary losses it suffered are a caused by and directly attributes to defendants gross
negligence as a result Fojas-Arca filed a complaint.
Issue:
Whether or not the acceptance and payment of the special withdrawal slips without the
presentation of the depositors passbook thereby giving the impression that it is a negotiable instrument
like a check.
Held:
No. Withdrawal slips in question were non negotiable instrument. Hence, the rules governing the
giving immediate notice of dishonor of negotiable instrument do not apply. The essence of negotiability
which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a
substitute for money. The withdrawal slips in question lacked this character.

Ang Tek Lian v. Court of Appeals [G.R. No. L-2516. September 25, 1950]
20
APR
FACTS
Petitioner drew a check payable to the order of cash knowing that he had no funds. He delivered it in
exchange of money. Petitioner was found guilty of estafa, but petitioner argued that the check had not
been indorsed by him, hence, he should not be held guilty thereof.
ISSUE
Whether or not indorsement is necessary to negotiate a check payable to the order of cash.
RULING
NO. Indorsement is no longer necessary. Under the Negotiable Instruments Law (Sec. 9 [d]), a check
drawn payable to the order of cash is a check payable to bearer, and the bank may pay it to the person
presenting it for payment without the drawers indorsement. Being a bearer instrument, negotiation may
be done by mere delivery of the instrument.

G.R. No. L-29432 August 6, 1975

Lessons Applicable: Forgery (Negotiable Instruments Law)
FACTS:
Jai-Alai Corp. deposited 10 checks with BPI.
The checks were from Ramirez, a sales agent of the Inter-Island Gas were all payable to Inter-Island Gas
Service, Inc. or order.
Inter-Island Gas discovered that all the indorsements made on the checks purportedly by its cashiers
were forgeries.
BPI debited Jai-Alai's current account and forwarded to it the checks containing the forged indorsements
ISSUE: W/N BPI had the right to debit.

HELD: YES.
Having indorsed the checks to BPI, Jai-Alai is deemed to have given the warranty prescribed in Section
66 of the NIL that every single one of those checks "is genuine and in all respects what it purports to be."
The depositor of a check as indorser warrants that it is genuine and in all respects what it purports to be.
Jai Alai Corporation negligent in accepting the checks without question from Antonio Ramirez
notwithstanding that the payee was the Inter-Island Gas Services, Inc. and it did not appear that he was
authorized to indorse it.

Philippine Bank of Commerce v. Aruego [G.R. Nos. L-25836-37.January 31, 1981]

FACTS
Defendant-appellant Aruego signed various bills of exchange which was negotiated and later dishonored.
Appellee bank aggrieved, sued Aruego.

ISSUE
Whether or not defendant may effectively put up the defense that he was just an agent of the company
issuing the bills of exchange.

RULING
Section 20 of the Negotiable Instruments Law provides that Where the instrument contains or a person
adds to his signature words indicating that he signs for or on behalf of a principal or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words
describing him as an agent or as filing a representative character, without disclosing his principal, does
not exempt him from personal liability.

DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL.

G.R. No. 85419 March 9, 1993
--complete undelivered
FACTS:
Respondent Sima Wei executed and delivered to petitioner Bank a promissory note engaging to pay the
petitioner Bank or order the amount of P1,820,000.00. Sima Wei subsequently issued two crossed
checks payable to petitioner Bank drawn against China Banking Corporation in full settlement of the
drawer's account evidenced by the promissory note. These two checks however were not delivered to
the petitioner-payee or to any of its authorized representatives but instead came into the possession of
respondent Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement to the
account of respondent Plastic Corporation with Producers Bank. Inspite of the fact that the checks were
crossed and payable to petitioner Bank and bore no indorsement of the latter, the Branch Manager of
Producers Bank authorized the acceptance of the checks for deposit and credited them to the account of
said Plastic Corporation.
ISSUE:
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks.

RULING:
No. A negotiable instrument must be delivered to the payee in order to evidence its existence as a
binding contract. Section 16 of the NIL provides that every contract on a negotiable instrument is
incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. Thus,
the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him.
Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on the
instrument. Petitioner however has a right of action against Sima Wei for the balance due on the
promissory note.
G.R. NO. 108747

Republic Bank v. Ebrada [G.R. No. L-40796. July 31, 1975]

30
JUL
FACTS
Treasury of the Philippines issued a check payable to MARTIN LORENZO who was already dead that
time. Signature forged, the check was indorsed to RAMON LORENZO, then to DELIA DOMINGUEZ, then
to appellant, where it was encashed with the plaintiff-appellee drawee bank.

ISSUE
Whether or not the drawee bank can recover from the one who encashed a check with forged signature of
payee.

RULING
YES. Defendant-appellant, upon receiving the check in question from Dominguez, was duty-bound to
ascertain whether the check in question was genuine before presenting it to plaintiff Bank for payment.
Her failure to do so makes her liable for the loss and the plaintiff Bank may recover from her the money
she received for the check. As reasoned out above, had she performed the duty of ascertaining the
genuineness of the check, in all probability the forgery would have been detected and the fraud defeated.
Metropolitan Waterworks and Sewerage System v. Court of Appeals [G.R. No. L-62943. July 14, 1986]
30
JUL
FACTS
Twenty three (23) personalized checks drawn by petitioner were paid by respondent bank and debited
against petitioner after they were deposited in collection banks.

ISSUE
Whether or not petitioner is barred from setting up the defense of forgery on the ground of gross
negligence.

RULING
YES. Respondent drawee Bank for not having detected the fraudulent encashment of the checks
because the printing of the petitioners personalized checks was not done under the supervision and
control of the Bank. There is no evidence on record indicating that because of this private printing the
petitioner furnished the respondent Bank with samples of checks, pens, and inks or took other
precautionary measures with the PNB to safeguard its interests.

Banco de Oro Savings and Mortgage Bank v. Equitable Banking Corp. [G.R. No. 74917. January 20,
1988]
24
MAR
FACTS
Equitable Bank drew six crossed managers check payable to certain member establishments of Visa
Card. Subsequently, the checks were deposited with Banco De Oro (BDO) to the credit of its depositor.
Following normal procedures and after stamping at the back of the checks the usual
endorsements,BDOsent the checks for clearing through the Philippine Clearing House Corporation
(PCHC). Accordingly, Equitable Banking paid the checks; its clearing account was debited for the value of
the checks and BDOs clearing account was credited for the same amount. Thereafter, Equitable Banking
discovered that the endorsements appearing at the back of the checks and purporting to be that of the
payees were forged and/or unauthorized or otherwise belong to persons other than the payees.Equitable
Banking presented the checks directly to BDO for the purpose of claiming reimbursement from the latter.
However, BDO refused to accept such direct presentation and to reimburse Equitable Banking for the
value of the checks.
ISSUES
(a) Whether or not BDO is estopped from claiming that checks under consideration are non-negotiable
instruments.
(b) Whether or not BDO can escape liability by reasons of forgery.
(c) Whether or not only negotiable checks are within the jurisdiction of PCHC.

RULING
(a) YES. BDO having stamped its guarantee of all prior endorsements and/or lack of endorsements is
now estopped from claiming that the checks under consideration are not negotiable instruments. The
checks were accepted for deposit by the petitioner stamping thereon its guarantee, in order that it can
clear the said checks with the respondent bank. By such deliberate and positive attitude of the petitioner it
has for all legal intents and purposes treated the said cheeks as negotiable instruments and accordingly
assumed the warranty of the endorser when it stamped its guarantee of prior endorsements at the back of
the checks. It led the said respondent to believe that it was acting as endorser of the checks and on the
strength of this guarantee said respondent cleared the checks in question and credited the account of the
petitioner. Petitioner is now barred from taking an opposite posture by claiming that the disputed checks
are not negotiable instrument.

