NEGOTIABLE INSTRUMENTS LAW

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Section 1

1 Roman Catholic of Malolos v IAC

PETITIONER: Roman Catholic Bishop of Malolos, Inc.
RESPONDENTS: IAC and Robes-Francisco Realty and Development, Corporation
FACTS:

July 7, 1971: Roman Catholic sold to Robes-Francisco, through its then

president Mr. Carlo F. Robes, for a parcel of land in Bulacan
o Downpayment: P23,930
o Balance: P100,000 plus 12% interest per annum to be paid within 4
years (that is, on or before July 7, 1975)
o Non-payment within the period: cancellation, forfeiture of payments,
and reconveyance of the land

The new lawyer (Atty. Francisco) of Robes-Francisco wrote a letter to Father

Vasquez to be furnished with a copy of the contract + supporting documents

On July 17, 1975: The contract had already expired; new lawyer wrote to
Roman Catholic formally requesting to proceed with payment as follows:
o Pay the balance of P100,000 in 3 equal installments of 6 months
each
o First installment + accrued interest of P24,000 will be paid upon
approval of said request

Roman Catholic denied the request, but granted a grace period of 5 days
from the receipt of the denial within which to complete the payment of
P124,000. Otherwise, the stipulation on cancellation, etc., will be implemented.

Atty. Francisco wrote another letter requesting for an extension of 30 days.

Atty. Fernandez, lawyer of petitioner, DENIED the request.

Atty. Francisco wrote another letter directly to petitioner for the alleged refusal
to accept the tender of payment made on the last day of the grace period.
o Also demanded for the execution of a Deed of Absolute Sale over the
land

Atty. Fernandez denied the request; denied the tender of payment; cancelled
the contract and considered all previous payments forfeited and the land
ipso jure reconveyed.

Declared the contract as cancelled

DP = forfeited

WHY?

Questionable pattern of human conduct

Inconsistency of testimonials

Atty. Francisco did not present the check used as

tender of payment

Company had insufficient funds

CA: Reversed the ruling of the trial court; ruled in favor of ROBES-FRANSICO
o Respondent had sufficient available funds
o Respondent tendered payment

ISSUES:
(1) WON the finding that respondent had sufficient available funds on or
before the grace period for the payment of its obligation proof that it did a
tender of payment?
(2) WON it is petitioners legal obligation to execute a deed of absolute sale
before the respondent has actually paid the complete consideration of the
sale?
(3) WON an offer of a check is a valid tender of payment under a contract that
stipulates that the consideration of the sale is in Philippine Currency?
HELD/RATIO:
(1) NO; a finding that respondent had sufficient available funds on or
before the grace period does not constitute proof of tender of
payment

ToP involves a positive and unconditional act by the obligor of

offering a legal tender currency as payment to the obligee for the
formers obligation and demanding that the latter accept the
same.

ToP cannot be presumed by a mere inference from the

surrounding circumstances.

ToP presupposes not only that the obligor is RWA

(2) NO; based on the contractual stipulation, the DOAS will only be
executed upon full payment of the consideration

Art. 1159 of the Civil Code: principle of obligatory force

TC: Ruled in favor of ROMAN CATHOLIC

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SC said it should have paid within the grace period and secured
a receipt such that it would have been in a position to demand
the execution of the documents.
(3) NO; a certified personal check is not legal tender nor the currency
stipulated

Therefore, not a valid ToP

Art. 1249 of CC

Philippine Airlines v CA: Delivery of a negotiable instrument does

not operate as payment; check is not legal tender, not a valid ToP

Hence, where the tender of payment by the private respondent

was not valid for failure to comply with the requisite payment in
legal tender or currency stipulated within the grace period and as
such, was validly refused receipt by the petitioner, the
subsequent consignation did not operate to discharge the former
from its obligation to the latter

2 BPI Express Credit Card Corporation v CA

PETITIONER: BPI Express Credit Card Corporation
RESPONDENTS: CA and Ricardo J. Marasigan
FACTS:

Atty, Ricardo J. Francisco was a complimentary member of the BECC and was
issued a credit card.
o Credit limit: P3,000
o In later years, it was increased to P5,000
o His membership was always renewed
o He often exceeded his credit limit and paid by mode of check, which
BPI tolerated

When Marasigans outstanding bill ballooned to P8,987.84 was not paid on

time (because he was in Quezon province), his secretary informed him that
BPI was demanding immediate payment of P15,000 to secure future bills and
threatening to suspend his credit card.

Marasigan issued a postdated Far East Bank check amounting to P15,000 on

the condition that BPI would not suspend his credit card
o It was received and remained in custody with employees of BPI

BPI, through a letter, informed Marasigan of the temporary suspension of

the privileges of his credit card and the inclusion of his account in the
Caution List.

o No showing that Marasigan received such letter

December 8, 1989: Marasigan was confident that he had settled his credit card
bill
o Caf Adriatico dishonored Marasigans credit card for the amount of
P735.32
o The bill was paid for by one of Marasigans guests
Marasigan, through a letter, asked BPI for the following:
o To present the exact billing due him
o To withhold the deposit of the postdated check
o To return said check to him
DEMANDS LEFT AND RIGHT BUT TO NO AVAIL

RTC: RULED IN FAVOR OF MARASIGAN

o Legal basis: Art. 19 of CC (Abuse of Rights Doctrine)