(b) NO. A commercial bank cannot escape the liability of an endorser of a check and which may turn out
to be a forged endorsement. Whenever any bank treats the signature at the back of the checks as
endorsements and thus logically guarantees the same as such there can be no doubt said bank has
considered the checks as negotiable.The collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the party making the presentment
has done its duty to ascertain the genuineness of the endorsements.
(c) NO. PCHCs jurisdiction is not limited to negotiable checks only. The term check as used in the said
Articles of Incorporation of PCHC can only connote checks in general use in commercial and business
activities. Thus, no distinction. Ubi lex non distinguit, nec nos distinguere debemus. Checks are used
between banks and bankers and their customers, and are designed to facilitate banking operations. It is
of the essence to be payable on demand, because the contract between the banker and the customer is
that the money is needed on demand.
Gempesaw v. Court of Appeals [G.R. No. 92244. February 9, 1993]
30
JUL
FACTS
Petitioner argues that respondent drawee Bank should not have honored the checks because they were
crossed checks.

ISSUE
Whether or not the issuance of crossed checks is restrictive indorsement.

RULING
NO. They are not the same. In restrictive indorsement, the prohibition to transfer or negotiate must be
written in express words at the back of the instrument, so that any subsequent party may be forewarned
that ceases to be negotiable. Crossed checks, on the other hand, is done by drawing two parallel lines
across the face of the check to mean that it cannot be presented for payment in cash, but can only be
deposited in payees account. Crossing of checks do not ipso facto cause the cessation of its negotiable
character.

Associated Bank v. Court of Appeals [G.R. No. 107382 G.R. No. 107612. January 31, 1996]
30
JUL
FACTS
Respondent Province of Tarlac allowed a retired hospital cashier to receive checks for the payee hospital
for a period three years and in not properly ascertaining why the retired hospital cashier was collecting
checks for the payee hospital in addition to the hospitals real cashier. Associated Bank, as collecting
bank, received and indorsed the said checks.

ISSUE
Whether or not the doctrine of comparative negligence apply.

RULING
YES. The Court finds as reasonable, the proportionate sharing of fifty percent fifty percent (50%-50%).
Respondent Province contributed to the loss and shall be liable to the PNB for fifty (50%), Province of
Tarlac can only recover fifty percent (50%) from PNB. Associated Bank, shall be liable to PNB for fifty
(50%). It is liable on its warranties as indorser of the checks which were deposited to it.
Negotiable Instruments Case Digest: Metrobank V. FNCB (1982)

G.R. No. L-55079 November 19, 1982

Lessons Applicable: Alteration (Negotiable Instruments Law)
FACTS:
August 25, 1964: Check dated July 8, 1964 for P50,000.00, payable to CASH, drawn by Joaquin
Cunanan & Company on First National City Bank (FNCB) was deposited with Metropolitan Bank and
Trust Company (Metro Bank) by Salvador Sales.
Earlier that day, Sales had opened a current account with Metro Bank depositing P500.00 in cash
Metro Bank immediately sent the cash check to the Clearing House of the Central Bank with the following
words stamped at the back of the check:
Metropolitan Bank and Trust Company Cleared (illegible) office All prior endorsements and/or Lack of
endorsements Guaranteed.
The check was cleared the same day. Private respondent paid petitioner through clearing the amount of
P50,000.00, and Sales was credited with the said amount in his deposit with Metro Bank.
August 26, 1964: Sales made his 1st withdrawal of P480.00 from his current account
August 28, 1964: he withdrew P32,100.00
August 31, 1964: he withdrew the balance of P17,920 and closed his account with Metro Bank
September 3, 1964: FNCB returned cancelled Check to drawer Joaquin Cunanan & Company, together
with the monthly statement of the company's account with FNCB.
notified FNCB that the check had been altered
actual amount of P50.00 was raised to P50,000.00
name of the payee, Manila Polo Club, was superimposed the word CASH.
September 10, 1964: FNCB wrote Metro Bank asking for reimbursement
June 29, 1965: FNCB filed for recovery

CA affirmed Trial Court: Metro Bank to reimburse FNCB

ISSUE: W/N Metrobank should reimsburse FNCB for the altered amount as indorser
HELD: NO. FNCB liable.
Under the procedure prescribed, the drawee bank receiving the check for clearing from the Central Bank
Clearing House must return the check to the collecting bank within the 24-hour period if the check is
defective for any reason. - FNCB failed to do so
indorsement must be read together with the 24-hour regulation on clearing House Operations of the
Central Bank
Metro Bank can not be held liable for the payment of the altered check.
Moreover, FNCB did not deny the allegation of Metro Bank that before it allowed the withdrawal of the
balance of P17,920.00 by Salvador Sales, Metro Bank withheld payment and first verified, through its
Assistant Cashier Federico Uy, the regularity and genuineness of the check deposit from Marcelo Mirasol,
Department Officer of FNCB, because its (Metro Bank) attention was called by the fast movement of the
account
Republic Bank vs. CA
Republic Bank vs. Court of Appeals
GR No. 42725
April 22, 1991
Grino Aquino, J.:
Facts:
San Miguel Corporation drew a dividend check worth P240 on its account in First National City
Bank in favor of J. Roberto Delgado, a stock holder. The amount on its face was fraudulently and without
authority of the drawer, altered by increasing it from P240 to P9, 240. The check was indorsed and
deposited by Delgado to his account with Republic bank. Republic endorsed the check to FNCB and
presented I for payment through the Central Bank Clearing House. FNCB paid P9, 240 to the Republic
through the Central Bank Clearing House. SMC notified FNCB of trhe material alteration in the check in
question. FNCB informed Republic with regard to the alteration nand forgery of the endorsement of
Delgado. By the, Delgado had already withdrawn his account from the republic. FNCB demanded that
Republic refund the P9, 240. Trial court rendered judgment in favor of FNCB and it was affirmed by the
Court of Appeals.
Issue:
Whether Republic, as the collecting bank, is protected, by 24-hour clearing house rule, found in
CB circular No. 9, as amended, from liability to refund the amount paid by FNCB, as drawee of the SMC
dividend check.
Held:
No. The 24-hour clearing house rule is valid rule applicable to commercial banks. It is true that
when an indorsement is forged, the collecting bank or last endorser, as general rule, bears the loss. But
the unqualified endorsement of the collecting bank on the check should be read together with the 24-hour
regulation on the clearing house operation. Thus, when the drawee bank fails to return a forged or altered
check to the collecting bank is absolved from liability. Unless an alteration is attributable to the fault or
negligence of the drawer himself, such as when he leaves spaces on the check which would allow the
fraudulent insertion of additional numerals in the amount appearing thereon, the remedy of the drawee
bank that negligently clears a forged and/or honor altered check for payment is against the party
responsible for the forgery or alteration, otherwise, it bears the loss. It may not charge the amount so paid

to the account of the drawer, if the latter was free from blame, nor recover it from the collecting bank is the
latter made payment after proper clearance from the drawee.
PCIB v. CA
Facts:
This case is composed of three consolidated petitions involving several checks, payable to the Bureau of
Internal Revenue, but was embezzled allegedly by an organized syndicate.
I. G. R. Nos. 121413 and 121479
On October 19, 1977, plaintiff Ford issued a Citibank check amounting to P4,746,114.41 in favor of the
Commissioner of Internal Revenue for the payment of manufacturers taxes. The check was deposited
with defendant IBAA (now PCIB), subsequently cleared the the Central Bank, and paid by Citibank to
IBAA. The proceeds never reached BIR, so plaintiff was compelled to make a second payment.
Defendant refused to reimburse plaintiff, and so the latter filed a complaint. An investigation revealed that
the check was recalled by Godofredo Rivera, the general ledger accountant of Ford, and was replaced by
a managers check. Alleged members of a syndicate deposited the two managers checks with Pacific
Banking Corporation. Ford filed a third party complaint against Rivera and PBC. The case against PBC
was dismissed. The case against Rivera was likewise dismissed because summons could not be served.
The trial court held Citibank and PCIB jointly and severally liable to Ford, but the Court of Appeals only
held PCIB liable.
II. G. R. No. 128604
Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to P5,851,706.37 and
P6,311,591.73. Both are crossed checks payable to payees account only. The checks never reached
BIR, so plaintiff was compelled to make second payments. Plaintiff instituted an action for recovery
against PCIB and Citibank.
On investigation of NBI, the modus operandi was discovered. Gorofredo Rivera made the checks but
instead of delivering them to BIR, passed it to Castro, who was the manager of PCIB San Andres. Castro
opened a checking account in the name of a fictitious person Reynaldo Reyes. Castro deposited a
worthless Bank of America check with the same amount as that issued by Ford. While being routed to the
Central Bank for clearing, the worthless check was replaced by the genuine one from Ford.
The trial court absolved PCIB and held Citibank liable, which decision was affirmed in toto by the Court of
Appeals.
Issues:
(1) Whether there is contributory negligence on the part of Ford
(2) Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank
(Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue?
Held:
(2) The general rule is that if the master is injured by the negligence of a third person and by the
concuring contributory negligence of his own servant or agent, the latter's negligence is imputed to his
superior and will defeat the superior's action against the third person, asuming, of course that the
contributory negligence was the proximate cause of the injury of which complaint is made. As defined,
proximate cause is that which, in the natural and continuous sequence, unbroken by any efficient,
intervening cause produces the injury and without the result would not have occurred. It appears that
although the employees of Ford initiated the transactions attributable to an organized syndicate, in our
view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree

of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the parties.
The mere fact that the forgery was committed by a drawer-payor's confidential employee or agent, who by
virtue of his position had unusual facilities for perpertrating the fraud and imposing the forged paper upon
the bank, does notentitle the bank toshift the loss to the drawer-payor, in the absence of some
circumstance raising estoppel against the drawer. This rule likewise applies to the checks fraudulently
negotiated or diverted by the confidential employees who hold them in their possession.
(2) We have to scrutinize, separately, PCIBank's share of negligence when the syndicate achieved its
ultimate agenda of stealing the proceeds of these checks.
a. G. R. Nos. 121413 and 121479
On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of
PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No.
SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances.
Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of
the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted
instructions given by the payor or its agent. It is a well-settled rule that the relationship between the payee
or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an
argreement to the contrary, that of principal and agent. A bank which receives such paper for collection is
the agent of the payee or holder.
Indeed, the crossing of the check with the phrase "Payee's Account Only," is a warning that the check
should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to
ascertain that the check be deposited in payee's account only. Therefore, it is the collecting bank
(PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the
clearing indorsement "all prior indorsements and/or lack of indorsement guaranteed".
Lastly, banking business requires that the one who first cashes and negotiates the check must take some
precautions to learn whether or not it is genuine. And if the one cashing the check through indifference or
other circumstance assists the forger in committing the fraud, he should not be permitted to retain the
proceeds of the check from the drawee whose sole fault was that it did not discover the forgery or the
defect in the title of the person negotiating the instrument before paying the check. For this reason, a
bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons
presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when
the proceeds of the checks were afterwards diverted to the hands of a third party. In such cases the
drawee bank has a right to believe that the cashing bank (or the collecting bank) had, by the usual proper
investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus, one who encashed
a check which had been forged or diverted and in turn received payment thereon from the drawee, is
guilty of negligence which proximately contributed to the success of the fraud practiced on the drawee
bank. The latter may recover from the holder the money paid on the check.
b. G. R. No. 128604
In this case, there was no evidence presented confirming the conscious participation of PCIBank in the
embezzlement. As a general rule, however, a banking corporation is liable for the wrongful or tortuous
acts and declarations of its officers or agents within the course and scope of their employment. A bank will
be held liable for the negligence of its officers or agents when acting within the course and scope of their
employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of
which malice is an essential element. In this case, we find a situation where the PCIBank appears also to
be the victim of the scheme hatched by a syndicate in which its own management employees had
participated. But in this case, responsibility for negligence does not lie on PCIBank's shoulders alone.
Citibank failed to notice and verify the absence of the clearing stamps. For this reason, Citibank had
indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks
should be paid only to its designated payee. The point is that as a business affected with public interest

and because of the nature of its functions, the bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of their relationship. Thus,
invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed
in their respective obligations and both were negligent in the selection and supervision of their employees
resulting in the encashment of Citibank Check Nos. SN 10597 AND 16508. Thus, we are constrained to
hold them equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR.
Ilusorio v. Court of Appeals [G.R. No. 139130. November 27, 2002]
30
JUL
FACTS
Petitioners secretary was able to encash and deposit to her personal account about seventeen (17)
checks drawn against the account of petitioner at the respondent bank. Petitioner disclaims the signatures
and demands bank to restoration of funds.

ISSUE
Whether or not petitioner is precluded from setting up the forgery.

RULING
YES. Petitioners failure to examine his bank statements appears as the proximate cause of his own
damage. Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result would not have occurred. In
the present case, the fact of forgery was not established with certainty, having compared the signature in
the checks from the specimen signatures on record and satisfied themselves that it was petitioners.
Samsung Construction Company Phils. v. Far East Bank and Trust Company [G.R. No. 129015. August
13, 2004]
30
JUL
FACTS
A check with forged signature payable to cash was drawn against petitioners account. Petitioner
demands credit of the amount debited by encashment.

ISSUE
Whether or not petitioner may recover from the drawee bank.

RULING
YES. The drawer whose signature was forged may still recover from the bank as long as he or she is not
precluded from setting up the defense of forgery. Here, the drawer, Samsung Construction, is not

precluded by negligence from setting up the forgery. The general rule should apply. Consequently, if a
bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount
so paid to the account of the depositor. A bank is liable, irrespective of its good faith, in paying a forged
check.
Philippine National Bank v. Court of Appeals [G.R. No. 107508. April 25, 1996]
30
JUL
FACTS
Petitioner returned the check to PBCom and debited PBComs account for the amount covered by the
check, the reason being that there was a material alteration of the check number.

ISSUE
Whether or not there is material alteration on the check.

RULING
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. Here, the alteration of check number does not affect its negotiability contemplated in Section 1 of
the Negotiable Instruments Law.
G.R. No. L-17845
April 27, 1967
Lessons Applicable: Consideration and Accommodation Party (Negotiable Instruments)
FACTS:
March 28, 1949: Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly and severally, in favor
of the BPI, or its order, a promissory note for P15,000.00 with interest at 8% per annum, payable on
demand.
The P15,000.00 proceeds was received by Oscar Varona alone.
Victor Sevilla and Simeon Sadaya signed the promissory note as co-makers only as a favor to Oscar
Varona.
June 15, 1950: outstanding balance is P4,850.00. No payment thereafter made.
Oct 16 1952: bank collected from Sadaya total of P5,416.12(w/ int)
Varona failed to reimburse Sadaya despite repeated demands. V
Victor Sevilla died Francisco Sevilla was named administrator.
Sadaya filed a creditor's claim for the above sum of P5,746.12, plus attorneys fees in the sum of
P1,500.00
The administrator resisted the claim upon the averment that the deceased Victor Sevilla "did not receive
any amount as consideration for the promissory note," but signed it only "as surety for Oscar Varona
June 5, 1957: Trial court order the administrator to pay
CA reversed.
ISSUE: W/N Sadaya can claim against the estate of Sevilla as co-accomodation party when Verona as
principal debtor is not yet insolvent
HELD: NO. Affirmed
Varona is bound by the obligation to reimburse Sadaya

solidary accommodation maker who made payment has the right to contribution, from his coaccommodation maker, in the absence of agreement to the contrary between them, and subject to
conditions imposed by law
requisites before one accommodation maker can seek reimbursement from a co-accommodation maker.
ART. 2073. 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.
If any of the guarantors should be insolvent, his share shall be borne by the others, including the payer, in
the same proportion.
(1) A joint and several accommodation maker of a negotiable promissory note may demand from the
principal debtor reimbursement for the amount that he paid to the payee;
(2) a joint and several accommodation maker who pays on the said promissory note may directly demand
reimbursement from his co-accommodation maker without first directing his action against the principal
debtor provided that
(a) he made the payment by virtue of a judicial demand, or -no judicial demand just voluntarily
(b) a principal debtor is insolvent. - Varona is not insolvent
Crisologo-Jose v. Court of Appeals [G.R. No. 80599. September 15, 1989]
30
JUL
FACTS
Petitioner avers that the accommodation party in this case is Mover Enterprises, Inc. and not private
respondent who merely signed the check in question in a representative capacity, that is, as vicepresident of said corporation, hence he is not liable thereon under the Negotiable Instruments Law.