CA: AFFIRMED THE DECISION OF THE RTC

ISSUES:
(1) WON Marasigan can recover moral damages arising from the cancellation
of his credit card by BPI?
(2) WON BPI had the right to suspend the credit card of Marasigan?
(3) WON prior to the suspension of Marasigans credit card, the parties
entered into an agreement whereby the card could still be used and would
be duly honored by duly accredited establishments?
HELD/RATIO:
(1) NO; BPI did not act in bad faith by cancelling the credit card

It was Marasigans own negligence (failure to pay the credit card

bill on time) which was the proximate cause of his embarrassing
and humiliating experience.
(2) YES; based on the terms and conditions of the credit card:

Unpaid balance within 30 days: suspended

Unpaid balance within 60 days: cancelled

Marasigan also admitted that he made no payments on the

periods given

Thus, BPI is justified in suspending the credit card

(3) YES; there was an arrangement between the parties; however,
Marasigan did not comply with his obligations

Agreement was issuance of a check for immediate payment

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However, while Marasigan did issue a check for P15,000, it was

postdated
Settled is the doctrine that a check is only a substitute for money
and not money, the delivery of such an instrument does not, by
itself operate as payment.
o Case at bar: The issuance of the postdated check was
not effective payment.

3 Caltex (Philippines), Inc. v CA

PETITIONER: Caltex (Philippines), Inc.
RESPONDENTS: CA and Security Bank and Trust Company
FACTS:

SECURITY BANK (Sucat Branch) issued 280 certificates of time deposit

(CTDs) amounting to P1.12M in favor of one ANGEL DELA CRUZ, who
deposited said sum of money to the bank

Dela Cruz delivered CTDs to CALTEX in connection with his purchase of fuel
products from the latter

Dela Cruz informed the manager of the Sucat Branch, TIMOTEO TIANGCO,
that he had lost all the CTDs issued to him
o Tiangco advised Dela Cruz to execute an AFFIDAVIT OF LOSS
(S.O.P. by the bank)

In compliance with Tiangcos advice, 280 replacement CTDs were issued to

Dela Cruz

Dela Cruz obtained and negotiated a LOAN with Security Bank for P875K

On the same day, Dela Cruz executed a DEED OF ASSIGNMENT OF TIME

DEPOSIT
o He surrendered to the bank full control of TDs

Caltex presented to Security Bank the 280 CTDs from Dela Cruz; informed
Security Bank of its decision to pre-terminate the TDs

Dela Cruz defaulted on the loan obligation

(2) WON Caltex can rightfully recover on the CTDs?

HELD/RATIO:
(1) NO; the CTDs are NEGOTIABLE INSTRUMENTS

Section 1of Negotiable Instruments Law (requisites)

CTDs meet the requirements of the law for negotiability

o Depositor = bearer

Negotiability or non-negotiability of an instrument is determined

from the writing, that is, from the face of the instrument itself
(2) NO;

CTDs are bearer instruments, but a valid negotiation thereof for

the true purpose and agreement as ultimately ascertained,
requires both delivery and indorsement.

CTD = payment as guarantee to secure purchases

CTD = embodied in a public instrument

4 Inciong, Jr. v CA
PETITIONER: Baldomero Inciong Jr.
RESPONDENTS: CA and Philippine Bank of Communications
FACTS:

INCIONG executed a PROMISSORY NOTE in the amount of P50K to

PHILLIPINE BANK OF COMMUNICATIONS
o Signed with 2 others; SOLIDARY OBLIGATION

On due date, the promisors did not pay their obligation.

Bank sent telegrams demanding payment.

TC: RULED AGAINST INCIONG

o Inconsistent testimony < Evidence of 50,000 on PN

CA: AFFIRMED THE RULING OF THE TC

ISSUE: WON a PROMISSORY NOTE is a negotiable instrument?
HELD/RATIO: YES; PROMISSORY NOTES ARE NEGOTIABLE INSTRUMENTS

TC: DISMISSED THE COMPLAINT OF CALTEX

CA: AFFIRMED THE LOWER COURTS DISMISSAL

ISSUES:
(1) WON the subject certificates of deposit are non-negotiable despite being
clearly negotiable instruments?
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5 Traders Royal Bank v CA

PETITIONER: Traders Royal Bank
RESPONDENTS: CA, Filriters Guaranty Assurance Corporation, Central Bank of
the Philippines
FACTS:

FILRITERS executed a DETACHED ASSIGNMENT assigning all its rights to

the CENTRAL BANKS CERTIFICATE OF INDEBTEDNESS to PHILFINANCE
worth P3.5M

TRADERS entered into a REPURCHASE AGREEMENT with PhilFinance

o PhilFinance sold to Traders one of the CBCIs from Filriters worth
P500K

PhilFinance failed to repurchase the CBCIs

PhilFinance issued a DETACHED ASSIGNMENT in favor of Traders to enable

it to have the title completed
o Expressly authorized issuer to transfer CBCIs

Traders presented it to [respondent], but the latter failed to recognize it

RTC: The assignment of CBCI in favor of PhilFinance, and the subsequent
assignment of the same CBCI by PhilFinance in favor of Traders NULL AND
VOID
CA: Affirmed the decision of the RTC
o CBCI is not a negotiable instrument

Payable only to FILRITERS and to no one else

ISSUE: WON a CENTRAL BANK CERTIFICATE OF INDEBTENDESS is a

negotiable instrument?
HELD/RATIO: YES
CBCI pertains to certificates for the creation and maintenance of a
permanent improvement revolving fund; it is similar to a bond
o Acknowledgement of an obligation to pay a fixed sum of money
Case at bar: The transfer of the instrument from PhilFinance to TRB was
merely an assignment

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