ISSUE
Whether or not petitioner is not liable on the ground that he is simply acting as an agent of a corporation.

RULING
NO. An accommodation party is liable on the instrument to a holder for value, although such holder at the
time of taking the instrument knew him to be only an accommodation party, does not include nor apply to
corporations which are accommodation parties. This is because the issue or indorsement of negotiable
paper by a corporation without consideration and for the accommodation of another is ultra vires.
Stelco Marketing Corporation v. Court of Appeals [G.R. No. 96160. June 17, 1992]
30
JUL
FACTS
Petitioner STELCO claimed it was a holder in due course and for value of a check that had been
deposited and dishonored. STELCO came into possession of it in some way, and was able, several years
after the dishonor of the check.

ISSUE

Whether or not STELCO may be considered a holder of the check for value.

RULING
NO. It is clear from the relevant circumstances that STELCO cannot be deemed a holder of the check for
value. It does not meet two of the essential requisites prescribed by the statute. It did not become the
holder of it before it was overdue, and without notice that it had been previously dishonored, and it did
not take the check in good faith and for value.
Travel-On vs CA
Travel-On, Inc. vs Court of Appeals
G.R. No. L-56169 June 26, 1992
-accommodation party
FACTS:
Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on behalf of airline
passengers and derived commissions therefrom. Miranda was sued by petitioner to collect on the six
postdated checks he issued which were all dishonored by the drawee banks. Miranda, however, claimed
that he had already fully paid and even overpaid his obligations and that refunds were in fact due to him.
He argued that he had issued the postdated checks not for the purpose of encashment to pay his
indebtedness but for purposes of accommodation, as he had in the past accorded similar favors to
petitioner. Petitioner however urges that the postdated checks are per se evidence of liability on the part
of private respondent and further argues that even assuming that the checks were for accommodation,
private respondent is still liable thereunder considering that petitioner is a holder for value.
ISSUE:
Whether Miranda is liable on the postdated checks he issued even assuming that said checks were
issued for accommodation only.
RULING:
There was no accommodation transaction in the case at bar. In accommodation transactions recognized
by the Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party,
by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course, who gave
full value therefor to the accommodated party. The latter, in other words, receives or realizes full value
which the accommodated party then must repay to the accommodating party. But the accommodating
party is bound on the check to the holder in due course who is necessarily a third party and is not the
accommodated party. In the case at bar, Travel-On was payee of all six (6) checks, it presented these
checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not an
accommodated party; it realized no value on the checks which bounced. Miranda must be held liable on
the checks involved as petitioner is entitled to the benefit of the statutory presumption that it was a holder
in due course and that the checks were supported by valuable consideration.
De Ocampo v. Gatchalian [G.R. No. L-15126. November 30, 1961]
30
JUL
FACTS
Appellant Gatchalian drew check worth P600 which was received by plaintiff-appellee in Vicente R. de
Ocampo & Co. (VRDO & Co.) payment of indebtedness of certain Matilde Gonzales. Plaintiff-appellee
even gave a change of P158.25 to Gonzales.

ISSUE
Whether or not VRDO & Co.s defense of good faith is tenable.
RULING
NO. The irregularity is evident. As holders title was defective or suspicious, it cannot be stated that the
payee acquired the check without knowledge of said defect in holders title, and for this reason the
presumption that it is a holder in due course or that it acquired the instrument in good faith does not exist.
And having presented no evidence that it acquired the check in good faith, it (payee) cannot be
considered as a holder in due course.
Mesina v. Intermediate Appellate Court [G.R. No. 70145. November 13, 1986]
30
JUL
FACTS
Petitioner became the holder of the cashiers check as endorsed by Alexander Lim who stole the check.
He refused to say how and why it was passed to him.
ISSUE
Whether or not petitioner is a holder in due course.
RULING
NO. Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or
value as shown by the established facts of the case. He had therefore notice of the defect of his title over
the check from the start. The holder of a cashiers check who is not a holder in due course cannot enforce
such check against the issuing bank which dishonors the same.
Metropol (Bacolod) Financing and Investment Corp v. Sambok Motors Company [G.R. No. L-39641.
February 28, 1983]
30
JUL
FACTS
Appellant Sambok added the words with recourse in the indorsement of a note. He argued that the note
contemplates a qualified indorsement.

ISSUE
Whether or not the contention of Sambok is meritorious.

RULING
NO. Recourse means resort to a person who is secondarily liable after the default of the person who is
primarily liable. Appellant, by indorsing the note with recourse does not make itself a qualified indorser
but a general indorser who is secondarily liable. The effect of such indorsement is that 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.
Sapiera vs CA
Sapiera vs Court of Appeals
[G.R. No. 128927. September 14, 1999]
FACTS:
Petitioner Remedios Sapiera, a sari-sari store owner, was issued by one Arturo de Guzman checks as
payment for purchases he made at her store. She used said checks to pay for certain items she
purchased from the grocery store of Ramon Sua. These checks were signed at the back by petitioner.
When presented for payment the checks were dishonored because the drawers account was already
closed. Sua informed Arturo de Guzman and petitioner about the dishonor but both failed to pay the
value of the checks. Petitioner was acquitted in the charge of estafa filed against her but she was found
liable for the value of the checks.
ISSUE:
Whether petitioner is liable for the value of the checks even if she signed the subject checks only for the
identification of the signature of Arturo de Guzman.
RULING:
Petitioner is liable for the value of the checks. As she (petitioner) signed the subject checks on the
reverse side without any indication as to how she should be bound thereby, she is deemed to be an
unqualified indorser thereof. Every indorser who indorses without qualification, warrants to all subsequent
holders in due course that, on due presentment, it shall be accepted or paid or both, according to its
tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay
the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it.
Prudential Bank vs IAC
PRUDENTIAL BANK vs. INTERMEDIATE APPELLATE COURT
G.R. No. 74886 December 8, 1992, 216 scra 257
--presentment for payment
FACTS:
Philippine Rayon Mills, Inc. entered into a contract with Nissho Co., Ltd. of Japan for the importation of
textile machineries under a five-year deferred payment plan. To effect payment for said machineries,
Philippine Rayon Mills opened a commercial letter of credit with the Prudential Bank and Trust Company
in favor of Nissho. Against this letter of credit, drafts were drawn and issued by Nissho, which were all
paid by the Prudential Bank through its correspondent in Japan. Two of these drafts were accepted by
Philippine Rayon Mills while the others were not. Petitioner instituted an action for the recovery of the
sum of money it paid to Nissho as Philippine Rayon Mills was not able to pay its obligations arising from
the letter of credit. Respondent court ruled that with regard to the ten drafts which were not presented
and accepted, no valid demand for payment can be made. Petitioner however claims that the drafts were
sight drafts which did not require presentment for acceptance to Philippine Rayon.
ISSUE:

Whether presentment for acceptance of the drafts was indispensable to make Philippine Rayon liable
thereon.
RULING:
In the case at bar, the drawee was necessarily the herein petitioner. It was to the latter that the drafts
were presented for payment. There was in fact no need for acceptance as the issued drafts are sight
drafts. Presentment for acceptance is necessary only in the cases expressly provided for in Section 143
of the Negotiable Instruments Law (NIL). The said section provides that presentment for acceptance
must be made:
(a) Where the bill is payable after sight, or in any other case, where presentment for acceptance is
necessary in order to fix the maturity of the instrument; or
(b) Where the bill expressly stipulates that it shall be presented for acceptance; or
(c) Where the bill is drawn payable elsewhere than at the residence or place of business of the
drawee.
In no other case is presentment for acceptance necessary in order to render any party to the bill liable.
Obviously then, sight drafts do not require presentment for acceptance.
G.R. No. 117857. June 25, 2001
LUIS S. WONG, Petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES,
Respondents.
RESOLUTION
QUISUMBING, J.:
PETITIONER Luis S. Wong, through counsel, seeks reconsideration of our decision on this case
promulgated on February 2, 2001.
In that decision, following policy guidelines set forth in AC No. 12-2000, we deleted the penalty of
imprisonment imposed on him below. But we ordered him to pay fines of P6,750.00, P12,820.00 and
P11,000.00 respectively corresponding to twice the face value of three checks involved in Criminal Cases
Nos. CBU-12057, 12058, and 12055; as well as civil indemnity in the amount of P18,025.00, in
connection with his conviction for violation of the Bouncing Checks Law (BP Blg. 22).
In his motion for reconsideration now before us, he avers, inter alia, that the amount of civil indemnity
imposed is erroneous. He states that:
The error in the statement of the amount of civil indemnity is quite obviously caused by the inadvertent
addition of the three checks issued by petitioner which were the subject of another case where he had
long ago been acquitted. This acquittal is duly noted by this Honorable Court in footnote 5 of page 3 of its
Decision. The error, though the product of inadvertence, is error nonetheless. And it must be corrected,
with all due respect. (Motion for Reconsideration, p. 2.)
FINDING his motion for reconsideration meritorious but only with respect to the prayer for recomputation
of civil indemnity to be imposed, we now set the amount thereof to only P15,285.00, which is the correct
sum of the face value of the three checks involved in the present case.
ACCORDINGLY, the dispositive portion of our Decision in this case is hereby amended to read as follows:
WHEREFORE, the petition is DENIED. Petitioner Luis S. Wong is found liable for violation of Batas
Pambansa Blg. 22 but the penalty imposed on him is hereby MODIFIED so that the sentence of
imprisonment is deleted. Petitioner is ORDERED to pay a FINE of (1) P6,750.00, equivalent to double the

amount of the check involved in Criminal Case No. CBU-12057, (2) P12,820.00, equivalent to double the
amount of the check involved in Criminal Case No. CBU-12058, and (3) P11,000.00, equivalent to double
the amount of the check involved in Criminal Case No. CBU-12055, with subsidiary imprisonment in case
of insolvency to pay the aforesaid fines. Finally, as civil indemnity, petitioner is also ordered to pay to LPI
the face value of said checks totaling P15,285.00 with legal interest thereon from the time of filing the
criminal charges in court, as well as to pay the costs.
INTERNATIONAL CORPORATE BANK V. SPS. GUECO
G.R. No.141968 February 12, 2001
Facts: Spouses Gueco obtained a loan from petitioner International Corporate Bank (now Union Bank of
Philippines) to purchase a car. Respondent spouses executed a promissory note in consideration, which
were payable in monthly installment and chattel mortgage over the car.
The spouses however, defaulted payment. The car was detained by the bank. When Dr. Gueco delivered
the mangers check of P150,000, the car was not released because of his refusal to sign the Joint Motion
to Dismiss (JMD).
The bank insisted that the JMD is a standard operating procedure to effect a compromise and to preclude
future filing of claims or suits for damages. Gueco spouses filed an action against the bank for fraud,
failing to inform them regarding JMD during the meeting & for not releasing the car if they do not sign the
said motion.
Issue: Whether or not International Corporate Bank was guilty of fraud.
Ruling: No. Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the
voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which
naturally and necessarily arise from such act or omission. The fraud referred to in Article 1170 of the Civil
Code is the deliberate and intentional evasion of the normal fulfillment of obligation. The court fails to see
how the act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could
constitute as fraud.
The joint motion to dismiss cannot in any way have prejudiced Dr. Gueco. The motion to dismiss was in
fact also for the benefit of Dr. Gueco, as the case filed by petitioner against it before the lower court would
be dismissed with prejudice.
The joint motion to dismiss was but a natural consequence of the compromise agreement and simply
stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioners act of
requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be a deliberate attempt on the
part of petitioner to renege on the compromise agreement of the parties.
State Investment House Inc. vs. CA
State Investment House Inc. vs. CA
GR No. 101163 January 11, 1993
Bellosillo, J.:
Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on commission,
two postdated checks in the amount of fifty thousand each. Thereafter, Victoriano negotiated the checks
to State Investment House, Inc. When Moulic failed to sell the jewellry, she returned it to Victoriano before
the maturity of the checks. However, the checks cannot be retrieved as they have been negotiated.
Before the maturity date Moulic withdrew her funds from the bank contesting that she incurred no
obligation on the checks because the jewellery was never sold and the checks are negotiated without her
knowledge and consent. Upon presentment of for payment, the checks were dishonoured for insufficiency
of funds.
Issues:

1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure or absence of
consideration
Held:
Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows that: on
the faces of the post dated checks were complete and regular; that State Investment House Inc. bought
the checks from Victoriano before the due dates; that it was taken in good faith and for value; and there
was no knowledge with regard that the checks were issued as security and not for value. A prima facie
presumption exists that a holder of a negotiable instrument is a holder in due course. Moulic failed to
prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for which
they were issued and therefore is not a holder in due course.
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke paragraphs c
and d as possible grounds for the discharge of the instruments. Since Moulic failed to get back the
possession of the checks as provided by paragraph c, intentional cancellation of instrument is impossible.
As provided by paragraph d, the acts which will discharge a simple contract of payment of money will
discharge the instrument. Correlating Article 1231 of the Civil Code which enumerates the modes of
extinguishing obligation, none of those modes outlined therein is applicable in the instant case. Thus,
Moulic may not unilaterally discharge herself from her liability by 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 check to a holder in due course. Moreover, the fact that the petitioner failed to give notice of dishonor
is of no moment. The need for such notice is not absolute; there are exceptions provided by Sec 114 of
NIL.
Bataan Cigar and Cigarette Factory, Inc. v. Court of Appeals [G.R. No. 93048. March 3, 1994]
30
JUL
FACTS
Petitioner BCCFI issued crossed checks to George King in consideration of tobacco bales, which the
latter sold to respondent SIHI in a discounted price. George King failed to deliver the consideration.
BCCFI ordered to stop payment. SIHI failed to encash the crossed checks.

ISSUE
Whether or not respondent SIHI here have shown legal absence of good faith.

RULING
YES. In failing to inquire about crossed checks, the holder SIHI is declared guilty of gross negligence
amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law, and
as such the consensus of authority is to the effect that the holder of the check is not a holder in due
course.
Citytrust vs. IAC
Citytrust banking Corp., vs. Intermediate Appellate Court

GR No. 84281 May 27, 1994

Vitug, J:
Facts:
Emme Herrero, businesswoman, made regular deposits with Citytrust Banking Corp. at its Burgoa
branch in Calamba, Laguna. She deposited the amount of P31, 500 in order to amply cover 6 postdated
checks she issued. All checks were dishonored due to insufficiency of funds upon the presentment for
encashment. Citytrust banking Corp. asserted that it was due to Herreros fault that her checks were
dishonored, for he inaccurately wrote his account number in the deposit slip. RTC dismissed the
complaint for lack of merit. CA reversed the decision of RTC.
Issue:
Whether or not Citytrust banking Corp. has the duty to honor checks issued by Emme Herrero
despite the failure to accurately stating the account number resulting to insufficiency of funds for the
check.
Held:
Yes, even it is true that there was error on the account number stated in the deposit slip, its is,
however, indicated the name of Emme Herrero. This is controlling in determining in whose account the
deposit is made or should be posted. This is so because it is not likely to commit an error in ones name
than merely relying on numbers which are difficult to remember. Numbers are for the convenience of the
bank but was never intended to disregard the real name of its depositors. The bank is engaged in
business impressed with public trust, and it is its duty to protect in return its clients and depositors who
transact business with it. It should not be a matter of the bank alone receiving deposits, lending out
money and collecting interests. It is also its obligation to see to it that all funds invested with it are properly
accounted for and duly posted in its ledgers.
G.R. No. 120594 June 10, 1997FACTS:On April 17, 1989, a case for partition and accounting
was instituted by thespouses Alfonso and Eteria Tan against Alfonso's brothers, Celestino
andMaximo, and their respective wives, Rosario and Teresita. It was alleged in thecomplaint that the
parties are co-owners of a 906-square meter residential lotwith improvements thereon situated at Banaue,
Cebu City acquired sometime in1970. Pursuant to the provisions of Article 494 of the New
Civil Code, thespouses Alfonso and Eteria Tan, being co-owners to the extent of one-third (1/3)portion
of the aforesaid lot, sought partition of the same. Anent the action foraccounting, the spouses claimed that
on August 15, 1963, the brothers togetherwith other siblings put up a business which they
registered as Bel Air AutoSupply Company and was engaged in the sale and distribution of auto
spareparts. They alleged that they are entitled to the fruits, proceeds and profits of thesaid family
business, so that, an accounting of the assets and liabilities of thepartnership, as well as the interest and
participation of each member, is proper inthe premises. Eteria testified that she and Alfonso were married
but were legallyseparated in 1977. Meanwhile, respondents claim that Alfonso and Eteria haveno claims
over the business since the business has long been dissolved andshares of the owners have been
delivered upon the business dissolution. Privaterespondents further alleged that the land was an
inheritance from their latemother. ISSUE:Whether or not the one third share of Alfonso must be
partitioned betweenAlfonso and his wife Eteria as part of their conjugal partnership upon their
legalseparation.HELD:Note that the marriage of Eteria and Alfonso and a decree of legal separationboth
took place prior to the effectivity of the Family Code. Thus, the defaultproperty regime in the
absence of a marriage settlement is conjugal partnershipof gains. Under the New Civil Code, all
properties of the marriage is presumed tobelong to the conjugal partnership unless it be proved that it
pertains to thehusband or to the wife (Art. 160, NCC). However, private respondents were ableto prove
that they inherited the land from their late mother. There is documentaryproof to support the testimony of
Maximo Tan that indeed the property in disputewas inherited by Alfonso, Celestino and Maximo from their
late mother, TrinidadUy Tan. We note that the 906-square meter lot is registered in the name
of:ALFONSO U. TAN, Filipino, of legal age, married to Eteria Teves; CELESTINOU. TAN, Filipino, of legal
age, married to Rosario Dy Kushin and MAXIMO U.TAN, Filipino, of legal age, single. The Court also held
that if spouses were co-owners, the title should say spouses Alfonso and Eteria. There can be no doubt

then, that although acquired during Alfonso's marriage to Eteria, the one-thirdportion of the property
should be regarded as Alfonso's own exclusively, as amatter of law pursuant to Article 148 of the Civil
Code which provides that: Art.148. The following shall be the exclusive property of each spouse: (2) That
whicheach acquires, during the mathe rriage, by lucrative titleThe Court held thatEteria was
failed to prove, that the lot was acquired by her and her husband withtheir funds. Neither was her
allegation that the house was constructed with theloan she and her husband obtained duly substantiated.
From whom the loan wasobtained was not even revealed. Thus, the one third portion of the subject
landcannot be partitioned between Eteria and Alfonso since it does not belong to theconjugal partnership.

[G.R. No. 130314. September 22, 1998]

ANNIE TAN, petitioner, vs. COURT OF APPEALS and BLOOMBERRY EXPORT MANUFACTURING,
INC., respondents.
DECISION
PANGANIBAN, J.:
Before a trial court, a motion for reconsideration that does not contain the requisite notice of hearing does
not toll the running of the period of appeal. It is a mere scrap of paper which the trial court and the
opposite party may ignore.
The Case
Petitioner seeks to set aside the August 22, 1997 Decision of the Court of Appeals[1] in CA-GR SP No.
43293, the dispositive portion of which reads:[2]
WHEREFORE, [i]n view of all the foregoing considerations, the petition for certiorari and prohibition is
granted. The Order dated October 4, 1996, of public respondent is hereby SET ASIDE and public
respondent is ordered to desist from further proceeding with the hearing of the Motion for
Reconsideration. The Decision dated July 18, 1996, of public respondent is declared final and executory.
The Facts
Petitioner Annie Tan, doing business under the name and style AJ & T Trading, leased a portion of the
ground floor of her building, more specifically described as Stall No. 623, Carvajal Street, Binondo,
Manila, in favor of Bloomberry Export Manufacturing, Inc. The lease was for a period of five years starting
on February 17, 1995 and ending on February 17, 2000, at a monthly rental of P20,000 for the first three
years.[3] For several alleged violations of the lease contract, petitioners filed against private respondent a
complaint for ejectment, docketed as Civil Case No. 148798-CV.[4] As its rental payment was refused by
petitioner, private respondent instituted on July 13, 1995 a case for consignation, docketed as Civil Case
No. 148814-CV.[5]
The two cases were consolidated. In due course, the Metropolitan Trial Court (MTC) of Manila, Branch I,
rendered on February 1, 1996 a Decision[6] which disposed as follows:[7]
WHEREFORE, in Civil Case No. 148798-CV for [b]reach of [c]ontract, failure to pay rentals on time,
encroachment on the adjacent premises without the consent of [petitioner], [she] failed to substantiate her
case with that degree of proof required by law. For this reason, except for the costs of suit, this Court
hereby orders the dismissal of the complaint of [petitioner]. The counterclaim and damages sought by
[private respondent are] likewise ordered dismissed. The case for consignation in Civil Case No. 148814CV has become moot and academic for failure of [petitioner] to appeal the decision of the Metropolitan
[Trial] Court, Branch 15, Manila, allowing the [private respondent] to consign rental payments to the Court
of Manila. Besides, the [c]omplaint for consignation being in conformity with law, [private respondent] is
allowed to continue consigning with this Court all rentals that [may be] due.

On appeal, the Regional Trial Court (RTC) of Manila, Branch 2, in its Decision dated July 18, 1996,
affirmed the aforementioned MTC Decision thus:
WHEREFORE, finding no cogent reasons to disturb the joint decision dated February 1, 1996 of the
Metropolitan Trial Court of Manila, Branch 1, the Court sustains and affirms in toto the said decision.
Respondent Court related the incidents that ensued, as follows:[8]
xxx [F]rom the Decision of the [RTC] dated July 18, 1996, [petitioner] filed a Motion for Reconsideration of
the aforesaid decision. The Motion for Reconsideration did not contain any notice of hearing as required
under Section 5, Rule 15 of the Revised Rules of Court.
On August 23, 1996, [private respondent] filed an ex-parte Motion for Entry of Judgment upon the ground
that said motion for reconsideration is a mere scrap of paper which should not merit the attention of the
[RTC] and in support thereof, cited the case of Traders Royal Bank vs. Court of Appeals, 208 SCRA 199.
[Private respondent] contends that since the Motion for Reconsideration is a mere scrap of paper aside
from being pro forma, said Motion for Reconsideration did not toll the period of appeal[;] hence, the
Decision dated July 18, 1996, had become final and executory.
"On September 3, 1996, [petitioner] filed a Motion to Set for Hearing the Motion for Reconsideration which
was vehemently opposed by [private respondent] on September 23, 1996.
On October 4, 1996, [the RTC] issued an Order granting the motion to set for hearing [petitioners] Motion
for Reconsideration and set[ting] the hearing [for] October 21, 1996, at 8:30 oclock in the morning. On
October 20, 1996, [private respondent] filed a Motion for Reconsideration of the Order dated October 4,
1996, which was set for hearing on October 25, 1996.
On November 11, 1996, [the RTC] issued an Order denying [private respondents] Motion for
Reconsideration. Hence, the Petition for Certiorari and Prohibition. xxx.
In the assailed Decision, Respondent Court of Appeals reversed the trial courts Order setting for hearing
petitioners Motion for Reconsideration.
The Ruling of the Court of Appeals
Respondent Court held that the trial court acted with grave abuse of discretion in setting for hearing
petitioners Motion for Reconsideration, notwithstanding the fact that said Motion contained no notice of
hearing.
Citing a litany of cases, it ruled that petitioners failure to comply with the mandatory provisions of Sections
4 and 5, Rule 15 of the Rules of Court, reduced her motion to a mere scrap of paper which did not merit
the attention of the court. Respondent Court also held that those cases in which the Court allowed a
motion for reconsideration that had not been set for hearing -- Galvez v. Court of Appeals,[9] Tamargo v.
Court of Appeals[10] and Que v. Intermediate Appellate Court[11]-- were inapplicable.
Respondent Court held that the facts in Galvez drastically differ from those in the present case. Galvez
involved a motion to withdraw the information -- not a motion for reconsideration -- that was filed ex parte
before the arraignment of the accused. In that case, the Court held that there was no imperative need of
notice and hearing because, first, the withdrawal of an information rests on the discretion of the trial court;
and, second, the accused was not placed in jeopardy. On the other hand, the subject of the present
controversy is a motion for reconsideration directed against the Decision of the RTC; thus, the motion
affects the period to perfect an appeal.
Que is not applicable, either. In said case, the trial court set the Motion for Reconsideration (MR) for
hearing, which was actually attended by the counsel for the adverse party. This was not so in the case at
bar; petitioners MR was set for hearing, because she belatedly moved for it upon the filing of private

respondents Motion for Entry of Judgment. Likewise, the present case differs from Tamargo, wherein the
application of the aforesaid mandatory provisions was suspended. The Court did so in order to give
substantial justice to the petitioner and in view of the nature of the issues raised which were found to be
highly meritorious.
Hence, this petition.[12]
The Issue
In her Memorandum,[13] petitioner presents a fairly accurate statement of the main issue to be resolved:
[14]
Whether xxx the omission [through] inadvertence of a notice of hearing of a motion for reconsideration
filed with the trial court xxx is a fatal defect which did not stop the running of the period to appeal[,] thus
rendering the assailed decision final [and] executory.
The Courts Ruling
The petition is devoid of merit.
Sole Issue:
Omission of Notice of Hearing Fatal
Petitioner admits the categorical and mandatory character of the directives in Sections 4 and 5 of Rule 15
of the Rules of Court, which read:[15]
SEC. 4. Hearing of motion.Except for motions which the court may act upon without prejudicing the rights
of the adverse party, every written motion shall be set for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served in such a
manner as to ensure its receipt by the other party at least three (3) days before the date of hearing,
unless the court for good cause sets the hearing on shorter notice.(4a)
SEC. 5. Notice of hearing.The notice of hearing shall be addressed to all parties concerned, and shall
specify the time and date of the hearing which must not be later than ten (10) days after the filing of the
motion.(5a)
In De la Pea v. De la Pea,[16] the Court presented a resume of earlier decisions regarding the necessity
of the notice of hearing in motions for reconsideration:
In Pojas v. Gozo-Dadole,[17] we had occasion to rule on the issue of whether a motion for reconsideration
without any notice of hearing tolls the running of the prescriptive period. In Pojas, petitioner received copy
of the decision in Civil Case No. 3430 of the Regional Trial Court of Tagbilaran on 15 April 1986. The
decision being adverse to him petitioner filed a motion for reconsideration. For failing to mention the date
when the motion was to be resolved as required in Sec. 5, Rule 15, of the Rules of Court, the motion for
reconsideration was denied. A second motion for reconsideration met the same fate. On 2 July 1986
petitioner filed a notice of appeal but the same was denied for being filed out of time as the motion for
reconsideration which the Court ruled as pro forma did not stop the running of the 15-day period to
appeal.[18]
In resolving the issue of whether there was grave abuse of discretion in denying petitioners notice of
appeal, this Court ruled
Section 4 of Rule 15 of the Rules of Court requires that notice of motion be served by the movant on all
parties concerned at least three (3) days before its hearing. Section 5 of the same Rule provides that the
notice shall be directed to the parties concerned, and shall state the time and place for the hearing of the

motion. A motion which does not meet the requirements of Section 4 and 5 of Rule 15 of the Rules of
Court is considered a worthless piece of paper which the clerk has no right to receive and the court has
no authority to act upon. Service of copy of a motion containing notice of the time and place of hearing of
said motion is a mandatory requirement and the failure of the movant to comply with said requirements
renders his motion fatally defective.[19]
In New Japan Motors, Inc. v. Perucho,[20] defendant filed a motion for reconsideration which did not
contain any notice of hearing. In a petition for certiorari, we affirmed the lower court in ruling that a motion
for reconsideration that did not contain a notice of hearing was a useless scrap of paper. We held further
Under Sections 4 and 5 of Rule 15 of the Rules of Court, xxx a motion is required to be accompanied by a
notice of hearing which must be served by the applicant on all parties concerned at least three (3) days
before the hearing thereof. Section 6 of the same rule commands that (n)o motion shall be acted upon by
the Court, without proof of service of the notice thereof xxx. It is therefore patent that the motion for
reconsideration in question is fatally defective for it did not contain any notice of hearing. We have already
consistently held in a number of cases that the requirements of Sections 4, 5 and 6 of Rules 15 of the
Rules of Court are mandatory and that failure to comply with the same is fatal to movants cause.[21]
In Sembrano v. Ramirez,[22] we declared that
(A) motion without notice of hearing is a mere scrap of paper. It does not toll the running of the period of
appeal. This requirement of notice of hearing equally applies to a motion for reconsideration. Without
such notice, the motion is pro forma. And a pro forma motion for reconsideration does not suspend the
running of the period to appeal.
In In re Almacen,[23] defendant lost his case in the lower court. His counsel then filed a motion for
reconsideration but did not notify the adverse counsel of the time and place of hearing of said motion. The
Court of Appeals dismissed the motion for the reason that the motion for reconsideration dated July 5,
1966 does not contain a notice of time and place of hearing thereof and is, therefore a useless piece of
paper which did not interrupt the running of the period to appeal, and, consequently, the appeal was
perfected out of time. When the case was brought to us, we reminded counsel for the defendant that
As a law practitioner who was admitted to the bar as far back as 1941, Atty. Almacen knew or ought to
have known that [for] a motion for reconsideration to stay the running of the period of appeal, the movant
must not only serve a copy of the motion upon the adverse party x x x but also notify the adverse party of
the time and place of hearing x x x.
Also, in Manila Surety and Fidelity Co., Inc. v. Bath Construction and Company,[24] we ruled-The written notice referred to evidently is that prescribed for motions in general by Rule 15, Sections 4
and 5 (formerly Rule 26), which provide that such notice shall state the time and place of hearing and
shall be served upon all the parties concerned at least three days in advance. And according to Section 6
of the same Rule no motion shall be acted upon by the court without proof of such notice. Indeed, it has
been held that in such a case the motion is nothing but a useless piece of paper. The reason is obvious;
unless the movant sets the time and place of hearing the court would have no way to determine whether
that party agrees to or objects to the motion, and if he objects, to hear him on his objection, since the
Rules themselves do not fix any period within [which] he may file his reply or opposition.'[25]
In fine, the abovecited cases confirm that the requirements laid down in Sec. 5 of Rule 15 of the Rules of
Court that the notice shall be directed to the parties concerned, and shall state the time and place for the
hearing of the motion, are mandatory. If not religiously complied with, they render the motion pro forma.
As such the motion is a useless piece of paper that will not toll the running of the prescriptive period.
For failing to attach a notice of hearing to the Motion for Reconsideration, petitioner proffers the following
excuses: (1) her former counsels messenger, due to an honest mistake, inadvertently omitted the fourth
page of the motion containing the crucial Notice of Hearing; and (2) because of the pressure of work, her

former counsel was unable to follow up such motion until the day said counsel requested the setting of a
hearing.[26]
We are not in the least convinced. First, it is unfair to place the blame for such omission on the
messenger. The burden of preparing a complete pleading falls on counsels shoulders, not on the
messengers. The counsel is ultimately responsible for the acts or omissions of his agents. Hence, the
messengers conduct can neither justify the counsels mistake nor warrant a departure from the mandate
of the aforesaid procedural rules.
Second, it is incredible that the fourth page containing the Notice of Hearing was left behind due to honest
mistake. In fact, there was no such page. Petitioners claim is belied by the following pertinent portions of
the subject Motion for Reconsideration:[27]
WHEREFORE, premises considered, it is respectfully prayed that the Honorable Court cause a further
REVIEW and RECONSIDERATION of its decision on the above-captioned consolidated cases.
Quezon City for Manila, August 12, 1996.
(Sgd.)ANGELINA ARANDIA-VILLANUEVA
Counsel for Plaintiff-Appellant
39-L T. Morato Avenue, Quezon City
IBP No. 407450 6-26-96
PTR No. 227013 1-5-96 Manila
Copy furnished:
Atty. Arnel Zaragoza Dolendo
Counsel for Defendant
Rm 408, 413 First United Bldg.
Escolta, Manila
The normal practice is to note, at the end of the pleading, that a copy was furnished to the adverse party.
Thus, petitioners motion ended exactly at the bottom of the third page as evidenced by the copy-furnished
notation. It is safe to conclude that there was no accidental or excusable neglect in not including a fourth
page in this case. In other words, petitioners counsel simply failed to include a notice of hearing.
Finally, the fact that petitioners former counsel calendared the motion for hearing for August 23, 1996[28]
belies the excuse that an alleged fourth page had been left behind. In the first place, if a notice of hearing
had been included in the Motion for Reconsideration, there would have been no need for petitioner to file
the Motion to set the time and date of hearing. What is clear is that said counsel filed the latter Motion,
only after private respondent had submitted its Motion for Entry of Judgment[29] -- with copy furnished
petitioners counsel[30]-- on the ground that petitioners Motion for Reconsideration was a mere scrap of
paper that did not stop the period for appeal.
Petitioner pleads for liberal construction of the rule on notice of hearing, citing Tamargo, Galvez and Que.
In rebuttal, we adopt by reference the CAs excellent disquisition, cited earlier, on why these cases are
inapplicable.
Petitioner further alleges that, first, the nonadmission of her Motion for Reconsideration would result in a
miscarriage of justice, as the main case (ejectment), which was tried under summary procedure, had
been unnecessarily prolonged; and, second, the tenant lessee would be occupying the premises without
paying rentals. She also relies on People v. Leviste,[31] in which the Court held:
While it is true that any motion that does not comply with the requirements of Rule 15, Rules of Court
should not be accepted for filing and, if filed, is not entitled to judicial cognizance, the Supreme Court has
likewise held that where rigid application of the rule will result in manifest failure or miscarriage of justice,
technicalities may be disregarded in order to resolve the case.

Liberal construction of this rule has been allowed by this Court in the following cases: (1) where a rigid
application will result in a manifest failure or miscarriage of justice,[32] especially if a party successfully
shows that the alleged defect in the questioned final and executory judgment is not apparent on its face or
from the recitals contained therein;[33] (2) where the interest of substantial justice will be served;[34] (3)
where the resolution of the motion is addressed solely to the sound and judicious discretion of the court;
[35] and (4) where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed.[36] Petitioner has failed to demonstrate
that the case at bar falls under any of these exceptions.
Finally, petitioner claims that she will be deprived of property without due process, as private respondent
has accumulated P348,800 in unpaid rentals and accrued interests.
We disagree. Petitioner can obtain proper payment of rentals through a motion for execution in the case
below. The MTC may have dismissed her ejectment case, but it did not exculpate private respondent from
its liabilities. Petitioner is, therefore, not being deprived of her property without due process.
Indeed, there is no miscarriage of justice to speak of. Having failed to observe very elementary rules of
procedure which are mandatory, petitioner caused her own predicament. To exculpate her from the
compulsory coverage of such rules is to undermine the stability of the judicial process, as the bench and
bar will be confounded by such irritating uncertainties as when to obey and when to ignore the Rules. We
have to draw the line somewhere.[37]
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. Costs against the
petitioner.

Myron Papa vs A.U. Valencia and Co., Inc.

March 15, 2012 No comments
FacebookTwitterPinterestLinkedInEmail
ADVERTISEMENTS

284 SCRA 643 Mercantile Law Negotiable Instruments Law Consummation of Sale in Lieu of Check
Payment
Myron Papa is the administrator of the estate of Angela Butte. In 1973, he sold a portion of said estate to
Felix Pearroyo through A.U. Valencia and Co., Inc. Pearroyo gave Papa P5,000.00 plus a check worth
P40,000.00. However, Papa was not able to deliver the certificate of title to Pearroyo. A litigation ensued
and ten years after, Papa argued that the sale between him and Pearroyo was never consummated
because he did not encash the P40,000.00 check and that the P5,000.00 cash was merely earnest
money.
ISSUE: Whether or not Papa is correct.
HELD: No. After more than ten (10) years from the payment in part by cash and in part by check, the
presumption is that the check had been encashed. Granting that Papa had never encashed the check, his
failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through
his unreasonable and unexplained delay. While it is true that the delivery of a check produces the effect of
payment only when it is cashed, pursuant to Article 1249 of the Civil Code, the rule is otherwise if the
debtor (Pearroyo) is prejudiced by the creditors (Papas) unreasonable delay in presentment. The
acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from

whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of
the debt or obligation for which it was given.
Bank of the Philippine Islands v. Court of Appeals [G.R. No. 102383. November 26, 1992]
30
JUL
FACTS
Petitioners checks were drawn and deposited to respondent CBC. It was discovered that the signature of
payee was forged.

ISSUE
Whether or not a drawee bank could claim reimbursement from collecting bank in case of forgery.

RULING
YES. Both banks were negligent in the selection and supervision of their employees resulting in the
encashment of the forged checks by an impostor. Both banks were not able to overcome the presumption
of negligence in the selection and supervision of their employees. Considering the comparative
negligence of the two (2) banks, court ruled that the demands of substantial justice are satisfied by
allocating the loss and the costs of the arbitration proceeding and the cost of litigation on a 60-40 ratio.